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                   PUERTO RICO INDUSTRIAL DEVELOPMENT COMPANY
                                 PO BOX 362350
                        SAN JUAN, PUERTO RICO 00936-2350

                                 LEASE CONTRACT

      PROJECTS NO.: T-0870-0-68 and extensions and Lot No. L-253-2-77-11-0
                         LOCATION: AGUADA, PUERTO RICO

        THIS AGREEMENT ENTERED into on October 9, 1997 by: AS "LANDLORD", THE
PUERTO RICO INDUSTRIAL DEVELOPMENT COMPANY, AND AS "TENANT", SMART MODULAR
TECHNOLOGIES (P.R.), INC.

                                   WITNESSETH

        WHEREAS, LANDLORD is the owner of certain land-site and building,
identified in the Epigraph, hereinafter referred to as the Premises.

        WHEREAS, LANDLORD has agreed to lease to TENANT, and TENANT has agreed
to lease from LANDLORD the Premises. NOW THEREFORE, in consideration of the
foregoing premises, the parties herein agree on this Lease subject to the
following:

                              TERMS AND CONDITIONS

        ONE:  LANDLORD hereby demises and lets unto TENANT, and TENANT hereby
leases from LANDLORD the premises which are fully described in SCHEDULE "A"
hereto annexed and made a part hereof. The Premises are subject to the
encumbrances, liens and/or restrictions, if any, that may appear from said
Schedule "A". Furthermore, the air rights of the Premises, are excepted and
reserved to LANDLORD. The Building consists of approximately 83,018.13 square
feet and the lot to be used for parking consists of approximately 11,615.92
square meters, with existing improvements.

        TWO:  Premises shall be used and occupied exclusively in the
manufacture of MEMORY MODULES, EMBEDDED COMPUTER MODULES, COMMUNICATIONS
PRODUCTS AND/OR SUCH OTHER ELECTRONICS PRODUCTS AS THE TENANT MAY DECIDE TO
MANUFACTURE IN PUERTO RICO.

        THREE:  TENANT shall hold the Premises for a period of TEN (10) years
commencing the first day of the month following the obtention of the
corresponding ARPE permits, but not later than DECEMBER 31, 1997.

        FOUR:  TENANT shall pay to LANDLORD an annual rental as follows:

                $2.20 PER SQ. FT. MONTHLY FOR THE FIRST FIVE (5) YEARS
                $2.75 PER SQ. FT. MONTHLY FOR THE SECOND FIVE (5) YEARS

        During the first year TENANT will pay rent on the basis of 60,000 sq.
ft. Thereafter, TENANT will pay rent for said 60,000 sq. ft. and any space in
excess of 60,000 sq. ft. actually utilized, nevertheless TENANT shall start
paying rent for the entire space of approximately 83,018.13 sq. ft., not later
than three (3) years from the date of this lease contract. TENANT shall notify
LANDLORD thirty (30) days prior to the end of each quarter, the space that it
is presently occupying, so that the rent for the following months can be
appropriately adjusted.

        Parking Lot Rent - $1,000.00 monthly throughout the term of the Lease.

        The monthly installments for rent specified herein, shall be paid in
advance on the first day of each month at LANDLORD'S office, or at any other
place that LANDLORD may notify. In the event that the date of commencement does
not fall on the first of the month, TENANT further agrees to pay the first
partial monthly installments, prior to, or on the date of commencement.

 
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     FIVE:  TENANT shall deposit in certified check, simultaneously with the
execution of this Lease, the amount of $15,840.

     This deposit shall guarantee the compliance by TENANT of its obligations,
under this Contract, particularly, but not limited to, the payment of rent,
the compliance of the environmental clauses herein included and the return of
the Premises in proper condition at the termination of this Lease. On said
termination, if TENANT is not in default of any of the terms and conditions of
this Contract, LANDLORD will return to TENANT the sum of money, if any, held
pursuant to this provision, after LANDLORD's Environmental Office certifies
that there are no environmental deficiencies as a result of TENANT's
manufacturing operation on the demised Premises.

     SIX:  TENANT agrees to have on the date of commencement of the term of
this Lease a capitalization of $5.7 million. Likewise TENANT agrees to install
within TWENTY FOUR (24) months from the same date, manufacturing machinery and
equipment with a value of at least $15 million. In other words, TENANT shall
increase its present investment of $5.7 millions so that its total investment
in machinery and equipment shall be $15 million. It is understood that TENANT
may require a period of up to twelve (12) additional months and LANDLORD will
grant the extension, if so requested.

     This shall not include the cost of transportation and installation
thereof, nor its ordinary depreciation after installation; and within
TWENTY FOUR (24) months from the date of commencement of the term, increase
its employment from 125 to 525. It is understood that TENANT may require a
period of up to TWELVE (12) additional months and LANDLORD will grant the
extension, if so requested.

     The aforementioned levels of capitalization, machinery and equipment and
employment herein required shall be maintained throughout the term of this
Lease or any extension thereof.

     SEVEN: All notices, demands, approvals, consents and/or communications
herein required or permitted shall be in writing. If by mail should be
certified and to the following addresses: To LANDLORD: P.O. BOX 362350, SAN
JUAN, PUERTO RICO 00936-2350. To TENANT: MR. DAVID B. MULLIN, SMART MODULAR
TECHNOLOGIES, INC., 4305 CUSHING PARKWAY, FREMONT, CALIFORNIA 94538.

     EIGHT: NET LEASE -- This Lease shall be interpreted as a net lease; it
being the exclusive responsibility of TENANT to pay for all operating expenses,
utilities, maintenance, expenses, insurance, taxes or any; other costs,
expenses or charges of any nature  not specifically assumed by LANDLORD
hereunder.

     NINE: WARRANTY AS TO USE -- LANDLORD does hereby warrant that at the time
of the commencement of the term of this Lease, the Premises may be used by
TENANT for the manufacturing purposes herein intended which are deemed
consistent with the design and construction in accordance with the
corresponding plans and specifications.

     TEN: ALTERATIONS -- TENANT shall make no alterations, additions or
improvements to the Premises without the prior consent of LANDLORD and all such
alterations, additions or improvements made by or for 
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TENANT, shall be at TENANT'S own cost and expenses and shall, when made, be the
property of LANDLORD without additional consideration and shall remain upon and
be surrendered with the Premises as a part thereof at the expiration or
earlier termination of this Lease, subject to any right of LANDLORD to require
removal or to remove as provided for hereinafter.

     In the event TENANT asks for LANDLORD'S consent for any alteration;
LANDLORD may at its option, require from TENANT to submit plans and
specifications for said alteration. Before commencing any such work, said plans
and specifications, if required, shall be filed with and approved by all
governmental agencies having jurisdiction thereof, and the consent of any
mortgagee having any interest in or lien upon this Lease shall be procured by
TENANT and delivered to LANDLORD if required by the term of the mortgage.

     Before commencing any such work, TENANT shall at TENANT'S own cost and
expense, deliver to LANDLORD a General Accident Liability Policy more
particularly described in Article THIRTY (30) hereof, but said policy shall
recite and refer to such work, and in addition thereto, if the estimated cost
of such work is more than FIVE THOUSAND DOLLARS ($5,000.00), TENANT shall, at
TENANT'S own cost and expense, deliver to LANDLORD a surety bond, or a
performance bond from a company acceptable to LANDLORD, or a similar bond or
other security satisfactory to LANDLORD, in an amount equal to the estimated
cost of such work, guaranteeing the completion of such work within a reasonable
time, due regard being had to conditions, free and clear of materialmen liens,
mechanics liens or any other kind of lien, encumbrances, chattel mortgages and
conditional bills of sale and in accordance with said plans and specifications
submitted to and approved by LANDLORD. At LANDLORD'S option TENANT shall
provide a blanket written guarantee in an amount sufficient to satisfy LANDLORD
as to all alterations, changes, additions and improvements to the Premises in
lieu of separate guarantee for each such project. 

     TENANT shall pay the increased premium, if any, charged by the insurance
companies carrying insurance policies on said building, to cover the additional
risk during the course of such work.

     ELEVEN:   POWER SUBSTATION - If required by TENANT'S operations, TENANT
shall, at its own cost and expense, construct and/or install a power substation
and connect it to the PUERTO RICO ELECTRICAL POWER AUTHORITY (PREPA)
distribution lines, for voltages up to 13.2 KV; and to PREPA transmission lines
for voltages of 38 KV, all in conformity to PREPA's requirements. Such
construction shall, in no event, be undertaken by TENANT until after LANDLORD
has approved the location thereof, as well as the routing of the power line
extension.             
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        TWELVE: Repairs and Maintenance - TENANT shall, at its own cost and
expense, put, keep and maintain in thorough repair and good order and safe
condition the building and improvements standing upon the Premises at the
commencement of the term hereon or thereafter erected upon the premises, or
forming part of the Premises, and their full equipment and appurtenances, the
side walks areas, sidewalk hoists, railings, gutters, curbs and the like in
from of the adjacent to the Premises, and each and every part thereof, both
inside and outside, extraordinary and ordinary, and shall repair the whole and
each and every part thereof in order to keep the same at all times during the
term hereof in through repair and good order and safe conditions, whenever the
necessity or desirability therefor may occur, and whether or not the same shall
occur, in whole or in part, by wear, tear, obsolescence or defects, and shall
use all reasonable precautions to prevent waste, damage or injury, except as
provided hereinafter.

        LANDLORD and not TENANT, shall be responsible for and shall promptly
correct any defects in the building on the Premises which are due to faulty
design, or to errors of construction not apparent at the time the Premises were
inspected by TENANT for purposes of occupancy by TENANT; this shall not be
interpreted to relieve TENANT of any responsibility or liability herein
otherwise provided, including among others, for structural failure due to the
fault or negligence of TENANT.

        TENANT shall also at TENANT'S own cost and expense, maintain the
landsite in thoroughly clean condition; free from solid waste (which includes
liquid and gaseous as defined by the Resource Conservation and Recovery Act),
and the Regulation on Hazardous and Non-Hazardous Waste of the Environmental
Quality Board, as amended, rubbish, garbage and other obstructions.
Specifically, TENANT shall not use said landsite, nor permit it to be used, as a
deposit or as dump for raw materials, waste materials, hazardous, toxic or
non-toxic substances, or substances of whichever nature. TENANT shall neither
make any excavation for the purpose of storing, putting away and/or concealing
raw materials or waste materials of any kind. Underground storage of hazardous
and/or toxic substances is specifically prohibited.

        TENANT shall not do or cause to be done, nor permit on the Premises
anything deemed extra hazardous, nor shall it store in the Premises flamable or
toxic products of any class or kind without taking the proper precautions and
complying with applicable federal and Commonwealth laws and regulations.


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        In case TENANT needs to store in the landsite raw materials of a
hazardous and/or toxic nature or hazardous and/or toxic wastes, TENANT shall
notify LANDLORD and secure its prior authorization. LANDLORD shall be furnished
with a copy of any permit issued for such storage.

        Although it is not intended that TENANT shall be responsible for any
decrease in value of the Premises due to the mere passing of time, or for
ordinary wear and tear of surfaces and other structural members of the
building, nevertheless TENANT shall: (i) replace, with like kind and quality,
doors, windows; electrical, sanitary and plumbing, fixtures; building equipment
and/or other facilities or fixtures in the Premises which through TENANT's use,
fault or negligence, become too worn out to repair during the life of this
Lease, (ii) paint the property inside and outside as required.

        In addition to the foregoing, TENANT shall indemnify and safe harmless
LANDLORD from and against any and all cost, expenses, claims, losses, damages,
or penalties, including counsel fees, because of or due to TENANT's failure to
comply with the foregoing, and TENANT shall not call upon LANDLORD for any
disbursement or outlay of money whatsoever, and hereby expressly releases and
discharges LANDLORD of and from any liability or responsibility whatsoever in
connection therewith.

        THIRTEEN:  Roof Care - TENANT, without the prior consent of LANDLORD,
shall not: (i) erect or cause to be erected on the roof any bill board, aerial
sign, or structure of any kind, (ii) place any fixture, equipment or any other
load over the roof, (iii) drill any hole on the roof for whichever purpose,
(iv) use the roof for storage nor (v) correct any leaks; it shall be the
responsibility of Landlord to correct leaks in a diligent manner and to respond
to communications regarding leaks on a timely basis, especially those that
TENANT has communicated to LANDLORD adversely effect its operations, it being
understood that a response within 48 hours to evaluate the situation and
determine a mutually satisfactory course of action in order to diligently
resolve the problem shall be deemed a timely response.

        FOURTEEN:  Floor Loads - TENANT hereby acknowledges that it has been
informed by LANDLORD that the maximum floor load of the Premises herein demised
is 150 pounds per sq. ft. Therefore, TENANT hereby agrees that in the event the
load of the machinery and equipment to be installed thereat exceeds such
maximum load, it shall, at its own cost and expense, carry out any improvements
to the floor of the Premises which may be necessary to support such additional
load; it being further agreed and understood that construction and/or
installation of such improvements shall not be commenced until after LANDLORD'S
approval of the plans to be prepared therefor by TENANT and 


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approval of the plans to be prepared therefor by TENANT and thereafter, after
completion of construction and/or installation of said facilities, they shall
be deemed covered by and subject to the applicable provisions of this Contract;
it being further specifically agreed and understood that upon termination of
this Lease, such facilities shall be removed by TENANT, at its own cost and
expense, or in the alternative, and upon request by LANDLORD, they shall remain
as part of the Premises with no right whatsoever on the part of TENANT to be
reimbursed and/or compensated therefor.

     FIFTEEN: Fixtures - TENANT shall not affix to the ceiling, nor to its
supporting joists or columns, nor to any of its walls, any air conditioning
unit, nor any other fixture, without the prior consent of LANDLORD.

     SIXTEEN: Environmental Protection and Compliance - TENANT agrees, as a
condition hereof, that it will not discharge its solid, liquid or gaseous
industrial and/or sanitary effluent or discharges, either into the sewer system
and/or into any other place until after required authorizations therefor has
been obtained from the Puerto Rico Aqueduct and Sewer Authority, and/or the
Department of Health of Puerto Rico and/or Environmental Quality Board, and/or
any other governmental agency having jurisdiction thereof and TENANT further
agrees and undertakes to pre-treat any such effluent, prior to discharge thereof
as required by the said Authority, Department and/or governmental agency with
jurisdiction, and/or to install any equipment or system required, and to fully
abide by and comply with any and all requisites imposed thereby, and upon
request by LANDLORD to submit evidence of such compliance; it being agreed that
non-compliance thereof by TENANT for a period of ninety (90) days after notice,
shall be deemed an additional event of default under the provisions hereof.
Provided, that no construction and/or installation shall be made until LANDLORD
has approved of it.

     TENANT shall also, at TENANT's own cost and expense, construct and
maintain Premises, processes and/or operating procedures in compliance with the
terms, conditions and commitments specified in any Environmental Impact
Statement, Environmental Assessment or any other analogous document produced by
the Commonwealth of Puerto Rico, Economic Development Administration/LANDLORD
as lead agency/or by any other governmental agency in connection with the
approval or operation of the project.

     TENANT shall also serve LANDLORD with a copy of any lawsuit, notice of
violation, order to show cause or any other regulatory or legal action against
TENANT in any environmental-related case or issue.
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     TENANT shall also serve LANDLORD with a copy of any permit granted to
TENANT for air emissions, water discharge, solid waste generation, storage,
treatment and/or disposal, and for any hazardous and/or toxic waste raw
materials or by-products used or generated, stored, treated and/or disposed or
any other endorsement, authorization or permit required to be obtained by
TENANT.
     TENANT shall also serve LANDLORD with a copy of any filing or notification
to be filed by TENANT with any regulatory agency or any environmentally related
case or issue, especially in any situation involving underground or surface
water pollution, hazardous and/or toxic waste spillage and ground contamination.
The notification to LANDLORD shall take place not later than the actual filing
of the pertinent documents with the regulatory agency. 
     SEVENTEEN: Improper Use - TENANT, during the term of this Lease and of any
renewal or extension thereof, agrees not to use or keep or allow the leased
Premises or any portion thereof to be used or occupied for any unlawful purpose
or in violation of this Lease or of any certificate of occupancy or certificate
of compliance covering or affecting the use of the Premises or any portion
thereof, and will not suffer any act to be done or any condition to exist on the
Premises or any portion thereof, or any article to be brought thereon, which may
be dangerous, unless safeguarded as required by law, or which may in law,
constitute a nuisance, public or private, or which may made void or voidable any
insurance then in force on the leased Premises.
     EIGHTEEN: Government Regulations - TENANT agrees and undertakes to abide by
and comply with any and all rules, regulations and requirements of the Planning
Board of Puerto Rico, the Department of Health, the Environmental Quality Board,
the Environmental Protection Agency (EPA), where applicable and/or of any other
governmental agency, having jurisdiction thereon applicable to TENANT'S
operations at the Premises and/or products to be manufactured thereat, and if
requested by LANDLORD, TENANT shall submit evidence of such compliance; it being
agreed and understood that noncompliance with any and all such rules,
regulations and requisites shall be deemed an additional event of default under
the provisions of this Contract, unless remedied within thirty (30) days after
receipt of notice thereof.
     Any and all improvements to the Premises required by any governmental
agency, having jurisdiction thereon so as to carry TENANT'S operations in
accordance with the regulations and requisites thereof, shall be at TENANT'S own
cost and expense, except for any improvements that may be required as a result
of any violation by LANDLORD that may exist at the effective date hereof other
than violations caused by TENANT or TENANT'S agents.

                                  
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     TENANT further agrees and undertakes to install in the Premises, at its own
costs and expense, such devices as may be necessary to prevent any hazard, which
may be caused or created by its operations from affecting the environmental
integrity of the landsite or causing any nuisance to adjacent TENANTS and/or the
community in general; it being agreed and understood that creating or causing
any such nuisance, shall be deemed an additional event of default under the
provisions of this Contract.

     TENANT further agrees and undertakes to abide by and comply with any and
all rules, regulations and requisites of the Fire Department relative to the
use and storage of raw materials, finished products and/or inflammable
materials, and/or of any other governmental agency, having jurisdiction thereon
applicable to TENANT'S operations at the Premises, and if requested by
LANDLORD, TENANT shall submit evidence of such compliance; it being agreed and
understood that noncompliance by TENANT with any of the aforementioned rules,
regulations and requisites shall be deemed, in each of such cases, an
additional event of default under the provisions of this Contract, unless
remedied within thirty (30) days after receipt of notice thereof.

     If as a consequence of the foregoing dispositions, TENANT need to make
alterations to the Premises, the same shall be done subject to the dispositions
of Article TEN hereof.

     NINETEEN: Use Permit - TENANT agrees to abide and comply with any and all
conditions and requisites included in the Use Permit which may be issued by
the Puerto Rico Permits and Regulations Administration (ARPE), and if requested
by LANDLORD, shall submit evidence of such compliance; it being agreed and
understood that noncompliance by TENANT with any and all such conditions and
requisites and/or the cancellation of the said Use Permit shall, in each of
such cases, be deemed an additional event of default under the provisions of
this Contract.

     TWENTY: Inspection - TENANT shall permit LANDLORD or LANDLORD'S agents to
enter the Premises at all reasonable time for the purpose of inspecting the
same, or of making repairs that TENANT has neglected or refused to make as
required by the terms, covenants and conditions of this Lease, and also for the
purpose of showing the Premises to persons wishing to purchase the same, and
during the year next preceding the expiration of this Lease, shall permit
inspection thereof by or on behalf of prospective TENANTS. If, at a reasonable
time, admission to the Premises for the purposes aforesaid cannot be obtained,
or if at any time an entry shall be deemed necessary for the inspection or
protection of the property, or for making any repairs, whether for the benefit
of TENANT or LANDLORD, LANDLORD'S agents or representatives may enter the
Premises by force, or otherwise, without rendering LANDLORD, 
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or LANDLORD'S agents or representatives liable to any claim or cause of action
or damage by reason thereof, and accomplish such purpose.

     The provisions contained in this Article are not to be construed as an
increase of LANDLORD'S obligations under this Lease; it being expressly agreed
that the right and authority hereby reserved does not impose, nor does LANDLORD
assume, by reason thereof, any responsibility or liability whatsoever for the
repair, care or supervision of the Premises, or any building, equipment or
appurtenance on the Premises.

     TWENTY ONE:    LANDLORD'S entry for repairs and alterations - LANDLORD
reserves the right to make such repairs, changes, alterations, additions or
improvements in or to any portion of the building and the fixtures and
equipment which are reputed part thereof as it may deem necessary or desirable
and for the purpose of making the same, to use the street entrances, halls,
stairs and elevators of the building provided that there be no unnecessary
obstruction of TENANT'S right of entry to and peaceful enjoyment of the
Premises, and TENANT shall make no claim for rent abatement compensation or
damages against LANDLORD by reason of any inconvenience or annoyance arising
therefrom.

     TWENTY TWO:    LANDLORD excused in certain instances - If, by reason of
inability to obtain and utilized labor, materials or supplies, or by reason of
circumstances directly or indirectly the result of any state of war, or of
emergency duly proclaimed by the corresponding governmental authority, or by
reason of any laws, rules, orders, regulations or requirements of any
governmental now or hereafter in force or by reason of strikes or riots, or by
reason of accidents, in damage to or the making of repairs, replacements
or improvements to the building or any of the equipment thereof, or by reason of
any other cause reasonable beyond the control of LANDLORD, LANDLORD shall be
unable to perform or shall be delayed in the performance of any covenant to
supply any service, such non-performance or delay in performance shall not be
ground to any claim against LANDLORD for damages or constitute a total or
partial eviction, constructive or otherwise. It being agreed and understood
that the time for completion of any such construction, shall be extended for a
period of time equal to the number of days of any such delay.

     TWENTY THREE:  Quiet Enjoyment - TENANT on paying the full rent and
keeping and performing the conditions and covenants herein contained, shall and
may peaceably and quietly enjoy the Premises for the term aforesaid,
subject, however, to the terms of this Lease and to the mortgages hereinafter
mentioned.

     TWENTY FOUR:   Leasehold Improvements - If leasehold improvements made by
or for the benefit of TENANT in the Premises at his request or other personal
property to TENANT are assessable or taxable and a tax      
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liability is imposed to TENANT or LANDLORD, it is understood that it shall be
the sole responsibility of TENANT to pay such taxes and in no event shall such
taxes be the liability of or be transferable to LANDLORD. In the event that by
operation of law, such taxes became a liability of LANDLORD, TENANT shall pay
such taxes as they become due and payable and shall promptly reimburse LANDLORD
for any payments or expenses incurred or disbursed by LANDLORD by reasons of
any such assessment. Said amount shall be due and payable, as additional rent,
with the next installment of rent. In the event that TENANT fails to make this
payment when due, it shall be subject to the dispositions of Article THIRTY
SEVEN hereof.

        TWENTY FIVE: Stoppage of Options - It is understood by the parties
hereto that this Lease is made by LANDLORD in furtherance of the
industrialization plans of the Commonwealth of Puerto Rico, and it is
accordingly understood that TENANT will use all reasonable efforts while this
Lease is in effect to maintain a manufacturing operation upon the Premises, but
nothing contained in this paragraph shall be deemed to require TENANT to
maintain such an operation otherwise than in accordance with sound principles of
business management, or (without limiting the generality of the foregoing) to
prevent TENANT from curtailing such operation or from shutting it down, whenever
and as often as TENANT may, in the exercise of sound business judgment, deem
such action advisable. However, TENANT shall give to LANDLORD notice of any
necessary or convenient curtailment and/or shut-down, at least seven (7) days
prior to the date fixed therefor except in cases of an emergency shut-down, in
which case such notice shall be given at the earliest possible time. No
curtailment of operations or shut-down in accordance with the provisions of this
paragraph shall constitute a default under the provisions of this Contract which
will enable LANDLORD to terminate it, unless such plants shall have been
shut-down for a period of six (6) consecutive months. A shut-down on account of
unforeseeable event or events which although foreseeable could not be prevented,
shall not constitute a breach of this agreement. Nothing in this paragraph
contained shall relieve TENANT from the payment of rent during the period of any
shut-down or curtailments of operations.

        TWENTY SIX: Assignment and Subletting - TENANT shall not assign, this
Lease nor let or sublet the Premises or any part thereof except to its parent
company, to a wholly owned subsidiary, to an affiliate of TENANT, wholly owned
by TENANT'S parent company or to a corporation to be organized by TENANT. In any
of these cases, TENANT shall promptly notify LANDLORD of said assignment or
subletting, it being agreed and understood that no such assignment or subletting
shall: (i) reduce or, in any way, affect the obligations of TENANT under this
Lease, nor (ii)

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release TENANT from liability under this Lease.

        TWENTY SEVEN: Successors in Interest - This Lease Contract and every
provision thereof, shall bind and inure to the benefit of the legal
representatives, successors and assigns on the parties. However, the term
"LANDLORD", as used in this Contract, so far as any covenants or obligations on
the part of LANDLORD under this Lease are concerned, shall be limited to mean
and include only the owner of lessor, at the time in question, of the Premises,
so that in the event hereafter of a transfer of the title to the Premises,
whether any such transfer be voluntary or by operation of law or otherwise, the
person, natural or juridicial, by whom any such transfer is made, shall be and
hereby is entirely freed and relieved of all personal liability as respects the
performance of the covenants and obligations of LANDLORD under this Lease from
and after the date of such transfer.

        TWENTY EIGHT: No Representation by LANDLORD - LANDLORD, LANDLORD'S
agents or employees, or the agents, executives or employees of the Economic
Development Administration, have made no representations or promises with
respect to the Premises except as herein expressly set forth and no rights,
easements or licenses are acquired by TENANT by implication or otherwise except
as expressly set forth in the provisions of this Contract. The taking possession
of the Premises by TENANT, shall be conclusive evidence, as against TENANT, that
TENANT accepts same "AS IS" and that said Premises, particularly the building
which forms a part of the same, were in good and satisfactory conditions at the
time such possession was so taken.

        TWENTY NINE: Damages - LANDLORD shall not be responsible for any latent
defect or change of conditions in the Premises resulting in damage to the same,
or the property or person therein, except to the extent of LANDLORD'S gross
negligence, and provided such claims or loss is not covered by insurances herein
required from TENANT. TENANT shall promptly notify LANDLORD of any damage to or
defects in the Premises, particularly in any part of the building's sanitary,
electrical, air conditioning or other systems located in our passing through the
Premises, and the damage or defective conditions, subject to the provisions of
Article TWENTY ONE (21) hereof, shall be remedied by LANDLORD with reasonable
diligence.

        THIRTY: General Liability Insurance - TENANT shall indemnify, have
harmless and defend LANDLORD and agents, servants and employees of LANDLORD
against and from any and all liability, fines, suits, claims, demands, expenses,
including attorneys' fees, and actions of any kind or nature arising by reason
of injury to person or property including



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the loss of use resulting thereof or, violation of law occurring in the
Premises occasioned in whole or in part by any negligent act or omission on the
part of TENANT or an employee (whether or not acting within the scope of his
employment), servant, agent, licensee, visitor, assignor or undertenant of
TENANT, or by any neglectful use or occupancy of the Premises or any breach,
violation or non-performance of any covenant in this Lease on the part of
TENANT to be observed or performed.

     Pursuant to the foregoing, TENANT shall, maintain during the term of this
lease, at its own cost and expense, a Comprehensive General Liability Policy.
Said policy shall: (i) be for a combined single limit of no less than
$500,000.00 per accident, (ii) hold LANDLORD harmless against any and all
liability as hereinbefore stated, and (iii) the care, custody & control
exclusion shall be deleted from this coverage. LANDLORD may require additional
reasonable limits of public liability insurance and coverages, when changing
circumstances so require.

     THIRTY ONE:     Property Insurance - TENANT recognizes that the rent
provided for herein does not include any element to indemnify, repair, replace
or make whole TENANT, his employees, servants, agents, licensees, visitors,
assignees, or undertenant for any loss or damage to any property or injury to
any person in the Premises.

     Accordingly, during the term of this Lease, TENANT shall keep the building
standing upon the Premises at the commencement of the term hereof or thereafter
erected upon the Premises, including all equipment appurtenant to the Premises
and all alterations, changes, additions and improvements, insured for the
benefit of LANDLORD and TENANT, as their respective interest may appear, in an
amount at least equal to the percentages stated below (as LANDLORD may from
time to time determine).

     The basis of the Property Insurance shall be Replacement Cost and the
coverage an "All Risks" Property Insurance Policy. Coverages included in the
All Risks Form:

          1.   Fire - "Building & Contents Form"

               (a)  Building - 100% of insurable value exclusive of
                    foundations

               (b)  Contents - All equipment appurtenant to the Premises
                    (State value of Policy)

          2.   Additional Coverages under the Fire Policy

               (a)  Extended Coverage Endorsement - 100% of insurable value
                    exclusive of foundations

               (b)  Earthquake - 50% of insurable value including
                    foundations         

    
<PAGE>   13
                                       13


               (c) Vandalism and Malicious Mischief Endorsement

               (d) Improvements and Betterments - For all alterations, changes,
                   additions and improvements

          3.   Landsite and Flood whenever applicable and/or necessary

          4.   Boiler and Machinery (if any) - 100% of insurable value

          5.   Pollution Liability Policy - if necessary

     THIRTY TWO: Multifactory Building Specific Dispositions - In the event
that the Premises constitute a section or sections of an industrial building
and landsite in which other operations are conducted by other TENANTS: (i) the
insurance coverage herein required, shall be acquired by LANDLORD for the whole
of the industrial building and TENANT shall reimburse LANDLORD for its
proportionate share in the total cost of said policies, (ii) if, because of
anything done, caused or permitted to be done, permitted or omitted by TENANT,
the premium rate for any kind of insurance affecting the Premises shall be
increased, TENANT shall pay to LANDLORD the additional amount which LANDLORD
may be thereby obligated to pay for such insurance, and if LANDLORD shall
demand that TENANT remedy the condition which cause the increase in the
insurance premiums rate, TENANT will remedy such conditions within five (5)
days after such demand, and (iii) the insurance policies required in the
preceding Articles THIRTY (30) & THIRTY ONE (31) shall be endorsed to include a
waiver of subrogation against TENANT. All amounts to be reimbursed by TENANT
under this Article, shall be due and payable, as additional rent, with the next
installment of rent. In the event that TENANT fails to make this payment, when
due, it shall be subject to the dispositions of Article THIRTY SEVEN (37)
hereof.

     THIRTY THREE: Additional Dispositions about Insurance - All the Insurance
policies herein required from TENANT, shall be taken in form and substance
acceptable to LANDLORD with insurance companies duly authorized to do business
in Puerto Rico, having a "A" and a higher financial fatting according to
Best's Insurance Report; and shall include LANDLORD as additional insured.
TENANT shall instruct the corresponding insurer to deliver such policies or
certified copies of Certificates of Insurance, in lieu of, directly to
LANDLORD. LANDLORD reserves the right not to deliver possession of the Premises
to TENANT, unless, and until two (2) days after such original policies, or
certified copies or certificates have been deposited with LANDLORD. 
<PAGE>   14
                                       14

     Furthermore, said policies, shall: (i) provide that they may not be
canceled by the insurer for nonpayment of premium or otherwise, until at least
thirty (30) days after services of notice by registered or certified mail of
the proposed cancellation upon LANDLORD, and (ii) be promptly renewed by TENANT
upon expiration and TENANT shall, within thirty (30) days after such renewal,
deliver to LANDLORD adequate evidence of the payment of premiums thereon. If
such premiums or any of them shall not be so paid, LANDLORD may procure the
same in the manner set forth for governmental agencies, and TENANT shall
reimburse LANDLORD any amount so paid. This reimbursement being due and payable
with the next installment of rent. In the event that TENANT fails to make this
payment when due, it shall be subject to the dispositions of Article THIRTY
SEVEN (37) hereof. It is expressly agreed and understood, that payment by
LANDLORD of any such premiums shall not be deemed to waive or release the
default in the payment thereof by TENANT nor the right of LANDLORD to take such
action as may be available hereunder as in the case of default in the payment
of rent.
     Upon the commencement of the term hereof, TENANT shall pay to LANDLORD the
apportioned unearned premiums on all such policies of insurance then carried by
LANDLORD in respect of the Premises in the event TENANT continues with the
insurance policies placed in LANDLORD.
     TENANT shall not violate nor permit to be violated any of the conditions
or provisions of any of said policies, and TENANT shall so perform and satisfy
the requirements of the companies writing such policies that at all times
companies of good standing and acceptable to LANDLORD shall be willing to write
and continue such insurance.
     TENANT shall cooperate with LANDLORD in connection with the collection of
any insurance monies that may be due in the event of loss and shall execute and
deliver to LANDLORD such proofs of loss and other instruments that may be
required for the purpose of facilitating the recovery of any such insurance
monies, and in the event that TENANT shall fail or neglect so to cooperate or
to execute, acknowledge and deliver any such instrument, LANDLORD, in addition
to any other remedies, may as the agent or attorney-in-fact of TENANT, execute
and deliver any proof of loss or any other instruments as may seem desirable to
LANDLORD and any mortgagee for the collection of such insurance monies. This
shall not be interpreted as any waiver of the obligations of TENANT under
Articles THIRTY, THIRTY ONE, THIRTY TWO and THIRTY THREE hereof or exclusively
in favor of LANDLORD under Article THIRTY NINE hereof.
<PAGE>   15
     THIRTY FOUR: Waivers - The receipt by LANDLORD of the rent, additional
rent, or any other sum or charges payable by TENANT with or without knowledge of
the breach of any covenant of this Contract, shall not be deemed a waiver of
such breach. No act or omission of LANDLORD or its agent during the term of this
Lease shall be deemed an acceptance of a surrender of the Premises and no
agreement to accept a surrender of the Premises shall be valid unless it be made
in writing and described by LANDLORD. This Contract contains all the agreements
and conditions made between the parties hereto with respect to the Premises and
it cannot be changed orally. Any additions to, or charges in this Lease must be
in writing, signed by the party to be charged.
     Failure on the part of LANDLORD to act or complain of any action or
non-action on the part of TENANT shall not be deemed to be a waiver of any of
its respective rights hereunder nor constitute a waiver at any subsequent time
of the same provision. The consent or approval by LANDLORD to, or of any action
by the other requiring consent or approval, shall not be deemed to waive or
render unnecessary the consent or approval by LANDLORD of any subsequent
similar act.
     THIRTY FIVE: Reinstatement - No receipt of monies by LANDLORD for TENANT
after the termination or cancellation hereof in any lawful manner shall
reinstate, continue or extend the term hereof, or affect any notice theretofore
given to TENANT, or operate as a waiver of the right of LANDLORD to enforce the
payment of rent, additional rent, or other charges then due or thereafter
falling due, or operate as a waiver of the right of LANDLORD to recover
possession of the Premises by proper suit, action, proceeding or remedy; it
being agreed that, after the service of notice to terminate or cancel this
Lease, and the expiration of the time therein specified, if the default has not
been cured in the meantime, or after the commencement of suit, action or
summary proceedings or of any other remedy, or after a final order, warrant of
judgment of the possession of the Premises, LANDLORD may demand, receive and
collect any monies then due, or thereafter becoming due, without in any manner
affecting such notice, proceeding, suit, action, order, warrant or judgment;
and any and all such monies so collected shall be deemed to be payments for the
use and occupation of the Premises, or at the election of LANDLORD, on account
of TENANT'S liability hereunder. Delivery or acceptance of the keys to the
Premises, or any similar act, by the LANDLORD, or its agents or employees,
during the term hereof, shall not be deemed to be a delivery or an acceptance
of a surrender of the Premises unless LANDLORD shall explicitly consent to it,
in the manner set forth hereinbefore.
<PAGE>   16


                                       16


     THIRTY SIX: Subordination and Attornment - This Lease is and shall be
subject and subordinate to all liens, or mortgages which may now or hereafter
affect the Premises and to all renewals, modifications, consolidations,
replacements and extensions thereof and, although this subordination provision
shall be deemed for all purposes to be automatic and effective without any
further instrument on the part of TENANT, TENANT shall execute any further
instrument requested by LANDLORD to confirm such subordination.

     TENANT further covenants and agrees that if by reason of a default upon
the part of LANDLORD of any mortgage affecting the Premises, the mortgage is
terminated or foreclosed by summary proceedings or otherwise, TENANT will
attorn to the mortgagee or the purchaser in foreclosure proceedings, as the
case may be, and will recognize such mortgage or purchaser, as the TENANT'S
landlord under this Lease. TENANT agrees to execute and deliver, at any time
and from time to time, upon the request of LANDLORD or of the mortgagee or the
purchaser in foreclosure proceedings, as the case may be, any reasonable
instrument which may be necessary or appropriate to evidence such attornment.
TENANT further waives the provision of any statute or rule of law now or
hereafter in effect which may give or purport to give TENANT any right of
election to terminate this lease or to surrender possession of the Premises
demised hereby in the event any such proceeding is brought by the holder of any
such mortgage, and TENANT'S obligations hereunder shall not be affected in any
way whatsoever by any such proceeding.

     TENANT, covenants and agrees, upon demand of the holder of any mortgage
duly recorded or recordable in the corresponding Registry of the Property or of
any receiver duly appointed by the foreclose any such mortgage, to pay to the
holder of any such mortgage or to such receiver, as the case may be, all rent
becoming due under this Lease after such demand, provided such holder of any
such mortgage or any such receiver complies with the obligations of LANDLORD
under this Lease.

     TENANT, upon request of LANDLORD or any holder of any mortgage or lien
affecting the Premises, shall from time to time, deliver or cause to be
delivered to LANDLORD or such lien holder or mortgagee, within ten (10)
working days from date of demand a certificate duly executed and acknowledged
in form for recording, without charges, certifying, if true, or to extent true,
that this Lease is valid and subsisting and in full force and effect and
LANDLORD is not in default under any of the terms of this Lease.
<PAGE>   17
                                       17

     THIRTY SEVEN:  Late Payments and Payment by LANDLORD - In the event that
(i) TENANT makes late payment, or fails to make payments to LANDLORD, in whole
or in part, of the rent, or of the additional rent, or of any of the other
payments of money required to be paid by TENANT to LANDLORD, as stipulated in
this Lease, when and as due and payable; or if (ii) LANDLORD, without assuming
any obligation to do so, after any notice or grace period provided hereunder,
performs or causes to be performed, at the cost and expense of TENANT, any of
the acts or obligations agreed to be performed by TENANT, as stipulated in this
Lease, and TENANT fails to refund LANDLORD any amounts of money paid or incurred
by LANDLORD in performing of causing the performance of such acts or
obligations, when and as due and payable, TENANT undertakes and agrees to pay
LANDLORD as additional rent, interest on such lately paid or unpaid rents,
additional rent, and/or on such other payments of money required to be paid,
and/or on any such amounts of money required to be refunded, from and after the
date when payment thereof matured or became due and payable, until full payment,
at the rate of twelve (12%) per cent per annum, or if such 12% interest, is
unlawful, then and in such event, at the highest maximum prevailing rate of
interest on commercial unsecured loans as fixed by the Board of Regulatory Rates
of Interest and Financial Charges, created under Law #1, approved October 15,
1973 (10 LPRA 998), as amended, or by any successor statute or regulation
thereof.

     THIRTY EIGHT:  Abatement - If any substantial service or facility to be
provided by LANDLORD is unavailable for a period exceeding thirty (30) days and
LANDLORD has been notified of the same, should time unavailability of such
service render all or any portion of the Premises untenable, TENANT after the
aforesaid thirty (30) days, shall be entitled to an abatement of a portion of
the rent that shall reflect that portion of the Premises which is untenable,
provided the damage to the service or facility is not attributable to the act
or neglect of TENANT or the employees, servants, licensees, visitors, assigns
or undertenants of TENANT.

     THIRTY NINE:   Fire or other Casualty - If before or during the term of
this Lease, the Premises shall be damaged by fire or other casualty, LANDLORD
after written notice thereof is given by TENANT, shall repair the same with
reasonable dispatch after notice to it of the damage, due allowances being made
for any delay due to causes beyond the LANDLORD's reasonable control,
provided, however, that       
<PAGE>   18

                                       18

LANDLORD shall not be required to repair or replace any furniture, furnishings
or other personal property which TENANT may have placed or installed or which it
may be entitled or required to remove from the Premises. LANDLORD shall proceed
with due diligence to obtain the corresponding insurance adjustment of the loss
and TENANT shall fully cooperate with LANDLORD and assist in the adjustment of
the loss. Until such repairs are completed, and provided such damage or other
casualty is not attributable to the act or neglect of TENANT or the employees,
servants, licensees, visitors, assigns or undertenants of TENANT, the rent
required to be paid pursuant to Article FOUR hereof, shall be abated in
proportion to the part of the Premises which are untenable. If the building, be
so damaged that LANDLORD shall decide to demolish and/or to reconstruct the
building, in whole or in part, LANDLORD may terminate this Lease by notifying
TENANT within a reasonable time after such damage of LANDLORD'S election to
terminate this Lease, such termination to be effective immediately if the term
shall not have commenced or on a date to be specified in such notice if given
during the term. In the event of the giving of such notice during the term of
this Lease, the rent shall be apportioned and paid up to the time of such fire
or other casualty if the Premises are damaged, or up to the specified date of
termination if the Premises are not damaged and LANDLORD shall not be otherwise
liable to TENANT for the value of the unexpired term of this Lease.

     FORTY: Default Provisions - If, during the term of this Lease, TENANT
shall: (i) apply for or consent in writing to, the appointment of a receiver,
trustee or liquidator of TENANT or of all or substantially all of its assets or
(ii) seek relief under the Bankruptcy Act, or admit in writing its inability to
pay its debts as they become due, or (iii) make a general assignment for the
benefit of this creditors, or (iv) file a petition case or an answer seeking
relief (other than a reorganization not involving the liabilities of TENANT) or
arrangement with creditors, or take advantage of any insolvency law, or (v)
file an answer admitting the material allegations of a case filed against it in
any bankruptcy, reorganization or insolvency proceeding or, if an order,
judgment or decree shall be entered by any court of competent jurisdiction on
the application of TENANT or creditor adjudicating TENANT a bankrupt or
insolvent, or approving a petition seeking reorganization of TENANT (other than
a reorganization not involving the liabilities of TENANT) or appointment of a
receiver, trustee or liquidator of TENANT, or of all or substantially all its
assets, and such order, judgment or decree, shall continue stayed and in effect
for any period of sixty
<PAGE>   19
                                       19


(60) consecutive days, the term of this Lease and all right, title and interest
of TENANT hereunder shall expire as fully and completely as if that day were
the date herein specifically fixed for the expiration of the term, and TENANT
will then, quit and surrender the Premises to LANDLORD, but TENANT shall remain
liable as hereinafter provided.

        If, during the term of this Lease: (i) TENANT shall default in
fulfilling any of the covenants of this Lease (other than the covenants for the
payment of rent or additional rent), or of any other standing contract with
LANDLORD or (ii) if, during the term of this Lease TENANT shall abandon,
vacate, or remove from the Premises the major portion of the goods, wares,
equipment, or furnishings usually kept on said premises, of (iii) this Lease,
without the prior consent of LANDLORD, shall be encumbered, assigned or
transferred in any manner in whole or in part or shall, by operation of law,
pass to or devolve upon any third party, except as herein provided, or (iv) if
TENANT is in violation of laws, rules and regulations regarding minimum wages
of its employees, or of any other law, rules and regulations applicable to his
operations, but which have not been specifically mentioned in this Lease,
LANDLORD may give to TENANT notice of any such default or the happening of any
event referred to above and if at the expiration of thirty (30) days after the
service of such a notice the default or event upon which said notice was based
shall continue to exist, or in the case of a default which cannot with due
diligence be cured within a period of thirty (30) days, if TENANT fails to
proceed promptly after the service of such notice and with all due diligence to
cure the same and thereafter to prosecute the curing of such default with all
due diligence (it being intended that in connection with a default not
susceptible of being cured with due diligence within thirty (30) days that the
time of TENANT within which to cure the same shall be extended for such period
as may be necessary to complete the same with all due diligence), LANDLORD may
give to TENANT a notice of expiration of the term of this Lease as of the date
of the service of such second notice, and upon the giving of said notice of
expiration the term of this Lease and all right, title and interest of TENANT
hereunder shall expire as full and completely as if that day were the date
herein specifically fixed for the expiration of the term, and TENANT or any
party holding under his will then quit and surrender the Premises to LANDLORD,
but TENANT shall remain liable as hereinafter provided.

        If, (i) TENANT shall default in the payment of the rent, the additional
rent, or of any other payment as required under this Lease and such default
shall continue for ten (10) working days after notice thereof by LANDLORD, of
(ii) if the default of the payment of 


<PAGE>   20

                                       20

the rent, continued for thirty (30) days from the date any such payment became
due and payable (AUTOMATIC DEFAULT TERMINATIONS), or (iii) if this Lease shall
terminate as in Paragraph one and two of this Article provided, this Lease
shall terminate and TENANT will then quit and surrender the Premises to
LANDLORD, but TENANT shall remain liable as hereinafter provided, LANDLORD or
LANDLORD's agents and servants may immediately or at any time thereafter
re-enter the Premises and remove all persons and all or any property therefrom,
whether by summary dispossess proceedings or by any suitable action or
proceeding at law, or with the license and permission of TENANT, which
shall under this Contract be deemed given upon expiration of the strict thirty
(30) days notice period of subdivision of paragraph Two of this Article,
without LANDLORD being liable to indictment, prosecution or damages therefor
and repossess and enjoy the Premises with all additions, alterations and
improvements.

     If TENANT shall fail to take possession of the Premises within ten (10)
days after the commencement of the term of this Lease, of if TENANT shall
vacate and abandon the Premises, LANDLORD shall have the right, at LANDLORD'S
option, to terminate this Lease and the term hereof, as well as all the right,
title and interest of TENANT hereunder, by giving TENANT five (5) days notice
in writing of such intention, and upon the expiration of the time fixed in such
latter notice, if such default be not cured prior thereto, this lease and the
term hereof, as well as all the right, title and interest of TENANT hereunder,
shall wholly cease and expire in the same manner and with the same force and
effect (except as to TENANT'S liability) as if the date fixed by such latter
notice were the expiration of the term herein originally granted; and TENANT
shall immediately quit and surrender to LANDLORD the Premises and each and
every part thereof and LANDLORD may enter into or repossess the Premises,
either by force, summary proceedings or otherwise. The right granted to
LANDLORD in this Article or any other Article of this Lease to terminate this
Lease, shall apply to any extension or renewal of the term hereby granted, and
the exercise of any such right by LANDLORD during the term hereby granted,
shall terminate any extension or renewal of the term hereby granted and any
right on the part of TENANT thereto.

     Upon the termination of this Lease by reason of any of the foregoing
event, or in the event of the termination of this Lease by summary dispossess
proceedings or under any provisions of law, now or at any time hereafter, in
force by reason of, or based upon, or arising out of a default under or breach
of this Lease on the part of TENANT, or upon LANDLORD recovering possession of
the Premises in the manner or 
<PAGE>   21
                                       21


in any of the circumstances herein-before mentioned, or in any other manner or
circumstances whatsoever, whether with or without legal proceedings, by reason
of, or based upon, or arising out of a default under or breach of this Lease on
the part of TENANT, LANDLORD, at its option, but without assuming any obligation
to do so in any case, may at any time, and from time to time, re-let the
Premises or any part or parts thereof for the account of TENANT or otherwise on
such terms as LANDLORD may elect, including the granting of concessions, and
receive and collect the rents therefor, applying the same at a rental not higher
than the one stipulated in this Contract, first to the payment of such
reasonable expenses as LANDLORD may have incurred in recovering possession of
the Premises, including reasonable legal expenses, and for putting the same into
good order or condition or preparing or altering the same for re-rental, and
expenses, commissions and charges paid, assumed, or incurred by LANDLORD in and
about the re-letting of the Premises or any portion thereof and then to the
fulfillment of the covenants of TENANT hereunder. Any such re-letting herein
provided for, may be for the remainder of the term of this Lease or for a longer
or shorter period or at a higher or lower rental. In any such case, whether or
not, the Premises or any part thereof be re-let, TENANT shall pay to LANDLORD
the rent required to be paid by TENANT up to the time of such termination of
this Lease, and/or the full rent provided for in the agreement for any holdover
of such period after termination and up to the surrender or recovery of
possession of the Premises by LANDLORD, as the case may be, and thereafter
TENANT covenants and agrees, to pay to LANDLORD until the end of the term of
this Lease as originally demised the equivalent of any deficiency amount of all
the rent reserved herein, less the net avails of reletting, if any, as specified
hereinabove in this Article and the same shall be due and payable by TENANT to
LANDLORD as provided herein, that is to say, TENANT shall pay to LANDLORD the
amount of any deficiency then existing.

        FORTY ONE: LANDLORD'S Remedies - In the event TENANT shall default in
the performance of any of the terms, covenants or provisions herein contained,
LANDLORD may, but without the obligation to do so, perform the same for the
account of TENANT and any amount paid or expense incurred by LANDLORD in the
performance of the same shall be repaid by TENANT on demand. In the event of a
breach or threatened breach by TENANT or any subtenant or other person holding
or claiming under TENANT of any of the covenants, conditions or provisions
hereof, LANDLORD shall have the right of injunction to restrain the same, and
the right to invoke any remedy allowed by law or in equity as if
<PAGE>   22
                                       22

specific remedies, indemnity or reimbursement were not herein provided for. The
rights and remedies given to LANDLORD in this Lease are distinct, separate and
cumulative, and no one of them, whether or not exercised by LANDLORD, shall be
deemed to be a waiver, or an exclusion of any of the others.

        FORTY TWO: Notice of Default - Anything in this Lease to the contrary
notwithstanding, it is specifically agreed that there shall be no enforceable
default against LANDLORD under any provisions of this Lease, unless notice of
such default be given by TENANT to LANDLORD in which TENANT shall specify the
default or omission complained of, and LANDLORD shall have thirty (30) days
after receipt of such notice in which to remedy such default, or if said default
or omission shall be of such a nature that the same cannot be cured within said
period, then the same shall not be an enforceable default if LANDLORD shall have
commenced taking the necessary steps to cure or remedy said default within the
said thirty (30) days and diligently proceeds with the correction thereof.

        FORTY THREE: Capitalization - For the purpose of this Contract,
specifically of Article SIX, Capitalization includes the total of owner's equity
sources (preferred stock, common stock and surplus accounts) plus long-term
debts, it being agreed and understood that the amortization of any such debt
shall in no way diminish the amount originally determined as capitalization.

        FORTY FOUR: Disclosure of Information - TENANT agrees to furnish to
LANDLORD within ninety (90) days after the expiration of each fiscal year of
TENANT, an annual statement certified by an independent Certified Public
Accountant showing as of the end of each such fiscal year: (i) TENANT'S paid-in
capital, (ii) long-term debts and capitalization as required by Articles SIX and
FORTY THREE hereof, (iii) investment in machinery and its capacity to provide
employment, (iv) taxes (including Social Security taxes) paid, and (v) any other
information as required by this Lease.

        In the event such statement is not filed with LANDLORD as herein
provided, LANDLORD may obtain such information from TENANT at TENANT'S expense,
and for such purpose TENANT shall make available to LANDLORD'S designated
representatives, its books of accounts and other necessary data and facilities,
all of which shall be provided and made available at TENANT'S principal office
in Puerto Rico.
<PAGE>   23
                                       23

     FORTY FIVE: Renewal - At the end of the term of the contract, renewal of
the lease shall be subject to negotiations between the parties, which shall not
exceed a six months period. In the event negotiations for a new lease has taken
place and the six month period has elapsed without any agreement, this lease
shall be deemed terminated.
     
     FORTY SIX: Partial Invalidity and Applicable Law - If any term or
provisions of this Lease or the application thereof to any person or
circumstances shall, to any extent, be invalid or unenforceable, the remainder
of this Lease and the application of such term or provision to persons or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby, and each term and provision of this Lease shall
be valid and be enforceable to the fullest extent permitted by law. This
Contract is entered into and shall be interpreted in accordance with the laws
of the Commonwealth of Puerto Rico.

     FORTY SEVEN: Lease Termination and Holding Over - Upon the expiration or
termination of this Lease:

     (i) TENANT shall inform LANDLORD in writing of TENANT'S activities
affecting each or any environmental area of concern during the period of
TENANT'S operation, including a description from an environmental standpoint of
the physical conditions of the premises and landsite. TENANT shall also inform
to LANDLORD in writing of any environmental regulatory violations, compliance
plans, permits, closure plans, clean-up actions or any other regulatory
procedures related to the operation. In the event that the information reveals
TENANT'S noncompliance of any of the above, or in the event that a physical
inspection of the Premises and adjacent areas by LANDLORD, or any other source
of information reveal the possibility of contamination, in that event, TENANT
shall, at LANDLORD'S request submit a plan of action with the appropriate
financial provisions to execute it. LANDLORD shall hold TENANT responsible for
any and all environmental damage, or any damage to third parties as a result of
any environmental damage, or any remedial action (including monitoring) to be
performed at landsite or otherwise as a result of TENANT'S operations after
termination of Lease and until such a time as complete remediation or
fulfillment of TENANT'S obligations is effected. In case TENANT fails to comply
with the foregoing provisions, LANDLORD may elect to effect them at TENANT'S
expense and responsibility.

     (ii) TENANT shall remove all hazardous and toxic substances belonging to
TENANT or to a third party. TENANT shall also
<PAGE>   24
                                       24

remove all other property of TENANT and that of any third party and failing so
to do, TENANT hereby appoints LANDLORD its agent so that LANDLORD may cause all
of the said property to be removed at the expense and risk of TENANT. TENANT
covenants and agrees to give full and timely observance and compliance to this
covenant to remove all its property and surrender the Premises broom clean.
TENANT hereby agrees to pay all reasonable necessary cost and expenses thereby
incurred by LANDLORD. IF, as the sole result of the removal of TENANT'S
property any portion of the Additional Premises or of the building of which
they are a part, are damaged, TENANT shall pay to LANDLORD the reasonable cost
of repairing such damages unless due to the gross negligence of LANDLORD, its
agents, servants, employees and contractors. TENANT'S obligation to observe or
perform this covenant shall survive the expiration or other termination of the
term of this Lease.

     FORTY EIGHT:   Change of Address - TENANT shall promptly notify LANDLORD
of any change in the addresses other than those required from it in Article
SEVEN hereof.

     FORTY NINE:    TENANT will indemnify LANDLORD for any and all liability,
loss, damages, expenses, penalties and/or fines, and any additional expenses
including any attorney fees LANDLORD may suffer as a result of claims,
lawsuits, demands, administrative orders, costs, resolutions or judgements
against it arising out of negligence and/or failure of TENANT or those acting
under TENANT to conform to the statutes, ordinances, or other regulations or
requirements of any governmental authority, be it Federal, of the Commonwealth
of Puerto Rico, its instrumentalities or public corporations, in connection
with the performance of this Lease.   
<PAGE>   25


                                       25


     FIFTY:  Notwithstanding, Paragraph 28, TENANT hereby accepts the Premises
in their present condition, subject to (1) the removal and disposal by the
current tenant of the freezer and/or coolers, (2) a favorable Phase I
environmental report to be undertaken at LANDLORD's expense, and (3) as set
forth in Article Twelve, any defects which are due to faulty design or errors
of construction not apparent at the time TENANT takes possession of the 
Premises.

     FIFTY ONE:  TENANT shall, at is own cost and expense, construct and/or
install all necessary equipment required to connect the building's electrical
system to the Puerto Rico Electrical Power Authority's electrical distribution
lines, such connection to be made in compliance with the requirement of PREPA.

     Paragraph Eleven, notwithstanding, it is clarified that the prior tenant
has left a 330 KVA electrical substation on the Premises which is fully
approved by LANDLORD and which is delivered and accepted by TENANT in its
actual condition as part of the Premises.

     FIFTY TWO:  Anything contained in this Contract to the contrary
notwithstanding, if required by TENANT, it shall be at TENANT's own cost and
expense the construction and/or installation of a sprinkler system; it being
agreed and understood that such construction shall be in accordance with the
provisions hereof.

     FIFTY THREE:  TENANT shall, at its own cost and expense, install a fire
protection system and shall obtain the endorsement and approval from said Fire
Department for such installation. TENANT must also provide security measures to
prevent or reduce fire hazard due to the storage of inflammable materials and
products.

     FIFTY FOUR:  TENANT hereby acknowledges that in the industrial park there
are other industries; therefore TENANT hereby specifically agrees and
undertakes to take such steps and install such equipment as may be necessary to
prevent that any hazard and/or noise which may be created by its operations
may in any way or manner unduly affect the operations of the other industries
and therefore TENANT hereby releases and saves LANDLORD harmless from any and
all claims or demands arising therefrom or in connection therewith.

     FIFTY FIVE:  TENANT must comply with the rules and regulations of
pre-treatment established by the Puerto Rico Aqueduct and Sewer Authority, the
Environmental Quality Protection Agency related to the effluent industrial
discharge in the sanitary sewer system and their final disposition. Also, any
improvement necessary to provide pre-treatment facilities for the above
mentioned effluents shall be at TENANT's own cost and expense and in
coordination and with the approval of LANDLORD's Engineering and Maintenance
Departments.

     FIFTY SIX:  TENANT shall procure and obtain a permit for the operation of
a solid waste emission source from the Environmental Quality Board and
authorization for the Office of Solid Waste and/or from the Municipality of
Aguada for the final disposition of wastes.
<PAGE>   26
                                       26

     FIFTY SEVEN: TENANT, at its own cost and expense, shall implement the
necessary measures and install the control equipment to maintain the
atmospheric air quality levels in compliance with the environmental laws and
regulations of the Environmental Quality Board and the Environmental Protection
Agency, as promulgated by any succeeding law or regulations.

     FIFTY EIGHT: It is hereby agreed and understood that TENANT shall take the
necessary steps to comply with the regulations and law requirements of the
PUERTO RICO OCCUPATIONAL SAFETY AND HEALTH OFFICE (PROSHO).

     FIFTY NINE: TENANT certifies and guarantees that at the date of
subscribing  this Contract it has submitted the Corporate Tax Returns Forms
during the last five (5) years and does not have any tax debt pending with the
Commonwealth of Puerto Rico or is complying with the terms of a payment plan
duly approved. TENANT also certifies and guarantees that at the date of
execution of this contract it has paid unemployment insurance compensation,
temporary disability insurance, and the driver's social security (as
applicable); or is complying with a payment plan duly approved.

     TENANT acknowledges that this is an essential condition of the Contract
and if the above certification is incorrect in any of its parts, LANDLORD may
cancel this contract.

     SIXTY: LANDLORD reserves the right to audit the leased premises from time
to time during the term of this contract, as LANDLORD may deem necessary, in
order to assess all aspects of the environmental condition of said premises and
TENANT's compliance with all environmental legislation and regulations, under
Commonwealth and federal law, TENANT hereby agrees to provide access to all
areas and structures of the premises for these purposes, upon LANDLORD's
request, and to also provide access to all books, records, documents and
instruments which LANDLORD may deem necessary in order to fully audit the
premises as herein stated.

     SIXTY ONE: TENANT shall furnish to LANDLORD, in addition to any other
information, documents or instruments that may be required in this contract:

     a)   Prompt written notice of the occurrence of any event that by law or
          regulation would require any oral, telephonic or written notice or
          communication to the US Environmental Protection Agency and/or to the
          Puerto Rico Environmental Quality Board, or any successor agency, and
          copies of all orders, notices or other communications and reports
          received, made or given in connection with any such event, and any
          enforcement action taken against TENANT or against any property owned,
          occupied or used by TENANT;

     b)   Quarterly certifications subscribed by an authorized representative
          designated by TENANT, as to the environmental condition of the leased
          premises, containing the information required by LANDLORD, which is
          specified in the form included as Schedule "B" of this contract, or
          any subsequent modification thereto;
     
     c)   Any other information and documents relating to TENANT's compliance
          with environmental legislation and regulations under federal and
          commonwealth laws.


<PAGE>   27

                                       27

        SIXTY-TWO:  TENANT hereby acknowledge having been informed by the
LANDLORD that Project No. T-0870-0-68 extensions and Lot No. L-253-277-11 are
currently leased to Dade Diagnostics of P.R. Inc. and that LANDLORD is exerting
its best efforts to terminate and/or rescind the existing lease contract to
recover possession of said premises. As soon as the mentioned projects are
vacated and are ready for occupancy by TENANT, LANDLORD shall so notify TENANT
by certified mail, return receipt requested.

        SIXTY-THREE: LANDLORD shall provide infrastructure funds in the amount
of up to $600,000 to cover a part of the investment to be made by TENANT to
reconstruct and refurnish LANDLORD's property (Premises). These funds will be
disbursed to TENANT in two (2) payments as follows: $400,000.00 in 1997 and
$200,000.00 by JANUARY 31, 1998. The initial incentive of $400,000.00 shall be
disbursed by LANDLORD to TENANT within fifteen (15) business days after
TENANT's written request that it is to be accompanied by adequate invoices and
evidence of payment; and upon inspection and approval by LANDLORD of the
completed work. The parties hereby acknowledge that the funds LANDLORD is
willing to provide to TENANT, are conditioned on TENANT's investment within the
first five (5) years after the commencement of the Lease Term in improvements
to the Premises. (Even though not restricted to the items set forth in
Paragraph 64 PRIDCO must approve improvements) of an amount that matches the
amount to be reimbursed by LANDLORD. Should TENANT (i) not invest in
improvements to the Premises an amount that matches the amount reimbursed by
LANDLORD and (ii) terminate the Lease prior to five years, then TENANT shall
reimburse to LANDLORD the short fall multiplied by a fraction, the numerator of
which shall be the months remaining in order to achieve the five year term and
the denominator of which shall be sixty.

        SIXTY-FOUR: LANDLORD recognizes that the following items qualify for
the infrastructure funds provided:

        a)  General Demolition and Architectural Work
            -----------------------------------------

            10" ft. high cyclone fencing 
              8 Refinish ga.                          Polished concrete flooring
            Window type A                             Toilet accessories
            Window type B                             Door type A
            Window type C                             Door type B
            Floor to be leveled                       Door type C (10'-0" high)
            Door type D
            Paint (interior)
            Paint (exterior)
            Door type C (8'-8" high)
            New toilet equipment (including plumbing)
            New ramp

        b)  HVAC System
            -----------

            New roof top air conditioners: 6 @ 25 tons; 1 split @ 40 tons
            New ductwork galvanized sheet metal
            Ductwork insulation - rigid fiberglass board
            New control system, humidity and energy management of A/C
            Diffusers, registers, fire dampers, volume & control campers
            Electric reheat coils (5 units)


  
<PAGE>   28
                                       28

  
                c)  Fire Protection System
                    ----------------------

                Sprinkler system grid relocation & sprinkler heads replacement
                Fire hose cabinets with fire extinguisher
                Fire system testing and compliance with insurer recommendations
            
                d)  Electrical Work
                    ---------------
 
                o  General

                   4160V-120/208V Transformer 500 KVA
                   120/208V & 227/480V Feeders (from SWBOS)
                   Panel boards
                   Breaker for 500 KVA Transformer
                   AHU Starters
                   AHU Disconnect switches
                   400 KW Emergency Generator
                   300 KVA Transformer 480-208/120
                   600A Auto-Transfer switch

                o  Fire Alarm System

                                       Total: $600,000.00

        The foregoing items have been estimated by TENANT at $851,420.00 but
the infrastructure funds to be provided shall be limited to $600,000.00 or the
actual amount invested by TENANT, whichever is lower.

        SIXTY-FIVE: Subject to the execution of the present lease, LANDLORD
shall release TENANT from any and all obligations under the previous lease
(Arecibo lease), nevertheless, TENANT must comply with the payment of all rent
through the termination date of the Arecibo's lease and with the delivery of
the property as agreed in the Arecibo's lease contract, including but not
limited to the compliance with environmental laws and regulations.

        The foregoing notwithstanding, LANDLORD has inspected the Arecibo
leased facilities and agrees to accept them in their present condition so that
TENANT will not have to remove any improvements made to said leased facilities.

        SIXTY-SIX: TENANT shall comply with all Government of Puerto Rico and
Federal laws and regulations.

        SIXTY-SEVEN: TENANT shall have the option of terminating the Lease by
giving LANDLORD six months prior written notice. To the extent such prior
notice does not comply with the six months, then TENANT shall pay rent for the
remaining period so that LANDLORD receives the equivalent of at least six
months rent from the notification date. Upon the payment of the rent and
compliance by TENANT with all the other terms and conditions under this Lease,
then TENANT shall be released from any further obligations under this Lease.

<PAGE>   29


                                       29


     SIXTY-EIGHT:  TENANT agrees to submit to LANDLORD within thirty (30) days
from the date of execution of this Contract: (a) evidence of its registration
in the Department of State of the Commonwealth of Puerto Rico and the name and
address of its resident agent; and (b) a certificate of a resolution of its
Board of Directors either authorizing or ratifying the execution of this
Contract.

     IN WITNESS WHEREOF, LANDLORD and TENANT have respectively signed upon
proper authority this Lease, this 9 day of October 1997.

                                    PUERTO RICO INDUSTRIAL DEVELOPMENT COMPANY
                                    SSP: 66-0292871

                                    BY: [SIG]
                                        ----------------------------------------
                                    

                                    SMART MODULAR TECHNOLOGIES (P.R.), INC.
                                    SSP: 77-039-4145


                                    BY: [SIG[
                                        ----------------------------------------

<PAGE>   30
     
                                                                    SCHEDULE "A"

DESCRIPTION OF BUILDING T-0870-0-68
LOCATED AT AGUADA, PUERTO RICO
--------------------------------------------------------------------------------

     This is a pitched roof type building consisting of reinforced concrete
foundations, steel columns and steel girders supporting 30 feet long steel
joists, which in turn support 22 gauge standard galvanized steel deck, covered
by 1" fiberglass insulation and a 3 plies built-up roofing. Roof ventilators
are provided.

     The structure consists of a main 240'-11" x 90'-6" out to out dimensions
with an area of 21,803.26 sq. ft. of manufacturing space, lean to 60'-6" x
10'-6" for an area of 635.25 sq. ft. This amounts to a total area of 22,438.51
sq. ft. of covered floor space.

     The floor consists of a 3 1/2" thick reinforced concrete slab with a
monolithic cement finish floor slab designed for a load capacity of 150 pounds
per square feet.

     Exterior walls are of concrete blocks plastered and painted on both sides.
     
     Interior walls at the lean-to are plastered and painted together with a
6'-1" sprayed-on glazed finish wainscot.

     Ceiling is rubbed and painted throughout the building.

     Windows are Miami aluminum louvers throughout the building.

     Interior doors are made of plywood and exterior are industrial type metal
ones.

     Clearance in the manufacturing area from finish floor to lowest part of
beams at the side eaves is 12'-4" and 13'-4" at the highest point.

DESCRIPTION OF BUILDING T-0870-1-73
LOCATED AT AGUADA, PUERTO RICO
--------------------------------------------------------------------------------

     This is a pitched roof type building consisting of reinforced concrete
foundations, steel columns and steel girders supporting 30 feet long steel
joists, which in turn support 22 gauge galvanized steel deck, covered by 1"
fiberglass insulation and a 3 plies built-up roofing. Roof ventilators are
provided.

     The structure consists of a divided main floor consisting of TWO (2)
units.

     UNIT #1 - consists of a manufacturing area 152'-2" x 181'-0" out to out
dimensions with an area of 25,540 sq. ft. and a lean-to 30'-0" x 13'-2" for an
area of 394.80 sq. ft. This gives a total area of 25,935.76 sq. ft. of covered
floor space.

     UNIT #2 - consists of a manufacturing area 91'-3" x 241'-0" out to out
dimensions for an area of 21,991.25 sq. ft. and two loading platform for an
area of 1,598.82 sq. ft. This amounts an area of 23,590.07 sq. ft.

     Adding both partial areas give a total area of 49,525.83 sq. ft. of
covered floor space for this project. In this project the sanitary facilities
are interior ones, so no change in gross area be considered.

<PAGE>   31
                                       31


        The floor consists of a 4" thick reinforce concrete slab with a
monolithic cement finish; floor slab designed for a load capacity of 150 pounds
per square foot.

        Exterior walls are of concrete blocks plastered and painted on both
sides. A 6'-1" high sprayed-on glazed finish is provided as wainscot.

        Windows are Miami aluminum louvers throughout the building.

        Interior doors are made of plywood and exterior are industrial type
metal ones.

        Clearance in the Unit #1 manufacturing area from finish floor to lowest
part beams at the side eaves is 12'-1" and 14'-4" at the highest below the
girders at mid span.

        Clearance in the Unit #2 manufacturing area form finish floor to lowest
part of beams at the side eaves is 20'-0" and 21'-2" the highest below the
girders at mid span.

DESCRIPTION OF BUILDING T-0870-2-87
LOCATED AT AGUADA, PUERTO RICO
--------------------------------------------------------------------------------

        This is a pitched roof type building consisting of reinforced
foundations, structural steel columns and steel framing supporting 30'-0" steel
joists, which in turn support gauge 22 galvanized steel deck, covered by 2"
fiberglass insulation and a 3 plies built-up roofing. Roof ventilators are
provided.

        The structure consists of corridor, office, file, gown and tab assembly
areas for a total area of 11,053.79 sq. ft. covered space & other support
facilities. (See Exhibit A)

        The floor consists of 5" thick reinforced concrete slab with monolithic
cement finish and vinyl tile. Floor is designed for a live load of 150 pounds
per square foot.

        Exterior walls are of concrete blocks plastered both sides, interior
face finish with gypsum board painted on both sides.

        Ceiling is steel deck unpainted, gypsum board painted and cleanable tile
hung ceiling.

        Windows opening consist of fixed aluminum louvers.

        Interior and exterior doors are industrial metal type.

        Clearance in the Tab assembly room from finish floor to lowest part of
beam at the side eaves is 21'-4".

<PAGE>   32


                                       32


DESCRIPTION OF PARCEL OF LAND, LOT NO. 3 & 5, LOCATED AT AGUADA INDUSTRIAL
PARK, SITE FOR PROJECT NO. T-0870-0-68 & EXT.
--------------------------------------------------------------------------------


GENERAL:

     Parcel of land, Lot No. 3 & 5, located at Aguada Industrial Park, Aguada,
P.R.

     It bounds: by the North, with Lot No. 7 of the same industrial area; by
the South, with Lot No. 1 of the same industrial area; by the East, with land
property of Comunidad Agricola Bianchi; and by the West, with Street "A" of the
same industrial park.

     It has an approximate surface area of 16,242.00 square meters, equivalent
to 4.13 cuerdas.

     It is affected by the following rights of ways:

     1.   A 3.00 meter wide strip in favor of PRASA running along the Northern
          & Eastern boundaries.

     2.   A 3.00 meter storm sewer wide strip running along the Eastern
boundary.


DESCRIPTION OF PARCEL OF LAND, LOT NO. 11, LOCATED AT AGUADA INDUSTRIAL PARK
--------------------------------------------------------------------------------

GENERAL:

     Parcel of land, Lot No. 11, located at Aguada Industrial Park, Aguada, P.R.

     It bounds: by the North, with land owned by Comunidad Agricola Bianchi; by
the South, with Lot No. 10 and with access street of the same industrial area;
by the East, with land owned by Comunidad Agricola Bianchi; and by the West,
with land owned by Residencial de Colores, Inc.

     It has an approximate surface area of 11,615.92 square meters, equivalent
to 2.95 cuerdas.

     It is not affected by any right of way.


                                    
<PAGE>   33

                                       33

                                                                    SCHEDULE "B"


                             COMPLIANCE REPORT WITH

                           ENVIRONMENTAL REQUIREMENTS


                 In the period of ____________ to ____________



I.   PERMITS


PERMITS NUMBER                     EXPIRATION                    RENEWAL DATE
                                      DATE                        (IF APPLY)






II.  COMPLIANCE ACTIONS


REFERENCE/CASE NUMBER                 DATE                       RESPONSE OF
                                                                   DATE OF








III. CERTIFICATION



     I certify, under penalty of law, that this document was prepared under my
supervicion and direction; and that was based in my investigation by the persons
directly responsible of gathering the information, that the information here
submitted is, according to my best judgment, certain, complete and precise.