EXHIBIT 10.2

 

PARTICIPATION AGREEMENT

        THIS PARTICIPATION AGREEMENT (this "Agreement" herein), dated as 
of December 5, 1997, is entered into by and among:
        (1)     ETEC SYSTEMS, INC., a Nevada corporation ("Lessee");
        (2)     LEASE PLAN NORTH AMERICA, INC., an Illinois 
corporation ("Lessor");
        (3)     Each of the financial institutions from time to time 
listed in Schedule I hereto, as amended from time to time (such 
financial institutions to be referred to collectively as the 
"Participants"); and
        (4)     ABN AMRO BANK N.V., acting through its San Francisco 
International Branch, as agent for the Participants (in such 
capacity, "Agent").

RECITALS
A.      Lessee has requested Lessor and the Participants to provide 
to Lessee a lease facility pursuant to which:
(1)     Lessor would (a) lease from Lessee the land described 
in Exhibit A (as more fully defined in Schedule 1.01, the "Land"), 
(b) sublease to Lessee the Land and lease to Lessee certain 
improvements to be constructed on the Land, (c) appoint Lessee as 
Lessor's agent to make such improvements (which improvements will 
be owned by Lessor), (d) make advances to finance such 
improvements and to pay certain related expenses and (e) grant to 
Lessee the right to purchase such improvements; and
(2)     The Participants would participate in such lease 
facility by (a) funding the advances to be made by Lessor and (b) 
acquiring participation interests in the rental and certain other 
payments to be made by Lessee.
B.      Lessor and the Participants are willing to provide such 
lease facility upon the terms and subject to the conditions set forth 
herein.

AGREEMENT
        NOW, THEREFORE, in consideration of the above Recitals and the 
mutual covenants herein contained, the parties hereto hereby agree as 
follows:

SECTION 1.      INTERPRETATION. 
        1.01.   Definitions.   Unless otherwise indicated in this Agreement 
or any other Operative Document, each term set forth in Schedule 1.01, 
when used in this Agreement or any other Operative Document, shall have 
the respective meaning given to that term in Schedule 1.01 or in the 
provision of this Agreement or other document, instrument or agreement 
referenced in Schedule 1.01.
        1.02.   Rules of Construction.   Unless otherwise indicated in this 
Agreement or any other Operative Document, the rules of construction set 
forth in Schedule 1.02 shall apply to this Agreement and the other 
Operative Documents.

SECTION 2.      LEASE FACILITY. 
        2.01.   Acquisition, Lease, Amount Limitations, Etc. 
        (a)     Acquisition, Lease, Etc.  Subject to the terms and 
conditions of this Agreement (including the limitations set forth 
in Subparagraph 2.01(b)):
        (i)     On a date specified by Lessee pursuant to 
Subparagraph 2.03(a) for the acquisition by Lessor of its 
leasehold interest in the Land (the "Closing Date"):
        (A)     Lessor and Lessee shall execute a ground 
lease in the form of Exhibit N (the "Ground Lease"), 
pursuant to which Lessee leases to Lessor the Land; 
and
        (B)     Immediately upon the execution by Lessor 
and Lessee of the Ground Lease, Lessor and Lessee 
shall execute (1) a Lease Agreement in the form of 
Exhibit B (the "Lease Agreement"), pursuant to which 
Lessor leases to Lessee Lessor's leasehold interest in 
the Land and Lessor's rights in the improvements to 
the Land; (2) a Purchase Agreement in the form of 
Exhibit C (the "Purchase Agreement"), pursuant to 
which Lessor grants to Lessee the right to purchase 
such improvements to the Land and (3) a Construction 
Agency Agreement in the form of Exhibit D (the 
"Construction Agency Agreement"), pursuant to which 
Lessee agrees to construct the improvements to such 
property; and
        (ii)    During the period (the "Commitment Period") 
beginning on the date of this Agreement and ending on 
December 1, 1999 (the "Outside Completion Date") or, if 
earlier, the first Business Day of the first full calendar 
month immediately succeeding the earlier of (A) the 
Completion Date and (B) the date on which the Unused Total 
Commitment is $0 (the earlier of the Outside Completion Date 
and such first Business Day to be referred to as the 
"Commitment Termination Date"), Lessor shall, at the request 
of Lessee, make advances to Lessee (with funds provided by 
the Participants) to pay Permitted Improvement Costs and 
Permitted Transaction Expenses ("Improvement/Expense 
Advances").
        (b)     Amount Limitations.  The advance made by Lessor to 
acquire its leasehold interest in the Land pursuant to the Ground 
Lease and to acquire any other initial property on the Closing 
Date (the "Acquisition Advance") and the Improvement/Expense 
Advances made by Lessor (the Acquisition Advances and the 
Improvement/Expense Advances to be referred to collectively as the 
"Advances") shall be subject to the following limitations:
(i)     The aggregate amount of the Acquisition Advance 
made by Lessor on the Closing Date shall not exceed the 
Closing Date Appraisal for the Property;
(ii)    Until February 27, 1998, the aggregate amount of 
all Advances made by Lessor (including the Acquisition 
Advance and all Improvement/Expense Advances) shall not 
exceed $3,000,000;
        (iii)   After February 27, 1998, the aggregate amount of 
all Advances made by Lessor (including the Acquisition 
Advance and all Improvement/Expense Advances) shall not 
exceed the lesser of (A) Sixty Million Dollars ($60,000,000) 
(the "Total Commitment") and (B) the Expiration Date 
Appraisal for the Property; and
(iv)    The aggregate amount of all Advances made by 
Lessor (including the Acquisition Advance and all 
Improvement/Expense Advances) during the period (the "364-
Day Commitment Period") beginning on the date of this 
Agreement and ending on December 4, 1998 (the "364-Day 
Commitment Termination Date") shall not exceed Thirty 
Million Dollars ($30,000,000) (the "364-Day Commitment").
Of the Total Commitment, Thirty Million Dollars ($30,000,000) (the 
"Two-Year Commitment") is available at any time during the entire 
Commitment Period.  Unless otherwise directed by Lessee, all 
Advances made by Lessor on or prior to the 364-Day Commitment 
Termination Date shall be allocated first to the 364-Day 
Commitment and, after the 364-Day Commitment is reduced to zero, 
to the Two-Year Commitment.  All Advances made by Lessor after the 
364-Day Commitment Termination Date shall be allocated to the Two-
Year Commitment, whether or not the 364-Day Commitment has been 
reduced to zero.
        (c)     Expiration Date Appraisal.  Not later than February 
27, 1998, Lessee shall deliver to Lessor an Expiration Date 
Appraisal for the Property, dated as of a recent date and in form 
and substance satisfactory to Lessor and Agent.
(d)     Tranches.  Each Advance shall consist of a Tranche A 
Portion, a Tranche B Portion and a Tranche C Portion.  For 
accounting purposes, the Tranche A Portion and Tranche B Portion 
of each Advance shall constitute debt and the Tranche C Portion 
shall constitute equity.
        2.02.   Participation Agreement. 
        (a)     Advances.  Each Participant severally, unconditionally 
and irrevocably agrees with Lessor to participate in each Advance 
made by Lessor in an amount equal to such Participant's 
Proportionate Share of such Advance; provided, however, that the 
aggregate amount of each Participant's Proportionate Share of all 
Advances shall not exceed such Participant's Commitment.  Each 
Participant shall fund its Proportionate Share of each Advance as 
provided in Subparagraph 2.05(a).  Each Participant's 
Proportionate Share of each Advance shall consist of such 
Participant's Tranche A Portion, Tranche B Portion and Tranche C 
Portion of such Advance.
        (b)     Payments.  In consideration of each Participant's 
participation in each Advance made by Lessor, such Participant 
shall participate in the payments made by Lessee under this 
Agreement and the other Operative Documents as provided in 
Paragraph 2.06.
        (c)     Other Rights of Participants and Agent.
        (i)     Until all amounts payable to Agent and 
Participants under this Agreement and the other Operative 
Documents are paid in full, Lessee shall deliver all notices 
for Lessor under this Agreement and the other Operative 
Documents to Agent at the office or facsimile number and 
during the hours specified in Paragraph 7.01.  Agent shall 
promptly furnish to Lessor and each Participant copies of 
each such notice and, in the case of each request for an 
Advance, shall notify each Participant of the amount of such 
Participant's Proportionate Share of the Advance requested 
thereby.
        (ii)    Lessor is not an agent for Participants or Agent 
and may exercise or refrain from exercising its rights under 
this Agreement and the other Operative Documents in its 
discretion; provided, however that, until all amounts 
payable to Agent and Participants under this Agreement and 
the other Operative Documents are paid in full, (A) Lessor 
shall, subject to the limitations set forth in Section VI, 
be required to act or to refrain from acting upon 
instructions of the Required Participants as provided in 
Paragraph 6.03 and (B) Agent may exercise any or all of the 
rights and remedies of Lessor, and shall be entitled to the 
other benefits afforded Lessor, under this Agreement and the 
other Operative Documents.
        (iii)   Neither Agent nor any Participant shall have any 
right, title or interest in the Property except for the Lien 
therein granted to Agent, for the benefit of the 
Participants, in the Lessor Deed of Trust, the Assignment of 
Lease and the Lessor Security Agreement.
        2.03.   Advance Requests. 
        (a)     Acquisition Request.  Lessee shall request Lessor to 
enter into the Ground Lease and make the Acquisition Advance by 
delivering to Agent an irrevocable written request in the form of 
Exhibit E, appropriately completed (the "Acquisition Request"), 
which specifies, among other things:
        (i)     The date selected by Lessor as the Acquisition 
Date for the Land, which shall be a date that is a Business 
Day on or prior to December 31, 1997; and
        (ii)    The amount of the Acquisition Advance, including 
the amount of the Acquisition Price and the Permitted 
Transaction Expenses included in such Acquisition Advance.
        (b)     Improvement/Expense Advance Requests.  Lessee shall 
request Lessor to make each Improvement/Expense Advance by 
delivering to Lessor:
        (i)     An irrevocable written request in the form of 
Exhibit F, appropriately completed (an "Improvement/Expense 
Advance Request"), which specifies, among other things:
        (A)     The amount of such Advance, which shall be 
in the amount of $500,000 or an integral multiple of 
$100,000 in excess thereof;
        (B)     The date of such Advance, which shall be 
the first Business Day of a month; and
        (C)     The Permitted Improvement Costs and 
Permitted Transaction Expenses to be paid by such 
Advance; and
        (ii)    If the proceeds of such Advance are to be used 
to purchase Related Goods:
        (A)     A Supplement to Exhibit B to the Lease 
Agreement in the form of Exhibit B(1) to the Lease 
Agreement (an "Exhibit B Supplement"), which contains 
a detailed description of such Related Goods; and
        (B)     Bills of sale for all such Related Goods 
showing Lessor as the purchaser.
Lessee shall not request more than one (1) Improvement/Expense 
Advance in any calendar month.
        (c)     Delivery of Advance Requests. Etc.  Lessee shall 
deliver the Acquisition Request to Lessor at least three (3) 
Business Days before the Closing Date.  Lessee shall deliver each 
Improvement/Expense Advance Request to Lessor at least three (3) 
Business Days before the date of such Advance.  The Acquisition 
Request and Improvement/Expense Advance Requests (collectively, 
"Advance Requests") shall be delivered by first-class mail or 
facsimile as required by Subparagraph 2.02(c) and Paragraph 7.01; 
provided, however, that Lessee shall promptly deliver to Lessor 
the original of any Advance Request initially delivered by 
facsimile.
        (d)     Capitalization of Base Rent During Commitment Period.  
On each Scheduled Rent Payment Date occurring under the Lease 
Agreement during the Commitment Period, the Base Rent due on such 
Scheduled Rent Payment Date shall be capitalized by automatically 
treating the amount of such Base Rent as an Improvement/Expense 
Advance made on such Scheduled Rent Payment Date.  Agent shall 
notify Lessor and each Participant of the amount of the Base Rent 
due on each such Scheduled Rent Payment Date and so treated as an 
Improvement/Expense Advance.
        2.04.   Fees.
        (a)     Agent's Fees.  Lessee shall pay to Agent, for its own 
account, agent's fees in the amounts and at the times set forth in 
the Agent's Fee Letter (the "Agent's Fees").
        (b)     Commitment Fees.  Lessee shall pay to Agent, for the 
ratable benefit of the Participants as provided in clause (ii) of 
Subparagraph 2.06(c), commitment fees (the "Commitment Fees") as 
follows:
(i)     Lessee shall pay Commitment Fees of one hundred 
seventy-five thousandths of one percent (0.175%) per annum 
on the daily average Unused 364-Day Commitment for the 364-
Day Commitment Period.
(ii)    Lessee shall pay Commitment Fees of two hundred 
seventy-five thousandths of one percent (0.275%) per annum 
on the daily average Unused Two-Year Commitment for the 
entire Commitment Period.
Lessee shall pay the Commitment Fees in arrears on the last 
Business Day in each February, May, August and November 
(commencing February 27, 1998) and on the Commitment Termination 
Date (or if the Total Commitment is cancelled on a date prior to 
such day, on such prior date).
        (c)     364-Day Commitment Extension Fee.  If Lessor and the 
Participants consent to any extension of the 364-Day Commitment 
Termination Date requested by Lessee pursuant to Subparagraph 
2.09(a), Lessee shall pay to Agent, for the ratable benefit of 
Lessor and the Participants as provided in clause (iii) of 
Subparagraph 2.06(c), an extension fee (the "364-Day Commitment 
Extension Fee") equal to one tenth of one percent (0.10%) of the 
Unused 364-Day Commitment on the original 364-Day Commitment 
Termination Date.  Lessee shall pay the 364-Day Commitment 
Extension Fee on or prior to the original 364-Day Commitment 
Termination Date.
        2.05.   Funding of Advances.
        (a)     Participant Funding and Disbursement.  Each 
Participant shall, before 11:00 a.m. on the date of each Advance, 
make available to Agent at its office specified in Paragraph 7.01, 
in same day or immediately available funds, such Participant's 
Proportionate Share of such Advance.  After Agent's receipt of 
such funds and upon fulfillment of the applicable conditions set 
forth in Section III, Agent will promptly disburse such funds on 
behalf of Lessor, in same day or immediately available funds, as 
directed by Lessee in the Advance Request for such Advance.
        (b)     Participant Failure to Fund.  Unless Agent shall have 
received notice from a Participant prior to the date of any 
Advance that such Participant will not make available to Agent 
such Participant's Proportionate Share of such Advance, Agent may 
assume that such Participant has made such portion available to 
Agent on the date of such Advance in accordance with Subparagraph 
2.05(a), and Agent may, in reliance upon such assumption, disburse 
the full amount of such Advance on such date; provided, however, 
that neither Agent nor Lessor shall have any obligation to make an 
Advance requested hereunder in an amount which exceeds the 
aggregate amount of funds actually received by Agent from the 
Participants on account of their respective Proportionate Shares 
of such Advance.  If any Participant does not make the amount of 
its Proportionate Share of any Advance available to Agent on or 
prior to the date such Advance is made, Agent promptly shall 
notify such Participant of such failure and such Participant shall 
pay to Agent, on demand, interest which shall accrue on such 
amount until made available to Agent at rates equal to (i) the 
daily Federal Funds Rate during the period from the date of such 
Advance through the third Business Day thereafter and (ii) the 
Base Rate plus two percent (2.0%) thereafter.  A certificate of 
Agent submitted to any Participant with respect to any amounts 
owing under this Subparagraph 2.05(b) shall be conclusive absent 
manifest error.  If any Participant's Proportionate Share of any 
Advance is not in fact made available to Agent by such Participant 
within three (3) Business Days after the date of such Advance, 
Lessee shall pay to Agent, on demand, an amount equal to such 
Proportionate Share together with interest thereon, for each day 
from the date such amount was made available to Lessee until the 
date such amount is repaid to Agent, at a per annum rate equal to 
the Base Rate.
        (c)     Participants' Obligations Several.  The failure of any 
Participant to fund its Proportionate Share of any Advance shall 
not relieve any other Participant of its obligation hereunder to 
fund its Proportionate Share of such Advance, and no Participant 
shall be responsible for the failure of any other Participant to 
fund its Proportionate Share of any Advance on the date of such 
Advance.
        2.06.   Sharing of Payments.
        (a)     Outstanding Lease Amount.  Lessor shall share payments 
applied to reduce the Outstanding Lease Amount as follows:
        (i)     Each payment of the Outstanding Lease Amount 
derived from the purchase price paid by Lessee (or an 
Assignee Purchaser) to purchase the Property pursuant to the 
Purchase Agreement shall be shared by the Participants pro 
rata according to their respective Outstanding Participation 
Amounts at the time of such payment.
        (ii)    Each payment of the Outstanding Lease Amount 
derived from the Residual Value Guaranty Amount paid by 
Lessee pursuant to the Purchase Agreement shall be shared 
first by the Tranche A Participants pro rata according to 
their respective Outstanding Tranche A Participation Amounts 
at the time of such payment; second, if any amounts remain 
after all Outstanding Tranche A Participation Amounts are 
paid in full, by the Tranche B Participants pro rata 
according to their respective Outstanding Tranche B 
Participation Amounts at the time of such payment; and 
third, if any amounts remain after all Outstanding Tranche A 
Participation Amounts and all Outstanding Tranche B 
Participation Amounts are paid in full, by the Tranche C 
Participants pro rata according to their respective 
Outstanding Tranche C Participation Amounts at the time of 
such payment.
        (iii)   Each payment of the Outstanding Lease Amount 
derived from:
        (A)     the purchase price paid by a Designated 
Purchaser to purchase the Property pursuant to the 
Purchase Agreement;
        (B)     the Indemnity Amount paid by Lessee 
pursuant to the Purchase Agreement; or
        (C)     Casualty Proceeds or Condemnation Proceeds 
related to any of the Property;
Shall be shared first by the Tranche B Participants pro rata 
according to their respective Outstanding Tranche B 
Participation Amounts at the time of such payment; second, 
if any amounts remain after all Outstanding Tranche B 
Participation Amounts are paid in full, by the Tranche A 
Participants pro rata according to their respective 
Outstanding Tranche A Participation Amounts at the time of 
such payment; and third, if any amounts remain after all 
Outstanding Tranche B Participation Amounts and all 
Outstanding Tranche A Participation Amounts are paid in 
full, by the Tranche C Participants pro rata according to 
their respective Outstanding Tranche C Participation Amounts 
at the time of such payment.
        (iv)    Each payment of the Outstanding Lease Amount 
derived from the purchase price paid by any other Person to 
purchase the Property (whether after the retention of such 
Property by Lessor following the Expiration Date of the 
Lease Agreement, upon foreclosure or otherwise) shall be 
shared first by the Tranche B Participants pro rata 
according to their respective Outstanding Tranche B 
Participation Amounts at the time of such payment; second, 
if any amounts remain after all Outstanding Tranche B 
Participation Amounts are paid in full, by the Tranche A 
Participants pro rata according to their respective 
Outstanding Tranche A Participation Amounts at the time of 
such payment; and third, if any amounts remain after all 
Outstanding Tranche B Participation Amounts and all 
Outstanding Tranche A Participation Amounts are paid in 
full, by the Tranche C Participants pro rata according to 
their respective Outstanding Tranche C Participation Amounts 
at the time of such payment.
        (v)     Each payment of the Outstanding Lease Amount 
derived from Cash Collateral shall be shared (i) by the 
Tranche A Participants alone pro rata according to their 
respective Outstanding Tranche A Participation Amounts at 
the time of such payment if such payment is made after the 
purchase of the Property by a Designated Purchaser pursuant 
to the Marketing Option in the Purchase Agreement or (ii) by 
all Participants pro rata according to their respective 
Outstanding Participation Amounts at the time of such 
payment if such payment is made in any other circumstance.
        (b)     Base Rent. Lessor shall share each payment applied to 
Base Rent among the Participants which funded the Outstanding 
Lease Amount pro rata according to (i) the respective Outstanding 
Participation Amounts so funded by such Participants and (ii) the 
dates on which such Participants so funded such amounts.
        (c)     Supplemental Rent. Lessor shall share each payment 
applied to Supplemental Rent among the Lessor Parties as follows:
        (i)     Each payment applied to Agent's Fees shall be 
solely for the account of Agent.
        (ii)    Each payment applied to Commitment Fees shall be 
shared by the Participants pro rata according to (A) their 
respective Proportionate Shares and (B) in the case of each 
Participant which becomes a Participant hereunder after the 
date hereof, the date upon which such Participant so became 
a Participant.
        (iii)   Each payment applied to the 364-Day Commitment 
Extension Fee shall be shared by the Participants pro rata 
according to their respective Proportionate Shares on the 
date of such payment.
        (iv)    Each payment applied to reimburse any Lessor 
Party for any fees, costs and expenses incurred by such 
Lessor Party shall be solely for the account of such Lessor 
Party.
        (v)     Each payment of interest (other than Base Rent) 
shall be shared among the Lessor Parties owed the amount 
upon which such interest accrues pro rata according to (A) 
the respective amounts so owed such Lessor Parties and (B) 
the dates on which such amounts became owing to such Lessor 
Parties.
        (vi)    All other payments under this Agreement and the 
other Operative Documents shall be for the benefit of the 
Person or Persons specified.
        (d)     Disproportionate Payments, Etc.  If any Participant 
shall obtain any payment (whether voluntary, involuntary, through 
the exercise of any right of setoff, or otherwise) on account of 
amounts owed to it in excess of its ratable share of payments on 
account of such amounts obtained by all Participants entitled to 
such payments, such Participant shall forthwith purchase from the 
other Participants such participations in the payments to be made 
under the Operative Documents as shall be necessary to cause such 
purchasing Participant to share the excess payment ratably with 
each of them; provided, however, that if all or any portion of 
such excess payment is thereafter recovered from such purchasing 
Participant, such purchase shall be rescinded and each other 
Participant shall repay to the purchasing Participant the purchase 
price to the extent of such recovery together with an amount equal 
to such other Participant's ratable share (according to the 
proportion of (i) the amount of such other Participant's required 
repayment to (ii) the total amount so recovered from the 
purchasing Participant) of any interest or other amount paid or 
payable by the purchasing Participant in respect of the total 
amount so recovered.  Lessee agrees that any Participant so 
purchasing a participation from another Participant pursuant to 
this Subparagraph 2.06(d) may, to the fullest extent permitted by 
law, exercise all its rights of payment (including the right of 
setoff) with respect to such participation as fully as if such 
Participant were the direct creditor of Lessee in the amount of 
such participation.
        2.07.   Other Payment Terms.
        (a)     Place and Manner of Payments by Lessee.  Lessee shall 
make all payments due to any Lessor Party under this Agreement and 
the other Operative Documents by payments to Agent, for the 
account of such Person, at Agent's office, located at the address 
specified in Paragraph 7.01, with each payment due to a 
Participant to be for the account of such Participant's Applicable 
Participating Office.  Lessee shall make all payments in lawful 
money of the United States and in same day or immediately 
available funds not later than 12:00 noon on the date due.  Agent 
shall promptly disburse to the appropriate Person each such 
payment received by Agent for such Person.
        (b)     Date.  Whenever any payment due under this Agreement 
or any other Operative Document shall fall due on a day other than 
a Business Day, such payment shall be made on the next succeeding 
Business Day, and such extension of time shall be included in the 
computation of Rent, interest or fees, as the case may be.  
Whenever this Agreement or any other Operative Document requires a 
payment to be made by Lessee but fails to specify a time for such 
payment to be made, such payment shall be due and payable thirty 
(30) days after demand for such payment is made upon Lessee by the 
applicable party.
        (c)     Late Payments.  If any amounts required to be paid by 
Lessee under this Agreement or any other Operative Document 
(including Rent, interest, fees or other amounts) remain unpaid 
after such amounts are due, Lessee shall pay a late payment charge 
on the aggregate, outstanding balance of such amounts from the 
date due until those amounts are paid in full at a per annum rate 
equal to the Base Rate plus two percent (2.0%), such rate to 
change from time to time as the Base Rate shall change.
        (d)     Application of Payments.  All payments under this 
Agreement and the other Operative Documents shall be applied first 
to unpaid fees, costs and expenses then due and payable under this 
Agreement or any other Operative Document, second to the accrued 
Base Rent then due and payable under this Agreement or any other 
Operative Document and finally to reduce the Outstanding Lease 
Amount.
        (e)     Failure to Pay Agent.  Unless Agent shall have 
received notice from Lessee at least one (1) Business Day prior to 
the date on which any payment is due to Lessor or the Participants 
under this Agreement or the other Operative Documents that Lessee 
will not make such payment in full, Agent may assume that Lessee 
has made such payment in full to Agent on such date and Agent may, 
in reliance upon such assumption, cause to be distributed to the 
appropriate Persons on such due date an amount equal to the amount 
then due such Persons.  If and to the extent Lessee shall not have 
so made such payment in full to Agent, each such Person shall 
repay to Agent forthwith on demand such amount distributed to such 
Person together with interest thereon, for each day from the date 
such amount is distributed to such Person until the date such 
Person repays such amount to Agent, at (i) the Federal Funds Rate 
for the first three (3) days and (ii) the Base Rate plus two 
percent (2.0%) thereafter, such rate to change from time to time 
as the Base Rate shall change.  A certificate of Agent submitted 
to any Person with respect to any amounts owing by such Person 
under this Subparagraph 2.07(e) shall be conclusive absent 
manifest error.
2.08.   Commitment Reductions.
        (a)     Reduction or Cancellation of Commitments.  Lessee may, 
at any time prior to the 364-Day Commitment Termination Date in 
the case of the 364-Day Commitment or the Commitment Termination 
Date in the case of the Two-Year-Day Commitment, upon five (5) 
Business Days written notice to Lessor, permanently reduce the 
364-Day Commitment or the Two-Year Commitment by the amount of One 
Million Dollars ($1,000,000) or an integral multiple of One 
Hundred Thousand Dollars ($100,000) in excess thereof or cancel 
the 364-Day Commitment or the Two-Year Commitment in its entirety.  
Any reduction of the 364-Day Commitment or the Two-Year Commitment 
shall result in a corresponding reduction of the Total Commitment.
        (b)     Effect of Commitment Reductions.  From the effective 
date of any reduction of the 364-Day Commitment or the Two-Year 
Commitment, the Commitment Fees shall be computed on the basis of 
the 364-Day Commitment or the Two-Year Commitment as so reduced.  
Once reduced or cancelled, the 364-Day Commitment, the Two-Year 
Commitment and the Total Commitment may not be increased or 
reinstated without the prior written consent of Lessor and all 
Participants.  Any reduction of the 364-Day Commitment, the Two-
Year Commitment or the Total Commitment pursuant to this Paragraph 
2.08 shall be applied ratably to reduce each Participant's 
Commitment pro rata in accordance with its Proportionate Share.
        2.09.   Extensions.
        (a)     364-Day Commitment Extension.  Lessee may request 
Lessor to extend the 364-Day Commitment Termination Date for an 
additional period of six (6) months by appropriately completing, 
executing and delivering to Agent a written request in the form of 
Exhibit G(1) (a " 364-Day Commitment Extension Request").  Lessee 
shall deliver the 364-Day Commitment Extension Request to Agent 
not more than three (3) months and not less than two (2) months 
before the original 364-Day Commitment Termination Date.  Agent 
shall promptly deliver to Lessor and each Participant three (3) 
copies of each 364-Day Commitment Extension Request received by 
Agent.  If Lessor or a Participant, in its sole and absolute 
discretion, consents to the 364-Day Commitment Extension Request, 
such Person shall evidence such consent by executing and returning 
two (2) copies of the 364-Day Commitment Extension Request to 
Agent not later than the last Business Day which is not less than 
fifteen (15) Business Days prior to the original 364-Day 
Commitment Termination Date.  Any failure by Lessor or any 
Participant so to execute and return a 364-Day Commitment 
Extension Request shall be deemed a denial thereof.  If Lessee 
shall deliver a 364-Day Commitment Extension Request to Lessor 
pursuant to the first sentence of this Subparagraph 2.09(a), then 
not later than ten (10) Business Days prior to the original 364-
Day Commitment Termination Date, Agent shall notify Lessee, Lessor 
and the Participants in writing whether (i) Agent has received a 
copy of the 364-Day Commitment Extension Request executed by 
Lessor and each Participant, in which case the definition of " 
364-Day Commitment Termination Date" set forth in Subparagraph 
2.01(a) shall be deemed extended to the date which is six (6) 
months after the original 364-Day Commitment Termination Date 
(subject to receipt by Agent of the 364-Day Commitment Extension 
Fee), or (ii) Agent has not received a copy of the 364-Day 
Commitment Extension Request executed by Lessor and each 
Participant, in which case such 364-Day Commitment Extension 
Request shall be deemed denied.  Lessee acknowledges that neither 
Lessor nor any Participant has promised (either expressly or 
implicitly), or has any obligation or commitment, to extend or 
consent to the extension of the 364-Day Commitment Termination 
Date at any time.
        (b)     Lease Extension.  Lessee may, as provided herein but 
not more than three (3) times, request Lessor to extend the 
Scheduled Expiration Date of the Lease Agreement for an additional 
period of one (1) year by appropriately completing, executing and 
delivering to Agent a written request in the form of Exhibit G(2), 
together with an attachment thereto setting forth the terms upon 
which Lessee would propose for the requested extension (a "Lease 
Extension Request").  Lessee shall deliver each Lease Extension 
Request to Agent not more than nine (9) months and not less than 
six (6) months before the then current Scheduled Expiration Date.  
Agent shall promptly deliver to Lessor and each Participant three 
(3) copies of each Lease Extension Request received by Agent.  If 
Lessor or a Participant, in its sole and absolute discretion, 
consents to a Lease Extension Request, such Person shall evidence 
such consent by executing and returning two (2) copies of such 
Lease Extension Request to Agent not later than the last Business 
Day which is not less than five (5) months prior to the then 
current Scheduled Expiration Date.  Any failure by Lessor or any 
Participant so to execute and return a Lease Extension Request 
shall be deemed a denial thereof.  If Lessee shall deliver a Lease 
Extension Request to Lessor pursuant to the first sentence of this 
Subparagraph 2.09(b), then not later than the last Business Day 
which is not less than four (4) months prior to the then current 
Scheduled Expiration Date, Agent shall notify Lessee, Lessor and 
the Participants in writing whether (i) Agent has received a copy 
of the Lease Extension Request executed by Lessor and each 
Participant, in which case the definition of "Scheduled Expiration 
Date" set forth in Subparagraph 2.02(a) of the Lease Agreement 
shall be deemed extended to the date which is one (1) year after 
the then current Scheduled Expiration Date (subject to the receipt 
by Agent of any amounts payable by Lessee in connection with such 
extension), or (ii) Agent has not received a copy of the Lease 
Extension Request executed by Lessor and each Participant, in 
which case such Lease Extension Request shall be deemed denied.  
Lessee acknowledges that neither Lessor nor any Participant has 
promised (either expressly or implicitly), or has any obligation 
or commitment, to extend or consent to the extension of the 
Scheduled Expiration Date at any time.
        2.10.   Nature of the Transactions.  Lessee and the Lessor Parties 
intend that the transactions evidenced by this Agreement and the other 
Operative Documents constitute operating leases pursuant to FASB 13 for 
accounting purposes and loans secured by the Property for other 
purposes, including federal, state and local income tax purposes and 
commercial, real estate and bankruptcy law purposes.  To the extent that 
this Agreement and the other Operative Documents reflect the lease form 
alone, they do so for convenience only.  Lessee and the Lessor Parties 
intend that the Operative Documents have the dual form referred to in 
the first sentence of this paragraph, notwithstanding the use of the 
lease form alone.
        (a)     Tax Treatment.  For purposes of all income, franchise 
and other taxes imposed upon or measured by income, Lessee and 
Lessor Parties intend that the transactions evidenced by the 
Operative Documents shall be treated as loans by the Participants 
(through Lessor) to Lessee secured by the Property, with Lessee as 
owner of the Property.  Lessee and the Lessor Parties may only 
take deductions, credits, allowances and other reporting positions 
on their respective returns, reports and statements which are 
consistent with such treatment, unless required to do otherwise by 
an appropriate taxing authority or after a clearly applicable 
change in applicable Governmental Rules; provided, however, that 
if an appropriate taxing authority or a clearly applicable change 
in applicable Governmental Rules requires any Lessor Party to take 
such an inconsistent position, such Lessor Party shall promptly 
notify Lessee.
        (b)     Other Legal Treatment.  For purposes of commercial 
law, real property law, bankruptcy law and other applicable laws, 
Lessee and Lessor Parties also intend that the transactions 
evidenced by the Operative Documents shall be treated as loans by 
the Participants (through Lessor) to Lessee secured by the 
Property, with Lessee as owner of the Property.  Consistent with 
such treatment, Lessee and the Lessor Parties intend that, among 
other things for such purposes, (i) the Advances be treated as 
loans to Lessee by the Participants (through Lessor); (ii) the 
Advances be secured by the Property and the Lessor Parties have 
the rights and remedies of secured lenders; (iii) Base Rent be 
treated as interest on the Advances; (iv) Lessee be required to 
pay on the Expiration Date only the Residual Value Guaranty 
Amount, the Indemnity Amount and the other amounts required by 
Subparagraph 4.06(b) of the Purchase Agreement (or Subparagraph 
4.06(c) if Lessor is retaining the Property) if Lessee exercises 
the Marketing Option in accordance with the Purchase Agreement; 
and (v) Lessee be required to pay on the Expiration Date the 
Outstanding Lease Amount and all other amounts outstanding under 
this Agreement and the other Operative Documents (including 
amounts required by Subparagraph 4.06(a) of the Purchase 
Agreement) if the Lease Agreement is terminated prior to its 
Scheduled Expiration Date after an Event of Default occurs under 
the Lease Agreement or if Lessee fails to or is otherwise not 
entitled to exercise the Marketing Option in accordance with the 
Purchase Agreement.
        (c)     No Reliance by Lessee.  Lessee acknowledges and agrees 
that no Lessor Party has made any representations or warranties to 
Lessee concerning the tax, accounting or legal characteristics of 
the Operative Documents and that Lessee has obtained and relied 
upon such tax, accounting and legal advice concerning the 
Operative Documents as it deems appropriate.
        (d)     Modification of Operative Documents.  Lessee and the 
Lessor Parties shall amend or modify this Agreement and the other 
Operative Documents to the extent necessary for the transaction 
evidenced by this Agreement and the other Operative Documents to 
qualify as an operating lease pursuant to FASB 13 for accounting 
purposes if, and only if, such amendments and modifications do not 
adversely affect either Lessee or any Lessor Party.
        2.11.   Security.
        (a)     Lessee Obligations.
        (i)     To the extent that the transaction evidenced by 
the Lease Agreement, Purchase Agreement and other Operative 
Documents is treated as a loan by the Participants (through 
Lessor) to Lessee secured by the Property, with Lessee as 
owner of the Property pursuant to Paragraph 2.10, the Lessee 
Obligations shall be secured by the Real Property Collateral 
and the Personal Property Collateral (collectively, the 
"Property Collateral") as provided in Subparagraphs 2.07(a) 
and 2.07(b) of the Lease Agreement and in an Assignment of 
Construction Agreements in the form of Exhibit H, duly 
executed by Lessee (the "Assignment of Construction 
Agreements").
                (ii)    In addition to the Property Collateral, the 
Lessee Obligations shall be secured by a Cash Collateral 
Agreement in the form of Exhibit I, duly executed by Lessee 
(the "Cash Collateral Agreement") and Cash Collateral 
delivered to Agent or Participants pursuant to the Cash 
Collateral Agreement as provided below:
(A)     To the extent such Cash Collateral is not 
then held by Agent or Participants pursuant to the 
Cash Collateral Agreement, Lessee shall deliver to 
Agent or Participants pursuant to the Cash Collateral 
Agreement:
(1)     Cash Collateral in an amount not 
less than 100% of the total Tranche A 
Proportionate Share of the Outstanding Lease 
Amount at any time Lessee elects, pursuant to 
Subparagraph 3.02(l) of the Purchase Agreement, 
to exercise the Marketing Option after Lessor 
notifies Lessee that Lessor is terminating the 
Lease Agreement on a Termination Date that is 
prior to the Scheduled Expiration Date and the 
only basis for such early termination is the 
occurrence of a Non-Marketing Option Event of 
Default; and
(2)     Cash Collateral in an amount not 
less than 100% of the total Outstanding Lease 
Amount on or prior to August 31, 2002.
(B)     Lessee may, at Lessee's election at any 
other time, deliver to Agent or Participants pursuant 
to the Cash Collateral Agreement Cash Collateral to 
decrease the Applicable Margin for the LIBOR Rental 
Rate under the Lease Agreement.  If Lessee elects to 
deliver any Cash Collateral pursuant to the Cash 
Collateral Agreement to decrease the Applicable Margin 
for the LIBOR Rental Rate, Lessee shall deliver to 
Agent, five (5) Business Days' prior to the delivery 
of such Cash Collateral, notice of such election and 
shall deliver such Cash Collateral only on a Scheduled 
Rent Payment Date under the Lease Agreement.
At the time Lessee delivers any Cash Collateral to Agent or 
Participants pursuant to this clause (ii), Lessee also shall 
deliver to Lessor a favorable written opinion of its 
counsel, in form and substance reasonably satisfactory to 
Lessor and Agent but subject to customary qualifications and 
assumptions, to the effect that the Cash Collateral 
Agreement is a legal, valid and binding agreement of Lessee, 
enforceable in accordance with its terms, and that Lessor 
has a perfected security interest in the Cash Collateral.  
Lessee may not withdraw any Cash Collateral required to be 
delivered pursuant to clause (A) above until the Expiration 
Date of the Lease Agreement and the satisfaction in full of 
all Lessee Obligations.  Lessee may withdraw Cash Collateral 
delivered and held pursuant to clause (B) above only as 
provided in the Cash Collateral Agreement.
        (iii)   Lessee shall deliver to Lessor and Agent such 
additional mortgages, deeds of trust, security agreements, 
pledge agreements, lessor consents and estoppels (containing 
appropriate mortgagee and lender protection language) and 
other instruments, agreements, certificates, opinions and 
documents (including Uniform Commercial Code financing 
statements and fixture filings and landlord waivers) as 
Lessor or Agent may reasonably request to (A) grant, 
perfect, maintain, protect and evidence security interests 
in favor of Lessor or Agent in the Property Collateral and 
Cash Collateral prior to the Liens or other interests of any 
Person, except in the case of the Property Collateral for 
Permitted Property Liens; and (B) otherwise establish, 
maintain, protect and evidence the rights provided to Lessor 
and Agent in the Property Collateral and Cash Collateral.  
Lessee shall fully cooperate with Lessor and Agent and 
perform all additional acts reasonably requested by Lessor 
or Agent to effect the purposes of this Subparagraph 
2.11(a).
        (b)     Lessor Obligations.
        (i)     The Lessor Obligations shall be secured by the 
following:
        (A)     An Assignment of Lease Agreement and 
Purchase Agreement in the form of Exhibit J, duly 
executed by Lessor (the "Assignment of Lease");
        (B)     A Construction Deed of Trust with 
Assignment of Rents, Security Agreement and Fixture 
Filing in the form of Exhibit K, duly executed by 
Lessor (the "Lessor Deed of Trust"); and
        (C)     A Security Agreement in the form of 
Exhibit L, duly executed by Lessor (the "Lessor 
Security Agreement").
        (ii)    Lessor shall deliver to Agent such additional 
mortgages, deeds of trust, security agreements, pledge 
agreements, lessor consents and estoppels (containing 
appropriate mortgagee and lender protection language) and 
other instruments, agreements, certificates, opinions and 
documents (including Uniform Commercial Code financing 
statements and fixture filings and landlord waivers) as 
Agent may reasonably request to (A) grant, perfect, 
maintain, protect and evidence security interests in favor 
of Agent in Lessor's rights in the Property Collateral and 
Cash Collateral; and (B) otherwise establish, maintain, 
protect and evidence the rights provided to Agent in the 
Property Collateral and Cash Collateral.  Lessor shall fully 
cooperate with Agent and perform all additional acts 
reasonably requested by Agent to effect the purposes of this 
Subparagraph 2.11(b).
        (iii)   Lessee hereby consents to the Assignment of 
Lease, the Lessor Deed of Trust and the Lessor Security 
Agreement; the Liens granted to Agent therein; and all other 
Liens granted to Agent in any of the Operative Documents and 
the Property to secure the Lessor Obligations.
        2.12.   Change of Circumstances.
        (a)     Inability to Determine Rates.  If, on or before the 
first day of any Rental Period, (i) any Participant shall advise 
Agent that the LIBOR Rental Rate for such Rental Period cannot be 
adequately and reasonably determined due to the unavailability of 
funds in or other circumstances affecting the London interbank 
market or (ii) Majority Participants shall advise Agent that the 
LIBOR Rental Rate for such Rental Period does not adequately and 
fairly reflect the cost to such Participants of funding their 
shares of the Outstanding Lease Amount, Agent shall immediately 
give notice of such condition to Lessee, Lessor and the other 
Participants.  After the giving of any such notice (and until 
Agent shall otherwise notify Lessee and Lessor that the 
circumstances giving rise to such condition no longer exist), the 
LIBOR Rental Rate shall be unavailable and the Rental Rate for 
each new Rental Period shall be the Alternate Rental Rate.
        (b)     Illegality.  If, after the date of this Agreement, the 
adoption of any Governmental Rule, any change in any Governmental 
Rule or the application or requirements thereof (whether such 
change occurs in accordance with the terms of such Governmental 
Rule as enacted, as a result of amendment or otherwise), any 
change in the interpretation or administration of any Governmental 
Rule by any Governmental Authority, or compliance by Lessor or any 
Participant with any request or directive (whether or not having 
the force of law) of any Governmental Authority (a "Change of 
Law") shall make it unlawful or impossible for any Participant to 
fund or maintain its portion of the Outstanding Lease Amount at 
the LIBOR Rental Rate, such Participant shall immediately notify 
Agent and Agent shall immediately notify Lessee, Lessor and the 
other Participants of such Change of Law.  After the giving of any 
such notice (and until Agent shall otherwise notify Lessee and 
Lessor that such Change of Law is no longer in effect), the LIBOR 
Rental Rate shall be unavailable and the Rental Rate for each 
Rental Period shall be the Alternate Rental Rate.
        (c)     Increased Costs.  If, after the date of this 
Agreement, any Change of Law:
        (i)     Shall subject Lessor or any Participant to any 
tax, duty or other charge with respect to the Outstanding 
Lease Amount, or shall change the basis of taxation of Base 
Rent payments by Lessee to Lessor or any Participant under 
this Agreement or any other Operative Document (except for 
changes in the rate of taxation on the overall net income of 
Lessor or any Participant imposed by its jurisdiction of 
incorporation or any jurisdiction in which it maintains an 
office); or
        (ii)    Shall impose, modify or hold applicable any 
reserve (excluding any Reserve Requirement or other reserve 
to the extent included in the calculation of the LIBOR 
Rental Rate), special deposit or similar requirement against 
assets held by, deposits or other liabilities in or for the 
account of, advances or loans by, or any other acquisition 
of funds by Lessor or any Participant for its portion of the 
Outstanding Lease Amount; or
        (iii)   Shall impose on Lessor or any Participant any 
other condition related to the Outstanding Lease Amount, 
Base Rent or Lessor's or such Participant's commitments 
hereunder;
And the effect of any of the foregoing is to increase the cost to 
Lessor or such Participant of funding or maintaining its portion 
of the Outstanding Lease Amount or commitments or to reduce any 
amount receivable by Lessor or such Participant hereunder; then 
Lessee shall from time to time within thirty (30) days after 
demand by Lessor or such Participant, pay to Lessor or such 
Participant additional amounts sufficient to reimburse Lessor or 
such Participant for such increased costs or to compensate Lessor 
or such Participant for such reduced amounts; provided, however, 
that Lessee shall have no obligation to make any payment to any 
demanding party under this Subparagraph 2.12(c) on account of any 
such increased costs or reduced amounts relating to any Rental 
Period that ended more than six (6) months prior to such demanding 
party's first demand for payment (or, if any increased costs or 
reduced amounts do not relate to a particular Rental Period, on 
account of any such increased costs or reduced amounts realized by 
the demanding party more than six (6) months prior to its first 
demand for payment).  A certificate setting forth in reasonable 
detail the amount of such increased costs or reduced amounts, 
submitted by Lessor or such Participant to Lessee shall constitute 
prima facie evidence of such costs or amounts.  The obligations of 
Lessee under this Subparagraph 2.12(c) shall survive the payment 
and performance of the Lessee Obligations and the termination of 
this Agreement.
        (d)     Capital Requirements.  If, after the date of this 
Agreement, Lessor or any Participant determines that (i) any 
Change of Law affects the amount of capital required to be 
maintained by such Person or any other Person controlling such 
Person (a "Capital Adequacy Requirement") and (ii) the amount of 
capital maintained by such Person or such other Person which is 
attributable to or based upon the Advances, the commitments or 
this Agreement must be increased as a result of such Capital 
Adequacy Requirement (taking into account such Person's or such 
other Person's policies with respect to capital adequacy), Lessee 
shall pay to such Person or such other Person, within thirty (30) 
Business Days after demand of such Person, such amounts as such 
Person or such other Person reasonably shall determine are 
necessary to compensate such Person or such other Person for the 
increased costs to such Person or such other Person of such 
increased capital; provided, however, that Lessee shall have no 
obligation to make any payment to any demanding party under this 
Subparagraph 2.12(d) on account of any such increased costs 
relating to any Rental Period that ended more than six (6) months 
prior to such demanding party's first demand for payment (or, if 
any increased costs or reduced amounts do not relate to a 
particular Rental Period, on account of any such increased costs 
or reduced amounts realized by the demanding party more than six 
(6) months prior to its first demand for payment).  A certificate 
of Lessor or any Participant setting forth in reasonable detail 
the computation of any such increased costs, delivered by such 
Person to Lessee shall constitute prima facie evidence of such 
costs.  The obligations of Lessee under this Subparagraph 2.12(d) 
shall survive the payment and performance of the Lessee 
Obligations and the termination of this Agreement.
        (e)     Mitigation.  If Lessor or any Participant becomes 
aware of (i) any Change of Law which will make it unlawful or 
impossible for such Person to fund or maintain its portion of the 
Outstanding Lease Amount at the LIBOR Rental Rate or (ii) any 
Change of Law or other event or condition which will obligate 
Lessee to pay any amount pursuant to Subparagraph 2.12(c) or 
Subparagraph 2.12(d), such Person shall notify Lessee and Agent 
thereof as promptly as practical.  If any Person has given notice 
of any such Change of Law or other event or condition and 
thereafter becomes aware that such Change of Law or other event or 
condition has ceased to exist, such Person shall notify Lessee and 
Agent thereof as promptly as practical.  Each Person affected by 
any Change of Law which makes it unlawful or impossible for such 
Person to fund or maintain its portion of the Outstanding Lease 
Amount at the LIBOR Rental Rate or to which Lessee is obligated to 
pay any amount pursuant to Subparagraph 2.12(c) or Subparagraph 
2.12(d) shall use reasonable commercial efforts (including 
changing the jurisdiction of its Applicable Participating Office) 
to avoid the effect of such Change of Law or to avoid or 
materially reduce any amounts which Lessee is obligated to pay 
pursuant to Subparagraph 2.12(c) or Subparagraph 2.12(d) if, in 
the reasonable opinion of such Person, such efforts would not be 
disadvantageous to such Person.
        2.13.   Taxes on Payments.
        (a)     Payments Free of Taxes.  All payments made by Lessee 
under this Agreement and the other Operative Documents shall be 
made free and clear of, and without deduction or withholding for 
or on account of, any present or future Indemnified Taxes, now or 
hereafter imposed, levied, collected, withheld or assessed by any 
Governmental Authority.  If any Indemnified Taxes are required to 
be withheld from any amounts payable to any Lessor Party hereunder 
or under the other Operative Documents, the amounts so payable to 
such Lessor Party shall be increased to the extent necessary to 
yield to such Lessor Party (after payment of all Indemnified 
Taxes) the Base Rent or any such other amounts payable hereunder 
at the rates or in the amounts specified in this Agreement and the 
other Operative Documents.  Whenever any Indemnified Taxes are 
payable by Lessee, as promptly as possible thereafter, Lessee 
shall send to Agent for its own account or for the account of 
Lessor or such Participant, as the case may be, a certified copy 
of an original official receipt received by Lessee showing payment 
thereof.  If Lessee fails to pay any Indemnified Taxes when due to 
the appropriate taxing authority or fails to remit to Agent the 
required receipts or other required documentary evidence, Lessee 
shall indemnify the Lessor Parties for any incremental taxes, 
interest or penalties that may become payable by the Lessor 
Parties as a result of any such failure.  The obligations of 
Lessee under this Subparagraph 2.13(a) shall survive the payment 
and performance of the Lessee Obligations and the termination of 
this Agreement.
        (b)     Withholding Exemption Certificates.  On or prior to 
the Closing Date or, if such date does not occur within thirty 
(30) days after the date of this Agreement, by the end of such 30-
day period, Lessor, if it is not incorporated under the laws of 
the United States of America or a state thereof, and each 
Participant which is not incorporated under the laws of the United 
States of America or a state thereof shall deliver to Lessee and 
Agent two duly completed copies of United States Internal Revenue 
Service Form 1001 or 4224 (or successor applicable form), as the 
case may be, certifying in each case that Lessor or such 
Participant, as the case may be, is entitled to receive payments 
under this Agreement and the other Operative Documents without 
deduction or withholding of any United States federal income 
taxes.  Each Person which delivers to Lessee and Agent a Form 1001 
or 4224 pursuant to the immediately preceding sentence further 
undertakes to deliver to Lessee and Agent two further copies of 
Form 1001 or 4224 (or successor applicable forms), or other manner 
of certification or procedure, as the case may be, on or before 
the date that any such form expires or becomes obsolete or after 
the occurrence of any event requiring a change in the most recent 
form previously delivered by it to Lessee and Agent, and such 
extensions or renewals thereof as may reasonably be requested by 
Lessee or Agent, certifying in the case of a Form 1001 or 4224 
that such Person is entitled to receive payments under this 
Agreement and the other Operative Documents without deduction or 
withholding of any United States federal income taxes, unless in 
any such cases an event (including without limitation any change 
in treaty, law or regulation) has occurred prior to the date on 
which any such delivery would otherwise be required which renders 
all such forms inapplicable or which would prevent Lessor or a 
Participant from duly completing and delivering any such form with 
respect to it and Lessor or such Participant advises Lessee and 
Agent that it is not capable of receiving payments without any 
deduction or withholding of United States federal income tax.
        (c)     Mitigation.  If any Lessor Party claims any additional 
amounts to be payable to it pursuant to this Paragraph 2.13, such 
Lessor Party shall use reasonable commercial efforts to file any 
certificate or document requested in writing by Lessee (including 
copies of Internal Revenue Service Form 1001 (or successor forms) 
reflecting a reduced rate of withholding) or to change the 
jurisdiction of its Applicable Participating Office if the making 
of such a filing or such change in the jurisdiction of its 
Applicable Participating Office would avoid the need for or 
materially reduce the amount of any such additional amounts which 
may thereafter accrue and if, in the reasonable opinion of a 
Participant, in the case of a change in the jurisdiction of its 
Applicable Participating Office, such change would not be 
disadvantageous to such Person.
        (d)     Tax Returns.  Nothing contained in this Paragraph 2.13 
shall require any Lessor Party to make available any of its tax 
returns (or any other information relating to its taxes which it 
deems to be confidential).
        2.14.   Funding Loss Indemnification.  If Lessee shall (a) pay all 
or any portion of the Outstanding Lease Amount on any day other than the 
last day of a Rental Period therefor (whether an optional payment, a 
mandatory payment or otherwise) or (b) cancel or otherwise fail to 
consummate any Advance Request which has been delivered to Agent 
(whether as a result of the failure to satisfy any applicable conditions 
or otherwise), Lessee shall, upon demand by Lessor or any Participant, 
reimburse such Person for and hold such Person harmless from all costs 
and losses incurred by such Person as a result of such payment, 
cancellation or failure.  Lessee understands that such costs and losses 
may include, without limitation, losses incurred by Lessor or a 
Participant as a result of funding and other contracts entered into by 
such Person to fund its portion of the Outstanding Lease Amount.  Each 
Person demanding payment under this Paragraph 2.14 shall deliver to 
Lessee, with a copy to Agent, a certificate setting forth the amount of 
costs and losses for which demand is made, which certificate shall set 
forth in reasonable detail the calculation of the amount demanded.  Such 
a certificate so delivered to Lessee shall constitute prima facie 
evidence of such costs and losses.  The obligations of Lessee under this 
Paragraph 2.14 shall survive the payment and performance of the Lessee 
Obligations and the termination of this Agreement.
        2.15.   Replacement of Participants.  If any Participant shall (a) 
become a Defaulting Participant more than once, (b) continue as a 
Defaulting Participant for more than five (5) Business Days at any time, 
(c) deliver, pursuant to Subparagraph 2.12(b), a notice of a Change of 
Law which does not affect Majority Participants, or (d) demand any 
payment under Subparagraph 2.12(c), 2.12(d) or 2.13(a) for a reason 
which is not applicable to Majority Participants, then Agent may (or 
upon the written request of Lessee if no Event of Default has occurred 
and is continuing, shall) replace such Participant (the "affected 
Participant"), or cause such affected Participant to be replaced, with 
another financial institution (the "replacement Participant") satisfying 
the requirements of an Eligible Assignee under Subparagraph 7.05(b), by 
having the affected Participant sell and assign all of its rights and 
obligations under this Agreement and the other Operative Documents to 
the replacement Participant pursuant to Subparagraph 7.05(b); provided, 
however, that if Lessee seeks to exercise such right, it must do so 
within sixty (60) days after it first receives notice of the event, 
condition or demand giving rise to such right, and no Lessor Party shall 
have any obligation to identify or locate a replacement Participant for 
Lessee.  Upon receipt by any affected Participant of a written notice 
from Agent stating that Agent is exercising the replacement right set 
forth in this Paragraph 2.15, such affected Participant shall sell and 
assign all of its rights and obligations under this Agreement and the 
other Operative Documents to the replacement Participant pursuant to an 
Assignment Agreement and Subparagraph 7.05(b) for a purchase price equal 
to the sum of its portion of the Outstanding Lease Amount, the accrued 
and unpaid portion of the Base Rent relating to such portion and its 
ratable share of all fees to which it is entitled.

SECTION 3.      CONDITIONS PRECEDENT.
        3.01.   Acquisition Advance.  The obligation of Lessor to enter into 
the Ground Lease and to make the Acquisition Advance (and the 
obligations of the Participants to fund their respective Proportionate 
Shares of the Acquisition Advance) is (are) subject to receipt by Agent, 
on or prior to the Closing Date, of each item listed in Schedule 3.01, 
each in form and substance satisfactory to Lessor, Agent and each 
Participant, and with sufficient copies for, Lessor, Agent and each 
Participant.
        3.02.   Improvement/Expense Advances.  The obligation of Lessor to 
make each Improvement/Expense Advance (and the obligations of the 
Participants to fund their respective Proportionate Shares of such 
Advance) is (are) subject to (i) satisfaction of the conditions set 
forth in Paragraph 3.01, (ii) receipt by Agent pursuant to Paragraph 
2.03 of the Advance Request for such Advance, appropriately completed 
and duly executed by Lessee, and (iii) receipt by Agent of date-down 
endorsements to Agent's and Lessor's title insurance policies or binders 
acceptable to Agent and Lessor.
        3.03.   Other Conditions Precedent.  The occurrence of each Credit 
Event (including the making of each Advance by Lessor and the funding of 
each Advance by the Participants) is subject to the further conditions 
that, on the date such Credit Event is to occur and after giving effect 
to such Credit Event, the following shall be true and correct:
        (a)     The representations and warranties of Lessee set forth 
in Paragraph 4.01 and in the other Operative Documents are true 
and correct in all material respects as if made on such date 
(except for representations and warranties expressly made as of a 
specified date, which shall be true as of such date);
        (b)     No Default has occurred and is continuing or will 
result from such Credit Event; and
        (c)     All of the Operative Documents are in full force and 
effect.
The submission by Lessee to Lessor and Agent of each Advance Request, 
each Notice of Rental Period Selection and a Notice of Marketing Option 
Exercise shall be deemed to be a representation and warranty by Lessee 
that each of the statements set forth above in this Paragraph 3.03 is 
true and correct as of the date of such request and notice.
        3.04.   Covenant to Deliver.  Lessee agrees (not as a condition but 
as a covenant) to deliver to Lessor and Agent each item required to be 
delivered to Lessor and Agent as a condition to each Advance if such 
Advance is made.  Lessee expressly agrees that the making of any Advance 
prior to the receipt by Lessor and Agent of any such item shall not 
constitute a waiver by Lessor, Agent or any Participant of Lessee's 
obligation to deliver such item, unless expressly waived in writing.

SECTION 4.      REPRESENTATIONS AND WARRANTIES.
        4.01.   Lessee's Representations and Warranties.  In order to induce 
the Lessor Parties to enter into this Agreement and the other Operative 
Documents to which they are parties, Lessee hereby represents and 
warrants to the Lessor Parties as follows:
        (a)     Due Incorporation, Qualification, etc.  Each of Lessee 
and Lessee's Subsidiaries (i) is a corporation duly organized, 
validly existing and in good standing under the laws of its state 
of incorporation; (ii) has the power and authority to own, lease 
and operate its properties and carry on its business as now 
conducted; and (iii) is duly qualified, licensed to do business 
and in good standing as a foreign corporation in each jurisdiction 
where the failure to be so qualified or licensed is reasonably 
likely to have a Material Adverse Effect.
        (b)     Authority.  The execution, delivery and performance by 
Lessee of each Operative Document executed, or to be executed, by 
Lessee and the consummation of the transactions contemplated 
thereby (i) are within the power of Lessee and (ii) have been duly 
authorized by all necessary actions on the part of Lessee.
(c)     Enforceability.  Each Operative Document executed, or 
to be executed, by Lessee has been, or will be, duly executed and 
delivered by Lessee and constitutes, or will constitute, a legal, 
valid and binding obligation of Lessee, enforceable against Lessee 
in accordance with its terms, except as limited by bankruptcy, 
insolvency or other laws of general application relating to or 
affecting the enforcement of creditors' rights generally and 
general principles of equity.
(d)     Non-Contravention.  The execution and delivery by 
Lessee of the Operative Documents executed by Lessee and the 
performance and consummation of the transactions contemplated 
thereby do not (i) violate any Requirement of Law applicable to 
Lessee; (ii) violate any provision of, or result in the breach or 
the acceleration of, or entitle any other Person to accelerate 
(whether after the giving of notice or lapse of time or both), any 
Contractual Obligation of Lessee; or (iii) result in the creation 
or imposition of any Lien (or the obligation to create or impose 
any Lien) upon any property, asset or revenue of Lessee (except 
such Liens as may be created in favor of the Lessor Parties 
pursuant to this Agreement or the other Operative Documents).
        (e)     Approvals.  No consent, approval, order or 
authorization of, or registration, declaration or filing with, any 
Governmental Authority or other Person (including, without 
limitation, the shareholders of any Person) is required in 
connection with the execution and delivery of the Operative 
Documents executed by Lessee and the performance and consummation 
by Lessee of the transactions contemplated thereby, except such as 
have been made or obtained and are in full force and effect.
        (f)     No Violation or Default.  Neither Lessee nor any of 
its Subsidiaries is in violation of or in default with respect to 
(i) any Requirement of Law applicable to such Person; (ii) any 
Contractual Obligation of such Person (nor is there any waiver in 
effect which, if not in effect, would result in such a violation 
or default), where, in each case, such violation or default is 
reasonably likely to have a Material Adverse Effect.  Without 
limiting the generality of the foregoing, neither Lessee nor any 
of its Subsidiaries (A) has violated any Environmental Laws, 
(B) has any liability under any Environmental Laws or (C) has 
received notice or other communication of an investigation or is 
under investigation by any Governmental Authority having authority 
to enforce Environmental Laws, where such violation, liability or 
investigation is reasonably likely to have a Material Adverse 
Effect.  No Default has occurred and is continuing.
        (g)     Litigation.  No actions (including, without 
limitation, derivative actions), suits, proceedings or 
investigations are pending or, to the knowledge of Lessee, 
threatened against Lessee or any of its Subsidiaries at law or in 
equity in any court or before any other Governmental Authority 
which (i) is reasonably likely (alone or in the aggregate) to have 
a Material Adverse Effect or (ii) seeks to enjoin, either directly 
or indirectly, the execution, delivery or performance by Lessee of 
the Operative Documents or the transactions contemplated thereby.
        (h)     Title; Possession Under Leases.  Lessee and its 
Subsidiaries own and have good and marketable title, or a valid 
leasehold interest in, all their respective properties and assets 
as reflected in the most recent Financial Statements delivered to 
Agent (except those assets and properties disposed of in the 
ordinary course of business or otherwise in compliance with this 
Agreement since the date of such Financial Statements) and all 
respective assets and properties acquired by Lessee and its 
Subsidiaries since such date (except those disposed of in the 
ordinary course of business or otherwise in compliance with this 
Agreement).  Such assets and properties are subject to no Lien, 
except for Permitted Liens.  Each of Lessee and its Subsidiaries 
has complied with all material obligations under all material 
leases to which it is a party and all such leases are in full 
force and effect.  Each of Lessee and its Subsidiaries enjoys 
peaceful and undisturbed possession under such leases.
        (i)     Financial Statements.  The Financial Statements of 
Lessee and its Subsidiaries which have been delivered to Agent, 
(i) are in accordance with the books and records of Lessee and its 
Subsidiaries, which have been maintained in accordance with good 
business practice; (ii) have been prepared in conformity with 
GAAP; and (iii) fairly present the financial conditions and 
results of operations of Lessee and its Subsidiaries as of the 
date thereof and for the period covered thereby.  Neither Lessee 
nor any of its Subsidiaries has any contingent obligations, 
liability for taxes or other outstanding obligations which are 
material in the aggregate, except as disclosed in the audited 
Financial Statements dated July 31, 1997, furnished by Lessee to 
Agent prior to the date hereof, or in the Financial Statements 
delivered to Agent pursuant to clause (i) or (ii) of 
Subparagraph 5.01.
        (j)     Equity Securities.  All outstanding Equity Securities 
of Lessee are duly authorized, validly issued, fully paid and non-
assessable.  All Equity Securities of Lessee have been offered and 
sold in compliance with all federal and state securities laws and 
all other Requirements of Law.
        (k)     No Agreements to Sell Assets; Etc.  Except as 
otherwise permitted by Subparagraph 5.02(c) or Subparagraph 
5.02(d), neither Lessee nor any of its Subsidiaries has any legal 
obligation, absolute or contingent, to any Person to sell the 
assets of Lessee or any of its Subsidiaries (other than sales in 
the ordinary course of business), or to effect any merger, 
consolidation or other reorganization of Lessee or any of its 
Subsidiaries or to enter into any agreement with respect thereto.
        (l)     Employee Benefit Plans.
        (i)     Based upon the latest valuation of each Employee 
Benefit Plan that either Lessee or any ERISA Affiliate 
maintains or contributes to, or has any obligation under 
(which occurred within twelve months of the date of this 
representation), the aggregate benefit liabilities of such 
plan within the meaning of   4001 of ERISA did not exceed 
the aggregate value of the assets of such plan.  Neither 
Lessee nor any ERISA Affiliate has any liability with 
respect to any post-retirement benefit under any Employee 
Benefit Plan which is a welfare plan (as defined in 
section 3(1) of ERISA), other than liability for health plan 
continuation coverage described in Part 6 of Title I(B) of 
ERISA, which liability for health plan contribution coverage 
is not reasonably likely to have a Material Adverse Effect.
(ii)    Each Employee Benefit Plan complies, in both 
form and operation, in all material respects, with its 
terms, ERISA and the IRC, and no condition exists or event 
has occurred with respect to any such plan which would 
result in the incurrence by either Lessee or any ERISA 
Affiliate of any liability, fine or penalty that is 
reasonably likely to have a Material Adverse Effect.  Each 
Employee Benefit Plan, related trust agreement, arrangement 
and commitment of Lessee or any ERISA Affiliate is legally 
valid and binding and in full force and effect.  No Employee 
Benefit Plan is being audited or investigated by any 
government agency or is subject to any pending or threatened 
claim or suit that is reasonably likely to have a Material 
Adverse Effect.  Neither Lessee nor any ERISA Affiliate nor 
any fiduciary of any Employee Benefit Plan has engaged in a 
prohibited transaction under section 406 of ERISA or section 
4975 of the IRC.
(iii)   Neither Lessee nor any ERISA Affiliate 
contributes to or has any material contingent obligations to 
any Multiemployer Plan.  Neither Lessee nor any ERISA 
Affiliate has incurred any liability (including secondary 
liability) to any Multiemployer Plan as a result of a 
complete or partial withdrawal from such Multiemployer Plan 
under Section 4201 of ERISA or as a result of a sale of 
assets described in Section 4204 of ERISA that is reasonably 
likely to have a Material Adverse Effect.  Neither Lessee 
nor any ERISA Affiliate has been notified that any 
Multiemployer Plan is in reorganization or insolvent under 
and within the meaning of Section 4241 or Section 4245 of 
ERISA or that any Multiemployer Plan intends to terminate or 
has been terminated under Section 4041A of ERISA.
        (m)     Other Regulations.  Lessee is not subject to 
regulation under the Investment Company Act of 1940, the Public 
Utility Holding Company Act of 1935, the Federal Power Act, the 
Interstate Commerce Act, any state public utilities code or to any 
other Governmental Rule limiting its ability to incur 
indebtedness.
        (n)     Patent and Other Rights.  Lessee and its Subsidiaries 
own or license under validly existing agreements all patents, 
licenses, trademarks, trade names, trade secrets, service marks, 
copyrights and all rights with respect thereto, which are required 
to conduct their businesses as now conducted.
        (o)     Governmental Charges and Other Indebtedness.  Lessee 
and its Subsidiaries have filed or caused to be filed all tax 
returns which are required to be filed by them.  Lessee and its 
Subsidiaries have paid, or made provision for the payment of, all 
taxes and other Governmental Charges which have or may have become 
due pursuant to said returns or otherwise and all other 
indebtedness, except such Governmental Charges or indebtedness, if 
any, which are being contested in good faith and as to which 
adequate reserves (determined in accordance with GAAP) have been 
provided or which are not reasonably likely to have a Material 
Adverse Effect if unpaid.
        (p)     Margin Stock.  Lessee owns no Margin Stock which, in 
the aggregate, would constitute a substantial part of the assets 
of Lessee, and no proceeds of any Loan will be used to purchase or 
carry, directly or indirectly, any Margin Stock or to extend 
credit, directly or indirectly, to any Person for the purpose of 
purchasing or carrying any Margin Stock.
        (q)     Subsidiaries, etc.  Set forth in Schedule 4.01(q) (as 
supplemented by Lessee from time to time in a written notice to 
Agent) is a complete list of all of Lessee's Subsidiaries, the 
jurisdiction of incorporation of each, the classes of Equity 
Securities of each and the number of shares and percentages of 
shares of each such class owned directly or indirectly by Lessee.
        (r)     Catastrophic Events.  Neither Lessee nor any of its 
Subsidiaries and none of their properties is or has been affected 
by any fire, explosion, accident, strike, lockout or other labor 
dispute, drought, storm, hail, earthquake, embargo, act of God or 
other casualty that is reasonably likely to have a Material 
Adverse Effect.  There are no disputes presently subject to 
grievance procedure, arbitration or litigation under any of the 
collective bargaining agreements, employment contracts or employee 
welfare or incentive plans to which Lessee or any of its 
Subsidiaries is a party, and there are no strikes, lockouts, work 
stoppages or slowdowns, or, to the best knowledge of Lessee, 
jurisdictional disputes or organizing activities occurring or 
threatened which alone or in the aggregate are reasonably likely 
to have a Material Adverse Effect.
        (s)     Burdensome Contractual Obligations, Etc.  Neither 
Lessee nor any of its Subsidiaries and none of their properties is 
subject to any Contractual Obligation or Requirement of Law which 
is reasonably likely to have a Material Adverse Effect.
        (t)     No Material Adverse Effect.  No event has occurred and 
no condition exists which is reasonably likely to have a Material 
Adverse Effect.
                (u)     The Property.
        (i)     The Land consists of 15.12 acres located in the 
City of  Hillsboro, Washington County, Oregon, more 
particularly described in Exhibit A.
        (ii)    On the date of this Agreement, there are no 
Improvements on the Land.  Upon the completion of the New 
Improvements on the Land, the Improvements on the Land will 
consist of a facility for the manufacture of advance laser 
beam generation equipment and associated processes 
containing approximately 15.12 acres (including parking, 
landscaping, recreational and related facilities, amenities 
and improvements).
        (iii)   No property, other than the leasehold interest 
in the Land will be acquired for the  Acquisition Price 
therefor.
        (iv)    Access to the Land for pedestrians and motor 
vehicles from publicly dedicated streets and public highways 
is available.
        (v)     No portion of the Property is located in an area 
identified as a special flood hazard area by the Federal 
Emergency Management Agency or other applicable Governmental 
Authority, or if any portion of the Property is located in 
such an area, flood insurance has been obtained for the 
Property or such portion thereof in accordance with 
Paragraph 3.03 of the Lease Agreement and the National Flood 
Insurance Act of 1968.
                (vi)    All of the Property complies and will comply at 
all times (whether before commencement of any construction, 
during any construction or after completion of construction 
of any New Improvements) with all applicable Governmental 
Rules (including Title III of the Americans with 
Disabilities Act; Environmental Laws; and zoning, land use, 
building, planning and fire laws, rules, regulations and 
codes) and Insurance Requirements, except for violations 
which are not reasonably likely to have a Material Adverse 
Effect.  No Hazardous Materials have been used, generated, 
manufactured, stored, treated, disposed of, transported or 
present on or released or discharged from the Property in 
any manner that is reasonably likely to have a Material 
Adverse Effect.  There are no claims or actions which are 
reasonably likely to have a Material Adverse Effect pending 
or, to Lessee's knowledge, threatened against any of the 
Property by any Governmental Authority or any other Person 
relating to Hazardous Materials or pursuant to any 
Environmental Laws.
                (vii)   None of the Improvements (whether before 
commencement of any construction, during any construction or 
after completion of construction of any New Improvements) 
encroach or will at any time encroach in any manner onto any 
adjoining land, except as permitted by express written and 
recorded encroachment agreements approved by Agent or as 
affirmatively insured against by appropriate title 
insurance.
                (viii)  All licenses, approvals, authorizations, 
consents, permits, easements and rights-of-way required for 
the use of any of the Property have been obtained or, if not 
yet required, will be obtained before required.
                (ix)    After the execution by Lessor and Lessee of the 
Ground Lease on the Closing Date, Lessor will have good and 
valid leasehold interest in the Property, subject to no 
Liens except for Permitted Property Liens.
                (v)     Chief Executive Office.  Lessee's chief executive 
office is located at 26460 Corporate Ave., Hayward, California.
        (w)     Accuracy of Information Furnished.  None of the 
Operative Documents and none of the other certificates, statements 
or information furnished to any Lessor Party by or on behalf of 
Lessee or any of its Subsidiaries in connection with the Operative 
Documents or the transactions contemplated thereby contains or 
will contain any untrue statement of a material fact or omits or 
will omit to state a material fact necessary to make the 
statements therein, in light of the circumstances under which they 
were made, not misleading.
Lessee shall be deemed to have reaffirmed, for the benefit of the Lessor 
Parties, each representation and warranty contained in this Paragraph 
4.01 on and as of the date of each Credit Event (except for 
representations and warranties expressly made as of a specified date, 
which shall be true as of such date).
        4.02.   Lessor's Representations and Warranties.  In order to induce 
Lessee, Agent and the Participants to enter into this Agreement and the 
other Operative Documents to which they are parties, Lessor hereby 
represents and warranties to Lessee, Agent and the Participants as 
follows:
        (a)     Due Incorporation, Qualification, etc.  Lessor (i) is 
a corporation duly organized, validly existing and in good 
standing under the laws of Illinois and (ii) has the power and 
authority to own, lease and operate its properties and carry on 
its business as now conducted.
        (b)     Authority.  The execution, delivery and performance by 
Lessor of each Operative Document executed, or to be executed, by 
Lessor and the consummation of the transactions contemplated 
thereby (i) are within the power of Lessor and (ii) have been duly 
authorized by all necessary actions on the part of Lessor.
        (c)     Enforceability.  Each Operative Document executed, or 
to be executed, by Lessor has been, or will be, duly executed and 
delivered by Lessor and constitutes, or will constitute, a legal, 
valid and binding obligation of Lessor, enforceable against Lessor 
in accordance with its terms, except as limited by bankruptcy, 
insolvency or other laws of general application relating to or 
affecting the enforcement of creditors' rights generally and 
general principles of equity.
        (d)     Non-Contravention.  The execution and delivery by 
Lessor of the Operative Documents executed by Lessor and the 
performance and consummation of the transactions contemplated 
thereby do not (i) violate any Requirement of Law applicable to 
Lessor; (ii) violate any provision of, or result in the breach or 
the acceleration of, or entitle any other Person to accelerate 
(whether after the giving of notice or lapse of time or both), any 
Contractual Obligation of Lessor; or (iii) result in the creation 
or imposition of any Lien (or the obligation to create or impose 
any Lien) upon any property, asset or revenue of Lessor (except 
such Liens as may be created in favor of Agent pursuant to this 
Agreement or the other Operative Documents).
        (e)     Approvals.  No consent, approval, order or 
authorization of, or registration, declaration or filing with, any 
Governmental Authority or other Person (including, without 
limitation, the shareholders of any Person) is required in 
connection with the execution and delivery of the Operative 
Documents executed by Lessor and the performance and consummation 
of the transactions contemplated thereby, except such as have been 
made or obtained and are in full force and effect.
        (f)     Litigation.  No actions (including, without 
limitation, derivative actions), suits, proceedings or 
investigations are pending or, to the knowledge of Lessor, 
threatened against Lessor at law or in equity in any court or 
before any other Governmental Authority which (i) is reasonably 
likely (alone or in the aggregate) to materially and adversely 
affect the ability of Lessor to perform its obligations under the 
Operative Documents to which it is a party or (ii) seeks to 
enjoin, either directly or indirectly, the execution, delivery or 
performance by Lessor of the Operative Documents or the 
transactions contemplated thereby.
        (g)     Other Regulations.  Lessor is not subject to 
regulation under the Investment Company Act of 1940, the Public 
Utility Holding Company Act of 1935, the Federal Power Act, the 
Interstate Commerce Act, any state public utilities code or to any 
other Governmental Rule limiting its ability to incur 
indebtedness.
        (h)     Chief Executive Office.  Lessor's chief executive 
office is located at 135 S. LaSalle Street, Suite 711, Chicago, 
Illinois,  60603.
        4.03.   Participants' Representations and Warranties.  In order to 
induce Lessee, Lessor and Agent to enter into this Agreement and the 
other Operative Documents to which they are parties, each Participant 
hereby represents and warranties to Lessee, Lessor and Agent as follows:
        (a)     Due Incorporation, Qualification, etc.  Such 
Participant (i) is a corporation duly organized, validly existing 
and in good standing under the laws of its jurisdiction of 
organization and (ii) has the power and authority to own, lease 
and operate its properties and carry on its business as now 
conducted.
        (b)     Authority.  The execution, delivery and performance by 
such Participant of each Operative Document executed, or to be 
executed, by such Participant and the consummation of the 
transactions contemplated thereby (i) are within the power of such 
Participant and (ii) have been duly authorized by all necessary 
actions on the part of such Participant.
        (c)     Enforceability.  Each Operative Document executed, or 
to be executed, by such Participant has been, or will be, duly 
executed and delivered by such Participant and constitutes, or 
will constitute, a legal, valid and binding obligation of such 
Participant, enforceable against such Participant in accordance 
with its terms, except as limited by bankruptcy, insolvency or 
other laws of general application relating to or affecting the 
enforcement of creditors' rights generally and general principles 
of equity.
        (d)     Non-Contravention.  The execution and delivery by such 
Participant of the Operative Documents executed by such 
Participant and the performance and consummation of the 
transactions contemplated thereby do not (i) violate any 
Requirement of Law applicable to such Participant; (ii) violate 
any provision of, or result in the breach or the acceleration of, 
or entitle any other Person to accelerate (whether after the 
giving of notice or lapse of time or both), any Contractual 
Obligation of such Participant; or (iii) result in the creation or 
imposition of any Lien (or the obligation to create or impose any 
Lien) upon any property, asset or revenue of such Participant 
(except such Liens as may be created in favor of Lessor or Agent 
pursuant to this Agreement or the other Operative Documents).
        (e)     Approvals.  No consent, approval, order or 
authorization of, or registration, declaration or filing with, any 
Governmental Authority or other Person (including, without 
limitation, the shareholders of any Person) is required in 
connection with the execution and delivery of the Operative 
Documents executed by such Participant and the performance and 
consummation of the transactions contemplated thereby, except such 
as have been made or obtained and are in full force and effect.
        (f)     Litigation.  No actions (including, without 
limitation, derivative actions), suits, proceedings or 
investigations are pending or, to the knowledge of such 
Participant, threatened against such Participant at law or in 
equity in any court or before any other Governmental Authority 
which (i) is reasonably likely (alone or in the aggregate) to 
materially and adversely affect the ability of such Participant to 
perform its obligations under the Operative Documents to which it 
is a party or (ii) seeks to enjoin, either directly or indirectly, 
the execution, delivery or performance by such Participant of the 
Operative Documents or the transactions contemplated thereby.
        (g)     Own Account.  Such Participant is acquiring its 
participation interest hereunder for its own account for 
investment and not with a view to any distribution (as such term 
is used in Section 2(11) of the Securities Act of 1933) thereof, 
and, if in the future it should decide to dispose of its 
participation interest, it understands that it may do so only in 
compliance with the Securities Act of 1933 and the rules and 
regulations of the Securities and Exchange Commission thereunder 
and any applicable state securities laws.

SECTION 5.      COVENANTS.
        5.01.   Lessee's Affirmative Covenants.  Until the termination of 
this Agreement and the satisfaction in full by Lessee of all Lessee 
Obligations, Lessee will comply, and will cause compliance, with the 
following affirmative covenants, unless Lessor and Required Participants 
shall otherwise consent in writing:
        (a)     Financial Statements, Reports, etc.  Lessee shall 
furnish to Agent, with sufficient copies for Lessor and each 
Participant, the following, each in such form and such detail as 
Agent, Lessor or the Required Participants shall reasonably 
request:
        (i)     As soon as available and in no event later than 
sixty (60) days after the last day of each fiscal quarter of 
Lessee (other than the last quarter of each fiscal year), a 
copy of the Financial Statements of Lessee and its 
Subsidiaries (prepared on a consolidated basis) for such 
quarter and for the fiscal year to date, certified by the 
president or chief financial officer of Lessee to present 
fairly the financial condition, results of operations and 
other information reflected therein and to have been 
prepared in accordance with GAAP (subject to normal year-end 
audit adjustments);
        (ii)    As soon as available and in no event later than 
one hundred, twenty (120) days after the close of each 
fiscal year of Lessee, (A) copies of the audited Financial 
Statements of Lessee and its Subsidiaries (prepared on a 
consolidated basis) for such year, audited by independent 
certified public accountants of recognized national standing 
acceptable to Agent and Required Participants, (B) copies of 
the unqualified opinions (or qualified opinions reasonably 
acceptable to Agent and Required Participants) delivered by 
such accountants in connection with all such Financial 
Statements and (C) certificates of such accountants to Agent 
stating that in making the examination necessary for their 
opinion they have reviewed Paragraph 5.03 and have obtained 
no knowledge of any violation by Lessee and its Subsidiaries 
of the covenants set forth therein, or if, in the opinion of 
such accountants, any such violation has occurred, a 
statement as to the nature thereof;
(iii)   Contemporaneously with the quarterly and year-
end Financial Statements required by the foregoing clauses 
(i) and (ii), a compliance certificate of the president or 
chief financial officer of Lessee (a "Compliance 
Certificate") which (A) states that no Default has occurred 
and is continuing, or, if any such Default has occurred and 
is continuing, a statement as to the nature thereof and what 
action Lessee proposes to take with respect thereto and (B) 
sets forth, for the quarter or year covered by such 
Financial Statements or as of the last day of such quarter 
or year (as the case may be), the calculation of the 
financial ratios and tests provided in Paragraph 5.03;
(iv)    As soon as possible and in no event later than 
five (5) Business Days after any officer of Lessee knows of 
the occurrence or existence of (A) any Reportable Event 
under any Employee Benefit Plan or Multiemployer Plan; (B) 
any actual or threatened litigation, suits, claims or 
disputes against Lessee or any of its Subsidiaries involving 
potential monetary damages payable by Lessee or its 
Subsidiaries of $10,000,000 or more (alone or in the 
aggregate); (C) any other event or condition which is 
reasonably likely to have a Material Adverse Effect; or 
(D) any Default; the statement of the president or chief 
financial officer of Lessee setting forth details of such 
event, condition or Default and the action which Lessee 
proposes to take with respect thereto; 
(v)     As soon as available and in no event later than 
five (5) Business Days after they are sent, made available 
or filed, copies of (A) all registration statements and 
reports filed by Lessee or any of its Subsidiaries with any 
securities exchange or the Securities and Exchange 
Commission (including, without limitation, all 10-Q, 10-K 
and 8-Q reports); (B) all reports, proxy statements and 
financial statements sent or made available by Lessee or any 
of its Subsidiaries to its security holders; and (C) all 
press releases and other similar public concerning any 
material developments in the business of Lessee or any of 
its Subsidiaries made available by Lessee or any of its 
Subsidiaries to the public generally;
(vi)    As soon as available and in no event later than 
thirty (30) days after the first day of each fiscal year of 
Lessee, the consolidated plan and forecast of Lessee and its 
Subsidiaries for such fiscal year, including quarterly cash 
flow projections; and
(vii)   Such other instruments, agreements, 
certificates, opinions, statements, documents and 
information relating to the operations or condition 
(financial or otherwise) of Lessee or its Subsidiaries, and 
compliance by Lessee with the terms of this Agreement and 
the other Operative Documents as Agent may from time to time 
reasonably request.
        (b)     Books and Records.  Lessee and its Subsidiaries shall 
at all times keep proper books of record and account in which 
full, true and correct entries will be made of their transactions 
in accordance with GAAP.
        (c)     Inspections.  Lessee and its Subsidiaries shall permit 
any Person designated by any Participant, upon reasonable notice 
and during normal business hours, to visit and inspect any of the 
properties and offices of Lessee and its Subsidiaries, to examine 
the books and records of Lessee and its Subsidiaries and make 
copies thereof and to discuss the affairs, finances and business 
of Lessee and its Subsidiaries with, and to be advised as to the 
same by, their officers, auditors and accountants, all at such 
times and intervals as any Participant may reasonably request; 
provided, however, that, if no Default has occurred and is 
continuing, Lessee shall not be required to permit more than four 
(4) such visits for inspection and examination in any fiscal year.
        (d)     Insurance. In addition to the insurance requirements 
set forth in the Lease Agreement with respect to the Property, 
Lessee and its Subsidiaries shall:
(i)     Carry and maintain insurance of the types and in 
the amounts customarily carried from time to time during the 
term of this Agreement by others engaged in substantially 
the same business as such Person and operating in the same 
geographic area as such Person, including, but not limited 
to, fire, public liability, property damage and worker's 
compensation;
(ii)    Carry and maintain each policy for such 
insurance with (A) a company which is rated A or better by 
A.M. Best and Company at the time such policy is placed and 
at the time of each annual renewal thereof or (B) any other 
insurer which is reasonably satisfactory to Agent; and
(iii)   Deliver to Agent from time to time, as Agent may 
request, schedules setting forth all insurance then in 
effect.
        (e)     Governmental Charges and Other Indebtedness.  Lessee 
and its Subsidiaries shall promptly pay and discharge when due 
(i) all taxes and other Governmental Charges prior to the date 
upon which penalties accrue thereon, (ii) all indebtedness which, 
if unpaid, could become a Lien upon the property of Lessee or its 
Subsidiaries and (iii) all other indebtedness which, if unpaid, is 
reasonably likely to have a Material Adverse Effect, except such 
Indebtedness as may in good faith be contested or disputed, or for 
which arrangements for deferred payment have been made, provided 
that in each such case appropriate reserves are maintained to the 
reasonable satisfaction of Agent.
        (f)     Use of Proceeds. Lessee shall not use any part of the 
proceeds of any Advance, directly or indirectly, for the purpose 
of purchasing or carrying any Margin Stock or for the purpose of 
purchasing or carrying or trading in any securities under such 
circumstances as to involve Lessee or any Lessor Party in a 
violation of Regulations G, T, U or X issued by the Federal 
Reserve Board.
        (g)     General Business Operations.  Each of Lessee and its 
Subsidiaries shall (i) preserve and maintain its corporate 
existence and all of its rights, privileges and franchises 
reasonably necessary to the conduct of its business, (ii) conduct 
its business activities in compliance with all Requirements of Law 
and Contractual Obligations applicable to such Person, the 
violation of which is reasonably likely to have a Material Adverse 
Effect and (iii) keep all property useful and necessary in its 
business in good working order and condition, ordinary wear and 
tear excepted.  Lessee shall maintain its chief executive office 
and principal place of business in the United States and shall not 
relocate its chief executive office or principal place of business 
outside of California except upon not less than ninety (90) days 
prior written notice to Agent.
        5.02.   Lessee's Negative Covenants.  Until the termination of this 
Agreement and the satisfaction in full by Lessee of all Lessee 
Obligations, Lessee will comply, and will cause compliance, with the 
following negative covenants, unless Lessor and Required Participants 
shall otherwise consent in writing:
        (a)     Indebtedness.  Neither Lessee nor any of its 
Subsidiaries shall create, incur, assume or permit to exist any 
Indebtedness or any Guaranty Obligations except for the following 
("Permitted Indebtedness"):
(i)     The Lessee Obligations under the Operative 
Documents;
(ii)    Indebtedness of Lessee and its Subsidiaries 
listed in Schedule 5.02(a) and existing on the date of this 
Agreement;
(iii)   Indebtedness of Lessee and its Subsidiaries 
arising from the endorsement of instruments for collection 
in the ordinary course of Lessee's or a Subsidiary's 
business;
(iv)    Indebtedness of Lessee and its Subsidiaries for 
trade accounts payable, provided that (A) such accounts 
arise in the ordinary course of business and (B) no material 
part of such account is more than ninety (90) days past due 
(unless subject to a bona fide dispute and for which 
adequate reserves have been established);
(v)     Indebtedness of Lessee and its Subsidiaries 
under Rate Contracts, provided that all such arrangements 
are entered into in connection with bona fide hedging 
operations and not for speculation;
(vi)    Indebtedness of Lessee and its Subsidiaries 
under purchase money loans and Capital Leases incurred by 
Lessee or any of its Subsidiaries to finance the acquisition 
by such Person of real property, fixtures or equipment 
provided that in each case, (A) such Indebtedness is 
incurred by such Person at the time of, or not later than 
ninety (90) days after, the first functional use by such 
Person of the property so financed and (B) such Indebtedness 
does not exceed the purchase price of the property so 
financed;
(vii)   Subordinated Indebtedness of Lessee and its 
Subsidiaries;
(viii)  Indebtedness of Lessee and its 
Subsidiaries under initial or successive refinancings of any 
Indebtedness permitted by clause (ii) above or under 
replacements of lines of credit or other credit commitments 
permitted by clause (ii) above, provided that (A) the 
principal amount of any such refinancing or replacement does 
not exceed the principal amount of the Indebtedness being 
refinanced or commitment being replaced and (B) the material 
terms and provisions of any such refinancing or replacement 
(including redemption, prepayment, default and subordination 
provisions) are not substantially less favorable than the 
comparable terms of the Indebtedness being refinanced or 
commitment being replaced, except that the maturity of the 
new Indebtedness or commitment may be longer;
(ix)    Indebtedness of Lessee and its Subsidiaries with 
respect to Surety Instruments incurred in the ordinary 
course of business (including surety bonds issued to secure 
obligations of Lessee and its Subsidiaries in respect of 
equipment ordered from Lessee and its Subsidiaries);
(x)     Guaranty Obligations of Lessee in respect of 
Permitted Indebtedness of its Subsidiaries;
(xi)    Indebtedness of Lessee to any of its 
Subsidiaries, Indebtedness of any of Lessee's Subsidiaries 
to Lessee or Indebtedness of any of Lessee's Subsidiaries to 
any of Lessee's other Subsidiaries, provided that (A) any 
Indebtedness of Lessee to any of its Subsidiaries and any 
Indebtedness of any of Lessee's Subsidiaries to Lessee shall 
be subject to Subparagraph 5.02(j) and (B) any Indebtedness 
of Lessee to any of its Subsidiaries is Subordinated 
Indebtedness;
(xii)   Indebtedness of Lessee's Japanese Subsidiary 
with respect to the sale, transfer or assignment of accounts 
receivable of such Subsidiary and certain rights and 
property related to the collection of or constituting 
proceeds of such accounts receivable, provided that:
(A)     Such sale, assignment or transfer is (1) 
in the ordinary course of business, (2) for cash, (3) 
with recourse to such Subsidiary in an amount not to 
exceed the aggregate face amount of the accounts 
receivable sold and certain additional interest 
charges with respect to such Indebtedness and (4) 
otherwise permitted under Subparagraph 5.02(c)(vii); 
and
(B)     Both immediately before and after giving 
effect to such sale, assignment or transfer, no 
Default shall have occurred and be continuing; and
(xiii)  Other Indebtedness of Lessee and its 
Subsidiaries, provided that the aggregate amount of such 
other Indebtedness outstanding at any time does not exceed 
ten percent (10%) of Lessee's Tangible Net Worth on the last 
day of the immediately preceding fiscal year.
        (b)     Liens.  Neither Lessee nor any of its Subsidiaries 
shall create, incur, assume or permit to exist any Lien on or with 
respect to any of its assets or property of any character, whether 
now owned or hereafter acquired, except for the following 
("Permitted Liens"):
(i)     Liens in favor of any Lessor Party securing the 
Lessee Obligations;
(ii)    Liens listed in Schedule 5.02(b) and existing on 
the date of this Agreement;
(iii)   Liens for taxes or other Governmental Charges 
not at the time delinquent or thereafter payable without 
penalty or being contested in good faith, provided that 
adequate reserves for the payment thereof have been 
established in accordance with GAAP;
(iv)    Liens of carriers, warehousemen, mechanics, 
materialmen, vendors, and landlords and other similar Liens 
imposed by law incurred in the ordinary course of business 
for sums not overdue or being contested in good faith, 
provided that adequate reserves for the payment thereof have 
been established in accordance with GAAP;
(v)     Deposits under workers' compensation, 
unemployment insurance and social security laws or to secure 
the performance of bids, tenders, contracts (other than for 
the repayment of borrowed money) or leases, or to secure 
statutory obligations of surety or appeal bonds or to secure 
indemnity, performance or other similar bonds in the 
ordinary course of business;
(vi)    Zoning restrictions, easements, rights-of-way, 
title irregularities and other similar encumbrances, which 
alone or in the aggregate are not substantial in amount and 
do not materially detract from the value of the property 
subject thereto or interfere with the ordinary conduct of 
the business of Lessee or any of its Subsidiaries;
(vii)   Banker's Liens and similar Liens (including set-
off rights) in respect of bank deposits;
(viii)  Liens on any property or assets acquired, 
or on the property or assets of any Persons acquired, by 
Lessee or any of its Subsidiaries after the date of this 
Agreement pursuant to Subparagraph 5.02(d), provided that 
(A) such Liens exist at the time such property or assets or 
such Persons are so acquired and (B) such Liens were not 
created in contemplation of such acquisitions;
(ix)    Judgement Liens, provided that such Liens do not 
have a value in excess of $10,000,000 or such Liens are 
released, stayed, vacated or otherwise dismissed within 
thirty (30) days after issue or levy and, if so stayed, such 
stay is not thereafter removed;
(x)     Rights of (A) vendors or lessors under 
conditional sale agreements, Capital Leases or other title 
retention agreements, provided that, in each case, (1) such 
rights secure or otherwise relate to Permitted Indebtedness, 
(2) such rights do not extend to any property other than 
property acquired with the proceeds of such Permitted 
Indebtedness and (3) such rights do not secure any 
Indebtedness other than such Permitted Indebtedness and (B) 
lessors under operating leases;
(xi)    Liens in favor of customs and revenue 
authorities arising as a matter of law to secure payment of 
customs duties and in connection with the importation of 
goods in the ordinary course of Lessee's and its 
Subsidiaries' businesses;
(xii)   Liens securing Indebtedness which constitutes 
Permitted Indebtedness under clause (vi) of Subparagraph 
5.02(a) provided that, in each case, such Lien (A) covers 
only those assets, the acquisition of which was financed by 
such Permitted Indebtedness, and (B) secures only such 
Permitted Indebtedness;
(xiii)  Liens securing Indebtedness which 
constitutes Permitted Indebtedness under clause (xii) of 
Subparagraph 5.02(a) provided that, in each case, such Lien 
(A) secures only such Permitted Indebtedness, and (B) such 
Liens do not extend to any assets or property other than the 
assets or property sold (other than cash pledged under 
certain circumstances to secure such Permitted Indebtedness 
in an amount not to exceed $15,000,000 in the aggregate 
during the term of this Agreement, provided that both 
immediately before and after giving effect to any such cash 
collateralization, Lessee shall be in compliance with the 
financial covenants set forth in Paragraph 5.03 and no other 
Default or Event of Default shall have occurred and be 
continuing);
(xiv)   Liens on the property or assets of any 
Subsidiary of Lessee in favor of Lessee or any other 
Subsidiary of Lessee;
(xv)    Liens incurred in connection with the extension, 
renewal or refinancing of the Indebtedness secured by the 
Liens described in clause (ii) or (xii) above, provided that 
any extension, renewal or replacement Lien (A) is limited to 
the property covered by the existing Lien and (B) secures 
Indebtedness which is no greater in amount and has material 
terms no less favorable to the Participants than the 
Indebtedness secured by the existing Lien;
(xvi)   Liens on insurance proceeds in favor of 
insurance companies with respect to the financing of 
insurance premiums;
(xvii)  Liens in inventory of Lessee and its 
Subsidiaries in favor of (A) customers of Lessee and its 
Subsidiaries to secure the obligations of Lessee and its 
Subsidiaries in respect of equipment ordered from Lessee and 
its Subsidiaries by such customers or (B) sureties that have 
issued surety bonds to such customers to secure such 
obligations, provided that each such Lien (1) covers only 
(y) the equipment ordered by a customer pursuant to a 
purchase order which has been delivered to Lessee or one of 
its Subsidiaries and (z) the parts and other inventory of 
Lessee and its Subsidiaries which will be used to build such 
equipment, (2) secures only the obligations of Lessee and 
its Subsidiaries in respect of such equipment and (3) 
terminates upon the delivery of such equipment to such 
customer or the ultimate purchaser thereof or the return to 
such customer of such deposit;
(xviii) Permitted Property Liens in the Property; 
and
(xix)   Other Liens, provided that the aggregate amount 
of the Indebtedness outstanding at any time and secured by 
such other Liens does not exceed five percent (5%) of 
Lessee's Tangible Net Worth on the last day of the 
immediately preceding fiscal year;
Provided, however, that the foregoing exceptions shall not be 
construed to permit any Liens, except for Permitted Property 
Liens, in any of the Property
        (c)     Asset Dispositions.  Neither Lessee nor any of its 
Subsidiaries shall sell, lease, transfer or otherwise dispose of 
all or any part of its assets or property, whether now owned or 
hereafter acquired, except for the following:
(i)     Sales of inventory by Lessee and its 
Subsidiaries in the ordinary course of their businesses;
(ii)    Sales or other dispositions of surplus, damaged, 
worn or obsolete equipment or inventory;
(iii)   Sales or other dispositions of Investments 
permitted by clause (i) of Subparagraph 5.02(e) for not less 
than fair market value;
(iv)    Sales or assignments of defaulted receivables to 
a collection agency in the ordinary course of business;
(v)     Licenses by Lessee or its Subsidiaries of its 
patents, copyrights, trademarks, trade names and service 
marks in the ordinary course of its business provided that, 
in each case, the terms of the transaction are terms which 
then would prevail in the market for similar transactions 
between unaffiliated parties dealing at arm's length;
(vi)    Sales or other dispositions of assets and 
property by Lessee to any of Lessee's Subsidiaries or by any 
of Lessee's Subsidiaries to Lessee or any of its other 
Subsidiaries, provided that the terms of any such sales or 
other dispositions by or to Lessee are terms which are no 
less favorable to Lessee then would prevail in the market 
for similar transactions between unaffiliated parties 
dealing at arm's length;
(vii)   Sales, for cash, in the ordinary course of 
business of accounts receivable of Lessee's Japanese 
Subsidiary and certain rights and property of such 
Subsidiary related to the collection of or constituting 
proceeds of such accounts receivable, with or without 
recourse, at a discount rate not to exceed ten percent 
(10%);
(viii)  Sales, for cash, in the ordinary course of 
business of accounts receivable of Lessee and certain rights 
and property of Lessee related to the collection of or 
constituting proceeds of such accounts receivable, with or 
without recourse, at a discount rate not to exceed ten 
percent (10%), provided that the aggregate amount of 
accounts receivable so sold by Lessee in any fiscal quarter 
does not exceed twelve million Dollars $12,000,000);
(ix)    The sale by Lessee to the Hayward Lessor of the 
improvements that have been made by Lessee to the property 
located at 26460 Corporate Avenue, Hayward, California and 
that will be leased back to Lessee pursuant to the Hayward 
Lease, provided that (A) the book value of such improvements 
at the time of such sale does not exceed $11,000,000 and (B) 
the purchase price paid by the Hayward Lessor for such 
improvements is not less than $12,000,000; and 
(x)     Other sales, leases, transfers and disposals of 
assets and property, provided that the aggregate value of 
all such assets and property (based upon the greater of the 
fair market or book value of such assets and property) so 
sold, leased, transferred or otherwise disposed of in any 
fiscal year does not exceed five percent (5%) of Lessee's 
Tangible Net Worth on the last day of the immediately 
preceding fiscal year;
Provided, however, that the foregoing exceptions shall not be 
construed to permit any sales, leases, transfers or other 
disposals of any of the Property, except as expressly permitted by 
the Lease Agreement.
        (d)     Mergers, Acquisitions, Etc.  Neither Lessee nor any of 
its Subsidiaries shall acquire any other Person (whether through 
merger with such Person, acquisition of such Person as a 
Subsidiary or otherwise) or all or substantially all of the assets 
of any other Person, except that Lessee and its Subsidiaries may 
make any such acquisitions if (i) the aggregate consideration paid 
by Lessee and its Subsidiaries in cash for all such acquisitions 
after the date of this Agreement does not exceed $25,000,000; (ii) 
the aggregate consideration paid by Lessee and its Subsidiaries in 
stock for all such acquisitions after the date of this Agreement 
does not exceed $50,000,000 (such stock to be valued at the market 
value thereof at the time paid as consideration); (iii) in any 
merger involving Lessee, Lessee is the surviving corporation; and 
(iv) both immediately before and after giving effect to any such 
acquisition, no Default shall have occurred and be continuing.
        (e)     Investments.  Neither Lessee nor any of its 
Subsidiaries shall make any Investment except for Investments in 
the following:
(i)     Investments in Cash Equivalents;
(ii)    Investments permitted by the investment policy 
of Lessee set forth in Schedule 5.02(e) or, if any changes 
to the investment policy of Lessee are hereafter duly 
approved by the Board of Directors of Lessee, in any 
subsequent investment policy which is the most recent 
investment policy delivered by Lessee to Agent with a 
certificate of Lessee's chief financial officer to the 
effect that such investment policy has been duly approved by 
Lessee's Board of Directors and is then in effect;
(iii)   Loans and other extensions of credit by Lessee 
and its Subsidiaries to each other to the extent permitted 
by clause (xi) of Subparagraph 5.02(a) and other types of 
Investments by Lessee and its Subsidiaries to each other;
(iv)    Investments consisting of loans to employees, 
officers and directors, provided that the aggregate 
principal amount of such loans does not exceed $5,000,000 at 
any time;
(v)     Investments of Lessee and its Subsidiaries in 
Rate Contracts, provided that all such arrangements are 
entered into in connection with bona fide hedging operations 
and not for speculation;
(vi)    Investments permitted by Subparagraph 5.02(d); 
and
(vii)   Other Investments, provided that the amount of 
any such Investment, when added to the aggregate amount of 
all other Investments made pursuant to this clause (vii) 
since the date of this Agreement (net of any returns 
previously received on account of such Investments), does 
not exceed ten percent (10%) of Lessee's Tangible Net Worth 
on the last day of the immediately preceding fiscal year.
        (f)     Dividends, Redemptions, Etc.  Neither Lessee nor any 
of its Subsidiaries shall pay any dividends or make any 
distributions on its Equity Securities; purchase, redeem, retire, 
defease or otherwise acquire for value any of its Equity 
Securities; return any capital to any holder of its Equity 
Securities as such; make any distribution of assets, Equity 
Securities, obligations or securities to any holder of its Equity 
Securities as such; or set apart any sum for any such purpose; 
except as follows:
(i)     Either Lessee or any of its Subsidiaries may pay 
dividends on its capital stock payable solely in such 
Person's own capital stock;
(ii)    Any Subsidiary of Lessee may pay dividends to 
Lessee; and
(iii)   Lessee may repurchase its Equity Securities, 
provided that the cost of any such repurchase, when added to 
the aggregate cost of all other repurchases made pursuant to 
this clause (iii) since the date of this Agreement, does not 
exceed ten percent (10%) of Lessee's Tangible Net Worth on 
the last day of the immediately preceding fiscal year.
        (g)     Change in Business.  Neither Lessee nor any of its 
Subsidiaries shall engage, either directly or indirectly through 
Affiliates, in any business that is substantially different from 
the semi-conductor market (including semi-conductor capital 
equipment, test and inspection equipment, flat panel displays and 
laser direct imaging equipment), the pattern generation market and 
any strategic component parts in relation thereto.
        (h)     Indebtedness Payments, Etc.  Neither Lessee nor any of 
its Subsidiaries shall (i) prepay, redeem, purchase, defease or 
otherwise satisfy in any manner prior to the scheduled payment 
thereof any Subordinated Indebtedness or (ii) amend, modify or 
otherwise change any of the subordination or other provisions of 
any document, instrument or agreement evidencing Subordinated 
Indebtedness in a manner which adversely affects the material 
rights of the Lessor Parties.
        (i)     ERISA.  Neither Lessee nor any ERISA Affiliate shall 
(i) adopt or institute any Employee Benefit Plan that is an 
employee pension benefit plan within the meaning of Section 3(2) 
of ERISA, (ii) take any action which will result in the partial or 
complete withdrawal, within the meanings of sections 4203 and 4205 
of ERISA, from a Multiemployer Plan, (iii) engage or permit any 
Person to engage in any transaction prohibited by section 406 of 
ERISA or section 4975 of the IRC involving any Employee Benefit 
Plan or Multiemployer Plan which would subject either Lessee or 
any ERISA Affiliate to any tax, penalty or other liability 
including a liability to indemnify, (iv) incur or allow to exist 
any accumulated funding deficiency (within the meaning of 
section 412 of the IRC or section 302 of ERISA), (v) fail to make 
full payment when due of all amounts due as contributions to any 
Employee Benefit Plan or Multiemployer Plan, (vi) fail to comply 
with the requirements of section 4980B of the IRC or Part 6 of 
Title I(B) of ERISA, or (vii) adopt any amendment to any Employee 
Benefit Plan which would require the posting of security pursuant 
to section 401(a)(29) of the IRC, where singly or cumulatively, 
the above would have a Material Adverse Effect.
        (j)     Transactions With Affiliates.  Neither Lessee nor any 
of its Subsidiaries shall enter into any Contractual Obligation 
with any Affiliate or engage in any other transaction with any 
Affiliate except upon terms at least as favorable to Lessee or 
such Subsidiary as an arms-length transaction with unaffiliated 
Persons.
        (k)     Accounting Changes.  Neither Lessee nor any of its 
Subsidiaries shall (i) change its fiscal year (currently August 1 
through July 31) or (ii) except as required by GAAP, change its 
accounting practices in any manner which would affect Lessee's 
compliance with Paragraph 5.03.
        5.03.   Lessee's Financial Covenants.  Until the termination of this 
Agreement and the satisfaction in full by Lessee of all Lessee 
Obligations, Lessee will comply, and will cause compliance, with the 
following financial covenants, unless Lessor and Required Participants 
shall otherwise consent in writing:
        (a)     Leverage Ratio.  Lessee shall not permit the Leverage 
Ratio of Lessee on the last day of any fiscal quarter set forth 
below to be greater than the ratio set forth opposite such quarter 
below:
                Quarters ending on January 31, 1998
                        April 30, 1998 and July 31, 1998                0.250 
to 1.000;

                Quarters ending on, October 31, 1998,
                        January 31, 1999, April 30, 1999
and July 31, 1999                               0.275 to 
1.000;

                Each quarter thereafter                         0.250 to 
1.000.
        (b)     Quick Ratio.  Lessee shall not permit the Quick Ratio 
of Lessee on the last day of any fiscal quarter set forth below to 
be less than the ratio set forth opposite such quarter below:
                        Quarter ending on January 31, 1998            1.00 
to 1.00;
                        Each quarter thereafter                         1.10 to
1.00.
        (c)     Net Worth.  Lessee shall not permit the net worth of 
Lessee and its Subsidiaries on the last day of any fiscal quarter 
(such day to be referred to herein as a "determination date") 
which commences after April 30, 1996 (such date to be referred to 
herein as the "base date") to be less than the sum on such 
determination date of the following:
(i)     $50,000,000;
(ii)    Seventy-five percent (75%) of the sum of the 
consolidated quarterly Adjusted Net Income (ignoring any 
quarterly losses) of Lessee and its Subsidiaries for each 
quarter after the base date through and including the 
quarter ending on the determination date; and
(iii)   Fifty percent (50%) of the Net Proceeds realized 
by Lessee and its Subsidiaries from the issuance of Equity 
Securities during the period commencing on the base date and 
ending on the determination date.
        (d)     Cash Balances.  Lessee shall not permit the Cash 
Balances of Lessee and its Subsidiaries to be less than 
$25,000,000 on the last day of any fiscal quarter.
        (e)     Debt Service Coverage Ratio.  Lessee shall not permit 
the Debt Service Coverage Ratio of Lessee and its Subsidiaries for 
any consecutive four-quarter period to be less than the ratio set 
forth opposite such quarter below:
                Quarters ending on January 31, 1998
                        and April 30, 1998                              5.00 
to 1.00;

                Quarters ending on, July 31, 1998
and October 31, 1998                            3.00 
to 1.00; 

                Quarters ending on, January 31, 1999
and April 30, 1999                              4.00 
to 1.00;

                Each quarter thereafter                         5.00 to 1.00
        (f)     Profitability.  Lessee shall not permit:
(i)     The Adjusted Net Income of Lessee and its 
Subsidiaries to be a loss in more than two quarters in any 
consecutive four-quarter period or the aggregate amount of 
any such two quarterly losses to exceed $10,000,000 in total 
for the two quarters combined;
(ii)    The Operating Income of Lessee and its 
Subsidiaries to be a loss in more than two quarters in any 
consecutive four-quarter period or the aggregate amount of 
any such two quarterly losses to exceed $10,000,000 in total 
for the two quarters combined; or
(iii)   The cumulative Adjusted Net Income of Lessee and 
its Subsidiaries for any consecutive four-quarter period to 
be less than $1.00.
        5.04.   Lessor's Covenants.  Until the termination of this Agreement 
and the satisfaction in full by Lessor of all Lessor Obligations, Lessor 
will comply, and will cause compliance, with the following covenants, 
unless Lessee and Required Participants shall otherwise consent in 
writing:
        (a)     Use of Proceeds.  Lessor shall use the proceeds of all 
amounts delivered to Lessor by Participants pursuant to 
Subparagraph 2.05(a) solely to fund Advances.
        (b)     Lessor Liens.  Lessor shall not create, incur, assume 
or permit to exist any Lessor Lien (other than any Lien granted to 
Agent or any Participant pursuant to the Operative Documents to 
secure the Lessor Obligations) and shall promptly discharge, at 
its sole cost and expense, any Lessor Lien on the Property (other 
than any Liens granted to Agent or any Participant pursuant to the 
Operative Documents to secure the Lessor Obligations); provided, 
however, that Lessor shall not be required so to discharge any 
such Lessor Lien if the same is being (or promptly will be) 
contested in good faith by appropriate proceedings diligently 
prosecuted, provided that any such contest is completed and all 
Lessor Liens are discharged on or prior to the Expiration Date. 
        (c)     Property Disposition.  Lessor shall not sell, lease, 
transfer or otherwise dispose of its right, title and interest in 
the Property and the Operative Documents except as provided in 
Subparagraph 2.11(b) or Subparagraph 7.05(d) hereof or in the 
Purchase Agreement or after retaining the Property following the 
Expiration Date.
        (d)     Chief Executive Office.  Lessor shall not change its 
chief executive office without giving Agent prompt written notice.
        5.05.   Participants' Covenants.  Each Participant covenants that it 
will not fund its portion of any Advance with the assets of any 
"employee benefit plan" (as defined in Section 3(3) of ERISA) which is 
subject to Title I of ERISA or any "plan" (as defined in Section 
4975(e)(1) of the IRC.

SECTION 6.      LESSOR, AGENT AND THEIR RELATIONS WITH PARTICIPANTS.
        6.01.   Appointment of Agent.  Each Participant hereby appoints and 
authorizes Agent to act as its agent hereunder and under the other 
Operative Documents with such powers as are expressly delegated to Agent 
by the terms of this Agreement and the other Operative Documents, 
together with such other powers as are reasonably incidental thereto.  
Lessor is not an agent for the Participants or Agent, and neither this 
Agreement nor any other Operative Document shall be construed to 
constitute or evidence a partnership among the Lessor Parties or 
otherwise to impose upon Lessor or Agent any fiduciary duty.
        6.02.   Powers and Immunities.  Neither Lessor nor Agent shall have 
any duties or responsibilities except those expressly set forth in this 
Agreement or in any other Operative Document, be a trustee for any 
Participant or have any fiduciary duty to any Participant.  
Notwithstanding anything to the contrary contained herein, neither 
Lessor nor Agent shall be required to take any action which is contrary 
to this Agreement or any other Operative Document or any applicable 
Governmental Rule.  Neither Lessor nor Agent nor any Participant shall 
be responsible to any Participant for any recitals, statements, 
representations or warranties made by Lessee or any of its Subsidiaries 
contained in this Agreement or in any other Operative Document, for the 
value, validity, effectiveness, genuineness, enforceability or 
sufficiency of this Agreement or any other Operative Document or for any 
failure by Lessee or any of its Subsidiaries to perform their respective 
obligations hereunder or thereunder.  Lessor and Agent may employ agents 
and attorneys-in-fact and shall not be responsible to any Participant 
for the negligence or misconduct of any such agents or attorneys-in-fact 
selected by it with reasonable care.  Neither Lessor nor Agent nor any 
of their respective directors, officers, employees, agents or advisors 
shall be responsible to any Participant for any action taken or omitted 
to be taken by it or them hereunder or under any other Operative 
Document or in connection herewith or therewith, except for its or their 
own gross negligence or willful misconduct.  Except as otherwise 
provided under this Agreement, Lessor and Agent shall take such action 
with respect to the Operative Documents as shall be directed by the 
Required Participants.
        6.03.   Reliance.  Lessor or Agent shall be entitled to rely upon 
any certificate, notice or other document (including any cable, 
telegram, facsimile or telex) believed by it in good faith to be genuine 
and correct and to have been signed or sent by or on behalf of the 
proper Person or Persons, and upon advice and statements of legal 
counsel, independent accountants and other experts selected by Lessor or 
Agent with reasonable care.  As to any other matters not expressly 
provided for by this Agreement, neither Lessor nor Agent shall be 
required to take any action or exercise any discretion, but shall be 
required to act or to refrain from acting upon instructions of the 
Required Participants and shall in all cases be fully protected by the 
Participants in acting, or in refraining from acting, hereunder or under 
any other Operative Document in accordance with the instructions of the 
Required Participants, and such instructions of the Required 
Participants and any action taken or failure to act pursuant thereto 
shall be binding on all of the Participants.
        6.04.   Defaults.  Neither Lessor nor Agent shall be deemed to have 
knowledge or notice of the occurrence of any Default unless Lessor and 
Agent have received a written notice from a Participant or Lessee, 
referring to this Agreement, describing such Default and stating that 
such notice is a "Notice of Default".  If Lessor and Agent receive such 
a notice of the occurrence of a Default, Agent shall give prompt notice 
thereof to the Participants.  Lessor and Agent shall take such action 
with respect to such Default as shall be reasonably directed by the 
Required Participants; provided, however, that until Lessor and Agent 
shall have received such directions, Lessor or Agent may (but shall not 
be obligated to) take such action, or refrain from taking such action, 
with respect to such Default as it shall deem advisable in the best 
interest of the Participants.
        6.05.   Indemnification.  Without limiting the Obligations of Lessee 
hereunder, each Participant agrees to indemnify Lessor and Agent, 
ratably in accordance with such Participant's Proportionate Share, for 
any and all liabilities, obligations, losses, damages, penalties, 
actions, judgments, suits, costs, expenses or disbursements of any kind 
or nature whatsoever which may at any time be imposed on, incurred by or 
asserted against Lessor or Agent in any way relating to or arising out 
of this Agreement or any documents contemplated by or referred to herein 
or therein or the transactions contemplated hereby or thereby or the 
enforcement of any of the terms hereof or thereof; provided, however, 
that no Participant shall be liable for any of the foregoing to the 
extent they arise from Lessor's or Agent's gross negligence or willful 
misconduct.  Lessor or Agent shall be fully justified in refusing to 
take or in continuing to take any action hereunder unless it shall first 
be indemnified to its satisfaction by the Participants against any and 
all liability and expense which may be incurred by it by reason of 
taking or continuing to take any such action.  The obligations of each 
Participant under this Paragraph 6.05 shall survive the payment and 
performance of the Lessee Obligations, the termination of this Agreement 
and any Participant ceasing to be a party to this Agreement (with 
respect to events which occurred prior to the time such Participant 
ceased to be a Participant hereunder).
        6.06.   Non-Reliance.  Each Participant represents that it has, 
independently and without reliance on Lessor, Agent, or any other 
Participant, and based on such documents and information as it has 
deemed appropriate, made its own appraisal of the business, prospects, 
management, financial condition and affairs of Lessee and the 
Subsidiaries and its own decision to enter into this Agreement and 
agrees that it will, independently and without reliance upon Lessor, 
Agent or any other Participant, and based on such documents and 
information as it shall deem appropriate at the time, continue to make 
its own appraisals and decisions in taking or not taking action under 
this Agreement or any other Operative Document.  Neither Lessor nor 
Agent nor any of their respective affiliates nor any of their respective 
directors, officers, employees, agents or advisors shall (a) be required 
to keep any Participant informed as to the performance or observance by 
Lessee or any of its Subsidiaries of the obligations under this 
Agreement or any other document referred to or provided for herein or to 
make inquiry of, or to inspect the properties or books of Lessee or any 
of its Subsidiaries; (b) have any duty or responsibility to provide any 
Participant with any credit or other information concerning Lessee or 
any of its Subsidiaries which may come into the possession of Lessor or 
Agent, except for notices, reports and other documents and information 
expressly required to be furnished to the Participants by Lessor or 
Agent hereunder; or (c) be responsible to any Participant for (i) any 
recital, statement, representation or warranty made by Lessee or any 
officer, employee or agent of Lessee in this Agreement or in any of the 
other Operative Documents, (ii) the value, validity, effectiveness, 
genuineness, enforceability or sufficiency of this Agreement or any 
Operative Document, (iii) the value or sufficiency of the Property or 
the validity or perfection of any of the liens or security interests 
intended to be created by the Operative Documents, or (iv) any failure 
by Lessee to perform its obligations under this Agreement or any other 
Operative Document.
        6.07.   Resignation or Removal of Agent.  Agent may resign at any 
time by giving thirty (30) days prior written notice thereof to Lessee 
and the Participants, and Agent may be removed at any time with or 
without cause by the Required Participants.  Upon any such resignation 
or removal, the Required Participants shall have the right to appoint a 
successor Agent, which Agent, if not a Participant, shall be reasonably 
acceptable to Lessee; provided, however, that Lessee shall have no right 
to approve a successor Agent if a Default has occurred and is 
continuing.  Upon the acceptance of any appointment as Agent hereunder 
by a successor Agent, such successor Agent shall thereupon succeed to 
and become vested with all the rights, powers, privileges and duties of 
the retiring Agent, and the retiring Agent shall be discharged from the 
duties and obligations thereafter arising hereunder.  After any retiring 
Agent's resignation or removal hereunder as Agent, the provisions of 
this Section VI and any other provision of this Agreement or any other 
Operative Document which by its terms survives the termination of this 
Agreement shall continue in effect for its benefit in respect of any 
actions taken or omitted to be taken by it while it was acting as Agent.
        6.08.   Authorization.  Agent is hereby authorized by the 
Participants to execute, deliver and perform, each of the Operative 
Documents to which Agent is or is intended to be a party and each 
Participant agrees to be bound by all of the agreements of Agent 
contained in the Operative Documents.
        6.09.   Lessor and Agent in their Individual Capacities.  Lessor, 
Agent and their respective affiliates may make loans to, accept deposits 
from and generally engage in any kind of banking or other business with 
Lessee and its Subsidiaries and affiliates as though Lessor were not 
Lessor hereunder and Agent were not Agent hereunder.  With respect to 
Advances, if any, made by Agent in its capacity as a Participant, Agent 
in its capacity as a Participant shall have the same rights and powers 
under this Agreement and the other Operative Documents as any other 
Participant and may exercise the same as though it were not Agent, and 
the terms "Participant" or "Participants" shall include Agent in its 
capacity as a Participant.

SECTION 7.      MISCELLANEOUS
        7.01.   Notices.  Except as otherwise provided herein, all notices, 
requests, demands, consents, instructions or other communications to or 
upon Lessor, Lessee, any Participant or Agent under this Agreement or 
the other Operative Documents shall be in writing and faxed, mailed or 
delivered, if to Lessor, Lessee or Agent, at its respective facsimile 
number or address set forth below or, if to any Participant, at the 
address or facsimile number specified beneath the heading "Address for 
Notices" under the name of such Participant in Part B of Schedule I (or 
to such other facsimile number or address for any party as indicated in 
any notice given by that party to the other parties).  All such notices 
and communications shall be effective (a) when sent by Federal Express 
or other overnight service of recognized standing, on the Business Day 
following the deposit with such service; (b) when mailed, first class 
postage prepaid and addressed as aforesaid through the United States 
Postal Service, upon receipt; (c) when delivered by hand, upon delivery; 
and (d) when faxed, upon confirmation of receipt; provided, however, 
that any Advance Request, Notice of Rental Period Selection, Extension 
Request, Notice of Term Purchase Option Exercise, Notice of Marketing 
Option Exercise or Notice of Expiration Date Purchase Option Exercise 
delivered to Lessor or Agent shall not be effective until received by 
Lessor or Agent.
                Lessee:         Etec Systems, Inc.
                                26460 Corporate Ave. 
                                Hayward, CA 94545
                                Attn:  Treasurer
                                Tel. No:  (510) 887-3649
                                Fax. No:  (510) 780-3845

                                Attn:  Saul Arnold
                                Tel. No:  (510) 887-3550
                                Fax. No:  (510) 780-3845

                Lessor:         Lease Plan North America, Inc. 
                                c/o ABN AMRO Bank N.V.
                                135 South LaSalle Street, Suite 711
                                Chicago, IL 60603
                                Attn: David M. Shipley
                                Tel. No: (312) 904-2183
                                Fax. No: (312) 904-6217

Agent:          ABN AMRO Bank N.V.
                                Capital Markets-Syndications Group
                                1325 Avenue of the Americas, 9th Floor
                                New York, NY  10019
                                Attn:  Linda Boardman
                                Tel. No: (212) 314-1724
                                Fax. No: (212) 314-1709

                                With a copy to:

                                        ABN AMRO Bank N.V.
                                101 California Street, Suite 4550
                                San Francisco, CA  94111-5812
                                Attn:  Robin Yim
                                Tel. No: (415) 984-3712
                                Fax. No: (415) 362-3524

Each Advance Request, Notice of Rental Period Selection, Extension 
Request, Notice of Term Purchase Option Exercise, Notice of Marketing 
Option Exercise and Notice of Expiration Date Purchase Option Exercise 
shall be given by Lessee to Agent's office located at its address 
referred to above during its normal business hours; provided, however, 
that any such notice received by Agent after 10:00 a.m. on any Business 
Day shall be deemed received by Agent on the next Business Day.  In any 
case where this Agreement authorizes notices, requests, demands or other 
communications by Lessee to any Lessor Party to be made by telephone or 
facsimile, any Lessor Party may conclusively presume that anyone 
purporting to be a person designated in any incumbency certificate or 
other similar document received by such Lessor Party is such a person.
        7.02.   Expenses.  Lessee shall pay on demand, whether or not any 
Advance is made hereunder, (a) all reasonable fees and expenses, 
including reasonable attorneys' fees and expenses, incurred by Lessor 
and Agent in connection with the preparation, negotiation, execution and 
delivery of, the consummation of the transactions contemplated by and 
the exercise of their duties under, this Agreement and the other 
Operative Documents, and the preparation, negotiation, execution and 
delivery of amendments and waivers hereunder and thereunder and (b) all 
reasonable fees and expenses, including reasonable attorneys' fees and 
expenses, incurred by the Lessor Parties in the enforcement or attempted 
enforcement of any of the Lessee Obligations or in preserving any of the 
Lessor Parties' rights and remedies (including all such fees and 
expenses incurred in connection with any "workout" or restructuring 
affecting the Operative Documents or the Lessee Obligations or any 
bankruptcy or similar proceeding involving Lessee or any of its 
Subsidiaries).  As used herein, the term "reasonable attorneys' fees and 
expenses" shall include, without limitation, allocable costs and 
expenses of Agent's and Participants' in-house legal counsel and staff.  
The obligations of Lessee under this Paragraph 7.02 shall survive the 
payment and performance of the Lessee Obligations and the termination of 
this Agreement.
        7.03.   Indemnification.  To the fullest extent permitted by law, 
Lessee agrees to protect, indemnify, defend and hold harmless, on an 
after-tax basis, the Lessor Parties and the other Indemnitees from and 
against any and all liabilities, losses, damages or expenses of any kind 
or nature (including Indemnified Taxes) and from any suits, claims or 
demands (including in respect of or for reasonable attorney's fees and 
other expenses) arising on account of or in connection with any matter 
or thing or action or failure to act by Indemnitees, or any of them, 
arising out of or relating to the Operative Documents, any transaction 
contemplated thereby or the Property, including any use by Lessee of the 
Property or the Advances, except to the extent such liability arises 
from the willful misconduct or gross negligence of such Indemnitee.  
Upon receiving knowledge of any suit, claim or demand asserted by a 
third party that any Lessor Party believes is covered by this indemnity, 
such Lessor Party shall give Lessee notice of the matter and an 
opportunity to defend it, at Lessee's sole cost and expense, with legal 
counsel reasonably satisfactory to such Lessor Party.  Such Lessor 
Parties may also require Lessee to defend the matter.  Any failure or 
delay of any Lessor Party to notify Lessee of any such suit, claim or 
demand shall not relieve Lessee of its obligations under this Paragraph 
7.03 but shall reduce such obligations to the extent of any increase in 
those obligations caused solely by any such failure or delay that is 
unreasonable.  The obligations of Lessee under this Paragraph 7.03 shall 
survive the payment and performance of the Lessee Obligations and the 
termination of this Agreement.
        7.04.   Waivers; Amendments.  Any term, covenant, agreement or 
condition of this Agreement or any other Operative Document may be 
amended or waived if such amendment or waiver is in writing and is 
signed by Lessor, Lessee and the Required Participants; provided, 
however that:
        (a)     Any amendment, waiver or consent which (i) increases 
the 364-Day Commitment, Two-Year Commitment or Total Commitment, 
(ii) extends the Scheduled Expiration Date, (iii) reduces the 
Rental Rate or any fees or other amounts payable for the account 
of the Participants hereunder, (iv) postpones any date scheduled 
for any payment of Base Rent or any fees or other amounts payable 
for the account of the Participants hereunder or thereunder, (v) 
amends Paragraph 2.06 or this Paragraph 7.04, (vi) amends the 
definition of Required Participants or (vii) releases Lessor's 
interest in any substantial part of the Property, must be in 
writing and signed or approved in writing by all Participants;
        (b)     Any amendment, waiver or consent which increases or 
decreases the Proportionate Share of any Participant must be in 
writing and signed by such Participant; and
        (c)     Any amendment, waiver or consent which affects the 
rights or obligations of Agent must be in writing and signed by 
Agent.
No failure or delay by any Lessor Party in exercising any right 
hereunder shall operate as a waiver thereof or of any other right nor 
shall any single or partial exercise of any such right preclude any 
other further exercise thereof or of any other right.  Unless otherwise 
specified in such waiver or consent, a waiver or consent given hereunder 
shall be effective only in the specific instance and for the specific 
purpose for which given.
        7.05.   Successors and Assigns.
        (a)     Binding Effect.  This Agreement and the other 
Operative Documents shall be binding upon and inure to the benefit 
of Lessee, Lessor, the Participants, Agent and their respective 
permitted successors and assigns.  All references in this 
Agreement to any Person shall be deemed to include all successors 
and assigns of such Person.
        (b)     Participant Assignments.
        (i)     Any Participant may, at any time, sell and 
assign to any other Participant or any Eligible Assignee 
(individually, an "Assignee Participant") all or a portion 
of its rights and obligations under this Agreement and the 
other Operative Documents (such a sale and assignment to be 
referred to herein as an "Assignment") pursuant to an 
assignment agreement in the form of Exhibit M (an 
"Assignment Agreement"), executed by each Assignee 
Participant and such assignor Participant (an "Assignor 
Participant") and delivered to Agent for its acceptance and 
recording in the Register; provided, however, that:
        (A)     Without the written consent of Lessor, 
Agent and, if no Default has occurred and is 
continuing, Lessee (which consent of Lessor, Agent and 
Lessee shall not be unreasonably withheld), no 
Participant may make any Assignment to any Assignee 
Participant which is not, immediately prior to such 
Assignment, a Participant hereunder or an Affiliate 
thereof; or
        (B)     Without the written consent of Lessor, 
Agent and, if no Default has occurred and is 
continuing, Lessee (which consent of Lessor, Agent and 
Lessee shall not be unreasonably withheld), no 
Participant may make any Assignment to any Assignee 
Participant if, after giving effect to such 
Assignment, the Commitment of such Participant or such 
Assignee Participant would be less than Five Million 
Dollars ($5,000,000) (except that a Participant may 
make an Assignment which reduces its Commitment to 
zero without the written consent of Lessor, Agent or 
Lessee); or
        (C)     Without the written consent of Lessor, 
Agent and, if no Default has occurred and is 
continuing, Lessee (which consent of Lessor, Agent and 
Lessee shall not be unreasonably withheld), no 
Participant may make any Assignment of its Outstanding 
Tranche A Participation Amount or its Outstanding 
Tranche B Participation Amount which does not assign 
and delegate an equal pro rata interest in (1) such 
Participant's Outstanding Tranche A Participation 
Amount and its Outstanding Tranche B Participation 
Amount, (2) such Participant's Tranche A Percentage 
and its Tranche B Percentage, and (3) such 
Participant's other rights, duties and obligations 
relating to the Tranche A Portion and the Tranche B 
Portion under this Agreement and the other Operative 
Documents.
        (D)     Without the written consent of Lessor, 
Agent and, if no Default has occurred and is 
continuing, Lessee (which consent of Lessor, Agent and 
Lessee shall not be unreasonably withheld), no Tranche 
C Participant may make any Assignment of its 
Outstanding Tranche C Participation Amount which does 
not assign and delegate an equal pro rata interest in 
(1) such Participant's Outstanding Tranche C 
Participation Amount, (2) such Participant's Tranche C 
Percentage, and (3) such Participant's other rights, 
duties and obligations relating to the Tranche C 
Portion under this Agreement and the other Operative 
Documents.
Upon such execution, delivery, acceptance and recording of 
each Assignment Agreement, from and after the Assignment 
Effective Date determined pursuant to such Assignment 
Agreement, (y) each Assignee Participant thereunder shall be 
a Participant hereunder with a Tranche A Percentage, Tranche 
B Percentage, Tranche C Percentage and Proportionate Share 
as set forth on Attachment 1 to such Assignment Agreement 
(under the caption "Tranche Percentages and Proportionate 
Shares After Assignment") and shall have the rights, duties 
and obligations of such a Participant under this Agreement 
and the other Operative Documents, and (z) the Assignor 
Participant thereunder shall be a Participant with a Tranche 
A Percentage, Tranche B Percentage, Tranche C Percentage and 
Proportionate Share as set forth on Attachment 1 to such 
Assignment Agreement (under the caption "Tranche Percentages 
and Proportionate Shares After Assignment") , or, if the 
Proportionate Share of the Assignor Participant has been 
reduced to 0%, the Assignor Participant shall cease to be a 
Participant and to have any obligation to fund any portion 
of any Advance; provided, however, that any such Assignor 
Participant which ceases to be a Participant shall continue 
to be entitled to the benefits of any provision of this 
Agreement which by its terms survives the termination of 
this Agreement.  Each Assignment Agreement shall be deemed 
to amend Schedule I to the extent, and only to the extent, 
necessary to reflect the addition of each Assignee 
Participant, the deletion of each Assignor Participant which 
reduces its Proportionate Share to 0% and the resulting 
adjustment of Tranche A Percentages, Tranche B Percentages, 
Tranche C Percentages and Proportionate Shares arising from 
the purchase by each Assignee Participant of all or a 
portion of the rights and obligations of an Assignor 
Participant under this Agreement and the other Operative 
Documents.  Each Assignee Participant which was not 
previously a Participant hereunder and which is not 
incorporated under the laws of the United States of America 
or a state thereof shall, within three (3) Business Days of 
becoming a Participant, deliver to Lessee and Agent two duly 
completed copies of United States Internal Revenue Service 
Form 1001 or 4224 (or successor applicable form), as the 
case may be, certifying in each case that such Participant 
is entitled to receive payments under this Agreement without 
deduction or withholding of any United States federal income 
taxes.
        (ii)    Agent shall maintain at its address referred to 
in Paragraph 7.01 a copy of each Assignment Agreement 
delivered to it and a register (the "Register") for the 
recordation of the names and addresses of the Participants 
and the Tranche A Percentage, Tranche B Percentage, Tranche 
C Percentage and Proportionate Share of each Participant 
from time to time.  The entries in the Register shall be 
conclusive in the absence of manifest error, and Lessee, 
Agent and the Participants may treat each Person whose name 
is recorded in the Register as the owner of the interests 
recorded therein for all purposes of this Agreement.  The 
Register shall be available for inspection by Lessee or any 
Participant at any reasonable time and from time to time 
upon reasonable prior notice.
        (iii)   Upon its receipt of an Assignment Agreement 
executed by an Assignor Participant and an Assignee 
Participant (and, to the extent required by clause (i) of 
this Subparagraph 7.05(b), by Lessor, Agent and Lessee), 
together with payment to Agent by Assignor Participant of a 
registration and processing fee of $2,500, Agent shall (A) 
promptly accept such Assignment Agreement and (B) on the 
Assignment Effective Date determined pursuant thereto record 
the information contained therein in the Register and give 
notice of such acceptance and recordation to Lessor, the 
Participants and Lessee.  Agent may, from time to time at 
its election, prepare and deliver to Lessor, the 
Participants and Lessee a revised Schedule I reflecting the 
names, addresses and respective Proportionate Shares of all 
Participants then parties hereto.
        (iv)    Subject to Subparagraph 7.13(g), the Lessor 
Parties may disclose the Operative Documents and any 
financial or other information relating to Lessee or any 
Subsidiary to each other or to any potential Assignee 
Participant.
        (c)     Participant Subparticipations.  Any Participant may at 
any time sell to one or more banks or other financial institutions 
("Subparticipants") subparticipation interests in the rights and 
interests of such Participant under this Agreement and the other 
Operative Documents.  In the event of any such sale by a 
Participant of subparticipation interests, such Participant's 
obligations under this Agreement and the other Operative Documents 
shall remain unchanged, such Participant shall remain solely 
responsible for the performance thereof and Lessee and the other 
Lessor Parties shall continue to deal solely and directly with 
such Participant in connection with such Participant's rights and 
obligations under this Agreement.  Any agreement pursuant to which 
any such sale is effected may require the selling Participant to 
obtain the consent of the Subparticipant in order for such 
Participant to agree in writing to any amendment, waiver or 
consent of a type specified in clause (i), (ii), (iii) or (iv) of 
Subparagraph 7.04(a) but may not otherwise require the selling 
Participant to obtain the consent of such Subparticipant to any 
other amendment, waiver or consent hereunder.  Lessee agrees that 
any Participant which has transferred any subparticipation 
interest shall, notwithstanding any such transfer, be entitled to 
the full benefits accorded such Participant under Paragraph 2.12, 
Paragraph 2.13, and Paragraph 2.14, as if such Participant had not 
made such transfer.
        (d)     Lessor Assignments.  Lessor may, upon one (1) month's 
prior written notice to Lessee and Agent, sell and assign all of 
its right, title and interest in the Property and its rights, 
powers, privileges, duties and obligations under this Agreement 
and the other Operative Documents, provided that:
        (i)     If such sale and assignment is effected after 
either (A) the occurrence of a Change of Law which makes it 
unlawful or unreasonably burdensome for Lessor to hold legal 
or beneficial title to the Property or to perform its 
obligations and duties under this Agreement and the other 
Operative Documents or (B) the resignation or removal of the 
Agent which was the Agent at the time Lessor became the 
Lessor, the purchaser/assignee (the "successor Lessor") 
shall be either (1) a Participant or an Eligible Assignee 
that will not cause the transaction evidenced by this 
Agreement and the other Operative Documents to lose its 
treatment as an operating lease under FASB 13 or (2) a 
Person approved as provided in clause (ii) below; or
        (ii)    If such sale and assignment is effected in any 
other circumstance, the successor Lessor shall be a Person 
that is (A) a financial institution or a Person controlled 
by a financial institution and (B) approved in writing by 
Agent, Required Participants and, if no Default has occurred 
and is continuing, Lessee (which consents of Agent, Required 
Participants and Lessee shall not be unreasonably withheld); 
and
        (iii)   The successor Lessor executes such documents, 
instruments and agreements as may reasonably be necessary to 
evidence its agreement to assume all of the obligations and 
duties of the Lessor under this Agreement and the other 
Operative Documents.
Upon the consummation of any such sale and assignment, (A) the 
successor Lessor shall become the "Lessor" and shall succeed to 
and become vested with all the rights, powers, privileges, duties 
and obligations of the Lessor under this Agreement and the other 
Operative Documents and (B) the retiring Lessor shall be 
discharged from the duties and obligations of the Lessor 
thereafter arising under this Agreement and the other Operative 
Documents.  After any retiring Lessor's discharge as the Lessor, 
the provisions of Section VI and any other provision of this 
Agreement or any other Operative Document which by its terms 
survives the termination of this Agreement shall continue in 
effect for its benefit in respect of any actions taken or omitted 
to be taken by it while it was acting as the Lessor.
        7.06.   Setoff.  In addition to any rights and remedies of the 
Participants provided by law, each Participant shall have the right, 
with the prior written consent of Agent, but without prior notice to or 
consent of Lessee, any such notice and consent being expressly waived by 
Lessee to the extent permitted by applicable law, upon the occurrence 
and during the continuance of an Event of Default, to set-off and apply 
against the Lessee Obligations, whether matured or unmatured, any amount 
owing from such Participant to Lessee, at or at any time after, the 
occurrence of such Event of Default.  The aforesaid right of set-off may 
be exercised by such Participant against Lessee or against any trustee 
in bankruptcy, debtor in possession, assignee for the benefit of 
creditors, receiver or execution, judgment or attachment creditor of 
Lessee or against anyone else claiming through or against Lessee or such 
trustee in bankruptcy, debtor in possession, assignee for the benefit of 
creditors, receiver, or execution, judgment or attachment creditor, 
notwithstanding the fact that such right of set-off shall not have been 
exercised by such Participant prior to the occurrence of an Event of 
Default.  Each Participant agrees promptly to notify Lessee after any 
such set-off and application made by such Participant, provided that the 
failure to give such notice shall not affect the validity of such set-
off and application.
        7.07.   No Third Party Rights.  Nothing expressed in or to be 
implied from this Agreement is intended to give, or shall be construed 
to give, any Person, other than the parties hereto and their permitted 
successors and assigns hereunder, any benefit or legal or equitable 
right, remedy or claim under or by virtue of this Agreement or under or 
by virtue of any provision herein.
        7.08.   Partial Invalidity.  If at any time any provision of this 
Agreement or any other Operative Document is or becomes illegal, invalid 
or unenforceable in any respect under the law or any jurisdiction, 
neither the legality, validity or enforceability of the remaining 
provisions of this Agreement or the other Operative Documents nor the 
legality, validity or enforceability of such provision under the law of 
any other jurisdiction shall in any way be affected or impaired thereby.
        7.09.   JURY TRIAL.  EACH OF LESSEE AND THE LESSOR PARTIES, TO THE 
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES 
ALL RIGHT TO TRIAL BY JURY AS TO ANY ISSUE RELATING TO THE OPERATIVE 
DOCUMENTS IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR 
RELATING TO ANY OPERATIVE DOCUMENT.
        7.10.   Counterparts.  This Agreement may be executed in any number 
of identical counterparts, any set of which signed by all the parties 
hereto shall be deemed to constitute a complete, executed original for 
all purposes.
        7.11.   No Joint Venture, Etc.  Neither this Agreement nor any other 
Operative Document nor any transaction contemplated hereby or thereby 
shall be construed to (a) constitute a partnership or joint venture 
between Lessee and any Lessor Party or (b) impose upon any Lessor Party 
any agency relationship with or fiduciary duty to Lessee.
        7.12.   Usury Savings Clause.  Nothing contained in this Agreement 
or any other Operative Documents shall be deemed to require the payment 
of interest or other charges by Lessee in excess of the amount the 
applicable Lessor Parties may lawfully charge under applicable usury 
laws.  In the event any Lessor Party shall collect monies which are 
deemed to constitute interest which would increase the effective 
interest rate to a rate in excess of that permitted to be charged by 
applicable law, all such sums deemed to constitute excess interest 
shall, upon such determination, at the option of Lessor, be returned to 
Lessee or credited against other Lessee Obligations.
        7.13.   Confidentiality.  No Lessor Party shall disclose to any 
Person any information with respect to Lessee or any of its Subsidiaries 
which is furnished pursuant to this Agreement or under the other 
Operative Documents, except that any Lessor Party may disclose any such 
information (a) to its own directors, officers, employees, auditors, 
counsel and other advisors and to its Affiliates to the extent 
reasonably determined by such Lessor Party to be necessary for the 
administration or enforcement of the Operative Documents; (b) to any 
other Lessor Party; (c) which is otherwise available to the public; (d) 
if required or appropriate in any report, statement or testimony 
submitted to any Governmental Authority having or claiming to have 
jurisdiction over such Lessor Party; (e) if required in response to any 
summons or subpoena; (f) in connection with any litigation among the 
parties relating to the Operative Documents or the transactions 
contemplated thereby; (g) to comply with any Requirement of Law 
applicable to such Lessor Party; (h) to any Assignee Participant or 
Subparticipant or any prospective Assignee Participant or 
Subparticipant, provided that such Assignee Participant or 
Subparticipant or prospective Assignee Participant or Subparticipant 
agrees to be bound by this Paragraph 7.13; or (i) otherwise with the 
prior consent of Lessee; provided, however, that (i) any Lessor Party 
served with any summons or subpoena demanding the disclosure of any such 
information shall use reasonable efforts to notify Lessee promptly of 
such summons or subpoena and, if requested by Lessee and not materially 
disadvantageous to such Lessor Party, to cooperate with Lessee in 
obtaining a protective order restricting such disclosure, and (ii) any 
disclosure made in violation of this Agreement shall not affect the 
obligations of Lessee and its Subsidiaries under this Agreement and the 
other Operative Documents. 
        7.14.   Governing Law. This Agreement and the other Operative 
Documents were accepted by the Lessor Parties in the state of 
California, which state the parties agree has a substantial relationship 
to the parties and to the underlying transaction embodied hereby.  
Accordingly, in all respects, including, without limiting the generality 
of the foregoing, matters of construction, validity, enforceability and 
performance, this Agreement and the other Operative Documents and the 
obligations arising hereunder and thereunder shall be governed by, and 
construed in accordance with, the laws of the state of California 
applicable to contracts made and performed in such state and any 
applicable law of the United States of America, except that at all times 
the provisions for enforcement of Lessor's STATUTORY POWER OF SALE 
granted under the Lease Agreement and the creation, perfection and 
enforcement of the security interests created pursuant thereto and 
pursuant to the other Operative Documents shall be governed by and 
construed according to the law of the state where the Property is 
located.  Except as provided in the immediately preceding sentence, 
Lessee hereby unconditionally and irrevocably waives, to the fullest 
extent permitted by law, any claim to assert that the law of any 
jurisdiction other than California governs this Agreement and the other 
Operative Documents. 
        7.15.   Consent to Jurisdiction. Lessee irrevocably submits to the 
jurisdiction of:  (a) any state or federal court sitting in the state of 
California over any suit, action, or proceeding, brought by Lessee 
against Lessor Parties, arising out of or relating to this Agreement or 
the other Operative Documents; (b) any state or federal court sitting in 
the state where the Property is located or the state in which Lessee's 
principal place of business is located over any suit, action or 
proceeding, brought by Lessor Parties against Lessee, arising out of or 
relating to this Agreement or the other Operative Documents; and (c) any 
state court sitting in the county of the state where the Property is 
located over any suit, action, or proceeding, brought by Lessor Parties 
to exercise their STATUTORY POWER OF SALE under this Agreement or any 
action brought by Lessor Parties to enforce their rights with respect to 
the Collateral.  Lessee irrevocably waives, to the fullest extent 
permitted by law, any objection that Lessee may now or hereafter have to 
the laying of venue of any such suit, action, or proceeding brought in 
any such court and any claim that any such suit, action, or proceeding 
brought in any such court has been brought in an inconvenient forum.
[The first signature page follows.]

        IN WITNESS WHEREOF, Lessee, Lessor, the Participants and Agent 
have caused this Agreement to be executed as of the day and year first 
above written.

LESSEE:                                 ETEC SYSTEMS, INC.


        By:______________________________________

Name:_________________________________

Title:__________________________________

LESSOR:                                 LEASE PLAN NORTH AMERICA, INC.


        By:______________________________________

Name:_________________________________

Title:__________________________________

AGENT:                                  ABN AMRO BANK N.V.


        By:______________________________________

Name:_________________________________

Title:__________________________________


        By:______________________________________

Name:_________________________________

Title:__________________________________

PARTICIPANTS:                           ABN AMRO BANK N.V.


        By:______________________________________

Name:_________________________________

Title:__________________________________


        By:______________________________________

Name:_________________________________

Title:__________________________________




SCHEDULE I
PARTICIPANTS
PART A(1)
TRANCHE PERCENTAGES AND PROPORTIONATE SHARES
PRIOR TO COMMITMENT TERMINATION DATE

         Tranche A       Tranche B       Tranche C     Proportionate
   Participant                    Percentage      Percentage      Percentage  
              Share___

ABN AMRO
Bank N.V.               89.90000000%     7.00000000%      0.00000000%    
96.90000000%

Lease Plan
North America             0.00000000%    0.00000000%     3.10000000%       
3.10000000%

TOTAL                   89.90000000%     7.00000000%     3.10000000%   
100.00000000%



PART A(2)
TRANCHE PERCENTAGES AND PROPORTIONATE SHARES
ON AND AFTER COMMITMENT TERMINATION DATE

       Tranche A       Tranche B       Tranche C     Proportionate
   Participant                    Percentage      Percentage      Percentage  
              Share___

ABN AMRO
Bank N.V.               83.00000000%    13.90000000%      0.00000000%    
96.90000000%

Lease Plan
North America             0.00000000%    0.00000000%     3.10000000%       
3.10000000%

TOTAL                   83.00000000%    13.90000000%     3.10000000%   
100.00000000%



PART B - ADDRESSES, ETC.

ABN AMRO BANK N.V.
Applicable Participating Office:

ABN AMRO Bank N.V.
San Francisco International Branch
101 California Street, Suite 4550
San Francisco, CA 94111


Address for Notices:

ABN AMRO Bank N.V.
San Francisco International Branch
101 California Street, Suite 4550
San Francisco, CA 94111
Attention:  Robin Yim
Telephone:  (415) 984-3712
Fax:  (415) 362-3524

ABN AMRO North America, Inc.
Capital Markets-Syndications Group
1325 Avenue of the Americas, 9th Floor
New York, NY 10019
Attention:  Linda Boardman
Telephone:  (212) 314-1724
Fax:  (212) 314-1709

Wiring Instructions:

ABN AMRO Bank N.V.
New York, New York
RT/ABA No.:  026009580
Account Name:  ABN AMRO San Francisco
Account No.:  6510010545-41
Reference:  Etec Systems, Inc. Synthetic Lease


SCHEDULE 1.01
DEFINITIONS

        "364-Day Commitment" shall have the meaning given to that term in 
Subparagraph 2.03(b) of the Participation Agreement.
        "364-Day Commitment Extension Fee" shall have the meaning given to 
that term in Subparagraph 2.04(c) of the Participation Agreement.
        "364-Day Commitment Period" shall have the meaning given to that 
term in Subparagraph 2.03(b) of the Participation Agreement.
        "364-Day Commitment Termination Date" shall have the meaning given 
to that term in Subparagraph 2.03(b) of the Participation Agreement.
        "ABN AMRO" shall mean ABN AMRO Bank N.V.
        "Acquisition Advance" shall have the meaning given to that term in 
Subparagraph 2.01(b) of the Participation Agreement.
        "Acquisition Date" shall mean the date on which Lessor acquires a 
leasehold interest in the Land by entering into the Ground Lease with 
Lessee.
        "Acquisition Price" shall mean the total price payable by Lessor 
to acquire its leasehold interest in the Land and to acquire the other 
initial Property, if any, on the Closing Date.
        "Acquisition Request" shall have the meaning given to that term in 
Subparagraph 2.03(a) of the Participation Agreement.
"Adjusted Net Income" shall mean, with respect to Lessee and its 
Subsidiaries for any period, the sum, determined on a consolidated basis 
in accordance with GAAP where applicable, of:
(a)     The net income or net loss of Lessee and its 
Subsidiaries for such period after provision for income taxes;
plus
(b)     To the extent deducted in calculating such net income 
or net loss for such period, all non-recurring charges incurred by 
Lessee and its Subsidiaries during such period for the acquisition 
of in-process technology; provided, however, that the sum of all 
such charges so added to net income or net loss in calculating the 
Adjusted Net Income of Lessee and its Subsidiaries during the 
period from the date of this Agreement through the Scheduled 
Expiration Date shall not exceed $15,000,000.
        "Advances" shall have the meaning given to that term in 
Subparagraph 2.01(b) of the Participation Agreement.
        "Advance Requests" shall have the meaning given to that term in 
Subparagraph 2.03(c) of the Participation Agreement.
        "Affiliate" shall mean, with respect to any Person, (a) each 
Person that, directly or indirectly, owns or controls, whether 
beneficially or as a trustee, guardian or other fiduciary, twenty (20%) 
or more of any class of Equity Securities of such Person, (b) each 
Person that controls, is controlled by or is under common control with 
such Person or any Affiliate of such Person or (c) each of such Person's 
officers, directors, joint venturers and partners; provided, however, 
that in no case shall any Lessor Party be deemed to be an Affiliate of 
Lessee or any of its Subsidiaries for purposes of the Operative 
Documents.  For the purpose of this definition, "control" of a Person 
shall mean the possession, directly or indirectly, of the power to 
direct or cause the direction of its management or policies, whether 
through the ownership of voting securities, by contract or otherwise.
        "Agent" shall mean ABN AMRO, acting in its capacity as Agent for 
the Participants under the Operative Documents.
        "Agent's Fee Letter" shall mean the letter agreement dated as of 
November 26, 1997 between Lessee and Agent regarding certain fees 
payable by Lessee to Agent.
        "Agent's Syndication Letter" shall mean the letter agreement dated 
as of November 26, 1997 between Lessee and Agent regarding post-closing 
syndication.
        "Agent's Fees" shall have the meaning given to that term in 
Subparagraph 2.04(a) of the Participation Agreement.
        "Alternate Rental Rate" shall mean, for any Rental Period (or 
portion thereof), the per annum rate equal to the Base Rate in effect 
from time to time during such period plus the Applicable Margin, such 
rate to change from time during such period as the Base Rate or 
Applicable Margin shall change.
"Applicable Margin" shall mean:
        (a)     Tranche A and Tranche B.  With respect to the 
Outstanding Tranche A Amount and Outstanding Tranche B Amount:
                (i)     No Cash Collateral.  During any period when 
Agent does not have, in accordance with the Cash Collateral 
Agreement, a first priority perfected security interest in 
any Cash Collateral securing the Lessee Obligations:
(A)     Ninety-five hundredths of one percent 
(0.95%) per annum with respect to the LIBOR Rental 
Rate; or
        (B)     Zero percent (0%) per annum with respect 
to the Alternate Rental Rate;
                (ii)    Full Cash Collateral.  During any period when 
Agent has, in accordance with the Cash Collateral Agreement, 
a first priority perfected security interest in Cash 
Collateral that secures the Lessee Obligations and has a 
value equal to or greater than the full Outstanding Lease 
Amount:
        (A)     Twenty-five hundredths of one percent 
(0.25%) per annum with respect to the LIBOR Rental 
Rate; or
(B)     Zero percent (0%) per annum with respect 
to the Alternate Rental Rate; or
                (iii)   Partial Cash Collateral.  During any period when 
Agent has, in accordance with the Cash Collateral Agreement, 
a first priority perfected security interest in Cash 
Collateral that secures the Lessee Obligations but has a 
value less than the full Outstanding Lease Amount:
        (A)     The per annum margin equal to the sum of 
the following with respect to the LIBOR Rental Rate:
(1)     The product of (y) ninety-five 
hundredths of one percent (0.95%) per annum 
times (z) a fraction, the numerator of which is 
the remainder of the Outstanding Lease Amount 
minus the value of the Cash Collateral and the 
denominator of which is the Outstanding Lease 
Amount; plus
        (2)     The product of (y) twenty-five 
hundredths of one percent (0.25%) per annum 
above times (z) a fraction, the numerator of 
which is the value of the Cash Collateral and 
the denominator of which is the Outstanding 
Lease Amount; or
        (B)     Zero percent (0%) per annum with respect 
to the Alternate Rental Rate; and
        (b)     Tranche C.  With respect to the Outstanding Tranche C 
Amount:
(i)     Two percent (2.0%) per annum with respect to the 
LIBOR Rental Rate; or
        (ii)    Two percent (2.0%) per annum with respect to the 
Alternate Rental Rate;
provided, however, that each Applicable Margin set forth in 
subparagraphs (a) and (b) of this definition shall be increased by two 
percent (2.0%) per annum on the date an Event of Default occurs and 
shall continue at such increased rate unless and until such Event of 
Default is waived in accordance with the Operative Documents.
        "Applicable Participating Office" shall mean, with respect to any 
Participant, (a) initially, its office designated as such in Part B of 
Schedule I (or, in the case of any Participant which becomes a 
Participant by an assignment pursuant to Subparagraph 7.05(b) of the 
Participation Agreement, its office designated as such in the applicable 
Assignment Agreement) and (b) subsequently, such other office or offices 
as such Participant may designate to Agent as the office at which such 
Participant's interest in the Lease Agreement will thereafter be 
maintained and for the account of which all payments of Rent and other 
amounts payable to such Participant under the Operative Documents will 
thereafter be made.
        "Appraisal" shall mean an appraisal of the Property or a portion 
thereof in a form satisfactory to Lessee, Lessor, Agent and the Required 
Participants, prepared by an independent MAI appraiser that (a) complies 
with the Financial Institutions Reform, Recovery and Enforcement Act of 
1989 and all other applicable Governmental Rules and (b) is approved by 
Lessor, Agent and the Required Participants (at the time such appraiser 
is selected).
        "Appurtenant Rights" shall mean all easements and rights-of-way, 
strips and gores of land, streets, ways, alleys, passages, sewer rights, 
water, water courses, water rights and powers, air rights and 
development rights, liberties, tenements, hereditaments and 
appurtenances of any nature whatsoever, in any way belonging, relating 
or pertaining to any Land or the Improvements thereto and the 
reversions, remainders, and all the estates, rights, titles, interests, 
property, possession, claim and demand whatsoever, both in law and in 
equity, of, in and to such Land and Improvements and every part and 
parcel thereof, with the appurtenances thereto.
        "Assignee Participant" shall have the meaning given to that term 
in Subparagraph 7.05(b) of the Participation Agreement.
        "Assignee Purchaser" shall have the meaning given to that term in 
Subparagraph 5.03(b)of the Purchase Agreement.
        "Assignment" shall have the meaning given to that term in 
Subparagraph 7.05(b) of the Participation Agreement.
        "Assignment Agreement" shall have the meaning given to that term 
in Subparagraph 7.05(b) of the Participation Agreement.
        "Assignment Effective Date" shall have, with respect to each 
Assignment Agreement, the meaning set forth therein.
        "Assignment of Construction Agreements" shall have the meaning 
given to that term in Subparagraph 2.11(a) of the Participation 
Agreement.
        "Assignment of Lease" shall have the meaning given to that term in 
Subparagraph 2.11(b).
        "Assignor Participant" shall have the meaning given to that term 
in Subparagraph 7.05(b) of the Participation Agreement.
        "Assumed Appraisal" shall have the meaning given to that term in 
Subparagraph 3.02(h) of the Purchase Agreement.
        "Base Rate" shall mean, on any day, the greater of (a) the Prime 
Rate in effect on such date and (b) the Federal Funds Rate for such day 
plus one-half percent (0.50%).
        "Base Rent" shall have the meaning given to that term in 
Subparagraph 2.03(a) of the Lease Agreement.
        "Business Day" shall mean any day on which (a) commercial banks 
are not authorized or required to close in San Francisco, California or 
New York, New York and (b) if such Business Day is related to a LIBOR 
Rental Rate, dealings in Dollar deposits are carried out in the London 
interbank market.
        "Capital Adequacy Requirement" shall have the meaning given to 
that term in Subparagraph 2.12(d) of the Participation Agreement.
        "Capital Asset" shall mean, with respect to any Person, any 
tangible fixed or capital asset owned or leased (in the case of a 
Capital Lease) by such Person, or any expense incurred by such Person 
that is required by GAAP to be reported as a non-current asset on such 
Person's balance sheet.
        "Capital Expenditures" shall mean, with respect to Lessee and its 
Subsidiaries for any period, the sum, determined on a consolidated basis 
in accordance with GAAP, of all amounts expended and indebtedness 
incurred or assumed by Lessee and its Subsidiaries during such period 
for the acquisition of Capital Assets (including all amounts expended 
and indebtedness incurred or assumed in connection with Capital Leases), 
other than amounts expended by Lessee and its Subsidiaries to repurchase 
used Lessee systems previously sold to customers by Lessee and its 
Subsidiaries.  (For clarification and without limiting the generality of 
this definition, amounts paid by Lessee under the Hayward Lease shall 
not constitute "Capital Expenditures" if the Hayward Lease is an 
operating lease under GAAP.)
        "Capital Leases" shall mean any and all lease obligations that, in 
accordance with GAAP, are required to be capitalized on the books of a 
lessee.
        "Cash Balances" shall mean, with respect to Lessee and its 
Subsidiaries at any time, the remainder, determined on a consolidated 
basis in accordance with GAAP, of:
        (a)     The sum of (i) the cash of Lessee and its Subsidiaries 
at such time and (ii) the market value of the Cash Equivalents of 
Lessee and its Subsidiaries at such time;
minus
        (b)     If the Outstanding Revolver Credit at such time 
exceeds $5,000,000, the amount of such excess.
        "Cash Collateral" shall mean United States Treasury Securities and 
deposit accounts held or maintained by Agent and Participants to the 
extent such securities and accounts are held and maintained in 
accordance with the Cash Collateral Agreement and Lessor has a first 
priority perfected security interest therein securing the Lessee 
Obligations.
        "Cash Collateral Agreement" shall have the meaning given to that 
term in Subparagraph 2.11(a) of the Participation Agreement.
"Cash Equivalents" shall mean, on any date:
(a)     Any debt investments that mature within one year from 
such date if such investments are permitted by the investment 
policy of Lessee set forth in Schedule 5.02(e) to the 
Participation Agreement; or
(b)     If the investment policy of Lessee is changed after 
the date of the Participation Agreement, any debt investments that 
mature within one year from such date if (i) such investments are 
permitted by the most recent investment policy of Lessee and (ii) 
such investment policy has been approved by Lessee's Board of 
Directors and by Lessor and Required Participants.
        "Casualty" shall mean any damage to, destruction of or decrease in 
the value of all or any portion of any of the Property as a result of 
fire, flood, earthquake or other natural cause; the actions or inactions 
of any Person or Persons (whether willful  or unintentional and whether 
or not constituting negligence); or any other cause.
        "Casualty and Condemnation Proceeds" shall mean all awards, 
damages, compensation, reimbursement and other payments made or to be 
made to Lessee, Lessor or Agent from any insurer, Governmental Authority 
or other Person (other than Lessee or any Lessor Party) on account of 
any Casualty or Condemnation.
"Change of Control" shall mean (a) with respect to Lessee, the 
occurrence of any of the following events:  (i) any person or group of 
persons (within the meaning of Section 13 or 14 of the Securities 
Exchange Act of 1934, as amended) shall (A) acquire beneficial ownership 
(within the meaning of Rule 13d-3 promulgated by the Securities and 
Exchange Commission under the Securities Exchange Act of 1934, as 
amended) of twenty-five percent (25%) or more of the outstanding Equity 
Securities of Lessee entitled to vote for members of the board of 
directors, or (B) acquire all or substantially all of the assets of 
Lessee and its Subsidiaries taken as a whole, or (ii) during any period 
of twelve (12) consecutive calendar months, individuals who are 
directors of Lessee on the first day of such period ("Initial 
Directors") and any directors of Lessee who are specifically approved by 
two-thirds of the Initial Directors and previously-approved Directors 
("Approved Directors") shall cease to constitute a majority of the Board 
of Directors of Lessee before the end of such period; and (b) with 
respect to Lessee's Japanese Subsidiary, Lessee shall cease to own at 
least fifty-one percent (51%) of the Equity Securities of such 
Subsidiary except for nominal amounts of director stock necessary to do 
business in Japan.
        "Change of Law" shall have the meaning given to that term in 
Subparagraph 2.12(b) of the Participation Agreement.
        "Closing Date" shall have the meaning given to that term in 
Subparagraph 2.01(a) of the Participation Agreement.
        "Closing Date Appraisal" shall mean, with respect to the Property 
on or as of a recent date prior to the Closing Date, an Appraisal that 
assesses at such time the Fair Market Value of Lessor's leasehold 
interest in the Property on such date.
        "Collateral" shall mean the Property Collateral, the Cash 
Collateral and all other property in which any Lessor Party has a Lien 
to secure any of the Lessee Obligations.
        "Commencement Date" shall have the meaning given to that term in 
Subparagraph 2.02(a) of the Lease Agreement.
        "Commitment" shall mean, with respect to any Participant at any 
time, such Participant's Proportionate Share of the Total Commitment at 
such time.
        "Commitment Fees" shall have the meaning given to that term in 
Subparagraph 2.04(b) of the Participation Agreement.
        "Commitment Period" shall have the meaning given to that term in 
Subparagraph 2.01(a) of the Participation Agreement.
        "Commitment Termination Date" shall have the meaning given to that 
term in Subparagraph 2.01(a) of the Participation Agreement.
        "Completion" shall have the meaning given to that term in 
Subparagraph 3.05(c) of the Construction Agency Agreement.  "Complete", 
"Completed" and "Completion" shall have comparable meanings.
        "Completion Date" shall mean the first date on which all of the 
conditions set forth in Subparagraph 3.05(c) of the Construction Agency 
Agreement are satisfied.
        "Compliance Certificate" shall have the meaning given to that term 
in Subparagraph 5.01(a) of the Participation Agreement.
        "Condemnation" shall mean any condemnation, requisition, 
confiscation, seizure or other taking or sale of the use, access, 
occupancy or other right in or to all or any portion of any of the 
Property (whether wholly or partially, temporarily or permanently), by 
or on account of any actual or threatened eminent domain proceeding or 
other taking of action by any Governmental Authority or other Person 
having the power of eminent domain, including an action by any such 
Governmental Authority or Person to change the grade of, or widen the 
streets adjacent to, such Property or alter the pedestrian or vehicular 
traffic flow to such Property so as to result in change in access to 
such Property, or by or on account of an eviction by paramount title or 
any transfer made in lieu of any such proceeding or action.  A 
"Condemnation" shall be deemed to have occurred on the earliest of the 
dates that use, access, occupancy or other right is taken.
        "Conforming Bid" shall have the meaning given to that term in 
Subparagraph 3.02(c) of the Purchase Agreement.
        "Construction Agency Agreement" shall have the meaning given to 
that term in Subparagraph 2.01(a) of the Participation Agreement.
        "Construction Agreements" shall have the meaning given to that 
term in Paragraph 3.02 of the Construction Agency Agreement.
"Contingent Obligation" shall mean, with respect to any Person, 
(a) any Guaranty Obligation of that Person; and (b) any direct or 
indirect obligation or liability, contingent or otherwise, of that 
Person (i) in respect of any Surety Instrument issued for the account of 
that Person or as to which that Person is otherwise liable for 
reimbursement of drawings or payments, (ii) as a partner or joint 
venturer in any partnership or joint venture, (iii) to purchase any 
materials, supplies or other property from, or to obtain the services 
of, another Person if the relevant contract or other related document or 
obligation requires that payment for such materials, supplies or other 
property, or for such services, shall be made regardless of whether 
delivery of such materials, supplies or other property is ever made or 
tendered, or such services are ever performed or tendered, or (iv) in 
respect to any Rate Contract that is not entered into in connection with 
a bona fide hedging operation that provides offsetting benefits to such 
Person.  The amount of any Contingent Obligation shall (subject, in the 
case of Guaranty Obligations, to the last sentence of the definition of 
"Guaranty Obligation") be deemed equal to the maximum reasonably 
anticipated liability in respect thereof, and shall, with respect to 
item (b)(iv) of this definition be marked to market on a current basis.
        "Contractual Obligation" of any Person shall mean, any indenture, 
note, lease, loan agreement, security, deed of trust, mortgage, security 
agreement, guaranty, instrument; contract, agreement or other form of 
contractual obligation or undertaking to which such Person is a party or 
by which such Person or any of its property is bound.
        "Credit Event" shall mean the making of each Advance, the 
selection of a new Rental Period or the exercise of the Marketing Option 
under the Purchase Agreement.
        "Current Appraisal" shall have the meaning given to that term in 
Subparagraph 3.02(h) of the Purchase Agreement.
"Debt Service Coverage Ratio" shall mean, with respect to Lessee 
and its Subsidiaries for any period, the ratio, determined on a 
consolidated basis in accordance with GAAP where applicable, of;
(a)     The remainder of (i) EBITDA of Lessee and its 
Subsidiaries for such period minus (ii) all Capital Expenditures 
of Lessee and its Subsidiaries for such period;
to
(b)     The sum of (i) all Interest Expenses of Lessee and its 
Subsidiaries for such period and (ii) all principal payments on 
long-term Indebtedness for borrowed money of Lessee and its 
Subsidiaries scheduled for payment during the immediately 
succeeding comparable period (excluding any payments of the 
Outstanding Lease Amount payable on the Expiration Date of the 
Lease Agreement).
        "Default" shall mean any Event of Default under the Lease 
Agreement or any event or circumstance not yet constituting an Event of 
Default under the Lease Agreement which, with the giving of any notice 
or the lapse of any period of time or both, would become an Event of 
Default under the Lease Agreement.
        "Defaulting Participant" shall mean a Participant which has failed 
to fund its portion of any Advance which it is required to fund under 
the Participation Agreement and has continued in such failure for three 
(3) Business Days after written notice from Agent.
        "Deposit Accounts" shall have the meaning given to that term in 
Subparagraph 2.01(a) of the Cash Collateral Agreement.
        "Depositary Bank" shall have the meaning given to that term in 
Paragraph 2.02 of the Cash Collateral Agreement.
        "Designated Purchaser" shall have the meaning given to that term 
in Subparagraph 3.02(e) of the Purchase Agreement.
        "Dollars" and "$" shall mean the lawful currency of the United 
States of America and, in relation to any payment under the Operative 
Documents, same day or immediately available funds.
"EBITDA" shall mean, with respect to Lessee and its Subsidiaries 
for any period, the sum of the following, determined on a consolidated 
basis in accordance with GAAP:
(a)     The Adjusted Net Income of Lessee and its Subsidiaries 
for such period;
plus
(b)     The sum (to the extent deducted in calculating such 
Adjusted Net Income) of (i) all Interest Expenses of Lessee and 
its Subsidiaries accrued during such period, (ii) all income taxes 
of Lessee and its Subsidiaries accrued during such period and (ii) 
all depreciation and amortization expenses of Lessee and its 
Subsidiaries accrued during such period.
        "Eligible Assignee" shall mean (a) a commercial bank organized 
under the laws of the United States, or any state thereof, and having a 
combined capital and surplus of at least $100,000,000; (b) a commercial 
bank organized under the laws of any other country which is a member of 
the Organization for Economic Cooperation and Development (the "OECD"), 
or a political subdivision of any such country, and having a combined 
capital and surplus of at least $100,000,000, provided that such bank is 
acting through a branch or agency located in the United States; or (c) a 
Person that is (i) a Subsidiary of a Participant, (ii) a Subsidiary of a 
Person of which a Participant is a Subsidiary, or (iii) a Person of 
which a Participant is a Subsidiary.
        "Employee Benefit Plan" shall mean any employee benefit plan 
within the meaning of section 3(3) of ERISA maintained or contributed to 
by Lessee or any ERISA Affiliate, other than a Multiemployer Plan.
        "Environmental Laws" shall mean the Clean Air Act, 42 U.S.C. 
Section 7401 et seq.; the Federal Water Pollution Control Act, 33 U.S.C. 
Section 1251 et seq.; the Resource Conservation and Recovery Act of 
1976, 42 U.S.C. Section 6901 et seq.; the Comprehensive Environment 
Response, Compensation and Liability Act of 1980 (including the 
Superfund Amendments and Reauthorization Act of 1986, "CERCLA"), 42 
U.S.C. Section 9601 et seq.; the Toxic Substances Control Act, 15 U.S.C. 
Section 2601 et seq.; the Occupational Safety and Health Act, 29 U.S.C. 
Section 651; the Emergency Planning and Community Right-to-Know Act of 
1986, 42 U.S.C. Section 11001 et seq.; the Mine Safety and Health Act of 
1977, 30 U.S.C. Section 801 et seq.; the Safe Drinking Water Act, 42 
U.S.C. Section 300f et seq.; and all other Governmental Rules relating 
to the protection of human health and the environment, including all 
Governmental Rules pertaining to reporting, licensing, permitting, 
transportation, storage, disposal, investigation, and remediation of 
emissions, discharges, releases, or threatened releases of Hazardous 
Materials into the air, surface water, groundwater, or land, or relating 
to the manufacture, processing, distribution, use, treatment, storage, 
disposal, transport, or handling of Hazardous Materials.
        "Equity Securities" of any Person shall mean (a) all common stock, 
preferred stock, participations, shares, partnership interests or other 
equity interests in and of such Person (regardless of how designated and 
whether or not voting or non-voting) and (b) all warrants, options and 
other rights to acquire any of the foregoing.
        "ERISA" shall mean the Employee Retirement Income Security Act of 
1974, as the same may from time to time be amended or supplemented, 
including any rules or regulations issued in connection therewith.
        "ERISA Affiliate" shall mean any Person which is treated as a 
single employer with Lessee under Section 414 of the IRC.
        "Event of Default" shall have the meaning given to that term in 
Paragraph 5.01 of the Lease Agreement.
        "Exhibit B Supplement" shall have the meaning given to that term 
in Subparagraph 2.03(b) of the Participation Agreement.
        "Existing Improvements" shall mean, with respect to the Land, all 
Improvements existing on the Land on the Closing Date.
        "Expiration Date" shall mean the earlier of (a) the Scheduled 
Expiration Date under the Lease Agreement, as such date may be extended 
pursuant to this Agreement, and (b) the Termination Date for the Lease 
Agreement, if the Lease Agreement is terminated prior to its Scheduled 
Expiration Date in accordance with its terms.
        "Expiration Date Appraisal" shall mean, with respect to the 
Property at any time, an Appraisal that assesses at such time the Fair 
Market Value of Lessor's leasehold and other interests in the Property 
on the Scheduled Expiration Date and as improved in accordance with the 
Plans and Specifications for the New Improvements.
        "Expiration Date Purchase Option" shall have the meaning given to 
that term in Subparagraph 3.01(b) of the Purchase Agreement.
        "Fair Market Value" shall mean, with respect to any of the 
Property or any portion thereof, the maximum reasonable amount (not less 
than zero) that would be paid in cash in an arm's-length transaction 
between an informed and willing purchaser and an informed and willing 
seller, neither of whom is under any compulsion to purchase or sell, for 
the ownership of the Property or such portion.
        "FASB 13" shall mean Financial Accounting Standards Board 
Statement No. 13.
        "Federal Funds Rate" shall mean, for any day, the rate per annum 
set forth in the weekly statistical release designated as H.15(519), or 
any successor publication, published by the Federal Reserve Board 
(including any such successor publication, "H.15 (519)") for such day 
opposite the caption "Federal Funds (Effective)".  If on any relevant 
day, such rate is not yet published in H.15 (519), the rate for such day 
shall be the rate set forth in the daily statistical release designated 
as the Composite 3:30 p.m. Quotations for U.S. Government Securities, or 
any successor publication, published by the Federal Reserve Bank of New 
York (including any such successor publication, the "Composite 3:30 p.m. 
Quotations") for such day under the caption "Federal Funds Effective 
Rate".  If on any relevant day, such rate is not yet published in either 
H.15 (519) or the Composite 3:30 p.m. Quotations, the rate for such day 
shall be the arithmetic means, as determined by Agent, of the rates 
quoted to Agent for such day by three (3) Federal funds brokers of 
recognized standing selected by Agent.
        "Federal Reserve Board" shall mean the Board of Governors of the 
Federal Reserve System.
        "Financial Statements" shall mean, with respect to any accounting 
period for any Person, statements of income, shareholders' equity and 
cash flows of such Person for such period, and a balance sheet of such 
Person as of the end of such period, setting forth in each case in 
comparative form figures for the corresponding period in the preceding 
fiscal year if such period is less than a full fiscal year or, if such 
period is a full fiscal year, corresponding figures from the preceding 
annual audit, all prepared in reasonable detail and in accordance with 
GAAP.
        "Force Majeure Events" shall mean any Acts of God, riots, civil 
commotions, insurrections, wars, strikes, lockouts or other events 
beyond the control of Lessee, except for (a) any such events that are 
known to or should be known to Lessee on the Closing Date; (b) any such 
events that are caused by the financial condition of Lessee or the 
failure of Lessee to make any payments under any Construction 
Agreements, any Operative Documents or any related agreements or (c) any 
events that could be remedied through the payment of money or the 
exercise of other commercially reasonable efforts.
        "GAAP" shall mean generally accepted accounting principles and 
practices as in effect in the United States of America from time to 
time, consistently applied.
        "Governmental Authority" shall mean any domestic or foreign 
national, state or local government, any political subdivision thereof, 
any department, agency, authority or bureau of any of the foregoing, or 
any other entity exercising executive, legislative, judicial, regulatory 
or administrative functions of or pertaining to government, including, 
without limitation, the Federal Deposit Insurance Corporation, the 
Federal Reserve Board, the Comptroller of the Currency, any central bank 
or any comparable authority.
        "Governmental Charges" shall mean taxes, levies, assessments, 
fees, imposts, duties, licenses, recording charges, claims or other 
charges imposed by any Governmental Authority.
        "Governmental Rule" shall mean any law, rule, regulation, 
ordinance, order, code, interpretation, judgment, decree, directive, 
guidelines, policy or similar form of decision of any Governmental 
Authority.
        "Ground Lease" shall have the meaning given to that term in 
Subparagraph 2.01(a) of the Participation Agreement.
        "Ground Lease Commencement Date" shall have the meaning given to 
that term in Paragraph 2.02 of the Ground Lease
        "Ground Lease Event of Default" shall have the meaning given to 
that term in Paragraph 5.01 of the Ground Lease.
        "Ground Lease Expiration Date" shall have the meaning given to 
that term in Paragraph 4.02
        "Ground Lease Option Price" shall have the meaning given to that 
term in Paragraph 6.02 of the Ground Lease.
        "Ground Lease Property" shall have the meaning given to that term 
in Paragraph 2.01 of the Ground Lease.
        "Ground Lease Purchase Option" shall have the meaning given to 
that term in Paragraph 6.01 of the Ground Lease.
        "Ground Lease Purchase Option Date" shall have the meaning given 
to that term in Paragraph 6.01 of the Ground Lease. 
        "Ground Lease Scheduled Expiration Date" shall have the meaning 
given to that term in Paragraph 2.02 of the Ground Lease. 
        "Ground Lessee" shall have the meaning given to that term in the 
introductory paragraph of the Ground Lease. 
        "Ground Lessor" shall have the meaning given to that term in the 
introductory paragraph of the Ground Lease.
"Guaranty Obligation" shall mean, with respect to any Person, any 
direct or indirect liability of that Person with respect to any 
indebtedness, lease, dividend, letter of credit or other obligation (the 
"primary obligations") of another Person (the "primary obligor"), 
including any obligation of that Person, whether or not contingent, 
(a) to purchase, repurchase or otherwise acquire such primary 
obligations or any property constituting direct or indirect security 
therefor, or (b) to advance or provide funds (i) for the payment or 
discharge of any such primary obligation, or (ii) to maintain working 
capital or equity capital of the primary obligor or otherwise to 
maintain the net worth or solvency or any balance sheet item, level of 
income or financial condition of the primary obligor, or (c) to purchase 
property, securities or services primarily for the purpose of assuring 
the owner of any such primary obligation of the ability of the primary 
obligor to make payment of such primary obligation, or (d) otherwise to 
assure or hold harmless the holder of any such primary obligation 
against loss in respect thereof.  The amount of any Guaranty Obligation 
shall be deemed equal to the stated or determinable amount of the 
primary obligation in respect of which such Guaranty Obligation is made 
or, if not stated or if indeterminable, the maximum reasonably 
anticipated liability in respect thereof.
"Hayward Lease" shall mean the Second Amended and Restated Lease 
Agreement to be entered into between the Hayward Lessor, as landlord, 
and Lessee, as tenant.
"Hayward Lease Property" shall mean the property leased by Lessee 
from the Hayward Lessor pursuant to the Hayward Lease.
"Hayward Lessor" shall mean ESI (CA) QRS 12-6, Inc., a California 
corporation.
"Hazardous Materials" shall mean all materials, substances and 
wastes which are classified or regulated as "hazardous," "toxic" or 
similar descriptions under any Environmental Law.
        "Improvement/Expense Advance Request" shall have the meaning given 
to that term in Subparagraph 2.03(b) of the Participation Agreement.
        "Improvement/Expense Advances" shall have the meaning given to 
that term in Subparagraph 2.01(a) of the Participation Agreement.
        "Improvements" shall mean all buildings, structures, facilities, 
fixtures and other improvements of every kind and description now or 
hereafter located on any of the Land, including (a) all parking areas, 
roads, driveways, walks, fences, walls, drainage facilities and other 
site improvements; (b) all water, sanitary and storm sewer, drainage, 
electricity, steam, gas, telephone and other utility equipment and 
facilities, all plumbing, lighting, heating, ventilating, air-
conditioning, refrigerating, incinerating, compacting, fire protection 
and sprinkler, surveillance and security, public address and 
communications equipment and systems, partitions, elevators, escalators, 
motors, machinery, pipes, fittings and other items of equipment of every 
kind and description now or hereafter located on such Land or attached 
to the Improvements thereto which by the nature of their location 
thereon or attachment thereto are real property under applicable law; 
and (c) all Modifications to such Land or its Improvements, except for 
any Modifications removed by Lessee from the Property pursuant to 
Subparagraph 3.10 of the applicable Lease Agreement.
"Indebtedness" of any Person shall mean, without duplication:
(a)     All obligations of such Person evidenced by notes, 
bonds, debentures or other similar instruments and all other 
obligations of such Person for borrowed money (including recourse 
obligations of such Person in connection with receivables and 
other assets sold by such Person);
(b)     All obligations of such Person for the deferred 
purchase price of property or services (including obligations 
under letters of credit and other credit facilities which secure 
or finance such purchase price and obligations under "synthetic" 
leases but excluding trade payables incurred in the ordinary 
course of business on ordinary terms which are not overdue);
(c)     All obligations of such Person under conditional sale 
or other title retention agreements with respect to property 
acquired by such Person (to the extent of the value of such 
property if the rights and remedies of the seller or lender under 
such agreement in the event of default are limited solely to 
repossession or sale of such property);
(d)     All obligations of such Person as lessee under or with 
respect to Capital Leases;
(e)     All net obligations of such Person, contingent or 
otherwise, under or with respect to Rate Contracts;
(f)     All Guaranty Obligations of such Person with respect 
to the obligations of other Persons of the types described in 
clauses (a) - (e) above; and
(h)     All obligations of other Persons of the types 
described in clauses (a) - (e) above to the extent secured by (or 
for which any holder of such obligations has an existing right, 
contingent or otherwise, to be secured by) any Lien in any 
property (including accounts and contract rights) of such Person, 
even though such Person has not assumed or become liable for the 
payment of such obligations.
(For clarification and without limiting the generality of this 
definition, the obligations of Lessee under the Hayward Lease shall not 
constitute "Indebtedness" if the Hayward Lease is an operating lease 
under GAAP.)
        "Indemnified Taxes" shall mean all income taxes, stamp taxes, 
sales taxes, use taxes, rental taxes, gross receipts taxes, property 
(tangible and intangible) taxes, franchise taxes, excise taxes, value 
added taxes, turnover taxes, withholding taxes and other taxes and 
Governmental Charges, together with any and all assessments, penalties, 
fines, additions and interest thereon, except:
(a)     Net income taxes and franchise taxes in lieu of net 
income taxes imposed on any Lessor Party by its jurisdiction of 
incorporation or a jurisdiction in which it maintains an office 
(provided, however, that this definition shall not be construed to 
prevent a payment from being made on an after-tax basis);
(b)     Any tax or other Governmental Charge that has not 
become a Lien on any of the Property and that Lessee is contesting 
pursuant to Paragraph 3.12 of the Lease Agreement (but only while 
Lessee is so contesting such tax or Governmental Charge); or
(c)     Any tax or other Governmental Charge that is imposed 
upon an Indemnitee primarily as a result of the gross negligence 
or willful misconduct of such Indemnitee itself (as opposed to 
gross negligence or willful misconduct imputed to such 
Indemnitee), but not taxes or other Governmental Charges imposed 
as a result of ordinary negligence of such Indemnitee.
        "Indemnitees" shall mean the Lessor Parties and their Affiliates 
and their respective directors, officers, employees, agents, attorneys 
and advisors.
        "Indemnity Amount" shall have the meaning given to that term in 
Subparagraph 3.02(g) of the Purchase Agreement.
        "Initial Bid" shall have the meaning given to that term in 
Subparagraph 3.02(b) of the Purchase Agreement.
        "Initial Marketing Period" shall have the meaning given to that 
term in Subparagraph 3.02(b) of the Purchase Agreement.
        "Insurance Requirements" shall mean all terms, conditions and 
requirements imposed by the policies of insurance which Lessee is 
required to maintain by the Operative Documents.
"Interest Expenses" shall mean, with respect to Lessee and its 
Subsidiaries for any period, the sum, determined on a consolidated basis 
in accordance with GAAP, of (a) all interest accrued on the Indebtedness 
of Lessee and its Subsidiaries during such period (including interest 
attributable to Capital Leases) and (b) all letter of credit fees 
payable by Lessee and its Subsidiaries accrued during such period.
"Investment" of any Person shall mean any loan or advance of funds 
by such Person to any other Person (other than advances to employees of 
such Person for moving and travel expenses, drawing accounts and similar 
expenditures in the ordinary course of business), any purchase or other 
acquisition of any Equity Securities or Indebtedness of any other 
Person, any capital contribution by such Person to or any other 
investment by such Person in any other Person (including any Guaranty 
Obligations of such Person and any indebtedness of such Person of the 
type described in clause (h) of the definition of "Indebtedness" on 
behalf of any other Person); provided, however, that Investments shall 
not include (a) accounts receivable or other indebtedness owed by 
customers of such Person which are current assets and arose from sales 
of inventory in the ordinary course of such Person's business or (b) 
prepaid expenses of such Person incurred and prepaid in the ordinary 
course of business.
        "IRC" shall mean the Internal Revenue Code of 1986.
        "Issues and Profits" shall mean all present and future rents, 
royalties, issues, profits, receipts, revenues, income, earnings and 
other benefits accruing from any of the Land, Improvements or 
Appurtenant Rights (whether in the form of accounts, chattel paper, 
instruments, documents, investment property, general intangibles or 
otherwise) including all rents and other amounts payable pursuant to any 
Subleases.
        "Land" shall mean all lots, pieces, tracts or parcels of land 
described in Exhibit A to the Lease Agreement and leased by Lessee 
pursuant to the Lease Agreement.
        "Lease Agreement" shall have the meaning given to that term in 
Subparagraph 2.01(a) of the Participation Agreement.
        "Lease Extension Request" shall have the meaning given to that 
term in Subparagraph 2.09(b) of the Participation Agreement.
        "Lease Reduction Payments" shall mean each of the following to the 
extent applied to reduce the Outstanding Lease Amount pursuant to the 
Operative Documents:
        (a)     Casualty and Condemnation Proceeds;
        (b)     The purchase price paid for the Property (or any 
portion thereof) by Lessee, an Assignee Purchaser or a Designated 
Purchaser pursuant to the Purchase Agreement;
        (c)     The Residual Value Guaranty and Indemnity Amount paid 
by Lessee pursuant to the Purchase Agreement;
        (d)     Any proceeds received by Lessee from any sale of the 
Property after the Expiration Date if such Property is retained by 
Lessor after such Expiration Date pursuant to the applicable 
Purchase Agreement; and
        (e)     Any proceeds received by any Lessor Party from the 
exercise of any of its remedies under the Operative Documents 
after the occurrence of an Event of Default under the Lease 
Agreement. 
        "Leasehold Mortgagee" shall have the meaning given to that term in 
Paragraph 3.07 of the Ground Lease. 
        "Leasehold Mortgages" shall have the meaning given to that term in 
Paragraph 3.07 of the Ground Lease. 
        "Lessee" shall mean Etec Systems, Inc., acting in its capacity as 
Lessee under the Operative Documents.
        "Lessee Obligations" shall mean and include all liabilities and 
obligations owed by Lessee to any Lessor Party under any of the 
Operative Documents of every kind and description and however arising 
(whether direct or indirect, absolute or contingent, due or to become 
due, now existing or hereafter arising), including the obligation of 
Lessee to pay Rent, to pay the Residual Value Guaranty Amount, Indemnity 
Amount and/or Outstanding Lease Amount and to pay all interest, fees, 
charges, expenses, attorneys' fees and accountants' fees chargeable to 
Lessee or payable by Lessee under the Operative Documents.
        "Lessee Security Documents" shall mean and include the Lease 
Agreement, the Cash Collateral Agreement, the Assignment of Construction 
Agreements, the Ground Lease and all other instruments, agreements, 
certificates, opinions and documents (including Uniform Commercial Code 
financing statements and fixture filings and landlord waivers) delivered 
to any Lessor Party in connection with any Collateral or to secure the 
Lessee Obligations.
        "Lessor" shall mean Lease Plan North America, Inc. , acting in its 
capacity as Lessor under the Operative Documents.
        "Lessor Deed of Trust" shall have the meaning given to that term 
in Subparagraph 2.11(b) of the Participation Agreement.
        "Lessor Liens" shall mean any Liens or other interests in any of 
the Property of any Person other than Lessee or a Lessor Party arising 
as a result of (a) any transfer or assignment by Lessor to such Person 
of any of Lessor's interests in such Property in violation of any of the 
Operative Documents or (b) any claim against Lessor by any such Person 
unrelated to any of the Operative Documents or the transactions 
contemplated thereby.  (Lessor Liens shall include Liens granted by 
Lessor to Agent or any Participant to secure the Lessor Obligations.)
        "Lessor Obligations" shall mean and include all liabilities and 
obligations owed by Lessor to Agent or any Participant under any of the 
Operative Documents of every kind and description and however arising 
(whether direct or indirect, absolute or contingent, due or to become 
due, now existing or hereafter arising), including the obligation of 
Lessor to share payments made by Lessee to Lessor under the Operative 
Documents as provided in Paragraph 2.06 of the Participation Agreement.
        "Lessor Parties" shall mean Lessor, the Participants and Agent.
        "Lessor Security Agreement" shall have the meaning given to that 
term in Subparagraph 2.11(b) of the Participation Agreement.
"Leverage Ratio" shall mean, with respect to Lessee and its 
Subsidiaries at any time, the ratio, determined on a consolidated basis 
in accordance with GAAP, of (a) the Senior Indebtedness of Lessee and 
its Subsidiaries at such time to (b) the Total Capital of Lessee and its 
Subsidiaries at such time.
        "LIBO Rate" shall mean, with respect to any Rental Period, a rate 
per annum equal to the quotient (rounded upward if necessary to the 
nearest 1/100 of one percent) of (a) the arithmetic mean (rounded upward 
if necessary to the nearest 1/16 of one percent) of the rates per annum 
appearing on the Telerate Page 3750 (or any successor publication) on 
the second Business Day prior to the first day of such Rental Period at 
or about 11:00 A.M. (London time) (for delivery on the first day of such 
Rental Period) for a term comparable to such Rental Period (or for a 
term of one (1) month for any Rental Period that is less than one (1) 
month but is at least seven (7) days), divided by (b) one minus the 
Reserve Requirement in effect from time to time.  If for any reason 
rates are not available as provided in clause (a) of the preceding 
sentence, the rate to be used in clause (a) shall be, the rate per annum 
at which Dollar deposits are offered to ABN AMRO by prime banks in the 
London interbank market on the second Business Day prior to the first 
day of such Rental Period at or about 11:00 A.M. (London time) (for 
delivery on the first day of such Rental Period) in an amount 
substantially equal to ABN AMRO's Proportionate Share of the Outstanding 
Lease Amount and for a term comparable to such Rental Period (or for a 
term of one (1) month for any Rental Period that is less than one (1) 
month but is at least seven (7) days).  The LIBO Rate shall be adjusted 
automatically as of the effective date of any change in the Reserve 
Requirement.
        "LIBOR Rental Rate" shall mean, for any Rental Period, the per 
annum rate equal to the LIBO Rate for such Rental Period, plus the 
Applicable Margin, such rate to change from time to time during such 
period as the Applicable Margin shall change.
        "Lien" shall mean, with respect to any property, any security 
interest, mortgage, pledge, lien, charge or other encumbrance in, of, or 
on such property or the income therefrom, including the interest of a 
vendor or lessor under a conditional sale agreement, Capital Lease, 
"synthetic" lease or other title retention agreement, or any agreement 
to provide any of the foregoing, and the filing of any financing 
statement or similar instrument under the Uniform Commercial Code or 
comparable law of any jurisdiction.
        "Major Casualty" shall mean, with respect to the Property, any 
Casualty affecting such Property where (a) the damage to such Property 
is treated by any insurer of such Property as a total loss; (b) such 
Property cannot reasonably be repaired and restored to the condition in 
which it existed immediately prior to such Casualty; or (c) the 
reasonably anticipated cost to repair and restore such Property to the 
condition in which it existed immediately prior to such Casualty would 
exceed twenty-five percent (25%) of the Outstanding Lease Amount.
        "Major Condemnation" shall mean, with respect to the Property, any 
Condemnation affecting such Property where (a) all or substantially all 
of such Property is taken by such Condemnation; (b) such Property cannot 
reasonably be repaired and restored to the condition in which it existed 
immediately prior to such Condemnation; or (c) the reasonably 
anticipated cost to repair and restore such Property to the condition in 
which it existed immediately prior to such Condemnation would exceed 
twenty-five percent (25%) of the Outstanding Lease Amount. 
        "Majority Participants" shall mean (a) at any time the aggregate 
Outstanding Lease Amount is greater than $0, Participants whose 
aggregate Outstanding Participation Amounts equal or exceed fifty 
percent (50%) of the aggregate Outstanding Lease Amount at such time and 
(b) at any time the aggregate Outstanding Lease Amount is $0, 
Participants whose Proportionate Shares equal or exceed fifty percent 
(50%).
        "Margin Stock" shall have the meaning given to that term in 
Regulation U issued by the Federal Reserve Board, as amended from time 
to time, and any successor regulation thereto.
        "Marketing Option" shall have the meaning given to that term in 
Subparagraph 3.01(a) of the Purchase Agreement.
        "Marketing Option Event of Default" shall mean any Event of 
Default other than a Non-Marketing Option Event of Default.
        "Material Adverse Effect" shall mean a material adverse effect on 
(a) the business, assets, operations or financial or other condition of 
Lessee and its Subsidiaries, taken as a whole; (b) the ability of Lessee 
to pay or perform the Lessee Obligations when due in accordance with the 
terms of the Operative Documents; (c) the rights and remedies of any 
Lessor Party under the Operative Documents or any related document, 
instrument or agreement; or (d) the value of the Property and the 
Collateral, any Lessor Party's security interests, Liens or other rights 
in the Property and the Collateral or the perfection or priority of such 
security interests, Liens or rights.
        "Material Casualty" shall mean any Casualty to the Property that 
alone, or in combination with any prior Casualties to the Property for 
which repairs to restore the Property to its prior condition have not 
been completed, will require repairs costing $1,000,000 or more to 
restore the Property to its prior condition.
        "maturity" shall mean, with respect to any Rent, interest, fee or 
other amount payable by Lessee under the Operative Documents, the date 
such Rent, interest, fee or other amount becomes due, whether upon the 
stated maturity or due date, upon acceleration or otherwise.
        "Modifications" shall have the meaning given to that term in 
Subparagraph 3.01(c) of the Lease Agreement.
        "Multiemployer Plan" shall mean any multiemployer plan within the 
meaning of section 3(37) of ERISA maintained or contributed to by Lessee 
or any ERISA Affiliate.
"Net Proceeds" shall mean, with respect to any issuance of Equity 
Securities by Lessee or any of its Subsidiaries, the aggregate 
consideration received by Lessee or such Subsidiary from such issuance 
less the sum of the actual amount of the reasonable fees and commissions 
payable to Persons other than Lessee or any Affiliate of Lessee and the 
other reasonable costs and expenses (including reasonable legal 
expenses) directly related to such issuance that are to be paid by 
Lessee or any of its Subsidiaries.
        "New Improvements" shall mean, with respect to the Land, all new 
Improvements to the Land contemplated by the Plans and Specifications.
        "Non-Marketing Option Event of Default" shall mean:
        (a)     An Event of Default under Subparagraph 5.01(m) of the 
Lease Agreement; or
        (b)     An Event of Default under Subparagraph 5.01(c) of the 
Lease Agreement resulting from Lessee's failure to start and 
complete the construction of the New Improvements in accordance 
with the Construction Agency Agreement where such failure is 
caused solely by a Force Majeure Event.
        "Notice of Expiration Date Purchase Option Exercise" shall have 
the meaning given to that term in Paragraph 3.01 of the Purchase 
Agreement.
        "Notice of Ground Lease Purchase Option Exercise" shall have the 
meaning given to that term in Paragraph 6.01 of the Ground Lease.
        "Notice of Ground Lease Rent Increase" shall have the meaning 
given to that term in Paragraph 2.03 of the Ground Lease.
        "Notice of Marketing Option Exercise" shall have the meaning given 
to that term in Paragraph 3.01 of the Purchase Agreement.
        "Notice of Rental Period Selection" shall have the meaning given 
to that term in Subparagraph 2.03(a) of the Lease Agreement.
        "Notice of Term Purchase Option Exercise" shall have the meaning 
given to that term in Subparagraph 2.01(a) of the Purchase Agreement.
"Operating Income" shall mean, with respect to Lessee and its 
Subsidiaries for any period, the sum of the following, determined on a 
consolidated basis in accordance with GAAP where applicable:
(a)     The Adjusted Net Income of Lessee and its Subsidiaries 
for such period;
plus
(b)     The remainder of (i) to the extent deducted in 
calculating such Adjusted Net Income, all Interest Expenses of 
Lessee and its Subsidiaries accrued during such period minus (ii) 
to the extent included in calculating such Adjusted Net Income, 
all interest income of Lessee and its Subsidiaries accrued during 
such period;
plus
(c)     The remainder of (i) to the extent deducted in 
calculating such Adjusted Net Income, all extraordinary losses of 
Lessee and its Subsidiaries accrued during such period minus (ii) 
to the extent included in calculating such Adjusted Net Income, 
all extraordinary gains of Lessee and its Subsidiaries accrued 
during such period;
plus
(d)     To the extent deducted in calculating such Adjusted 
Net Income, all depreciation and amortization expenses of Lessee 
and its Subsidiaries accrued during such period.
"Operative Documents" shall mean and include the Participation 
Agreement, the Lease Agreement, the Construction Agency Agreement, the 
Purchase Agreement, the Lessee Security Documents, the Lessor Deed of 
Trust, the Lessor Security Agreement, the Assignment of Lease, the 
Agent's Fee Letter and the Agent's Syndication Letter; all other 
notices, requests, certificates, documents, instruments and agreements 
delivered to any Lessor Party pursuant to Paragraph 3.01 or 3.02 of the 
Participation Agreement; and all notices, requests, certificates, 
documents, instruments and agreements delivered to any Lessor Party in 
connection with any of the foregoing on or after the date of the 
Participation Agreement.  (Without limiting the generality of the 
preceding definition, the term "Operative Documents" shall include all 
written waivers, amendments and modifications to any of the notices, 
requests, certificates, documents, instruments and agreements referred 
to therein.)
        "Option Exercise Notification Date" shall have the meaning given 
to that term in Paragraph 6.01 of the Ground Lease.
        "Outside Completion Date" shall have the meaning given to that 
term in Subparagraph 2.01(a) of the Participation Agreement.
        "Outstanding Lease Amount" shall mean, on any date, the remainder 
of (a) the sum of all Advances made by Lessor on or prior to such date, 
minus (b) the sum of all Lease Reduction Payments applied by Lessor on 
or prior to such date.
        "Outstanding Participation Amount" shall mean, with respect to any 
Participant on any date, the remainder of (a) the sum of the portions of 
all Advances funded by such Participant on or prior to such date, minus 
(b) the sum of such Participant's share of all Lease Reduction Payments 
applied to the Outstanding Lease Amount on or prior to such date.
"Outstanding Revolver Credit" shall mean, with respect to Lessee 
and its Subsidiaries at any time, the sum of the aggregate principal 
amount of all loans of Lessee and its Subsidiaries outstanding at such 
time under revolving lines of credit.
        "Outstanding Tranche A Participation Amount" shall mean, with 
respect to any Tranche A Participant on any date, the remainder of (a) 
such Participant's Tranche A Portion of all Advances made by Lessor on 
or prior to such date, minus (b) such Participant's share of all Lease 
Reduction Payments applied to the Tranche A Portion of the Advances on 
or prior to such date.
        "Outstanding Tranche B Participation Amount" shall mean, with 
respect to any Tranche B Participant on any date, the remainder of (a) 
such Participant's Tranche B Portion of all Advances made by Lessor on 
or prior to such date, minus (b) such Participant's share of all Lease 
Reduction Payments applied to the Tranche B Portion of the Advances on 
or prior to such date.
        "Outstanding Tranche C Participation Amount" shall mean, with 
respect to any Tranche C Participant on any date, the remainder of (a) 
such Participant's Tranche C Portion of all Advances made by Lessor on 
or prior to such date, minus (b) such Participant's share of all Lease 
Reduction Payments applied to the Tranche C Portion of the Advances on 
or prior to such date.
        "Participants" shall mean the financial institutions from time to 
time listed in Schedule I to the Participation Agreement (as amended 
from time to time pursuant to Subparagraph 7.05(b) of the Participation 
Agreement or otherwise), acting in their capacities as Participants 
under the Operative Documents.
        "Participation Agreement" shall mean the Participation Agreement, 
dated as of December 5,1997 among Lessee and the Lessor Parties.
        "PBGC" shall mean the Pension Benefit Guaranty Corporation, or any 
successor thereto.
        "Permitted Improvement Costs" shall mean all reasonable costs and 
expenses necessary for the construction of the New Improvements to the 
Land (not including the costs of the Land, the Existing Improvements and 
the other Property to be acquired for the Acquisition Price paid by 
Lessor for the Land and the other initial Property on the Closing Date), 
including:
        (a)     All reasonable costs and expenses of building supplies 
and materials necessary for the construction of the New 
Improvements;
        (b)     All reasonable costs and expenses of architects, 
engineers, contractors and other Persons providing labor and 
services necessary for the construction of the New Improvements;
        (c)     All reasonable costs and expenses of performance and 
other bonds and other insurance necessary for the construction of 
the New Improvements; and
        (d)     All Base Rent accruing during the Commitment Period.
"Permitted Indebtedness" shall have the meaning given to that term 
in Subparagraph 5.02(a) of the Participation Agreement.
"Permitted Liens" shall have the meaning given to that term in 
Subparagraph 5.02(b) of the Participation Agreement.
        "Permitted Property Liens" shall have the meaning given to that 
term in Subparagraph 3.07(a) of the Lease Agreement.
        "Permitted Transaction Expenses" shall mean the following costs 
and expenses to the extent payable by Lessee in connection with and 
directly related to the preparation, execution and delivery of the 
Operative Documents and the transactions contemplated thereby:
        (a)     The reasonable fees and expenses of counsel for Lessee 
incurred in connection with the preparation, negotiation, 
execution and delivery of the Operative Documents;
        (b)     The reasonable fees and expenses of counsel for each 
of Lessor and Agent incurred in connection with the preparation, 
negotiation, execution and delivery of the Operative Documents;
        (c)     The reasonable fees and expenses incurred in 
recording, registering or filing any of the Operative Documents;
        (d)     The title fees, premiums and escrow costs and other 
expenses relating to title insurance and the closing of the 
transactions contemplated by the Operative Documents;
        (e)     The reasonable fees and expenses of required 
environmental audits and appraisals;
        (f)     The reasonable fees and expenses of consultants and 
accountants for Lessee;
        (g)     The reasonable fees and expenses for surveys; and
        (h)     Other related reasonable fees and expenses.
        "Person" shall mean and include an individual, a partnership, a 
corporation (including a business trust), a joint stock company, an 
unincorporated association, a limited liability company, a joint 
venture, a trust or other entity or a Governmental Authority.
        "Personal Property Collateral" shall have the meaning given to 
that term in Subparagraph 2.07(b) of the Lease Agreement.
"Plans and Specifications" shall mean the architectural, 
engineering and construction plans, specifications and drawings for the 
new Improvements to be constructed on the Land delivered to Lessor on or 
prior to the Closing Date pursuant to Subparagraph 3.01 and Schedule 
3.01 of the Participation Agreement, as such plans, specifications and 
drawings may thereafter be revised, amended, supplemented or modified 
pursuant to Paragraph 3.01 of the Construction Agency Agreement.
        "Prime Rate" shall mean the per annum rate publicly announced by 
ABN AMRO from time to time at its Chicago Office.  The Prime Rate is 
determined by ABN AMRO from time to time as a means of pricing credit 
extensions to some customers and is neither directly tied to any 
external rate of interest or index nor necessarily the lowest rate of 
interest charged by ABN AMRO at any given time for any particular class 
of customers or credit extensions.  Any change in the Base Rate 
resulting from a change in the Prime Rate shall become effective on the 
Business Day on which each change in the Prime Rate occurs.
        "Property" shall have the meaning given to that term in Paragraph 
2.01 of the Lease Agreement.
        "Property Collateral" shall have the meaning given to that term in 
Subparagraph 2.11(a) of the Participation Agreement.
        "Proportionate Share" shall mean, with respect to each 
Participant, the percentage set forth under the caption "Proportionate 
Share" opposite such Participant's name on Part A of Schedule I, or, if 
changed, such percentage as may be set forth for such Participant in the 
Register.  The Proportionate Share of each Participant shall equal the 
sum of such Participant's Tranche A Proportionate Share, Tranche B 
Proportionate Share and Tranche C Proportionate Share.
        "Purchase Agreement" shall have the meaning given to that term in 
Subparagraph 2.01(a) of the Participation Agreement.
        "Purchase Documents" shall have the meaning given to that term in 
Subparagraph 4.01(a) of the Purchase Agreement.
        "Purchaser" shall have the meaning given to that term in 
Subparagraph 4.01(a) of the Purchase Agreement.
"Quick Ratio" shall mean, with respect to Lessee and its 
Subsidiaries at any time, the ratio, determined on a consolidated basis 
in accordance with GAAP, of:
(a)     The sum at such time of (i) all cash of Lessee and its 
Subsidiaries; (ii) the market value of all Cash Equivalents of 
Lessee and its Subsidiaries; and (iii) all accounts receivable of 
Lessee and its Subsidiaries, less all reserves therefor; provided, 
however, that in computing the foregoing sum, there shall be 
excluded therefrom any cash, Cash Equivalent or accounts 
receivable subject to a security interest in favor of any Person 
other than any Participant;
to
(b)     The sum at such time of (i) the current liabilities of 
Lessee and its Subsidiaries; and (ii) to the extent not included 
in such current liabilities, the Outstanding Revolver Credit at 
such time.
"Rate Contracts" shall mean swap agreements (as that term is 
defined in Section 101 of the Federal Bankruptcy Reform Act of 1978, as 
amended) and any other agreements or arrangements designed to provide 
protection against fluctuations in interest or currency exchange rates.
        "Real Property Collateral" shall have the meaning given to that 
term in Subparagraph 2.07(a) of the Lease Agreement.
        "Register" shall have the meaning given to that term in 
Subparagraph 7.05(b) of the Participation Agreement.
        "Related Agreements" shall mean all chattel paper, accounts, 
instruments, documents, investment property and general intangibles 
relating to any of the Land, Improvements or Appurtenant Rights or to 
the present or future development, construction, operation or use of any 
of the Land, Improvements or Appurtenant Rights, including (a) all 
plans, specifications, construction agreements, maps, surveys, studies, 
books of account, records, files, insurance policies, guarantees and 
warranties relating to such Land or Improvements or to the present or 
future development, construction, operation or use of such Land, 
Improvements or Appurtenant Rights (including the Construction 
Agreements and the Plans and Specifications); (b) all architectural, 
engineering, construction and management contracts, all supply and 
service contracts for water, sanitary and storm sewer, drainage, 
electricity, steam, gas, telephone and other utilities relating to such 
Land, Improvements or Appurtenant Rights or to the present or future 
development, construction, operation or use of such Land, Improvements 
or Appurtenant Rights; and (c) all computer software and intellectual 
property, guaranties and warranties, letters of credit, and documents 
relating to such Land, Improvements or Appurtenant Rights or to the 
present or future development, construction, operation or use of such 
Land, Improvements or Appurtenant Rights.
        "Related Goods" shall mean:
        (a)     All machinery, furniture, equipment, fixtures and 
other goods and tangible personal property (including construction 
materials and supplies) financed by any Advance, including all 
such property described in Exhibit B to the Lease Agreement and in 
each Exhibit B Supplement delivered by Lessee; and
                (b)     All machinery, equipment, fixtures and other goods and 
tangible personal property (including construction materials and 
supplies) now or hereafter intended for the construction, 
reconstruction, repair, replacement, alteration, addition or 
improvement of or to any of the Improvements or any other Related 
Goods.
        "Related Permits" shall mean all licenses, authorizations, 
certificates, variances, consents, approvals and other permits, now or 
hereafter pertaining to any of the Land, Improvements or Appurtenant 
Rights and all tradenames or business names relating to any of the Land, 
Improvements or Appurtenant Rights or the present or future development, 
construction, operation or use of any of the Land, Improvements or 
Appurtenant Rights.
        "Rent" shall mean collectively Base Rent and Supplemental Rent.
"Rent Increase Notification Date" shall have the meaning given to 
that term in Paragraph 2.03 of the Ground Lease.
        "Rental Period" shall have the meaning given to that term in 
Subparagraph 2.03(a ) of the Lease Agreement.
        "Rental Rate" shall have the meaning given to that term in 
Subparagraph 2.03(a) of each Lease Agreement.
        "Repair and Restoration Account" shall have the meaning given to 
that term in Subparagraph 3.04(c) of the Lease Agreement.
        "Reportable Event" shall have the meaning given to that term in 
ERISA and applicable regulations thereunder.
        "Required Participants" shall mean (a) at any time the aggregate 
Outstanding Lease Amount is greater than $0, Participants whose 
aggregate Outstanding Participation Amounts equal or exceed sixty-six 
and two-thirds percent (66-2/3%) or more of the aggregate Outstanding 
Lease Amount at such time and (b) at any time the aggregate Outstanding 
Lease Amount is $0, Participants whose Proportionate Shares equal or 
exceed sixty-six and two-thirds percent (66-2/3%).
        "Requirement of Law" applicable to any Person shall mean (a) the 
Articles or Certificate of Incorporation and By-laws, Partnership 
Agreement or other organizational or governing documents of such Person, 
(b) any Governmental Rule applicable to such Person, (c) any license, 
permit, approval or other authorization granted by any Governmental 
Authority to or for the benefit of such Person or (d) any judgment, 
decision or determination of any Governmental Authority or arbitrator, 
in each case applicable to or binding upon such Person or any of its 
property or to which such Person or any of its property is subject.
        "Reserve Requirement" shall mean, with respect to any day in any 
Rental Period, the aggregate of the reserve requirement rates (expressed 
as a decimal) in effect on such day for eurocurrency funding (currently 
referred to as "Eurocurrency liabilities" in Regulation D of the Federal 
Reserve Board) maintained by a member bank of the Federal Reserve 
System.  As used herein, the term "reserve requirement" shall include, 
without limitation, any basic, supplemental or emergency reserve 
requirements imposed on any Participant by any Governmental Authority.
        "Residual Value Guaranty Amount" shall have the meaning given to 
that term in Subparagraph 3.02(g) of the Purchase Agreement.
        "Scheduled Expiration Date" shall have the meaning given to that 
term in Subparagraph 2.02(a) of the Lease Agreement.
        "Scheduled Rent Payment Date" shall have the meaning given to that 
term in Subparagraph 2.03(a) of the Lease Agreement.
        "Secondary Marketing Period" shall have the meaning given to that 
term in Subparagraph 3.02(b) of the Purchase Agreement.
 "Senior Indebtedness" shall mean, with respect to Lessee and its 
Subsidiaries at any time, the remainder, determined on a consolidated 
basis in accordance with GAAP, of (a) the total Indebtedness of Lessee 
and its Subsidiaries at such time minus (b) the total Subordinated 
Indebtedness of Lessee and its Subsidiaries at such time.
        "Solvent" shall mean, with respect to any Person on any date, that 
on such date (a) the fair value of the property of such Person is 
greater than the fair value of the liabilities (including, without 
limitation, contingent liabilities) of such Person, (b) the present fair 
saleable value of the assets of such Person is not less than the amount 
that will be required to pay the probable liability of such Person on 
its debts as they become absolute and matured, (c) such Person does not 
intend to, and does not believe that it will, incur debts or liabilities 
beyond such Person's ability to pay as such debts and liabilities mature 
and (d) such Person is not engaged in business or a transaction, and is 
not about to engage in business or a transaction, for which such 
Person's property would constitute an unreasonably small capital.
        "Subleases" shall mean all leases and subleases of any of the 
Land, Improvements and/or Appurtenant Rights by Lessee as lessor or 
sublessor, now or hereafter in effect, whether or not of record, 
including all guaranties and security therefor and the right to bring 
actions and proceedings thereunder or for the enforcement thereof and to 
do anything which Lessee is or may become entitled to do thereunder.
"Subordinated Indebtedness" shall mean Indebtedness which is 
unsecured and subordinated to the Lessee Obligations on terms acceptable 
to Lessor and the Required Participants.
        "Subparticipants" shall have the meaning given to that term in 
Subparagraph 7.05(c) of the Participation Agreement.
        "Subsidiary" of any Person shall mean (a) any corporation of which 
more than 50% of the issued and outstanding Equity Securities having 
ordinary voting power to elect a majority of the Board of Directors of 
such corporation (irrespective of whether at the time capital stock of 
any other class or classes of such corporation shall or might have 
voting power upon the occurrence of any contingency) is at the time 
directly or indirectly owned or controlled by such Person, by such 
Person and one or more of its other Subsidiaries or by one or more of 
such Person's other Subsidiaries, (b) any partnership, joint venture, or 
other Person of which more than 50% of the equity interest having the 
power to vote, direct or control the management of such partnership, 
joint venture, business trust or other Person is at the time owned and 
controlled by such Person, by such Person and one or more of the other 
Subsidiaries or by one or more of such Person's other Subsidiaries or 
(c) any other Person included in the Financial Statements of such Person 
on a consolidated basis.
        "Supplemental Rent" shall have the meaning given to such term in 
Subparagraph 2.03(b) of the Lease Agreement.
        "Surety Instruments" shall mean all letters of credit (including 
standby and commercial), banker's acceptances, bank guaranties, shipside 
bonds, surety bonds and similar instruments.
"Tangible Net Worth" shall mean, with respect to Lessee and its 
Subsidiaries at any time, the remainder at such time, determined on a 
consolidated basis in accordance with GAAP, of (a) the total assets of 
Lessee and its Subsidiaries minus (b) the sum (without limitation and 
without duplication of deductions) of (i) the total liabilities of 
Lessee and its Subsidiaries, (ii) all reserves established by Lessee and 
its Subsidiaries for anticipated losses and expenses (to the extent not 
deducted in calculating total assets in clause (a) above), and (iii) all 
intangible assets of Lessee and its Subsidiaries (to the extent included 
in calculating total assets in clause (a) above), including, without 
limitation, goodwill (including any amounts, however designated on the 
balance sheet, representing the cost of acquisition of businesses and 
investments in excess of underlying tangible assets), trademarks, 
trademark rights, trade name rights, copyrights, patents, patent rights, 
licenses, unamortized debt discount, marketing expenses, organizational 
expenses, non-compete agreements and deferred research and development.
        "Term" shall mean the period beginning on the Commencement Date of 
the Lease Agreement and ending on the Expiration Date of the Lease 
Agreement.
"Termination Date" shall mean (a) the date set forth in a Notice 
of Term Purchase Option as the Scheduled Rent Payment Date on which the 
Lease Agreement will be terminated by Lessee pursuant to Paragraph 4.01 
of the  Lease Agreement and the Property will be purchased by Lessee 
pursuant to Section II of the Purchase Agreement or (b) the date set 
forth in a written notice delivered by Lessor to Lessee pursuant to 
Subparagraph 5.03(a) or 5.04(a) of the Lease Agreement after the 
occurrence of an Event of Default thereunder as the date on which the 
Lease Agreement will be terminated.
        "Term Purchase Option" shall have the meaning given to that term 
in Paragraph 2.01 of the Purchase Agreement.
"Total Capital" shall mean, with respect to Lessee and its 
Subsidiaries at any time, the sum, determined on a consolidated basis in 
accordance with GAAP, of (a) the total Indebtedness of Lessee and its 
Subsidiaries at such time plus (b) the net worth of Lessee and its 
Subsidiaries at such time.
        "Total Commitment" shall mean the amount set forth as such in 
Subparagraph 2.01(b) of the Participation Agreement or, if such amount 
is reduced pursuant to Subparagraph 2.08(a) of the Participation 
Agreement, the amount to which so reduced.
        "Tranche A Participant" shall mean, at any time, any Participant 
having an Outstanding Tranche A Participation Amount at such time.
        "Tranche A Percentage" shall mean (a) with respect to each 
Participant at any time prior to the Commitment Termination Date, the 
percentage set forth under the caption "Tranche A Percentage" opposite 
such Participant's name in Part A(1) of Schedule I and (b) with respect 
to each Participant at any time on or after the Commitment Termination 
Date, the percentage set forth under the caption "Tranche A Percentage" 
opposite such Participant's name in Part A(2) of Schedule I; or in the 
case of either such percentage, if changed, such percentage as may be 
set forth for such Participant in the Register.
        "Tranche A Portion" shall mean, (a) with respect to any Advance 
without reference to any Participant, the portion of such Advance equal 
to the Tranche A Proportionate Share of such Advance and (b) with 
respect to any Advance with reference to any Participant, the portion of 
such Advance equal to such Participant's Tranche A Percentage of such 
Advance.
        "Tranche A Proportionate Share" shall mean (a) at any time prior 
to the Commitment Termination Date, eighty-nine and nine-tenths percent 
(89.9%) and (b) at any time on or after the Commitment Termination Date, 
eighty-three percent (83.0%).
        "Tranche B Participant" shall mean, at any time, any Participant 
having an Outstanding Tranche B Participation Amount at such time.
        "Tranche B Percentage" shall mean (a) with respect to each 
Participant at any time prior to the Commitment Termination Date, the 
percentage set forth under the caption "Tranche B Percentage" opposite 
such Participant's name in Part A(1) of Schedule I and (b) with respect 
to each Participant at any time on or after the Commitment Termination 
Date, the percentage set forth under the caption "Tranche B Percentage" 
opposite such Participant's name in Part A(2) of Schedule I; or in the 
case of either such percentage, if changed, such percentage as may be 
set forth for such Participant in the Register..
        "Tranche B Portion" shall mean, (a) with respect to any Advance 
without reference to any Participant, the portion of such Advance equal 
to the Tranche B Proportionate Share of such Advance and (b) with 
respect to any Advance with reference to any Participant, the portion of 
such Advance equal to such Participant's Tranche B Percentage of such 
Advance.
        "Tranche B Proportionate Share" shall mean (a) at any time prior 
to the Commitment Termination Date, seven percent (7.0%) and (b) at any 
time on or after the Commitment Termination Date, thirteen and nine-
tenths percent (13.9%).
        "Tranche C Participant" shall mean, at any time, any Participant 
having an Outstanding Tranche C Participation Amount at such time.
        "Tranche C Percentage" shall mean (a) with respect to each 
Participant at any time prior to the Commitment Termination Date, the 
percentage set forth under the caption "Tranche C Percentage" opposite 
such Participant's name in Part A(1) of Schedule I and (b) with respect 
to each Participant at any time on or after the Commitment Termination 
Date, the percentage set forth under the caption "Tranche C Percentage" 
opposite such Participant's name in Part A(2) of Schedule I; or in the 
case of either such percentage, if changed, such percentage as may be 
set forth for such Participant in the Register.
        "Tranche C Portion" shall mean, (a) with respect to any Advance 
without reference to any Participant, the portion of such Advance equal 
to the Tranche C Proportionate Share of such Advance and (b) with 
respect to any Advance with reference to any Participant, the portion of 
such Advance equal to such Participant's Tranche C Percentage of such 
Advance.
        "Tranche C Proportionate Share" shall mean, at all times (whether 
before, on or after the Commitment Termination Date), three and one-
tenth percent (3.1%).
        "Trustee" shall have the meaning given to that term in the 
introductory paragraph of the Lease Agreement.
        "Two-Year Commitment" shall have the meaning given to that term in 
Subparagraph 2.01(b) of the Participation Agreement.
        "Unused" shall mean (a) with respect to the 364-Day Commitment at 
any time, the remainder of (i) the 364-Day Commitment at such time minus 
(ii) the aggregate amount of all Advances made prior to such time and 
allocated to the 364-Day Commitment; (b) with respect to the Two-Year 
Commitment at any time, the remainder of (i) the Two-Year Commitment at 
such time minus (ii) the aggregate amount of all Advances made prior to 
such time and allocated to the Two-Year Commitment; and (b) with respect 
to the Total Commitment at any time, the remainder of (i) the Total 
Commitment at such time minus (b) the aggregate amount of all Advances 
made prior to such time.



SCHEDULE 1.02
RULES OF CONSTRUCTION

        (a)     GAAP.  Unless otherwise indicated in any Operative Document, 
all accounting terms used in the Operative Documents shall be construed, 
and all accounting and financial computations thereunder shall be 
computed, in accordance with GAAP.  If GAAP changes after the date of 
the Participation Agreement such that any covenants contained in the 
Operative Documents would then be calculated in a different manner or 
with different components, Lessee and the Lessor Parties agree to 
negotiate in good faith to amend the applicable Operative Documents in 
such respects as are necessary to conform those covenants as criteria 
for evaluating Lessee's financial condition to substantially the same 
criteria as were effective prior to such change in GAAP; provided, 
however, that, until Lessee and the Lessor Parities so amend the 
Operative Documents, all such covenants shall be calculated in 
accordance with GAAP as in effect immediately prior to such change.
        (b)     Headings.  Headings in each of the Operative Documents are 
for convenience of reference only and are not part of the substance 
thereof.
        (c)     Plural Terms.  All terms defined in any Operative Document 
in the singular form shall have comparable meanings when used in the 
plural form and vice versa.
        (d)     Time.  All references in each of the Operative Documents to 
a time of day shall mean San Francisco, California time, unless 
otherwise indicated.  All references in each of the Operative Documents 
to a date (the "action date") which is one month prior to or after 
another date (the "reference date") shall mean the date in the 
immediately preceding or succeeding calendar month (as the case may be) 
which numerically corresponds to the reference date; provided, however, 
that (i) if such corresponding date in the immediately preceding or 
succeeding calendar month (as the case may be) is not a Business Day, 
the action date shall be the next succeeding Business Day after such 
corresponding date (unless, in the case of a Rental Period, such next 
Business Day falls in another calendar month, in which case the action 
date shall be the immediately preceding Business Day) and (ii) if the 
reference date is the last Business Day of a calendar month (or a day 
for which there is no numerically corresponding day in the immediately 
preceding calendar month) the action date shall be the last Business Day 
of the immediately preceding or succeeding calendar month (as the case 
may be).  All references in each of the Operative Documents to an 
earlier date which is two or more months prior to a reference date or to 
a later date which is two or more months after a reference date shall be 
determined in a comparable manner.
        (e)     Construction.  The Operative Documents are the result of 
negotiations among, and have been reviewed by Lessee and each Lessor 
Party and their respective counsel.  Accordingly, the Operative 
Documents shall be deemed to be the product of all parties hereto, and 
no ambiguity shall be construed in favor of or against Lessee or any 
Lessor Party.
        (f)     Entire Agreement.  The Operative Documents, taken together, 
constitute and contain the entire agreement of Lessee and the Lessor 
Parties and supersede any and all prior agreements, negotiations, 
correspondence, understandings and communications among the parties, 
whether written or oral, respecting the subject matter thereof 
(including the commitment letter dated as of November 26, 1997] between 
Lessee and Agent.)
        (g)     Calculation of Base Rent, Interest and Fees.  All 
calculations of Base Rent, interest and fees under the Operative 
Documents for any period (i) shall include the first day of such period 
and exclude the last day of such period and (ii) shall be calculated on 
the basis of a year of 360 days for actual days elapsed, except that 
during any period that Base Rent or any interest is to be calculated 
based upon the Base Rate, such Base Rent or interest shall be calculated 
on the basis of a year of 365 or 366 days, as appropriate, for actual 
days elapsed.
        (h)     References.
        (i)     References in any Operative Document to "Recitals," 
"Sections," "Paragraphs," "Subparagraphs," "Articles," "Exhibits" 
and "Schedules" are to recitals, sections, paragraphs, 
subparagraphs, articles, exhibits and schedules therein and 
thereto unless otherwise indicated.
        (ii)    References in any Operative Document to any document, 
instrument or agreement (A) shall include all exhibits, schedules 
and other attachments thereto, (B) shall include all documents, 
instruments or agreements issued or executed in replacement 
thereof, and (C) shall mean such document, instrument or 
agreement, or replacement or predecessor thereto, as amended, 
modified and supplemented from time to time and in effect at any 
given time.
        (iii)   References in any Operative Document to any 
Governmental Rule (A) shall include any successor Governmental 
Rule, (B) shall include all rules and regulations promulgated 
under such Governmental Rule (or any successor Governmental Rule), 
and (C) shall mean such Governmental Rule (or successor 
Governmental Rule) and such rules and regulations, as amended, 
modified, codified or reenacted from time to time and in effect at 
any given time.
        (iv)    References in any Operative Document to any Person in 
a particular capacity (A) shall include any permitted successors 
to and assigns of such Person in that capacity and (B) shall 
exclude such Person individually or in any other capacity.
        (i)     Other Interpretive Provisions.  The words "hereof," "herein" 
and "hereunder" and words of similar import when used in any Operative 
Document shall refer to such Operative Document as a whole and not to 
any particular provision of such Operative Document.  The words 
"include" and "including" and words of similar import when used in any 
Operative Document shall not be construed to be limiting or exclusive.  
In the event of any inconsistency between the terms of the Participation 
Agreement and the terms of any other Operative Document, the terms of 
the Participation Agreement shall govern.

SCHEDULE 3.01
CONDITIONS PRECEDENT TO ACQUISITION ADVANCE

A.      Principal Operative Documents.
        (1)     The Participation Agreement, duly executed by Lessee, 
Lessor, each Participant and Agent;
        (2)     The Lease Agreement, duly executed by Lessee and 
Lessor and appropriately notarized for recording;
        (3)     The Purchase Agreement, duly executed by Lessee and 
Lessor;
        (4)     The Construction Agency Agreement, duly executed by 
Lessee and Lessor;
        (5)     The Assignment of Construction Agreements, duly 
executed by Lessee;
        (6)     The Cash Collateral Agreement, duly executed by 
Lessee;
(7)     The Assignment of Lease, duly executed by Lessor and 
appropriately notarized for recording;
        (8)     The Lessor Deed of Trust, duly executed by Lessor and 
appropriately notarized for recording; and
        (9)     The Lessor Security Agreement, duly executed by 
Lessor.

B.      Lessee Corporate Documents.
        (1)     The Certificate or Articles of Incorporation of 
Lessee, certified as of a recent date prior to the Closing Date by 
the Secretary of State (or comparable official) of its 
jurisdiction of incorporation;
        (2)     A Certificate of Good Standing (or comparable 
certificate) for Lessee, certified as of a recent date prior to 
the Closing Date by the Secretary of State (or comparable 
official) of its jurisdiction of incorporation;
        (3)     A certificate of the Secretary or an Assistant 
Secretary of Lessee, dated the Closing Date, certifying (a) that 
attached thereto is a true and correct copy of the Bylaws of 
Lessee as in effect on the Closing Date; (b) that attached thereto 
are true and correct copies of resolutions duly adopted by the 
Board of Directors of Lessee and continuing in effect, which 
authorize the execution, delivery and performance by Lessee of the 
Operative Documents executed or to be executed by Lessee and the 
consummation of the transactions contemplated thereby; and 
(c) that there are no proceedings for the dissolution or 
liquidation of Lessee;
        (4)     A certificate of the Secretary or an Assistant 
Secretary of Lessee, dated the Closing Date, certifying the 
incumbency, signatures and authority of the officers of Lessee 
authorized to execute, deliver and perform the Operative Documents 
and all other documents, instruments or agreements related thereto 
executed or to be executed by Lessee; and
        (5)     A Certificates of Good Standing (or comparable 
certificates) for Lessee, certified as of a recent date prior to 
the Closing Date by the Secretary of State of California and 
Oregon.

C.      Financial Statements, Financial Condition, Etc.
        (1)     A copy of the 10-K report filed by Lessee with the 
Securities and Exchange Commission for the fiscal year ended July 
31, 1997;
                (2)     The consolidated plan and forecast of Lessee and its 
Subsidiaries for the fiscal year to end July 31, 1998, including 
quarterly cash flow projections; and
        (3)     Such other financial, business and other information 
regarding Lessee, or any of its Subsidiaries as Agent or any 
Participant may reasonably request, including information as to 
possible contingent liabilities, tax matters, environmental 
matters and obligations for employee benefits and compensation.

D.      Collateral Documents.
        (1)     The Ground Lease, duly executed by Lessor and Lessee;
(2)     A Memorandum of Ground Lease, appropriately completed 
and duly executed by Lessor and Lessee and appropriately notarized 
for recording;
        (3)     A Memorandum of Purchase Agreement, appropriately 
completed and duly executed by Lessee and Lessor and appropriately 
notarized for recording;
(4)     Evidence that the Lease Agreement, the Assignment of 
Lease, the Lessor Deed of Trust, the Memorandum of Ground Lease 
and the Memorandum of Purchase Agreement delivered pursuant to 
items A(2), A(7), A(8), D(2) and D(3) have been properly recorded 
in the Official Records of the County of Washington County, 
Oregon;
        (5)     An extended coverage owner's policy or binder of title 
insurance (or a commitment therefor) for the Property insuring 
Lessor's leasehold estate to the Property (subject to such 
exceptions as Agent may approve), in such amounts and with such 
endorsements as Agent may reasonably require, issued by a title 
insurer acceptable to Agent, together with such policies of co-
insurance or re-insurance (or commitments therefor) as Agent may 
require;
        (6)     An extended coverage lender's policy of title 
insurance (or a commitment therefor) for the Property insuring the 
validity and priority of the Lease Agreement (subject to such 
exceptions as Agent may approve), in such amounts and with such 
endorsements as Agent may reasonably require, issued by a title 
insurer acceptable to Agent, together with such policies of co-
insurance or re-insurance (or commitments therefor) as Agent may 
require;
        (7)     An extended coverage lender's policy of title 
insurance (or a commitment therefor) for the Property insuring the 
validity and priority of the Lessor Deed of Trust (subject to such 
exceptions as Agent may approve), in such amounts and with such 
endorsements as Agent may reasonably require, issued by a title 
insurer acceptable to Agent, together with such policies of co-
insurance or re-insurance (or commitments therefor) as Agent may 
require;
        (8)     Copies of all leases for the Property and all other 
documents, instruments and agreements recorded against or 
otherwise affecting the Property, including all amendments, 
extensions and other modifications thereof;
        (9)     Subordination, non-disturbance and attornment 
agreements from the lessee under each of the leases for the 
Property;
        (10)    Such consents and estoppels, with appropriate 
mortgagee protection language, as are requested by Agent, each 
duly executed by the appropriate Person;
        (11)    Such Uniform Commercial Code financing statements and 
fixture filings (appropriately completed and executed) for filing 
in such jurisdictions as Agent may request to perfect the Liens 
granted to Lessor and Agent in the Lessee Security Documents, the 
Lessor Security Agreement and the other Operative Documents;
        (12)    Such Uniform Commercial Code termination statements 
(appropriately completed and executed) for filing in such 
jurisdictions as Agent may request to terminate any financing 
statement evidencing Liens of other Persons in the Collateral 
which are prior to the Liens granted to Lessor and Agent in the 
Lessee Security Documents, the Lessor Security Agreement and the 
other Operative Documents, except for any such prior Liens which 
are expressly permitted by the Operative Documents to be prior;
        (13)    Uniform Commercial Code search certificates from the 
jurisdictions in which Uniform Commercial Code financing 
statements are to be filed pursuant to item B(10) above reflecting 
no other financing statements or filings which evidence Liens of 
other Persons in the Collateral which are prior to the Liens 
granted to Lessor and Agent in the Lessee Security Documents, the 
Lessor Security Agreement and the other Operative Documents, 
except for any such prior Liens (a) which are expressly permitted 
by the Operative Documents to be prior or (b) for which Agent has 
received a termination statement pursuant to item B(12) above;
        (14)    Such other documents, instruments and agreements as 
Agents may reasonably request to establish and perfect the Liens 
granted to any Lessor Party in the Lessee Security Documents, the 
Lessor Deed of Trust, the Lessor Security Agreement and the other 
Operative Documents;
        (15)    Such other evidence as Agent may request to establish 
that the Liens granted to Agent or any Participant in the Lessee 
Security Documents, the Lessor Deed of Trust, the Lessor Security 
Agreement and the other Operative Documents are perfected and 
prior to the Liens of other Persons in the Collateral, except for 
any such Liens which are expressly permitted by the Operative 
Documents to be prior; and
        (16)    Oregon Statutory Notice Letter.

E.      Opinions. 
(1)     A favorable written opinion of Pillsbury, Madison & 
Sutro, counsel to Lessee, dated the Closing Date, addressed to 
Lessor and Agent, for the benefit of Lessor, Agent and the 
Participants, and covering such legal matters as Agent may 
reasonably request and otherwise in form and substance 
satisfactory to Agent.

F.      Other Items.
        (1)     A duly completed and timely delivered Acquisition 
Request, duly executed by Lessee;
        (2)     A Closing Date Appraisal for the Property, dated as of 
a recent date prior to the Closing Date;
        (3)     Bills of sale for all Related Goods to be acquired 
with the Acquisition Advances to be made on the Closing Date, each 
reflecting Lessor as the purchaser of such Related Goods;
        (4)     An as-built survey of the Property (a) prepared and 
dated not more than two (2) months prior to the Closing Date by a 
registered surveyor reasonably satisfactory to Agent, 
(b) certified as correct and as (i) having been made in accordance 
with the most recent standards for "Minimum Standard Detail 
Requirements for ALTA/ACSM Land Title Surveys," jointly 
established and adopted by ALTA and ACSM, and (ii) meeting the 
accuracy requirements of a Class A survey (as defined therein) and 
including items 1-5, 7-13 and 15 of Table 3 thereof, and 
(c) disclosing, among other things, (i) the location of the 
perimeter of the Property by courses and distances, (ii) all 
easements and rights-of-way, whether above or underground, (iii) 
the lines of the street abutting the Property and the width 
thereof, (iv) encroachments, if any, and the extent thereof in 
feet and inches upon the Property, and (v) all boundary and lot 
lines, and all other matters that would be disclosed by inspection 
of the Property and the public records;
                (5)     If requested by Lessor, Agent or any Participant, a 
list of and copies of all Construction Agreements;
        (6)     Environmental reports and assessments satisfactory to 
Agent issued by environmental consultants acceptable to Agent with 
respect to the Property;
        (7)     Certificates of insurance evidencing the insurance 
Lessee is required to maintain pursuant to Paragraph 3.03 of the 
Lease Agreements;
        (8)     A certificate of the Chief Financial Officer of 
Lessee, addressed to Lessor and Agent and dated the Closing Date, 
certifying that:
                (a)     The representations and warranties set forth in 
Paragraph 4.01 of the Participation Agreement and in the 
other Operative Documents are true and correct in all 
material respects as of such date (except for such 
representations and  warranties made as of a specified date, 
which shall be true as of such date);
                (b)     No Default has occurred and is continuing as of 
such date;
        (c)     All of the Operative Documents are in full force 
and effect on such date.
        (9)     All fees and expenses payable to the Lessor Parties on 
or prior to the Closing Date (including all Agent's Fees);
        (10)    All fees and expenses of Lessor's and Agent's counsels 
through the Closing Date; and
        (11)    Such other evidence as Agent may reasonably request to 
establish the accuracy and completeness of the representations and 
warranties and the compliance with the terms and conditions 
contained in the Operative Documents.