<PAGE>
 
                                                                    EXHIBIT 10.1


                             AMENDED AND RESTATED
                                LEASE AGREEMENT

                                by and between

                           ESI (CA) QRS 12-6, INC.,
                           a California corporation

                                  as LANDLORD

                                      and

                              ETEC SYSTEMS, INC.,
                             a Nevada corporation,

                                   as TENANT


                        Premises:  Hayward, California



                        Dated as of:  January 31, 1997
<PAGE>
 
                               TABLE OF CONTENTS
                               -----------------
<TABLE> 
<CAPTION> 
                                                                            Page
                                                                            ----
<C>  <S>                                                                    <C> 
1.   Demise of Premises.....................................................  2

2.   Certain Definitions....................................................  2

3.   Title and Condition.................................................... 11

4.   Use of Leased Premises; Quiet Enjoyment................................ 13

5.   Term................................................................... 13

6.   Basic Rent............................................................. 14

7.   Additional Rent........................................................ 15

8.   Net Lease; Non-Terminability........................................... 16

9.   Payment of Impositions................................................. 17

10.  Compliance with Laws and Easement Agreements;
     Environmental Matters.................................................. 19

11.  Liens; Recording....................................................... 21

12.  Maintenance and Repair................................................. 22

13.  Alterations and Improvements........................................... 23

14.  Permitted Contests..................................................... 24

15.  Indemnification........................................................ 25

16.  Insurance.............................................................. 26

17.  Casualty and Condemnation.............................................. 31

18.  Termination Events..................................................... 33

19.  Restoration; Reduction of Rent......................................... 34

20.  Procedures Upon Purchase............................................... 36

21.  Assignment and Subletting; Prohibition against
     Leasehold Financing.................................................... 37

22.  Events of Default...................................................... 42

23.  Remedies and Damages Upon Default...................................... 45

24.  Notices................................................................ 49
 
</TABLE>

                                      -i-
<PAGE>
 
<TABLE>

<C>  <S>                                                                    <C> 
25.  Estoppel Certificate................................................... 49

26.  Surrender.............................................................. 50

27.  No Merger of Title..................................................... 50

28.  Books and Records...................................................... 50

29.  Determination of Value................................................. 52

30.  Non-Recourse as to Landlord............................................ 55

31.  Financing.............................................................. 56

32.  Subordination.......................................................... 56

33.  Financial Covenants; Covenant Breach Offer............................. 57

34.  Tax Treatment; Reporting............................................... 58

35.  Right of First Refusal................................................. 59

36.  Financing Major Alterations............................................ 61

37.  Security Deposit....................................................... 62

38.  Right to Vacate; Rejectable Offer Upon Vacation........................ 63

39.  Miscellaneous.......................................................... 64
</TABLE>

Exhibit A  - Premises
Exhibit B  - Machinery and Equipment
Exhibit C  - Permitted Encumbrances
Exhibit D  - Basic Rent Payments
Exhibit E  - Financial Covenants

Schedule 1 - Termination Values
Schedule 2 - Approved Alterations to Building Two
             and Building Three

                                     -ii-
<PAGE>
 
     AMENDED AND RESTATED LEASE AGREEMENT, made as of this 31st day of January,
1997, between ESI (CA) QRS 12-6, INC., a California corporation ("Landlord"),
with an address c/o W. P. Carey & Co., Inc., 50 Rockefeller Plaza, Second Floor,
New York, New York 10020, and ETEC SYSTEMS, INC., a Nevada corporation
("Tenant"), with an address at 26460 Corporate Avenue, Hayward, California
94545.

                                   BACKGROUND
                                   ----------

     A.   Landlord and Tenant entered into a Lease Agreement dated as of
February 1, 1995, as amended by the terms of Exhibit 1 to that certain letter
agreement dated August 7, 1996 (said Lease Agreement, as amended, the "Original
Lease").

     B.   As of the date hereof, Landlord has purchased from Tenant an office
building containing approximately 60,000 square feet ("Building One") located on
the Land (as defined in the Original Lease).

     C.   Landlord desires to demise to Tenant and Tenant desires to lease from
Landlord the Building One and in connection therewith to amend and restate the
Original Lease in its entirety.

     In consideration of the rents and provisions herein stipulated to be paid
and performed, Landlord and Tenant hereby covenant and agree as follows:

     1.   Demise of Premises.  Landlord hereby demises and lets to Tenant, and
          ------------------                                                  
Tenant hereby takes and leases from Landlord, for the term and upon the
provisions hereinafter specified, the following described property
(collectively, the "Leased Premises"):  (a) the premises described in Exhibit
"A" hereto, together with the Appurtenances (collectively, the "Land"); (b) the
three office/manufacturing facilities constructed on the Land, known as
"Building One," "Building Two" and "Building Three" and containing approximately
60,000 square feet, 47,000 square feet and 106,000 square feet, respectively,
and all other buildings, structures and other improvements now or hereafter
constructed on the Land (collectively, the "Improvements"); and (c) the
fixtures, machinery, equipment and other property described in Exhibit "B"
hereto (collectively, the "Equipment").

     2.   Certain Definitions.
          ------------------- 

     (a) "ACQUISITION COST" shall mean $14,321,137.

     (b) "ADDITIONAL RENT" shall mean Additional Rent as defined in Paragraph 7.

     (c) "ADJOINING PROPERTY" shall mean all sidewalks, driveways, curbs, gores
and vault spaces adjoining any of the Leased Premises.

                                      -2-
<PAGE>
 
     (d) "ALTERATIONS" shall mean all changes, additions, improvements or
repairs to, all alterations, reconstructions, renewals, replacements or removals
of and all substitutions or replacements for any of the Improvements or
Equipment, both interior and exterior, structural and non-structural, and
ordinary and extraordinary.

     (e) "APPURTENANCES" shall mean all tenements, hereditaments, easements,
rights-of-way, rights, privileges in and to the Land, including (a) easements
over other lands granted by any Easement Agreement and (b) any streets, ways,
alleys, vaults, gores or strips of land adjoining the Land.

     (f) "ASSIGNMENT" shall mean any assignment of rents and leases from
Landlord to a Lender which (a) encumbers any of the Leased Premises and (b)
secures Landlord's obligation to repay a Loan, as the same may be amended,
supplemented or modified from time to time.

     (g) "BASIC RENT" shall mean Basic Rent as defined in Paragraph 6.

     (h) "BASIC RENT PAYMENT DATES" shall mean the Basic Rent Payment Dates as
defined in Paragraph 6.

     (i) "CASUALTY" shall mean any injury to or death of any person or any loss
of or damage to any property (including the Leased Premises) included within or
related to the Leased Premises or arising from the Adjoining Property.

     (j) "COMMENCEMENT DATE" shall mean Commencement Date as defined in
Paragraph 5.

     (k) "CONDEMNATION" shall mean a Taking and/or a Requisition.

     (l) "CONDEMNATION NOTICE" shall mean notice or knowledge of the institution
of or intention to institute any proceeding for Condemnation.

     (m) "COSTS" of a Person or associated with a specified transaction shall
mean all reasonable costs and expenses incurred by such Person or associated
with such transaction, including without limitation, attorneys' fees and
expenses, court costs, brokerage fees, escrow fees, title insurance premiums,
mortgage commitment fees, mortgage points, recording fees and transfer taxes, as
the circumstances require.

     (n) "COVENANT BREACH" shall mean Covenant Breach as defined in Paragraph
33.

     (o) "COVENANTS" shall mean Covenants as defined in Paragraph 33.

                                      -3-
<PAGE>
 
     (p) "CPI" shall mean CPI as defined in Exhibit "D".

     (q) "DEFAULT TERMINATION AMOUNT" shall mean the Default Termination Amount
as defined in Paragraph 23(a)(iii).

     (r) "DEFAULT RATE" shall mean the Default Rate as defined in Paragraph
7(a)(iv).

     (s) "DEPOSIT AMOUNT" shall mean Deposit Amount as defined in Paragraph 21.

     (t) "EASEMENT AGREEMENT" shall mean any conditions, covenants,
restrictions, easements, declarations, licenses and  other agreements listed as
Permitted Encumbrances or as may hereafter affect the Leased Premises.

     (u) "ENVIRONMENTAL LAW" shall mean (i) whenever enacted or promulgated, any
applicable federal, state, foreign and local law, statute, ordinance, rule,
regulation, license, permit, authorization, approval, consent, court order,
judgment, decree, injunction, code, requirement or agreement with any
governmental entity, (x) relating to pollution (or the cleanup thereof), or the
protection of air, water vapor, surface water, groundwater, drinking water
supply, land (including land surface or subsurface), plant, aquatic and animal
life from injury caused by a Hazardous Substance or (y) concerning exposure to,
or the use, containment, storage, recycling, reclamation, reuse, treatment,
generation, discharge, transportation, processing, handling, labeling,
production, disposal or remediation of Hazardous Substances, Hazardous
Conditions or Hazardous Activities, in each case as amended and as now or
hereafter in effect, and (ii) any common law or equitable doctrine (including,
without limitation, injunctive relief and tort doctrines such as negligence,
nuisance, trespass and strict liability) that may impose liability or
obligations or injuries or damages due to or threatened as a result of the
presence of, exposure to, or ingestion of, any Hazardous Substance. The term
Environmental Law includes, without limitation, the federal Comprehensive
Environmental Response Compensation and Liability Act of 1980, the Superfund
Amendments and Reauthorization Act, the federal Water Pollution Control Act, the
federal Clean Air Act, the federal Clean Water Act, the federal Resources
Conservation and Recovery Act of 1976 (including the Hazardous and Solid Waste
Amendments to RCRA), the federal Solid Waste Disposal Act, the federal Toxic
Substance Control Act, the federal Insecticide, Fungicide and Rodenticide Act,
the federal Occupational Safety and Health Act of 1970, the federal National
Environmental Policy Act and the federal Hazardous Materials Transportation Act,
each as amended and as now or hereafter in effect and any similar state or local
Law.

     (v) "ENVIRONMENTAL VIOLATION" shall mean (a) any direct or indirect
discharge, disposal, spillage, emission, escape, pumping, pouring, injection,
leaching, release, seepage,

                                      -4-
<PAGE>
 
filtration or transporting of any Hazardous Substance at, upon, under, onto or
within the Leased Premises, or from the Leased Premises to the environment, in
violation of any Environmental Law or which could be reasonably expected to
result in any liability to Landlord, Tenant or Lender, any Federal, state or
local government or any other Person for the costs of any removal or remedial
action or natural resources damage or for bodily injury or property damage, (b)
any deposit, storage, dumping, placement or use of any Hazardous Substance at,
upon, under or within the Leased Premises or which extends to any Adjoining
Property in violation of any Environmental Law or which could reasonably be
expected to result in any liability to any  Federal, state or local government
or to any other Person for the costs of any removal or remedial action or
natural resources damage or for bodily injury or property damage, (c) the
abandonment or discarding of any barrels, containers or other receptacles
containing any Hazardous Substances in violation of any Environmental Laws, (d)
any activity, occurrence or condition which could be reasonably expected to
result in any liability, cost or expense to Landlord or Lender or any other
owner or occupier of the Leased Premises, or which could be reasonably expected
to result in a creation of a lien on the Leased Premises under any Environmental
Law, or (e) any violation of or noncompliance with any Environmental Law.

     (w) "EQUIPMENT" shall mean the Equipment as defined in Paragraph 1.

     (x) "EVENT OF DEFAULT" shall mean an Event of Default as defined in
Paragraph 22(a).

     (y) "FAIR MARKET RENTAL VALUE" shall mean the fair market rental value of
the Leased Premises for the relevant Renewal Term determined in accordance with
the procedure specified in Paragraph 29.

     (z) "FAIR MARKET VALUE" shall mean the fair market value of the Leased
Premises as of the Relevant Date.  For all purposes of this Lease, Fair Market
Value shall be determined in accordance with the procedure specified in
Paragraph 29.

     (aa) "FAIR MARKET VALUE DATE" shall mean the date when the Fair Market
Value is determined in accordance with Paragraph 29.

     (ab) "FEDERAL FUNDS" shall mean federal or other immediately available
funds which at the time of payment are legal tender for the payment of public
and private debts in the United States of America.

     (ac) "HAZARDOUS ACTIVITY" means any activity, process, procedure or
undertaking which directly or indirectly (i) procures, generates or creates any
Hazardous Substance; (ii) causes or results in (or threatens to cause or result
in) the release, seepage, spill, leak, flow, discharge or emission of

                                      -5-
<PAGE>
 
any Hazardous Substance into the environment (including the air, ground water,
watercourses or water systems), (iii) involves the containment or storage of any
Hazardous Substance; or (iv) would cause the Leased Premises or any portion
thereof to become a hazardous waste treatment, recycling, reclamation,
processing, storage or disposal facility within the meaning of any Environmental
Law.

     (ad) "HAZARDOUS CONDITION" means any condition which would support any
claim or liability under any Environmental Law, including the presence of
underground storage tanks.

     (ae) "HAZARDOUS SUBSTANCE" means (i) any substance, material, product,
(including, without limitation, petroleum products), derivative (including,
without limitation, petroleum products), compound, mixture, mineral (including,
without limitation, asbestos), chemical, gas, waste, contaminant or pollutant,
in each case whether naturally occurring, man-made or the by-product of any
process, that is toxic, harmful or hazardous or acutely hazardous to public
health or safety or the environment or (ii) any substance supporting a claim
under any Environmental Law, whether or not such substance is defined as
hazardous or toxic as such under any Environmental Law.  By way of example, and
not of limitation, Hazardous Substances include, but are not limited to, any
toxic substance, hazardous substance, hazardous waste, hazardous constituent,
pollutant, contaminant, industrial waste, medical waste, petroleum product,
petroleum derivative, petroleum waste, radon, radioactive material, asbestos,
asbestos containing materials, urea formaldehyde, foam insulation, lead or
polychlorinated biphenyl.

     (af) "HOLDER" means Landlord or the Initial Lender as a holder of Warrants
or Stock.

     (ag) "IMPOSITIONS" shall mean the Impositions as defined in Paragraph 9(a).

     (ah) "IMPROVEMENTS" shall mean the Improvements as defined in Paragraph 1.

     (ai) "INDEMNITEE" shall mean an Indemnitee as defined in Paragraph 15.

     (aj) "INITIAL LENDER" shall mean Creditanstalt-Bankverein, its successors
and assigns.

     (ak) "INITIAL LOAN" shall mean the $8,221,345 loan from Lender evidenced by
a Note of even date herewith.

     (al) "INITIAL TERM" shall mean Initial Term as defined in Paragraph 5.

                                      -6-
<PAGE>
 
     (am) "INSURANCE REQUIREMENTS" shall mean the requirements of all insurance
policies required to be maintained in accordance with this Lease.

     (an) "INTENDED ASSIGNMENT OFFER" shall mean Intended Assignment Offer as
defined in Paragraph 21(a)(iv).

     (ao) "INTENDED TRANSACTION" shall mean Intended Transaction as defined in
Paragraph 33(b).

     (ap) "LAND" shall mean the Land as defined in Paragraph 1.

     (aq) "LAW" shall mean any constitution, statute, rule of law, code,
ordinance, order, judgment, decree, injunction, rule, regulation, policy,
requirement or administrative or judicial determination, even if unforeseen or
extraordinary, of every duly constituted governmental authority, court or
agency, now or hereafter enacted or in effect.

     (ar) "LEASE" shall mean this Amended and Restated Lease Agreement.

     (as) "LEASE YEAR" shall mean twelve (12) consecutive month period during
the Term except that the first Lease Year commenced on February 16, 1995 and
terminated on February 29, 1996 and the last Lease Year shall end on the last
day of the Term.

     (at) "LEASED PREMISES" shall mean the Leased Premises as defined in
Paragraph 1.

     (au) "LEGAL REQUIREMENTS" shall mean all present and future Laws (including
but not limited to Environmental Laws and Laws relating to accessibility to,
usability by, and discrimination against, disabled individuals) and all
covenants, restrictions and conditions now or hereafter of record which may be
applicable to Tenant or to any of the Leased Premises, or to the use, manner of
use, occupancy, possession, operation, maintenance, alteration, repair or
restoration of any of the Leased Premises, even if compliance therewith
necessitates structural changes or improvements or results in interference with
the use or enjoyment of any of the Leased Premises.

     (av) "LENDER" shall mean (a) Initial Lender, and (b) any person or entity
(and their respective successors and assigns) which may, after the date hereof,
make a Loan to Landlord or is the holder of any Note.

     (aw) "LOAN" shall mean any loan made by one or more Lenders to Landlord,
which loan is secured by a Mortgage and an Assignment and evidenced by a Note.

     (ax) "MAJOR ALTERATIONS" shall mean Major Alterations as defined in
Paragraph 36(a).

                                      -7-
<PAGE>
 
     (ay) "MONETARY OBLIGATIONS" shall mean Rent and all other sums payable by
Tenant under this Lease to Landlord, to any third party on behalf of Landlord or
to any Indemnitee.

     (az) "MORTGAGE" shall mean any mortgage or deed of trust from Landlord to a
Lender which (a) encumbers any of the Leased Premises and (b) secures Landlord's
obligation to repay a Loan, as the same may be amended, supplemented or
modified.

     (ba) "NET AWARD" shall mean (a) the entire award payable to Landlord or
Lender by reason of a Condemnation whether pursuant to a judgment or by
agreement or otherwise, or (b) the entire proceeds of any insurance required
under clauses (i), (ii) (to the extent payable to Landlord or Lender), (iv), (v)
or (vi) of Paragraph 16(a), as the case may be, less any expenses incurred by
Landlord and Lender in collecting such award or proceeds.

     (bb) "NON-PREAPPROVED ASSIGNEE" shall mean Non-Preapproved Assignee as
defined in Paragraph 21(a)(ii).

     (bc) "NON-PREAPPROVED ASSIGNMENT" shall mean Non-Preapproved Assignment as
defined in Paragraph 21(a)(ii).

     (bd) "NOTE" shall mean any promissory note evidencing Landlord's obligation
to repay a Loan, as the same may be amended, supplemented or modified.

     (be) "OFFER AMOUNT" shall mean (i) prior to the expiration of the Initial
Term, the greater of (a) the Fair Market Value of the Leased Premises as of the
Relevant Date and (b) the sum of the Acquisition Cost and the applicable
Prepayment Premium which Landlord will be required to pay, and (ii) after the
expiration of the Initial Term, the Fair Market Value of the Leased Premises as
of the Relevant Date.

     (bf) "PARTIAL CASUALTY" shall mean any Casualty which does not constitute a
Termination Event.

     (bg) "PARTIAL CONDEMNATION" shall mean any Condemnation which does not
constitute a Termination Event.

     (bh) "PERMITTED ENCUMBRANCES" shall mean those covenants, restrictions,
reservations, liens, conditions and easements and other encumbrances, other than
any Mortgage or Assignment, listed on Exhibit "C" hereto (but such listing shall
not be deemed to revive any such encumbrances that have expired or terminated or
are otherwise invalid or unenforceable).

     (bi) "PERSON" shall mean an individual, partnership, association,
corporation or other entity.

     (bj) "PREAPPROVED ASSIGNEE" shall mean Preapproved Assignee as defined in
Paragraph 21(a)(i).

                                      -8-
<PAGE>
 
     (bk) "PREAPPROVED ASSIGNMENT" shall mean Preapproved Assignment as defined
in Paragraph 21(a)(i).

     (bl) "PREAPPROVED SUBLET" shall mean Preapproved Sublet as defined in
Paragraph 21(b).

     (bm) "PREPAYMENT PREMIUM" shall mean any payment (other than a payment of
principal and/or interest which Landlord is required to make under a Note or a
Mortgage) by reason of any prepayment by Landlord of any principal due under a
Note or Mortgage, and which may be (in lieu of such prepayment premium or
prepayment penalty) a "make whole" clause requiring a prepayment premium in an
amount sufficient to compensate the Lender for the loss of the benefit of the
Loan due to a prepayment or a "breakage fee" or "funding losses" as a result of
any prepayment; provided, however, that the Prepayment Premium shall not exceed
the amount thereof that would be payable if the outstanding principal amount of
the Loan being prepaid were $8,221,345.

     (bn) "PRIME RATE" shall mean the annual interest rate as published, from
time to time, in the Wall Street Journal as the "Prime Rate" in its column
entitled "Money Rate".  The Prime Rate may not be the lowest rate of interest
charged by any "large U.S. money center commercial banks" and Landlord makes no
representations or warranties to that effect.  In the event the Wall Street
Journal ceases publication or ceases to publish the "Prime Rate" as described
above, the Prime Rate shall be the average per annum discount rate (the
"Discount Rate") on ninety-one (91) day bills ("Treasury Bills") issued from
time to time by the United States Treasury at its most recent auction, plus
three hundred (300) basis points.  If no such 91-day Treasury Bills are then
being issued, the Discount Rate shall be the discount rate on Treasury Bills
then being issued for the period of time closest to ninety-one (91) days.

     (bo) "RELEVANT AMOUNT" shall mean the Termination Amount, Offer Amount or
the Default Termination Amount, as the case may be.

     (bp) "RELEVANT DATE" shall mean (a) the date immediately prior to the date
on which the applicable Condemnation Notice is received, in the event of a
Termination Notice under Paragraph 18 which is occasioned by a Taking, (b) the
date immediately prior to the date on which the applicable Casualty occurs, in
the event of a Termination Notice under Paragraph 18 which is occasioned by a
Casualty, (c) the date when Fair Market Value is redetermined, in the event of a
redetermination of Fair Market Value pursuant to Paragraph 20(c), (d) the date
immediately prior to the date on which Landlord makes an Intended Assignment
Offer, (e) the date immediately prior to the Event of Default giving rise to the
need to determine Fair Market Value in the event Landlord provides Tenant with
notice of its intention to require Tenant to make a termination offer

                                      -9-
<PAGE>
 
under Paragraph 23(a)(iii), (f) the Fair Market Value Date, in the event
Landlord receives an offer to purchase the Leased Premises pursuant to the third
paragraph of Paragraph 35(a), (g) with respect to a Covenant Breach or an
Intended Transaction, the date that is the earlier of (i) the date immediately
prior to the date on which Tenant notifies Landlord that an Intended Transaction
or Covenant Breach will occur or makes a public announcement to such effect, or
(ii) the date immediately prior to the date on which the Covenant Breach or the
Intended Transaction occurs or, but for the acceptance by Landlord of the
rejectable offer under Paragraph 33, would occur, and (h) the date immediately
prior to the date on which Tenant vacates the Leased Premises in the event
Tenant makes a Vacation Offer pursuant to Paragraph 38.

     (bq) "REMAINING SUM" shall mean Remaining Sum as defined in Paragraph
19(c).

     (br) "RENEWAL TERM" shall mean Renewal Term as defined in Paragraph 5.

     (bs) "RENT" shall mean, collectively, Basic Rent and Additional Rent.

     (bt) "REQUISITION" shall mean any temporary requisition or confiscation of
the use or occupancy of any of the Leased Premises by any governmental
authority, civil or military, whether pursuant to an agreement with such
governmental authority in settlement of or under threat of any such requisition
or confiscation, or otherwise.

     (bu) "RETENTION DATE" shall mean the later of the date on which the amount
of the Remaining Sum is finally determined or the date on which Landlord's right
to the Remaining Sum is finally determined.

     (bv) "SECURITY DEPOSIT" shall mean Security Deposit as defined in Paragraph
37.

     (bw) "SITE ASSESSMENT" shall mean a Site Assessment as defined in Paragraph
10(c).

     (bx) "STATE" shall mean the State of California.

     (by) "SURVIVING OBLIGATIONS" shall mean any obligations of Tenant under
this Lease, actual or contingent, which arise on or prior to the expiration or
prior termination of this Lease or which survive such expiration or termination
by their own terms.

     (bz) "TAKING" shall mean (a) any taking or damaging of all or a portion of
any of the Leased Premises (i) in or by condemnation or other eminent domain
proceedings pursuant to any Law, general or special, or (ii) by reason of any
agreement with any condemnor in settlement of or under threat of any such

                                     -10-
<PAGE>
 
condemnation or other eminent domain proceeding, or (iii) by any other means, or
(b) any de facto condemnation.  The Taking shall be considered to have taken
place as of the later of the date actual physical possession is taken by the
condemnor, or the date on which the right to compensation and damages accrues
under the law applicable to the Leased Premises.

     (ca) "TERM" shall mean the Term as defined in Paragraph 5.

     (cb) "TERMINATION AMOUNT" shall mean (i) prior to the expiration of the
Initial Term, the greater of (a) the sum of the applicable Termination Value
specified on Schedule 1 hereto and any Prepayment Premium which Landlord will be
required to pay in prepaying any Loan with proceeds of the Termination Amount or
(b) the Fair Market Value of the Leased Premises as of the Relevant Date and
(ii) after the expiration of the Initial Term, the Fair Market Value of the
Leased Premises as of the Relevant Date.

     (cc) "TERMINATION DATE" shall mean Termination Date as defined in Paragraph
18(b).

     (cd) "TERMINATION EVENT" shall mean a Termination Event as defined in
Paragraph 18(a).

     (ce) "TERMINATION NOTICE" shall mean Termination Notice as defined in
Paragraph 18(a).

     (cf) "THIRD PARTY PURCHASER" shall mean Third Party Purchaser as defined in
Paragraph 35.

     (cg) "VACATION OFFER" shall mean Vacation Offer as defined in Paragraph 38.

     (ch) "WARRANT AGREEMENT" shall mean the Warrant Agreement, of even date,
between Landlord and Tenant.

     3.   Title and Condition.
          ------------------- 

     (a) The Leased Premises are demised and let subject to (i) the Mortgage and
Assignment presently in effect, (ii) the rights of any Persons in possession of
the Leased Premises, (iii) the existing state of title of any of the Leased
Premises, including any Permitted Encumbrances, (iv) any state of facts which an
accurate survey or physical inspection of the Leased Premises might show, (v)
all Legal Requirements, including any existing violation of any thereof, and
(vi) the condition of the Leased Premises as of the commencement of the Term,
without representation or warranty by Landlord.

     (b) Tenant acknowledges that the Leased Premises are in acceptable
condition and repair at the inception of this Lease.  LANDLORD LEASES AND WILL
LEASE AND TENANT TAKES AND WILL TAKE THE LEASED PREMISES AS IS.  TENANT
ACKNOWLEDGES THAT LANDLORD

                                     -11-
<PAGE>
 
(WHETHER ACTING AS LANDLORD HEREUNDER OR IN ANY OTHER CAPACITY) HAS NOT MADE AND
WILL NOT MAKE, NOR SHALL LANDLORD BE DEEMED TO HAVE MADE, ANY WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT TO ANY OF THE LEASED PREMISES,
INCLUDING ANY WARRANTY OR REPRESENTATION AS TO (i) ITS FITNESS, DESIGN OR
CONDITION FOR ANY PARTICULAR USE OR PURPOSE, (ii) THE QUALITY OF THE MATERIAL OR
WORKMANSHIP THEREIN, (iii) THE EXISTENCE OF ANY DEFECT, LATENT OR PATENT, (iv)
LANDLORD'S TITLE THERETO, (v) VALUE, (vi) COMPLIANCE WITH SPECIFICATIONS, (vii)
LOCATION, (viii) USE, (ix) CONDITION, (x) MERCHANTABILITY, (xi) QUALITY, (xii)
DESCRIPTION, (xiii) DURABILITY (xiv) OPERATION (xv) THE EXISTENCE OF ANY
HAZARDOUS SUBSTANCE, HAZARDOUS CONDITION OR HAZARDOUS ACTIVITY OR (xvi)
COMPLIANCE OF THE LEASED PREMISES WITH ANY LAW OR LEGAL REQUIREMENT; AND ALL
RISKS INCIDENT THERETO ARE TO BE BORNE BY TENANT.  TENANT ACKNOWLEDGES THAT THE
LEASED PREMISES IS OF ITS SELECTION AND TO ITS SPECIFICATIONS AND THAT THE
LEASED PREMISES HAS BEEN INSPECTED BY TENANT AND IS SATISFACTORY TO IT.  IN THE
EVENT OF ANY DEFECT OR DEFICIENCY IN ANY OF THE LEASED PREMISES OF ANY NATURE,
WHETHER LATENT OR PATENT, LANDLORD SHALL NOT HAVE ANY RESPONSIBILITY OR
LIABILITY WITH RESPECT THERETO OR FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES
(INCLUDING STRICT LIABILITY IN TORT).  THE PROVISIONS OF THIS PARAGRAPH 3(b)
HAVE BEEN  NEGOTIATED, AND ARE INTENDED TO BE A COMPLETE EXCLUSION AND NEGATION
OF ANY WARRANTIES BY LANDLORD, EXPRESS OR IMPLIED, WITH RESPECT TO ANY OF THE
LEASED PREMISES, ARISING PURSUANT TO THE UNIFORM COMMERCIAL CODE OR ANY OTHER
LAW NOW OR HEREAFTER IN EFFECT OR ARISING OTHERWISE.

     (c) Tenant represents to Landlord that Tenant has examined the title to the
Leased Premises prior to the execution and delivery of this Lease and has found
the same to be satisfactory for the purposes contemplated hereby.  Tenant
acknowledges that (i) Tenant has conveyed fee simple title (both legal and
equitable) in the Leased Premises to Landlord and that Tenant has only the
leasehold right of possession and use of the Leased Premises as provided herein,
(ii) to Tenant's knowledge the Improvements conform to all material Legal
Requirements and all Insurance Requirements, (iii) to Tenant's knowledge all
easements necessary or appropriate for the use or operation of the Leased
Premises have been obtained, (iv) all contractors engaged by Tenant and to
Tenant's knowledge, all subcontractors who have performed work on or supplied
materials to the Leased Premises have been fully paid or Tenant is holding
retainage sufficient to pay such contractors in full, and all materials and
supplies have been fully paid for or Tenant is holding retainage sufficient to
pay for such materials and supplies in full, (v) to Tenant's knowledge the
Improvements have been fully completed in all material respects in a workmanlike
manner of first class quality, and (vi) to Tenant's knowledge all Equipment
necessary or appropriate for the use or operation of the Leased Premises has
been installed and is presently fully operative in all material respects.

                                     -12-
<PAGE>
 
     (d) Landlord hereby assigns to Tenant, without recourse or warranty
whatsoever, all warranties, guaranties, indemnities and similar rights which
Landlord may have against any manufacturer, seller, engineer, contractor or
builder in respect of any of the Leased Premises.  Such assignment shall remain
in effect until an Event of Default occurs or until the expiration or earlier
termination of this Lease, whereupon such assignment shall cease and all of said
warranties, guaranties, indemnities and other rights shall automatically revert
to Landlord.

     4.   Use of Leased Premises; Quiet Enjoyment.
          --------------------------------------- 

     (a) Tenant may occupy and use the Leased Premises for offices,
manufacturing, warehouse, distribution and research and development and uses
ancillary thereto and for no other purpose without Landlord's consent, which
shall not be unreasonably withheld, delayed or conditioned.  Tenant shall not
use or occupy or permit any of the Leased Premises to be used or occupied, nor
do or permit anything to be done in or on any of the Leased Premises, in a
manner which would or might (i) violate any Law or Legal Requirement, (ii) make
void or voidable or cause any insurer to cancel any insurance required by this
Lease, or make it difficult or impossible to obtain any such insurance at
commercially reasonable rates, (iii) cause structural injury to any of the
Improvements or (iv) constitute a public or private nuisance or waste.

     (b) Subject to the provisions hereof, so long as no Event of Default has
occurred and is continuing, Tenant shall quietly hold, occupy and enjoy the
Leased Premises throughout the Term, without any hindrance, ejection or
molestation by Landlord with respect to matters that arise after the date
hereof, provided that Landlord may, upon reasonable prior notice to Tenant,
enter upon and examine any of the Leased Premises at such reasonable times as
Landlord may select and as may be approved by Tenant, for the purpose of
inspecting the Leased Premises, verifying compliance or non-compliance by Tenant
with its obligations hereunder and the existence or non-existence of an Event of
Default or event which with the passage of time and/or notice would constitute
an Event of Default, showing the Leased Premises to prospective Lenders and
purchasers and taking such other action with respect to the Leased Premises as
is permitted by any provision hereof.

     5.   Term.
          ---- 

     (a) Subject to the provisions hereof, Tenant shall have and hold the Leased
Premises for an initial term (herein, the "Initial Term", and the Initial Term,
as extended or renewed in accordance with the provisions hereof, being called
the "Term") that commenced on February 16, 1995 (the "Commencement Date") and
that expires on February 29, 2012 (the "Expiration Date").  If all Rent and all
other sums due hereunder shall not have been

                                     -13-
<PAGE>
 
fully paid by the end of the Term, Landlord may, at its option, extend the Term
until all said sums shall have been fully paid.

     (b) Provided that if, on or prior to the Expiration Date or any other
Renewal Date (as hereinafter defined) this Lease shall not have been terminated
pursuant to any provision hereof, then on the Expiration Date and on the fifth
(5th) and tenth (10th) anniversaries of the Expiration Date, such anniversary
being a "Renewal Date", the Term shall be deemed to have been automatically
extended for an additional period of five (5) years, and on the fifteenth (15th)
anniversary of the Expiration Date such anniversary being a "Renewal Date", the
Term shall be deemed to have been automatically extended for two (2) years and
eleven (11) months (each such extension period, a "Renewal Term"), unless in any
case Tenant shall notify Landlord in writing at least one (1) year prior to the
next Renewal Date that Tenant is terminating this Lease as of the next Renewal
Date.  If Tenant elects not to extend the Term of this Lease then, prior to the
expiration date, Tenant shall, at the request of Landlord, provide to Landlord a
Termination of Lease in recordable form.  Any such extension of the Term shall
be subject to all of the provisions of this Lease, as the same may be amended,
supplemented or modified.

     (c) If Tenant exercises its option not to extend or further extend the
Term, or if an Event of Default exists, then Landlord shall have the right
during the remainder of the Term then in effect and, in any event, Landlord
shall have the right during the last year of the Term, to (i) advertise the
availability of the Leased Premises for sale or reletting and to erect upon the
Leased Premises signs indicating such availability and (ii) upon reasonable
prior notice to Tenant show the Leased Premises to prospective purchasers or
tenants or their agents at such reasonable times as Landlord may select and as
may be approved by Tenant, such approval not to be unreasonably withheld or
delayed (except that no approval shall be required if an Event of Default
exists) and remains uncured.

     6.   Basic Rent.  Landlord acknowledges that all Basic Rent has been paid
          ----------                                                          
through December 31, 1996.  Tenant shall pay to Landlord on February 1, 1997
Basic Rent in the amount of [$86,196] for the period from January 1, 1997
through January 31, 1997.  Tenant shall pay to Landlord, as annual rent for the
Leased Premises during the portion of the Term remaining after February 1, 1997,
the amounts determined in accordance with Exhibit "D" hereto ("Basic Rent").
Payments shall be made on March 1, 1997 and on the first day of each month
during the remainder of the Term (each such day being a "Basic Rent Payment
Date").  Each such rental payment shall be made, (a) at Landlord's sole
discretion, to Landlord at its address set forth above and/or to such one or
more other Persons, at such addresses and in such proportions as Landlord may
direct by fifteen (15) days' prior written notice to Tenant (in which event
Tenant shall give Landlord notice of each such payment

                                     -14-
<PAGE>
 
concurrent with the making thereof), and (b) in funds available to Landlord on
the applicable Basic Rent Payment Date.

     7.   Additional Rent.
          --------------- 

     (a) Tenant shall pay and discharge, as additional rent (collectively,
"Additional Rent"):

          (i)  except as otherwise specifically provided herein, all costs and
     expenses of Tenant and all reasonable costs and expenses of, Landlord and
     any other Persons specifically referenced herein which are incurred in
     connection or associated with (A) the use, non-use, occupancy, possession,
     operation, condition, design, construction, maintenance, alteration, repair
     or restoration of any of the Leased Premises, (B) the performance of any of
     Tenant's obligations under this Lease, (C) any sale or other transfer of
     any of the Leased Premises to Tenant under this Lease, (D) any Condemnation
     proceedings, (E) the adjustment, settlement or compromise of any insurance
     claims involving or arising from any of the Leased Premises, (F) the
     prosecution, defense or settlement of any litigation involving or arising
     from any of the Leased Premises, this Lease, or the sale of the Leased
     Premises to Landlord, (G) the enforcement by Landlord, its successors and
     assigns, of any of its rights under this Lease, (H) any amendment to or
     modification or termination of this Lease made at the request of Tenant,
     (I) Costs of Landlord's counsel incurred in connection with the
     preparation, negotiation and execution of this Lease, Costs of Landlord's
     counsel incurred in connection with the review and/or negotiation of
     documents requested by Tenant and Costs of third party consultants retained
     by Landlord in connection with any act undertaken by Landlord at  the
     request of Tenant, or incurred in connection with any act of Landlord
     performed on behalf of Tenant that Landlord has the right to perform under
     the terms of this Lease, (J) the reasonable cost of a consultant retained
     by Lender to review plans, specifications, and contracts in connection with
     any Alteration for which the approval of Lender is required or permitted
     under the terms of the Mortgage and the reasonable costs of Lender in
     connection with any inspection of the Leased Premises, and (K) any other
     items specifically required to be paid by Tenant under this Lease, which
     costs and expenses shall include, without limitation, all Costs, judgments,
     settlement amounts, Impositions, insurance premiums, appraisal fees, the
     cost of performing and reporting any Site Assessment if an Environmental
     Violation is found, the cost of monitoring compliance with the provisions
     of Paragraph 10(j) hereof, including the reasonable cost of consultants
     retained by Landlord and Lender, the cost of curing any Environmental
     Violation, and the cost of complying with all Legal Requirements, fines,
     penalties and interest;

                                     -15-
<PAGE>
 
          (ii)  after the date all or any portion of any installment of Basic
     Rent is due and not paid, an amount ("Late Charge") equal to three percent
     (3%) of the amount of such unpaid installment or portion thereof; provided,
     however, that with respect to the first two late payments of all or any
     portion of any installment of Basic Rent in any consecutive twelve (12)
     month period the Late Charge shall not be due and payable unless the Basic
     Rent has not been paid within three (3) business days following receipt by
     Tenant of written notice that such installment has not been received;

          (iii)  a sum equal to any additional sums (including any late charge,
     default penalties, interest and fees of Lender's counsel) which are payable
     by Landlord to any Lender under any Note by reason of Tenant's late payment
     or non-payment of Basic Rent or by reason of an Event of Default; and

          (iv)  interest at the rate per annum (the "Default Rate") equal to the
     default interest rate per annum in the Note on the following sums until
     paid in full:  (A) all overdue installments of Basic Rent from the
     respective due dates thereof, (B) all overdue amounts of Additional Rent
     relating to obligations which Landlord shall have paid on behalf of Tenant,
     from the date Tenant receives notice of payment thereof by Landlord, and
     (C) all other overdue amounts of Additional Rent, from the date that Tenant
     receives notice any such amount has become overdue.

     (b) Tenant shall pay and discharge (i) any Additional Rent referred to in
Paragraph 7(a)(i) when the same shall become due, provided that amounts which
are billed to Landlord or any third party, but not to Tenant, shall be paid
within five (5) days after Landlord's demand for payment thereof, and (ii) any
other Additional Rent, immediately upon Landlord's demand for payment thereof.

     (c) In no event shall amounts payable under Paragraph 7(a)(ii), (iii) and
(iv) exceed the maximum amount permitted by applicable Law.

     8.   NET LEASE; NON-TERMINABILITY.
          ---------------------------- 


     (a) This is a net lease and all Monetary Obligations shall be paid without
notice or demand and without  set-off, counterclaim, recoupment, abatement,
suspension, deferment, diminution, deduction, reduction or defense, except as
specifically provided herein to the contrary (collectively, a "Set-Off").

     (b) Except as otherwise expressly provided herein, this Lease and the
rights of Landlord and the obligations of Tenant

                                     -16-
<PAGE>
 
hereunder shall not be affected by any event or for any reason, including the
following:  (i) any damage to or theft, loss or destruction of any of the Leased
Premises, (ii) any Condemnation, (iii) the prohibition, limitation or
restriction of Tenant's use of any of the Leased Premises, (iv) any eviction by
paramount title or otherwise, (v) Tenant's acquisition of ownership of any of
the Leased Premises other than pursuant to an express provision of this Lease,
(vi) any default on the part of Landlord hereunder or under any Note, Mortgage,
Assignment or any other agreement, (vii) any latent or other defect in any of
the Leased Premises, (viii) the breach of any warranty of any seller or
manufacturer of any of the Equipment, (ix) any violation of Paragraph 4(b) or
any other provision of this Lease by Landlord, (x) the bankruptcy, insolvency,
reorganization, composition, readjustment, liquidation, dissolution or winding-
up of, or other proceeding affecting Landlord, (xi) the exercise of any remedy,
including foreclosure, under any Mortgage or Assignment, (xii) any action with
respect to this Lease (including the disaffirmance hereof) which may be taken by
Landlord, any trustee, receiver or liquidator of Landlord or any court under the
Federal Bankruptcy Code or otherwise, (xiii) any interference with Tenant's use
of the Leased Premises, (xiv) market or economic changes, (xv) the failure of
Landlord to fund the Second Disbursement and/or the Third Disbursement (as
defined in the letter agreement dated August 7, 1996 between Landlord and
Tenant) or (xvi) any other cause, whether similar or dissimilar to the
foregoing, any present or future Law to the contrary notwithstanding.

     (c) The obligations of Tenant hereunder shall be separate and independent
covenants and agreements, all Monetary Obligations shall continue to be payable
in all events (or, in lieu thereof, Tenant shall pay amounts equal thereto), and
the obligations of Tenant hereunder shall continue unaffected unless the
requirement to pay or perform the same shall have been terminated pursuant to an
express provision of this Lease.  All Rent payable by Tenant hereunder shall
constitute "rent" for all purposes (including Section 502(b)(6) of the
Bankruptcy Code).

     (d) Except as otherwise expressly provided herein, Tenant shall have no
right and hereby waives all rights which it may have under any Law (i) to quit,
terminate or surrender this Lease or any of the Leased Premises, or (ii) to any
Set-Off of any Monetary Obligations.

     9.   Payment of Impositions.
          ---------------------- 

     (a) Tenant shall, not later than the due date thereof, or at least five (5)
days prior to the day before any fine, interest, penalty or cost may be added
thereto or imposed, or at least five (5) days prior to the day any lien may be
filed for the non-payment thereof (if such day is used to determine the due date
of the respective item), pay and discharge all taxes (including real and
personal property, franchise, sales and rent

                                     -17-
<PAGE>
 
taxes), all charges for any easement or agreement maintained for the benefit of
any of  the Leased Premises, all assessments and levies, all permit, inspection
and license fees, all rents and charges for water, sewer, utility and
communication services relating to the any of Leased Premises, all ground rents
and all other public charges whether of a like or different nature, even if
unforeseen or extraordinary, imposed upon or assessed against (i) Tenant, (ii)
any of the Leased Premises, including any increases in real estate taxes from a
reassessment of the Leased Premises by the applicable taxing authority as a
result of any transfer of the Leased Premises to any affiliate of Landlord or
Landlord's parent of which Landlord's parent directly or indirectly owns
beneficially more than fifty percent (50%) or to Landlord's parent so long as in
any such case Tenant has an opportunity to review and comment upon the structure
of such transfer prior to the occurrence thereof, (iii) Landlord as a result of
or arising in respect of the acquisition, ownership, occupancy, leasing, use,
possession or sale of any of the Leased Premises, any activity conducted on any
of the Leased Premises, or the Rent, or (iv) any Lender by reason of any Note,
Mortgage, Assignment or other document evidencing or securing a Loan and which
(as to this clause (iv)) Landlord has agreed to pay (collectively, the
"Impositions"); provided, that nothing herein shall obligate Tenant to pay (A)
income, excess profits or other taxes of Landlord (or Lender) which are
determined on the basis of Landlord's (or Lender's) net income or net worth
(unless such taxes are a substitute for any then existing tax, assessment or
other charge upon or with respect to the Leased Premises which, if it were in
effect, would be payable by Tenant under the provisions hereof or by the terms
of such tax, assessment or other charge), (B) any estate, inheritance,
succession, gift or similar tax imposed on Landlord or Lender, (C) any capital
gains tax imposed on Landlord in connection with the sale of the Leased Premises
to any Person or (D) any increases in real estate taxes from a reassessment of
the Leased Premises by the applicable taxing authority as a result of any sale
or transfer of the Leased Premises except as provided in (ii) above.  If any
Imposition may be paid in installments without interest or penalty, Tenant shall
have the option to pay such Imposition in installments; in such event, Tenant
shall be liable only for those installments which accrue or become due and
payable during the Term.  Tenant shall prepare and file all tax reports required
by governmental authorities which relate to the Impositions.  Tenant shall
deliver to Landlord (1) copies of all settlements and notices pertaining to the
Impositions which may be issued by any governmental authority within ten (10)
days after Tenant's receipt thereof, (2) receipts for payment of all taxes
required to be paid by Tenant hereunder within thirty (30) days after the due
date thereof and (3) receipts for payment of all other Impositions within ten
(10) days after Landlord's request therefor.  Any refunds of Impositions
attributable to any period during the Term shall be payable to, and shall be the
property of, Tenant.

                                     -18-
<PAGE>
 
     (b) Landlord shall have the right at any time following the occurrence and
during the continuation of an Event of Default to require Tenant to pay to
Landlord (or Lender if Landlord is so required pursuant to the terms of the
Mortgage) an additional monthly sum (the "Escrow Payments") sufficient to pay
the Escrow Charges (as hereinafter defined) as they become due.  As used herein,
"Escrow Charges" shall mean real estate taxes on the Leased Premises or payments
in lieu thereof and premiums on any insurance required by this Lease.  Landlord
shall determine the amount of the Escrow Charges and of each Escrow Payment.  As
long as the Escrow Payments are being held by Landlord and not Lender, or if
Lender shall hold the Escrow Payments and shall so agree,  the Escrow Payments
shall not be commingled with other funds of Landlord or other Persons and
interest shall accrue thereon for the benefit of Tenant, from the date such
monies are received by or on behalf of Landlord to the date such monies are
disbursed to pay Escrow Charges.  Landlord or Lender, as the case may be, shall
apply the Escrow Payments to the payment of the Escrow Charges in such order or
priority as Landlord shall determine or as required by law.  If at any time the
Escrow Payments theretofore paid to Landlord or Lender, as the case may be,
shall be insufficient for the payment of the Escrow Charges, Tenant, within ten
(10) days after Landlord's demand therefor, which shall include written
verification of such deficiency, shall pay the amount of the deficiency to
Landlord.

     10.  Compliance with Laws and Easement Agreements; Environmental Matters.
          ------------------------------------------------------------------- 

     (a) Tenant shall, at its expense, be in material compliance with and
conform to, and cause any other Person occupying any part of the Leased Premises
to be in material compliance with and conform to, all Insurance Requirements and
Legal Requirements (except that Tenant and the Leased Premises shall be in
absolute compliance with all applicable Environmental Laws).  Tenant shall not
at any time (i) cause, permit or suffer to occur any material Environmental
Violation or (ii) permit any sublessee, assignee or other Person occupying the
Leased Premises under or through Tenant to cause, permit or suffer to occur any
material Environmental Violation and, at the request of Landlord or Lender,
Tenant shall promptly remediate any existing Environmental Violation, however
immaterial.

     (b) Tenant, at its sole cost and expense, will at all times promptly and
faithfully abide by, discharge and perform all of the covenants, conditions and
agreements contained in any Easement Agreement on the part of Landlord or the
occupier to be kept and performed thereunder.  Tenant will not alter, modify,
amend or terminate any Easement Agreement, give any consent or approval
thereunder, or enter into any new Easement Agreement without, in each case, the
prior written consent of Landlord, which consent shall not be unreasonably
withheld.  Any such new

                                     -19-
<PAGE>
 
Easement Agreement shall automatically be a Permitted Encumbrance.

     (c) Not more frequently than once every three (3) years and at any other
time that, in the opinion of Landlord or Lender, a reasonable basis exists to
believe that an Environmental Violation of an Environmental Law or any other
material Environmental Violation exists or a condition that could be reasonably
expected to result in an Environmental Violation exists, upon prior written
notice from Landlord or Lender, Tenant shall permit such persons as Landlord or
Lender may designate ("Site Reviewers") to visit the Leased Premises at
reasonable times agreed to by Tenant and perform, as agents of Tenant,
environmental site investigations and assessments ("Site Assessments") on the
Leased Premises for the purpose of investigating the Leased Premises.  In
addition to the permitted Site Assessments, the Site Reviewers shall have the
right to  obtain from Tenant information reasonably necessary to update any Site
Assessment.  Such Site Assessments may include both above and below the ground
testing for Environmental Violations and such other tests as may be reasonably
necessary, in the opinion of the Site Reviewers, to conduct the Site
Assessments.  Tenant shall supply to the Site Reviewers such historical and
operational information regarding the Leased Premises as may be reasonably
requested by the Site Reviewers to facilitate the Site Assessments, and shall
make available for meetings with the Site Reviewers appropriate personnel having
knowledge of such matters.  Landlord shall pay the cost of any such Site
Assessment unless an Environmental Violation is found, in which event the cost
shall be paid by Tenant.

     (d) If an Environmental Violation occurs or is found to exist and, in
Landlord's reasonable judgment, the cost of remediation of the same is likely to
exceed $250,000, or, if an Event of Default under Paragraph 22(a)(i) hereof has
occurred during the immediately preceding twelve (12) month period, $50,000,
Tenant shall provide to Landlord, and Lender within ten (10) days after
Landlord's request therefor, adequate financial assurances that Tenant will
effect such remediation in accordance with applicable Environmental Laws.

     (e) Notwithstanding any other provision of this Lease, if an Environmental
Violation occurs or is found to exist that would render the Leased Premises
untenantable or unmarketable and the Term would otherwise terminate or expire,
then, at the option of Landlord, the Term shall be automatically extended beyond
the date of termination or expiration and this Lease shall remain in full force
and effect beyond such date until the earlier to occur of (i) the completion of
all remedial action in accordance with applicable Environmental Laws or (ii) the
date specified in a written notice from Landlord to Tenant terminating this
Lease.

                                     -20-
<PAGE>
 
     (f) If Tenant fails to comply with (or promptly commence to comply with and
diligently pursue to completion) any requirement of any Environmental Law in
connection with any Environmental Violation which occurs or is found to exist,
then after ten (10) days prior notice to Tenant (except that no notice shall be
required if any emergency exists) Landlord shall have the right (but no
obligation) to take any and all actions as Landlord shall deem necessary or
advisable in order to cure such Environmental Violation.

     (g) Tenant shall notify Landlord and Lender immediately after becoming
aware of any Environmental Violation (or alleged Environmental Violation) or
noncompliance with any of the covenants contained in this Paragraph 10 and shall
forward to Landlord and Lender immediately upon receipt thereof copies of all
orders, claims, reports, notices, permits, applications or other communications
relating to any such violation or noncompliance.

     (h) All future leases, subleases or concession agreements relating to the
Leased Premises entered into by Tenant shall contain covenants of the other
party thereto which are comparable to the covenants contained in this Paragraph
10.

     (i) Tenant shall not release The Perkin-Elmer Corporation ("PE") from any
of its obligations under the Asset Purchase Agreement, dated March 16, 1990,
between Tenant and PE that relate to clause (f) of Section 6.2 or otherwise
amend said clause (f) or any other applicable provision without having obtained
the prior written approval of Landlord and Lender.  Tenant represents and
warrants to Landlord that the indemnity under clause (f) of Section 6.2 includes
1, 1-dichloroethene on the Lease Premises.

     11.  Liens; Recording.
          ---------------- 

     (a) Tenant shall not, directly or indirectly, create or permit to be
created or to remain and shall promptly discharge or remove any lien, levy or
encumbrance on any of the Leased Premises or on any Rent or any other sums
payable by Tenant under this Lease, other than any Mortgage or Assignment, the
Permitted Encumbrances and any mortgage, lien, encumbrance or other charge
created by or resulting solely from any act or omission of Landlord.  NOTICE IS
HEREBY GIVEN THAT LANDLORD SHALL NOT BE LIABLE FOR ANY LABOR, SERVICES OR
MATERIALS FURNISHED OR TO BE FURNISHED TO TENANT OR TO ANYONE HOLDING OR
OCCUPYING ANY OF THE LEASED PREMISES THROUGH OR UNDER TENANT, AND THAT NO
MECHANICS' OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS SHALL ATTACH
TO OR AFFECT THE INTEREST OF LANDLORD IN AND TO ANY OF THE LEASED PREMISES.
LANDLORD MAY AT ANY TIME, AND AT LANDLORD'S REQUEST TENANT SHALL PROMPTLY, POST
ANY NOTICES ON THE LEASED PREMISES REGARDING SUCH NON-LIABILITY OF LANDLORD.

                                     -21-
<PAGE>
 
     (b) Tenant shall execute, deliver and record, file or register
(collectively, "record") all such instruments as may be required or permitted by
any present or future Law in order to evidence the respective interests of
Landlord and Tenant in the Leased Premises, and shall cause a memorandum of this
Lease (or, if such a memorandum cannot be recorded, this Lease), and any
supplement hereto or thereto, to be recorded in such manner and in such places
as may be required or permitted by any present or future Law in order to protect
the validity and priority of this Lease.

     12.  Maintenance and Repair.
          ---------------------- 

     (a) Tenant shall at all times maintain the Leased Premises and the
Adjoining Property in substantially as good repair and appearance as they are in
on the date hereof, ordinary wear and tear excepted, and fit to be used for
their intended use in accordance with the practices generally recognized as then
acceptable by other companies in its industry, and, in the case of the
Equipment, in as good mechanical condition as it was on the later of the date
hereof or the date of its installation, except for ordinary wear and tear.
Tenant shall take every other reasonable action necessary or appropriate for the
preservation and safety of the Leased Premises.  Tenant shall promptly make all
Alterations of every kind and nature, whether foreseen or unforeseen, which may
be required to comply with the foregoing requirements of this Paragraph 12(a).
Landlord shall not be required to make any Alteration, whether foreseen or
unforeseen, or to maintain any of the Leased Premises or Adjoining Property in
any way, and Tenant hereby expressly waives any right which may be provided for
in any Law now or hereafter in effect to make Alterations at the expense of
Landlord or to require Landlord to make Alterations.  Any Alteration made by
Tenant pursuant to this Paragraph 12 shall be made in conformity with the
provisions of Paragraph 13.

     (b) If any Improvement, now or hereafter constructed, shall (i) encroach
upon any setback or any property, street or right-of-way adjoining the Leased
Premises, (ii) violate the provisions of any restrictive covenant affecting the
Leased Premises, (iii) hinder or obstruct any easement or right-of-way to which
any of the Leased Premises is subject or (iv) impair the rights of others in, to
or under any of the foregoing, Tenant shall, promptly after receiving a notice
thereof, correct such condition from the party entitled to make such demand,
either (A) obtain from all necessary parties waivers or settlements of all
claims, liabilities and damages resulting from each such encroachment,
violation, hindrance, obstruction or impairment, whether the same shall affect
Landlord, Tenant or both, or (B) take such action as shall be necessary to
remove all such encroachments, hindrances or obstructions and to end all such
violations or impairments, including, if necessary, making Alterations.

                                     -22-
<PAGE>
 
     13.  Alterations and Improvements.
          ---------------------------- 

     (a) Tenant shall have the right, without having obtained the prior written
consent of Landlord and Lender, to make (i) non-structural Alterations to the
Leased Premises, (ii) structural Alterations or a series of related structural
Alterations that, as to any such Alterations or series of related Alterations,
do not cost in excess of $1,000,000 or, with respect to Alterations to the
"clean room" test area in Building Three and "process laboratory" in Building
Two, $2,500,000, (iii) to install Equipment in the Improvements or accessions to
the Equipment that, as to such Equipment or accessions, do not cost in excess of
$1,000,000 or, with respect to Alterations to the "clean room" test area in
Building Three and "process laboratory" in Building Two, $2,500,000, and (iv)
the Alterations identified in Schedule 2 attached hereto so long as at the time
of construction or installation of any such Equipment or Alterations no Event of
Default exists and the value and utility of the Leased Premises is not
diminished thereby.  If the cost of any structural Alterations, series of
related structural Alterations, Equipment or accessions thereto is in excess of
$1,000,000 or, with respect to Alterations to the "clean room" test area in
Building Three and "process laboratory" in Building Two, $2,500,000, the prior
written approval of Lender shall be required, such approval not to be
unreasonably withheld, delayed or conditioned.  Tenant shall not construct upon
the Land any additional buildings without having first obtained the prior
written consent of Landlord and Lender.

     (b) If Tenant makes any Alterations pursuant to this Paragraph 13 or
Paragraph 36 or as required by Paragraph 12 or 17 (such Alterations and actions
being hereinafter collectively  referred to as "Work"), whether or not
Landlord's consent is required, then (i) the market value of the Leased Premises
shall not be lessened by any such Work or its usefulness impaired, (ii) all such
Work shall be performed by Tenant in a good and workmanlike manner, (iii) all
such Work shall be expeditiously completed in compliance with all Legal
Requirements, (iv) all such Work shall comply with the Insurance Requirements,
(v) if any such Work involves the replacement of Equipment or parts thereto, all
replacement Equipment or parts shall have a value and useful life so as not to
diminish the value of the Improvements, (vi) Tenant shall promptly discharge or
remove all liens filed against any of the Leased Premises arising out of such
Work, (vii) Tenant shall procure and pay for all permits and licenses required
in connection with any such Work, (viii) all such Work that constitutes part of
the Leased Premises shall be the property of Landlord and shall be subject to
this Lease, and Tenant shall execute and deliver to Landlord any document
requested by Landlord evidencing the assignment to Landlord of all estate,
right, title and interest (other than the leasehold estate created hereby) of
Tenant or any other Person thereto or therein, and (ix) Tenant shall comply, to
the extent requested by Landlord or required by this Lease, with the

                                     -23-
<PAGE>
 
provisions of Paragraph 19(a), whether or not such Work involves restoration of
the Leased Premises.

     14.  Permitted Contests.  Notwithstanding any other provision of this
          ------------------                                              
Lease, Tenant shall not be required to (a) pay any Imposition, (b) comply with
any Legal Requirement, (c) discharge or remove any lien referred to in Paragraph
11 or 13 or (d) take any action with respect to any encroachment, violation,
hindrance, obstruction or impairment referred to in Paragraph 12(b) (such non-
compliance with the terms hereof being hereinafter referred to collectively as
"Permitted Violations"), so long as at the time of such contest no Event of
Default exists and so long as Tenant shall contest, in good faith, the
existence, amount or validity thereof, the amount of the damages caused thereby,
or the extent of its or Landlord's liability therefor by appropriate proceedings
which shall operate during the pendency thereof to prevent or stay (i) the
collection of, or other realization upon, the Permitted Violation so contested,
(ii) the sale, forfeiture or loss of any of the Leased Premises or any Rent to
satisfy or to pay any damages caused by any Permitted Violation, (iii) any
material interference with the use or occupancy of any of the Leased Premises,
(iv) any interference with the payment of any Rent, (v) the cancellation or
increase in the rate of any insurance policy or a statement by the carrier that
coverage will be denied or (vi) the enforcement or execution of any injunction,
order or Legal Requirement with respect to the Permitted Violation.  Tenant
shall provide Landlord security which is satisfactory, in Landlord's reasonable
judgment, to assure that such Permitted Violation is corrected, including all
Costs, interest and penalties that may be incurred or become due in connection
therewith.  While any proceedings which comply with the requirements of this
Paragraph 14 are pending and the required security (if any) is held by Landlord,
Landlord shall not have the  right to correct any Permitted Violation thereby
being contested unless Landlord is required by law to correct such Permitted
Violation and Tenant's contest does not prevent or stay such requirement as to
Landlord.  Each such contest shall be promptly and diligently prosecuted by
Tenant to a final conclusion, except that Tenant, so long as the conditions of
this Paragraph 14 are at all times complied with, has the right to attempt to
settle or compromise such contest through negotiations.  Tenant shall pay any
and all losses, judgments, decrees and Costs in connection with any such contest
and shall, promptly after the final determination of such contest, fully pay and
discharge the amounts which shall be levied, assessed, charged or imposed or be
determined to be payable therein or in connection therewith, together with all
penalties, fines, interest and Costs thereof or in connection therewith, and
perform all acts the performance of which shall be ordered or decreed as a
result thereof.  No such contest shall subject Landlord to the risk of any civil
or criminal liability.

                                     -24-
<PAGE>
 
     15.  Indemnification.
          --------------- 

     (a) Tenant shall pay, protect, indemnify, save and hold harmless Landlord,
Lender and all other Persons described in Paragraph 30 (each an "Indemnitee")
from and against any and all liabilities, losses, damages (including punitive
damages), penalties, Costs, causes of action, suits, claims, demands or
judgments of any nature whatsoever, howsoever caused, without regard to the form
of action and whether based on strict liability, gross negligence, negligence or
any other theory of recovery at law or in equity, arising from (i) any matter
pertaining to the acquisition (or the negotiations leading thereto), ownership,
use, non-use, occupancy, operation, condition, design, construction,
maintenance, repair or restoration of the Leased Premises or Adjoining Property,
(ii) any casualty in any manner arising from the Leased Premises or Adjoining
Property, whether or not Landlord has or should have knowledge or notice of any
defect or condition causing or contributing to said casualty, (iii) any
violation by Tenant of any provision of this Lease, any contract or agreement to
which Tenant is a party, any Legal Requirement or any Permitted Encumbrance or
(iv) any alleged, threatened or actual Environmental Violation, however
immaterial, including (A) liability for response costs and for costs of removal
and remedial action incurred by the United States Government, any state or local
governmental unit or any other Person, or damages from injury to or destruction
or loss of natural resources, including the reasonable costs of assessing such
injury, destruction or loss, incurred pursuant to Section 107 of CERCLA, or any
successor section or act or provision of any similar state or local Law, (B)
liability for costs and expenses of abatement, correction or clean-up, fines,
damages, response costs or penalties which arise from the provisions of any of
the other Environmental Laws and (C) liability for personal injury or property
damage arising under any statutory or common-law tort  theory, including damages
assessed for the maintenance of a public or private nuisance or for carrying on
of a dangerous activity, but excluding in all cases any and all liabilities,
losses, damages (including punitive damages), penalties, costs, causes of
action, suits, claims, demands or judgments caused by the gross negligence or
willful misconduct of any Indemnitee.

     (b) In case any action or proceeding is brought against any Indemnitee by
reason of any such claim, such Indemnitee may either (i) retain its own counsel
and defend such action (it being understood that Tenant may employ counsel of
its choice to monitor the defense of any such action) or (ii) notify Tenant to
resist or defend such action or proceeding by retaining counsel reasonably
satisfactory to such Indemnitee, and such Indemnitee will cooperate and assist
in the defense of such action or proceeding if reasonably requested so to do by
Tenant.

     (c) The obligations of Tenant under this Paragraph 15 shall survive any
termination or expiration of this Lease.

                                     -25-
<PAGE>
 
     16.  Insurance.
          --------- 

     (a) Tenant shall maintain the following insurance on or in connection with
the Leased Premises:

          (i)  Insurance against physical loss or damage to the Improvements and
     Equipment as provided under a standard "All Risk" property policy including
     but not limited to flood (if the Leased Premises is in a flood zone) in
     amounts not less than the actual replacement cost of the Improvements and
     Equipment.  Such policies shall contain replacement cost and agreed amount
     endorsements and shall contain deductibles not more than $50,000.00 per
     occurrence.  (B) Tenant shall maintain earthquake insurance for the
     Improvements and Equipment in the amount of not less than $7,000,000 with a
     deductible of not more than 10%, provided, however, that in the event of a
     substantial change in the availability or cost of earthquake coverage
     Landlord and Tenant shall in good faith negotiate a different amount or a
     different deductible or other different terms of such insurance (subject to
     the consent of Lender), taking into account the cost and availability of
     such insurance and the objective of reasonably protecting the interests of
     Landlord and Lender.

          (ii)  Commercial General Liability Insurance against claims for
     personal and bodily injury, death or property damage occurring on, in or as
     a result of the use of the Leased Premises, in an amount not less than
     $15,000,000 per occurrence/annual aggregate including but not limited to
     Incidental Medical Malpractice, Garagekeepers Liability, Host Liquor
     Liability, Non-Owned and Hired Automobile Liability and all other coverage
     extensions that are usual and customary for properties of this size and
     type provided, however, that the Landlord shall have the right to require
     such higher limits as may be reasonable and customary for properties of
     this size and type.

          (iii)  Workers' Compensation Insurance covering all persons employed
     by Tenant in connection with any work done on or about any of the Leased
     Premises for which claims for death, disease or bodily injury may be
     asserted against Landlord, Tenant or any of the Leased Premises or, in lieu
     of such Worker's Compensation Insurance, a program of self-insurance
     complying with the rules, regulations and requirements of the appropriate
     agency of the State.

          (iv)  Comprehensive Boiler and Machinery Insurance on any of the
     Equipment or any other equipment on or in the Leased Premises including but
     not limited to Service Interruption, Expediting Expenses, Ammonia
     Contamination, Hazardous Clean-Up and Comprehensive Object Definition, in
     an amount not less than $1,000,000 for damage to property, bodily injury or
     death resulting from such covered perils

                                     -26-
<PAGE>
 
     as found in a standard Comprehensive Boiler & Machinery Policy.  Such
     policies may contain a deductible not in excess of $50,000.

          (v)  Business Income/Interruption Insurance to include Loss of Rents
     on an Actual Loss Sustained basis with a period of indemnity not less than
     one year from the time of loss.  Such insurance shall name Landlord and
     Lender as "loss payee" solely with respect to Rent payable to or for the
     benefit of Landlord under this Lease.

          (vi)  During any period in which substantial Alterations at the Leased
     Premises are being undertaken, Builder's Risk insurance covering the total
     completed value including any "soft costs" with respect to the Improvements
     being altered or repaired (on a completed value, non-reporting basis),
     replacement cost of work performed and equipment, supplies and materials
     furnished in connection with such construction or repair of Improvements or
     Equipment, together with such "soft cost" endorsements and such other
     endorsements as Landlord may reasonably require and General Liability,
     Worker's Compensation and Automobile Liability Insurance with respect to
     the Improvements being constructed, altered or repaired.

          (vii)  Such other insurance (or other terms with respect to any
     insurance required pursuant to this Paragraph 16, including without
     limitation amounts of coverage, deductibles, form of mortgagee clause) on
     or in connection with any of the Leased Premises as Landlord or Lender may
     reasonably require, which at the time is usual and commonly obtained in
     connection with properties similar in type of building size and use to the
     Leased Premises.

     (b) The insurance required by Paragraph 16(a) shall be written by companies
which have a Best's rating of A:X or above and are admitted in, and approved to
write insurance policies by, the State Insurance Department for the State.  The
insurance policies (i) shall be for such terms as Landlord may reasonably
approve, (ii) shall be in amounts sufficient at all times to satisfy any
coinsurance requirements thereof and (iii) shall (except for the worker's
compensation insurance referred to in Paragraph 16(a)(iii) hereof) name
Landlord, Tenant and Lender as additional insureds or loss payees, as their
respective interests may appear.  If said insurance or any part thereof shall
expire, be withdrawn, become void, voidable, unreliable or unsafe for any
reason, including a breach of any condition thereof by Tenant or the failure or
impairment of the capital of any insurer, or if for any other reason whatsoever
said insurance shall become  reasonably unsatisfactory to Landlord, Tenant shall
immediately obtain new or additional insurance reasonably satisfactory to
Landlord.

                                     -27-
<PAGE>
 
     (c) Each policy required by any provision of Paragraph 16(a), except clause
(iii) thereof, shall provide that it may not be canceled except after sixty (60)
days' prior notice to Landlord and Lender.  Each such policy shall also provide
that any loss otherwise payable thereunder shall be payable notwithstanding (i)
any act or omission of Landlord or Tenant which might, absent such provision,
result in a forfeiture of all or a part of such insurance payment, (ii) the
occupation or use of any of the Leased Premises for purposes more hazardous than
those permitted by the provisions of such policy, (iii) any foreclosure or other
action or proceeding taken by Lender pursuant to any provision of the Mortgage,
Note, Assignment or other document evidencing or securing the Loan upon the
happening of an event of default therein or (iv) any change in title to or
ownership of any of the Leased Premises.

     (d) Tenant shall pay as they become due all premiums for the insurance
required by Paragraph 16(a), shall renew or replace each policy and deliver to
Landlord evidence of the payment of the full premium therefor or installment
then due prior to the expiration date of such policy, and shall promptly deliver
to Landlord each original policy or a duplicate thereof.

     (e) Anything in this Paragraph 16 to the contrary notwithstanding, any
insurance which Tenant is required to obtain pursuant to Paragraph 16(a) may be
carried under a "blanket" or umbrella policy or policies covering other
properties or liabilities of Tenant, provided that such "blanket" or umbrella
policy or policies otherwise comply with the provisions of this Paragraph 16 and
provided further that such policies shall provide for a reserved amount
thereunder with respect to the Leased Premises so as to assure that the amount
of insurance required by this Paragraph 16 will be available notwithstanding any
losses with respect to other property covered by such blanket policies.  The
amount of the total insurance allocated to the Leased Premises, which amount
shall be not less than the amounts required pursuant to this Paragraph 16, shall
be specified either (i) in each such "blanket" or umbrella policy or (ii) in a
written statement, which Tenant shall deliver to Landlord, from the insurer
thereunder.  The original or a certified copy of each such "blanket" or umbrella
policy shall promptly be delivered to Landlord.

     (f) Tenant shall promptly comply with and conform to (i) all provisions of
each insurance policy required by this Paragraph 16 and (ii) all requirements of
the insurers thereunder applicable to Landlord, Tenant or any of the Leased
Premises or to the use, manner of use, occupancy, possession, operation,
maintenance, alteration or repair of any of the Leased Premises, even if such
compliance necessitates Alterations or results in  interference with the use or
enjoyment of any of the Leased Premises.

                                     -28-
<PAGE>
 
     (g) Tenant shall not carry separate insurance concurrent in form or
contributing in the event of a Casualty with that required in this Paragraph 16
unless (i) Landlord and Lender are included therein as loss payee or additional
insureds, with loss payable as provided herein, and (ii) such separate insurance
complies with the other provisions of this Paragraph 16.  Tenant shall
immediately notify Landlord of such separate insurance and shall deliver to
Landlord copies of the policies therefor.

     (h) All policies shall contain effective waivers by the carrier against all
claims for insurance premiums against Landlord and shall contain full waivers of
subrogation against the Landlord.

     (i) All proceeds of any insurance required under Paragraph 16(a) shall be
payable as follows:

          (i)  Except for proceeds payable to a Person other than Landlord,
     Tenant or Lender and proceeds of less than $500,000, all proceeds of
     insurance required under clauses (ii), (iii), (iv) and (vii) of Paragraph
     16(a) and proceeds attributable to the general liability coverage
     provisions of Builder's Risk insurance under clause (vi) of Paragraph 16(a)
     shall be payable to Landlord or, if required by the Mortgage or requested
     by Lender pursuant to the Mortgage, to Lender.  All proceeds of insurance
     required under clause (v) of Paragraph 16(a) shall be payable to Landlord
     or, if required by the Mortgage, to Lender.

          (ii)  Proceeds of insurance required under clause (i) of Paragraph
     16(a) and proceeds attributable to Builder's Risk insurance (other than its
     general liability coverage provisions) under clause (vi) of Paragraph 16(a)
     shall be payable as follows:

               (A) In the event of a Casualty that is a Termination Event for
          which a Termination Notice has been given under Paragraph 18(a), the
          proceeds shall be payable to Landlord or, if required by the Mortgage
          or requested by Lender pursuant to the Mortgage, to Lender.  Landlord
          shall retain or apply the Net Award in accordance with the provisions
          of Paragraphs 18 and 20.

               (B) In the event of a Casualty that is not a Termination Event
          where the proceeds exceed $500,000, the proceeds shall be payable to
          Landlord or, if required by the Mortgage or requested by Lender
          pursuant to the Mortgage, to Lender.  Landlord shall apply the Net
          Award in accordance with the provisions of Paragraph 19.

                                     -29-
<PAGE>
 
               (C) In the event of a Casualty that is not a Termination Event
          where the proceeds are equal to or less than $500,000 and unless an
          Event of Default exists and is continuing, or if a fact or condition
          exists which with the lapse of time or giving of notice, of both,
          would in Landlord's judgment constitute an Event of Default, at the
          time such proceeds are paid, the Net Award shall be payable to Tenant.
          Tenant shall apply the Net Award to restoration of the Leased Premises
          in accordance with the applicable provisions of this Lease.

          (iii)  In the event that Tenant is listed as a payee on a check from
     an insurance carrier for insurance proceeds which subparagraphs (i) and
     (ii) provide are to be payable to Landlord, Lender or another party or
     parties, Tenant shall cooperate by promptly endorsing said check over to
     the party to whom the proceeds are to be payable under subparagraphs (i) or
     (ii).  Tenant hereby appoints each of Landlord or Lender as Tenant's
     attorneys-in-fact to endorse any such check.

                                     -30-
<PAGE>
 
     17.  Casualty and Condemnation.
          ------------------------- 

     (a) If any Casualty occurs the insurance proceeds for which is reasonably
estimated by Tenant to be equal to or in excess of Fifty Thousand Dollars
($50,000), Tenant shall give Landlord and Lender immediate notice thereof.  So
long as no Event of Default exists Tenant is hereby authorized to adjust,
collect and compromise all claims under any of the insurance policies required
by Paragraph 16(a) (except public liability insurance claims payable to a Person
other than Tenant, Landlord or Lender) and to execute and deliver on behalf of
Tenant all necessary proofs of loss, receipts, vouchers and releases required by
the insurers and Landlord shall have the right to join with Tenant therein.  Any
adjustment, settlement or compromise of any such claim in excess of $500,000
shall be subject to the prior written approval of Landlord, which shall not be
unreasonably withheld, conditioned or delayed and Landlord shall have the right
to prosecute or contest, or to require Tenant to prosecute or contest, any such
claim, adjustment, settlement or compromise.  If an Event of Default exists,
Tenant shall not be entitled to adjust, collect or compromise any such claim or
to participate with Landlord in any adjustment, collection and compromise of the
Net Award payable in connection with a Casualty.  Tenant agrees to sign, upon
the request of Landlord, all such proofs of loss, receipts, vouchers and
releases.  Each insurer is hereby authorized and directed to make payment under
said policies in excess of $500,000 and return of unearned premiums, directly to
Landlord or, if required by the Mortgage or requested by Lender pursuant to the
Mortgage, to Lender instead of to Landlord and Tenant jointly, and Tenant hereby
appoints each of Landlord and Lender as Tenant's attorneys-in-fact to endorse
any draft therefor.  The rights of Landlord under this Paragraph 17(a) shall be
extended to Lender if and to the extent that any Mortgage so provides.

     (b) Tenant, immediately upon receiving a Condemnation Notice, shall notify
Landlord and Lender thereof.  So long as no Event of Default exists, Tenant is
authorized to collect, settle and compromise the amount of any Net Award and
Landlord shall have the right to join with Tenant herein.  If an Event of
Default exists, Landlord shall be authorized to collect, settle and compromise
the amount of any Net Award and Tenant shall not be entitled to participate with
Landlord in any Condemnation proceeding or negotiations under threat thereof or
to contest the Condemnation or the amount of the Net Award therefor.  No
agreement with any condemnor in settlement or under threat of any Condemnation
shall be made by Tenant without the written consent  of Landlord which shall not
be unreasonably withheld, conditioned or delayed.  Subject to the provisions of
this Paragraph 17(b), Tenant hereby irrevocably assigns to Landlord any award or
payment to which Tenant is or may be entitled by reason of any Condemnation,
whether the same shall be paid or payable for Tenant's leasehold interest
hereunder or otherwise; but nothing in this Lease shall impair Tenant's right to
any

                                     -31-
<PAGE>
 
award or payment on account of Tenant's trade fixtures, equipment or other
tangible property which is not part of the Equipment, moving expenses or loss of
business, if available, to the extent that and so long as (i) Tenant shall have
the right to make, and does make, a separate claim therefor against the
condemnor and (ii) such claim does not in any way reduce either the amount of
the award otherwise payable to Landlord for the Condemnation of Landlord's fee
interest in the Leased Premises or the amount of the award (if any) otherwise
payable for the Condemnation of Tenant's leasehold interest hereunder.  The
rights of Landlord under this Paragraph 17(b) shall also be extended to Lender
if and to the extent that any Mortgage so provides.

     (c) If any Partial Casualty (whether or not insured against) or Partial
Condemnation shall occur, this Lease shall continue, notwithstanding such event,
and there shall be no abatement or reduction of any Monetary Obligations, except
as provided in Paragraph 17(d) and 19(c).  Promptly after such Partial Casualty
or Partial Condemnation, Tenant, as required in Paragraph 12(a), shall commence
and diligently continue to restore the Leased Premises as nearly as practicable
to their value, condition and character immediately prior to such event.  Upon
the receipt by Landlord of the entire Net Award of such Partial Casualty or
Partial Condemnation, Landlord shall make such Net Award available to Tenant for
restoration in accordance with and subject to the provisions of Paragraph 19(a).
If any Casualty or Condemnation which is not a Partial Casualty or Partial
Condemnation shall occur, Tenant shall comply with the terms and conditions of
Paragraph 18.

     (d) In the event of a Requisition of any of the Leased Premises, if any Net
Award payable by reason of such Requisition is retained by Landlord or Lender,
each installment of Basic Rent payable on or after the date on which the Net
Award is paid to Landlord shall be reduced by a fraction, the denominator of
which shall be the total amount of all Basic Rent due from such date to and
including the last day such Requisition remains in effect and the numerator of
which shall be the amount of such Net Award retained by Landlord.  Upon the
expiration of the Term, any portion of such Net Award which shall not have been
previously credited to Tenant shall be retained by Landlord.

                                     -32-
<PAGE>
 
     18.  Termination Events.
          ------------------ 

     (a) If (i) the Leased Premises shall be taken by a Taking or (ii) any
substantial portion of the Leased Premises shall be taken by a Taking or all or
any substantial portion of  the Leased Premises shall be damaged or destroyed by
a Casualty and, in such case, Tenant certifies to Landlord that it will forever
abandon operations at the Leased Premises (each of the events described in the
above clauses (i) and (ii) shall hereinafter be referred to as a "Termination
Event"), then (x) in the case of (i) above, Tenant shall be obligated, within
thirty (30) days after Tenant receives a Condemnation Notice and (y) in the case
of (ii) above, Tenant shall have the option, within thirty (30) days after
Tenant receives a Condemnation Notice or thirty (30) days after the Casualty, as
the case may be, to give to Landlord written notice of the Tenant's option to
terminate this Lease (a "Termination Notice") in the form described in Paragraph
18(b).

     (b) A Termination Notice shall contain (i) notice of Tenant's intention to
terminate this Lease on the first Basic Rent Payment Date which occurs at least
ninety (90) days after the Fair Market Value Date (the "Termination Date"), (ii)
a binding and irrevocable offer of Tenant to purchase the Leased Premises for an
amount equal to the Termination Amount and (iii) if the Termination Event is an
event described in Paragraph 18(a)(ii), the certification described therein and
a certified resolution of the Board of Directors of Tenant authorizing the same.
Promptly upon the delivery to Landlord of a Termination Notice, Landlord and
Tenant shall commence to determine the Fair Market Value of the Leased Premises.

     (c) If Landlord shall reject such offer to purchase the Leased Premises by
written notice to Tenant (a "Rejection"), which Rejection shall contain the
written consent of Lender, not later than thirty (30) days following the Fair
Market Value Date, then this Lease shall terminate on the Termination Date;
provided that, if Tenant has not satisfied all Monetary Obligations and all
other obligations and liabilities under this Lease which have arisen on or prior
to the Termination Date (collectively, "Remaining Obligations") on the
Termination Date, then Landlord may, at its option, extend the date on which
this Lease may terminate to a date which is no later than the first Basic Rent
Payment Date after the Termination Date on which Tenant has satisfied all
Remaining Obligations.  Upon such termination (i) all obligations of Tenant
hereunder shall terminate except for any Surviving Obligations, (ii) Tenant
shall promptly vacate and shall have no further right, title or interest in or
to any of the Leased Premises and (iii) the Net Award shall be retained by
Landlord.  Notwithstanding anything to the contrary hereinabove contained, if
Tenant shall have received a Rejection and, on the date when this Lease would
otherwise terminate as provided above, Landlord shall not have received the full
amount of the Net Award payable by reason of the applicable Termination Event,
then on the Termination Date

                                     -33-
<PAGE>
 
Tenant shall assign to Landlord all of its right, title and interest, if any, in
and to the Net Award.

     (d) Unless Tenant shall have received a Rejection not later than the
thirtieth (30th) day following the Fair Market  Value Date, Landlord shall be
conclusively presumed to have accepted such offer.  If such offer is accepted by
Landlord then, on the Termination Date, Tenant shall pay to Landlord (or Lender
if the Mortgage requires or permits Lender to so require) the Termination Amount
and all Remaining Obligations and, if requested by Tenant, Landlord shall (i)
convey to Tenant the Leased Premises or the remaining portion thereof, if any,
and (ii) pay to or assign to Tenant its entire interest in and to the Net Award,
all in accordance with Paragraph 20.

     19.  Restoration; Reduction of Rent.
          ------------------------------ 

     (a) So long as no Event of Default exists, any Net Award up to and
including $500,000 shall be paid directly to Tenant and Tenant shall restore the
Leased Premises in accordance with the requirements of Paragraph 13(b) of this
Lease.  Any Net Award in excess of $500,000 shall be made available by Landlord
to Tenant for the restoration of any of the Leased Premises, and Landlord (or
Lender if required by any Mortgage or if the Mortgage permits Lender to so
require) shall hold such Net Award in a fund (the "Restoration Fund") and
disburse amounts from the Restoration Fund only in accordance with the following
conditions:

          (i)  prior to commencement of restoration, (A) the architects,
     contracts, contractors, plans and specifications for the restoration shall
     have been approved by Landlord, such approval not to be unreasonably
     withheld, conditioned or delayed and (B) Landlord and Lender shall, upon
     reasonable request and based upon a review of the contractor's and prime
     subcontractors' credit, be provided with acceptable performance bonds which
     insure satisfactory completion of the restoration, are in an amount and
     form and have a surety acceptable to Landlord, and name Landlord and Lender
     as additional dual obligees;

          (ii)  at the time of any disbursement, no Event of Default shall exist
     and no mechanics' or materialmen's liens shall have been filed against any
     of the Leased Premises and remain undischarged;

          (iii)  disbursements shall be made from time to time in an amount not
     exceeding the cost of the work completed since the last disbursement, upon
     receipt of (A) satisfactory evidence, including architects' certificates,
     of the stage of completion, the estimated total cost of completion and
     performance of the work to date in a good and workmanlike manner in
     accordance with the contracts, plans and specifications, (B) waivers of
     liens, (C)

                                     -34-
<PAGE>
 
     contractors' and subcontractors' sworn statements as to completed work and
     the cost thereof for which payment is requested, (D) a satisfactory
     bringdown of title insurance and (E) other evidence of cost and payment so
     that Landlord and Lender can verify that the amounts disbursed from time to
     time are represented by work that is completed, in place and free and clear
     of mechanics' and materialmen's lien claims;

          (iv)  each request for disbursement shall be accompanied by a
     certificate of Tenant, signed by the president or a vice president or the
     chief financial officer of Tenant, describing the work for which payment is
     requested, stating the cost incurred in connection therewith, stating that
     Tenant has not previously received payment for such work and, upon
     completion of the work, also stating that the work has been fully completed
     and complies with the applicable requirements of this Lease;

          (v)  Landlord may retain ten percent (10%) of the restoration fund
     until the restoration is fully completed;

          (vi)  if the Restoration Fund is held by Lender it may be commingled
     with Lender's other funds and shall bear interest unless otherwise required
     by Lender; if it is held by Landlord it shall be commingled with Landlord's
     other funds and shall bear interest at the best available interest rate;
     and

          (vii)  such other reasonable conditions to insure timely, lien free
     completion of the restoration as Landlord or Lender may impose.

     (b) Prior to commencement of restoration and at any time during
restoration, if the estimated cost of completing the restoration work free and
clear of all liens, as determined by Landlord or if required by a Mortgage or by
Lender pursuant to the terms of a Mortgage, to Lender, exceeds the amount of the
Net Award available for such restoration, the amount of such excess shall, upon
demand by Landlord, be paid by Tenant to Landlord or if required by a Mortgage
or by Lender pursuant to the terms of a Mortgage, to Lender to be added to the
Restoration Fund.  Any sum so added by Tenant which remains in the Restoration
Fund upon completion of restoration shall be refunded to Tenant.  For purposes
of determining the source of funds with respect to the disposition of funds
remaining after the completion of restoration, the Net Award shall be deemed to
be disbursed prior to any amount added by Tenant.

     (c) If any sum remains in the Restoration Fund after completion of the
restoration and any refund to Tenant pursuant to Paragraph 19(b), such sum (the
"Remaining Sum") shall be retained by Landlord or, if required by a Note or
Mortgage or by Lender pursuant to the terms of a Note or Mortgage, paid by

                                     -35-
<PAGE>
 
Landlord to a Lender.  If the Remaining Sum is (i) retained by Landlord, each
installment of Basic Rent payable on or after the Retention Date shall be
reduced by a fraction, the denominator of which shall be the total amount of all
Basic Rent due from such date to and including the last Basic Rent Payment Date
for the then existing Term and the numerator of which shall be the Remaining
Sum, or (ii) paid to Lender, then each installment of Basic Rent thereafter
payable shall be reduced in the same amount as payments are reduced under any
Note as if the Loan were reamortized to reflect such payment, in each case until
such Remaining Sum has been applied in full or until the Term has expired,
whichever occurs first.  Landlord agrees that if the terms of a Note or Mortgage
permit partial prepayment of the principal balance of the Loan without premium
or penalty and, in such event, require the Lender to thereupon reamortize the
Loan,  Landlord shall pay any Remaining Sum to Lender as a partial prepayment of
the Loan and clause (ii) of this Paragraph  19(c) shall apply.  Upon the
expiration of the Term, any portion of the Remaining Sum which has not been so
applied shall be retained by Landlord.

     20.  Procedures Upon Purchase.
          ------------------------ 

     (a) If the Leased Premises is purchased by Tenant pursuant to any provision
of this Lease, Landlord need not convey any better title thereto than that which
was conveyed to Landlord, and Tenant shall accept such title, subject, however,
to the Permitted Encumbrances and to all other liens, exceptions and
restrictions on, against or relating to any of the Leased Premises and to all
applicable Laws, but free of the lien of and security interest created by any
Mortgage or Assignment and liens, exceptions and restrictions on, against or
relating to the Leased Premises which have been created by or resulted solely
from acts of Landlord after the date of this Lease, unless the same are
Permitted Encumbrances or customary utility easements benefiting the Leased
Premises or were created with the concurrence of Tenant or as a result of a
default by Tenant under this Lease.

     (b) Upon the date fixed for any such purchase of the Leased Premises
pursuant to any provision of this Lease (any such date the "Purchase Date"),
through an appropriate escrow, Tenant shall pay to Landlord, or to any Person to
whom Landlord directs payment, the Relevant Amount therefor specified herein, in
Federal Funds, less any credit of the Net Award received and retained by
Landlord or a Lender allowed against the Relevant Amount, and Landlord shall
deliver to Tenant (i) a special warranty deed which describes the premises being
conveyed and conveys the title thereto as provided in Paragraph 20(a), (ii) such
other instruments as shall be necessary to transfer to Tenant or its designee
any other property (or rights to any Net Award not yet received by Landlord or a
Lender) then required to be sold by Landlord to Tenant pursuant to this Lease
and (iii) any Net Award received by Landlord, not credited to Tenant

                                     -36-
<PAGE>
 
against the Relevant Amount and required to be delivered by Landlord to Tenant
pursuant to this Lease; provided, that if any Monetary Obligations remain
outstanding on such date, then Landlord may deduct from the Net Award the amount
of such Monetary Obligations; and further provided, that if any event has
occurred which, in Landlord's reasonable judgment, is likely to subject any
Indemnitee to any liability which Tenant is required to indemnify against
pursuant to Paragraph 15, then an amount shall be deducted from the Net Award
which, in Landlord's reasonable judgment, is sufficient to satisfy such
liability, which amount shall be deposited in an escrow account with a financial
institution reasonably satisfactory to Landlord and Tenant on terms reasonably
satisfactory to Landlord and Tenant pending resolution of such matter.  If on
the Purchase Date any Monetary Obligations remain outstanding and no Net Award
is payable to Tenant by Landlord or the amount of such Net Award is less than
the amount of the  Monetary Obligations, then Tenant shall pay to Landlord on
the Purchase Date the amount of such Monetary Obligations.  Upon the completion
of such purchase, this Lease and all obligations and liabilities of Tenant
hereunder shall terminate, except any Surviving Obligations.

     (c) If the Tenant shall cause completion of such purchase to be delayed
after (i) the Termination Date, in the event of a purchase pursuant to Paragraph
18 or, (ii) the date scheduled for such purchase, in the event of a purchase
under any other provision of this Lease then (x) Rent shall continue to be due
and payable until completion of such purchase and (y) at Landlord's sole option,
Fair Market Value shall be redetermined and the Relevant Amount payable by
Tenant pursuant to the applicable provision of this Lease shall be adjusted to
reflect such redetermination.  Landlord shall not be deemed to have caused
completion of such purchase to be delayed if it in good faith disputes the
process or methodology for determining Fair Market Value.

     (d) Any prepaid Monetary Obligations paid to Landlord shall be prorated as
of the Purchase Date, and the prorated unapplied balance shall be deducted from
the Relevant Amount due to Landlord.

     21.  Assignment and Subletting; Prohibition against Leasehold Financing.
          ------------------------------------------------------------------ 

     (a) Tenant shall have the right so long as an Event of Default has not
occurred and is continuing, upon thirty (30) days prior written notice to
Landlord and Lender, with no consent of Landlord or Lender being required or
necessary ("Preapproved Assignment") to assign this Lease to any Person
("Preapproved Assignee") that is a Subsidiary of Tenant on the date hereof or
that, after the date hereof, is a wholly-owned Subsidiary of Tenant or which,
whether or not in connection with the transfer or sale of all or substantially
all of Tenant's business, immediately following such assignment satisfies all

                                     -37-
<PAGE>
 
published criteria necessary to obtain a publicly traded unsecured senior debt
rating of "A" or better from Moody's Investors Services, Inc. or a rating of "A"
or better from Standard & Poor's Corporation, and in the event all of such
rating agencies cease to furnish such ratings, then a comparable rating by any
rating agency reasonably acceptable to Landlord and Lender.

     (b) During the Initial Term, if Tenant desires to assign this Lease to a
Person ("Non-Preapproved Assignee") who would not be a Preapproved Assignee
("Non-Preapproved Assignment") then Tenant shall, not less than ninety (90) days
prior to the date on which it desires to make a Non-Preapproved Assignment
submit to Landlord and Lender information regarding the following with respect
to the Non-Preapproved Assignee:  (A) credit, (B) capital structure, (C)
management, (D) operating history, (E) proposed use of the Leased Premises and
(F) risk factors associated with the proposed use of the Leased Premises by the
Non-Preapproved Assignee, taking into account  factors such as environmental
concerns, product liability and the like.  Landlord and Lender shall review such
information and shall approve or disapprove the Non-Preapproved Assignee no
later than the thirtieth (30th) day following receipt of all such information,
and Landlord and Lender shall be deemed to have acted reasonably in granting or
withholding consent if such grant or disapproval is based on their review of the
above-described criteria.  Notwithstanding anything to the contrary contained
herein, if the request for consent to a Non-Preapproved Assignment is in
connection with the sale by Tenant of all or substantially all of its assets,
Landlord and Lender shall be deemed to have consented to the Non-Preapproved
Assignment so long as an Event of Default has not occurred and is continuing and
if, immediately after the assignment, the Non-Preapproved Assignee has, on a pro
forma basis, an Adjusted Consolidated Net Worth (as defined in Exhibit "E") of
not less than Fifty-three Million Dollars ($53,000,000).

     (c) After the Initial Term, if Tenant desires to carry out a Non-
Preapproved Assignment, then Tenant shall, not less than fifteen (15) days prior
to the date on which it desires to make such Non-Preapproved Assignment, submit
to Landlord (and Lender, if Lender's consent to the Pre-Approved Assignment is
required), reasonable information regarding the identity and credit of the Non-
Preapproved Assignee.  Landlord (and Lender, if applicable) shall review such
information and shall, no later than the fifteenth (15th) day following receipt
of such information, approve or disapprove the Non-Preapproved Assignee.  Such
approval shall be deemed given if the net worth of the Non-Preapproved Assignee
is greater than or equal to the net worth of the Tenant as shown on its then
most recently prepared financial statements, and otherwise such approval shall
not be unreasonably withheld, conditioned or delayed.

                                     -38-
<PAGE>
 
     (d) If Landlord and Lender withhold consent to the Non-Preapproved
Assignment and Tenant desires to complete the Non-Preapproved Assignment, Tenant
shall make a rejectable offer (the "Intended Assignment Offer") to purchase the
Leased Premises for a purchase price equal to the Offer Amount and to consummate
the purchase on the first Basic Rent Payment Date occurring thirty (30) days
after the determination of Fair Market Value (the "Intended Assignment Purchase
Date").  Notwithstanding the foregoing, if the Intended Assignment Offer is
accepted by Landlord and the Non-Preapproved Assignment occurs on a date (the
"Assignment Date") that is prior to the Intended Assignment Purchase Date, then
no later than the Assignment Date, then on the Assignment Date Tenant shall
deposit in escrow with Lender an amount (the "Deposit Amount") equal to one
hundred percent (100%) of the sum of the Acquisition Cost and any Prepayment
Premium.  The Deposit Amount shall be held by and invested by Landlord and the
Deposit Amount, together with any interest earned thereon, shall be applied on
the Intended Assignment Purchase Date to payment of the Offer Amount.

     (e) If Landlord shall reject the Intended Assignment Offer by notice to
Tenant, such notice to contain the  written consent of Lender to such rejection,
no later than the thirtieth (30th) day following receipt of the Intended
Assignment Offer by Landlord, then this Lease shall remain in full force and
effect and Landlord and Lender shall be deemed to have consented to the Non-
Preapproved Assignment.  Nothing provided herein shall constitute a waiver by
Landlord of the obligation of Tenant re comply with the requirements of this
Paragraph 21(a)(iii) if a subsequent Non-Preapproved Assignment arises.  No
rejection of the Intended Assignment Offer shall be effective for any purpose
unless consented to in writing by Lender.

     (f) Unless Landlord shall have rejected the Intended Assignment Offer by
the foregoing notice to Tenant not later than the thirtieth (30th) day following
receipt of information described in the foregoing Paragraph 21(a)(ii), Landlord
shall be conclusively presumed to have accepted the Intended Assignment Offer.
If the Intended Assignment Offer is accepted by Landlord, Tenant shall pay to
Landlord the Offer Amount (less the Deposit Amount and interest thereon paid to
Landlord) on the Intended Assignment Purchase Date and, provided that no Rent or
any other charge is due and unpaid under this Lease as of the Intended
Assignment Purchase Date and Tenant is otherwise in compliance with the terms of
this Lease, Landlord shall convey to Tenant the Leased Premises in accordance
with the provisions of Paragraph 20 of this Lease.

     (g) Any assignment of Tenant's interest in this Lease by operation of law
as a result of any merger or consolidation by Tenant shall be governed by the
provisions of Paragraph 1(c) of Exhibit "E".

                                     -39-
<PAGE>
 
     (h) Tenant shall have the right, upon thirty (30) days prior written notice
to Landlord and Lender, to enter into one or more subleases that demise, in the
aggregate, up to but not in excess of thirty-one percent (31%) of the gross
space in the Improvements with no consent or approval of Landlord being required
or necessary ("Preapproved Sublet").  Other than pursuant to a Preapproved
Sublet, during the Initial Term, no portion of the Leased Premises shall be
subleased during the Term to any other Person without the prior written consent
of Landlord and Lender, which consent shall not be unreasonably withheld or
delayed, and which consent shall be granted or withheld based on a review of the
following criteria as they relate to the proposed sublessee:  (i) credit, (2)
capital structure, (3) management, (4) operating history and (5) the proposed
use of the sublet portion of the Improvements, taking into account factors
related to the proposed subtenant's use of the Leased Premises such as
environmental concerns.  Landlord and Lender shall be deemed to have acted
reasonably in granting or withholding consent if such grant or disapproval is
based on their reasonable review of the above-described criteria.

     (i) After the Initial Term, if Tenant desires to sublet any portion of the
Leased Premises other than as  permitted by the first sentence of subparagraph
(i) above, then Tenant shall, not less than fifteen (15) days prior to the date
on which it desires to enter into such sublease, submit to Landlord regarding
the identity and credit of the proposed subtenant.  Landlord shall review such
information and shall, no later than the fifteenth (15th) day following receipt
of such information, approve or disapprove the proposed sublease.  Such approval
shall be deemed given if the net worth of the proposed subtenant is greater than
or equal to the net worth of the Tenant as shown on its then most recently
prepared financial statements, and otherwise such approval shall not be
unreasonably withheld, conditioned or delayed.

     (j) If Tenant assigns all its rights and interest under this Lease, the
assignee under such assignment shall expressly assume all the obligations of
Tenant hereunder, actual or contingent, including obligations of Tenant which
may have arisen on or prior to the date of such assignment, by a written
instrument delivered to Landlord at the time of such assignment.  Each sublease
of any of the Leased Premises shall be subject and subordinate to the provisions
of this Lease.  No assignment or sublease made as permitted by this Paragraph 21
shall affect or reduce any of the obligations of Tenant hereunder, and all such
obligations shall continue in full force and effect as obligations of a
principal and not as obligations of a guarantor, as if no assignment or sublease
had been made.  No assignment or sublease shall impose any additional
obligations on Landlord under this Lease.

     (k) With respect to any Preapproved Assignment or Preapproved Sublet,
Tenant shall provide to Landlord information

                                     -40-
<PAGE>
 
reasonably required by Landlord to establish that any proposed Preapproved
Assignment or Preapproved Sublet satisfies the criteria set forth above.

     (l) Tenant shall, within ten (10) days after the execution and delivery of
any assignment or sublease consented to by Landlord, deliver a duplicate
original copy thereof to Landlord which, in the event of an assignment, shall be
in recordable form.

     (m) As security for performance of its obligations under this Lease, Tenant
hereby grants, conveys and assigns to Landlord all right, title and interest of
Tenant in and to all subleases now in existence or hereinafter entered into for
any or all of the Leased Premises, any and all extensions, modifications and
renewals thereof and all rents, issues and profits therefrom.  Landlord hereby
grants to Tenant a license to collect and enjoy all rents and other sums of
money payable under any sublease of any of the Leased Premises, provided,
however, that Landlord shall have the absolute right at any time during the
existence of an Event of Default, upon notice to Tenant and any subtenants, to
revoke said license and to collect such rents and sums of money and to retain
the same.  Tenant shall not consent to, cause or allow any modification or
alteration of any of the terms,  conditions or covenants of any of the subleases
or the termination thereof, without the prior written approval of Landlord,
which consent shall not be unreasonably withheld, nor shall Tenant do nor permit
anything to be done, the doing of which, nor omit or refrain from doing
anything, the omission of which, will or could be a breach of or default in the
terms of any of the subleases.

     (n) Tenant shall have the right to grant a first lien leasehold mortgage
on, or to pledge its leasehold interest in, the Leased Premises to its senior
lender, but shall not have the power to otherwise mortgage, pledge or otherwise
encumber its interest under this Lease or any sublease of the Leased Premises,
and any other such mortgage, pledge or encumbrance made in violation of this
Paragraph 21 shall be void.  Landlord and Lender shall execute such documents as
may be reasonably requested by Tenant's senior lender and are customarily
acceptable to Landlord and Lender in order to afford to such senior lender
rights of notice and an opportunity to cure an Event of Default and the benefits
of any non-disturbance and attornment agreement in favor of Tenant, provided,
however, that any entity that becomes a successor tenant under this Paragraph
21(g) shall be required to be in compliance with all of the terms of this Lease,
including, during the Initial Term, the Covenants.

     (o) Subject to Tenant's rights under Paragraph 35, Landlord may sell or
transfer the Leased Premises at any time without Tenant's consent to any third
party (each a "Third Party Purchaser"), provided, that so long as no Event of
Default

                                     -41-
<PAGE>
 
exists either at the time Landlord enters into an Agreement of Sale for the
purchase of the Leased Premises or on the date of conveyance to a Third Party
Purchaser, Landlord shall not sell the Leased Premises to any Person whose
primary business is the manufacturing of equipment that makes masks for the
semi-conductor industry.  In the event of any such transfer, Tenant shall attorn
to any Third Party Purchaser as Landlord so long as such Third Party Purchaser
and Landlord notify Tenant in writing of such transfer and such Third Party
Purchaser assumes in writing the obligations of Landlord under this Lease.  At
the request of Landlord, Tenant will execute such documents confirming the
agreement referred to above and such other agreements as Landlord may reasonably
request, provided that such agreements do not increase the liabilities and
obligations of Tenant hereunder.

     22.  Events of Default.
          ----------------- 

     (a) The occurrence of any one or more of the following (after expiration of
any applicable cure period as provided in Paragraph 22(b)) shall, at the sole
option of Landlord, constitute an "Event of Default" under this Lease:

          (i)  a failure by Tenant to make any payment of any Monetary
     Obligation, regardless of the reason for such failure;

          (ii)  a failure by Tenant duly to perform and observe, or a violation
     or breach of, any other provision hereof not otherwise specifically
     mentioned in this Paragraph 22(a);

          (iii)  any representation or warranty made by Tenant herein or in any
     certificate, demand or request made pursuant hereto proves to be incorrect,
     now or hereafter, in any material respect;

          (iv) a default beyond any applicable cure period or at maturity by
     Tenant in any payment of principal or interest on any obligations for
     borrowed money having an outstanding principal balance of $10,000,000 or
     more in the aggregate, or in the performance of any other provision
     contained in any instrument under which any such obligation is created or
     secured (including the breach of any covenant thereunder), (x) if such
     payment is a payment at maturity or a final payment, or (y) if a result of
     such default is to cause such obligation to be accelerated prior to its
     stated maturity;

          (v)  a default by Tenant beyond any applicable cure period in the
     payment of rent under, or in the performance of any other material
     provision of, any other lease or leases that have, in the aggregate,

                                     -42-
<PAGE>
 
     rental obligations over the terms thereof of $10,000,000 or more in the
     aggregate if the landlord under any such lease or leases commences to
     terminate such lease or leases, dispossess Tenant or accelerate the rent
     payable thereunder;

          (vi)  a final, non-appealable judgment or judgments for the payment of
     money in excess of $10,000,000 (less any amounts payable from the proceeds
     of insurance) in the aggregate shall be rendered against Tenant and the
     same shall not be payable from the proceeds of insurance and shall remain
     undischarged, unbonded or unsatisfied for a period of sixty (60)
     consecutive days;

          (vii)  Tenant shall breach any Covenant or an Intended Transaction or
     a Non-Preapproved Assignment shall occur and Tenant shall have failed to
     comply with the provisions of Paragraph 21(a)(iv) through (vi) or Paragraph
     33, as applicable;

          (viii)  Tenant shall (A) voluntarily be adjudicated a bankrupt or
     insolvent, (B) seek or consent to the appointment of a receiver or trustee
     for itself or for the Leased Premises, (C) file a petition seeking relief
     under the bankruptcy or other similar laws of the United States, any state
     or any jurisdiction, (D) make a general assignment for the benefit of
     creditors, or (E) be unable to pay its debts as they mature;

          (ix)  a court shall enter an order, judgment or decree appointing,
     without the consent of Tenant, a receiver or trustee for it or for any of
     the Leased Premises or approving a petition filed against Tenant which
     seeks relief under the bankruptcy or other similar laws of the United
     States, any state  or any jurisdiction, and such order, judgment or decree
     shall remain undischarged or unstayed ninety (90) days after it is entered;

          (x)  the Leased Premises shall have been vacated (i.e., ceased to be
     operated on a consistent basis) except as permitted under, and subject to
     the terms and conditions of, Paragraph 38 hereof or the Leased Premises
     shall have been abandoned;

          (xi)  Tenant shall be liquidated or dissolved or shall begin
     proceedings towards its liquidation or dissolution;

          (xii)  the estate or interest of Tenant in any of the Leased Premises
     shall be levied upon or attached in any proceeding and such estate or
     interest is about

                                     -43-
<PAGE>
 
     to be sold or transferred or such process shall not be vacated or
     discharged within sixty (60) days after it is made;

          (xiii)  a failure by Tenant, following any notice and an opportunity
     to cure, to perform or observe, or a violation or breach of, or a
     misrepresentation by Tenant under any provision of any Assignment or any
     other document between Tenant and Lender that, as to such Assignment or
     other document, (A) recites that a breach, violation or misrepresentation
     by Tenant thereunder will cause a default under the Loan and (B) provides
     that Lender will give to Tenant any notice of such default that it is
     required to give to Landlord, if such failure, violation, breach or
     misrepresen tation gives rise to a default beyond any applicable cure
     period with respect to any Loan; or

          (xiv)  a failure by Tenant to maintain in effect any occupancy permit
     for the Leased Premises or permit required under any Environmental Law.

     (b) No notice or cure period shall be required in any one or more of the
following events:  (A) the occurrence of an Event of Default under clause (i)
(except as otherwise set forth below), (v), (vi), (vii), (viii), (ix), (x)
(except as otherwise set forth below), (xi), (xii) or (xiii) of Paragraph 22(a);
(B) the default consists of a failure to pay Basic Rent, a failure to provide
any insurance required by Paragraph 16 or an assignment or sublease entered into
in violation of Paragraph 21; or (C) the default is such that any delay in the
exercise of a remedy by Landlord could reasonably be expected to cause
irreparable non-monetary harm to Landlord.  If the default consists of the
failure to pay any Monetary Obligation under clause (i) of Paragraph 22(a), the
applicable cure period shall be five (5) days from the date on which notice is
given, but Landlord shall not be obligated to give notice of, or allow any cure
period for, any such default more than twice within any Lease Year.  If the
default consists of a default under clauses (iv), (v) or (x) the applicable cure
period shall be ten (10) days from the date on which notice is given provided
that (X) with respect to a default under clause (iv) or (v) Tenant immediately
gives to Landlord notice of acceleration or the exercise of remedies by a
landlord or (Y) with respect to a default under clause (x) Tenant immediately
give to Landlord notice that it has vacated the Leased Premises.  If the default
consists of a default under clauses (ii), (iii) or (xiv) of Paragraph 22(a),
other than the events specified in clauses (B) and (C) of the first sentence of
this Paragraph 22(b), the applicable cure period shall be twenty (20) days from
the date on which notice is given or, if the default cannot be cured within such
twenty (20) day period, the cure period shall be extended for the period
required to cure the default (but such cure period, including any extension,
shall not in the aggregate

                                     -44-
<PAGE>
 
exceed one hundred eighty (180) days), provided that Tenant shall commence to
cure the default within the said twenty-day period and shall actively,
diligently and in good faith proceed with and continue the curing of the default
until it shall be fully cured.

     23.  Remedies and Damages Upon Default.
          --------------------------------- 

     (a) If an Event of Default shall have occurred and is continuing, Landlord
shall have the right, at its sole option, then or at any time thereafter, to the
extent permitted by applicable law, to exercise its remedies and to collect
damages from Tenant in accordance with this Paragraph 23, without demand upon or
notice to Tenant except as otherwise provided in Paragraph 22(b) and this
Paragraph 23.

          (i)  Landlord may give Tenant notice of Landlord's intention to
     terminate this Lease on a date specified in such notice.  Upon such date,
     this Lease, the estate hereby granted and all rights of Tenant hereunder
     shall expire and terminate.  Upon such termination, Tenant shall
     immediately surrender and deliver possession of the Leased Premises to
     Landlord in accordance with Paragraph 26.  If Tenant does not so surrender
     and deliver possession of the Leased Premises, Landlord may re-enter and
     repossess the Leased Premises, with or without legal process, by peaceably
     entering the Leased Premises and changing locks or by summary proceedings,
     ejectment or any other lawful means or procedure.  Upon or at any time
     after taking possession of the Leased Premises, Landlord may, by peaceable
     means or legal process, remove any Persons or property therefrom.  Landlord
     shall be under no liability for or by reason of any such entry,
     repossession or removal.  Notwithstanding such entry or repossession,
     Landlord may (A) exercise the remedy set forth in and collect the damages
     permitted by Paragraph 23(a)(iii) or (B) collect the damages set forth in
     Paragraph 23(c).

          (ii)  After repossession of the Leased Premises pursuant to clause (i)
     above, Landlord shall have the right to relet any of the Leased Premises to
     such tenant or tenants, for such term or terms, for such rent, on such
     conditions and for such uses as Landlord in its sole discretion may
     determine, and collect and receive any rents payable by reason of such
     reletting.  Landlord may make such Alterations in connection with such
     reletting as it may deem advisable in its sole discretion.  Notwithstanding
     any such reletting, Landlord may collect the damages set forth in Paragraph
     23(c).

                                     -45-
<PAGE>
 
          (iii)  To the extent permitted by applicable law, Landlord may, upon
     notice to Tenant, require Tenant to make an irrevocable offer to terminate
     this Lease upon payment to Landlord of an amount (the "Default Termination
     Amount") specified in the next sentence.  The "Default Termination Amount"
     shall be the greater of (A) the Fair Market Value of the Leased Premises,
     or (B) the sum of the Acquisition Cost and Prepayment Premium which
     Landlord will be required to pay in prepaying any Loan with proceeds of the
     Default Termination Amount.  Upon such notice to Tenant, Tenant shall be
     deemed to have made such offer and shall, if requested by Landlord, within
     ten (10) days following such request deposit with Landlord as payment
     against the Default Termination Amount the amount described in (B) above,
     Landlord and Tenant shall promptly commence to determine Fair Market Value.
     Within thirty (30) days after the Fair Market Value Date, Landlord shall
     accept or reject such offer.  If Landlord accepts such offer then, on the
     tenth (10th) business day after such acceptance, Tenant shall pay to
     Landlord the Default Termination Amount and, at the request of Tenant,
     Landlord will convey the Leased Premises to Tenant or its designee in
     accordance with Paragraph 20.  Any rejection by Landlord of such offer
     shall have no effect on any other remedy Landlord may have under this
     Lease.

     (b) In addition to its other rights under this Lease, Landlord has the
remedy described in California Civil Code Section 1951.4 which provides
substantially as follows:  Landlord may continue the Lease in effect after
Tenant's breach and abandonment and recover the Rent as it becomes due.  In
accordance with California Civil Code Section 1951.4 (or any successor statute),
Tenant acknowledges that in the event Tenant breaches this Lease and abandons
the Leased Premises, this Lease shall continue in effect for so long as Landlord
does not terminate Tenant's right to possession, and Landlord may enforce all of
its rights and remedies under this Lease, including the right to recover the
Rent as it becomes due under this Lease.  Tenant acknowledges that the
limitations on subletting and assignment set forth in Paragraph 21 are
reasonable.  Acts of maintenance or preservation or efforts to relet the Leased
Premises or the appointment of a receiver upon initiative of Landlord to protect
Landlord's interest under this Lease shall not constitute a termination of
Tenant's right to possession.

     (c) If Landlord elects to terminate this Lease upon the occurrence of an
Event of Default, Landlord may collect from Tenant damages computed in
accordance with the following  provisions in addition to Landlord's other
remedies under this Lease:

                                     -46-
<PAGE>
 
          (i)  the worth at the time of award of any unpaid Rent which has been
     earned at the time of such termination; plus

          (ii)  the worth at the time of award of the amount by which any unpaid
     Rent which would have been earned after termination until the time of award
     exceeds the amount of such rental loss that Tenant proves could have been
     reasonably avoided; plus

          (iii)  the worth at the time of award of the amount by which the
     unpaid Rent for the balance of the Term after the time of award exceeds the
     amount of such rental loss that Tenant proves could be reasonably avoided,
     plus

          (iv)  any other reasonable Cost necessary to compensate Landlord for
     all the detriment proximately caused by Tenant's failure to perform its
     obligations under this Lease or which in the ordinary course of things
     would be likely to result therefrom including, without limitation,
     brokerage commissions, the cost of repairing and reletting the Leased
     Premises and reasonable attorneys' fees; plus

          (v)  at Landlord's election, such other amounts in addition to or in
     lieu of the foregoing as may be permitted from time to time by applicable
     state law.  Damages shall be due and payable from the date of termination.

     (d) For purposes of clauses (i) and (ii) of this Paragraph, the "worth at
the time of award" shall be computed by adding interest at the Default Rate to
the past due Rent.  For the purposes of clause (iii) of this Paragraph 23(d),
the "worth at the time of award" shall be computed by discounting such amount at
the discount rate of the Federal Reserve Bank of San Francisco at the time of
the award, plus one percent (1%).

     (e) Landlord shall be entitled to apply the Security Deposit to any amounts
due under Paragraph 23(c) if this Lease shall be terminated, or, if this Lease
shall remain in full force and effect, to any amounts due under Paragraph 23(b)
or in the following order (i) to past due Basic Rent, (ii) to cure any other
monetary Event of Default and (iii) to installments of Basic Rent in inverse
order of maturity commencing with the last installment of the Term.

     (f) Notwithstanding anything to the contrary herein contained, in lieu of
or in addition to any of the foregoing remedies and damages, Landlord may
exercise any remedies and collect any damages available to it at law or in
equity.  If Landlord is unable to obtain full satisfaction pursuant to the

                                     -47-
<PAGE>
 
exercise of any remedy, it may pursue any other remedy which it has hereunder or
at law or in equity.

     (g) Landlord shall not be required to mitigate any of its damages hereunder
unless required to by applicable Law.  If any Law shall validly limit the amount
of any damages provided for herein to an amount which is less than the amount
agreed to herein, Landlord shall be entitled to the maximum amount available
under such Law.

     (h) No termination of this Lease, repossession or reletting of the Leased
Premises, exercise of any remedy or collection of any damages pursuant to this
Paragraph 23 shall relieve Tenant of any Surviving Obligations.

     (i) WITH RESPECT TO ANY REMEDY OR PROCEEDING OF LANDLORD HEREUNDER, TENANT
WAIVES ANY RIGHT TO A TRIAL BY JURY.  Tenant agrees that this Lease constitutes
a written consent to waiver of trial by jury pursuant to the provisions of
California Code of Civil Procedure Section 631 and Tenant does hereby appoint
Landlord its true and lawful attorney-in-fact, which appointment is coupled with
an interest, and Tenant does hereby authorize and empower Landlord, in the name,
place and stead of Tenant, to file this Lease with the clerk or judge of any
court of competent jurisdiction as statutory written consent to waiver of trial
by jury.

     (j) During the existence of any Event of Default, Landlord shall have the
right (but no obligation) to perform any act required of Tenant hereunder and,
if performance of such act requires that Landlord enter the Leased Premises,
Landlord may enter the Leased Premises for such purpose.

     (k) No failure of Landlord (i) to insist at any time upon the strict
performance of any provision of this Lease or (ii) to exercise any option,
right, power or remedy contained in this Lease shall be construed as a waiver,
modification or relinquishment thereof.  A receipt by Landlord of any sum in
satisfaction of any Monetary Obligation with knowledge of the breach of any
provision hereof shall not be deemed a waiver of such breach, and no waiver by
Landlord of any provision hereof shall be deemed to have been made unless
expressed in a writing signed by Landlord.

     (l) Tenant hereby waives and surrenders, for itself and all those claiming
under it, including creditors of all kinds, (i) any right and privilege which it
or any of them may have under any present or future Law to redeem any of the
Leased Premises or to have a continuance of this Lease after termination of this
Lease or of Tenant's right of occupancy or possession pursuant to any court
order or any provision hereof, and (ii) the benefits of any present or future
Law which exempts property from liability for debt or for distress for rent.

                                     -48-
<PAGE>
 
     (m) Except as otherwise provided herein, all remedies are cumulative and
concurrent and no remedy is exclusive of any other remedy.  Each remedy may be
exercised at any time an Event of Default has occurred and is continuing and may
be exercised from time to time.  No remedy shall be exhausted by any exercise
thereof.

     24.  Notices.  All notices, demands, requests, consents, approvals, offers,
          -------                                                               
statements and other instruments or communications required or permitted to be
given pursuant to the provisions of this Lease shall be in writing and shall be
deemed to have been given for all purposes when delivered in person or by
Federal Express or other reliable 24-hour delivery service or five (5) business
days after being deposited in the United States mail, by registered or certified
mail, return receipt requested, postage prepaid, addressed to the other party at
its address stated above.  A copy of any notice given by Tenant to Landlord
shall simultaneously be given by Tenant to Reed Smith Shaw & McClay, 2500 One
Liberty Place, Philadelphia, PA  19103, Attention:  Chairman, Real Estate
Department.  For the purposes of this Paragraph, any party may substitute
another address stated above (or substituted by a previous notice) for its
address by giving fifteen (15) days' notice of the new address to the other
party, in the manner provided above.

     25.  Estoppel Certificate.  At any time upon not less than ten (10) days'
          --------------------                                                
prior written request by either Landlord, Tenant or Lender (the "Requesting
Party") to Landlord or Tenant, as applicable, (the "Responding Party"), the
Responding Party shall deliver to the Requesting Party a statement in writing,
executed by an authorized officer of the Responding Party, certifying (a) that,
except as otherwise specified, this Lease is unmodified and in full force and
effect, (b) the dates to which Basic Rent, Additional Rent and all other
Monetary Obligations have been paid, (c) that, to the knowledge of the signer of
such certificate and except as otherwise specified, no default by either
Landlord or Tenant exists hereunder, (d) such other matters as the Requesting
Party may reasonably request, and (e) if Tenant is the Responding Party that,
except as otherwise specified, there are no proceedings pending or, to the
knowledge of the signer, threatened, against Tenant before or by any court or
administrative agency which, if adversely decided, would materially and
adversely affect the financial condition and operations of Tenant.  Any such
statements by the Responding Party may be relied upon by the Requesting Party,
any Person whom the Requesting Party notifies the Responding Party in its
request for the Certificate is an intended recipient or beneficiary of the
Certificate, any Lender or their assignees and by any prospective purchase or
mortgagee of any of the Leased Premises.  Any certificate required under this
Paragraph 25 and delivered by Tenant shall state that, in the opinion of each
person signing the same, he has made such examination or investigation as is
necessary to enable him to express an informed opinion as to the subject matter
of such

                                     -49-
<PAGE>
 
certificate, and shall briefly state the nature of such examination or
investigation.

     26.  Surrender.  Upon the expiration or earlier termination of this Lease,
          ---------                                                            
Tenant shall peaceably leave and surrender the Leased Premises to Landlord in
the same condition in which the Leased Premises was at the commencement of this
Lease, except as repaired, rebuilt, restored, altered, replaced or added to as
permitted or required by any provision of this Lease, and except for ordinary
wear and tear.  Upon such surrender, Tenant shall (a) remove from the Leased
Premises all property which is owned by Tenant or third parties other than
Landlord and (b) repair any damage caused by such removal.  Property not so
removed shall become the property of Landlord, and Landlord may thereafter cause
such property to be removed from the Leased Premises.  The cost of removing and
disposing of such property and repairing any damage to any of the Leased
Premises caused by such removal shall be paid by Tenant to Landlord upon demand.
Landlord shall not in any manner or to any extent be obligated to reimburse
Tenant for any such property which becomes the property of Landlord pursuant to
this Paragraph 26.

     27.  No Merger of Title.  There shall be no merger of the leasehold estate
          ------------------                                                   
created by this Lease with the fee estate in any of the Leased Premises by
reason of the fact that the same Person may acquire or hold or own, directly or
indirectly, (a) the leasehold estate created hereby or any part thereof or
interest therein and (b) the fee estate in any of the Leased Premises or any
part thereof or interest therein, unless and until all Persons having any
interest in the interests described in (a) and (b) above which are sought to be
merged shall join in a written instrument effecting such merger and shall duly
record the same.

     28.  Books and Records.
          ----------------- 

     (a) Tenant shall permit Landlord and Lender by their respective agents,
accountants and attorneys, upon reasonable notice to Tenant, to visit and
inspect the Leased Premises and examine (and make copies of) the records and
books of account and to discuss the finances and business with the officers of
Tenant, at such reasonable times as may be requested by Landlord.  Upon the
request of Lender (either telephonically or in writing), Tenant shall provide to
Lender (with a copy to Landlord) such other information as Lender shall
reasonably request.

     (b) Tenant shall deliver to Landlord and to Lender within ninety (90) days
of the close of each fiscal year, annual audited financial statements of Tenant
prepared by nationally recognized independent certified public accountants.
Tenant shall also furnish to Landlord and Lender within forty-five (45) days of
the close of each of the remaining three (3) fiscal quarters unaudited financial
statements of Tenant, certified by

                                     -50-
<PAGE>
 
Tenant's chief financial officer, and all other quarterly reports of Tenant, and
all filings, if any, of Form 10-K, Form 10-Q and other required  filings with
the Securities and Exchange Commission pursuant to the provisions of the
Securities Exchange Act of 1934, as amended, or any other Law.  All financial
statements of Tenant shall be prepared in accordance with GAAP consistently
applied.  All annual financial statements shall be accompanied (x) by an opinion
of said accountants stating that (1) there are no qualifications as to the scope
of the audit and (2) the audit was performed in accordance with GAAP and (y) by
the affidavit of the president or a vice president of Tenant, dated within five
(5) days of the delivery of such statement, stating that (i) the affiant knows
of no Event of Default, or event which, upon notice or the passage of time or
both, would become an Event of Default which has occurred and is continuing
hereunder or, if any such event has occurred and is continuing, specifying the
nature and period of existence thereof and what action Tenant has taken or
proposes to take with respect thereto and (ii) except as otherwise specified in
such affidavit, that Tenant has fulfilled all of its obligations under this
Lease which are required to be fulfilled on or prior to the date of such
affidavit.

     (c) Landlord and its agents, accountants and attorneys, shall consider and
treat on a strictly confidential basis (i) any information contained in the
books and records of Tenant, (ii) any copies of any books and records of Tenant,
and any financial statements of Tenant pursuant to Paragraph 28(b) which are
delivered to or received by them.  Landlord and its agents, accountants and
attorneys, shall conspicuously mark all copies of such documents as
"Confidential."  Neither Landlord nor its agents, accountants and attorneys,
shall disclose any information contained in Tenant's books and records nor
distribute copies of any of such books and records nor Tenant's financial
statements to any other Persons without the prior written consent of the chief
operating officer of Tenant.

     (d) The restrictions contained in this Paragraph 28(c) shall not prevent
disclosure by Landlord any information in any of the following circumstances:

          (i)  Upon the order of any court or administrative agency to the
     extent required by such order and not effectively stayed or by appeal or
     otherwise;

          (ii)  Upon the request, demand or requirement of any regulatory agency
     or authority having jurisdiction over such party, including the Securities
     and Exchange Commission (whether or not such request or demand has the
     force of law);

                                     -51-
<PAGE>
 
          (iii)  That has been publicly disclosed by Tenant in a press release
     or other public announcement of general circulation;

          (iv)  To counsel or accountants for Landlord or counsel or accountants
     for such other Person who has agreed to abide by the provisions of this
     Paragraph 28(c);

          (v)  While an Event of Default exists, in connection with the exercise
     of any right or remedy under this Lease or any other related document;

          (vi)  Independently developed by Landlord to the extent that
     confidential information provided by Tenant is not used to develop such
     information;

          (vii)  With respect to financial information and information that
     Landlord or its attorneys deem to be material in any reporting to the
     shareholders of Landlord or the shareholders or prospective shareholders
     (whether through a registered public offering or otherwise) of Landlord's
     parent company;

          (viii)  In connection with any sale or financing of the Leased
     Premises, provided that any recipient of such information who is a
     prospective purchaser of the Leased Premises (except for a purchaser that
     purchases all or substantially all of the assets of Landlord's parent
     company) shall agree to be bound by the terms of this Paragraph 28(c);

          (ix)  From Landlord to Lender; or

          (x)  As otherwise required by Law.

     29.  Determination of Value.
          ---------------------- 

     (a) Whenever a determination of Fair Market Value or Fair Market Rental
Value is required pursuant to any provision of this Lease, such Fair Market
Value or Fair Market Rental Value shall be determined in accordance with the
following procedure:

          (i)  Landlord and Tenant shall endeavor to agree upon such Fair Market
     Value within thirty (30) days after the date (the "Applicable Initial
     Date") on which (A) Tenant provides Landlord with notice of its intention
     to terminate this Lease and purchase the Leased Premises pursuant to
     Paragraph 18, (B) Landlord provides Tenant with notice of its intention to
     redetermine Fair Market Value pursuant to Paragraph 20(c), (C) Landlord
     provides Tenant with notice of Landlord's intention to require Tenant to
     make an offer to terminate this Lease pursuant to

                                     -52-
<PAGE>
 
     Paragraph 23(a)(iii), (D) Tenant provides Landlord with an Intended
     Transaction Offer under Paragraph 21(a)(iii), (E) the date on which
     Landlord accepts Tenant's offer pursuant to Paragraph 33(c), (F) the date
     on which Landlord accepts the Third Party Purchaser's offer pursuant to the
     third paragraph of Paragraph 35(a) and (G) the date on which Landlord
     accepts Tenant's offer pursuant to Paragraph 38(c).  Landlord and Tenant
     shall endeavor to agree on Fair Market Rental Value on the date (also, an
     "Applicable Initial Date") which is six (6) calendar months prior to the
     expiration of the then current Term unless Tenant has previously exercised
     its option pursuant to Paragraph 5(b) not to have the Term automatically
     extended.  Upon reaching such agreement, the parties shall execute an
     agreement setting forth the amount of such Fair Market Value or Fair Market
     Rental Value, as the case may be.

          (ii)  If the parties shall not have signed such agreement within
     thirty (30) days after the Applicable Initial Date, Tenant shall within
     fifty (50) days after the Applicable Initial Date select an appraiser and
     notify Landlord in writing of the name, address and qualifications of such
     appraiser.  Within twenty (20) days thereafter, Landlord shall select an
     appraiser and notify Tenant of the name, address and qualifications of such
     appraiser.  Such two appraisers shall endeavor to agree upon Fair Market
     Value or Fair Market Rental Value, as the case may be, based on an
     appraisal made by each of them as of the Relevant Date.  If such two
     appraisers shall agree upon a Fair Market Value or Fair Market Rental
     Value, as the case may be, the amount of such Fair Market Value or Fair
     Market Rental Value, as the case may be, as so agreed shall be binding and
     conclusive.

          (iii)  If such two appraisers shall be unable to agree upon a Fair
     Market Value or Fair Market Rental Value, as the case may be, within twenty
     (20) days after the selection of an appraiser by Landlord, then such
     appraisers shall advise Landlord and Tenant of their respective
     determination of Fair Market Value or Fair Market Rental Value, as the case
     may be, and shall select a third appraiser to make the determination of
     Fair Market Value or Fair Market Rental Value, as the case may be, which
     determination as to the selection of the third appraiser shall be binding
     and conclusive upon Landlord and Tenant.

          (iv)  If such two appraisers shall be unable to agree upon the
     designation of a third appraiser within ten (10) days after the expiration
     of the twenty (20) day period referred to in clause (iii) above, or if

                                     -53-
<PAGE>
 
     such third appraiser does not make a determination of Fair Market Value or
     Fair Market Rental Value, as the case may be, within twenty (20) days after
     his selection, then such third appraiser or a substituted third appraiser,
     as applicable, shall, at the request of either party hereto (with notice to
     the other party), be appointed by the President or Chairman of the American
     Arbitration Association in San Francisco, California.  The determination of
     Fair Market Value or Fair Market Rental Value, as the case may be, made by
     the third appraiser appointed pursuant hereto shall be made within twenty
     (20) days after such appointment.

          (v)  Fair Market Value or Fair Market Rental Value, as the case may
     be, shall be the average of the determination of Fair Market Value or Fair
     Market Rental Value, as the case may be, made by the third appraiser and
     the determination of Fair Market Value or Fair Market Rental Value, as the
     case may be, made by the appraiser (pursuant to Paragraph 29(a)(iii)
     hereof) whose determination of Fair Market Value or Fair Market Rental
     Value, as the case may be, is nearest to that of the third appraiser.  Such
     average shall be binding and conclusive upon Landlord and Tenant.

          (vi)  All appraisers selected or appointed pursuant to this Paragraph
     29(a) shall (A) be independent  qualified MAI appraisers (B) have no right,
     power or authority to alter or modify the provisions of this Lease, (C)
     utilize the definition of Fair Market Value set forth in Paragraph 2 or the
     definition of Fair Market Rental Value as set forth below, and (D) be
     registered in the State if the State provides for or requires such
     registration.  The Cost of the procedure described in this Paragraph 29(a)
     above shall be borne equally by Landlord and Tenant, except that the Cost
     with respect to the appraisals performed under Paragraphs 21, 23, 33 or 38
     shall be paid by Tenant and the Cost with respect to the appraisals
     performed under Paragraph 35 shall be paid by the Third Party Purchaser.

     (b) If, by virtue of any delay, Fair Market Value is not determined by the
expiration or termination of the then current Term, then the date on which the
Term would otherwise expire or terminate shall be extended to the date specified
for termination in the particular provision of this Lease pursuant to which the
determination of Fair Market Value is being made.  If, by virtue of any delay,
Fair Market Rental Value is not determined by the expiration or termination of
the then current Term, then until Fair Market Rental Value is determined, Tenant
shall continue to pay Basic Rent during the succeeding Renewal Term in the same
amount which it was obligated under this Lease

                                     -54-
<PAGE>
 
to pay prior to the commencement of the Renewal Term.  When Fair Market Rental
Value is determined, the appropriate Basic Rent shall be calculated retroactive
to the commencement of the Renewal Term and Tenant shall either receive a refund
from Landlord (in the case of an overpayment) or shall pay any deficiency to
Landlord (in the case of an underpayment).

     (c) Fair Market Value shall be determined as follows:  The appraisers shall
add (i) the present value of the Rent for the remaining Term, (with assumed
increases in the CPI to be determined by the appraisers) using a discount rate
(which may be determined by an investment banker) based on the creditworthiness
of Tenant and (ii) the present value of the Fair Market Value of the Leased
Premises as of the end of the then current Term (without necessarily making any
assumption as to whether the Tenant will or will not exercise any remaining
options), using a yield rate required by investors for property having similar
characteristics, without consideration given to Tenant's credit rating or
creditworthiness.  In determining the value under (ii), the appraisers shall,
insofar as possible, consider properties having similar characteristics and in
reasonable proximity to the Leased Premises, but the appraisers shall not be
precluded from considering properties that do not have "clean" rooms, properties
that are (or are not) located in Hayward, California or properties having a
different use than the Leased Premises.  The appraisers shall further assume
that no default then exists under the Lease, that Tenant has complied (and will
comply) with all provisions of the Lease, and that Tenant has not violated (and
will not violate) any of the Covenants.

     (d) In determining Fair Market Rental Value, the appraisers shall determine
the amount that a willing tenant would pay, and a willing landlord of a building
having similar characteristics and in reasonable proximity to the Leased
Premises would accept, at arm's length, taking into account:  (a) the age,
quality, and condition of the Improvements; (b) that the Leased Premises will be
leased as a whole or substantially as a whole to a single user; (c) a lease term
of five (5) years; (d) an absolute triple net lease; and (e) such other items
that professional real estate appraisers customarily consider.  In determining
Fair Market Rental Value, the appraisers shall, insofar as possible, consider
properties having similar characteristics and in reasonable proximity to the
Leased Premises, but the appraisers shall not be precluded from considering
properties that do not have "clean" rooms, properties that are (or are not)
located in Hayward, or properties having a different use than the Leased
Premises.

     30.  Non-Recourse as to Landlord.  Anything contained herein to the
          ---------------------------                                   
contrary notwithstanding, any claim based on or in respect of any liability of
Landlord under this Lease shall be enforced only against the Leased Premises and
not against any other assets, properties or funds of (a) Landlord, (b) any

                                     -55-
<PAGE>
 
director, officer, general partner, shareholder, limited partner, advisor,
employee or agent of Landlord or any general partner of Landlord or any of its
general partners (or any legal representative, heir, estate, successor or assign
of any thereof), (c) any predecessor or successor partnership or corporation (or
other entity) of Landlord or any of its general partners, shareholders,
officers, directors, advisors, employees or agents, either directly or through
Landlord or its general partners, shareholders, officers, directors, advisors,
employees or agents or any predecessor or successor partnership or corporation
(or other entity), or (d) any other Person (including W.P. Carey Incorporated)
affiliated with any of the foregoing, or any director, officer, advisor,
employee or agent of any thereof).

     31.  Financing.
          --------- 

     (a) If Landlord desires to obtain or refinance any Loan, Tenant shall
negotiate in good faith with Landlord concerning any request made by any Lender
or proposed Lender for changes or modifications in this Lease.  In particular,
Tenant shall agree, upon request of Landlord, to supply any such Lender with
such notices and information as Tenant is required to give to Landlord hereunder
and to extend the rights of Landlord hereunder to any such Lender and to consent
to such financing if such consent is requested by such Lender.  Tenant shall
provide any other consent or statement and shall execute any and all other
documents that such Lender requires in connection with such financing, including
any environmental indemnity agreement and subordination, non-disturbance and
attornment agreement, so long as the same do not materially adversely affect any
right, benefit or privilege of Tenant under this Lease or materially increase
Tenant's obligations under this Lease.

     (b) Tenant shall not be responsible for any fees or expenses associated
with any of the transactions contemplated by this Paragraph 31.  Landlord shall
reimburse Tenant for all reasonable costs and expenses incurred by Tenant in
carrying out its obligations under this Paragraph 31 other than as provided in
the foregoing sentence.

     32.  Subordination.  This Lease and Tenant's interest hereunder shall be
          -------------                                                      
subordinate to any Mortgage or other security instrument hereafter placed upon
the Leased Premises by Landlord, and to any and all advances made or to be made
thereunder, to the interest thereon, and all renewals, replacements and
extensions thereof, provided that any such Mortgage or other security instrument
(or a separate instrument in recordable form duly executed by the holder of any
such Mortgage or other security instrument and delivered to Tenant) shall
provide for the recognition of this Lease and all Tenant's rights hereunder
unless and until an Event of Default exists or Landlord shall have the right to
terminate this Lease pursuant to any applicable provision hereof all as set
forth in a

                                     -56-
<PAGE>
 
Subordination, Non-Disturbance and Attornment Agreement in form and substance
reasonably satisfactory to Tenant.

     33.  Financial Covenants; Covenant Breach Offer.
          ------------------------------------------ 

     (a) Until the expiration of the Initial Term, Tenant hereby covenants and
agrees to comply with all the covenants and agreements (the "Covenants")
described in Paragraphs 1 through 3 in Exhibit "E" hereto.

     (b) If (i) Tenant intends to take any action or, with respect to Paragraph
1(b) of Exhibit "E", has knowledge that such action is intended to be taken by
another Person, or such action occurs (such action, an "Intended Transaction")
that would result in a breach of any Covenant set forth in Paragraphs 1 or 2 of
Exhibit "E" attached hereto or (ii) Tenant becomes aware that the Covenant set
forth in Paragraph 3 of Exhibit "E" will be or has been breached (a "Covenant
Breach"), then, not less than ninety (90) days prior to the Intended
Transaction, in the case of (i) above, or immediately upon becoming aware that a
Covenant Breach will occur or has occurred, in the case of (ii) above, Tenant
shall submit to Landlord and Lender a description thereof specifying the
Intended Transaction or the Covenant Breach, as the case may be, together with a
rejectable offer of Tenant to purchase the Leased Premises (as required by, and
in accordance with, the provisions of this Paragraph 33) and, if such offer is
accepted by Landlord, Tenant shall purchase the Leased Premises within the time
prescribed for such purchase (as provided in this Paragraph 33) and otherwise in
accordance with the provisions of Paragraph 20 of this Lease.

     (c) Tenant shall make an offer to purchase the Leased Premises no later
than the date (the "Intended Transaction Closing Date") on which the Intended
Transaction will occur (or, in the case of a Covenant Breach, no later than the
earlier of ninety (90) days from the date Tenant becomes aware that a Covenant
Breach has occurred or will occur) for a purchase price equal to the Offer
Amount.

     (d) If Landlord shall reject such offer by notice to Tenant, such notice to
contain the written consent of Lender to  such rejection, not later than the
thirtieth (30th) day following receipt of such offer by Landlord, then the Lease
shall remain in full force and effect and the Intended Transaction or Covenant
Breach, as the case may be, shall be deemed waived or acceptable by Landlord and
Lender, respectively, and the waiver or acceptance shall remain in effect for
the balance of the Term with respect to the specific Intended Transaction or
specific set of facts giving rise to the Covenant Breach only.  No rejection of
an offer under this Paragraph 33 shall be effective for any purpose unless
consented to in writing by Lender.

                                     -57-
<PAGE>
 
     (e) Unless Landlord shall have rejected such offer by the foregoing notice
to Tenant not later than the thirtieth (30th) day following receipt of Tenant's
offer by Landlord, Landlord shall be conclusively presumed to have accepted such
offer.  If such offer is accepted by Landlord, Tenant shall pay to Landlord the
Offer Amount on the Intended Transaction Closing Date (except that if the Fair
Market Value of the Leased Premise shall not yet have been determined, Tenant
shall pay to Landlord an amount equal to the Deposit Amount on the Intended
Transaction Closing Date and any excess of the Fair Market Value of the Leased
Premises over such sum shall be paid by Tenant to Landlord within ten (10) days
of the determination of such Fair Market Value) and, provided that no Rent or
any other charge is due and unpaid under the Lease as of the Intended
Transaction Closing Date, and Tenant is otherwise in compliance with the terms
of this Lease, Landlord shall convey to Tenant the Leased Premises in accordance
with the provision of Paragraph 20 of the Lease.

     (f) Notwithstanding the foregoing, and only with respect to offers made
solely in anticipation of an Intended Transaction or a Covenant Breach which
Tenant anticipates will occur, if Tenant determines that the Intended
Transaction or Covenant Breach will not occur, Tenant shall have the right to
revoke its offer to purchase the Leased Premises by notice to Landlord received
not later than fifteen (15) days prior to the anticipated Intended Transaction
Closing Date (TIME BEING OF THE ESSENCE), provided that Tenant shall be
obligated to pay all Costs of Landlord and Lender reasonably incurred as a
result of the offer made by Tenant pursuant to this Paragraph 33.  Nothing
provided herein shall constitute a waiver by Landlord of the obligation of
Tenant to comply with the requirements of this Paragraph 33 if a subsequent
Covenant Breach or subsequent Intended Transaction will occur or occurs.

     34.  Tax Treatment; Reporting.  Landlord and Tenant each acknowledge that
          ------------------------                                            
each shall treat this transaction as a true lease for state law purposes and
shall report this transaction as a Lease for Federal income tax purposes.  For
Federal income tax purposes each shall treat this Lease as a true lease with
Landlord as the owner of the Leased Premises and Equipment and Tenant as the
lessee of such Leased Premises and Equipment including:  (1) treating Landlord
as the owner of the property eligible to claim depreciation deductions under
Section 167 or 168 of the  Internal Revenue Code of 1986 (the "Code") with
respect to the Leased Premises and Equipment, (2) Tenant reporting its Rent
payments as a business expense under Section 162 of the Code, and (3) Landlord
reporting the Rent payments as rental income.

                                     -58-
<PAGE>
 
     35.  Right of First Refusal.
          ---------------------- 

     (a) Except as otherwise provided in clause (e) of this Paragraph 35, and
provided an Event of Default does not then exist, prior to selling the Leased
Premises to any Third Party Purchaser, if Landlord shall enter into a contract
for the sale of the Leased Premises with a Third Party Purchaser, (i) such
contract shall be conditioned upon Tenant's failure to exercise its right under
this Paragraph 35(a) and (ii) Landlord shall give written notice to Tenant of
the contract for sale, together with a copy of the executed offer or contract
and the name and business address of the Third Party Purchaser.

     (b) For a period of thirty (30) days following receipt of such notice,
Tenant shall have the right and option, exercisable by written notice to
Landlord given within said thirty (30) day period, to elect to purchase the
Leased Premises at the purchase price and upon all the terms and conditions set
forth in such contract for sale except that no contingencies contained in such
contract for sale as to environmental assessments, engineering studies,
inspection of the Leased Premises, sale of other property, state of the title to
or encumbrances on the Leased Premises which pertains to any exception of title
created by, or suffered to exist by, Tenant, or any other condition or
contingency to the Third Party Purchaser's obligation to purchase the Leased
Premises which pertains to the condition of the Leased Premises, shall apply to
Tenant's obligation to purchase the Leased Premises under this Paragraph 35, and
Tenant shall be obligated to purchase the Leased Premises without any such
condition or contingency.

     (c) If at the expiration of the aforesaid thirty (30) day period Tenant
shall have failed to exercise the aforesaid option, Landlord may sell the Leased
Premises to such Third Party Purchaser upon the terms set forth in such
contract.  For the purposes of this Paragraph 35(a), the purchase price in any
contract to purchase the Leased Premises which is received by Landlord between
the first day of the last six (6) calendar months of the ninth (9th) Lease Year
or the first six (6) calendar months of the tenth (10th) Lease Year shall be
deemed to be "acceptable to Landlord" if such offer (i) is for an amount equal
to or greater than the greater of (A) Fair Market Value (which shall be
determined in accordance with the procedure set forth in Paragraph 29 of this
Lease, except that references to Tenant in Paragraphs 29(a) and (b) hereof shall
mean Third Party Purchaser) or (B) the sum of (1) the Acquisition Cost reduced
by the principal payments made on the Note to the date of purchase and (2) the
Prepayment Premium, (ii) provides that the purchaser pays  all costs in
connection with such purchase, (iii) provides that such purchase price is
payable in cash at the closing of the sale of the Leased Premises and (iv) the
closing date for such purchase will occur within sixty (60) days prior to the
last day of the tenth (10th) Lease Year.

                                     -59-
<PAGE>
 
     (d) Except as otherwise specifically provided in the foregoing Paragraph
35(a), the closing date for any purchase of the Leased Premises by Tenant
pursuant to this Paragraph 35 shall be on a date designated by Tenant, but not
later than (i) ninety (90) days after the date of Tenant's notice to Landlord of
its intention to purchase the Leased Premises upon the terms of the contract for
sale with a Third Party Purchaser or (ii) the closing date provided in such
contract for sale.  At such closing Landlord shall convey the Leased Premises to
Tenant in accordance with, and Tenant shall pay to Landlord the purchase price
and other consideration set forth in, the applicable offer or contract.

     (e) Tenant shall have the right during the Term to exercise the foregoing
right of first refusal upon each proposed sale of the Leased Premises prior to
the last day of the tenth (10th) Lease Year; provided, that if, following
compliance with the procedure described in Paragraph 35(a), a Third Party
Purchaser does not purchase the Leased Premises, such event shall not count as
an exercise of Tenant's right of first refusal.  Notwithstanding anything to the
contrary, if Tenant fails to exercise the right of first refusal by the last day
of the tenth (10th) Lease Year, and the sale to a Third Party Purchaser is
consummated or if this Lease terminates or the Term expires, such right shall
terminate and be null and void and of no further force and effect.

     (f) If Tenant does not exercise its right of first refusal to purchase the
Leased Premises and the Leased Premises are transferred to a Third Party
Purchaser, Tenant will attorn to any Third Party Purchaser as Landlord so long
as such Third Party Purchaser and Landlord notify Tenant in writing of such
transfer.  At the request of Landlord, Tenant will execute such documents
confirming the agreement referred to above and such other agreements as Landlord
may reasonably request, provided that such agreements do not increase the
liabilities and obligations of Tenant hereunder.

     (g) The provisions of Paragraph 35(a) shall not apply to or prohibit (i)
any mortgaging, subjection to deed of trust or other hypothecation of Landlord's
interest in the Leased Premises, (ii) any sale of the Leased Premises pursuant
to a private power of sale under or judicial foreclosure of any Mortgage or
other security instrument or device to which Landlord's interest in the Leased
Premises is now or hereafter subject, (iii) any transfer of Landlord's interest
in the Leased Premises to a Lender, beneficiary under deed of trust or other
holder of a security interest therein by deed in lieu of  foreclosure, (iv) any
transfer of the Leased Premises to any governmental or quasi-governmental agency
with power of condemnation, (v) any transfer of the Leased Premises to any
affiliate of Landlord or to any entity for whom W.P. Carey & Co., Inc., W.P.
Carey Incorporated or any of their affiliates provides material management or
investment advice, (vi) any

                                     -60-
<PAGE>
 
Person to whom Landlord sells all or substantially all of its assets, (vii) any
transfer of the Leased Premises to any of the successors or assigns of any of
the Persons referred to in the foregoing clauses (i) through (vi) or (viii) any
transfer, sale or conveyance of any part or all of the stock of Landlord to one
of its affiliates.

     36.  Financing Major Alterations.
          --------------------------- 

     (a) Should Tenant, during the Term of this Lease, desire to make
Alterations to any of the Leased Premises which are not readily removable
without causing material damage to the Leased Premises which cannot be repaired
and which will cost in excess of Five Hundred Thousand Dollars ($500,000)
("Major Alterations"), Tenant may, prior to the commencement of construction of
such Major Alterations, request Landlord (with a copy of such request to Lender)
to reimburse the costs thereof to Landlord (the "Alteration Cost") to Tenant, to
wit: cost of labor and materials, financing fees, legal fees, survey, title
insurance and other normal and customary loan or construction costs.

     (b) Should Landlord agree to reimburse such costs, Landlord and Tenant
shall enter into good faith negotiations regarding the execution and delivery of
a written agreement of modification of this Lease, which agreement shall provide
for the following:

          (i)  payment by Landlord to Tenant of the Alteration Cost within one
     hundred twenty (120) days of the date of Landlord's agreement to pay the
     Alteration Cost, or in installment payments as agreed, or on the date of
     completion of the Major Alterations, whichever shall be the later;

          (ii)  an increase in the annual Basic Rent payable during the
     Amortization Period (as hereinafter defined) to an amount sufficient to
     amortize the Alteration Cost ("Total Financing") over a period (the
     "Amortization Period") which shall be the remainder of the then current
     Term and, if Tenant so elects, any additional extension periods provided
     for herein (so long as Tenant shall confirm any such extension periods
     included in the Amortization Period by a written waiver of its right to
     give notice of its intention not to renew this Lease prior to the
     expiration of such extension periods), at such rate of interest and upon
     such other terms as shall be agreed upon between Landlord and Tenant, but
     which shall be no less favorable than the prevailing interest rate and
     terms for unsecured loans in a principal amount equal to the Total
     Financings for borrowers with credit ratings equivalent to the lesser of
     Landlord's or Tenant's credit rating at that time; and

                                     -61-
<PAGE>
 
          (iii)  such other changes and amendments to this Lease as may be
     necessary and appropriate in view of such payment of the Alteration Cost by
     Landlord to Tenant.

     (c) Tenant shall pay all Costs incurred by Landlord in connection with any
such modification to this Lease and such financing, including closing costs,
brokerage fees, taxes, recording charges and legal fees and expenses.

     (d) If Landlord and Tenant do not reach agreement on Tenant's request to
have Landlord finance the Alteration Costs, Tenant shall, subject to the
provisions of Paragraph 13 of this Lease, have the right to construct the Major
Alterations at Tenant's sole cost and expense.  In any event, the construction
of the Major Alterations shall be performed in accordance with the provisions of
Paragraph 13 hereof and the Major Alterations shall be the property of Landlord
and part of the Leased Premises subject to this Lease.

     (e) Nothing contained in this Paragraph 36 shall be construed to modify
Paragraph 13 hereof, and the provisions of Paragraph 12 and subparagraphs (i)
and (ii) of Paragraph 13(a) shall apply to all Major Alterations made or
constructed hereunder, including the requirement for Landlord's consent to
Alterations.

     37.  Security Deposit.
          ---------------- 

     (a) Tenant has delivered to Landlord a security deposit (the "Security
Deposit") in the amount of Three Hundred Forty-two Thousand Five Hundred Eighty-
one and 25/100 ($342,581.25).  If not sooner applied as provided in Paragraph
23(d), the Security Deposit shall be applied (i) to monthly payments of the
Basic Rent in reverse order, commencing with the last month of the Initial Term,
commencing with the last payment due or (ii) if Tenant purchases the Leased
Premises, against Tenant's obligation to pay the Default Termination Amount,
Offer Amount or Termination Amount, as the case may be.  The Security Deposit
shall be security for the payment by Tenant of the Rent and all other charges or
payments to be paid hereunder and the performance of the covenants and
obligations contained herein.  Landlord shall have the right to commingle the
Security Deposit with other funds of Landlord.  Anything herein contained to the
contrary notwithstanding, the Security Deposit shall be credited against Rent or
other obligations of Tenant hereunder.

     (b) Landlord shall have the right to assign to Lender or any other holder
of a Mortgage the Security Deposit during the term of the applicable Loan, and
the Lender or such other holder of a Mortgage shall have all of the rights of,
and shall be subject to the terms of, this Paragraph 37.  Tenant covenants and
agrees to execute such agreements, consents and

                                     -62-
<PAGE>
 
acknowledgments as may be reasonably requested by Landlord and Lender from time
to time to acknowledge the assignment of the Security Deposit.

     38.  Right to Vacate; Rejectable Offer Upon Vacation.
          ----------------------------------------------- 

     (a) Tenant shall have the right to vacate the Leased Premises; provided
that (i) Tenant shall notify Landlord and Lender within ten (10) days after
vacation of the Leased Premises by Tenant, (ii) Tenant shall make reasonable
good faith efforts to sublet the Leased Premises, which sublease or subleases
which shall be subject to the provisions of Paragraph 21(b) hereof and (iii)
Tenant shall continue to perform all of its obligations under this Lease,
including its obligation to maintain the Leased Premises and to pay all Rent as
and when due hereunder.

     (b) If, at any time during the Term, the Leased Premises shall be vacant
for twelve (12) consecutive months, Tenant shall, on the first day of the
thirteenth (13th) month that Leased Premises are vacant, make an offer (the
"Vacation Offer") to purchase the Leased Premises on the first Basic Rent
Payment Date occurring thirty (30) days after the determination of Fair Market
Value (the "Vacation Purchase") for a purchase price equal to the Offer Amount.
Promptly upon the delivery to Landlord of the Vacation Offer, Landlord and
Tenant shall commence to determine the Fair Market Value of the Leased Premises.

     (c) No rejection of the Vacation Offer shall be effective for any purpose
unless consented to in writing by Lender.  If Landlord shall reject the Vacation
Offer by notice to Tenant, containing the written consent of Lender to such
rejection, no later than the thirtieth (30th) day following receipt of the
Vacation Offer by Landlord, then this Lease shall remain in full force and
effect and Landlord and Lender shall be deemed to have waived the Event of
Default described in Paragraph 22(a)(x) with respect to a vacation of the Leased
Premises.

     (d) Unless Landlord shall have rejected the Vacation Offer by the foregoing
notice to Tenant not later than the thirtieth (30th) day following receipt of
the Vacation Offer by Landlord, Landlord shall be conclusively presumed to have
accepted the Vacation Offer.  If the Vacation Offer is accepted by Landlord,
then, through an appropriate escrow, (i) Tenant shall pay to Landlord the Offer
Amount on the Vacation Purchase Date and, (ii) provided that no Rent or any
other charge is due and unpaid under this Lease as of the Vacation Purchase Date
and Tenant is otherwise in compliance with the terms hereof, Landlord shall
convey to Tenant the Leased Premises in accordance with the provisions of
Paragraph 20.

                                     -63-
<PAGE>
 
     39.  Miscellaneous.
          ------------- 

     (a) The paragraph headings in this Lease are used only for convenience in
finding the subject matters and are not part of this Lease or to be used in
determining the intent of the parties or otherwise interpreting this Lease.

     (b) As used in this Lease, the singular shall include the plural and any
gender shall include all genders as the context requires and the following words
and phrases shall have the following meanings: (i) "including" shall mean
"including without limitation"; (ii) "provisions" shall mean "provisions, terms,
agreements, covenants and/or conditions"; (iii) "lien" shall mean "lien, charge,
encumbrance, title retention agreement, pledge, security interest, mortgage
and/or deed of trust"; (iv) "obligation" shall mean "obligation, duty,
agreement, liability, covenant and/or condition"; (v) "any of the Leased
Premises" shall mean "the Leased Premises or any part thereof or interest
therein"; (vi) "any of the Land" shall mean "the Land or any part thereof or
interest therein"; (vii) "any of the Improvements" shall mean "the Improvements
or any part thereof or interest therein"; (viii) "any of the Equipment" shall
mean "the Equipment or any part thereof or interest therein"; and (ix) "any of
the Adjoining Property" shall mean "the Adjoining Property or any part thereof
or interest therein".

     (c) Any act which Landlord is permitted to perform under this Lease may be
performed at any time and from time to time by Landlord or any person or entity
designated by Landlord.  Each appointment of Landlord as attorney-in-fact for
Tenant hereunder is irrevocable and coupled with an interest.  Except as
otherwise specifically provided herein, Landlord shall have the right, at its
sole option, to withhold or delay its consent whenever such consent is required
under this Lease for any reason or no reason.  Time is of the essence with
respect to the performance by Tenant of its obligations under this Lease.

     (d) Landlord shall in no event be construed for any purpose to be a
partner, joint venturer or associate of Tenant or of any subtenant, operator,
concessionaire or licensee of Tenant with respect to any of the Leased Premises
or otherwise in the conduct of their respective businesses.

     (e) This Lease, the August 7, 1996 letter agreement between Landlord and
Tenant with respect to the Second Disbursement and Third Disbursement (as such
terms are defined therein) and any documents which may be executed by Tenant on
or about the effective date hereof at Landlord's request constitute the entire
agreement between the parties and supersede all prior understandings and
agreements, whether written or oral, between the parties hereto relating to the
Leased Premises and the transactions provided for herein.  Landlord and Tenant
are business entities having substantial experience with the subject

                                     -64-
<PAGE>
 
matter of this Lease and have each fully participated in the negotiation and
drafting of this Lease.  Accordingly, this Lease shall be construed without
regard to the rule that ambiguities in a document are to be construed against
the drafter.

     (f) This Lease may be modified, amended, discharged or waived only by an
agreement in writing signed by the party against whom enforcement of any such
modification, amendment, discharge or waiver is sought.

     (g) The covenants of this Lease shall run with the land and bind Tenant,
its successors and assigns and all present and subsequent encumbrances and
subtenants of any of the Leased Premises, and shall inure to the benefit of
Landlord, its successors and assigns.  If there is more than one Tenant, the
obligations of each shall be joint and several.

     (h) If any one or more of the provisions contained in this Lease shall for
any reason be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
of this Lease, but this Lease shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein.

                                     -65-
<PAGE>
 
     (i) This Lease shall be governed by and construed and enforced in
accordance with the Laws of the State.

     IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be duly
executed under seal as of the day and year first above written.


                                        LANDLORD:                 
                                                                  
ATTEST:                                 ESI (CA) QRS 12-6, INC.,  
                                        a California corporation  
                                                                  
                                                                  
By:  /s/ Ruth S. Perfido                By:  /s/ Barclay G. Jones 
                                                                  
Title:  Assistant Secretary             Title:  Executive Vice President
                 
[Corporate Seal] 
                                        TENANT:
                                               
                                               
ATTEST:  ETEC SYSTEMS, INC.                    
a Nevada corporation                           
                                        
                                        
                                        
By:  /s/ Saul E. Arnold                 By:  /s/ Melanie J. Mock
                                                
Title:  Assistant Secretary             Title:  Treasurer
                              
[Corporate Seal]              
                                     -66-
<PAGE>
 
                                   EXHIBIT A
                                   ---------


                                   PREMISES

     REAL PROPERTY in the City of Hayward, County of Alameda, State of
California, described as follows:

     Beginning on the Northeast line of Corporate Avenue at the common line of
Parcels 1 and 2, Parcel Map No. 461, filed April 10, 1969, Book 58, of Parcel
Maps, Page 96, Alameda County Records; thence from said point of beginning,
North 33 degrees 20' 15" West, along said Northeast line of Corporate Avenue as
shown on said Parcel Map, 564.987 feet and Northwesterly, along the arc of a
tangent curve to the right with a radius of 1166 feet, an arc distance of
235.490 feet to the common line of Parcels 1 and 2 of Parcel Map No. 1500, filed
February 25, 1975, Book 87 of Parcel Maps, Page 23, Alameda County Records;
thence along said last mentioned common line, as follows: North 58 degrees 22'
09" East, 611.160 feet, North 80 degrees 11' 21" East 201.924 feet and South 65
degrees 00' 00" East, 203.000 feet to the most Easterly corner of Parcel 2 of
said Parcel Map No. 1500 (87 PM 23), being also the most Northerly corner of
Parcels 1 and 2 of the aforesaid Parcel Map No. 461 (58 PM 96); thence along the
exterior line of said Parcel 2 of said Parcel Map No. 461, South 41 degrees 29'
51" East, 562.970 feet and South 58 degrees 22' 09" West, 1006.638 feet to the
point of beginning.

     Being also known as Parcel 2 of Parcel Map 461, filed April 10, 1969 in
Book 58 of Parcel Maps, at Page 96; and Parcel 2 of Parcel Map 1500, filed
February 25, 1975 in Book 87 of Parcel Maps, at Page 23, Official Records of
said County.
<PAGE>
 
                                   EXHIBIT B
                                   ---------


                            MACHINERY AND EQUIPMENT

     (a) All fixtures, now or hereafter affixed or attached to or installed in
any of the Leased Premises (except as hereafter provided) including all
electrical, anti-pollution, heating, lighting (including hanging fluorescent
lighting), incinerating, air cooling, air conditioning, humidification,
sprinkling, power, plumbing, lifting, cleaning, fire prevention, fire
extinguishing and ventilating systems, devices and machinery and all engines,
pipes, pumps, tanks (including exchange tanks and fuel storage tanks), motors,
conduits, ducts, steam circulation coils, blowers, steam lines, compressors, oil
burners, boilers, doors, windows, loading platforms, lavatory facilities,
stairwells, fencing (including cyclone fencing), passenger and freight
elevators, overhead cranes and garage units;

     (b) All personal property now or hereafter affixed or attached to or
installed in the "clean room" and the process laboratory that is integral to the
suitability of such room as a "clean room" and the process laboratory (including
electrical, anti-pollution, heating, lighting, air-conditioning, plumbing and
ventilation systems) and cable, wiring and networking equipment for computer
interface, together with all additions thereto, substitutions therefor and
replacements thereof required or permitted by this Lease,

     but excluding all personal property and all trade fixtures and all
machinery, office, manufacturing and warehouse equipment whether or not attached
to or built-in as part of the buildings (except for personal property in the
"clean room" and the process laboratory and described in clause (b) above) that
are not necessary to the operation, as buildings, of the buildings that
constitute part of the Leased Premises.
<PAGE>
 
                                   EXHIBIT C
                                   ---------


                            PERMITTED ENCUMBRANCES

     1.   Second Installment of TAXES for the fiscal year 1996-1997.

     2.   TAXES for the fiscal year 1997-1998, a lien not yet due or payable.

     3.   The Lien of supplemental taxes, if any, assessed pursuant to Chapter
3.5 commencing with Section 75 of the California Revenue and Taxation Code.

     4.   EASEMENT for the purposes stated herein
 
          (a)  Purpose:  Utilities
          (b)  Granted to:  Pacific Gas and Electric Company
          (c)  Recorded:  June 28, 1951, Book 6474, Page 395, Official       
          (d)  Records
          (e)  Affects:  The Northerly 175 feet of the Land
 
     5.   EASEMENT for the purposes stated herein
 
          (a)  Purpose:  Utilities
          (b)  Granted to:  Pacific Gas and Electric Company, a California
          (c)  corporation
          (d)  Recorded:  August 19, 1954, Book 7403, Page 177, Official
          (e)  Records
          (f)  Affects:  The Southerly 65 feet of the Northerly 24 feet
          (g)  of the Land
 
     6.   EASEMENT as shown on the filed map of Tract 2898
 
          (a)  Purpose:  Public Utilities
          (b)  Affects:  The Westerly 10 feet of the Land

     7.   LIMITATIONS, covenants, conditions, restrictions, reservations,
exceptions or terms in the instrument recorded June 30, 1967, Reel 1991, Image
793, Official Records.

     8.   POSSIBLE EASEMENT for Communication Facilities, as disclosed by the
Grant of Easement from Crow-Spieker #18 to The Pacific Telephone & Telegraph
Company, recorded July 24, 1974, Reel 3736, Image 788, Official Records.

     9.   Any rights, interests or claims which may exist or arise by reason of
the following facts shown on a survey plat entitled "ETEC, 26460 Corporate
Avenue, Hayward, California,

                                      -1-
<PAGE>
 
Alameda County" prepared by Lea & Sung Engineering, Inc. dated  January 29,
1997, Job No. 96433ALT.

          (a)  The fact that a chainlink fence is located within the boundaries
               of said land in varying distances of up to 2.20 feet from said
               boundaries.

          (b)  The fact that walkways, curbs and storm drain lines are located
               within the easements described in documents recorded June 8,
               1951, Book 6474, Page 395 and August 19, 1954, Book 7403, Page
               177, Official Records.

          (c)  A Water Backflow Preventer located partly on a Southwesterly
               portion of said land and partly outside the boundary of said
               land.

          (d)  The fact that a PG&E Vault is located within the area identified
               on said Survey as "... under construction as of 1/9/97" (said
               improvements being constructioned disclosed by Surveyor as
               Courtyard Area).

                                      -2-
<PAGE>
 
                                   EXHIBIT D
                                   ---------


                              BASIC RENT PAYMENTS

     1.   Basic Rent.  Subject to the adjustments provided for in Paragraphs 2,
          ----------                                                           
3, 4 and 5 below, Basic Rent payable in respect of the portion of the Initial
Term remaining after January 31, 1997 shall be $1,604,880 per annum, payable
monthly in arrears commencing on March 1, 1997 and on each Basic Rent Payment
Date thereafter, in equal installments of $133,740.00 each.

     2.   CPI Adjustments to Basic Rent.  The Basic Rent shall be subject to
          -----------------------------                                     
adjustment, in the manner hereinafter set forth, for increases in the index
known as United States Department of Labor, Bureau of Labor Statistics, Consumer
Price Index, All Urban Consumers, United States City Average, All Items, (1982-
84=100) ("CPI") or the successor index that most closely approximates the CPI.
If the CPI shall be discontinued with no successor or comparable successor
index, Landlord and Tenant shall attempt to agree upon a substitute index or
formula, but if they are unable to so agree, then the matter shall be determined
by arbitration in accordance with the rules of the American Arbitration
Association then prevailing in New York City.  Any decision or award resulting
from such arbitration shall be final and binding upon Landlord and Tenant and
judgment thereon may be entered in any court of competent jurisdiction.  In no
event will the Basic Rent as adjusted by the CPI adjustment be less than the
Basic Rent in effect for the three (3) year period immediately preceding such
adjustment.  No CPI adjustments shall be made during any Renewal Term.

     3.   Effective Dates of CPI Adjustments.  (a) Basic Rent shall be adjusted
          ----------------------------------                                   
on March 1, 1998 (the "First Basic Rent Adjustment Date") to reflect changes in
the CPI.  On the First Basic Rent Adjustment Date $1,030,452 of Basic Rent shall
be adjusted to reflect increases in the CPI during the three year period
preceding March 1, 1998 and $574,428 of Basic Rent shall be adjusted to reflect
increases in the CPI for the one year period preceding March 1, 1998.

     (b) Basic Rent shall also be adjusted on March 1, 2001, March 1, 2004,
March 1, 2007 and March 1, 2010 to reflect increases in the CPI during the most
recent three (3) year period immediately preceding each of the foregoing dates
in this subparagraph 3(b) (the First Basic Rent Adjustment Date and each date
referred to in this Subparagraph 3(b) being hereinafter referred to as the
"Basic Rent Adjustment Date").

                                      -1-
<PAGE>
 
     4.   Method of Adjustment for CPI Adjustment.
          --------------------------------------- 

     (a) As of each Basic Rent Adjustment Date when the average CPI determined
in clause (i) below exceeds the Beginning CPI (as defined in this Paragraph
4(a)), the Basic Rent in effect immediately prior to the applicable Basic Rent
Adjustment Date shall be multiplied by a fraction, the numerator of which shall
be the difference between (i) the average CPI for the three (3) most recent
calendar months (the "Prior Months") ending prior to such Basic Rent Adjustment
Date for which the CPI has been published on or before the forty-fifth (45th)
day preceding such Basic Rent Adjustment Date and (ii) the Beginning CPI, and
the denominator of which shall be the Beginning CPI.  An amount equal to the
lesser of (A) the product of such multiplication or (B) $145,960 with respect to
the first Basic Rent Adjustment Date and the product of the Basic Rent in effect
immediately prior to such Basic Rent Adjustment Date multiplied by 12% with
respect to each succeeding Basic Rent Adjustment Date, shall be added to the
Basic Rent in effect immediately prior to such Basic Rent Adjustment Date.  As
used herein, "Beginning CPI" shall mean the average CPI for the three (3)
calendar months corresponding to the Prior Months, but occurring three (3) years
earlier with respect to each adjustment of Basic Rent, except that with respect
to the $574,428 of Basic Rent to be adjusted on the First Basic Rent Adjustment
Date, "Beginning CPI" shall mean the average CPI for the three (3) calendar
months corresponding to the Prior Months but occurring one (1) year earlier.  If
the average CPI determined in clause (i) is the same or less than the Beginning
CPI, the Basic Rent will remain the same for the ensuing three (3) year period.

     (b) Effective as of a given Basic Rent Adjustment Date occurring during the
Initial Term, Basic Rent payable under this Lease until the next succeeding
Basic Rent Adjustment Date shall be the Basic Rent in effect after the
adjustment provided for as of such Basic Rent Adjustment Date.

     (c) Notice of the new annual Basic Rent shall be delivered to Tenant on or
before the tenth (10th) day preceding each Basic Rent Adjustment Date.

     5.   Basic Rent During Each Renewal Term.  During each Renewal Term, annual
          -----------------------------------                                   
Basic Rent for the Renewal Term shall be Fair Market Rental Value as of the
first day of such Renewal Term, as determined in accordance with Paragraph 29 of
the Lease.  Basic Rent during each Renewal Term shall be payable monthly in
arrears in installments equal to 1/12 of the annual Basic Rent for such Renewal
Term.  If the Fair Market Rental Value of the Leased Premises has not been
determined as of the first day of any Renewal Term, Tenant shall pay as monthly
installments of Basic Rent an amount equal to the Basic Rent in effect
immediately prior to such Renewal Date, and shall receive a credit or make an
additional payment, as applicable, on the

                                      -2-
<PAGE>
 
first Basic Rent Payment Date following the determination of Fair Market Rental
Value.

                                      -3-
<PAGE>
 
                                   EXHIBIT E
                                   ---------


                              FINANCIAL COVENANTS

     1.   Corporate Existence; Control; Mergers, Etc.
          ------------------------------------------ 

     (a) Tenant shall maintain its corporate existence, rights and franchises in
full force and effect in its jurisdiction of incorporation.  Tenant shall, and
shall cause of its Subsidiaries to, qualify and remain qualified as a foreign
corporation in each jurisdiction in which failure to receive or retain such
qualification would have an adverse effect on the business, operations or
financial condition of the enterprise comprised of the Tenant and its
Subsidiaries taken as a whole.

     (b) At no time during the Term shall any Person acquire directly or
indirectly more than 50% of any class of Tenant's Voting Stock (other than a
Person owning an equity interest in Tenant as of the commencement of the Term).

     (c) The Tenant shall not consolidate with or merge into any other Person
unless an Event of Default does not then exist and, immediately following such
consolidation or merger, (i) the surviving corporation shall have, on a proforma
basis, an Adjusted Consolidated Net Worth of not less than Fifty-three Million
Dollars ($53,000,000), (ii) the Board of Directors of Tenant immediately prior
to such merger or consolidation remains in control following such merger or
consolidation, (iii) the senior management does not change in any material
respect immediately following such merger or consolidation and (iv) after giving
effect thereto, an Event of Default does not then exist.  This Section 1(c)
shall not apply to a merger with a Person that is a Subsidiary of Tenant as of
December 31, 1994 nor a wholly-owned Subsidiary of Tenant if, in each case,
Tenant is the surviving entity.

     (d) The Tenant shall not, except as specifically permitted under, and in
accordance with the terms of Paragraph 21 of this Lease, in a single transaction
or series of related transactions, sell or convey, transfer, abandon or lease
all or substantially all of its assets to any Person.

     (e) The Tenant shall not make any substantial change in the nature of its
business.

     2.   Debt and Restricted Payments.
          ---------------------------- 

     (a) Tenant will not, directly or indirectly make, or cause or permit any
Subsidiary of the Tenant to make, any Restricted Payment, unless at the time
thereof, and after giving effect thereto:

                                      -1-
<PAGE>
 
          (i)  no Event of Default shall have occurred and be continuing; and

          (ii)  the Tenant's Adjusted Consolidated Net Worth equals or exceeds
     $53,000,000 as of the end of the month preceding the date of such
     Restricted Payment; and

          (iii)  such Restricted Payment, together with all other Restricted
     Payments made from the commencement date of the Term to the date of such
     Restricted Payment does not exceed the sum of 40% of the Tenant's
     Consolidated Net Income on a cumulative basis beginning with and including
     the fiscal year in which the Term commenced to the month immediately
     preceding the date of such Restricted Payment.

     (b) The Tenant will not become or be a guarantor or surety of, or otherwise
incur any Contingent Obligation or become or be responsible in any manner
(whether by agreement to purchase any obligations, stock, assets, goods or
services, or to supply or advance any funds, assets, goods or services, or
otherwise) with respect to, any undertaking of any other Person (except as to
any Subsidiary), or make or permit to exist any loans or advances to, or
investments in, any other Person (except as to any Subsidiary) other than (i)
for an amount outstanding at any time not to exceed Fifteen Million Dollars
($15,000,000) less the amount of Funded Debt outstanding at such time under
clause (iii) of paragraph (c) below and (ii) additional Contingent Obligations
up to three (3) times Consolidated EBIDTA on a proforma basis, reduced by the
amount of Funded Debt outstanding under clause (iii) of paragraph (c) below.

     (c) Tenant will not, and will not permit any Subsidiary directly or
indirectly to, incur, create, assume any Indebtedness other than (i) Funded Debt
outstanding on the Closing Date and reflected in the audited financial
statements described in Paragraph 28(b), (ii) Funded Debt that replaces or
refinances the Funded Debt described in (i) above and is repayable on the basis
of an amortization schedule substantially similar to, or better than, the
amortization schedule for the Funded Debt outstanding on the Closing Date, (iii)
not more than the amount at any time of Fifteen Million Dollars ($15,000,000) in
Funded Debt in addition to the Funded Debt described in (i) and (ii) above less
the amount of Contingent Obligation outstanding at such time under clause (i) of
paragraph (b) above and (iv) additional Funded Debt up to three (3) times
Consolidated EBIDTA on a proforma basis, reduced by the amount of Contingent
Obligation outstanding at such time under clause (ii) of paragraph (b) above.

     3.   Consolidated Net Worth.  Consolidated Net Worth shall not as of the
          ----------------------                                             
end of each fiscal quarter of Tenant that ends on and after January 31, 1997 be
less than an amount equal to the

                                      -2-
<PAGE>
 
sum of (a) $53,000,000 plus (b) commencing with the fiscal quarter of Tenant
that commences August 1, 1996 and continuing for each fiscal quarter thereafter
60% of Consolidated Net Income on a cumulative basis, calculated at the end of
each fiscal quarter.

     4.   Definitions.  For the purpose of this Exhibit "E" the following terms
          -----------                                                          
shall have the following meanings:

     (a) "Adjusted Consolidated Net Worth" shall mean, at any date, the net
worth of Tenant and its consolidated Subsidiaries on a consolidated basis,
determined in accordance with GAAP, except that any Qualified Subordinated Debt
shall be computed as equity.

     (b) "Closing Date" shall mean January 31, 1997.

     (c) "Consolidated EBIDTA" for any period, with respect to Tenant and its
consolidated Subsidiaries, shall mean earnings from continuing operations,
exclusive of extraordinary items, if any, before interest expense, depreciation,
taxes, amortization expense (including amortization of debt issuance costs) and
less capital expenditures.

     (d) "Consolidated Fixed Charges" for any period, with respect to Tenant and
its consolidated Subsidiaries, shall mean the sum of the total interest expense
for such period and rent or lease payments for such period, determined on a
consolidated basis in accordance with GAAP, but excluding interest paid in
respect of Qualified Subordinated Debt.

     (e) "Consolidated Net Income" shall mean, for any period, the aggregate net
income (or loss) of Tenant, and its Subsidiaries for such period on a
consolidated basis, determined in accordance with GAAP.

     (f) "Consolidated Net Worth" shall mean, at any date, the net worth of
Tenant and its consolidated Subsidiaries on a consolidated basis, determined in
accordance with GAAP.

     (g) "Contingent Obligation" as to any Person shall mean the undrawn face
amount of any letters of credit issued for the account of such Person and shall
also mean any obligation of such Person guaranteeing or in effect guaranteeing
any Indebtedness, leases, dividends, letters of credit or other obligations
("primary obligations") of any other Person other than a Subsidiary (the
"primary obligor") in any manner, whether directly or indirectly including,
without limitation, any obligation of such Person, whether or not contingent,
(a) to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (b) to advance or supply funds (i) for the
purchase or payment of any such primary obligation or (ii) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain

                                      -3-
<PAGE>
 
the financial condition or solvency of the primary obligor, (c) to purchase
property, securities or services primarily for the purpose of assuring the
obligee under 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 obligee under such primary obligation against loss in respect
thereof; provided, however, that the term Contingent Obligation shall not
include (x) endorsements of instruments for deposit or collection in the
ordinary course of business or (y) usual and customary representations and
warranties contained in loan and other financing agreements.  The amount of any
contingent Obligation shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation or, where such Contingent
Obligation is specifically limited to a portion of any such primary obligation,
that portion to which it is limited.

     (h) "Funded Debt" of any Person shall mean all Indebtedness of such Person
which in accordance with GAAP would be classified on a balance sheet as long
term debt, and shall in any event include (without duplication) all
Indebtedness, whether secured or unsecured, having a final maturity (or which,
pursuant to the terms of a revolving credit agreement or otherwise is renewable
or extendible at the option of the obligor for a period ending) more than one
year after the date of the creation thereof (including, without limitation, any
portion of such Funded Debt maturing in less than one year) and money borrowed
for working capital purposes unless for a period of not less than sixty (60)
consecutive days in any period of twelve (12) consecutive months such
obligations are reduced to zero.

     (i) "GAAP" shall mean generally accepted accounting principles as in effect
from time to time in the United States of America, applied on a consistent
basis.

     (j) "Indebtedness" of any Person shall mean, as of any date, all
obligations which would in accordance with GAAP be classified as debt, and shall
include (a) all obligations of such Person for borrowed money, (b) all
obligations of such person in respect of letters of credit, surety bonds or
similar obligations issued for the account of such Person, (c) all obligations
of such Person as lessee, user or obligor under any lease of real or personal
property which, in accordance with GAAP, are or should be capitalized on the
books of the lessee, user or obligor (excluding, in the case of Tenant, any
lease classified in accordance with GAAP as an operating lease), (d) all
obligations of such Person in respect of the deferred purchase price for goods,
property or services acquired by such Person, (e) all obligations of such Person
to purchase goods, property or services where payment therefor is required
regardless of whether delivery  of such goods or property or the performance of
such services is ever made or tendered, (f) all obligations of such Person in
respect of any interest rate or

                                      -4-
<PAGE>
 
currency swap, rate cap or other similar transaction (valued in an amount equal
to the highest termination payment, if any, that would be payable by such Person
upon termination for any reason on the date of determination), and (g) all
obligations of others similar in character to those described in clauses (a)
through (f) of this definition to the extent such person is liable, contingently
or otherwise, as obligor, guarantor or in any other capacity, or in respect of
which obligations such Person assures a creditor against loss or agrees to take
any action to prevent any such loss (other than endorsements of negotiable
instruments for collection in the ordinary course of business), including,
without limitation, all obligations of such Person to advance funds to, or to
purchase property or services from, any other Person in order to maintain the
financial condition of such other Person and, in the case of Tenant, all
Indebtedness which is non-recourse to the credit of Tenant but which is secured
by the assets or property of Tenant (but excluding any such non-recourse
Indebtedness of Subsidiaries of Tenant in which Tenant has no liability).  Any
Indebtedness which is extended or renewed (other than by an option created with
the original creation of such Indebtedness) will be deemed to have been created
when extended or renewed.

     (k) "Person" shall mean an individual, partnership, association,
corporation or other entity.

     (l) "Qualified Subordinated Debt" means subordinated debt pursuant to which
the borrower's obligation to pay interest on a current basis is contingent upon
the borrower meeting certain financial tests satisfactory to Landlord and
Lender.

     (m) "Restricted Payment" shall mean and include (a) any direct or indirect
purchase, redemption or other acquisition or retirement for value of any equity
security of Tenant or any option, warrant or right to acquire any such equity
security, or any security convertible into or exchangeable for any such equity
security, (b) any dividend, distribution, loan advance, guarantee, extension of
credit or other payment of transfer, whether in cash or property and whether
direct or indirect, to or for the benefit any Person holding an equity interest
in the Tenant, whether or not such interest is evidenced by a security, or any
Affiliate of any such Person, and (c) any direct or indirect purchase,
redemption, prepayment or other acquisition or retirement for value, prior to
its stated maturity, scheduled repayment or scheduled sinking fund payment of
any Qualified Subordinated Debt of the Tenant or any Subsidiary held by any
Person described in clause (b) above; provided, however, that so long as an
Event of Default shall not exist, the term Restricted Payment shall not include
(i) the repurchase by Tenant of stock in Tenant for an amount not to exceed on a
cumulative basis the sum of $2,500,000 and the cash purchase price received by
Tenant from the sale of stock in Tenant to employees, consultants or directors
or prospective employees, consultants or directors, or (ii) the repayment of
Subordinated Debt (including any interest

                                      -5-
<PAGE>
 
thereof, whether current, "blocked" or accrued) from (A) the proceeds of an
initial public offering or (B) from cash balances of Tenant so long as following
such payment Tenant will have cash balances, on a proforma basis, of not less
than $10,000,000 and is otherwise in compliance with the Covenants.

     (n) "Subsidiary" of any Person means a corporation a majority of the Voting
Stock of which is at the time owned, or the management of which is otherwise
controlled, directly or indirectly, through one or intermediaries, or both, by
such Person.

     (o) "Voting Stock" means shares of stock of a corporation having ordinary
voting power to elect the board of directors or other managers of such
corporation.

                                      -6-
<PAGE>
 
                                  SCHEDULE 1
                                  ----------


                              TERMINATION VALUES
<TABLE>
<CAPTION>
 
            Lease Year   Termination Value
            ----------   -----------------
            <S>          <C>
 
                 1          $12,000,000
                 2          $12,000,000
                 3          $15,329,861
                 4          $13,829,861
                 5          $13,371,746
                 6          $13,371,746
                 7          $12,371,746
                 8          $12,371,746
                 9          $11,874,363
                 10         $11,874,363
                 11         $10,874,363
                 12         $10,874,363
                 13         $10,795,829
                 14         $10,795,829
                 15         $10,795,829
                 16         $10,795,829
                 17         $10,795,829
</TABLE>
<PAGE>
 
                                  SCHEDULE 2
                                  ----------


                            APPROVED ALTERATIONS TO
                        BUILDING TWO AND BUILDING THREE

     1.   Integrated Facility Management System:  Fault Tolerant, Upgradable,
Electronic Direct Digital Control System

     2.   Water-Cooled Chiller with Cooling Towers and Pumps (Three to replace
existing systems)

     3.   Main Air Conditioning system and DX to AHU Conversion

     4.   AHU (Air Handling Unit) and Backup Systems

     5.   Toxic Gas Control System and HVAC Isolation System

     6.   Electrical Main replacements

     7.   Hi-Voltage Monitor

     8.   Boiler Auto Blowdown Control

     9.   House Vacuum System and Control

     10.  Engineering Computer Room--Air Conditioning Backup, Controls and
          Monitoring

     11.  Process Exhaust Monitoring

     12.  New Cage for Inspection Equipment and Kits

     13.  Test Cell Enclosures

     14.  Backup Generator

     15.  Process Lab Test Cells

     16.  Process Lab Production Upgrades

     17.  Patio Area Adjoining Building One