Document:

<PAGE>

                                      Document is copied.
                                                                    EXHIBIT 10.7

                                  AMENDMENT #1
                                     to the
                   NONEXCLUSIVE FIELD OF USE LICENSE AGREEMENT

                              dated March 29, 1999

                                 by and between

      EASTMAN KODAK COMPANY, on behalf of itself and its subsidiaries, ("Kodak")

                                       and

      FED Corporation, which recently changed its name to eMagin ("FED-eMagin")

This  Amendment #1 shall amend and modify,  to the extent of any  inconsistency,
the provisions of the above-referenced Agreement, as follows:

1.        In Section 2.11(d) following the word "modules",  the following phrase
          is inserted: ", including optics designed or made by FED-eMagin or its
          Affiliates and integrated  with the structure of products in the Field
          of Use (but not including optics  technology  covered by the claims of
          U.S.  Patent  5,539,422  issued  July 23,  1996 and its  corresponding
          patents filed in foreign countries)"

2.        In Sections 2.4,  2.6.2,  2.8, 7.1 and 7.2 delete "March 31, 2000" and
          insert "March 31, 2002".

All other terms and conditions of the above referenced Agreement shall remain in
full force and effect.

APPROVED AND AGREED TO THIS 16th DAY OF MARCH, 2000.

EASTMAN KODAK COMPANY                       eMagin Corporation (formerly FED
                                             CORPORATION)

By: /s/ J.C. Stoffel                       By: /s/ Gary W. Jones
    ------------------------                   ----------------------------
    Signature                                  Signature

    J.C. Stoffel                               Gary W. Jones
    ------------------------                   ----------------------------
    Printed Name                               Printed Name

Title: Vice President                     Title:  President and CEO
       ---------------------                      -------------------------<PAGE>

Exhibit 10.8                                    IBM

-------------------------------------------
International Business Machines Corporation     1580 Route 52
Hudson Valley Research Park                     Hopewell Junction, NY 12533-6531

Mr. Gary Jones
President and Chief Executive Officer
FED Corporation
Hudson Valley Research Park
1580 Route 52
Hopewell Junction, NY 12533-6531
                                                                    July 9, 1999

     Subject: First Amendment to the Lease executed on May 28, 1999, between
   International Business Machines Corporation (IBM) and FED Corporation (FED)

Dear Mr. Jones:

       This letter, upon your signed acceptance, amends the above referenced
Lease between IBM and FED for space located at the Hudson Valley Research Park
in Hopewell Junction, New York. The Lease shall be amended as follows:

       In "TABLE OF CONTENTS", page 2, delete line "Exhibit A4 -FED Occupied
Space, Bldg. 320B First Floor" in its entirety.

       In PARAGRAPH 1, PREMISES: replace "...EXHIBITS A1 through A4..." with
"...EXHIBITS A1 through A3..." and replace "...buildings numbered 310, 334, 330C
and 32OB..." with "...buildings numbered 310, 334 and 330C..."

       In Paragraph 2, USE OF PREMISES, (a) Permitted Uses, replace "...Storage
Space in EXHIBIT A1, EXHIBIT A3, and EXHIBIT A4..." with "...Storage Space in
EXHIBIT A1, and EXHIBIT A3..."

       On Page 36, replace "Riders, A, B ,C, and D; EXHIBITS A1, A2, A3, A4, B,
C, and D;..." with "Riders, A, B ,C, and D; EXHIBITS A1, A2, A3, B, C, and
D;..."

       Replace "EXHIBIT A1", dated 01-15-99 in its entirety with "EXHIBIT A1"
dated 07-02-99.

       On page 57, delete "EXHIBIT A4, FED Occupied Space Bldg. 320B First
Floor" in its entirety and replace with "This page intentionally left Blank".

       Delete "EXHIBIT A4" dated 01-15-99 in its entirety.

       Except as amended herein, all the terms and conditions of the Lease shall
remain in full force and be effective. Please indicate your acceptance by
signing two (2) copies of this letter and returning them to IBM for counter
signature. Thank you.

Accepted and agreed to:

INTERNATIONAL BUSINESS                  FED CORPORATION
MACHINES CORPORATION

------------------------------          -------------------------------
Raymond J. Wagner                       Gary W. Jones
Senior Program Manager                  President and Chief Executive Officer
North Region Real Estate

Date:                                   Date:
     --------------------------              --------------------------<PAGE>
                                        Document is copied.
                                                                    EXHIBIT 10.9

                                      LEASE

              INTERNATIONAL BUSINESS MACHINES CORPORATION, Landlord

                                       AND

                             FED CORPORATION, Tenant
<PAGE>
                               TABLE OF CONTENTS

Title                                                                       Page

PREMISES..................................................................... 3
USE OF PREMISES.............................................................. 3
USE OF COMMON AREAS.......................................................... 4
TERM, EXTENSION AND BUILD OUT................................................ 5
RENT......................................................................... 7
SERVICES AND UTILITIES....................................................... 8
ASSIGNMENT, SUBLETTING & RECAPTURE........................................... 9
ALTERATIONS.................................................................. 9
SIGNS........................................................................11
CARE OF PREMISES.............................................................12
NOTICE.......................................................................12
LANDLORD'S TITLE.............................................................13
CERTAIN RIGHTS RESERVED TO LANDLORD..........................................13
DEFAULT UNDER OTHER LEASES...................................................14
WAIVER OF CLAIMS.............................................................15
HOLDING OVER.................................................................15
RULES........................................................................16
SUBORDINATION................................................................16
DEFAULT......................................................................17
MECHANICS' LIENS.............................................................20
EMINENT DOMAIN...............................................................21
CASUALTY.....................................................................21
INSURANCE....................................................................22
CONDITION OF PREMISES........................................................23
INDEMNITY....................................................................23
QUIET ENJOYMENT..............................................................24
PARKING......................................................................24
ENVIRONMENTAL MATTERS........................................................25
LIMITATION ON LIABILITY......................................................30
ESTOPPEL CERTIFICATE.........................................................31
ACCESS TO THE PREMISES.......................................................31
MISCELLANEOUS................................................................32
IBM-ESDC SALE-LEASEBACK......................................................32

Rider A - IBM Rules  (As of  February  17,  1997)
Rider B - List of  Recognized Holidays
Rider C - Services  Provided by the  Landlord
Rider D - Loading  Dock Access/Use by Tenants Rules and Responsibilities

Exhibit A1 - FED Occupied Space, Bldg. 310
Exhibit A2 - FED Occupied Space, Bldg. 334 Second Floor
Exhibit A3 - FED Occupied Space, Bldg. 330C First Floor
Exhibit A4 - FED Occupied Space, Bldg. 320B First Floor
Exhibit B  - Parking Plan
Exhibit C  - Environmental Consent Order
Exhibit D  - Chemical  Storage,  Handling,  and  Waste Disposal practices in FED
             Corporation's Organic thin films Laboratory

Schedule A - Base Rent Computation Schedule
Schedule B - Base Rent Payment Schedule
Schedule C - Utilities/Services Pricing
Schedule D - Computed Utilities Schedule
Schedule E - Loan Amortization Schedule
<PAGE>

                                      LEASE

     This Lease, made the 28th day of May 1999 is between INTERNATIONAL BUSINESS
MACHINES  CORPORATION,  a New York  corporation,  having its principal office at
Armonk,  New York  (hereinafter  called the "Landlord") and FED  CORPORATION,  a
Delaware  corporation,  having its principal  office at 1580 Route 52,  Hopewell
Junction, New York 12533 (hereinafter called the "Tenant").

     This Lease  replaces and  supersedes  the prior lease between  Landlord and
Tenant, dated December 20, 1993 and all amendments thereto which, subject to the
following   sentence,   are   hereby   deemed  to  be  no  longer  in  effect  .
Notwithstanding  the  foregoing,  all  provisions  of the  prior  lease  between
Landlord and Tenant,  originally dated December 20, 1993, as amended,  expressly
stated in the prior  lease to survive  expiration  or  termination  of the prior
lease, shall remain in full force and effect.

PARAGRAPH 1. PREMISES.

     The Landlord  hereby leases to the Tenant,  and the Tenant hereby hires and
takes from the Landlord,  from the Commencement Date (as that term is defined in
Paragraph  4(a)),  and for the  duration of the Term (as that term is defined in
Paragraph 4(a)), those premises outlined and described in EXHIBITS A1 through A4
hereto  (hereinafter  called the  "Premises").  The Premises shall be located in
portions  of  buildings  numbered  310,  334,  330C and 320B at 1580  Route  52,
Hopewell  Junction,  New York 12533  (hereinafter  collectively and individually
called the "Building"). The land and all improvements (including the Building of
which the Premises  form a part) located at Hudson Valley  Research  Park,  1580
Route 52, Hopewell Junction, New York 12533 are hereinafter called the "Site."

PARAGRAPH 2. USE OF PREMISES.

     (a) Permitted Uses.

     Subject to subparagraph  (b) below,  the Tenant may use and occupy (1) that
part of the Premises  described  as Office Space in EXHIBIT A1,  EXHIBIT A2, and
EXHIBIT  A3  (hereinafter  referred  to as  "office  space")  solely  for office
purposes,  such as administrative  and executive  activities and break area, and
for no other purpose;  (2) that part of the Premises  described as Storage Space
in EXHIBIT A1, EXHIBIT A3, and EXHIBIT A4 for storage of process and development
tools and  equipment  and for no other  purpose;  (3) that part of the  Premises
described as Clean Space and Dry Lab Space in EXHIBIT A3  (hereinafter  referred
to as  "manufacturing  space") for  semiconductor-like  production of flat panel
video displays,  and for no other purpose. In addition to the semiconductor-like
process steps,  this production  involves but is not limited to display assembly
and test and the following processes: glass frit sealing, glass milling, cutting
and polishing, ceramic substrate polishing, phosphor screen coating, and organic
matter coating;  and (4) that part of the Premises described as Wet Lab Space in
EXHIBIT A1 for use as a  research  and  development  Laboratory  supporting  the
Tenant's  organic  thin  film  processes,  and for no other  purpose.  Except as
provided  in  Paragraph  29, the  Tenant  shall,  at its sole  cost,  obtain all
governmental  licenses  and  permits  required  by the  Laws  for  the  Tenant's
permitted uses.

     (b) Restrictions on Use.

          (1) The Tenant shall not use the Premises or permit the Premises to be
     used in any manner which (i)  violates any current or future Laws  (defined
     in PARAGRAPH 10),  including any  certificate  of occupancy,  environmental
     permit  issued to the Tenant or issued to the Landlord and disclosed to the
     Tenant,  Consent  Orders  attached  hereto,  or  covenants,  conditions  or
     restrictions  filed on the public record which affect the Site; (ii) causes
     or is  reasonably  likely to cause  damage  to any part of the Site;  (iii)
     violates a requirement  or condition of any insurance  policy  covering any
     part of the Site of which the Tenant is made aware,  or increases  the cost
     of such policy;  (iv)  constitutes or is reasonably  likely to constitute a
     nuisance,  annoyance or  inconvenience to other tenants or occupants on the
     Site or  interferes  with the use and  occupancy of any part of the Site by
     other tenants or occupants;  (v) impairs or is reasonably  likely to impair
     the  maintenance,  operation  or  repair  of any  part  of  the  equipment,
     facilities  or systems  located on the Site;  (iv)  interferes  with, or is
     reasonably  likely to  interfere  with,  the  transmission  or reception of
     microwave,  television,  radio, telephone or other communication signals by
     antennae or other  facilities  located on, in and about the Site;  or (vii)

<PAGE>

     violates the Rules and  Regulations  described in Rider A (the "IBM Rules")
     or such other rules, regulations and procedures promulgated by the Landlord
     pursuant to PARAGRAPH 17.

          (2) The  Tenant  shall not use or permit the use of the  Premises  for
     governmental or quasi-governmental functions (such as a private corporation
     which is funded  primarily by a government  agency);  any type of political
     organization  or  function;  any manner of  political  activity  (including
     activity  which  generates  political or social  debate or issues);  retail
     banking;  food  services  (except  vending  machine  operations),  or for a
     medical or dental practice.

          (3) Chemical use and storage in Wet Lab Space shall be  restricted  to
     the chemicals and the not-to-exceed quantities specified in EXHIBIT D.

PARAGRAPH 3. USE OF COMMON AREAS.

     (a) Except as provided  elsewhere  in this Lease and subject to  compliance
with the IBM Rules,  the  Landlord  hereby  grants to the Tenant a  nonexclusive
license to use, and to permit its directors,  contractors,  agents and employees
(hereinafter  collectively  called  "Tenant's  Agents")  to use in the course of
conducting  business at the Premises the  following  (herein  called the "Common
Areas"):

          (1) any and all elevators, common stairways, lobbies, common hallways,
     rest rooms,  the cafeteria  and other  portions of the Building  which,  by
     their nature,  are  manifestly  designed and intended for common use by the
     occupants of the Building,  and for  pedestrian  ingress to and egress from
     the Premises and for any other such manifest purposes, and

          (2) any and  all  parts  of the  Site  which,  by  their  nature,  are
     manifestly  designed and  intended  for common use by the  occupants of the
     Building  for  pedestrian  and  vehicular  ingress to and  egress  from the
     Premises.

     (b)  Notwithstanding  the provisions of Paragraph 3(a),  neither the Tenant
nor the Tenant's Agents shall be entitled to the use of or access to any part of
buildings 303, 304, 309, 312, 315, 316, 323, 325, 327, 328, 329, 330F, 331, 335,
338, 343, 385,  386,  630,  640,  650,  650A,  and 690 without the prior written
permission of the Landlord.

     (c) In the Landlord's sole  discretion,  the Landlord may change,  improve,
rearrange  and  otherwise  modify the Common  Areas both  within and without the
Building  and on all  parts of the  Site  and use the  Common  Areas  for  other
purposes,  and nothing herein  contained  shall be deemed to grant to the Tenant
any right of approval  thereof;  provided,  that no such changes will  interfere
unreasonably with the Tenant's use of or ingress to or egress from the Premises.

     (d) The license to use the Common  Areas shall be  exercised in common with
the exercise  thereof by the Landlord and any others  occupying the Building and
other buildings on the Site, and any other Person  (defined in PARAGRAPH  33(m))
who may now or hereafter have any right to use any or all of the areas which are
the  subject  of  such  license,  and  their  respective  officers,   directors,
contractors, employees and invitees.

PARAGRAPH 4. TERM, EXTENSION, AND BUILD-OUT.

     (a) The term of this Lease (herein called the "Term") shall be for a period
of five (5) years, to commence on June 1, 1999 (the "Commencement Date"), unless
sooner terminated as hereinafter provided.

     (b) Commencement Date. As of the Commencement Date, the Landlord and Tenant
agree that the Tenant is in  possession  of the  premises,  except for the B/310
Organic Thin Films Laboratory  space.  The Landlord shall deliver  possession of
the new B/310  Organic  Thin Films  Laboratory  portion of the  Premises  to the
Tenant on or before  August 1,  1999 in the  Substantially  Completed  condition
hereinafter described in subparagraph (f).

     (c) Extension Option.

          (1) The Tenant is hereby granted the option to extend the Term for all
     of the  Premises  except for any and all  portions  of the  Premises in IBM
     Building 310 for one period of one year subject to and upon the  provisions
     set forth in this  subparagraph  and subject to a Rent to be  determined by
     the Landlord in its sole discretion..

<PAGE>

          (2) This extension shall commence at the expiration of the Term.

          (3) The Tenant  shall  exercise  this option by notice to the Landlord
     not later than six (6) months prior to the expiration of the Term.

          (4) This extension  shall be upon all of the provisions of this Lease.
     The  Premises  shall be accepted by the Tenant "as is" and in its  existing
     condition at the time the extension  commences,  and the Landlord shall not
     be  obligated  to make  any  leasehold  improvements  or  contribute  funds
     therefore.

          (5) The Tenant  shall not assign its rights  under this  subparagraph,
     except  in  connection  with an  assignment  of  this  Lease  permitted  by
     paragraph 7 of this Lease.

          (6) If the  Tenant  fails duly and  timely to  exercise  its option to
     extend the Term,  the option shall  thereupon  automatically  terminate and
     expire.

          (7) If at the time the Tenant  exercises its option to extend the Term
     or at anytime  thereafter until  commencement of the extension period,  the
     Tenant  shall be in  default as set forth in  paragraphs  14 and 19 of this
     Lease in the performance of its obligations  under this Lease, the Tenant's
     exercise  of  the  extension   option   hereunder  shall  become  void  and
     unenforceable.

     (d)  Build-out.  The Landlord  shall build the new B/310 Organic Thin Films
Laboratory  portion of the  Premises  described  in  EXHIBIT A1 to the  Tenant's
requirements provided that the Landlord, in its sole discretion, determines that
the  Tenant's  requirements  do  not  decrease  the  value  of the  Premises  or
determines that such build-out is not in the best interest of the Landlord.  The
total cost of the build-out shall be paid by the Tenant as part of the Base Rent
amortized  over  the  term of this  lease  as per  Schedule  B.  Notwithstanding
anything in this Lease to the contrary, the full amount of the unpaid balance of
the  build-out  cost shall become  immediately  due and payable in full upon any
early  termination  or expiration  of this Lease.  A schedule of such amounts is
provided in Schedule E. The  forgoing is not  intended to limit other rights and
remedies of IBM.

     (e) Delay. If the Landlord is unable to deliver possession of the new B/310
Organic Thin Films  Laboratory  portion of the Premises  described by Exhibit A1
Substantially  Completed,  on or before August 1, 1999, for any reason or cause,
this Lease  shall not end and all  provisions  of this Lease  shall  continue in
effect except that rent shall abate for the period that possession by the Tenant
is delayed,  until the new B/310  Organic Thin Films  Laboratory  portion of the
Premises are Substantially  Completed,  provided that abatement shall occur only
if  the  Landlord's   inability  to  deliver  possession  did  not  result  from
interference by the Tenant.

     (f) Substantially Completed. The words "Substantially Completed" shall mean
the occurrence of all of the following:  (1) construction by the Landlord of the
Premises  such that the remaining  work to be done to render the Premises  fully
completed  adjustments or decoration  which will not interfere with the Tenant's
use and enjoyment of the Premises;  (2) the utility services have been installed
and are  operational  for use by the  Tenant;  and (3) all means of ingress  and
egress,  parking  granted to the Tenant and loading areas  authorized for use by
the Tenant,  are available for use by the Tenant.  The Tenant's  taking total or
partial  occupancy  of the  Premises  or  the  Landlord's  having  Substantially
Completed  the  Premises,  shall not relieve the Landlord of its  obligation  to
proceed diligently to complete those items listed in this section. With the sole
exception  of the new B/310  Organic  Thin Films  Laboratory  space,  the Tenant
agrees that as of the date this Lease is signed by the Tenant,  the Landlord has
fulfilled  any  and  all of  the  Landlord's  obligations  with  respect  to the
construction and maintenance of the Premises.

     (g) Prior to the Commencement  Date, the Tenant agrees to vacate completely
the Storage space located at Column S-30 in Bldg. 330C and to deliver possession
of the  space  to the  Landlord  in good  condition,  reasonable  wear  and tear
excepted.  Tenant at its expense, shall remove all of its personal property from
the Storage space at Column s-30 in Bldg. 330C prior to the Commencement Date

PARAGRAPH 5. RENT.

     (a) Base Rent and Additional Rent.

<PAGE>

          (1) The  Tenant  shall pay the annual  rent (the "Base  Rent") for the
     entire  Premises in monthly  installments  in advance,  on the first day of
     every calendar month during the Term, pursuant to Schedules A and B hereto.
     The  Tenant  shall  pay  additional  rent,  as  described  hereafter,  when
     invoiced.

          (2) From the  Commencement  Date until the end of the Term,  Base Rent
     shall  include  those  services  described  in Rider C (except as otherwise
     provided in Rider C) and in Paragraph 6 hereto.

          (3) The Tenant shall pay as additional rent the price for utilities or
     services  listed in  Schedule C consumed  on that  portion of the  Premises
     described  as other than office space in EXHIBITS A1 and A3. The Schedule C
     utilities  and  services  provided to the Tenant on the  Commencement  Date
     include,  but are not limited to: Electricity,  Domestic Water,  De-Ionized
     Water,  Chilled Water, Low Temperature  Chilled Water, High Temperature Hot
     Water,  Compressed  Air,  Bulk Gases and  Industrial,  and  Fluoride  Waste
     Drainage and Treatment and within Bldg.  310 Organic Thin Films  Laboratory
     Solvent  Drainage  and  Treatment.  The amount of  additional  rent,  where
     applicable,  for  utilities  will be based upon meter  readings and will be
     billed  monthly.  The amount of additional  rent for utilities where meters
     are not  applicable,  will be billed  monthly  pursuant  to Schedule D. The
     Tenant shall promptly notify the Landlord of changes (increase/decrease) in
     utility use where meters are not used. Once each calendar year of the Term,
     the prices  listed in Schedule C are subject to change upon written  notice
     from the Landlord to the Tenant.

     (b) Payment of Rent. The Tenant will pay the rent,  including Base Rent and
additional rent as hereinafter described,  without deduction, set off or demand,
to  Scribcor  Inc.,  as agent for IBM Lease  Administration,  P.O.  Box  809224,
Chicago, Illinois 60680, or to such other Person (defined in PARAGRAPH 33(m)) or
at such other place as the  Landlord may  designate  in writing.  The words Base
Rent and additional  rent are sometimes  together  called the "rent." Checks for
the payment of rent shall be made payable to  "International  Business  Machines
Corporation."  No payment by the Tenant or receipt by the  Landlord  of a lesser
amount than the correct amount of rent due hereunder shall be deemed to be other
than a payment on account;  nor shall any  endorsement or statement on any check
or any letter  accompanying any check or payment be deemed to effect or evidence
an accord  and  satisfaction.  The  Landlord  may  accept  such check or payment
without  prejudice to the Landlord's  right to recover the balance or pursue any
other remedy provided in this Lease or at law or in equity.

PARAGRAPH 6. SERVICES AND UTILITIES.

     (a) The Landlord  shall furnish the Tenant with the following  services and
utilities in the Premises, subject to the provisions of PARAGRAPH 5.

          (1)  JANITOR  SERVICE,  except  in  storage  space,  in and  about the
     Premises,  each  day  except  on  Saturdays,   Sundays  and  holidays  (the
     "Holidays")  listed in Rider B hereto. As to the Office Space, the Landlord
     will provide weekly trash removal and monthly general  cleaning.  As to the
     other areas of the Premises  (except  Storage  Space),  the  Landlord  will
     provide daily trash removal. The Tenant shall not provide any additional or
     alternative  janitor service without the Landlord's written consent. If the
     Landlord consents,  such janitor service shall be at the Tenant's sole cost
     and  responsibility  and the Tenant shall pay the Landlord a reasonable fee
     to coordinate  these  multiple  janitorial  services.  The Tenant shall not
     provide  any  janitor  service  in the  Premises  except  through  a Person
     satisfactory  to the Landlord;  provided,  that if the Landlord  determines
     that such Person will cause labor disharmony on the Site, rejection of that
     Person shall not be subject to challenge by the Tenant.

          (2) HEAT AND AIR CONDITIONING whenever heat or air conditioning shall,
     in the Landlord's sole judgment, be required for the comfortable occupation
     of the Premises. Whenever heat generating machines or equipment or lighting
     fixtures  are used in the  Premises  and affect the  temperature  otherwise
     maintained  by the  Building  air  conditioning  system,  the  Landlord may
     install  supplementary air conditioning  units in or for the benefit of the
     Premises,  and the cost of installation,  operation and maintenance thereof
     shall be paid by the Tenant as additional rent to the Landlord.

          (3) WATER for drinking, lavatory and toilet purposes.

<PAGE>

          (4)  ELECTRICITY  for uses within the Office Space and Storage  Space,
     provided that (i) the connected  electrical load of the use does not exceed
     an average of three watts per square foot of that portion of the  Premises;
     (ii) the  electricity so furnished for such use will be at nominal 120 volt
     single phase and that no electrical circuit for the supply of such use will
     have a current  capacity  exceeding  15 amperes and (iii) such  electricity
     will be used only for equipment and accessories normal to office usage.

     (b) No  Warranties.  The Landlord does not warrant that any of the services
or  utilities  listed  above,  in Rider C, in  Schedule  C, in  Paragraph  5, or
elsewhere  will  be  free  of or  from  interruption.  ALL  IMPLIED  WARRANTIES,
INCLUDING  MERCHANTABILITY  AND  FITNESS OR USE FOR A  PARTICULAR  PURPOSE,  ARE
HEREBY  DISCLAIMED.  Any  interruption  of service or  utilities  shall never be
deemed an eviction or  disturbance  of the  Tenant's use and  possession  of the
Premises or any part  thereof,  or render the Landlord  liable to the Tenant for
damages,  or relieve the Tenant from  performance  of the  Tenant's  obligations
under this Lease.

     (c)  Conservation.  Notwithstanding  anything to the  contrary set forth in
this PARAGRAPH or elsewhere in this Lease,  the Landlord shall have the right to
institute policies,  programs and measures as may be necessary or desirable,  in
the Landlord's reasonable judgment,  for the conservation and/or preservation of
energy or  energy-related  services,  or as may be  required  to comply with any
applicable Laws, whether mandatory or voluntary.

PARAGRAPH 7. ASSIGNMENT, SUBLETTING & RECAPTURE.

     The Tenant  shall not,  whether  voluntarily  or by  operation of the Laws,
assign,  encumber or otherwise  transfer this Lease or any interest  herein,  or
sublet the Premises or any part  thereof,  or permit the Premises to be occupied
by anyone  other than the Tenant or the  Tenant's  Agents  (defined in PARAGRAPH
3(a)). An assignment shall include any transfer of any interest in this Lease or
the  Premises by the Tenant  pursuant to a merger,  division,  consolidation  or
liquidation,  or  pursuant  to change in  ownership  of the Tenant  involving  a
transfer of voting  control in the Tenant  (whether  by transfer of  partnership
interests,  corporate stock or otherwise), or any pledge of any interest in this
Lease as  collateral  for a loan.  Any  assignment in violation of the foregoing
prohibitions shall be void.

PARAGRAPH 8. ALTERATIONS.

     (a) If the  Tenant  requests  that  the  Landlord  make  alterations  in or
additions to the Premises,  and the Landlord agrees, such work will be performed
under  separate  written  contract to be  negotiated  between the  Landlord  and
Tenant. The Tenant shall not make or permit anyone to make any alterations in or
additions to the Premises  (hereinafter  collectively called  "Improvements") or
install any  equipment  of any kind which will require any  Improvements  to the
Premises,  or which  require the use of the Building  Service  Systems  (defined
below),  without the Landlord's  advance written  consent in each instance.  The
Landlord  may consent to the  Tenant's  request to make  improvements  after the
Tenant furnishes the Landlord with plans and specifications  therefor, names and
addresses of contractors who will perform the work, and  indemnification  of the
Landlord against claims, costs, damages,  liabilities and expenses, each in form
and amount  satisfactory to the Landlord.  The Landlord agrees to provide prompt
review  of  Tenant's  alteration  request,  60  days or  less  depending  on the
complexity  of the project,  and will call for a project  review  meeting if any
problems  surface during the course of this review that require further input or
discussion  from the  Tenant.  The  Landlord  will not  unreasonably  delay  the
commencement of a Landlord-approved alteration project as long as the Tenant has
complied with the  requirements  set forth in paragraph  8(a). All  Improvements
shall be installed  in a good and  workmanlike  manner and only new,  high grade
materials shall be used. Whether the Tenant furnishes the Landlord the foregoing
or not,  the Tenant  hereby  agrees to  indemnify,  defend and hold the Landlord
harmless  from and  defend it  against  any and all  claims,  actions,  damages,
liabilities and expenses of every kind and description which may arise out of or
be connected in anyway with the Improvements or the installation thereof. Before
commencing  any  work in the  Premises  or  delivering  any  materials  into the
Building,  the Tenant shall furnish the Landlord with a certificate of insurance
from all  contractors  performing  labor or furnishing  materials,  insuring the
Landlord against all claims, costs, damages,  liabilities and expenses which may
arise out of or be connected in anyway with the Improvements or the installation
thereof. The Tenant shall promptly furnish information regarding increase in the
use of utilities, environmental services, and other services by the Tenant which
the  parties  agree will be the basis for  additional  rent to be charged to the
Tenant pursuant to this Lease.  The Tenant shall ensure all work performed is in
full compliance with the most current version of the "199X Contractor Guide", as

<PAGE>

referenced in Rider A. The words "Building Service Systems" mean the electrical,
HVAC,  mechanical,  plumbing (including all environmental  systems),  safety and
health  and  telecommunication  (voice/data/signal)  systems  that  service  the
Building up to the point of localized distribution to the Premises. Such systems
provide the main source of supply and distribution  throughout the Building. The
word "Structure" shall mean bearing walls, roof, exterior walls,  support beams,
foundation, window frames, floor slabs and support columns of the Building.

     (b) The  Tenant  shall pay the cost of all  Improvements  and  installation
thereof and also the cost of redecorating  the Premises  occasioned by them. All
Improvements  shall comply with all insurance  requirements known to the Tenant,
and with all Laws applicable to the work and to the Tenant.

     (c) Upon completing any Improvements, the Tenant shall promptly furnish the
Landlord with contractors' affidavits and full and final waivers of lien.

     (d) The privilege herein granted to the Tenant to make  Improvements to the
Premises  is  conditioned  upon the  Tenant's  contractors,  workmen,  employees
working  in  harmony  and  not  interfering  with  the  workmen,  employees  and
contractors  of the Landlord or of any other tenant.  All hardware and non-trade
fixtures and all Improvements,  temporary or permanent, in or upon the Premises,
whether  placed there by the Landlord or the Tenant  shall,  unless the Landlord
requests their removal in accordance  with  subparagraph  (e) below,  become the
Landlord's  property  and shall remain upon the Premises at the end of the Term,
however ended, without compensation, allowance or credit to the Tenant.

     (e) The  Landlord  may  require  the  Tenant to  remove  some or all of the
Improvements  (including  equipment  required by  Improvements  as  aforesaid in
subparagraph  (a)),  hardware  and  non-trade  fixtures  at the end of the Term,
however ended,  whether  installed by or on behalf of the Tenant before or after
the start of the Term.  The Tenant shall remove the same within thirty (30) days
after the end of the Term and the Tenant shall repair all damage to the Premises
caused thereby; except that the Tenant shall not be required to remove pipes and
wires  concealed  in the floors,  walls,  or ceiling,  provided  that the Tenant
properly  cuts  and caps the same  and  seals  them off in a safe,  lawful,  and
workmanlike manner. If, after the Landlord's request, the Tenant does not remove
items it is required  hereunder to remove  within thirty (30) days after the end
of the Term,  however  ended,  the  Landlord  may remove the same and repair all
damages caused thereby, and the Tenant shall pay to the Landlord upon demand the
cost of such removal and repair of all damage.

     (f) The  Tenant  shall  remove  the  Tenant's  Personal  Property  from the
Premises at the end of the Term,  however ended. If not so removed within thirty
(30) days after the end of the Term,  however ended,  the Landlord may do so and
the Tenant  shall pay the  Landlord  upon  demand the cost of such  removal  and
repair of all damage. All such items not removed by the Tenant as required above
shall become the Landlord's property without  compensation,  allowance or credit
by the Landlord to the Tenant.

     (g)  Subparagraph  (e),  this  subparagraph  (g),  and the  indemnification
provisions  contained  in this  Paragraph  8 shall  survive the end of the Term,
however ended.

PARAGRAPH 9. SIGNS.

     At its expense,  the Tenant may place its signs within the Premises without
the Landlord's  consent,  provided the signs (a) comply with the Law; (b) cannot
be seen from outside of the Premises; and (c) do not affect the Building Systems
or Structure, health and safety of occupants in the Building or the environment.
With the Landlord's consent as to size, color, manner and style, the Tenant may,
at its expense,  place signs on the entrance  doors to the Premises which comply
with the Law. At the  Tenant's  expense,  the Landlord  shall place  directional
signs in the hallways  leading to the Premises.  Except for the  foregoing,  the
Tenant shall not permit or suffer any signs, logos,  symbols,  advertisements or
notices to be displayed, inscribed upon or affixed on any part of the outside or
inside of the Premises, or in any other part of the Building, or on the Site.

PARAGRAPH 10. CARE OF PREMISES.

     (a) At the expiration or earlier  termination  of this Lease,  for whatever
reason,  the Tenant shall  return the Premises to the Landlord in the  condition
required by the provisions of this Lease.  During the Term, the Tenant will take
good care of the Premises and the Building  fixtures and  appurtenances  located
within the Premises,  and all  Improvements  (defined in PARAGRAPH  8(a)) to the
Premises;  will  maintain the Premises and make all repairs  thereto,  including

<PAGE>

repair of all damage resulting from the negligence or willful  misconduct of the
Tenant or Tenant's Agents (defined in PARAGRAPH  3(a));  will suffer no waste or
injury;  will execute and comply with all federal,  state and local laws, rules,
orders, statutes,  directives,  ordinances and regulations  (collectively herein
called the "Laws"),  at any time issued or enforced by any lawful authority,  as
well as the IBM Rules,  which in each case are  applicable  to the Tenant's use,
manner of use or occupancy of the  Premises;  and will repair,  at or before the
end of the term all injury  done by the  installation  or  removal  of  Tenant's
Personal Property and the Improvements.

     (b)  At  any  time,   whether   voluntarily  or  pursuant  to  governmental
requirements, the Landlord may, and, where required by this Lease, shall, at its
cost,  make repairs and  improvements in or to the Building and the Site, or any
part thereof;  provided,  that (i) the Landlord shall give the Tenant reasonable
notice of any intention to enter the Premises (unless doing so is impractical or
unreasonable because of an emergency),  and (ii) any such repair and improvement
does not interfere unreasonably with the Tenant's use of or ingress to or egress
from the  Premises.  Upon prior  notice to the Tenant,  the  Landlord  may close
entrances,  doors, corridors,  elevators or other facilities,  provided that any
such action shall not materially  interfere with the Tenant's  operations within
the Premises or the Tenant's  ingress to or egress from the  Premises.  Provided
the  Landlord  has given prior  notice  (unless  impracticable  or  unreasonable
because of an emergency), the Landlord shall not be liable to the Tenant for any
expense,  injury, loss or damage resulting from work done in or upon, or the use
of, any adjacent or nearby building, land, street or alley, except to the extent
caused by the gross  negligence  or willful  misconduct  of the  Landlord or the
Landlord's directors, employees, agents or contractors (hereinafter collectively
called  "Landlord's  Agents"),  and in no event  shall  rent or  other  monetary
obligations hereunder of the Tenant be suspended,  reduced,  abated or otherwise
affected.

PARAGRAPH 11. NOTICE.

     Any notice,  request,  communication or demand under this Lease shall be in
writing and shall be considered properly delivered when addressed as hereinafter
provided,  given or served  personally or by overnight  private  express service
carrier, or given by registered or certified mail (return receipt requested) and
deposited in the United States general or branch post office, or by IBM Internal
Certified Mail. Any notice, request,  communication or demand by the Landlord to
the Tenant  shall be addressed  to the Tenant at the  Premises  until  otherwise
directed in writing by the Tenant. Any notice, request,  communication or demand
by the Tenant to the Landlord  shall be addressed  to Mr. Roy G.  Dieterle,  IBM
Corporation,  Hudson Valley  Research  Park,  Building  300-44X,  1580 Route 52,
Hopewell Junction,  New York 12533, with copies addressed  simultaneously to the
Landlord,  Office of Area  Counsel,  IBM  Corporation,  1580 Route 52,  Hopewell
Junction,  New York  12533-6531,  until  otherwise  directed  in  writing by the
Landlord. Rejection or other refusal to accept a notice, request,  communication
or demand or the  inability to deliver the same because of a changed  address of
which no notice was given shall be deemed to be receipt of the notice,  request,
communication or demand sent.

PARAGRAPH 12. LANDLORD'S INTEREST

     The Landlord's interest in the property subject to this Lease is and always
shall be paramount to the Tenant's  interest in this Lease,  and nothing  herein
contained  shall  empower  the  Tenant to do any act which  shall  encumber  the
Landlord's interest in the property subject to this Lease,

PARAGRAPH 13. CERTAIN RIGHTS RESERVED TO LANDLORD.

     (a) The  Landlord  reserves  the  following  rights to be  exercised in the
Landlord's sole discretion:

          (1) To  change  the name of  street  address  of the Site or  Building
     without liability of the Landlord to the Tenant. The Landlord shall provide
     the Tenant with reasonable advance notice of such change.

          (2) To install  and  maintain a sign or signs on the  exterior  of the
     Building or other areas of the Site.

          (3) To grant to anyone the exclusive  right to conduct any  particular
     business or undertaking in the Building or on any part of the Site.

          (4) To take  any  and all  measures,  including  audits,  inspections,
     charges,  alterations,  repairs and  improvements of and to the Premises or

<PAGE>

     elsewhere in the Building or on the Site,  as may be necessary or desirable
     for the safety,  protection or preservation of the Premises and other parts
     of the Building or the Site or the Landlord's  interests therein, or as may
     be necessary or desirable in the operation of the Building or the Site.

          (5) To  approve  the  weight,  size and  location  of  safes,  vaults,
     vertical  files and other  heavy  equipment  and  articles in and about the
     Premises  and  elsewhere in the Building so as not to exceed the legal live
     load per square foot designated by the Landlord's structural engineers, and
     to require all such items and  furniture and similar items to be moved into
     or out of the  Building  only  at such  times  and in  such  manner  as the
     Landlord  shall direct in writing.  The Tenant shall not install or operate
     machinery or any mechanical devices of a nature not directly related to the
     Tenant's  ordinary use of the Premises without the prior written consent of
     the Landlord, which it will not unreasonably withhold or delay. Movement of
     the Tenant's Personal Property and Improvements into or out of the Building
     and  within  the   Building   is  entirely   at  the   Tenant's   risk  and
     responsibility,  and the Landlord reserves the right to require permits, if
     required by Law,  before  allowing  the same to be moved into or out of the
     Building.

          (6) To  establish  reasonable  security  controls  for the  purpose of
     regulating  all  property  and  packages  on the Site,  both  personal  and
     otherwise,  to be moved into or out of the Building or on the Site, and all
     Persons  using  the  Building  or the  Site.  The  Landlord,  in  its  sole
     discretion, may exclude any of the Tenant's Agents or Vendors from the Site
     or any portion  thereof if the Landlord has any reason to believe that such
     Tenant's  Agent or Vendor poses a security risk to the Landlord,  the Site,
     or any  occupant  of the Site.  In  exercising  the  foregoing  right,  the
     Landlord  may, but shall not be required to furnish the Tenant or any other
     Person  with the  grounds of why the  Landlord  has reason to believe  such
     Tenant's Agent or Vendor poses a security risk.

          (7) To establish reasonable security controls to regulate delivery and
     service of supplies and the use of the loading docks,  receiving  areas and
     freight elevators.

          (8) If prior to the end of the Term the Tenant  vacates the  Premises,
     to decorate,  remodel,  repair, alter or otherwise prepare the Premises for
     re-occupancy.

          (9) To  constantly  have pass keys to the  Premises,  provided  access
     shall be upon the  prior  reasonable  notice to the  Tenant,  except in the
     event of an emergency.  The Landlord shall not have access to secured areas
     designated by the Tenant, except in an emergency.

     (b) The  Landlord may enter the Premises and may exercise any or all of the
foregoing  rights hereby reserved  without being deemed guilty of an eviction or
disturbance  of the Tenant's use or  possession  and without being liable in any
manner to the Tenant;  provided,  that the Landlord  gives the Tenant the notice
required  elsewhere in this Lease,  or if no notice period is specified,  then a
reasonable  notice,  of any intention to enter the Premises  (unless doing so is
impractical or unreasonable because of an emergency as reasonably  determined by
the Landlord).

     (c) Loading  dock access may be granted to the Tenant via key lock or badge
lock.  The terms and  conditions  of this  privilege are specified in Rider D to
this Lease.

PARAGRAPH 14. DEFAULT UNDER OTHER LEASES.

     If the term of any  lease  made by the  Tenant  for any  space on the Site,
other than this Lease,  shall be terminated  or  terminable  after the making of
this Lease  because of any default by the Tenant  under such other  lease,  such
fact shall constitute a default under this Lease and shall empower the Landlord,
at the Landlord's sole option, to terminate this Lease by notice to the Tenant.

PARAGRAPH 15. WAIVER OF CLAIMS.

     (a) Unless  caused by the gross  negligence  or willful  misconduct  of the
Landlord or  Landlord's  Agents  (defined in PARAGRAPH  10(b) the Tenant  hereby
releases  the  Landlord  and  Landlord's  Agents  from and waives all claims for
injury (including  death) to any Person and damage to any property  sustained by
the Tenant or Tenant's  Agents  (defined in PARAGRAPH  3(a),  resulting from the
Building  or  Premises or any part of either or any  equipment  or  appurtenance

<PAGE>

becoming out of repair, or resulting from any accident, assault or robbery on or
about the Site, or resulting  directly or indirectly  from any act,  omission or
neglect of any other Person,  including  other  tenants and their  licensees and
invitees.  This PARAGRAPH shall apply  especially,  but not exclusively,  to the
flooding of the  Premises,  and to damage  caused by  refrigerators,  sprinkling
devices, air conditioning  apparatus,  water, snow, frost, steam, excessive heat
or cold or  humidity,  falling  plaster or  ceiling  components,  broken  glass,
blocked drains,  failed pumps, failed electrical systems,  sewage, gas, odors or
noises, or the bursting or leaking of pipes or plumbing fixtures, or the failure
or interruption  of any building or utility system,  and shall apply whether any
such damage  results from the act,  omission or neglect or of any Person,  other
than the Landlord or Landlord's  Agent's  willful  misconduct,  including  other
tenants and their  licensees and invitees,  and whether such damage be caused by
or results from any thing or circumstance above mentioned or referred to, or any
other thing or  circumstance  whether of a like nature or of a wholly  different
nature. If any such damage, whether to the Premises or to the Building or to the
Site, or any part thereof, or whether to the Landlord or to other tenants in the
Building or Site,  results  from any  negligence  or willful  misconduct  of the
Tenant or Tenant's Agents, the Landlord may, in its sole discretion, repair such
damage and the Tenant shall, upon demand by the Landlord, reimburse the Landlord
forthwith  for the total cost of the repairs as additional  rent.  Neither party
shall be  liable  to the other for any  damages  caused  by a  negligent  act or
omission to the extent either has recovered  insurance proceeds therefor and the
insurance  company  which has paid one party  hereto has  waived in writing  its
rights of subrogation against the other party hereto.

     (b) As a material part of the  consideration  to the  Landlord,  the Tenant
hereby  assumes  all risk or damage  to or loss,  theft or  misappropriation  of
property  located in, upon or about the Site or in any motor  vehicles owned by,
leased by, or being used by the  employees  of the Tenant or Tenant's  Agents or
its employees and located on the Site,  unless caused by the willful  misconduct
of the Landlord.

PARAGRAPH 16. HOLDING OVER.

     (a) If the Tenant remains in possession of the Premises or any part thereof
after the end of the Term,  however  ended,  the Tenant shall pay the Landlord a
rental at double the rate of the Base Rent and additional rent specified in this
Lease for the entire  Premises for the time the Tenant  remains in possession of
any part of the Premises,  and in addition  thereto,  shall pay the Landlord for
all damages, whether consequential,  special, incidental or otherwise, sustained
by reason of the  Tenant's  retention  of  possession.  The  provisions  of this
PARAGRAPH  do not waive the  Landlord's  rights of reentry  or any other  rights
hereunder or which are available at law or in equity.

     (b) The word "possession"  shall include continued  occupancy of Persons or
of items that the Tenant is required by PARAGRAPH 8 to remove but which continue
to remain in the Premises beyond the end of the Term by more than five (5) days.

PARAGRAPH 17. RULES.

     The Tenant shall observe faithfully and comply strictly with the IBM Rules,
modifications  thereto,  and  such  other  rules,   regulations  and  procedures
promulgated from time to time by the Landlord,  which in the Landlord's judgment
reasonably  exercised,   are  necessary  for  the  safety,   security,  care  or
cleanliness  of the  Building  and Site or for the  preservation  of good  order
therein.  The  Landlord  will not be liable to the Tenant for  violation of such
rules,  regulations  or  procedures  by any other  tenant or  occupant  or their
respective employees, agents, invitees, licensees, or contractors.

PARAGRAPH 18. SUBORDINATION.

     (a) This Lease shall be subordinate  and subject at all times to all ground
or underlying leases and to any mortgage or deed of trust covering the Site, the
Building,  other  buildings on the Site, or which at any time hereafter shall be
made,  and to  all  renewals,  modifications,  consolidations,  or  replacements
thereof, and to all advances made, or hereafter to be made, upon the security of
any such  mortgage  or deed of  trust.  The  Tenant  shall  execute  instruments
subordinating  this Lease to any such  lease,  mortgage  or deed or trust as the
Landlord shall request,  failing which the Tenant shall be in default  hereunder
and, without limiting other remedies  available to the Landlord  hereunder,  the
Landlord may act as the Tenant's attorney-in-fact for such purposes.

     (b) If the Landlord commits any act or omission which would give the Tenant
the  right  under  this  Lease to  damages  from the  Landlord  or the  right to

<PAGE>

terminate this Lease, the Tenant agrees that it will not sue for such damages or
terminate this Lease until (i) it shall have given written notice of the claimed
act or omission to the Landlord and to the holder of the  indebtedness  or other
obligations  secured by any mortgage or deed of trust  affecting the Premises or
of any ground or underlying  lease,  if the name and address of such holder have
been  furnished  to the Tenant,  and (ii) in light both of the time  required to
effect  a  remedy  and of the  impact  of the act or  omission  on the  Tenant's
business  operations at the Premises,  a reasonable period of time for remedying
the act or omission has elapsed following the giving of the notice.  During such
time, the Landlord and such holder,  or either of them,  and Landlord's  Agents,
will be entitled to enter upon the  Premises and do whatever may be necessary to
remedy the act or omission.

PARAGRAPH 19. DEFAULT.

     (a)  Default By Tenant.  All rights and  remedies  of the  Landlord  herein
enumerated shall be cumulative, and none shall exclude any other right or remedy
available at Law or in equity.

          (1) The  occurrence of any one or more of the  following  events shall
     constitute  a default  by the Tenant  and a breach of this  Lease:  (i) the
     Tenant fails to make a payment of Base Rent or additional rent or any other
     monetary  obligation  when the same shall become due and payable  hereunder
     and such failure shall continue for more than ten (10) days after notice by
     the  Landlord,  or (ii) the Tenant fails to promptly  and fully  perform or
     observe  any of the  other  provisions  in this  Lease to be  performed  or
     observed by the Tenant and the failure shall  continue for more than twenty
     (20)  days  after  notice by the  Landlord  specifying  the  nature of such
     failure,  or if the failure so specified shall be of such a nature that the
     same cannot be  reasonably  cured or remedied  within said twenty (20) days
     period,  the Tenant shall not have  commenced to cure or remedy the failure
     in good faith within such twenty (20) day period and thereafter  shall have
     diligently  proceeded to cure or remedy it,  (unless the act or omission of
     the Tenant or occurrence  involves a hazardous or emergency condition which
     shall be cured by the Tenant  forthwith  upon the  Landlord's  demand),  or
     (iii) the leasehold interest or property of the Tenant is levied upon under
     execution or is attached by process of Law, or (iv) at any time prior to or
     during  the  Term,  the  Tenant  makes an  assignment  for the  benefit  of
     creditors,  or a receiver is appointed  for any property of the Tenant,  or
     any voluntary or involuntary petition or similar pleading under any section
     or sections of any  bankruptcy Law shall be filed by or against the Tenant,
     or any voluntary or  involuntary  proceeding in any court or tribunal shall
     be  instituted  to  declare  the  Tenant  in  solvent  or unable to pay the
     Tenant's debts, and in the case of any involuntary  petition or proceeding,
     the petition or proceeding is not dismissed  within thirty (30) consecutive
     days from the date it is filed.

          (2) If the Tenant defaults hereunder, and at any time thereafter,  (i)
     if the Term shall not have commenced, the Landlord may cancel and terminate
     this Lease  effective three (3) days after receipt of notice by the Tenant,
     or (ii) if the Term shall have  commenced,  the Landlord may serve upon the
     Tenant a notice that this Lease and the Term will terminate on a date to be
     specified  therein,  (which shall not be less than three (3) days after the
     date the Landlord's notice is received),  and upon the date so specified by
     the Landlord in its notice,  this Lease and the then  unexpired  Term shall
     terminate  and  come  to an end as  fully  and  completely  as if the  date
     specified in the Landlord'  notice was the day herein  definitely fixed for
     the end of the Term,  and the  Tenant  shall  then quit and  surrender  the
     Premises to the Landlord, but the Tenant shall remain liable as hereinafter
     set forth; provided,  however, that if the Tenant shall fail to make timely
     payment of rent and such failure  shall  continue  for two (2)  consecutive
     months,  or if the Tenant shall default in the performance of an obligation
     in this Lease on its part to be performed,  including the timely payment of
     rent,  two (2) or more  times in any  period of six (6)  months  then,  not
     withstanding  that each act or  omission  shall have been cured  within the
     period after the giving of notices as herein provided,  any further default
     in the  performance  of any  obligation  under  this  Lease  on its part be
     performed shall be deemed to be deliberate and the Landlord  thereafter may
     serve the aforesaid notice of termination without affording to the Tenant a
     further opportunity to cure the default.

          (3) Upon  termination  of this Lease by the  Landlord as herein  above
     provided,  the Landlord may terminate all services and reenter the Premises
     either by force or  otherwise,  and by summary  proceedings  or  otherwise,
     dispossess  the  Tenant and the legal  representative  of the Tenant or any

<PAGE>

     other occupant of the Premises,  and remove all effects  therefrom  without
     being  deemed  in any  manner  guilty of  trespass,  eviction  or  forcible
     detainer, and hold the Premises as if this Lease had not been made.

          (4) If the Tenant  defaults under this Lease,  the Landlord shall have
     the right to terminate this Lease and receive from the Tenant,  in addition
     to the other remedies provided in this Lease:

               (i) any unpaid rent which is due and owing to the Landlord at the
          time of such termination or reentry; plus

               (ii) the  present  value of the unpaid rent which would have been
          earned  under  this Lease  after  termination  or re- entry  minus the
          amount of such rental loss (net of  expenses)  that the Tenant  proves
          could be reasonably avoided; plus

               (iii) any other  amount  specific  and  documented  necessary  to
          compensate  the Landlord for all the detriment  proximately  caused by
          the Tenant's  failure to perform its  obligations  under this Lease or
          which in the  ordinary  course  of  things  would be  likely to result
          therefrom; and

               (iv) at the 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 Law or in equity.

As used in this PARAGRAPH, "present value" shall mean the sums due and owing the
Landlord  hereunder  as if this Lease had not been  terminated,  such sums being
discounted  from the date these sums were  otherwise due under this Lease to the
date actually paid to the Landlord.  The discount rate shall be two percent (2%)
above  the  prime  rate  published  in the Wall  Street  Journal  on the date of
termination of this Lease.

          (5) Any and all property which may be removed from the Premises by the
     Landlord pursuant to the authority of this Lease or by Law or in equity, to
     which the Tenant has or may have an  interest,  may be handled,  removed or
     stored by the  Landlord at the  Tenant's  risk and cost,  and the  Landlord
     shall in no event be responsible for the value, preservation or safekeeping
     thereof.  The Tenant  shall pay to the Landlord  upon demand as  additional
     rent any and all expenses incurred by the Landlord to remove and store such
     property so long as the same shall be in the Landlord's possession or under
     the  Landlord's  control.  Any  property of the Tenant which is not removed
     from the Premises or retaken  from storage by the Tenant  within sixty (60)
     days after the end of the Term,  however  terminated,  shall be presumed to
     have been conveyed by the Tenant to the Landlord under this Lease as a bill
     of sale without further  compensation,  allowance or credit by the Landlord
     to the Tenant.

          (6) The Tenant shall pay upon demand all costs and charges,  including
     the fees of counsel,  agents and others retained by the Landlord,  incurred
     by the Landlord to enforce or carry out the Tenant's obligations  hereunder
     or incurred by the Landlord in any  litigation,  negotiation or transaction
     in which the Tenant causes the Landlord,  without the Landlord's  fault, to
     become involved or concerned, plus interest from the date of payment at the
     rate of 1.5% percent per month.

          (7) The  Tenant  hereby  expressly  waives  the  service  of notice of
     intention  to reenter or to  institute  legal  proceedings  to that end and
     waives any and all rights of redemption  granted by or under any present or
     future Laws by reason of the Tenant being evicted or  dispossessed  for any
     cause,  or by reason of the Landlord  obtaining  possession of the Premises
     because of the Tenant's violation of any of the provisions of this Lease or
     otherwise.  The words  "reenter,"  "enter"  and  "reentry"  as used in this
     Lease, are not restricted to their technical legal meaning.

          (8)  If  the  Tenant  breaches  or  threatens  breach  of  any  of the
     provisions  of this  Lease  on its  part  to be  performed  hereunder,  the
     Landlord  shall  have the right of  injunction  and the right to invoke any
     remedy allowed at Law or in equity as if reentry,  summary  proceedings and
     other remedies were not herein  provided for.  Mention in this Lease of any
     particular  remedy shall not preclude the Landlord  from pursuing any other
     remedy available at Law or in equity.

          (9) The  delivery  of keys to any agent or  employee  of the  Landlord
     shall not be considered  as a  termination  of this Lease or a surrender of
     the Premises.
<PAGE>

          (10) The  Landlord  and the Tenant  hereby  waive trial by jury in any
     action,  proceeding or  counterclaim  brought by either of them against the
     other on any matters not relating to personal injury but otherwise  arising
     out of or in any way connected  with this Lease,  the  relationship  of the
     Landlord and the Tenant, the Tenant's use or occupancy of the Premises,  or
     any statutory remedy. The Tenant further agrees that it shall not interpose
     any counterclaim in summary proceeding or in any action based on nonpayment
     of rent or any other payment required of the Tenant hereunder to be made to
     the Landlord.

     (b) Default by Landlord.

          (1) The  occurrence of any one or more of the  following  events shall
     constitute a default by the  Landlord  and a breach of this Lease:  (i) the
     Landlord  fails to make a payment of any monetary  obligation to the Tenant
     as and  when the same  shall  become  due and  payable  hereunder  and such
     failure shall continue for more than ten (10) consecutive days after notice
     by the Tenant,  or (ii) the Landlord fails to promptly and fully perform or
     observe  any of the  other  provisions  in this  Lease to be  performed  or
     observed by the  Landlord  and the  failure  shall  continue  for more than
     twenty (20)  consecutive  days after  notice by the Tenant  specifying  the
     nature of such failure,  or if the failure so specified  shall be of such a
     nature that the same  cannot be  reasonably  cured or remedied  within said
     twenty (20) day period,  the Landlord  shall not have  commenced to cure or
     remedy the  failure in good faith  within  such  twenty (20) day period and
     thereafter  shall have  diligently  proceeded to cure or remedy it, (unless
     the act or omission of the Landlord or  occurrence  involves a hazardous or
     emergency condition which shall be cured by the Landlord forthwith upon the
     Tenant's  demand),  or (iii) at any time prior to or during  the Term,  the
     Landlord makes an assignment for the benefit of creditors, or a receiver is
     appointed for any property of the Landlord, or any voluntary or involuntary
     petition  or  similar  pleading  under  any  section  or  sections  of  any
     bankruptcy Law shall be filed by or against the Landlord,  or any voluntary
     or  involuntary  proceeding in any court or tribunal shall be instituted to
     declare the Landlord  insolvent or unable to pay the Landlord's  debts, and
     in the case of any  involuntary  petition or  proceeding,  the  petition or
     proceeding is not dismissed  within thirty (30)  consecutive  days from the
     date it is filed.

          (2) If the Landlord defaults hereunder and at any time thereafter, (i)
     if the Term shall not have  commenced,  the Tenant may cancel and terminate
     this Lease effective  three (3) days after notice to the Landlord,  or (ii)
     if the Term shall have commenced,  the Tenant may serve upon the Landlord a
     notice  that  this  Lease  and  the  Term  will  terminate  on a date to be
     specified  therein,  (which  shall not be less than  three (3) or more than
     thirty (30) days after the date the Tenant's notice is given), and upon the
     date so  specified  by the  Tenant in its  notice,  this Lease and the then
     unexpired  Term shall  terminate and come to an end as fully and completely
     as if the  date  specified  in the  Tenant's  notice  was  the  day  herein
     definitely  fixed for the end of the Term,  and the Tenant  shall then quit
     and surrender  the Premises to the Landlord,  but the Tenant may pursue any
     remedy at Law or in equity by reason of the Landlord's default; except that
     in no event shall the  Landlord be liable to the Tenant or any other Person
     for any  consequential,  special or indirect  damages and the Tenant hereby
     waives and releases the Landlord from any claims therefor.

PARAGRAPH 20. MECHANICS' LIENS.

     The Tenant shall not permit any  mechanics'  or  materialmen's  liens to be
filed against the Site, the Building, the Landlord, the Empire State Development
Corporation,  or against the  Tenant's  interest in the  Premises.  The Landlord
shall  have the  right at all  reasonable  times to post and keep  posted on the
Site,  including  the  Building  and the  Premises,  any notices  which it deems
necessary for protection  from such liens.  If any  mechanics' or  materialmen's
liens are so filed by  reason of acts or  omissions  of the  Tenant or  Tenant's
Agents, the Tenant shall remove the lien by payment,  bonding or other method of
discharge  within  thirty (30) days after the lien is filed,  failing  which the
Landlord, at its election, may pay and satisfy the same. In such event, the sums
so paid by the Landlord,  including  expenses and  reasonable  attorneys'  fees,
shall be due and payable by the Tenant at once as  additional  rent upon written
demand.

<PAGE>

PARAGRAPH 21. EMINENT DOMAIN.

     (a) If the whole or a  substantial  part of the Premises  shall be lawfully
condemned or taken in any manner,  this Lease and the Term shall forthwith cease
and  terminate  on the  date  of the  taking  of  possession  by the  condemning
authority and the Landlord shall be entitled to receive the entire award granted
in the proceeding  for recovery of the  Landlord's  fee and leasehold  interests
without any payment to the Tenant,  the Tenant hereby  assigning to the Landlord
the Tenant's  interest in the award, if any. The rent shall be apportioned as of
the date the  Tenant no longer  has  access  to the  Premises  by reason of such
taking.  The Tenant may file a separate claim in the  proceedings to recover its
losses.  Notification to Tenant should occur promptly after Landlord is notified
of a condemnation, that will affect the Premises.

     (b) If any part of the  Building  shall be so condemned or taken and if the
Landlord  determines in its sole discretion that the Building should be restored
in such a way as to materially  alter the Premises,  or that the Building should
be  demolished,  the Landlord may terminate  this Lease and the Term in its sole
discretion,  without compensation to the Tenant, by notifying the Tenant of such
termination  within  sixty  (60)  days  following  the  date  of the  taking  of
possession by the condemning authority.  This Lease and the Term shall expire on
the date  specified in the notice of  termination,  which shall not be less than
sixty (60) days after the giving of such notice,  as fully and  completely as if
such date were the date herein before set for the  expiration  of the Term,  and
the rent shall be  apportioned  as of such date.  Notification  to Tenant should
occur promptly after  Landlord is notified of a  condemnation,  that will affect
the Premises.

PARAGRAPH 22. CASUALTY.

     (a) If there is damage or  destruction  to the Premises  during the Term by
fire, the elements or other casualty,  the Landlord shall  forthwith  repair the
same,  provided  such  repairs can be made within one hundred  twenty (120) days
from the date of the damage or  destruction as determined by the Landlord in its
sole  discretion.  The damage or destruction  shall in no way annul or void this
Lease,  but the Tenant  shall be entitled to a  proportionate  reduction of rent
while such repairs are being made. Such  proportionate  reduction shall be based
upon the extent to which the Premises, or part thereof, is untenantable.

     (b) If the Landlord  determines that such repairs to the Premises cannot be
made within such one hundred  twenty (120) day period,  the Landlord may, at its
option to be exercised  within  thirty (30) days from the date of such damage or
destruction,  make such  repairs as soon as possible  thereafter  and this Lease
shall  continue  in full force and effect and the rent shall be  proportionately
reduced as provided in subparagraph (a) above. If the Landlord does not elect to
make such repairs  which cannot be made within the one hundred  twenty (120) day
period,  the Landlord shall notify the Tenant within such thirty (30) day period
of its  intentions  and, if the  Landlord  elects in its notice not to terminate
this Lease,  this Lease may be  terminated at the option of the Tenant by notice
thereof to the Landlord  within thirty (30) days after receipt of the Landlord's
notice.

     (c) If the Building is damaged, this Lease shall continue in full force and
effect and the Landlord shall forthwith  repair such damage;  except that if the
Building is damaged or destroyed and repair or replacement, as determined by the
Landlord in its sole discretion,  cannot be made within one hundred twenty (120)
days from the date of such damage or destruction, the Landlord, at its option to
be exercised within sixty (60) days from the date of such damage or destruction,
may terminate this Lease.  If and until this Lease is so terminated,  the Tenant
shall be entitled to a proportionate  reduction of rent only if the Premises are
untenantable  as aforesaid and no such rent reduction shall be allowed by reason
of  inconvenience,  annoyance or injury to the Tenant's business because of such
damage or destruction to the Building, or the necessity of repairing any portion
of the Building,  or the making of such repairs,  and the Landlord  shall not be
liable to the Tenant because of such inconvenience, annoyance, or injury.

PARAGRAPH 23. INTENTIONALLY LEFT BLANK

PARAGRAPH 24. INSURANCE.

     (a) The Tenant shall  purchase and during the Term maintain for the benefit
of the  Tenant,  the  Landlord  and the  Landlord's  property  manager (as their
respective  interests may appear) insurance coverage on terms and with companies
reasonably  satisfactory to the Landlord.  Initially,  the Tenant shall maintain
the following coverage in the following amounts with such increases in limits as
the Landlord may from time to time reasonably  request based on customary limits

<PAGE>

required by other sophisticated  landlords of commercial and industrial space in
the region.

          (1) Comprehensive Public Liability  Insurance,  naming the Tenant, the
     Landlord,  the  Landlord's  lender  (if any) and the  property  manager  as
     additional  insureds,  covering any liability for bodily  injury,  personal
     injury  (including  death) and property  damage arising out of the Tenant's
     operations,  its assumed liability under this Lease (including  contractual
     indemnities) and its use, manner of use and occupancy of the Premises,  for
     limits of not less than:

     Personal/Bodily       $1,000,000 each occurrence
     Injury Liability      $5,000,000 annual aggregate
     Property              $1,000,000 each occurrence
     Damage                $5,000,000 annual aggregate

          (2) Property  Damage  Insurance  covering all trade  fixtures,  office
     equipment,  merchandise  and other items,  including the Tenant's  Personal
     Property,  located within the Premises.  Such insurance shall be written on
     an "all risk" of physical  loss or damage basis,  for the full  replacement
     cost of the covered items and in amounts that meet any  coinsurance  clause
     of the policies of insurance.

          (3) Business Interruption  Insurance in such amounts as will reimburse
     the Tenant for direct or indirect loss of earnings  attributable  to perils
     insured against in this PARAGRAPH.

     (b) Prior to the  Commencement  Date, the Tenant shall furnish the Landlord
with certificates evidencing the coverage required above. The certificates shall
state that the coverage is primary and noncontributory and may not be changed or
canceled  without at least ten (10) days' prior  written  notice to the Landlord
and the Tenant.

     (c) The Tenant  shall  comply  with all Laws,  all orders and  decrees of a
court and all  requirements of other  governmental  authorities and agencies and
political subdivision thereof applicable to the use, manner of use and occupancy
of the Premises and Common Areas,  and shall not,  directly or indirectly,  make
any use of the  Premises or Common Areas which may thereby be  prohibited  or be
dangerous  to any Person or  property,  or which may  jeopardize  any  insurance
coverage purchased by the Landlord,  or may increase the cost of such insurance,
or which may require the Landlord to purchase additional insurance coverage.  If
by  reason  of the  Tenant's  failure  to  comply  with the  provisions  of this
PARAGRAPH,  any of the Landlord's or Tenant's  insurance coverage is jeopardized
or the Landlord's insurance premiums are increased  specifically due to Tenant's
actions, the Landlord may (1) in its sole discretion terminate this Lease if the
Tenant fails to stop the conduct  which is  jeopardizing  such  coverage or, (2)
require  the  Tenant  to  make  immediate  payment  as  additional  rent of such
increased  insurance  premium incurred by the Landlord,  or (3) assure continued
coverage  of  the  Landlord  by all  commercially  reasonable  means  available,
including  payment of premiums,  in which event the Tenant shall  reimburse  the
Landlord for all costs incurred therefor as additional rent.

PARAGRAPH 25. CONDITION OF PREMISES.

     The Tenant's  taking  possession of and operation in the Premises  shall be
conclusive  evidence  against the Tenant that the Premises were in the condition
required  by the  provisions  of this  Lease when the  Tenant  took  possession,
subject only to completion of punch list items if, and to the extent required by
this  Lease.  No  promise of the  Landlord  to alter,  remodel  or  improve  the
Premises,  the  Building  or the Site,  and no  representations  respecting  the
condition  of the  Premises,  the  Building  or the Site  have  been made by the
Landlord to the Tenant except as  specifically  expressed in this Lease.  At the
end of the Term by lapse of time or  otherwise,  the  Tenant  shall  return  the
Premises to the condition required by PARAGRAPH 8 and, in addition, in as good a
condition as when the Tenant took possession,  ordinary wear and loss by fire or
other casualty required to be insured by the Landlord hereunder excepted. If the
Tenant  fails to comply  with such  obligation,  the  Landlord  may  restore the
Premises as required by the  provisions  of this Lease and the Tenant  shall pay
the cost thereof as additional rent and this obligation shall survive the end of
the Term.

PARAGRAPH 26. INDEMNITY.

     (a) The Tenant agrees to indemnify,  defend, and save harmless the Landlord
and Landlord's  officers,  directors,  employees,  agents,  invitees,  licenses,

<PAGE>

subsidiaries,  contractors,  successors,  and assigns from,  any and all claims,
actions, demands and liabilities (collectively,  the "Claims") and reimburse the
Landlord for all costs, expenses, fines, penalties, remedial actions, reasonable
attorneys'  fees and court costs incurred by reason of a Claim,  when a Claim is
made by or on behalf of any third  party and arises  from or is alleged to arise
from (1) the use,  manner of use, or occupancy of the Premises,  the Building or
the Site by the Tenant or Tenant's Agents, or from any activity,  work, or thing
done,  permitted  or suffered  by the Tenant or Tenant's  Agents in or about the
Premises  or the  Building  or on or about the Site,  or from (2) any  breach or
default in the  performance  or observance of any provision in this Lease on the
Tenant's part to be performed or observed, or from (3) any willful misconduct or
negligent  act or  omission  of the  Tenant or  Tenant's  Agents in or about the
Premises or the Building or on or about the Site.

     (b) The Landlord  hereby  agrees to indemnify  and save harmless the Tenant
and its officers, employees and agents from all claims, costs, damages, demands,
expenses,  fines,  judgments,   liabilities  and  losses  (including  reasonable
attorneys'  fees,  expert  witness  fees,  consultant  fees,  and other costs of
defense)  which  arise  during  or  after  the  term  of this  Lease  from or in
connection with the presence or suspected presence of Hazardous Materials in the
soil,  groundwater,  air or soil vapor on or under the site,  provided  however,
that this indemnity,  defense and reimbursement  obligation shall be enforceable
against  the  Landlord  only if (i) the  Tenant is in full  compliance  with the
Environmental  Laws and the Site rules,  and (ii) the  Hazardous  Materials  are
present  solely as a result  of the  negligence  or  willful  misconduct  of the
Landlord.

     (c) Any  obligation  by one party to  indemnify  the other in this Lease is
conditioned upon prompt written notice of such claim and demand to indemnify and
the furnishing of information  and reasonable  assistance by the party demanding
the indemnity.

     (d) The  provisions of this  Paragraph 26 shall  survive the  expiration or
termination of the Term.

PARAGRAPH 27. QUIET ENJOYMENT.

     The Landlord  covenants  and agrees that on paying the rent and  performing
and  observing  the  covenants on the Tenant's part to be performed and observed
hereunder,  the Tenant  shall and may  peaceably  and quietly hold and enjoy the
Premises for the Term, subject to the provisions of this Lease.

PARAGRAPH 28. PARKING.

     (a)  Commencing  as of the  Commencement  Date  and  continuing  thereafter
throughout  the Term the Landlord  shall provide the Tenant  unreserved  parking
spaces  (the  "Tenant's  Parking  Spaces") in the  general  parking  area of the
Building, as outlined on EXHIBIT B.

     (b) The Tenant, on behalf of itself and Tenant's Agents,  waives any claims
for damage,  theft and, without  limitation,  any other loss however caused,  to
vehicles (including contents therein) located in the Tenant's Parking Spaces, it
being agreed that any user of the Tenant's Parking Spaces shall look exclusively
to its own funds or insurance coverage if there is such a loss. The Landlord may
require  each  user to sign a waiver  of  claims  as a  condition  to using  the
Tenant's Parking Spaces.

     (c) The Tenant may permit use of the Tenant's Parking Spaces only by
the Tenant and its directors, employees, agents, invitees and contractors.

     (d) From time to time, the Landlord may establish  reasonable rules for the
safe and efficient  operation of the parking areas which are located on the Site
or off-site and controlled by the Landlord. Within ten (10) days after notice of
these rules is received by the Tenant,  the Tenant  shall cause all users of the
Tenant's Parking Spaces to comply with them.

PARAGRAPH 29. ENVIRONMENTAL MATTERS.

     (a) The  words  "Environmental  Law(s)"  mean and  include  all  applicable
existing and future statutes,  ordinances,  codes, regulations,  rules, rulings,
orders,  decrees,  directives,  and other laws and  requirements by any federal,
state  or local  governmental  authority  regulating  the  Site  (including  the
Premises),  relating to or imposing liability or standards of conduct related to
environmental  control  or  protection  of the  environment,  including  but not
limited to (1) the Consent  Order  attached in Exhibit C; (2) the New York State

<PAGE>

Department of  Environmental  Conservation  Part 373 Hazardous Waste  Management
Permit,  effective  September  29, 1995 which is  incorporated  in this Lease by
reference;  (3) the United States Environmental  Protection Agency Hazardous and
Solid  Waste  Amendments  of 1984  Permit,  effective  November 3, 1995 which is
incorporated in this Lease by reference;  and (4) the New York State  Department
of Environmental  Conservation SPDES Permit,  effective May 1, 1993 and modified
on April 13, 1995 which is incorporated in this Lease by reference.

     (b) The words "Hazardous Materials" mean (1) any material or substance: (i)
which is defined or becomes defined as "hazardous  substance" "hazardous waste,"
"toxic substance,"  "infectious waste," "chemical mixture or substance," or "air
pollutant"  under the  Environmental  Laws; or (ii)  containing  polychlorinated
biphenyl;  or (iii) containing  asbestos,  radon, gas or urea  formaldehyde foam
insulation;  or  (iv)  which  is  radioactive;  or (2)  any  other  material  or
substance,  which  is or  becomes  identified,  defined,  or  regulated  by  the
Environmental Laws.

     (c) The words  "Handle,"  "Handled,"  or  "Handling,"  each  shall mean and
include  any  installation,   handling,  generation,  storage,  treatment,  use,
disposal,  discharge,  release,  manufacture,  refinement,  presence, migration,
emission, abatement, removal,  transportation,  or other activity of any type in
connection with or involving Hazardous Materials.

     (d) No Hazardous  Materials  shall be  introduced by the Tenant to the Site
without notice to the Landlord and the Landlord's  prior consent.  All Hazardous
Materials  shall be delivered to the IBM designated  location on the Site before
it is delivered to the Premises.  The Tenant shall pay as additional  rent,  the
fees for such deliveries to the Premises, as specified in Schedule C. At no time
shall the Tenant  introduce  onto the Site the Prohibited  Substances  listed in
Rider A.

     (e) Prior to the  Handling by the Tenant of any  Hazardous  Material not in
use on the  Commencement  Date,  the Tenant and the  Landlord  shall review full
compliance  relating to the specific  Hazardous  Material with the Environmental
Laws and IBM Rules,  provided  that at all times the Tenant  shall  comply  with
Environmental  Laws and IBM Rules.  If the  Tenant's  use in the Building or the
Premises requires prior permitting by the federal,  state or local government or
any regulatory agency, the Landlord shall apply for said permitting provided the
Tenant  provides the Landlord with reasonable  notice of its Hazardous  Material
requirements,  except as stated in subparagraph  (f). The Tenant shall reimburse
the  Landlord  as  additional  rent for all  reasonable  related  fees and costs
associated  therewith  which are  authorized  by the  Tenant in  advance  or are
required  by any  Laws.  Under no  circumstances  shall the  Tenant  use any new
Hazardous Material on the Premises without full compliance.

     (f) If the  Landlord is not lawfully  permitted to apply for  environmental
permits on behalf of the Tenant pursuant to the  Environmental  Laws, the Tenant
shall, in compliance with the Environmental Laws, apply for said permits.  Prior
to said application, the Tenant shall notify the Landlord.

     (g) The  Tenant  shall give the  Landlord  prompt  notice of any  potential
violation of an Environmental Law, any pending or threatened claim regarding any
Environmental Law, or any spill or release of contaminants to the environment at
the Site of which it is aware.  Any party  indemnified  pursuant to Paragraph 29
that  intends to seek  indemnification  for any claim  pursuant to  Paragraph 29
shall provide the indemnifying party prompt notice of such a claim and offer the
indemnifying  party the opportunity to control the defense of the claim,  and to
make final or  partial  settlement  of any such  claim,  and to arrange  for any
actions,  including  clean- up  activities,  which are necessary for the Site to
comply in whole or in part  with  Environmental  Law or to settle  such a claim.
Neither party shall take any action which  prejudices  the other party's  rights
under this Lease and shall fully  cooperate in the defense and settlement of any
such matter.  The indemnified party may hire its own counsel to consult with the
indemnifying party at its own expense. The indemnified party shall also have the
right at its own expense to participate in and be separately  represented in the
defense of any claim that would  subject  indemnified  party to liability to the
indemnifying  party to this  paragraph  if any  portion  of such  claim  (or the
allegations  that  provide  the  basis  for  such  claim)  were  adjudicated  or
determined by any governmental  agency,  court or other tribunal in favor of the
claimant; and any settlement of any such claim that causes the indemnified party
to be liable for the payment of any damages, costs, penalties, or other monetary
consideration  or  requires  the  indemnified  party to admit  wrongdoing  shall
require the prior written consent of the indemnified party.

<PAGE>

     (h) After the  Commencement  Date,  the  Landlord or a firm of its choosing
shall have the right from time to time to make  environmental  investigations of
the  Premises  upon no less than 24 hours  advance  notice to Tenant  (except in
cases of emergency where no notice will be required). The Tenant shall cooperate
in all respects by providing  access to the  Premises and to all  necessary  and
non-confidential  documents  and  data  in the  Tenant's  possession  (including
records of Tenant's chemical inventories, environmental reporting documents made
to federal,  state and local  authorities and any documents  related to spill or
release covered by such investigations).  Without limiting the generality of the
above,  the Landlord shall have the right to make such an investigation at least
every six months  while the Tenant  operates  the  Premises  and at any time the
Tenant ceases to occupy a substantial  portion of the Premises,  and at any time
receives  notice of a violation of an  Environmental  Law, a spill or threatened
spill or release of  contaminants  to the Premises or any pending or  threatened
claim.  The  Landlord  shall  provide the Tenant with the results  (including  a
complete  copy) of any such  investigation.  The Landlord shall not disclose any
information obtained in, or any results of, such environmental  investigation to
any Person other than Tenant without Tenant's prior written  permission,  unless
(1) disclosure is required by Law,  necessary to prevent harm in an emergency or
limited to  information  already  disclosed,  and (2) Landlord  provides  Tenant
written  notice  ten (10)  days  prior  to  disclosure  or,  if such  notice  is
prohibited by Law or would prevent appropriate  emergency  response,  as soon as
allowable by Law or practicable in any emergency.

     (i) If at any time after the Commencement Date, the Landlord is required by
an Environmental Law or, on its own initiative, desires to perform environmental
remediation  at the Premises  ("Landlord  Remediation  Activities"),  the Tenant
agrees  to  provide  access to the  Landlord  for any such  purpose,  (including
granting the Landlord any  appropriate  property  easements to  facilitate  such
cleanup efforts), and will cooperate with the Landlord to remediate the Premises
as the Landlord,  in its sole but  reasonable  discretion,  deems  necessary and
appropriate.  Landlord  shall  provide  Tenant with written  notice no less than
fifteen  (15) days  prior to  obtaining  access  to the  Premises  for  Landlord
Remediation  Activities  (except in the case of  emergency  where no such notice
will be required or where a shorter time period is required by Law) and Landlord
shall use  reasonable  efforts to consult with Tenant with respect to the timing
and scope of such Landlord Remediation Activities. Landlord shall use reasonable
efforts to minimize interference with Tenant's use and occupancy of the Premises
during the performance of any Landlord Remediation Activities.

     (j)  The  Landlord  shall  conduct  its  operations,   including,   without
limitation,  services provided under contract with Tenant,  (including,  without
limitation,  this Lease) in compliance  with applicable  Environmental  Laws and
shall provide other  occupants and tenants with  appropriate  guidance to enable
them to conduct their  operations at the Site in compliance  with all applicable
Environmental  Laws.  The Landlord  shall  maintain in full force and effect all
material permits,  licenses and other authorizations that are required under the
Environmental  Laws  with  respect  to the  Landlord's  operations  at the Site,
including  services provided under contract to the Tenant.  Tenant and its agent
shall have the right, on an annual basis,  to have a compliance  audit performed
on  the  treatment,  storage,  disposal,   recordkeeping  and  other  activities
performed  by Land lord for the  benefit of Tenant  with  respect to  Landlord's
management of Tenants  Hazardous  Materials in accordance  with its  obligations
pursuant  to this  Lease.  Tenant  shall give  Landlord  seven (7) days  advance
written  notice of such audit,  and Landlord  shall  provide  Tenant  reasonable
access to those areas where the Hazardous Materials  Activities are performed in
order to enable  Tenant to complete  such  audit.  Landlord  shall also  provide
Tenant access to all  non-confidential  records  necessary to the performance of
such audit.  Tenant shall not disclose  such records  except upon the same basis
that Landlord is permitted to disclose  Tenant's records under subsection (h) of
this Paragraph 29.

     (k) Hazardous  Materials  discharged by the Tenant in compliance  with this
Lease to Building  drain  systems for  treatment  and  discharge  pursuant to an
approved State of New York SPDES permit shall become the  responsibility  of the
Landlord  after the Hazardous  Materials  have left the Premises and entered the
Site  drainage  systems.  The Tenant shall remain  liable for its  proportionate
share of any residual  sludge  generated as a result of treatment of its aqueous
wastes at the Site's waste treatment  plant,  which are then  containerized  and
disposed  of  at a  governmentally  permitted  and  approved  off-Site  disposal
facility.  Notwithstanding  the  foregoing,  to  the  extent  permitted  by  the
Environmental Laws, the Landlord will manage the Tenant's Hazardous Materials on
the Site in  accordance  with its  obligations  pursuant to this Lease,  and the
Landlord  will  exercise  the  same  diligence  and  care  with  respect  to the
transportation  and  disposition  of  the  Tenant's  Hazardous  Materials  as it
exercises  with respect to its own  Hazardous  Materials  and the Landlord  will

<PAGE>

require that all Persons and/or entities  transporting or disposing the Tenant's
Hazardous Materials obtain and maintain all permits and authorizations  required
by Environmental Laws in connection with such transportation or disposal.

     (l) The Tenant  shall  comply with the  Landlord's  instructions  regarding
compliance with the Environmental Laws.

     (m) The Tenant agrees to  indemnify,  defend and hold harmless the Landlord
and the Landlord's Agents from and against any loss,  liability,  claim, damages
or expenses (including  reasonable fees for legal and other advisors),  suffered
or incurred by any such  indemnified  party to the extent arising from a release
on or from the Premises of any  Hazardous  Materials  (including  any  condition
stemming  therefrom),  or which  arises  from any  other  adverse  environmental
condition  which  release or  condition  violates the  Environmental  Laws or is
required to be investigated or remediated  pursuant to an Environmental  Law and
which is caused by Tenant or is  attributable  to the Tenant because of the acts
of third parties related in contractual  privity to the Tenant during the course
of such third parties' activities on the Premises or activities performed at the
request or for the benefit of Tenant or its contractors,  subcontractors, agents
or  employees,  other  than the  Landlord,  the  Landlord's  Agents,  other Site
occupants  or tenants,  and which  occurred or which was caused by the Tenant or
any such third party after the Commencement Date or because of any due diligence
testing  done  by  the  Tenant  prior  to  the  Commencement  Date.  The  Tenant
understands that, subject to the conditions  provided in Paragraph 29 (k) above,
(1) Hazardous  Materials  generated by the Tenant,  which are  containerized  or
bulked for transportation and disposal off-Site at governmentally  permitted and
approved disposal facilities, shall be the responsibility of the Tenant, and (2)
all title,  risk and  liability  for the release or discharge of said  Hazardous
Materials during  transportation  or disposal of such materials under applicable
Environmental  Laws shall remain with the Tenant.  Except as otherwise  provided
for herein,  the Tenant shall indemnify the Landlord,  pursuant to the terms and
conditions of this subparagraph (m), for any and all liability  resulting from a
release or discharge of such  Hazardous  Materials.  The provisions of Paragraph
29(m) shall survive the expiration or termination of the Term.

     (n) (1) If at any time  after  the  Commencement  Date,  a  release  of any
Hazardous  Materials  (including any condition stemming  therefrom) occurs on or
from  the  Site  and  violates  and  Environmental  Law,  or is  required  to be
investigated  or  remediated  under  Environmental  Laws,  and the cause of said
release cannot be reasonably  determined,  then: for any such release  occurring
within the  interior  walls of the  Premises,  the Tenant  shall  indemnify  the
Landlord pursuant to this Paragraph.

     (2) Landlord shall provide Tenant reasonable access to any and all publicly
available  information  in  Landlord's  possession  or control  relating  to the
presence, on or about the Premises or the Site (including the soil,  groundwater
or  improvements  thereon),  of any  Hazardous  Materials.  Landlord  shall also
provide to Tenant  reasonable  access to results from any and all  environmental
testing  performed  by Landlord on the Premises at any time before or during the
Tenant's occupancy of the Premises.

     (o) The Tenant  shall  provide to the  Landlord,  on an annual basis and as
requested,  regardless  of the  volume  of waste  generated  or  chemical  used,
information  regarding the Tenant's waste  minimization  activities and chemical
usage.  Emphasis  in the waste  minimization  activities  shall be placed on the
source reduction of hazardous wastes as required by the Environmental  Laws. The
information  provided by the Tenant,  and information  generated by the Landlord
regarding the Tenant's waste generation and chemical usage, shall be provided by
the  Landlord  to  regulatory  agencies  to  fulfill   environmental   reporting
obligations of the Landlord under the Environmental Laws. The waste minimization
information provided by the Tenant to the Landlord shall be sufficient to enable
the Tenant to comply with hazardous waste manifest and annual reports.

     (p) Consistent with its responsibilities  under this Paragraph,  the Tenant
agrees to prepare and execute  documentation  related to environmental duties or
obligations which may be required by the Landlord or governmental authorities to
comply with the Environmental Laws.

PARAGRAPH 30. LIMITATION ON LIABILITY.

     (a)  Anything  herein  to the  contrary  notwithstanding,  it is  expressly
understood  and agreed by and  between  the  parties  hereto that each and every
representation, covenant, undertaking and agreement herein made by the Landlord,
while in form  purporting  to be a  representation,  covenant,  undertaking  and
agreement of the Landlord,  are nevertheless,  made and intended not as personal

<PAGE>

representations  covenants,  undertakings  and agreements by the Landlord or for
the purpose or with the  intention of binding the Landlord  personally,  but are
made and intended for the purpose of binding only the Landlord's interest in the
Site and for no other  purpose  whatsoever.  In the  event of a  default  by the
Landlord,  the Tenant  shall look solely to the  interest of the Landlord in the
Site. No duty shall rest upon the Landlord to sequester the Site g or the rents,
issues and profits arising  therefrom,  or the proceeds arising from any sale or
other  disposition  thereof.  The Tenant  shall have no  recourse to the assets,
tangible or intangible,  of the Landlord excepting only the Landlord's  interest
in  the  Site.   Without   limitation,   no  personal   liability   or  personal
responsibility  is assumed by nor shall at any time be asserted  or  enforceable
against   the   Landlord  on  account  of  this  Lease  or  on  account  of  any
representation, covenant, undertaking or agreement of the Landlord in this Lease
contained,  either expressed or implied,  all such personal  liability,  if any,
being expressly waived and released by the Tenant.  The foregoing  limitation on
the Landlord's  liability shall inure to and for the benefit of the Landlord and
its  successors  and  assigns  and  their  respective  shareholders,   officers,
directors, partners, agents and employees.

     (b) THE TOTAL CUMULATIVE LIABILITY OF THE LANDLORD AND THE EXCLUSIVE REMEDY
FOR ANY AND ALL LOSSES AND DAMAGES,  OR THE RIGHT TO ANY OTHER FORM OF RELIEF BY
THE TENANT,  ARISING OUT OF ANY CAUSE  WHATSOEVER  UNDER ANY THEORY OF CONTRACT,
TORT, STRICT  LIABILITY,  OR OTHER LEGAL OR EQUITABLE THEORY SHALL BE LIMITED TO
ACTUAL  DIRECT  DAMAGES  NOT TO EXCEED SIX HUNDRED  AND FIFTY  THOUSAND  DOLLARS
($650,000),  PROVIDED  THAT IN NO EVENT  SHALL THE  LANDLORD  BE LIABLE FOR LOST
PROFITS,  SPECIAL,  INCIDENTAL,  CONSEQUENTIAL  OR PUNITIVE  DAMAGES  UNDER THIS
LEASE.

     (c) The  provisions of this  Paragraph 30 shall survive the  termination or
expiration of the Term.

PARAGRAPH 31. ESTOPPEL CERTIFICATE.

     The Tenant agrees that,  from time to time upon not less than ten (10) days
after the  Landlord's  request,  the Tenant,  or the  Tenant's  duly  authorized
representative  having  knowledge of the  following  facts,  will deliver to the
Landlord a statement in writing certifying (a) that this Lease is unmodified and
in full force and effect (or if there have been modifications,  a description of
such modifications and that this Lease as modified is in full force and effect);
(b) the dates to which  rent and other  charges  have  been  paid;  (c) that the
Landlord is not in default under any provision of this Lease, or, if in default,
the nature thereof in detail;  and (d) such further  matters as may be requested
by the Landlord, it being intended that any such statement may be relied upon by
any  mortgagees  or assignees of the  Landlord,  or  prospective  mortgagees  or
assignees of the Landlord,  or  prospective  transferees or purchasers of all or
part of the Landlord's  interest in the Site and/or any buildings  thereon.  The
Tenant shall execute and deliver  whatever  instruments may be required for such
purposes,  and if the  Tenant  fails so to do within ten (10)  consecutive  days
after demand in writing,  the Tenant shall be  considered  in default under this
Lease and the Landlord is hereby granted the power as attorney-  in-fact for the
Tenant to unilaterally  execute and deliver such estoppel and other  instruments
on behalf of the Tenant.

PARAGRAPH 32. ACCESS TO THE PREMISES.

     (a)  Identification  Badges.  The  Landlord  shall  provide the Tenant with
identification  badges to be worn by the Tenant's  employees  (the  "Employees")
working in the  Premises.  These badges shall give the  Employees  access to the
Premises  during normal  working  hours  (hereinafter  defined).  Identification
badges for the Employees  shall state the Tenant's name and name of the Employee
but shall not include  the name of the  Landlord.  The  Landlord  shall,  at the
Tenant's request, provide to the Tenant's vendors (the "Vendors") identification
badges which shall give the Vendors access to the Premises during normal working
hours. The Tenant shall be responsible for returning to the Landlord's  security
department  the  identification  badge  of:  (i) any  Employee  who is no longer
employed  by the Tenant;  (ii) any Vendor  when such  Vendor no longer  requires
access to the Premises;  and (iii) all Employees and Vendors upon  expiration or
earlier termination of this Lease. All lost badges shall be immediately reported
to the Landlord's security department.

     (b)  Access  Outside  Normal  Working  Hours.  The  Landlord  shall,   upon
reasonable advance notice from the Tenant to the Landlord's security department,
provide  identification  badges to agents,  licensees and invitees of the Tenant
who require access to the Premises outside normal working hours. As used in this
PARAGRAPH  32., the words  "normal  working  hours" shall mean 8:00 A.M. to 6:00
P.M., Monday through Friday, excluding the Saturdays, Sundays and Holidays.
<PAGE>

     (c) Access by Emergency Response Personnel. Notwithstanding anything to the
contrary  contained  herein,  the Landlord's  personnel shall have access to the
Building  and the  Premises  for  the  purpose  of  responding  to an  emergency
involving the Premises.

PARAGRAPH 33. MISCELLANEOUS.

     (a)  After  the  termination  of this  Lease,  no  receipt  of money by the
Landlord from the Tenant,  service of any notice,  commencement  of any suit, or
final judgment for possession of the Premises shall renew,  reinstate,  continue
or extend  the Term or  affect  any such  termination  notice,  demand,  suit or
judgment.

     (b) No waiver of any  default  hereunder  of either  party shall be implied
from any  omission by the other to take any action on account of such default if
such  default  persists or is repeated,  and no express  waiver shall affect any
default other than the default  specified in a written  waiver and then only for
the time and to the extent therein stated. The invalidity or unenforceability of
any  provision of this Lease shall not affect or impair any other  provision and
the invalid or unenforceable  provision shall be deemed modified and restated to
comply with Law.

     (c) The word  "Tenant"  wherever  used in this Lease shall be  construed to
mean  "Tenants"  in all  cases  where  there is more  than one  tenant,  and the
necessary  grammatical  changes  required to make the  provisions  hereof  apply
either to corporations,  firms or individuals,  men or women, shall in all cases
be assumed as though in each case fully expressed.

     (d) Provisions  inserted herein or affixed hereto shall not be valid unless
appearing in the duplicate original hereof held by the other party hereto.

     (e) Each  provision  hereof  shall  extend  to and  shall,  as the case may
require,  bind and inure to the benefit of the Landlord and the Tenant and their
respective legal representatives, successors and permitted assigns.

     (f)  The  headings  of  Paragraphs,  Sections  and  subparagraphs  are  for
convenience  only and do not limit or construe the  contents of the  Paragraphs,
Sections or subparagraphs.

     (g)  Submission of this  instrument for  examination  does not constitute a
reservation of or option for the Premises.  This instrument becomes effective as
a lease upon execution  thereof by both the Landlord and the Tenant and delivery
of an executed counterpart to each other.

     (h) At the  Landlord's  discretion,  all sums due and owing to the Landlord
hereunder shall bear interest from their due date until paid at the rate of 1.5%
per month. All such amounts other than Base Rent shall be deemed additional rent
and shall be paid within thirty (30) days from the date shown on the  applicable
statement of account.

     (i) No rights to any view or to light or air over any property,  whether be
longing to the Landlord or any other  Person,  are granted to the Tenant by this
Lease.

     (j) All rights and remedies of the Landlord and the Tenant under this Lease
shall be cumulative and none shall exclude any other rights and remedies allowed
by Law or in equity.

     (k) The  Landlord  and the Tenant  shall  have the right to apply  payments
received from the other pursuant to this Lease (regardless of the designation of
such payments by the payor) to satisfy any  obligations of the other  hereunder,
in such order and amounts as the payee in its sole discretion may elect.

     (l) Time is of the essence of this Lease and each of its provisions.

     (m) This Lease shall be strictly  construed neither against the Landlord or
the  Tenant;  each  provision  hereof  shall be  deemed  both a  covenant  and a
condition running with the land; except as otherwise  expressly provided in this
Lease and its Riders,  Schedules,  Exhibits and other attachments,  the singular
includes the plural and the plural includes the singular; "or" is not exclusive;
a  reference  to  an  agreement  or  other  contract  includes  supplements  and
amendments  thereto to the extent  permitted  by this Lease;  a reference to any
Laws  includes any amendment or supplement to such Laws; a reference to a Person

<PAGE>

includes its permitted  successors and assigns;  accounting  provisions have the
meanings assigned to them by generally accepted accounting principles applied on
a consistent  basis; the words "such as," "include,"  "includes" and "including"
are  not  limiting;  when  used  in this  Lease,  the  word  "Person"  means  an
individual,  partnership,  trust,  corporation,  firm or other entity; except as
specifically  agreed upon in this Lease,  any right may be exercised at any time
and from time to time and all obligations are continuing  obligations throughout
the Term of this Lease (and  beyond if  expressly  agreed upon herein to survive
the end of the Term); and in calculating any time period, the first day shall be
excluded  and the last day  shall be  included  and all days are  calendar  days
unless otherwise specified.

     (n) This Lease shall be construed according to the laws of the State of New
York.

     (o) Each party agrees to pay the other party's attorneys' fees and costs of
litigation  if the party,  for any reason  whatsoever,  brings suit  against the
other party and the other party is finally adjudicated not to have liability.

     (p) As used in this Lease, the words "Excusable Delay" shall mean any delay
or  interruption  due  to  strikes,   lockouts  or  other  labor  or  industrial
disturbance;  civil disturbance;  accidents; the Landlord's ordinary negligence;
future order of any government,  court or regulatory body claiming jurisdiction;
act of the public enemy;  building  component or utility system failure,  unless
attributable  solely to the Landlord's  willful  misconduct or gross negligence;
war,  riot,  sabotage,  blockage  or  embargo;  failure or  inability  to secure
materials  or  supplies  through  ordinary  sources  by reason of  shortages  or
priority or similar  regulation or order of any  government or regulatory  body;
lightning,  earthquake,  fire,  storm,  hurricane,  tornado,  flood,  washout or
explosion, or act or omission of one party hereto which prevents the other party
from complying,  or which materially and adversely  interferes with the claiming
party's ability to comply with an obligation  under this Lease on its part to be
performed.

     (q) The square  footage of a floor shall be computed by measuring  from the
inside finished  surface of the dominant portion of the permanent outer Building
walls,  excluding any major vertical  penetrations  of the floor.  No deductions
shall be made for columns and projections necessary to the Building.

     (r) During the Term of this Lease, and for a period of one year thereafter,
neither the Tenant or the  Landlord  will  solicit for  employment  purposes the
present  employees of the other party without  prior  written  approval from the
employing   party.   This  Lease  does  not  in  any  manner  restrict   general
solicitations  for employment,  or the right of any employee of one party on his
or her own initiative or in response to general solicitations to seek employment
from the other party.

PARAGRAPH 34. IBM-ESDC Sale-Lease back

     FED Corporation acknowledges and agrees to the following:

     (a) On December 31, 1998,  International  Business Machines Corporation,  a
corporation with an office at 1580 Route 52, Hopewell  Junction,  New York 12533
(referred  to in this  PARAGRAPH as "IBM" and referred to elsewhere in the Lease
as "Landlord") and The New York State Urban Development Corporation d/b/a Empire
State Development Corporation, a corporation with an office at 633 Third Avenue,
New York,  New York 10017  (hereinafter  referred to as "ESDC"),  entered into a
Sale-leaseback transaction (hereinafter referred to as the "Sale-Lease back") of
the Site, including the Premises;

     (b) As of  December  31,  1998,  (i) ESDC is the  title  owner of the Site,
including the Premises,  (ii) IBM is in possession of the Site as ESDC's tenant,
and (iii) IBM is the operator of the Site;

     (c) The  Sale-Lease  back  contains  provisions  granting IBM the option to
repurchase the Site during the fifteen (15) year term of the Sale-Lease back and
provides for the  reconveyance  of the Site to IBM at the end of the term of the
Sale-Lease back;

     (d) FED Corporation shall have no third-party  beneficiary rights under the
Sale-Lease back;

     (e) ESDC may enforce certain of IBM's rights under the Lease, including but
not limited to inspection  rights.  Notwithstanding  the foregoing,  (i) nothing
herein is intended to grant third- party  beneficiary  rights to ESDC  different

<PAGE>

from or in addition to those rights  contained in the Sale-Lease  back, and (ii)
FED Corporation shall not tender  performance  hereunder to ESDC or send notices
hereunder to ESDC without the specific prior written  consent from an authorized
representative of IBM in each instance;

     (f) A breach  by FED  Corporation  under  the  Lease may be a breach by IBM
under the Sale-Lease back;

     (g) In the event that FED Corporation  receives a written notice from ESDC,
FED  Corporation  shall  promptly  provide a copy of such notice to IBM's person
designated  for the  receipt of notices in  PARAGRAPH  11. In the event that FED
Corporation  receives an oral notice from ESDC, FED  Corporation  shall promptly
inform IBM's person designated for the receipt of notices in PARAGRAPH 11 of the
substance of such oral notice; and

     (h) As a subtenant  possessing  Premises owned by an agency of the State of
New York,  FED  Corporation  shall be bound by and shall  include the  following
subparagraphs  (1)  through  (5)  of  this  section  or  substantially   similar
subparagraphs,  in such a manner that said  subparagraphs  shall be binding upon
the parties with whom  prospective  construction  contracts  with respect to the
Premises are entered into:

          (1) Contractor shall not discriminate  against employees or applicants
     for employment because of race, creed,  color,  religion,  national origin,
     ancestry,  sex,  age,  disability  or marital  status and shall insure that
     employees  and  applicants  are  afforded  equal  employment  opportunities
     without discrimination.

          (2) At the request of IBM,  Contractor  shall request each  employment
     agency, labor union and authorized  representative of workers with which it
     has a collective bargaining or other agreement or understanding, to furnish
     it with a written  statement that such  employment  agency,  labor union or
     representative  will  not  discriminate  because  of  race,  creed,  color,
     religion, national origin, ancestry, sex, age, disability or marital status
     and that such union or representative shall affirmatively  cooperate in the
     implementation of Contractor's obligations hereunder.

          (3) Contractor shall state in all solicitations or advertisements  for
     employees  placed  by  or  on  behalf  of  Contractor  that  all  qualified
     applicants  shall  be  afforded  equal  employment   opportunities  without
     discrimination  because of race, creed, color,  religion,  national origin,
     ancestry, sex, age, disability or marital status.

          (4) Contractor shall comply with the provisions of Sections 291-299 of
     the Executive Law of the State of New York.

          (5) Contractor shall include the foregoing provisions of subparagraphs
     (1) through  (4),  above,  or  substantially  similar  provisions  in every
     subcontract,  in such a manner that said  provisions  shall be binding upon
     the subcontractor as to its work force on the Premises.

          (6) With respect to the Premises, FED Corporation covenants and agrees
     that it shall (i) neither commit nor permit  discrimination  or segregation
     by reason of race, creed, color, religion,  national origin, ancestry, sex,
     age, disability or marital status ("Discrimination") in any permitted sale,
     transfer or assignment of its interest under this Lease or in any permitted
     subleasing,  use or  occupancy  of the  Premises or any part  thereof or in
     connection with any permitted erection,  maintenance,  repair, restoration,
     alteration  or  replacement  of, or  addition  to, and  Building;  (ii) not
     willfully engage in any personnel practices which may have a discriminatory
     effect;  and  (iii)  comply  with  all  federal,   state  and  local  laws,
     ordinances,  rules, and regulations from time to time in effect prohibiting
     Discrimination   or   segregation   or  pertaining   to  equal   employment
     opportunities.

     FED Corporation  shall assist and cooperate  actively with IBM in obtaining
compliance by FED Corporation's agents,  contractors and subcontractors with the
applicable provisions of this PARAGRAPH.

     Riders A, B, C and D;  EXHIBITS A1, A2, A3, A4, B, C, and D; and  Schedules
A, B, C, D, and E are attached hereto and made a part of this Lease.

     This Lease, consisting of the foregoing terms and conditions;  Riders A, B,
C and D; Exhibits A1, A2, A3, A4, B, C, and D, hereto; and Schedules A, B, C, D,
and  E  hereto,   constitutes  the  complete  and  exclusive  agreement  between

<PAGE>

International Business Machines Corporation and FED Corporation  superseding any
prior or contemporaneous  agreements,  written or oral,  relating to the subject
matter herein.

     IN  WITNESS  WHEREOF,  this  instrument  has  been  executed  by  the  duly
authorized  representatives  of the parties  hereto as of the day and year first
above written.

INTERNATIONAL BUSINESS MACHINES CORPORATION

By: /s/ Raymond V. Wagner                    Title: Sr. Program Manager
    --------------------------------                ----------------------------

Print Name: Raymond V. Wagner                Date:  5/28/99
            ------------------------                ----------------------------

Witness:  Thomas P. Short

FED CORPORATION

By: Gary W. Jones                            Title: President & CEO
    --------------------------------                ----------------------------

Print Name: Gary W. Jones                    Date:  May 28, 1999
            ------------------------                ----------------------------

Witness: Diane Stafford
<PAGE>

                                                                         RIDER A

                                    IBM RULES
                            (As of February 17, 1997)

                          Attached to and made part of

                                      Lease

                                     between

                   International Business Machines Corporation
                                       and
                             FED CORPORATION, Tenant

     Pursuant to the  provisions  of Paragraph  (17) of the Lease,  the Landlord
reserves the right to delete, modify, and add additional IBM Rules.

     For the purposes of these IBM Rules,  the word  "Tenant"  shall include the
Tenant and the Tenant's Agents (defined in Paragraph 3(a) of the Lease).

     1.  The  sidewalks,  halls,  passages,   elevators  and  stairways,  exits,
entrances,  and other common areas shall not be obstructed by the Tenant or used
for any  purpose  other than for ingress to and egress  from the  Premises.  The
halls, passages, exits, entrances,  elevators and stairways,  balconies and roof
are not for the use of the general  public,  and the Landlord shall in all cases
retain the right to control and  prevent  access  thereto of all  persons  whose
presence  in the sole  judgment  of the  Landlord  shall be  prejudicial  to the
safety,  character,  reputation  and  interests of the Building and its tenants.
However,  nothing  stated  above shall be  construed  to prevent  such access to
persons  with  whom the  Tenant  normally  deals in the  ordinary  course of its
business unless such persons are engaged in illegal  activities.  The Tenant and
its  employees and invitees  shall not go upon the roof of the Building  without
the written  consent of the Landlord which the Landlord may withhold in its sole
discretion.

     2. The  bathroom  facilities  shall not be used for any purpose  other than
that for which  they were  constructed,  and no  foreign  substance  of any kind
whatsoever shall be thrown therein.  The expense of any breakage,  stoppage,  or
damage,  resulting  from a violation of this rule,  shall be borne by the Tenant
who, or whose employees, agents, contractors, or visitors, shall have caused it.

     3. If the Landlord, by notice in writing to the Tenant, shall object to any
curtain,  blind,  shade or screen attached to, or hung in, or used in connection
with, any window or door of the Premises, such use of such curtain, blind, shade
or screen shall be forthwith discontinued by the Tenant.

     4. None of the Tenant's  Personal  Property or other items heavier than the
lift capacity of the freight  elevators of the Building shall be brought into or
installed in the  Premises.  The Tenant shall not place a load upon any floor of
the  Premises  which  exceeds  the load per  square  foot  which  such floor was
designed  to carry and which is allowed by law.  The moving of heavy items shall
occur only between such hours as may be  designated  by, and only upon  previous
notice, to the property manager,  and the persons employed to move these heavier
items in or out of the Building must be acceptable to the Landlord.  No freight,
furniture or bulky matter of any description shall be received into the Building
or carried into the elevators  except  during hours and in a manner  approved by
the Landlord.

     5.  Supplementing  Paragraph 8., if the Tenant  desires  telephone or other
telecommunication  connections  from a  provider  other than the  Landlord,  the
Landlord  will  direct  electricians  as to where  and how the  wires  are to be
introduced.  No boring or cutting for wires or  otherwise  shall be made without
specific  directions  from the Landlord.  When installing wire or cabling within
the Building,  the Tenant shall follow all  applicable  codes and the Landlord's
telecommunication rules.

     6. The Tenant,  upon the  termination of its tenancy,  shall deliver to the
Landlord  all the keys of offices,  rooms and toilet rooms which shall have been
furnished to the Tenant or which the Tenant shall have had made.

<PAGE>

     7. On Saturdays,  Sundays and Holidays, and on other days between the hours
of 6:00 P.M. and 8:00 A.M., access to the Building, or to the halls,  corridors,
elevators or stairways in the Building, or to the Premises may be refused unless
the Person  seeking  access has a pass  approved by the Landlord or is otherwise
properly  identified.  The  Landlord  shall in no case be liable  to anyone  for
damages for the  admission to or exclusion  from the Building of any person whom
the Landlord has the right to exclude under this Rule 7., or otherwise.  In case
of invasion,  mob, riot,  public  excitement,  or other commotion,  the Landlord
reserves  the right to prevent  access to the Site and the  Building  during the
continuance  of the same by  closing  the gates or doors or  otherwise,  for the
safety of the tenants or the Landlord's  employees and protection of property in
the Building and on the Site.

     8.  Where  badges are not in use,  the  Tenant  shall not alter any lock or
install a new or additional lock or any bolt on any door of the Premises without
prior written  consent of the Landlord.  If the Landlord shall give its consent,
the Tenant shall in each case furnish the Landlord with a key for any such lock.
Call extension 4-5625 (4-LOCK) for service.  Tenant shall not duplicate any keys
provided by the Landlord.

     9. Without the Landlord's prior written  consent,  the Tenant shall not use
the name of the Building (whether or not the Building is named or commonly known
as "The IBM Building" or the like) in its  advertising or other  publicity or on
its stationery or other correspondence or otherwise,  and shall not use pictures
of the Building in advertising or publicity or otherwise.

     10. The Tenant shall not make any  room-to-room  or  building-to-  building
canvass to solicit  business  from other tenants or occupants in the Building or
on the Site, and shall not exhibit, sell or offer to sell, use, rent or exchange
in or from the Premises unless ordinarily embraced within the Tenant's expressed
use of the Premises specified in the Lease.

     11.  The  Tenant  shall  not  waste  electricity,   gases,  water,  or  air
conditioning  and agrees to cooperate fully with the Landlord to assure the most
effective operation of the Building's heating, ventilation and air conditioning,
and shall not allow the adjustment (except by the Landlord's authorized Building
personnel)  of any  controls  other  than  room  thermostats  installed  for the
Tenant's use.

     12. The Tenant shall be solely  responsible  for having a Person present at
the  loading  dock to receive all  deliveries  made to the Tenant at the loading
dock and to deliver the same from the loading dock to the Premises.

     13.  Additional  services  requested by the Tenant shall be performed  only
pursuant to a separate service agreement between the Tenant and the Landlord.

     14. The Tenant shall not conduct any auction, fire,  bankruptcy,  going out
of business, liquidation or similar sales anywhere on the Site.

     15.  Without  limiting  any other  obligation  required by this Lease,  the
Tenant must obtain a permit or approval from the Landlord before:

          a. Using products or tools using x-rays,  (or other ionizing radiation
     sources),  or laser  products  which operate at Class IIIa,  IIIb or IV, or
     incorporate  Class IIIb or IV lasers with the  exception  of properly  used
     Class IIIa laser pointers.

          b. Disturbing  Asbestos containing material (ACM) or Presumed Asbestos
     containing material (PACM).

          c. Working in an area where there is a reasonable potential to disturb
     ACM or PACM.

          d. Internal combustion engine use indoors

          e. Blasting or explosives use

          f. Explosive (powder) actuated fastening tool use

          g. Airlifting, crane, mobile crane, or hoist use

          h. Use of powered industrial vehicles

          i. Cutting, welding, burning, or open flame work

          j. Entering a confined space

<PAGE>

          k. Moving or relocating any emergency equipment

          l. Fire alarm system work or sprinkler system impairment

          m. Hot work in hazardous areas

          n. Using salamanders or heaters

Approvals/permits  for 15 a,  b, c,  and d can be  obtained  through  Industrial
Hygiene.  Approvals/permits  for 15 e, f, g, and h are provided  through Safety.
Approvals/permits  for 15 i, j,  k, l, m,  and n  above,  are  provided  through
Emergency  Control.  The  Landlord  shall  respond to a request for its approval
within one (1) working day.

     16. The Tenant,  its employees,  agents,  contractors,  invitees and guests
shall not obstruct any sidewalk,  road, driveway,  Site or Building entrance, or
any part of the common areas in and about the Building or the Site.  The Tenant,
its employees, agents, contractors,  invitees and guests shall not park in areas
where  prohibited.  The Tenant shall cause its employees,  agents,  contractors,
invitees and guests to park only in the Tenant's Parking Spaces.

     17.  The  Tenant  shall not place  objects  against  windows  or post signs
visible from outside a window which would be unsightly  from the exterior of the
Building,  and will  promptly  remove any such objects or signs upon notice from
the Landlord.

     18. The Tenant shall not go into  building  systems  areas of the Building,
except to the extent  permitted  or  required by the terms of the Lease and only
when accompanied by the Landlord.

     19. The Tenant shall not make noises, cause disturbances or vibrations,  or
use or operate any  electrical  or  electronic  devices that emit sound or other
waves  or  disturbances  or  create  odors,  any of  which  may be  unreasonably
offensive  to any  people in the  Building  or  (supplementing  PARAGRAPH  2(b))
interferes  with the  operation of any device,  equipment or radio or television
broadcasting  or reception  from or within the Building or elsewhere,  and shall
not bring animals into, or allow animals to be brought onto the Site or into the
Building  except for the  assistance  of the  disabled,  without  consent of the
Landlord which it may withhold in its sole discretion.

     20. No  portion  of the  Premises  shall be used for  cooking,  lodging  or
sleeping   except   customary  and  reasonable   office   microwave   ovens  and
refrigerators for employee use.

     21.  Smoking is  prohibited  in all areas of the  Building  which  includes
hallways,  rest rooms,  lobbies,  stairwells,  elevators  and all  occupied  and
unoccupied  space within the Building.  The Tenant shall  prohibit any employee,
and other people entering upon the Tenant's  premises from smoking or carrying a
lighted  cigar,  cigarette  or  pipe,  or form  using a match  or  other  flame-
producing device for lighting any such item at any time during their presence in
or upon the Building  and the  Premises.  "Smoking"  means  inhaling,  exhaling,
burning or carrying any lighted cigar,  pipe,  cigarette,  weed,  plant or other
combustible substance in any manner in any form.

     22. The  Landlord  reserves the right to exclude or expel from the Site any
Person who, in the sole judgment of the Landlord,  is  intoxicated  or under the
influence  of liquor or drugs,  or who poses a security  risk to the Site or any
occupant of the Site, or who shall in any manner  threaten to do or does any act
in violation of these Rules and Regulations.

     23. The Tenant shall keep all portions of  Premises,  including  vestibule,
fixtures, windows and plate glass free from pests and vermin.

     24. The Tenant shall store all its trash, refuse and waste materials within
the Premises or in such  locations as the Landlord may designate and shall cause
the same to be regularly removed at the Tenant's expense unless the Landlord has
agreed in writing to remove it. All trash,  refuse and waste  materials shall be
stored in adequate containers so as not to constitute a health or fire hazard or
a nuisance to any other tenant. No burning of trash,  refuse and waste materials
shall be allowed.

     25.  Supplementing  PARAGRAPH  8.,  the  Tenant  shall  coordinate  all its
construction  activities in the Premises so that such construction work does not
interfere with the operations of other tenants or the Landlord. The Tenant shall

<PAGE>

place all construction trailers in staging areas designated by the Landlord. The
Tenant shall store all construction materials entirely within the Premises.

     26. The Tenant shall cause all trucks making  deliveries to or pickups from
the Premises to utilize truck drives and loading dock  facilities  designated by
the Landlord.

     27. Controlling access to Site facilities is a primary security measure. It
is essential  that all persons who enter any Site  facility are  authorized  and
that an audit  trail/record of this access and authorization  exist. All tenants
are  required to display  prominently  their  identification  badge while on the
Site.

     28. Each of the Tenant's  Employees and Vendors must badge-in  individually
and must not allow  Persons  behind them to enter  unless they "light the light"
with their own badge.  If they do not have a badge or their badge does not work,
direct them to the main lobby  receptionist  for visitor  sign-in or a temporary
badge, or to security badge  operations to see why their badge does not work. If
a badge is lost of stolen,  IBM must be notified  immediately.  IBM reserves the
right to challenge persons leaving or entering the Building or Site.

     29. Non-Site people are provided dated, temporary badges. These individuals
must sign in and out and require a Tenant escort at all times.

     30. Visits by anyone employed by an IBM competitor must be pre- approved by
the Landlord.  This is necessary  whether or not the visitor is representing the
competing company at the time of the visit. An "IBM Competitor" is anyone who is
in a business that competes with the business carried on by IBM at the Site, and
any other business specified in writing to a tenant.

     31.  Any  visit  to the  Site by a Person  who is a  representative  of any
organization of, or located within, a Restricted Trade Country, as defined, from
time to time by the U.S. Export Regulations,  requires the prior approval of the
Landlord and the IBM Office of Area Counsel.

     32. Do not park in restricted  zones,  which are reserved for the disabled,
for medical  personnel,  or  visitors,  or which are marked  with yellow  lines.
Unauthorized  parking  will  result in a security  violation.  Violators  may be
subject  to loss of Site  driving  and  parking  privileges.  If the owner of an
illegally  parked  vehicle  cannot be  located,  the vehicle may be towed at the
owner's expense.

     33. All vehicles  must yield "Right Of Way" to all  pedestrians  and at all
pedestrian  crossings and to all emergency vehicles.  Site speed limit is 30 MPH
unless  otherwise  posted.  Parking lot speed limit is 10 MPH.  Violators may be
subject to loss of Site driving and parking privileges.

     34. All tenants must supply  vehicle  registration  of its employees to IBM
Security.  Such information may be used to contact the vehicle owner for matters
involving the vehicle.

     35.  All  fire  and  medical  emergencies  as well as  threats  and acts of
violence must be reported immediately to IBM's security office, ext. 4-3333. All
vehicles  that may affect the health,  welfare or safety of any  occupant of the
Hudson  Valley  Research  Park/IBM  East  Fishkill  must also be reported to IBM
Security.

     36. In the event of an emergency evacuation of a building, occupants of the
Building will be notified via the Site public address system. (A distinctive set
of tones followed by an  announcement).  All occupants must become familiar with
their primary and secondary evacuation routes and group assembly location.

     37. All non-emergency security related incidents,  i.e., theft,  vandalism,
illegal  drugs,  violence,  or  any  suspicious  activity,  should  be  reported
immediately to the IBM Security office, extension 4-2000.

     38. Weapons of any sort (e.g., guns, knives, archery equipment, explosives,
and ammunition)  are not permitted on Hudson Valley Research Park property.  The
manufacture,  use,  distribution,  sale,  or  possession  of  illegal  drugs  or
alcoholic  beverages  or  other  controlled  substances,   except  for  approved
purposes, is prohibited on Hudson Valley Research Park property.

     39.  Cameras and  recording  devices may be used solely within the Tenant's
Premises at any time without the consent of the Landlord, but may not be used in
any other portion of the Site without the  Landlord's  written  consent.  Tenant

<PAGE>

must obtain a camera pass for any camera  brought  into any building on the Site
even for use only in the Premises.

     40. If any serious personal injury or illness or significant  damage to the
Premises  occurs in connection  with the Tenant's  operations,  the Tenant shall
immediately  notify the Landlord of the event and provide a written statement of
the facts of the incident by the close of the next business day.

     41. The Tenant  shall  notify the  Landlord if a charge of non-  compliance
with  OSHA or any  other  regulatory  agency  is filed  against  the  Tenant  in
connection with the Tenant's operations performed on the Premises.

     42. The Tenant  shall  inform the Landlord if it has reason to believe that
an event  other  than  normal  operating  procedures  may  adversely  affect the
Landlord or other Tenants on the Site.

     43.  The  Tenant  shall  notify the  Landlord  prior to using any  Ionizing
Radiation Source.

     44. The following substances are prohibited from use at the Site:

Certain glycol ethers
(see Chemical  Management and Environmental  Manual 03-01-01 for list)
PCBs (new uses prohibited)
Polybrominated Biphenyls/Polybrominated Biphenyls Oxides (PCB(O)s)
The following  substances are prohibited from use in production processes at the
Site, and may be restricted or prohibited in other uses in the  Landlord's  sole
discretion (e.g., development):

Carbon tetrachloride
Methylene  chloride (only  production  use, is as chlorine  feedback in vertical
furnaces;  no  new  uses  in  production  or  development)
CFCs (see Chemical Management and Environmental Manual 03-01-01 for list)
Halons (see Chemical Management and Environmental Manual 03-01-01 for list)
Perchlorethylene  (no new  uses in  production  or  development)  HCFCs  (use as
solvent is prohibited in production or development)
1,1,1  Trichloroethane  (only production use is  transformation  use where it is
consumed)
Trichloroethylene (new uses in production and development  prohibited) Low level
radioactive chemicals

Additional  substances  may be added  to the  above  lists  upon  notice  by the
Landlord to the Tenant, in the Landlords sole discretion.

Additional  information regarding chemical restrictions at the Site is contained
in Chemical Management and Environmental Manual index 03-01-01.

     45. The Tenant will become familiar with and ensure its contractors  comply
with the most  current  version  of the IBM  Contractor  Guide.  Copies  of this
document will be provided separately.

     46. Tenant will observe the IBM East  Fishkill/Hudson  Valley Research Park
Chemical  Management and Environmental  Manual,  which is incorporated herein by
reference. Copies of this document will be provided separately.

     47.  Toxic  gasses  with  IBM  classification  #3 and #4 in  the  IBM  East
Fishkill/Hudson  Valley  Research Park  Chemical  Management  and  Environmental
Manual  (Health  Hazard  Gasses),  if required  for the  operation of the Tenant
premises, must be provided only by authorized IBM Personnel.  Toxic gas cabinets
shall be operated only by authorized IBM Personnel and not Tenant Personnel. IBM
requires reasonable notice before performing this service.  All costs associated
with this requirement will be the sole responsibility of the Tenant in an amount
to be agreed to by Tenant and Landlord.
<PAGE>

                                                                         RIDER B

The word "Holidays" shall mean:

                  New Year's Day
                  Memorial Day
                  Independence Day
                  Labor Day
                  Thanksgiving Day
                  Christmas Day

The Landlord reserves the right to add additional holidays to the above list.

During  these  Holidays,  service  levels and support  may be reduced,  and Site
access may be restricted.

In addition,  unless otherwise  notified,  the Landlord may shut down the entire
Site for the week of  Independence  Day or another  one week  period,  as may be
required.
<PAGE>

                                                                         RIDER C

                        Services Provided by the Landlord

1. BUILDING MAINTENANCE

     IBM   will   provide   labor   and   incidental    materials   to   support
facilities-related systems and equipment. This service is included in Base Rent.

     All requests for IBM  Facilities  Maintenance  services  shall be placed by
calling 894-8000. Minimal support will be provided during off-shift hours.

     All  emergency  situations  (e.g.,  chemical  spills,  leaks,  and  medical
emergencies) must immediately be reported to IBM Emergency Control via telephone
number 894-3333.

     a. Service Boundaries

     The Tenant will maintain Tenant's tools and equipment, including peripheral
equipment  that is  controlled  by the tool or operator  control panel and which
therefore can be considered part of the tool. IBM's Facilities  Maintenance will
generally  be  responsible  from the  source  of the  service,  up to the  first
valve/main  disconnecting  device, on the service branch line extending from the
main service line to the Tenant's  equipment/tool.  Maintenance of such valve or
disconnecting device shall be the responsibility of IBM Facilities Maintenance.

     IBM's  Facilities  Maintenance  will maintain all services  upstream of the
last mechanical or electrical service  disconnecting  device,  prior to entering
the Tenant's equipment or tool. IBM's Facilities Maintenance will be responsible
for actuating the main disconnecting device to induce power, air, vacuum, water,
or any  other  Facilities  service  to  the  Tenant  equipment  or  tools  after
performing the Tenant tool/service  connection  acceptance  process.  Only IBM's
Facilities Maintenance will be permitted to perform this task.

     The specific boundaries for Facilities  Maintenance services are identified
below:

          (1) Tenant Equipment/Tools

          IBM's Facilities  Maintenance will not maintain fume hoods, sinks, gas
     storage  cabinets  (nontoxic),  and clean work  stations.  This list is not
     intended to be all-inclusive.

          (2) Drain Systems

          IBM's   Facilities   Maintenance   will  maintain  all  drain  systems
     downstream  of and  including  the inlet  fitting on the main or  secondary
     trunk line.  The Tenant will  maintain  the drain  system  upstream of such
     fitting.  Drain line flame  arresters,  if any, will be maintained by IBM's
     Facilities  Maintenance,  except where such devices are located  within the
     Tenant's equipment or tools.

     b. Miscellaneous

     Installation  or  modification  of Tenant's  equipment  that will enter the
building  ceiling plenum or extends into a building  service area requires prior
approval of IBM's Facilities Engineering/Maintenance and other IBM departments.

     Tenant  shall pay  Landlord as  additional  rent,  at the rate  outlined in
Schedule  C, for (1) the time  required  by the  Landlord  to inspect any new or
changed  service  or  utility  connections;  and (2) the time  required  for the
Landlord to respond to a service interruption that was caused by the Tenant, its
employees, agents, or contractors.

2. SECURITY SUPPORT SERVICES

     The Landlord will provide the following security support services:

-    24-hour staffed security control center that monitors all fire, safety, and
     security protection alarms.

-    24-hour emergency operator

<PAGE>

-    Issuance of photo identification access badges

-    Site receptionist services

-    Access control systems
     -    Badge reader
     -    Door keys/locks

-    Building perimeter and site security patrols

-    Traffic/parking control

-    Camera/recording device pass control

-    Security incident investigation

-    After hours-telephone operator

-    Site public address announcements and paging for emergencies only

     IT IS AGREED  THAT THE  LANDLORD  IS NOT AN INSURER  AND THAT IT IS NOT THE
INTENTION OF THE PARTIES THAT THE LANDLORD  ASSUME  RESPONSIBILITY  FOR ANY LOSS
OCCASIONED BY  MALFEASANCE  OR  MISFEASANCE  IN THE  PERFORMANCE OF THE SECURITY
SUPPORT  SERVICES  LISTED  ABOVE OR FOR ANY LOSS OR  DAMAGES  SUSTAINED  THROUGH
BURGLARY,  THEFT,  ROBBERY,  FIRE,  OR OTHER CAUSES  RELATED TO THE PROVISION OF
THESE SERVICES.

3. SITE GROUNDS KEEPING SERVICES

     SITE  GROUNDS  KEEPING  services  include lawn mowing,  snow  removal,  and
general  upkeep of the outside  grounds as  necessary  to maintain  Site safety,
hygiene, and aesthetics.

4. EMERGENCY CONTROL SERVICES

     The  Emergency  Control (EC)  department  provides  emergency  response and
emergency prevention services as follows:

     1. Emergency Response

     The department will respond to emergencies involving fire, chemical spills,
medical  situations,  and confined  space.  An EC ambulance  provides Basic Life
Support; should Advanced Life Support be required, a vendor ambulance company is
used.  (Tenant is  responsible  for the cost of ALS ambulance  support).  During
off-shift hours, EC provides first-aid services.

     2. Reporting an Emergency

     The Tenant will pre-plan an emergency  action sequence for the Premises and
communicate this sequence to its employees. The plan shall address:

          a. Who should report an emergency.

          b. Who should  initiate  an  evacuation  in the  absence of the Tenant
     employee manager.

          c. How to report  emergencies.  (The employee should call 4-3333, give
     name, building, floor, location, and number calling from.)

          d.  What  to do  after  calling.  (Inform  others  in the  area.  Meet
     emergency personnel. Remain available for information.)

     3. Emergency Phone Number Decals

     Emergency  Control  requires  that  every  phone  have a  decal  on it that
displays  the  emergency  number  4-3333.  The  decals  are  available  from the
Emergency Control department. Call 4-2222 to obtain them.

     4. Evacuation Procedure

     The Tenant  will post an  evacuation  route,  which  includes a primary and
secondary route, and keep it current.  In an evacuation,  the Tenant's employees
will go to a  pre-selected  area in the parking  lot, at least 250 feet from the
building.  All personnel  will be accounted for by the Tenant.  Whenever  Tenant

<PAGE>

calls  for an  evacuation,  the  emergency  must be  reported  on 4-3333 so that
appropriate emergency personnel can respond.

     5. Preventive Services

     The  Premises  will be  inspected  by EC  technicians  each month to assure
compliance with New York State fire laws and insurance company requirements. The
technicians  will  test  the  sprinkler  system,  smoke  detection  system,  and
extinguishing   systems.   The   technicians   will  check  the  portable   fire
extinguishers,  storage  of  chemicals,  operation  of fire  doors,  and for any
potential fire hazards.  When  deficiencies are found,  corrective action by the
Tenant  will  be  required.  Before  entering  Tenant's  area  to  do a  monthly
inspection, the EC technician contacts the Tenant to make arrangements.

     6. Insurance Company Inspections

     Annually,  the  property  insurer  tours  each  building  with EC to review
operations and buildings for compliance  with their  requirements.  EC will seek
prior approval from the Tenant before conducting these inspections.

     7. Water Supply System

     The EC department will inspect and maintain the fire valves and hydrants.

     8. Portable Fire Extinguishers and Fire Hoses

     The EC  department  will inspect all portable fire  extinguishers  and fire
hoses for proper operation.  Extinguishers and hoses not operating properly will
be replaced.  The EC  technician  will  prearrange  these  inspections  with the
Tenant.

     All portable extinguishers must be provided by the Landlord,  unless needed
in the support of Tenant construction activity.

     9. Open Flame Permits

     EC controls all open flame producing work through a permit system. This may
include,  but is  not  limited  to,  welding,  soldering,  and  spark  producing
equipment.  Tenant will  obtain  permit by calling  the EC  department.  EC will
dispatch a  technician  to inspect the area  before and after the  issuance of a
permit.

     10. Evacuation Drills

     Emergency Control will conduct annual evacuation drills of the Premises. EC
will contact the Tenant before the evacuation drill occurs.  The Tenant will use
the procedure outlined earlier under Emergency Response.

     11. Confined Spaces

     Confined  Spaces are clearly  marked with yellow and black signs.  Under no
circumstances  will a Tenant  employee enter one of these spaces unless issued a
permit by the Emergency Control department.

5. ENVIRONMENTAL AND CHEMICAL MANAGEMENT SERVICES

     The Landlord shall provide limited  environmental  engineering  support and
chemical management support to the Tenant.  This includes  interactions with and
submissions  to  federal,  state and  local  environmental  regulatory  agencies
regarding  Tenant  activities  (e.g.,  permitting,  reporting)  upon  receipt of
appropriate and timely  information  from the Tenant.  The Tenant shall maintain
ultimate  accountability  for compliance with all laws,  regulations,  and rules
with respect to the Tenant's activities.

     Disposal and  treatment  of  hazardous  and  nonhazardous  chemical  wastes
generated by the Tenant shall be through the  Landlord  and in  accordance  with
requirements  established  by the  Landlord.  The  off-site  disposal  of Tenant
chemical  wastes  shall be  consistent  with the  disposal  methods  used by the
Landlord for its wastes. The Tenant may discharge wastes into site drain systems
(dilute  industrial  acid,  fluoride  heavy metal and  solvent)  only upon prior
written  authorization  from the Landlord and only if the wastes are  compatible
with the drain system  and/or  treatment  facility.  All  chemical  usage by the
Tenant requires prior  authorization  by the Landlord.  This includes use of new
chemicals or increased use of existing chemicals. All chemical deliveries to the
Tenant must be routed through the  Landlord's  chemical  warehouse  facility for
processing by the Landlord.

<PAGE>

     For all chemicals other than class 4 toxic gases, the Tenant has the option
of direct delivery from Tenant's  supplier/carrier with processing at Landlord's
chemical  warehouse,  or receipt from Tenant's  supplier at Landlord's  chemical
warehouse with distribution by Landlord to the Tenant Building.  Direct delivery
from Tenant's  supplier/carrier requires shipping instructions to specify "check
in at B/304 with  delivery to B/XXX." In case of handling  class 4 toxic  gases,
all  cylinders   must  be  received  at  Landlord's   chemical   warehouse  with
distribution  attended  and  supervised  by  Landlord.  Refer to  Schedule C for
pricing.

6. SHIPPING/RECEIVING/INTERNAL DISTRIBUTION SERVICES

     The IBM  Materials  Distribution  Center  (MDC)  located  within the Hudson
Valley  Research  Park shall  provide  limited  SHIPPING  RECEIVING and INTERNAL
DISTRIBUTION  services to Tenant during normal IBM first shift  business  hours,
(excluding holidays); Monday through Friday, 07:00 AM to 3:00 PM.

     All shipping,  receipts and internal distributions will occur within normal
MDC turnaround times.

     Tooling/rigging/special  handling  services  are  not  covered  under  this
agreement.

     Tenant  agrees they will not use this service to ship,  receive  distribute
any  HAZARDOUS,  RESTRICTED  or  PERISHABLE  MATTER such as, but not limited to,
chemical, explosives, flammable materials, corrosives,  compressed gasses, radio
active materials, and poisons.

     In no event shall IBM be liable for any damage or losses of packages or the
contents  thereof.  Tenant shall be solely  responsible for filing damage claims
with external carrier and suppliers for all dangerous goods, including concealed
damage.

     Shipping,  Receiving, and Internal Distribution services are provided on an
"AS IS" basis, without warranty of any kind, express or implied.

     A. Shipping

     Customer  carriers are to make all pickups at building  308 dock.  MDC will
meet  carrier to load  packages  on  carrier's  truck and provide  carrier  with
customer's shipping documentation.

     B. Receiving

     MDC will receive packages from carrier at building 308.

     C. Internal Distribution

     MDC will provide delivery of packages to designated Tenant drop areas along
with pickup of outgoing  packages from same area. Drop areas and schedules shall
be predetermined by MDC.
<PAGE>

                                                                         RIDER D

                       Loading Dock Access/Use by Tenants
                           Rules and Responsibilities

A. General

     IBM will identify a loading dock to be used by the Tenant.

     A limited  number of Tenant  personnel  will be granted badge access to the
designated  loading dock door. All Tenant usage of the  designated  loading dock
will be subordinate to IBM's need to utilize the loading docks.

     Failure to comply with any of the  conditions  in this Rider D will require
prompt corrective action to be taken by the Tenant.  Repeated incidents may lead
to termination of this privilege.  In the event that loading dock privileges are
terminated, shipping/receiving services will be required to be purchased.

     It is the Tenant's responsibility to notify the suppliers of their assigned
dock.  Once the dock  access is  granted  and agreed  upon,  IBM will not accept
Tenant  freight at Building 308. All Tenant  freight will be redirected to their
assigned dock.

B. Safety

     Tenant  agrees to provide  training to designated  Tenant  personnel in the
safe operation of dock equipment, overhead doors, and dock levelers.

     Truck  entry,  exit,  and  maneuvering  areas  are to be kept  clear of all
obstructions, parked vehicles, pedestrians, and debris.

     Pedestrian exits, such as stairs, are to be kept clear and clean.

     Wheel chocks are available and are to be used during loading and unloading.
The truck and trailer wheels must be properly chocked.

     When loading or unloading trucks,  the pitch of the truck bed, dock boards,
or dock levelers must be limited to safe inclines.

     Tenant will be responsible for and report  immediately any damage or unsafe
condition in the dock area. Call extension 4-8000.

     IBM is not  responsible for any injuries or damage caused by misuse of dock
equipment.

C. Security

     Tenant   personnel   will  be  responsible   for  the  following   security
requirements related to the dock area:

*    Dock is not to be left  unattended  while the  loading  dock door is in the
     "open" position.

*    Tenant  will  challenge  any  personnel  attempting  to enter the  building
     through the opened  overhead  loading dock door. Only those who are able to
     identify  themselves as working for IBM Security or IBM  Emergency  Control
     are to be  allowed  entry  through  the  opened  overhead  door.  All other
     personnel  are to be  directed to the nearest  badge  controlled  personnel
     entry door or to the main lobby in Building 320.

*    Notify IBM Security (by calling 4-2000)  immediately of any unauthorized or
     uncooperative personnel. The Tenant is not to use any force in detaining or
     confronting any uncooperative individual(s).

     Drivers  and/or  suppliers  of the Tenant are not allowed to leave the dock
area or enter the building for any purpose  without  following  the  established
Access Control Procedures (obtain visitors badge).
<PAGE>

                                                                      EXHIBIT A1

     FED Occupied Space Bldg. 310 First Floor
<PAGE>

                                                                      EXHIBIT A2

     FED Occupied Space Bldg. 334 Second Floor
<PAGE>

                                                                      EXHIBIT A3

     FED Occupied Space Bldg. 330C First Floor
<PAGE>

                                                                      EXHIBIT A4

     FED Occupied Space Bldg. 320B First Floor
<PAGE>

                                                                       EXHIBIT B

                                  PARKING PLAN
<PAGE>

                                                                       EXHIBIT C

                           ENVIRONMENTAL CONSENT ORDER

<PAGE>

                                                                       EXHIBIT D

            Chemical Storage, Handling, and Waste Disposal practices
                                       in
                 FED Corporation's Organic thin films Laboratory
<PAGE>

                                                                      SCHEDULE A

                         BASE RENT COMPUTATION SCHEDULE
<PAGE>

                                                                      SCHEDULE B

                           BASE RENT PAYMENT SCHEDULE
<PAGE>

                                                                     SCHEDULE  C

                       UTILITIES/SERVICES PRICING SCHEDULE
<PAGE>

                                                                     SCHEDULE  D

                           COMPUTED UTILITIES SCHEDULE
<PAGE>

                                                                     SCHEDULE  E

                           LOAN AMORTIZATION SCHEDULE

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