Document:

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                                                              DATE: July 1, 2004

                                      RULES
                                       OF
                            THE ADVANTEST CORPORATION
                        INCENTIVE STOCK OPTION PLAN 2004

1    Definitions

1.1  In these Rules:

     "Advantest Group" means the Company and its subsidiaries;

     "Broker" means Mizuho Investors Securities Co., Ltd. or such other broker
     or agent appointed from time to time by the Company to execute transactions
     in connection with the Plan;

     "Company" means Advantest Corporation;

     "Date of Grant" means July 1, 2004;

     "Directors" means the board of directors of the Company;

     "Eligible Employee" means any such director, auditor, officer or employee
     of an Employing Company as designated by the Company;

     "Employing Company" means any one of the companies listed on Attachment A
     hereto;

     "Exercise Period" means a period commencing on April 1, 2005 and expiring
     at the close of business on March 31, 2009;

     "Exercise Price" means the price to be paid by a Stock Option Holder for
     the exercise of each Stock Option;

     "Guidelines" means Incentive Stock Option Plan 2004 Guidelines for
     exercising Stock Option granted to Eligible Employees in accordance with
     these Rules;

     "Plan" means the plan known as "The Advantest Corporation Incentive Stock
     Option Plan 2004" in its present form or as from time to time amended in
     accordance with the Rules;

     "Rules" means these rules as amended from time to time;

     "Shares" means fully paid common shares of stock of the Company;

     "Stock Option" means the stock options granted by the Company in accordance
     with the resolution of the shareholders' meeting of the Company held on
     June 25, 2004 and the resolution of the board meeting of the Company held
     on June 25, 2004;

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     "Stock Option Holder" means a person holding a Stock Option;

     "Stock Option Register" means a register which is prepared and maintained
     by the Company pursuant to the Japanese Commercial Code and which lists
     information including the names and addresses of Stock Option Holders;

     "Subscription Price" means the price of a Share to be delivered upon
     exercise of a Stock Option, subject to adjustment provided in Rule 3, and
     the initial Subscription Price is 7,464 yen;

     "Tokyo Business Day" means a business day in Tokyo, Japan on which both the
     Company and the Tokyo Stock Exchange are open for the transaction of
     business; and

     "Unit" means 100 Shares or such other amount of Shares to which a voting
     right at a shareholders' meeting is granted pursuant to the Japanese
     Commercial Code and the Articles of Incorporation of the Company.

1.2  Where the context permits or requires the singular includes the plural and
     the masculine includes the feminine and vice versa.

1.3  Headings shall be ignored in construing the Rules.

2    Grant of Stock Options

2.1  Grant of Stock Options

     The Company may at its absolute discretion grant to any Eligible Employee
     such number of Stock Options as determined by the Company. Each Eligible
     Employee will be informed in writing by the Company of such grant.

2.2  Conditions on Exercise

     2.2.1  A Stock Option may be exercised only on a Tokyo Business Day.

     2.2.2  The number of Stock Options exercised at one time shall be 10 or
            multiples of 10. If the number of Stock Options held by a Stock
            Option Holder is not 10 or a multiple of 10 (e.g., the number of
            Stock Options held is 27), the remaining Stock Options (in this
            example, 7) may be exercised only when they are exercised together
            with 10 or a multiple of 10 Stock Options (in this example, he or
            she may exercise 17 or 27 of his Stock Options). However, if the
            number of Stock Options held by a Stock Option Holder is less than
            10, the Stock Option Holder may exercise his Stock Options only when
            he exercises all of his Stock Options.

     2.2.3  Notwithstanding Rule 2.5.1, in each case of a Stock Option being
            non-exercisable pursuant to Rule 5, such Stock Option shall be
            deemed automatically transferred to the Company without any action
            of the Holder of such Stock Option and without any consideration.

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2.3  Acceptance of Stock Option

         To be entitled to grant of Stock Options, any Eligible Employee must
         execute a written acceptance of such Stock Options in the form of
         Attachment B hereto and deliver such acceptance form to the Company by
         July 8, 2004. The acceptance form includes the explanation of the terms
         of Stock Options in compliance with the Japanese Commercial Code. In
         the event of any inconsistency between these Rules and the acceptance
         form, the provisions of these Rules shall prevail.

2.4  No Payment

         No payment to the Company or the Employing Company shall be required
         from a Stock Option Holder upon the grant or acceptance of any Stock
         Option. The grant of the Stock Option is the Company's ex gratia.

2.5  Disposal Restrictions

     2.5.1  Neither a Stock Option nor any rights or interests in respect of it
            may be transferred, assigned, pledged or otherwise disposed of by a
            Stock Option Holder to any other person or entity. If a Stock Option
            Holder purports to transfer, assign, pledge or dispose of any such
            Stock Option or rights or interests, whether voluntarily or
            involuntarily, then the Stock Option may not be exercised and will
            be cancelled by the Company pursuant to Rule 4.2.

     2.5.2  A Stock Option Holder may not assign, delegate or otherwise transfer
            any of its rights or obligations under these Rules.

2.6  Certificates

     No certificates will be issued for Stock Options.

2.7  Grant to Employing Company

     When the Stock Options are granted to an Employing Company, these Rules
     shall apply to that Employing Company, and "Eligible Employee" shall read
     as "Employing Company", and in the application of Rule 5, "Stock Option
     Holder" shall be read as "Eligible Employee who is granted a cash bonus
     right corresponding to the Stock Option granted to that Employing Company".

3    Variations In Share Capital

3.1  Adjustment of Stock Option

     3.1.1  The Exercise Price is 746,400 yen.

     3.1.2  The number of Shares to be delivered upon exercise of each Stock
            Option is 100 Shares (i.e., 1 Unit). If any adjustment is made to
            the Subscription Price, then the number of Shares to be delivered in
            relation to each Stock Option shall be adjusted in accordance with
            the following formula, with fractions of a Share being rounded down:

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                                             Exercise Price
                        Number of Shares = ------------------
                                           Subscription Price

     3.1.3  If the Company shall make a stock split or consolidate its Shares
            into a smaller number of shares, then the Subscription Price shall
            be adjusted by the Directors based on the following formula:

                                                      1
                        NSP = OSP x --------------------------------------------
                                      Stock Split Ratio or Consolidation Ratio

            where:
            NSP = the Subscription Price after such adjustment.
            OSP = the Subscription Price before such adjustment.

     3.1.4  If the Company shall issue any Shares (other than Shares issued upon
            conversion or exchange of any convertible or exchangeable securities
            issued by the Company or upon exercise of any rights or warrants
            issued, granted or offered by the Company) or dispose of Shares
            owned by the Company (other than Shares delivered upon exercise of
            any rights or warrants granted by the Company) and the consideration
            per Share receivable by the Company shall be less than the current
            market price per Share, then the Subscription Price shall be
            adjusted by the Directors based on the following formula:

                                        N + v
                         NSP = OSP x  ----------
                                        N + n

            where:
            NSP and OSP have the meanings ascribed thereto in Rule 3.1.3.
            N = the number of Shares outstanding immediately prior to such
                adjustment.
            n = the number of additional Shares being issued as aforesaid or
                (in the case of disposal of Shares owned by the Company) the
                number of Shares being disposed of.
            v = the number of Shares which the aggregate consideration
                receivable by the Company would purchase at such current market
                price per Share.

     3.1.5  In addition to Rule 3.1.3 and 3.1.4, in any of the following
            circumstances, the Company will adjust the Subscription Price in the
            manner it considers appropriate in its absolute discretion:

            (i)   the Company will issue securities convertible into Shares at a
                  consideration per Share receivable by the Company which is
                  less than the current market price per Share;

            (ii)  the Company will issue warrants, or securities with warrants,
                  to subscribe for or purchase Shares at a consideration per
                  Share receivable by the Company which is less than the current
                  market price per Share;

            (iii) adjustment of the Subscription Price becomes necessary as a
                  result of capital reduction, merger or corporate division; or

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            (iv)  in addition to the foregoing, adjustment of the Subscription
                  Price becomes necessary as a result of change (or possible
                  change) in the number of outstanding Shares.

     3.1.6  Any fractional number resulting from calculations of the
            Subscription Price shall be rounded up to the nearest one yen.

3.2  Notice

     The Company will notify Stock Option Holders of any adjustment made under
     this Rule 3.

4    Exercise and Cancellation - General Rules

4.1  Exercise

     Unless otherwise specified in these Rules, a Stock Option shall only be
     exercisable:

     4.1.1  within the Exercise Period; and

     4.1.2  subject to the conditions imposed under Rule 2.2 and Rule 5.

4.2  Cancellation

     Unless otherwise specified in these Rules, a Stock Option shall be
     cancelled with no payment by the Company when:

     4.2.1  a shareholders' meeting of the Company approves merger whereby the
            Company will be merged into another company;

     4.2.2  a shareholders' meeting of the Company approves share exchange or
            share transfer whereby the Company will be a wholly owned subsidiary
            of another company; or

     4.2.3  a Stock Option becomes non-exercisable as a Stock Option Holder
            falls within any of the categories listed in Rule 5.

5    Exercise - Conditions

5.1  Cessation of Employment

     If a Stock Option Holder becomes a person who does not hold any position as
     a director, auditor, officer, employee or any other similar position of the
     Advantest Group, then all Stock Options then owned by that Stock Option
     Holder shall become non-exercisable; provided, however, that if the Company
     deems that it is appropriate to allow him to exercise his Stock Options and
     notifies him that his Stock Options continue to be exercisable, he shall be
     allowed to exercise his Stock Options during the Exercise Period.

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5.2  Death

     If a Stock Option Holder dies, all Stock Options held by that Stock Option
     Holder shall become non-exercisable.

5.3  Waiver

     If a Stock Option Holder waives all or part of his Stock Options by
     submitting to the Company the form specified by the Company, then all or
     such part of Stock Options granted shall become non-exercisable.

5.4  Notice by the Company

     5.4.1  If for any reason a Stock Option Holder becomes a director, auditor,
            officer or employee of a company which is a competitor with the
            Company and the Company notifies the Stock Option Holder that his
            Stock Options are non-exercisable, then all of his Stock Options
            shall become non-exercisable.

     5.4.2  If a Stock Option Holder is in breach of laws, internal rules of the
            Company or these Rules, and the Company notifies the Stock Option
            Holder that his Stock Options are non-exercisable, then all of his
            Stock Options shall become non-exercisable.

6    Exercise of Stock Option

6.1  Manner of Exercise

     6.1.1  To exercise a Stock Option, a Stock Option Holder must deliver on a
            Tokyo Business Day, an exercise notice to the Company (with a copy
            to the Employing Company), in the prescribed form (Attachment C),
            duly completed and signed by the Stock Option Holder. The Stock
            Option Holder may not withdraw the exercise notice for any reason.

     6.1.2  A Stock Option Holder shall pay the total amount of the Exercise
            Price relating to the number of Stock Options that he exercised (the
            "Total Exercise Price") and the related expenses and taxes (if any),
            by transfer to the account designated by the Company. The commission
            for such transfer shall be incurred by the Stock Option Holder.
            After the Company confirms its receipt of the Total Exercise Price
            and the related expenses and taxes (if any), the Shares shall be
            delivered by crediting the number of Shares, through the Japan
            Securities Depository Center, Inc. (the "JSDC"), to the Stock Option
            Holder's account opened pursuant to Rule 6.6.2.

6.2  Sale of Shares

     6.2.1  A Stock Option Holder may request, through the Company, that the
            Broker sell all the Shares resulting from his exercise of Stock
            Options. Any such request shall be made in a notice as referred to
            in Rule 6.1.1.

     6.2.2  After the receipt of a notice as referred to in Rule 6.2.1, the
            Company shall procure funds to be paid as the Total Exercise Price
            on behalf of the Stock Option Holder, and deliver the resulting
            Shares to the Stock Option Holder

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            in the manner specified in Rule 6.1.2. The Shares shall be sold
            without delay after the Broker confirms receipt of the Shares by the
            Stock Option Holder. Subject to Rule 6.5, the Broker shall transfer,
            to the Stock Option Holder's account with Mizuho Bank, Ltd. ("Mizuho
            Bank") opened pursuant to Rule 6.6.3, the proceeds of the sale of
            the Shares less (i) the commission for the sale, (ii) the related
            expenses and taxes (if any) and (iii) the commission for such
            transfer, within 30 days of the sale. The Stock Option Holder shall
            transfer, to the bank account designated by the Company, an amount
            equal to (i) the Total Exercise Price plus (ii) the related expenses
            and taxes paid or to be paid by the Company in connection with the
            exercise of the Stock Options or the sale of the Shares.

     6.2.3  If the Company deems that the proceeds of a sale of the Shares will
            not be enough to cover (i) the Total Exercise Price plus (ii) all
            expenses and taxes paid or to be paid by the Broker or the Company
            in connection with the exercise of the Stock Options or the sale of
            the Shares, the Company may either (a) sell the Shares in accordance
            with Rule 6.2.2 or (b) reject the request of the Stock Option Holder
            to sell the Shares and deem that he has withdrawn the exercise of
            his Stock Options, provided that if the request to sell the Shares
            has been made to the Broker in accordance with Rule 6.2.1, the
            Company may so deem only when such withdrawal can be made under the
            rules of the JSDC and the internal rules of the Broker. If the Stock
            Options are deemed to have not been exercised, the Stock Option
            Holder may exercise the relevant Stock Options in accordance with
            these Rules after he receives a notice from the Company to the
            effect that his Stock Options have been so deemed. The Company shall
            not be liable to the Stock Option Holder for any result of any
            decision made under this Rule 6.2.3.

6.3  When the number of Shares deliverable upon exercise of the Stock Options
     includes less than one Unit, the exercising Stock Option Holder shall be
     deemed to request the Company to purchase such Shares pursuant to the
     Japanese Commercial Code. The determination of whether the number of Shares
     deliverable upon exercise includes less than one Unit shall be made
     separately with respect to each exercise (regardless of the number of Stock
     Options included therein).

6.4  No Part Exercise

     A Stock Option may be exercised with respect only to each Stock Option, and
     no Stock Option may be exercised in part.

6.5  Withholding

     The Company and the Broker shall be entitled to withhold, and the Stock
     Option Holder shall be obligated to pay, the amount of any tax attributable
     to or payable by and any social security or similar payments attributable
     to or payable by the Stock Option Holder in connection with the exercise or
     receipt of his Stock Option or the sale of the Shares. The Company and the
     Broker may establish appropriate procedures to provide for any such
     payments and to ensure that the relevant company receives prompt advice
     concerning the occurrence of any event which may create, or effect the
     timing or amount of any obligation to pay or withhold any such taxes or
     which may make available to the relevant company any tax deduction with
     respect to the payment.

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6.6  Broker

     6.6.1  The Broker will assist the Company in connection with the exercise
            of the Stock Options and the sale of the resulting Shares.

     6.6.2  Prior to the exercise of the Stock Options, a Stock Option Holder
            shall open and maintain an account in his name with the Broker for
            the purpose of the delivery and deposit of the Shares to be
            delivered upon the exercise. Such account shall be opened through
            the Company.

     6.6.3  Prior to the sale of the Shares pursuant to Rule 6.2, a Stock Option
            Holder shall open and maintain an account in his name with Mizuho
            Bank for the purpose of the payment of the proceeds of a sale of
            Shares. Such account shall be opened through the Company.

7    General

7.1  Notices

     Any notice or other document required to be given under or in connection
     with the Plan may be delivered to a Stock Option Holder or sent by post or
     facsimile with confirmation in writing to him at his address which appears
     on the Stock Option Register. Notices sent by post shall be deemed to have
     been given on the day following the date of posting. Any notice or other
     document required to be given to the Company under or in connection with
     the Plan may be delivered or sent by post or facsimile with confirmation in
     writing to it at its registered office (or such other place or places as
     the Company may from time to time determine and provide Stock Option
     Holders with notification of).

7.2  Directors' Decisions Final and Binding

     The decision of the Directors in connection with any interpretation of the
     Rules or in any dispute relating to a Stock Option or other matter relating
     to the Plan shall be final and conclusive and binding on the relevant
     parties.

7.3  Costs

     The costs of introducing and administering the Plan shall be borne by the
     Company and the Employing Companies.

7.4  Regulations

     The Company shall have power from time to time to make or vary regulations
     for the administration and operation of the Plan, provided that the same
     are not inconsistent with these Rules.

7.5  Limitation of Liability

     The rights and obligations of a Stock Option Holder under the terms and
     conditions of his office or employment shall not be affected by his
     participation in the Plan or any right he may have to participate in the
     Plan. An individual who

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     participates in the Plan waives all and any rights to compensation or
     damages in connection with rights under the Plan arising from the
     termination of his office or employment with any company for any reason
     whatsoever relating to any Stock Option under the Plan as a result of such
     termination or from the loss or diminution in value of such rights or
     entitlements.

7.6  Personal Information

     A Stock Option Holder hereby consents and agrees that the Company and the
     Employing Companies may collect, store, process, use, transfer and modify
     his personal information regarding identity, place of employment and other
     pertinent information needed to effectuate his participation in the Plan
     with other parties within the Advantest Group, or with third parties to the
     extent necessary or helpful in the implementation of the Plan.

7.7  No Entitlements

     7.7.1  Nothing in the Plan, these Rules or any document related thereto
            shall be construed as guaranteeing any Eligible Employee's continued
            employment or engagement with any member of the Advantest Group, or
            as giving any Eligible Employee any right to continued employment or
            engagement with any member of the Advantest Group, during any
            period.

     7.7.2  Awards of Stock Options are discretionary. No award of Stock Options
            shall confer on the Stock Option Holder any right or entitlement to
            receive another award of stock options at any time in the future.

8    Amendments

     Subject to Rule 7.4, the Company may at any time modify these Rules in any
     respect. The Company may at any time amend these Rules so that the Company
     may issue new shares upon exercise of Stock Options instead of transferring
     its treasury stock.

9    Governing Law and Jurisdiction

     These Rules and all Stock Options shall be governed by and construed in
     accordance with Japanese law. Any dispute arising out of, or in connection
     with, these Rules shall be subject to the exclusive jurisdiction of the
     Tokyo District Court.

10   Local Law Appendix

     The Local Law Appendix attached hereto shall be an integral part of these
     Rules. In the event of any inconsistency between these Rules and the Local
     Law Appendix, the provisions of the Local Law Appendix shall prevail.

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                                                                    Attachment A

Employing Company

          Advantest America Corporation (Holding Co.)

          Advantest America, Inc.

          Advantest America R&D Center, Inc.

          Advantest America Measuring Solutions, Inc.

          Advantest (Europe) GmbH

          Advantest (Singapore) Pte. Ltd.

          Advantest (Malaysia) Sdn. Bhd.

          Advantest Taiwan Inc.

          Advantest Korea Co., Ltd.

          Advantest (Suzhou) Co., Ltd.

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                                                                    Attachment B

Acceptance Form:  to be delivered on July 1, 2004

                                                                    Attachment C

Exercise Notice:  to be delivered separately

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                               Local Law Appendix
                                   for Germany

1.   Definitions

     Definitions as set out in 1.1 of the Rules are applicable to this Appendix.

2.   Eligible Employees

     The Company's discretion with respect to 2.1 will be exercised in a way
     complying with German law, in particular with the labour law principle of
     equal treatment (arbeitsrechtlicher Gleichbehandlungsgrundsatz) and with
     the prohibition of discrimination (Diskriminierungsverbot).

3.   Ex-gratia benefit

     The grant of the Stock Option is an ex-gratia benefit (freiwillige
     Leistung). It is granted without any obligation and even repeated granting
     will not create such obligation.

4.   Vesting

     The Stock Options shall vest in Eligible Employees at the time of exercise
     of such Stock Options.

5.   Deemed Exercise

     If Stock Options held by a Stock Option holder become non-exercisable
     pursuant to Rule 5.1, those Stock Options shall be deemed to be exercised
     immediately prior to the time the respective Stock Option Holder becomes a
     person who does not hold any position as director, auditor, officer,
     employee or any other similar position of the Advantest Group. If the
     Company deems that the proceeds of the sale of the resulting Shares will
     not be enough to cover (i) the Total Exercise Price plus (ii) all costs,
     expenses and taxes referred to in Rule 6.2.3, then the Stock Options are
     deemed to be waived by the Stock Option Holder. This clause 5 applies to
     Rule 5.4 mutatis mutandis.

6.   Adjustment of the Subscription Price

     The Company's discretion with respect to the Adjustment of the Subscription
     Price will be exercised taking into fair consideration the circumstances
     where such adjustment is deemed appropriate.

7.   Taxes/Withholding

     There are income tax charges on the exercise of an option at a rate of
     between 16 % and 45 % (as of 2004) depending on the taxable income of the
     Stock Option Holder to be increased by a 5.5 % "solidarity" surcharge on
     the income tax due. The tax charge is determined by the difference between
     the market value of the shares at

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     the time the options are exercised and the option price. The market value
     is defined on the basis of the quoted prices on the respective stock
     exchange. The Employing Company is entitled to deducted the taxes from the
     gross salary of the Stock Option Holder. Additionally, the usual social
     security contributions (to the extent the wage base for social security
     contributions are not exceeded) have to be paid on the difference between
     the exercise price and the market value at the time the options are
     exercised. If the regular salary of the Stock Option Holder is not
     sufficient for the Employing Company to deduct wage tax and pay such tax to
     the competent tax office, the Employing Company will request the Stock
     Option Holder to either pay the tax to the Employing Company enabling the
     Employing Company to withhold wage tax or pay it to the tax office
     directly. The Employing Company will inform the tax office of such request.

     If the Stock Option Holder sells the shares within 12 months of the
     acquisition (and the aggregated total short-term capital gains less
     short-term capital losses for the respective calendar year amount to Euro
     512 or more) or owns 1 % or more of the stated capital of the Company (or
     has owned 1 % or more at any time in the last five years) or holds the
     shares as business assets, he will be subject to income tax (and solidarity
     surcharge) on one-half of the difference between the sales prices and the
     market value at the date of exercise. If the Stock Option Holder sells the
     shares more than 12 months after acquisition (or within 12 months of the
     acquisition and the aggregated total short-term capital gains less
     short-term capital losses for the respective calendar year amount to less
     than Euro 512), does not own 1 % or more of the stated capital of the
     Company (and has not owned 1 % or more at any time in the last five years)
     and does not hold the shares as business assets, no tax is payable.

     In principle, one-half of the gross dividends received by Stock Option
     Holders will be subject to income tax at the progressive tax rate plus
     solidarity surcharge. Investment income received by the Stock Option
     Holder, including dividends and interest, after deduction of half the
     income-related expenses in economic connection with the dividends or the
     standard amount for income-related expenses of Euro 51 (Euro 102 for
     married couples filing jointly), are tax-free up to the maximum amount of
     tax-free savings allowances of Euro 1,370 (or Euro 2,740 for married
     couples filing jointly).

     Please note, however, that the progressive tax rate will be changed to a
     range of 15 % to 42 % as of 2005. In addition, there are ongoing
     discussions among the German Finance Ministry officials with respect to
     changing German income tax rules, in particular those for capital gains.
     Changes with effect in 2004 or later, therefore, cannot be excluded.

8.   Insider Dealings

     Please note that Germany has adopted the EC-Directive on Insider Dealings.
     Insiders are, among others, persons who by virtue of their position as
     members of managing or supervisory boards of the issuing company or its
     subsidiaries or by their profession or work, have knowledge of not publicly
     known facts which may influence the market value of the securities issued.
     Insiders are subject to certain restrictions in selling or purchasing such
     securities or otherwise making use of their insider knowledge. Anyone in
     breach of those provisions will be liable to imprisonment or fine.

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9.   Directors' decisions

     The decision of the Directors in connection with any interpretation of the
     Rules or in any dispute relating to a Stock Option or other matters
     relating to the Plan shall be final and conclusive and binding on the
     relevant parties. It may only be revised by competent courts.

10.  Governing Law

     The Rules shall be governed by and construed in accordance with Japanese
     law but mandatory provisions of German law may be applied.

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                               Local Law Appendix
                                    for Italy

TAXATION

Any term not defined in the present appendix shall have the same meaning as
ascribed to it under the Rules.

For the purpose of this appendix, the Stock Option Holder is assumed to be
resident in Italy for Italian tax purposes.

Grant of a Stock Option. The grant of a Stock Option itself is not subject to
tax in the hands of the Stock Option Holder, as the Rules do not provide for the
possibility to transfer it to any third parties.

Exercise of a Stock Option. If the Exercise Price is equal to, or higher than,
the fair market value (as defined below) of the Share on the date of the offer
of the Stock Option (as defined below), the difference between:

o    the fair market value of the Share on the date of exercise of the Stock
     Option, and
o    the Exercise Price paid by the Stock Option Holder

is not taxable in the hands of the Stock Option Holder as employment income.
However, such exemption does not apply if, as a consequence of the exercise of
the Stock Option, the Stock Option Holder owns more than 10% of the share
capital of the Company.

Conversely, if the Exercise Price is lower than the fair market value of the
Share at the time of the offer of the Stock Option, the above mentioned
difference is fully taxable as employment income in the hands of the Stock
Option Holder and social security contributions also are due.

Employment income is subject to tax at progressive rates roughly ranging between
23% and 45%, depending on the total taxable income of the Stock Option Holder.
Under certain circumstances, taxes due by the Stock Option Holder are to be
withheld by the Employing Company and remitted to the competent tax offices.

As to shares listed on a regulated market, the fair market value for tax
purposes is equal to the average of the stock market prices of same shares
computed with reference to the last month. The date of the offer is the day when
the corporate bodies of the Company resolve upon the main terms and conditions
of the Plan.

Sale of Shares. The sale of Shares amounting to a "non qualified shareholding"
is subject to a 12.5% substitute tax in the hands of the transferor on the
difference between the sale price and the Exercise Price.

The sale of Shares amounting to a "qualified shareholding" is subject to
personal progressive taxation in the hands of the transferor at rates roughly
ranging between 23% and 45% on an amount equal to 40% of the difference between
the sale price and the Exercise Price.

Shares are deemed to amount to a "non qualified shareholding" in case they
entitle the relevant holder to:

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                                      - 16-

o    up to 2% of the voting rights at the ordinary shareholders' meeting of the
     company or to 5% of the share capital of the company, as far as shares
     listed on a regulated market, or
o    up to 20% of the voting rights at the ordinary shareholders' meeting of the
     company or to 25% of the share capital of the company, as far as shares not
     listed on a regulated market.

If the above percentages are exceeded, the shares are deemed to amount to a
"qualified shareholding".

The amount subject to substitute tax or personal progressive taxation is reduced
by any amount possibly subject to tax at the time of the exercise of the Stock
Options (see under Exercise of Stock Options, above).

Dividends. Dividends received on "non qualified shareholdings" (as defined
above) are subject to a 12.5% tax, which is either withheld by the Italian
financial intermediary - if any - entrusted with the actual payment of such
dividends, or directly paid by the recipient, as the case may be.

Dividends received on "qualified shareholdings" (as defined above) are subject
to progressive taxation in the hands of the recipient at rates roughly ranging
between 23% and 45%. In case any Italian financial intermediary is entrusted
with the actual payment of such dividends, the same intermediary shall levy an
advanced 12.5% withholding, which can be deducted against the final tax burden
to be paid by the recipient. Similarly, any tax possibly paid or withheld abroad
on the dividends received can be deducted against the final tax burden within
the limits provided for by the relevant Italian tax law.

<PAGE>

                                      - 17-

                               Local Law Appendix
                                    for Korea

This Appendix has been prepared to provide you with a summary of information
regarding your stock options granted by the Company under the Incentive Stock
Option Plan 2004 (the "Plan") specific to Korea.

This supplement is based on the tax laws and other laws concerning stock options
in effect in Korea as of June 2004. These laws are often complex and change
frequently. As a result, the information contained in this summary may be
out-of-date at the time you exercise your option or sell shares you acquire
under the Plan.

In addition, this supplement is general in nature. It may not apply to your
particular tax or financial situation, and the Company is not in a position to
assure you of any particular tax result. Accordingly, you are advised to seek
appropriate professional advice as to how the tax or other laws in your country
apply to your specific situation.

If you are a citizen or resident of a country other than Korea, the information
contained in this supplement may not be applicable to you.

TAX INFORMATION

Grant

You will not be subject to tax when a stock option is granted to you under the
Plan.

Date of Vesting

You will not be subject to tax when your stock options vest.

Exercise

You will be subject to income tax when you exercise your stock option. You will
be taxed on the difference between the fair market value of the shares at
exercise and the option price (i.e., the spread). This difference is treated as
salary and taxed at your marginal rate. Your employer will withhold from the
spread at exercise any social insurance contributions associated with the
realized income and pay it to Korea's social insurance funds.

Sale of Shares

When you subsequently sell the shares that you acquire under the Plan, you will
be subject to capital gains tax on any gain that you realize above the fair
market value at the time the option is exercised. No securities transaction tax
will apply to either Company's sale to you or your subsequent disposition of
shares acquired pursuant to the Plan.

Dividends

If you exercise your stock option, your employer is not required to withhold or
report income tax. It is your responsibility to report this income on your
annual tax return and to pay all taxes owed.

<PAGE>

                                      - 18-

Labor Law Acknowledgment

By accepting this stock option, you acknowledge that the Plan is discretionary
in nature and may be unilaterally suspended or terminated by the Company at any
time.

RELATED CONSENTS

Personal Information

Through accepting the invitation extended to you to receive Stock Options
offered under the Plan, you effectively consent and agree that your employer and
the Company may use personal information regarding your identity, place of
employment, and other pertinent information needed to effectuate your
participation in the Plan with other parties within the Advantest Group or third
parties to the extent necessary or helpful to implement the Plan.

Treatment and Management of Purchased Stock

Through accepting the invitation extended to you to receive Stock Options
offered under the Plan, you effectively consent and agree that upon subscribing
to Shares under the Plan, the Company is authorized to take action regarding the
stocks and proceeds derived therefrom and participate in the management of the
stocks and proceeds derived therefrom as outlined in the Rules of the Advantest
Corporation Incentive Stock Option Plan 2004, as described in Section 6.2, 6.4,
6.5, and all other Sections describing such actions and/or participation.

<PAGE>

                                      - 19-

                               Local Law Appendix
                                  for Malaysia

INTERPRETATION

Terms which have been defined in the Rules of the Plan shall, unless otherwise
defined in this Local Law Appendix for Malaysia, have the same meaning and
interpretation ascribed to it in the Rules of the Plan.

The terms and conditions set out in this Local Law Appendix for Malaysia shall
be applicable to Eligible Employees who are residents in Malaysia and is
supplemental to the terms and conditions set out in the Rules of the Plan. In
the event of any inconsistency or conflict between (1) this Local Law Appendix
for Malaysia, (2) the Rules of the Plan and/or (3) the written acceptance for
Stock Options in the form of Attachment B of the Rules, this Local Law Appendix
for Malaysia shall prevail.

AMENDMENTS/ADDITIONS TO THE RULES

Rule 2.3 - Acceptance of Stock Option
-------------------------------------

Rule 2.3 shall be deleted in its entirety and replaced with the following new
Rule:-

"2.3 Acceptance of Stock Option
-------------------------------

     2.3.1  Eligibility under the Plan does not confer on an Eligible Employee a
            claim or right to participate in or any rights whatsoever under the
            Plan and an Eligible Employee does not acquire or have any rights
            over or in connection with the Stock Options or the Shares comprised
            herein unless a grant of Stock Options has been made by the Company
            to the Eligible Employee pursuant to Rule 2.1 and the Eligible
            Employee has accepted the grant of Stock Options in accordance with
            the terms of such grant and the Plan.

     2.3.2  To be entitled to grant of Stock Options, any Eligible Employee must
            execute a written acceptance of such Stock Options in the form of
            Attachment B hereto and deliver such acceptance form to the Company
            by July 8, 2004 (the "Expiry Date"). The acceptance form includes
            the explanation of the terms of Stock Options in compliance with the
            Japanese Commercial Code. In the event of any inconsistency between
            these Rules and the acceptance form, the provisions of these Rules
            shall prevail.

     2.3.3  If any grant of Stock Option is not accepted in the manner
            prescribed above, such grant shall on the Expiry Date, automatically
            lapse and be null and void and of no further legal effect."

Rule 2.7 - Grant to Employing Company
-------------------------------------

Rule 2.7 shall be deleted in its entirety.

<PAGE>

                                      - 20-

Rule 7.7 - No Entitlements
--------------------------

The following new Rule 7.7.3 shall be inserted immediately after the existing
Rule 7.7.2:-

     "7.7.3 This Plan does not form part nor shall it in any way be construed as
            giving rise to any term of employment of any Eligible Employee,
            whether express or implied, in respect of the grant of Stock Options
            under the Plan."

EXCHANGE CONTROL

These exchange control regulations are based upon the ECM Notices issued by Bank
Negara Malaysia which are in effect in Malaysia as at June 2004. A person
"resident" in Malaysia is required to comply with the Malaysian exchange control
requirements, as it may be varied or revoked by Bank Negara Malaysia from time
to time. You should therefore seek the advice of your local counsel to ensure
that you are in compliance with such requirements at all times. Non-compliance
with any of the ECM Notices constitutes an offence under paragraph 7 of the
Fifth Schedule to the Exchange Control Act, 1953.

For Malaysian exchange control purposes, a "resident" means inter alia:-
(1)  a citizen of Malaysia, excluding a person who has obtained permanent
     resident status in a territory outside Malaysia and is residing outside
     Malaysia; or
(2)  a non-citizen of Malaysia who has obtained permanent resident status in
     Malaysia and is residing permanently in Malaysia.

Currency of Payment
-------------------

All payments by residents, pursuant to the exercise of the Stock Options in
accordance with Rule 6.1.2 and/or Rule 6.2.2, must be made in a foreign currency
other than the currencies of Israel, Serbia and Montenegro.

Registration Requirement
------------------------

A resident may invest any amount in foreign currency in the Shares of the
Company under the Plan. However, a Stock Option Holder who, pursuant to the
exercise of his Stock Options, is required to transfer the sum of the Total
Exercise Price (including any related expenses or taxes) to an account
designated by the Company pursuant to Rule 6.1.2 and/or Rule 6.2.2, must
register such investments with the Controller at least seven (7) days prior to
the remittance of the Total Exercise Price (including any related expenses or
taxes).

Sale of Shares
--------------

If a resident sells his Shares pursuant to Rule 6.2, such resident must obtain
the prior approval of the Controller if the Total Exercise Price exceeds the
aggregate foreign currency equivalent of RM5 million. However, where the Total
Exercise Price exceeds the equivalent of RM1 million but does not exceed the
equivalent of RM5 million, the resident is only obliged to provide the
Controller with certain information as prescribed in Appendix I of ECM 10 of the
ECM Notices.

A resident is required to (i) repatriate all interest, dividend, profits and
proceeds from the sale of the Shares to Malaysia as soon as they are received
and (ii) sell such receipts

<PAGE>

                                      - 21-

arising therefrom for Ringgit to an authorized adealer, or deposit the funds in
a permitted foreign currency account subject to the limits imposed by the
Controller.

TAXATION

The taxation treatment for Stock Options in Malaysia as contained herein are
based upon current taxation law in Malaysia as at June 2004. However, as these
laws may be subject to changes, you should seek the advice of your local tax
expert to ensure that you are in compliance with taxation laws in Malaysia at
all times.

Payment of Taxes in relation to Stock Option
--------------------------------------------

Under Section 13 of the Income Tax Act, 1967, employment income includes any
benefits arising from the grant of a Stock Option and the employee is liable to
pay tax on such benefits. The employer shall be entitled to withhold such taxes
attributable to the Stock Options upon the exercise by the employee of the Stock
Options in Malaysia.

Calculation of Taxable Income from the Exercise of Stock Options
----------------------------------------------------------------

Taxable income from the exercise of a Stock Option is calculated as the
difference between the market value of the Stock at the time the Stock Option is
exercised and the Exercise Price of the Stock Option. Market value for purposes
of the foregoing is defined on the basis of the quoted price of the Share on the
relevant stock exchange.

<PAGE>

                                      - 22-

                               Local Law Appendix
                         for People's Republic of China

The Rules of The Advantest Corporation Incentive Stock Option Plan 2004 shall be
supplemented with the following provisions to govern Stock Options granted to
Eligible Employees who are employed at an Employing Company established in the
People's Republic of China (the "PRC"):

1.   Rule 2.1 shall read in its entirety as follows:

          Grant of Stock Options

          The Company may at its absolute discretion grant to any Eligible
          Employee such number of Stock Options as determined by the Company.
          Each Eligible Employee will be informed in writing by the Company of
          such grant. Benefits granted to Eligible Employees under the Plan are
          intended to be an additional performance incentive for employee
          performance beyond normal day-to-day responsibilities, and thus are
          not part of the regular salary offered in exchange for services.

2.   Rule 2.4 shall read in its entirety as follows:

          No Payment

          No payment to the Company or the Employing Company shall be required
          or permitted from a Stock Option Holder upon the grant or acceptance
          of any Stock Option. The Stock Option Holder shall not remit any
          foreign currency out of the PRC in relation to the Stock Option to
          which he or she is entitled. The grant of the Stock Option is the
          Company's ex gratia benefit of employment. The Stock Option has no
          commercial value.

3.   Rule 2.5.1 shall read in its entirety as follows:

          Disposal Restrictions

          Neither a Stock Option nor any rights or interests in respect of it
          may be transferred, assigned, pledged or otherwise disposed of by a
          Stock Option Holder to any other person or entity. If a Stock Option
          Holder purports to transfer, assign, pledge, or dispose of any such
          Stock Option or rights or interests, whether voluntarily or
          involuntary, then the Stock Option may not be exercised and will be
          cancelled by the Company. The Stock Option Holder may not ask the
          Company to redeem the Stock Options for any consideration if he
          decides not to exercise the Stock Option.

4.   Rules 2.5.2 shall be deleted.

5.   Rule 6.1.2 shall be deleted.

<PAGE>

                                      - 23-

6.   Rule 6.2.2 shall read in its entirety as follows:

          After the receipt of a notice as referred to in Rule 6.2.1, the
          Company shall procure funds to be paid the total amount of the
          Exercise Price relating to the number of Stock Options that the Stock
          Option Holder has exercised (the "Total Exercise Price") on behalf of
          the Stock Option Holder, and deliver the resulting Shares to the Stock
          Option Holder. All of the Shares shall be sold without delay after the
          Broker confirms receipt of the Shares by the Stock Option Holder.
          Subject to Rule 6.4, the Broker shall transfer, to the Stock Option
          Holder's account with Mizuho Bank, Ltd. ("Mizuho Bank") opened
          pursuant to Rule 6.6.3, the proceeds of the sale of the Shares less,
          (i) the commission for the sale, (ii) the related expenses and taxes
          (if any), and (iii) the commission for such transfer, within 30 days
          of the sale. The Stock Option Holder shall then transfer, to the bank
          account designated by the Company, an amount equal to (i) the Total
          Exercise Price plus (ii) the related expenses and taxes paid or to be
          paid by the Company in connection with the sale of the Shares.

7.   Rule 6.2.3 should be amended to read in its entirety as follows:

          If the Company deems that the proceeds of a sale of the Shares will
          not be enough to cover (i) the Total Exercise Price plus (ii) all
          costs, expenses and taxes referred to in Rule 6.2.2, the Company may
          either (a) sell the Shares in accordance with Rule 6.2.2 or (b) reject
          the request of the Stock Option Holder to sell the Shares and deem
          that he has withdrawn the exercise of his Stock Options, provided that
          if the request to sell the Shares has been made to the Broker in
          accordance with Rule 6.2.1, the Company may so deem only when such
          withdrawal can be made under the rules of the Japan Securities
          Depository Center and the internal rules of the Broker. If the Stock
          Options are deemed to have not been exercised, the Stock Option Holder
          may exercise the relevant Stock Options in accordance with these Rules
          after he receives a notice from the Company to the effect that his
          Stock Options have been so deemed. The Company shall not be liable to
          the Stock Option Holder for any result of any decision made under this
          Rule 6.2.3.

8.   A new Rule 6.7 shall read in its entirety as follows:

          Under no circumstances shall the Stock Option Holder be required or
          permitted to provide the Exercise Price for the exercise of the Stock
          Option.

9.   A new Rule 7.8 shall read in its entirety as follows:

          At no time shall the Plan be considered an offer to purchase or sell
          securities in the PRC.

10.  A new Rule 11 shall read in its entirety as follows:

          In order to comply with any applicable requirements announced by an
          authority of the PRC government, the Company shall have the right to
          terminate the Plan or to modify the Plan to the extent necessary to
          comply with such requirements. Such termination or the extent of any
          such modification shall be at the sole discretion of the Company. The
          Company shall bear no liability to the Stock Option Holder in the
          event the Plan is terminated or modified in accordance with this Rule
          11.

<PAGE>

                                      - 24-

                               Local Law Appendix
                                  for Singapore

          This Appendix is only applicable to employees of Advantest's
          Singapore entity who are ordinarily tax residents in Singapore.
          For avoidance of doubt, please contact your tax advisor to
          determine whether you are ordinarily a tax resident of Singapore.

INTERPRETATION

The terms and conditions set out in this Local Law Appendix for Singapore shall
be applicable to Eligible Employees who are residents in Singapore and is
supplemental to the terms and conditions set out in the Rules of the Plan. In
the event of any inconsistency or conflict between (1) this Local Law Appendix
for Singapore, (2) the Rules of the Plan and/or (3) the written acceptance for
Stock Options in the form of Attachment B of the Plan, this Local Law Appendix
for Singapore shall prevail.

AMENDMENTS / ADDITIONS TO THE RULES

Clause 1.1 - Definitions
------------------------

The definition of "Eligible Employees" in the Rules of the Plan to be deleted in
its entirety and replaced with the following:

"Eligible Employee" means any such director, officer or employee of an Employing
Company as designated by the Company.

Clause 2.7 - Grant to Employing Company
---------------------------------------

Clause 2.7 shall be deleted in its entirety.

Clause 4.1.1 - Exercise and Cancellation - General Rules
--------------------------------------------------------

Clause 4.1.1 shall be deleted in its entirety and replaced with the following:

within the period commencing one year from the Date of Grant and expiring at
close of business on March 31, 2009.

Clause 5.1 - Cessation of Employment
------------------------------------

Clause 5.1 shall be deleted in its entirety and replaced with the following:

If a Stock Option Holder becomes a person who does not hold any position as a
director, officer, employee or any other similar position of the Advantest
Group, then all Stock Options then owned by that Stock Option Holder shall
become non-exercisable; provided, however, that if the Company deems that it is
appropriate to allow him to exercise his Stock Options and notifies him that his
Stock Options continue to be exercisable, he shall be allowed to exercise his
Stock Options during the Exercise Period.

<PAGE>

                                     - 25 -

                               Local Law Appendix
                         for Republic of China (Taiwan)

Amendments/Additions to the Rules

2.4  No Payment

     Delete "The grant of the Stock Option is the Company's ex gratia benefit of
     employment" and move this sentence to an added provision 2.8.

2.8  Ex Gratia Benefit (New Provision)

     The grant of the Stock Option is the Company's ex gratia benefit of
     employment. Participation in this Stock Option is entirely separate from
     any pension right or entitlement a Stock Option Holder may have and from
     the terms of the employment.

7.8  Tax Liabilities

     A Stock Option Holder should consult his or her financial and/or tax
     adviser to determine the personal tax treatment upon the grant of Stock
     Options, the exercise of Stock Options and the subsequent sale of Shares.

Taxation

The following discussion is intended to summarize briefly certain tax
consequences associated with the grant and exercise of options under the Plan,
as well as the sale of shares obtained under the Plan. It is not intended to
serve as specific tax advice concerning your participation. This supplement
reflects that tax laws in effect as of June 9, 2004. Any changes in the tax laws
after this date may affect the taxation of your options. You should seek the
advice of your personal tax advisor for specific tax consequences associated
with your participation in the Plan.

Grant of Stock Options
----------------------

A Stock Option Holder will not be subject toTaiwan taxation at the grant of the
stock option under the Plan.

Date of Vesting
---------------

A Stock Option Holder will not be subject to Taiwan taxation on the vesting date
of the stock option under the Plan.

Exercise of Stock Options and Sale of Shares
--------------------------------------------

A Stock Option Holder may be subject to Taiwan taxation on the exercise of the
stock option on the difference between the fair market value of the underlying
shares on the date of exercise and the exercise price.

<PAGE>

                                     - 26 -

                               Local Law Appendix
                                     for USA

Purpose
-------

     This Appendix sets forth certain terms and conditions applicable to
residents of the United States who are awarded Stock Options (each, a "U.S.
Stock Option Holder") under the Plan and supplements the terms and conditions
set forth in the Rules of the Plan. IN THE EVENT OF ANY CONFLICT AMONG THE TERMS
OF THIS APPENDIX, THE RULES OR A STOCK OPTION ACCEPTANCE FORM, THE TERMS OF THIS
APPENDIX SHALL GOVERN. Capitalized terms used in this Appendix without
definition have the meaning assigned to such terms in the Rules.

Administration of Stock Options Granted to U.S. Stock Option Holders
--------------------------------------------------------------------

     The Company, or its authorized U.S. representative, shall (i) administer
the terms of this Appendix, (ii) establish from time to time such rules and
procedures as it may deem appropriate for the proper administration of this
Appendix and (iii) make such determinations under and such interpretations of
and take such steps in connection with this Appendix or the Stock Options
granted to U.S. Stock Option Holders as it may deem necessary or advisable.

Right to American Depository Shares ("ADSs")
--------------------------------------------

     The Company may arrange, in its sole discretion, for U.S. Stock Option
Holders to receive ADSs rather than Shares upon the exercise of their Stock
Options, in which case, all references to "Shares" in the Rules, this Appendix,
a Stock Option Acceptance Form or any other document related to the Plan shall
be deemed to be a reference to four (4) ADSs per Share, as the context may
require. 400 ADSs will be deemed to constitute a "Unit." ADSs will be evidenced
by American Depository Receipts of the Company, which are currently traded on
the New York Stock Exchange.

     In the event that the Company elects to issue ADSs upon the exercise of
Stock Options by U.S. Stock Option Holders, 400 ADSs will be issued upon the
exercise of each Stock Option. The number of ADSs so issued will be adjusted
accordingly when the number of Shares to be issued upon the exercise of each
Stock Option is adjusted pursuant to the Rules.

Limitation on Number of Shares or ADSs Available for Issuance
-------------------------------------------------------------

     Notwithstanding anything to the contrary in the Rules or this Appendix, the
maximum aggregate number of Shares (or ADSs) that may be issued under the Plan
as ISOs is 122,000 Shares (or 488,000 ADSs), subject to any equitable
adjustments to the number and kind of Shares or ADSs under the Rules to the
extent permitted under Section 422 of the United States Internal Revenue Code of
1986, as amended (the "Code"). To the extent permitted under Section 422 of the
Code, any Shares or ADSs subject to a Stock Option that lapses, expires or is
otherwise terminated without the issuance of such Shares or ADSs may again be
available for purposes of this limit.

<PAGE>

                                     - 27 -

ISO Qualification.
------------------

     To the extent possible, Stock Options awarded to Eligible Employees
resident in the United States are intended to qualify as incentive stock options
("ISOs") within the meaning of Section 422 of the Code. Pursuant to the
requirements of the Code, only those Stock Options awarded to Eligible Employees
who are employees of an Employing Company (and which is a "parent corporation"
or "subsidiary corporation" within the meaning of Section 424 of the Code) may
be considered ISOs. Stock Options awarded to non-employee directors of an
Employing Company shall be nonqualified stock options.

Vesting and Exercise
--------------------

     By way of clarification, if a U.S. Stock Option Holder ceases to be a
director, auditor, officer or employee of any Employing Company under
circumstances as a result of which such U.S. Stock Option Holder's Stock Options
"shall become non-exercisable" in accordance with Rule 5.1, as applicable, it is
understood that:

     (1)  If such cessation occurs prior to the start of the Exercise Period
          (April 1, 2005), such U.S. Stock Option Holder's Stock Options shall
          never become exercisable, but shall be cancelled without any payment
          being made to the U.S. Stock Option Holder in respect thereof; and

     (2)  If such cessation occurs on or after the start of the Exercise Period,
          such U.S. Stock Option Holder's Stock Options shall no longer be
          exercisable as of the date of such cessation, and shall be cancelled
          without any payment being made to the U.S. Stock Option Holder in
          respect thereof.

In no event will a U.S. Stock Option Holder be permitted to exercise Stock
Options either before the start of the Exercise Period or after the end of the
Exercise Period.

     Due to the prohibition on loans to directors and executive officers of the
Company set forth under Section 402 of the Sarbanes-Oxley Act of 2002, the
cashless exercise feature of the Plan, as set forth in Rule 6.2, is not
available for U.S. Stock Option Holders who are directors and executive officers
of the Company at the present time. The Company will inform those who are
subject to this prohibition if such feature does become available in the future.
Until such time, such U.S. Stock Option Holder must exercise his or her Stock
Options in the manner set forth in Rule 6.1.

ISO Conditions

     A U.S. Stock Option Holder must comply with each of the following
conditions to ensure that his or her Stock Options qualify as ISOs. Except where
otherwise noted, responsibility for complying with the following conditions will
be the responsibility of the individual U.S. Stock Option Holder:

     (1)  Employee Status. At all times during the period commencing on the
          ---------------
          relevant Date of Grant and ending on the date three month's prior to
          the date of exercise, the U.S. Stock Option Holder must be an employee
          of the Company or another member of the Advantest Group (except in the
          case of an employee who is disabled within the meaning of Section
          22(e)(3) of the Code, in which case such three-month period is
          extended to one year).

<PAGE>

                                     - 28 -

     (2)  10% Shareholders. No Stock Option shall qualify as an ISO if the U.S.
          Stock Option Holder is a 10% Shareholder, unless (a) the Exercise
          Price, as of the Date of Grant, is at least 110% of the fair market
          value of the Shares or ADSs subject to the Stock Option and (b) such
          Stock Option, by its terms, is not exercisable after the expiration of
          five years from the Date of Grant. A "10% Shareholder" means that, as
          of the relevant Date of Grant, an individual owns stock possessing
          more than 10% of the total combined voting power of all classes of
          stock of the Company or any of its subsidiaries.

     (3)  Holding Period. A Stock Option will qualify for ISO treatment only if
          the U.S. Stock Option Holder makes no disposition of the Shares or
          ADSs acquired upon exercise of the Stock Option within two years from
          the Date of Grant or within one year from the date of exercise.

     (4)  Restrictions on Exercise.

          (a)  The Stock Option may only be exercised by the U.S. Stock Option
               Holder during his or her lifetime.

          (b)  To the extent that the aggregate fair market value of Shares or
               ADSs with respect to which Stock Options are exercisable for the
               first time by a U.S. Stock Option Holder during any calendar year
               exceeds $100,000, such Stock Options shall not qualify for
               treatment as ISOs. The foregoing sentence shall be applied by
               taking Stock Options into account in the order in which they were
               granted.

     (5)  Conditions Otherwise Satisfied by Plan. The Plan was approved by
          shareholders of the Company on July 1, 2004. No Stock Option shall be
          granted under the Plan later than ten years from the date on which the
          Plan was approved by the Board of Directors of the Company (the
          "Board").

Any Stock Option granted under the Plan that fails to satisfy conditions (1)
through (5) above shall be deemed to be a nonqualified stock option. Any
ambiguities in the terms of a Stock Option granted under the Plan shall, to the
extent possible, be construed in favor of a finding that such Stock Option
qualifies as an ISO.

     The Company shall have the right, in its sole discretion, to elect to have
any rights granted to Stock Option Holders generally by operation of any
non-U.S. law, including, without limitation, any Japanese law granting
retroactive dividend rights, not apply to U.S. Stock Option Holders where such
law (i) is not required to apply to U.S. Stock Option Holders and (ii) would
jeopardize or prevent such U.S. Stock Option Holders' Stock Options from
qualifying as ISOs.

Cessation of Employment
-----------------------

     This Appendix shall not be construed to limit the period of time, if any,
following a U.S. Stock Option Holder's termination of employment during which
the U.S. Stock Option Holder may exercise his or her Stock Options pursuant to
Rule 5. Nevertheless, a U.S. Stock Option Holder who intends for his or her
Stock Options to be treated as ISOs will be required to exercise such Stock
Options upon the earlier of (i) such time specified in the applicable provision
of Rule 5 and (ii) three months following his or her termination of employment
(except in the case of an employee who is disabled within the meaning of

<PAGE>

                                     - 29 -

Section 22(e)(3) of the Code, in which case such three-month period is extended
to one year).

Not Part of Wages
-----------------

     Awards of Stock Options are not part of a U.S. Stock Option Holder's base
salary or wages and will not be taken into account in determining any other
employment-related rights the U.S. Stock Option Holder may have, such as rights
to pension or severance pay.

Securities Law Restrictions.
---------------------------

     The Company may require each U.S. Stock Option Holder purchasing or
acquiring Shares or ADSs pursuant to a Stock Option under the Plan to represent
to and agree with the Advantest Group in writing that such U.S. Stock Option
Holder is acquiring the Shares or ADSs for investment and not with a view to the
distribution thereof. All certificates for Shares or ADSs delivered under the
Plan, upon exercise of a Stock Option, shall be subject to such stock-transfer
orders and other restrictions as the Company may deem advisable under the rules,
regulations, and other requirements of the Securities and Exchange Commission,
any exchange upon which the Shares or ADSs are then listed, and any applicable
federal or state securities law, and the Company may cause a legend or legends
to be put on any such certificates to make appropriate reference to such
restrictions. No Shares or ADSs shall be issued hereunder unless the Advantest
Group shall have determined that such issuance is in compliance with, or
pursuant to an exemption from, all applicable federal and state securities laws.

Bank and Broker
---------------

     Notwithstanding anything to the contrary in the Rules, including, without
limitation, Rules 1.1 or 6.6.3, or your Stock Option Acceptance Form:

     (1)  "Broker" means JPMorgan Chase Bank or such other broker or agent
          appointed from time to time by the Company to execute transactions in
          connection with the Plan; and

     (2)  A U.S. Stock Option Holder shall open and maintain an account in his
          or her name with JPMorgan Chase Bank for the purpose of the payment of
          the proceeds of a sale of Shares or ADSs. Such account shall be opened
          through the Company.Exhibit 10.7

                                 LEASE AGREEMENT

This Lease  Agreement  (this "Lease") made to be effective as of the 15th day of
January 2003 between Thomas B. Goodkind,  John M. Goodkind,  Rachel A. Goodkind,
Daniel M.  Goodkind,  Robert F.  Goodkind and Walter L.  Goodkind,  having their
principal office at 15 Hiawatha  Heights,  Woodstock  Valley,  Connecticut 06282
(collectively,  "Lessor") and CAROLINA  NATIONAL BANK AND TRUST COMPANY,  having
its  principal  office at 1350  Main  Street,  Columbia,  South  Carolina  29201
("Lessee").

                                   WITNESSETH:

Lessor leases to Lessee and Lessee leases from Lessor, the lot or parcel of land
containing  approximately  8,112 square feet known as 1340 Sumter Street located
in Richland  County,  South  Carolina more  particularly  described in Exhibit A
attached  hereto,   together  with  all  other   improvements   located  thereon
(collectively, the "Premises").

                                    ARTICLE 1
                                  TERM; RENEWAL

         1.01 The initial  term of this Lease shall be for seven (7) years.  The
initial term of this Lease shall  commence on the date the Lease is fully signed
by Lessor and delivered to Lessee (the "Commencement  Date") and end at midnight
on the last day of January, 2010 (the "Expiration Date").

         1.02 If Lessee shall  remain in  possession  of the Property  after the
expiration  of either the  initial  term of this Lease or of any  extended  term
without  Lessor's consent it shall not be deemed or construed to be a renewal or
extension  of this  Lease  but shall  only  operate  to create a  month-to-month
tenancy  at  a  rate  equal  to  150%  of  the  previous   rate  paid  and  said
month-to-month tenancy may be terminated by either party at the end of any month
upon 30 days prior written notice to the other party.

         1.03 Lessee's entry into, and taking  possession of, the Property shall
constitute  Lessee's  acknowledgment that the Property is in good and tenantable
condition at the beginning of the term hereof.  At the time of execution of this
Lease  or at any  time  thereafter,  Lessor  shall  be under no duty to make any
alterations or repairs to the Property not specifically set forth in this Lease.

         1.04 If Lessor is unable to deliver possession of the Property upon the
date the term of this Lease is to commence,  then neither  Lessor nor its agents
shall be  liable  for any  damages  caused  to Lessee by reason of the delay nor
shall this Lease become void or voidable; however, except as otherwise expressly
provided,  Lessee  shall not be liable  for the  payment  of rent  until  Lessor
delivers possession.

         1.05 Lessee  shall have the option to extend the term of this Lease for
three (3)  additional 5- year term  ("Option  Period(s)")  by providing  written
notice to

<PAGE>

Lessor of its election to extend the term,  such notice to be given at least 180
days prior to the  expiration of the  then-current  term. If a renewal option is
not elected  and  written  notice not given to Lessor at least 180 days prior to
the  expiration  of the  then-current  term,  Lessee  agrees to vacate  premises
completely by the expiration date of the term.

                                    ARTICLE 2
                                  RENT PAYMENTS

         2.01 The net  monthly  rental  (the "Net  Rent") for the first five (5)
years of the  initial  term shall be equal to  $2,500.00  per month pro rated as
necessary for any partial month during the term.  After the first five (5) years
of the initial term, Net Rent for each  succeeding  five (5) years will increase
by 15% over the prior period.

         2.02 Lessor  shall  receive the Net Rent free from all taxes,  charges,
expenses,  and  reductions  of every  description  for each  lease year in equal
monthly  installments,  due and payable to Lessor on the first day of each month
throughout the term of this Lease, with such payments commencing as of the first
day of  January  1,  2003.  All  rental  payments  shall be made at the  address
specified  above or such other  location as  specified in writing by Lessor from
time to time.

         2.03  Lessee  shall pay to Lessor all other sums that may become due or
be payable by Lessee under this Lease, at the time and in the manner provided in
this Lease.  All of such other sums so to be paid may, at  Lessor's  option,  be
deemed to be additional rent, and in the event of non-payment, Lessor shall have
all  the  rights  and  remedies  provided  in  this  Lease  in the  case  of the
non-payment of rent.

                                    ARTICLE 3
                               USE AND MAINTENANCE

         3.01 The Property shall be utilized for the purpose of locating  teller
windows, pneumatic tubes, an ATM machine and for all lawful purposes incident to
a branch banking  facility.  No additional  uses shall be permitted  without the
prior  written   consent  of  Lessor,   which  consent  shall  not  be  withheld
unreasonably  so long as such use does not  decrease  or impair the value of the
Property.

         3.02 The  Property  shall be kept in good order and repair by Lessee at
Lessee's  sole  cost  and  expense,  and  Lessee  shall  make  all  repairs  and
replacements,  ordinary  as  well as  extraordinary,  foreseen  and  unforeseen,
structural or otherwise,  that may be necessary or required in or about the same
so that at all times the Property, including all components,  systems, fixtures,
common areas, roof repair, roof maintenance,  landscape maintenance, parking lot
maintenance and repair and site improvements shall be in good order,  condition,
and repair.

         3.03 No Hazardous Materials shall be permitted to be generated, stored,
handled or disposed of on or about the Property;  provided,  however,  that this
provision  shall not be applicable to materials  located on the Property used by
occupants

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<PAGE>

in the normal  course of business so long as the same are stored,  utilized  and
disposed  of  in  accordance  with  all  applicable  Governmental   Requirements
(hereafter  defined)  and are of a type and  quantity  normally  found in office
buildings and other Property dedicated to the uses permitted herein and which do
not represent any material  danger to persons or property if an accident were to
occur with respect thereto.

                                    ARTICLE 4
                              COMPLIANCE WITH LAWS

         4.01  Throughout the term of this Lease,  Lessee shall, at its own cost
and expense,  promptly  observe and comply with all laws,  orders,  regulations,
rules,  ordinances,  and  requirements of the Federal,  State,  County and local
Governments,  including all Environmental Laws (as defined in Article 28) and of
all of their  administrative  departments,  bureaus,  officials and of the local
fire  insurance  rating  organization,  and of all insurance  companies  writing
policies covering the Property or any part thereof,  whether those laws, orders,
regulations,  rules,  ordinances,  or requirements relate to structural repairs,
changes, or alterations to or in and about the Property or to repairs,  changes,
or  alterations  incident  to or as the result of any use or  occupation  of the
Property,  or use of the  adjacent  sidewalks,  and  whether the same now are in
force,  or  that  may,  at any  time  in the  future,  be  enacted  or  directed
(collectively  "Governmental  Requirements");  and  Lessee  shall pay all costs,
expenses, claims, fines, penalties, and damages that may in any manner arise out
of or be  imposed  because  of the  failure  of  Lessee  to  comply  with  these
covenants.

         4.02 Lessee,  after notice to Lessor,  may, by appropriate  proceedings
conducted  promptly  at its own  expense,  in its name or  (whenever  necessary)
Lessor's  name,  contest in good faith the validity or  enforcement  of any such
law,  order,  regulation,   rule,  ordinance,  or  requirement,  and  may  defer
compliance  therewith provided that (a) such non-compliance shall not constitute
a crime on the part of  Lessor,  (b)  Lessee  shall  diligently  prosecute  such
contest  to  final  determination  by the  court,  department,  or  governmental
authority or body having final jurisdiction, and (c) Lessee shall furnish Lessor
with such  security as Lessor may  reasonably  request in  connection  with that
contest.  Lessor agrees to cooperate  reasonably with Lessee, and to execute any
documents or pleadings reasonably required, for the purpose of any such contest,
provided  that Lessee  shall  discharge  any expense or  liability  of Lessor in
connection therewith.

                                    ARTICLE 5
                            SURRENDER AT END OF TERM

         5.01 Lessee shall surrender and deliver up the Property,  including all
systems and fixtures used in connection  with the operation of the Property (but
not movable  trade  fixtures and  equipment of  occupants in  possession  of the
Property,  all of which shall be retained by Lessee and removed by Lessee at its
expense,  with all damage and unsightly  conditions caused by such removal to be
repaired at the  expiration of this Lease or sooner  termination  in good repair
and condition, reasonable wear and tear thereof excepted.

                                       3
<PAGE>

                                    ARTICLE 6
                                MECHANICS' LIENS

         6.01  Lessee  shall have no power to subject  the  Property or Lessor's
interest in the Property to any mechanics' or other liens.  If any mechanics' or
other  liens or  order  for the  payment  of money  shall be filed  against  the
Property or any building or  improvement  thereon by reason of or arising out of
any labor or  material  furnished  or  alleged to have been  furnished  or to be
furnished to or for Lessee at the  Property,  or for or by reason of any change,
alteration,  or addition or the cost or expense thereof or any contract relating
thereto,  Lessee  shall cause the same to be  discharged  of record  against the
Property,  by bond or  otherwise  as  allowed  by law at the  expense of Lessee,
within 30 days after written demand therefor, and shall also defend on behalf of
Lessor at Lessee's sole cost and expense,  any action,  suit, or proceeding that
may be brought  thereon or for the  enforcement of those liens,  lien or orders,
and  Lessee  shall  save  harmless  Lessor  from any  judgment,  claim or damage
resulting therefrom.

                                    ARTICLE 7
                          UTILITIES AND OTHER SERVICES

         7.01 Lessee shall be solely responsible for the payment of all sums due
for electrical,  natural gas, sewer, water and other utility service provided to
the Property,  as well as all other services required to operate the Property in
accordance  with the terms of this  Lease,  including  trash  removal  services,
heating,  air conditioning and ventilation and other system  contracts,  private
security  services,  landscaping and exterior  maintenance  services and outside
lighting. All payments due hereunder shall be made in a reasonably timely manner
to assure proper operations of the Property on a continuing basis.

                                    ARTICLE 8
                            INDEMNIFICATION OF LESSOR

         8.01 Lessee shall keep, save, and hold harmless Lessor from any and all
loss, damage,  claims or causes of action (including reasonable attorneys' fees)
arising out of or related  directly or indirectly  to Lessee's  occupancy of the
Property during the term of this Lease,  including (without  limitation) acts or
omissions  of  Lessee,   Lessee's  agents  or  servants  involving   negligence,
recklessness,  intentional  misconduct  or failure of Lessee to comply with this
Lease.

         8.02 Without  limiting the foregoing,  Lessee shall  indemnify and hold
Lessor harmless from and against any and all damages,  penalties, fines, claims,
liens,  suits,  liabilities,  costs (including  clean-up  costs),  judgments and
expenses (including attorneys',  consultants', or experts' fees and expenses) of
every kind and nature  suffered  by or  asserted  against  Lessor as a direct or
indirect result of any violation of any  Environmental  Law by Lessee during the
term of this Lease on or about the Property.

                                       4
<PAGE>

                                    ARTICLE 9
                         CASUALTY INSURANCE; RESTORATION

         9.01 Lessee  shall at all times  during the term of this Lease,  at its
own  expense,  insure  and  keep  insured  by  responsible  insurance  companies
authorized to do business in South  Carolina and which is rated A+ by the latest
Best  Guide  unless  otherwise   approved  by  Lessor,   the  Property  and  all
alterations,  extensions,  and improvements  thereto and  replacements  thereof,
against  loss or damage by fire and the risks  contemplated  within the extended
coverage  endorsement,  including loss of rent coverage (as such  endorsement in
the broadest  form may  customarily  be written in that state from time to time)
and against such other risks as shall  reasonably  be required by Lessor,  or as
shall be required by any Institutional Lender (as defined in Article 28) holding
a mortgage  and/or  security  interest on and/or in the  Property,  in an amount
equal to the full replacement value, from time to time, of the Property.  Lessee
agrees to pay the premiums on this insurance,  as and when those premiums become
due and  payable,  and  promptly to deliver to and deposit  with Lessor all such
policies  of  insurance  with due proof of payment of  premiums,  and to deliver
renewal policies,  with such proof, to Lessor within 25 days prior to expiration
of the  policies.  All  policies of fire and other  insurance  described in this
Section 9.01 shall be for the benefit of, Lessor,  Lessee, and any Institutional
Lender holding an Institutional  Mortgage on Lessor's  interest in the Property,
as their  interests may appear,  but the interest of any such mortgagee shall be
covered by the customary mortgagee endorsement employed in South Carolina.

         9.02 If during the term of the Lease of the  Property  shall be damaged
or  destroyed  by fire or any other  casualty  which is covered by the policy of
insurance  required  pursuant  to  Section  9.01  and the net  proceeds  of such
insurance  are paid to Lessee in  accordance  with  Section  9.05,  Lessee shall
thereafter  commence and diligently  prosecute to  completion,  at Lessee's sole
expense,  the repair or rebuilding of the Property or portion  thereof which was
damaged,  in a good and  workmanlike  manner using  materials of first grade and
quality (which materials shall be at least as good quality as the materials used
originally  in  the  improvements),  in  accordance  with  the  same  plans  and
specifications in accordance with which the Property were originally constructed
or such other plans and specifications  satisfactory to Lessee and Lessor, which
Lessor shall not unreasonably disapprove;  provided,  however, that the Property
upon  completion  of such repair or  rebuilding  shall have a value which is not
substantially  less  than the  value of the  Property  immediately  prior to the
damage or  destruction.  Lessee  shall be  responsible  for the  payment  of all
deductibles on such insurance.  Notwithstanding the foregoing,  in the event the
Property  is damaged or  destroyed  at any time during the last two years of the
initial  term or any  option  period  and if the cost to repair or  replace  the
Property exceeds 66 2/3% of the replacement  value of the Property,  then Lessee
may,  at its  option,  terminate  this Lease upon such date as is set forth in a
written  notice  given to  Lessor  within  30 days of the date of the  damage or
destruction;  provided,  however,  that the date of termination shall be no less
than 5 and no more  than 60 days  after the  notice  date.  If Lessee  should so
terminate this Lease, all of the net proceeds of such insurance shall be paid to
Lessor.

         9.03 Lessee shall not be entitled to any  abatement of rent,  nor shall
its  obligations  under this Lease be terminated  during the term of this Lease,
except as provided in 9.02 above.

                                       5
<PAGE>

         9.04 In the event of damage to or  destruction  of the  Property  which
involves less than $100,000,  all insurance proceeds shall be retained solely by
Lessee and  utilized as provided  above.  In the event of damage or  destruction
which involves more than $100,000,  all proceeds of insurance  shall be escrowed
in  a  manner  reasonably   acceptable  to  Lessor  and  Lessee  and  procedures
established  to pay all repair costs and ongoing  obligations  under this Lease,
including the following:

               A. Stage  payments  shall be made as the work of  restoration  is
prosecuted by Lessee. Each stage payment shall equal 90% of the cost of the work
duly  certified to have been  completed from the time of the making of the prior
stage payment to the date of  requisition of the then current  payment,  and any
balance  remaining shall be paid upon due  certification to Lessor of completion
of the restoration. All payments shall be received by Lessee in trust to pay the
cost of  restoration,  and shall not be  commingled  with any of Lessee's  other
funds.

               B. No payment of any insurance  proceeds  shall be required to be
made by the  escrow  agent to  Lessee  until  Lessee  shall  have  expended  for
restoration  an amount  equal to the excess of any loss over the amount  paid by
the insurance carrier on the loss as adjusted, and due proof of payment for that
excess shall have been submitted by Lessee to Lessor.

               C.  All  plans  and  specifications  for  the  restoration  and a
detailed  budget  therefor  shall be subject to the written  approval of Lessor,
with such approval not to unreasonably be withheld.

               D. Sections  9.04(A)  through (C) are subject to such  additional
reasonable requirements as may be reasonably imposed by any Institutional Lender
holding  a  mortgage  on  Lessor's  interest  in the  Property  relative  to the
disbursement  of  insurance  proceeds,  and  Lessee  agrees to comply  with such
requirements.

                                   ARTICLE 10
                                  CONDEMNATION

         10.01 If any  governmental  entity shall at any time during the term of
this Lease  lawfully  condemn and by reason  thereof  acquire  title to Lessor's
interest in the Property, in or by condemnation  proceedings in pursuance of the
law,  general,  special,  or  otherwise,  Lessor shall be entitled to and shall,
except as hereinafter  provided,  receive any award that may be made,  including
the award,  if any, to Lessee for the value of the unexpired term of this lease,
and Lessee  shall and does hereby  assign and  transfer to Lessor any award that
may be so made to Lessee for any  damages to the term of years set forth in this
Lease.  This  assignment  shall not include any award for taking of or damage to
the trade fixtures of Lessee, or its subtenants.

         10.02 In the event of a taking by  condemnation as described in Section
10.01, this Lease (except as hereinafter  provided) shall nevertheless  continue
and the Net Rent to be paid by Lessee shall not be reduced;  provided,  however,
that in such  event  Lessor  will  apply (or cause to have  applied)  any sum so
awarded  toward the cost of restoring that Property as nearly as possible to the
condition  in which it was before that taking.  In any event,  Lessee shall make
that restoration and Lessor, upon payment of the award, shall apply (or cause to

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<PAGE>

be applied)  toward the cost of that  restoration the said award as and when the
same shall be required by Lessee to pay the cost of that restoration in the same
manner as a casualty loss in accordance with Article 9 hereof.

                                   ARTICLE 11
                            CURING LESSEE'S DEFAULTS

         11.01 Should Lessee fail to perform any of its  obligations  under this
Lease  within 30 days after the giving of written  notice to Lessee  (but in any
event,  regardless  of that  notice or the lack  thereof,  promptly  before  the
accrual  of any  penalty  as  provided  by law or by  any  mortgage  held  by an
Institutional  Lender (as defined in Article 28) superior to this Lease,  Lessor
may perform those  obligations  and add any such sum or sums paid or expended in
that performance to any rent then due or thereafter falling due under this Lease
with like effect as if an  original  part of that  installment,  and that sum or
sums shall be and become additional rental.  This Article 11, however,  does not
grant  Lessee any license or  privilege  to allow the Property to be without the
insurance  coverage provided by Article 9, or Lessee to be without the liability
insurance  protection provided by Article 19, and the failure promptly to comply
with Articles 9 and 19 shall privilege Lessor to place immediately the necessary
insurance,  and the cost thereof shall be  additional  rent and  collectible  as
such.  The 30-day  notice  provided by this Article 11 is the same 30-day notice
provided by Article 14 and not an additional one.

                                   ARTICLE 12
                       MORTGAGING; ASSIGNMENT; SUBLETTING

         12.01  Lessee may not  mortgage  this Lease in whole or in part without
prior  written  consent  from Lessor  which  consent  shall not be  unreasonably
withheld.

         12.02  Lessee  shall not  sublet  all or any  portion  of the  Property
without  the  prior  written  consent  of  Lessor  which  consent  will  not  be
unreasonably  withheld or delayed. Any sublease shall be subject and subordinate
to this Lease and Lessee shall remain liable for the  performance  of all of its
covenants and agreements under this Lease. Lessee shall not assign this Lease in
whole or in part  without the prior  written  consent of Lessor.  No  assignment
shall be effective unless each such assignee by written  instrument or operation
of law,  shall  assume  and  become  bound to  perform  and  observe  all of the
covenants and agreements of Lessee under this Lease,  provided that Lessee shall
not be released of liability for the payment of Net Rent and for the performance
and observance of any of the other  covenants and agreements of Lessee under the
Lease after the effective time of such assignment.

         12.03  Lessee may assign this Lease,  after  written  consent of Lessor
which consent will not be  unreasonably  withheld or delayed,  at any time after
execution  provided that Lessee's  assignee assumes all of Lessee's  obligations
and liabilities under this Lease.

                                   ARTICLE 13
                                      TAXES

         13.01 Lessee shall,  pay and discharge all duties,  taxes,  charges for
water,  sewer taxes,  assessments,  extraordinary  as well as ordinary,  whether
foreseen  or  unforeseen,  as shall,  during  the term of this  Lease,  be laid,
levied,  assessed,  imposed or otherwise  accrue upon the Property or liens upon
the Property, or any part thereof, or any appurtenances thereto or the leasehold
estate  created by this Lease  whether by virtue of any  present or future  law,
order, or ordinance of the United States of America,  or of the City, County, or
other local government, or of any department,  office, or bureau thereof, or any
other  governmental  authority,  or  otherwise.   The  duties,  taxes,  charges,
assessments, and payments described in this Section 13.01 are sometimes referred
to in this Article collectively as "Impositions."

                                       7
<PAGE>

         13.02 All Impositions shall be paid by Lessee when they be come due and
payable  without  interest  or penalty  to the  department,  officer,  or bureau
charged  with the  collection  thereof But  nothing in this Lease shall  require
Lessee to pay any inheritance,  franchise, income, payroll, employment,  workers
compensation,  excise, privilege,  rent, capital stock, estate or profit tax, or
any tax of similar nature, that is, or may be, imposed upon Lessor, unless those
taxes shall be levied upon the rent reserved in this Lease in the place of taxes
upon the Property.

         13.03 All taxes, assessments,  and water rents that are mentioned above
to be paid by Lessee  shall be prorated  and  adjusted  for the fiscal  years in
which the term of this Lease begins and ends.

         13.04 In the case of assessments for local  improvements or betterments
that are  assessed  or  imposed  during  the term of this  Lease and that may be
payable in installments,  Lessee shall only be obligated to pay the installments
that fall due during the term of this Lease.

         13.05  Lessee  may  contest  or review by legal  proceedings  or in any
manner that Lessee in its opinion shall deem  advisable  (which  proceedings  or
other steps taken by Lessee, if instituted, shall be conducted diligently at its
own  expense  and free of  expense to Lessor)  any and all  Impositions  levied,
assessed,  or imposed  upon or against the  Property  or taxes in lieu  thereof,
required to be paid by Lessee under this Lease.  No such contest or review shall
be undertaken in a manner that exposes the Property or Lessor's interest therein
to jeopardy.

         13.06 Lessee upon request of Lessor will promptly exhibit to Lessor all
paid bills (or copies) for real estate  taxes,  water  rates,  and  assessments,
which bills after inspection by Lessor shall be returned to Lessee.

         13.07  Notwithstanding  Sections 13.01 through 13.06,  Lessee agrees at
the election of Lessor,  which election shall be made only if Lessor is required
to make monthly  payments of  Impositions by an  Institutional  Lender holding a
mortgage on Lessor's interest in the Property to pay to Lessor the amount of the
Impositions imposed upon the Property for each fiscal tax year, in equal monthly
installments  on the first day of each month during that fiscal tax year.  Those
payments shall in the first instance be based on the  Impositions  for the prior
fiscal tax year, and when the  Impositions  shall be ascertained for the current
tax year,  appropriate  adjustments  shall be made. No interest shall be paid by
Lessor or Lessee on the monthly payments by Lessee, but the same will be kept by
Lessor in a separate  escrow  account,  the funds of which  shall be employed by
Lessor to pay the  Impositions  for the current tax year as they  mature.  If an
Imposition  is payable in full  before  the  expiration  of the fiscal tax year,
whether in installments or by lump sum payment,  the monthly  payments by Lessee
shall be in amounts such that there shall be a fund in Lessor's hands sufficient
to meet the payment of any  Imposition or  installment  thereof as it falls due.
Each monthly  payment of Lessee  shall be in an equal  amount  during the period
between  Imposition  payment dates; in any event, at least 10 days in advance of
the last date for payment of any Imposition,  or installment  thereof,  before a
penalty or interest accrued  thereon,  Lessee will deposit with Lessor an amount
sufficient to make up any deficiency for that payment.

                                   ARTICLE 14
                                    DEFAULTS

         14.01 Each of the  following  shall be deemed a default by Lessee and a
breach of this Lease:

               A. Lessee's  failure to pay any installment of Net Rent or to pay
any additional  rent, which failure persists after the expiration of 5 days from
the date  Lessor  gives  written  notice  to  Lessee  calling  attention  to the
existence of that failure;

               B. Lessee's  failure to observe or perform any of its obligations
under the other terms,  covenants,  or conditions  of this Lease,  which failure
persists  after the  expiration  of 30 days from the date Lessor gives notice to
Lessee  calling  attention to the existence of that failure,  but, if the matter
that is the  subject  of the  notice  is of such a  nature  that  it  cannot  be
reasonably  corrected  within 30 days,  then no default  shall be deemed to have
occurred  if Lessee  promptly,  upon the receipt of the  notice,  commences  the
curing of the default and diligently prosecutes the same to completion. However,
if the default is one relating to a matter that exposes  space  occupants or the
public to a danger to safety  or  health of which the  public  authorities  have
given due notice to Lessee, then such shorter notice to Lessee,  whether written
or  otherwise,  shall  be  sufficient  as  the  circumstances  demand  with  the
responsibility of Lessee to take corrective measures forthwith.

                                       8
<PAGE>

               C. The adjudication of Lessee in bankruptcy; the taking by Lessee
of the benefit of any other insolvency act or procedure, which term includes any
form of proceeding for reorganization or arrangement or rearrangement  under the
Bankruptcy  Code as well as an assignment  for the benefit of creditors;  or the
appointment of a receiver for Lessee and such receiver remains  undischarged for
30 days.

         14.02  Should  Lessee  default as described in this Article 14 and such
default  continues  beyond  any  applicable  grace  period,  Lessor  at any time
thereafter  may, at its option,  give Lessee 5 days' written notice of intention
to end the term of this Lease and  thereupon at the  expiration  of those 5 days
the term of this Lease shall expire as  completely as if that date were the date
definitely  fixed in this Lease for the  expiration  of the term and Lessee will
then quit and surrender  the Property to Lessor,  but Lessee shall remain liable
as provided in this Article 14.

         14.03 If the notice provided for in Section 14.02 shall have been given
and the term of this Lease shall  expire as  described  in that  Section,  or if
Lessee shall abandon the Property, or if the Lease shall be taken from Lessee as
a result of any execution against Lessee in any proceeding in which Lessee shall
have no appeal or further  appeal,  then Lessor may without notice  re-enter the
Property and dispossess Lessee by summary  proceedings or otherwise,  and Lessee
or other  occupant or occupants of the  Property  will remove their  effects and
hold the  Property  as if this  Lease had not been made,  and Lessee  waives the
service of notice of intention to re-enter or to institute legal  proceedings to
that end.

         In case of any default,  re-entry,  expiration or dispossess by summary
proceedings or otherwise:

               A. Rent shall become due  thereupon and be paid up to the time of
that re-entry, dispossess, or expiration, together with any expenses that Lessor
may incur for legal expenses and attorneys'  fees,  including  those incident to
the recovery of possession,  brokerage,  and putting the Property in good order,
or for preparing the same for re-rental;

               B. Lessor may relet the  Property  or any part or parts  thereof,
either  in the name of  Lessor  or  otherwise,  for a term or terms  that may at
Lessor's  option be less than or exceed the period  that  would  otherwise  have
constituted  the balance of the term of this Lease and may grant  concessions or
free rent without thereby in any way affecting Lessee's liability for the rental
payable under this Lease for the period of concession or free rent; and

               C.  Lessee  shall also pay Lessor as  liquidated  damages for the
failure of Lessee to observe  and  perform  Lessee's  covenants  any  deficiency
between the rent reserved in this Lease and the net amount, if any, of the rents
collected  by reason of the  reletting  of the  Property  for each  month of the
period that would  otherwise  have  constituted  the balance of the term of this
Lease.

                  i. In computing liquidated damages there shall be added to the
         said  deficiency any expenses that Lessor may incur in connection  with
         the recovery of possession of the Property and reletting,  such as, but
         not limited to, legal expenses, attorneys' fees, brokerage, for keeping
         the Property in good order and for preparing the same for reletting.

                  ii.  Any such  liquidated  damages  shall  be paid in  monthly
         installments  by Lessee on the rent day specified in this Lease and any
         suit  brought to collect  the  amount of the  deficiency  for any month
         shall not  prejudice  in any way the  rights of Lessor to  collect  the
         deficiency for any subsequent month by a similar action or proceeding.

         14.04 Lessor may make any  alterations  and decorations in the Property
that Lessor,  in its sole  judgment,  considers  advisable and necessary for the
purpose  of  reletting  the  Property.   The  making  of  these  alterations  or
decorations  shall not  operate  or be  construed  to  release  Lessee  from any
liability under this Article 14.

         14.05 Lessor shall in no event be liable and Lessee's  liability  under
this Article 14 shall not be affected or  diminished in any way  whatsoever  for
failure to relet the  Property,  or if the  Property  are relet,  for failure to
collect the rent thereof under such reletting.

                                       9
<PAGE>

         14.06 In the event of a breach or threatened breach by Lessee of any of
the  covenants  or  provisions  of this  Lease,  Lessor  shall have the right of
injunction  and the right to invoke any remedy allowed at law or in equity as if
re-entry, summary dispossess proceedings, or other remedies were not provided in
this Lease.  Mention in this Lease of any  particular  remedy shall not preclude
Lessor from any other remedy, in law or in equity.

         14.07 If Lessor shall enter into and  repossess  the  Property  because
Lessee  defaults in the  performance  of any of the terms of this Lease,  Lessee
will not claim  the right to redeem or  reenter  the  Property  or  restore  the
operation  of this Lease,  and Lessee  waives the right to such  redemption  and
re-entrance  under any present or future law,  and waives the right of any party
claiming  through or under Lessee to make payment of any sum or sums of rent, or
otherwise,  of which Lessee shall have made default  under any of the  covenants
this  Lease,  and to claim any  subrogation  to the rights of Lessee  under this
Lease, by reason of that payment.

         14.08 Any action  taken by Lessor under this Article 14 shall not waive
any right that Lessor would  otherwise  have against Lessee for rent reserved in
this Lease or otherwise,  and Lessee shall remain  responsible to Lessor for any
loss and damage suffered by Lessor by reason of Lessee's default or breach.  The
words  "re-enter"  and  "re-entry"  as used in this lease are not  restricted to
their technical legal meanings.

         14.09 Anything to the contrary contained in this Lease notwithstanding,
in the event any payment of Net Rent or any additional rent is more than 10 days
past due, an administrative charge equal to 5% of such past due sum shall be due
and payable by Lessee to Lessor upon written demand.  In addition,  any sum more
than 30 days past due shall bear interest at the rate equal to the Prime Rate as
published by The Wall Street  Journal  from time to time,  plus 5% per annum (or
the  highest  lawful rate  allowable  if less than such rate until paid in full,
with said  interest  to be due and  payable  by Lessee  to Lessor  upon  written
demand.

         14.10 In the event any litigation is commenced to enforce any provision
of this Lease,  the  prevailing  party  shall be entitled to recover  reasonable
attorneys'  fees and  other  costs of such  litigation  from the  non-prevailing
party.

                                   ARTICLE 15
                                NO REINSTATEMENT

         15.01 A. No receipt of monies by Lessor  from  Lessee  after the lawful
termination or cancellation of this Lease,  shall reinstate,  continue or extend
the term of this Lease,  or affect any notice  theretofore  given to Lessee,  or
waive Lessor's right to enforce the payment of fixed or additional rent or rents
then due (to the extent  provided in Article 14), or thereafter  falling due, or
waive  Lessor's  right to recover  possession  of the  Property by proper  suit,
action, proceeding, or remedy.

               B. After the service of notice to terminate or cancel this Lease,
or the  commencement  of suit,  action,  or  summary  proceedings,  or any other
remedy,  or after a final order or judgment for the  possession of the Property,
Lessor may demand,  receive and  collect any monies due, or  thereafter  falling
due,  without in any manner  affecting  the notice,  proceeding,  suit,  action,
order, or judgment.  All such monies collected shall be deemed to be payments on
account of the use and occupation or Lessee's liability under this Lease.

         15.02  Lessor's  failure to  enforce  any term of this  Lease,  that is
breached by the Lessee,  after notice had, shall not be deemed to void or affect
the right of Lessor to enforce that term on the occasion of a subsequent default
or breach.

                                   ARTICLE 16
                                  SUBORDINATION

         16.01  This  Lease  shall be  subject  and  subordinate  to any and all
Institutional  Mortgages  (as defined in Article  28) that may now or  hereafter
affect Lessor's interest in the real property of which the Property form a part,
and of all renewals, modifications, consolidations, replacements, and extensions
thereof  Subject to full  compliance  with Section  16.02,  this clause shall be
self-operative and no further instruments of subordination shall be required. In
confirmation of this subordination Lessee shall execute promptly any certificate
that Lessor may request.  Lessee  constitutes  and  appoints  Lessor as Lessee's
attorney-in-fact  to execute any such  certificate  or  certificates  for and on
behalf of Lessee.

         16.02 A. The subordination described in Section 16.01 as it pertains to
Institutional Mortgages now in effect or hereafter made (which term includes any
agreement  modifying  any  Institutional  Mortgage now in existence or hereafter
made),  is conditioned  upon the agreement of the  Institutional  Lender,  to be
delivered by it to Lessee, in which the Institutional Lender agrees in substance
that so long as no default on the part of Lessee has occurred and is continuing:

                                       10
<PAGE>

                  i.  Lessee  will not be  disturbed  in its  possession  of the
         Property and the rights and  privileges of Lessee under this Lease will
         not be disturbed by the holder of the mortgage;

                  ii.  Lessee will not be joined in any action or  proceeding to
         foreclose the mortgage by the holder thereof; and

                  iii. Casualty  insurance  proceeds and condemnation  awards to
         which the holder of the  mortgage  is  entitled  under the terms of the
         mortgage will be applied towards restoration of the Property consistent
         with Articles 9 and 10 of this Lease, respectively, and be disbursed as
         provided for by those Articles.

               B. The giving of any  agreement as described in Section  16.02(A)
by an Institutional  Lender may be conditioned by it on the reciprocal agreement
by Lessee to attorn to the  Institutional  Lender  should it become  vested with
Lessor's interest in the Property,  and such additional  agreements of Lessee as
are  normally  contained  in  Subordination,   Non-Disturbance   and  Attornment
Agreements reasonably required by Institutional Lenders making mortgage loans in
North Carolina.

                                   ARTICLE 17
                                 QUIET ENJOYMENT

         17.01 Lessee, upon paying the rent and performing its other obligations
under  this  Lease  shall and may,  at all times  during  the term of this Lease
peaceably  and  quietly  have,  hold,  and  enjoy  the  said  Property  free  of
molestation by Lessor.

                                   ARTICLE 18
                                 BINDING EFFECT

         18.01 The covenants and agreements contained in this Lease inure to the
benefit of and are binding upon the parties to this Lease,  their successors and
assigns, but this Article does not modify the provisions  governing  assignment,
as elsewhere provided for in this Lease.

                                   ARTICLE 19
                               LIABILITY INSURANCE

         19.01 Lessee will carry at all times during the Lease term,  at its own
cost and expense,  steam boiler and general liability  insurance for the benefit
of both Lessor and Lessee in responsible  insurance companies  indemnifying both
Lessor and Lessee against claims for personal injuries sustained in or about the
Property,  in an amount not less than  $1,000,000  for  injuries or death to one
person and  $3,000,000  for injuries or death  arising out of the same  accident
when  more than one  person is  involved,  and for not less than  $1,000,000  in
respect to property damage. Lessee will deposit with Lessor a certificate of the
insurance  carrier or carriers  indicating  that this insurance is in full force
and  effect and that the  premiums  therefor  have been  paid.  If the limits of
liability  insurance generally carried by owners of comparable office Properties
in the vicinity of the Property  exceeds the  foregoing  limits,  the  foregoing
limits shall be increased accordingly.

                                   ARTICLE 20
                             DEMOLITION/ALTERATIONS

         20.01 In  consideration  of Lessee's  agreement to construct a drive in
branch banking facility on the Premises (the "New  Improvements"),  Lessee shall
be entitled, at its sole cost and expense, to demolish the existing improvements
on the  Premises.  Notwithstanding  the  foregoing,  Lessee  shall not  commence
demolition of the existing  structure  except as follows:  (i) Lessee shall have
submitted to Lessor a conceptual rendering/drawing of the New Improvements to be
constructed and, when reasonably available,  a set of the construction plans and
specifications  therefore;  (ii) all costs and expenses of constructing  the New
Improvements  shall be borne  solely by Lessee  and the  Lessee  guarantees  the
lien-free  completion  thereof;  (iii) in the event Lessee fails to complete the
New Improvements within twenty-four months of the date the existing improvements
are demolished,  Lessee agrees to pay the Lessor the sum of  $100,000.00,  which
sum  represents the agreed fair market value of the existing  improvements.  The
New Improvements will remain on the Premises and shall be deemed the property of
Lessor  at the end of the  term  hereof.  Lessee  may  make  alterations  to the
Property with or without the prior written consent of Lessor.

                                       11
<PAGE>

                                   ARTICLE 21
                                     NOTICES

         21.01 All  notices to the  parties  shall be  addressed  to them at the
respective  addresses  first  given  for them in this  Lease,  or to such  other
address,  of which either of them, as the case may be, shall notify the other in
the manner stated in this Article 21 for giving notice. The notice must be given
by either  registered  mail,  return receipt  requested,  or by certified  mail,
return  receipt  requested.  In the case of the former the service of the notice
shall  be  deemed  complete  upon  the  registration  thereof  with  the  postal
authorities,  and in the case of the latter upon the due mailing thereof. In any
case,  regardless  of place of origin of mailing,  to ensure proper and verified
notification,  service shall not be considered complete until notice is received
by the sender that delivery has been successful.

                                   ARTICLE 22
                                    NO WAIVER

         22.01 The  failure  of  Lessor to insist in any one or more  instances,
upon a strict  performance of any of the covenants of this Lease, or to exercise
any option  contained  in this Lease,  shall not be  construed as a waiver of or
relinquishment for the future of the performance of that covenant,  or the right
to exercise  that option,  but the same shall  continue and remain in full force
and effect.  Lessor's  receipt of Net Rent or additional rent, with knowledge of
the breach of any  covenant of this Lease,  shall not be deemed a waiver of that
breach,  and no waiver by Lessor of any  provision of this Lease shall be deemed
to have been made unless expressed in writing and signed by Lessor.

         22.02  Lessor's  receipt of any  installment of the Net Rent under this
Lease  or of any  additional  rent  shall  not be a  waiver  of any Net  Rent or
additional rent then due. Lessor may, in its sole discretion, apply any payments
made by  Lessee  to the  satisfaction  of any debt or  obligation  of  Lessee to
Lessor,  regardless  of Lessee's  instructions  as to the  application  of those
payments,   whether  those  instructions  are  endorsed  on  Lessee's  check  or
otherwise.

                                   ARTICLE 23
                               REMEDIES CUMULATIVE

         23.01 All the rights and remedies given to Lessor in this Lease for the
recovery of the Property  because of the default by Lessee in the payment of any
sums that may be payable pursuant to the terms of this Lease, or upon the breach
of any of the terms of this Lease,  or the right to re-enter and take possession
of the Property  upon the happening of any of the defaults or breaches of any of
the  covenants  of this Lease,  or the right to maintain  any action for rent or
damages  and all other  rights and  remedies  allowed  at law or in equity,  are
reserved  and  conferred  upon  Lessor as  distinct,  separate,  and  cumulative
remedies,  and no one of them,  whether  exercised  by Lessor  or not,  shall be
deemed to be in exclusion of any of the others.

                                   ARTICLE 24
                              INSPECTIONS BY LESSOR

         24.01 Lessee shall permit Lessor and Lessor's agents  inspection of the
Property  from time to time at  reasonable  hours upon prior  written  notice to
Lessee to determine Lessee's compliance with the terms of this Lease.

                                   ARTICLE 25
                          ENTIRE AGREEMENT; AMENDMENTS

         25.01 This Lease contains the entire agreement between the parties, and
any agreement  hereafter made shall not operate to change,  modify, or discharge
this Lease in whole or in part unless that agreement is in writing and signed by
the Lessor and Lessee.

         25.02 In the event any  Institutional  Lender  providing  financing  to
Lessor with respect to Lessor's  interest in the Property desires  modifications
in  the  terms  or  conditions  of  this  Lease,  Lessee  shall  agree  to  such
modifications  as reasonably  requested by Lessor to satisfy the requirements of
such  Institutional  Lender so long as such  modification (i) does not result in
any  increase in the  financial  obligations  of Lessee  hereunder or impose any
burdensome  non-monetary  obligation  or  other  liability  or risk  (actual  or
contingent)  on  Lessee;  and (ii) is  consistent  with  requirements  generally
imposed by Institutional  Lenders for  transactions of similar  magnitude in the
State of South Carolina.

                                       12
<PAGE>

                                   ARTICLE 26
                               NO REPRESENTATIONS

         26.01 Except as specifically otherwise provided herein, Lessee is fully
familiar  with the  physical  condition  of the  Property,  and Lessee takes the
Property in its "as is" condition. Lessor has made no representations whatsoever
in connection with the conditions of the Property and Lessor shall not be liable
for any latent or patent defects therein.

                                   ARTICLE 27
                              ESTOPPEL CERTIFICATES

         27.01  Lessee  agrees  at any time and from  time to time upon not less
than 10 days prior  written  request by Lessor,  to  execute,  acknowledge,  and
deliver  to  Lessor  a  statement  in  writing  certifying  that  this  Lease is
unmodified  and in full force and  effect  (or if there have been  modifications
that  the  same  is in full  force  and  effect  as  modified  and  stating  the
modifications), and the dates to which the rent and other charges have been paid
in advance, if any, it being intended that any such statement delivered pursuant
to this  Article 27 may be relied  upon by  prospective  purchasers  of Lessor's
interest or  mortgagees  of Lessor's  interest or assignees of any mortgage upon
Lessor's interest in the Property.

                                   ARTICLE 28
                               CERTAIN DEFINITIONS

         28.01 The term  "Lessor"  as used in this Lease shall refer only to the
owner for the time being of Lessor's  estate in  Property,  with any  subsequent
owner  succeeding  to all the rights and interests of Lessor under this Lease as
of the effective date of the relevant transfer. Upon such transfer, Lessee shall
be  notified in writing by Lessor all sums due from  Lessee  hereunder  from and
after the date of receipt of such notice  shall be remitted as  instructed  from
time to time by the  successor  Lessor.  Lessor shall be and is hereby  relieved
from any breach of  covenants  or  obligations  of Lessor  hereunder  arising or
occurring  after the date of transfer of Lessor's  estate in the  Property,  but
only if the transferee  shall have assumed and agreed to carry out all covenants
and obligations of Lessor  hereunder  during such time as said transferee  shall
own or hold Lessor's estate or interest in the Property.  The provisions of this
Section shall apply to each successive  transfer of Lessor's interest or estate.
The  liability  of Lessor  under  this Lease  shall be and is hereby  limited to
Lessor's interest in the Property and no other asset of Lessor shall be affected
by  reason  of any  liability  which  Lessor  may have to Lessee or to any other
person by reason of this Lease,  the execution  thereof,  or the  acquisition of
Lessor's interest.

         28.02 The term "Institutional Lender" means any one of the following: a
bank; trust company; insurance company; any pension,  retirement or welfare fund
or other  non-profit  organization  where the  investment  policy and  financial
condition  of that fund or  organization  is  subject  to the  supervision  of a
governmental agency.

         28.03  An  "Institutional  Mortgage"  is  a  mortgage  and/or  security
interest  held by an  Institutional  Lender  on the  interest  of  Lessor in the
Property.

         28.04 The term "Environmental Laws" means all federal,  state and local
laws, statutes,  ordinances and regulations,  now or hereafter in effect, and in
each case as  amended  or  supplemented  from time to time,  and any  applicable
judicial  or   administrative   interpretation   thereof,   including,   without
limitation,  any applicable judicial or administrative  order, consent decree or
judgment applicable to the Property relating to the regulation and protection of
human health and safety and/or the environment and natural resources (including,
without  limitation,  ambient air, surface water,  groundwater,  wetlands,  land
surface or subsurface  strata,  wildlife,  aquatic species and/or vegetation and
Hazardous Materials (as defined below).

         28.05 The term  "Hazardous  Materials"  means any substance,  chemical,
compound, product, solid, gas, liquid, waste, byproduct, pollutant, contaminant,
or material which is hazardous or toxic, and includes,  without limitation,  (a)
asbestos,  polychlorinated  biphenyls and petroleum (including crude oil and any
fraction  thereof)  and  (b)  any  such  material  classified  or  regulated  as
"hazardous" or "toxic"  pursuant to the  Comprehensive  Environmental  Response,
Compensation  and Liability Act of 1980, as amended by the Superfund  Amendments
and  Reauthorization Act of 1986, 42 USC 9601 et seq., Solid Waste Disposal Act,
as amended by the Resource  Conservation  and Recovery Act of 1976 and Hazardous
and Solid Waste Amendments of 1984, 42 USC 6901 et seq., Federal Water Pollution
Control  Act,  as amended by the Clean  Water Act of 1977,  33 USC 1251 et seq.,
Clean Air Act of 1966, as amended, 42 USC 7401 et seq., Toxic Substances Control
Act of 1976, 15 USC 2601 et seq., or Hazardous Materials  Transportation Act, 49
USC App. 1801 et seq.

                                       13
<PAGE>

                                   ARTICLE 29
                               RECORDING OF LEASE

         29.01 This Lease shall not be  recorded,  but Lessor and Lessee may, at
Lessee's request and cost, execute and cause to be recorded an appropriate Short
Form Lease to place all parties on notice of the  granting of this Lease for the
term hereof.

                                   ARTICLE 30
                              COUNTERPART EXECUTION

         30.01  This  Lease  may be  executed  in  counterparts  by  each of the
signatories  hereto and, when presented  together,  such counterpart  signatures
shall be deemed to be an executed original hereof.

                              [SIGNATURES OMITTED]

                                       14

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