Document:

<PAGE>

                                                                   Exhibit 10.14

[LOGO] CacheFlow(R)

April 23, 2001

Mr. Robert P. Verheecke

Dear Bob:

We are pleased to extend to you an offer to join us as Senior Vice President and
Chief Financial Officer, reporting to myself, the President and CEO.

Per our conversations, I have structured a compensation package that consists of
eight primary components. They are as follows:

 .    You will receive an annual base salary of $225,000 paid according to
     standard company payroll policies.

 .    You will be eligible to participate in an executive level bonus plan
     available generally to other members of the executive management team as
     may be authorized and approved by the Board of Directors.

 .    You will be granted an option to purchase 500,000 shares of the Company's
     Common Stock, which represents approximately 1.35% of the weighted average
     basic diluted capitalization of the Company. The exercise price per share
     will be equal to the fair market value per share on the date the option is
     granted. You will vest in 25% of the option shares after 12 months of
     service, and the balance will vest in monthly installments over the next 36
     months of service, as described in the applicable stock option agreement.

 .    Should you make an 83B election and exercise some or all your unvested
     stock options, the company will issue you a full recourse loan for a
     principal amount of up to one million dollars ($1,000,000) at a fair market
     rate of interest. Any exercised but unvested stock options shall be subject
     to repurchase rights by the Company. The loan will be evidenced by a
     promissory note and stock pledge agreement in a form approved by the Board.

 .    Your option grants will include certain board approved acceleration rights
     in the event of a change of control of the Company under the provisions of
     the Company's 1999 Incentive Plan and the 2000 Supplemental Plan. These
     plans read substantially in part as follows. In the event the company is
     subject to a change of control and you are Involuntarily Terminated within
     eighteen months following the change of control, your outstanding stock
     options will vest immediately prior to your Involuntary Termination and
     become fully exercisable. An Involuntary Termination includes 1)
     involuntary dismissal or discharge other than for Misconduct, or 2) your
     voluntary resignation following (a) a change in your
<PAGE>

Mr. Robert P. Verheecke
April 23, 2001

     position with the Company that materially reduces your level of
     responsibility (b) a reduction in your level of compensation, or (c) a
     relocation of your place of employment by more than 50 miles without your
     consent.

 .    You will receive four (4) weeks of vacation annually accrued as a rate of
     6.67 hours per pay period, such vacation will be subject to the Company's
     accrual and vacation policies.

 .    You are eligible for all standard health and welfare benefits according to
     the Company's medical, dental and other benefits plan. Information on the
     benefits is being supplied to you along with this offer letter.

 .    Like all Company employees, you will be required, as a condition to your
     employment with the Company, to sign the Company's standard Proprietary
     Information and Inventions Agreement, a copy of which is enclosed.

While you render services to the Company, you will not engage in any other
gainful employment, business or activity without the written consent of the
Company. While you render services to the Company, you also will not assist any
person or organization in competing with the Company, in preparing to compete
with the Company or in hiring any employees or consultants of the Company.

Your employment with the Company will be "at will," meaning that either you or
the Company will be entitled to terminate your employment at any time and for
any reason, with or without cause. Any contrary representations, which may have
been made to you, are superseded by this offer. This is the full and complete
agreement between you and the Company on this term. Although your job duties,
title, compensation and benefits, as well as the Company's personnel policies
and procedures, may change from time to time, the "at will" nature of your
employment may only be changed in an express written agreement signed by you and
the Company's President & CEO.

This letter and the enclosed Proprietary Information and Inventions Agreement
supersede any prior understandings or agreements, whether oral or written,
between you and the Company. These documents may not be amended or modified
except by an express written agreement signed by you and the Company's President
& CEO. The terms of this letter agreement and the resolution of any disputes
will be governed by California law.

This offer stands until 6:00 p.m. on April 27, 200l and your signature below
acknowledges your acceptance of these terms. We expect that you will start no
later than May 1, 200l.
<PAGE>

Mr. Robert P. Verheecke
April 23, 2001

Bob, I am very excited to have you join CacheFlow as a part of our team. I
sincerely believe that this presents an opportunity for you to make a
significant contribution in helping CacheFlow sustain a market leadership
position

Best Regards,

/s/ Brian NeSmith
-----------------
Brian NeSmith
President & CEO
CacheFlow Inc.

Accepted:

/s/ Robert P. Verheecke
-----------------------
Robert P. Verheecke

My Start Date Will Be: May 1, 2001
                      -------------<PAGE>

                                                                   Exhibit 10.22

                            SUNNYVALE VIII TRUST,
                          a Maryland business trust
                                   Landlord

                                      and

                               CACHEFLOW, INC.,
                            a Delaware corporation
                                    Tenant

--------------------------------------------------------------------------------

                              OFFICE / R&D LEASE

--------------------------------------------------------------------------------

                                     Dated

                                March 30, 200l
<PAGE>

                              OFFICE / R&D LEASE

                               Table of Contents

Summary of Terms
Recitals
<TABLE>
<S>            <C>
Section 1.     Lease of Premises
Section 2.     Term of Lease
Section 3.     Early Entry
Section 4.     Possession; Delay in Delivery of Possession
Section 5.     Rent
Section 6.     Use
Section 7.     Utilities
Section 8.     Taxes
Section 9.     Condition of Premises
Section 10.    Repairs and Maintenance
Section 11.    Alterations
Section 12.    Entry
Section 13.    Surrender of Premises; Holding Over
Section 14.    Indemnity
Section 15.    Insurance
Section 16.    Trade Fixtures
Section 17.    Communications Cables
Section 18.    Signs
Section 19.    Damage and Destruction
Section 20.    Condemnation
Section 21.    Assignment and Subletting
Section 22.    Default
Section 23.    Remedies
Section 24.    Late Charge
Section 25.    Default Interest
Section 26.    Waiver
Section 27.    Estoppel Certificates
Section 28.    Attorney Fees
Section 29.    Security for Tenant's Obligations
Section 30.    Authority
Section 31.    Notices
Section 32.    Heirs and Successors
Section 33.    Partial Invalidity
Section 34.    Entire Agreement
Section 35.    Time of Essence
Section 36.    Amounts Deem Rent
</TABLE>

                                       i
<PAGE>

<TABLE>
<S>            <C>
Section 37.    Amendments
Section 38.    Subordination, Nondisturbance and Attornment
Section 39.    Merger
Section 40.    Right of Relocation
Section 41.    Options to Extend Term
Section 42.    Determination of Monthly Rent for Extension Term
Section 43.    Improvements
Section 44.    Environmental Provisions
Section 45.    Publicity
Section 46.    Easements
Section 47.    Covenants and Conditions
Section 48.    Recordation
Section 49.    Intentionally Deleted
Section 50.    Security Measures
Section 51.    Brokers
Section 52.    Liability of Landlord
Section 53.    Governing Law
Section 54.    Parking; Outside Area
Section 55.    Force Majeure
Section 56.    Quite Enjoyment
Section 57.    Offer
Section 58.    Governing Law
</TABLE>

Schedule of Attachments and Exhibits

Attachment 1. Index of Defined Terms

Exhibit A.     Legal Description of Property
Exhibit B.     Description of Premises
Exhibit C.     Work Letter Agreement
Exhibit D.     Commencement Date Memorandum

                                      ii
<PAGE>

                               SUMMARY OF TERMS

Date: March 30, 2001

Landlord: Sunnyvale VIII Trust, a Maryland business trust

Tenant: CacheFlow Inc., a Delaware corporation

Premises: The two story office, research and development building located at
477 Potrero Avenue, Sunnyvale, California, the floor plans for which are shown
in attached Exhibit B.

Rentable Area of Premises: approximately 45,823 rentable square feet (subject to
calculation by Landlord's and Tenant's architects as set forth herein)

Outside Area: All areas of the Property  located  exterior of the Building shell
including the Parking Lot and all landscaped areas and sidewalks.

(Section 2.) Estimated Delivery Date ("Estimated Delivery Date"): April 1, 2001

(Section 2.) Lease Term: Five (5) years from the Commencement Date.

(Section 5.) Monthly Rent: Rent shall commence as of the Commencement Date.

--------------------------------------------------------------------------------
Lease Months                            Monthly Base Rent

1-12                                                                  $181,001
13-24                                                                 $186,431
25-36                                                                 $192,024
37-48                                                                 $197,785
49-60                                                                 $203,718
--------------------------------------------------------------------------------

(Section 31.) Tenant's Address for Notices:

                                               With a copy to:
CacheFlow, Inc.                                Miller, Starr & Regalia
650 Almanor Avenue                             545 Middlefield Road, Suite 200
Sunnyvale, CA 94086                            Menlo Park, CA 94025
Attn.: Director of Facilities and Real Estate  Attn: Robin Kennedy

Tel. 408 220-2200                              Tel. 650 463-7800
Fax 408 220-2250                               Fax 650 462-1010
<PAGE>

(Section 31.) Landlord's Address for Notices:
                                                  With copy to:

Sunnyvale VIII Trust                              Carlyle Realty
CB Richard Ellis Property Management              4675 MacArthur Court
226 Airport Parkway                               Newport Beach, CA 92660
San Jose, CA 95110
Attn: Diana Florian

                                                  Makai Properties
                                                  P.O. Box 373
                                                  Crystal Bay, Nevada 89402
                                                  Attn: Mike Newbro

                                                  Mackenzie & Albritton
                                                  One Post Street, Suite 500
                                                  San Francisco, CA 94104
                                                  Attn: Paul Albritton, Esq.

(Section 51.) Broker: CPS Commercial Property exclusively representing Landlord
("Landlord Broker") and Cawley International exclusively representing Tenant
("Tenant Broker").

The defined terms in this Summary of Terms are part of this Lease. In the event
of any conflict between any information shown on this Summary and the Lease, the
latter shall control.

<PAGE>

                        OFFICE/RESEARCH & DEVELOPMENT LEASE

THIS OFFICE/RESEARCH & DEVELOPMENT LEASE (Lease) is entered into as of March
30, 2001, by and between SUNNYVALE VIII TRUST, a Maryland business trust
("Landlord") and CacheFlow Inc., a Delaware corporation ("Tenant").

                                   RECITALS

A.   Landlord is owner of that certain two story building consisting of
approximately 45,823 rentable square feet and improvements (collectively, the
"Building") located at 477 Potrero Avenue, Sunnyvale, California, in the County
of Santa Clara (the "Property") as more particularly described in Exhibit A
attached hereto and incorporated herein by this reference. The Building is
located in a group of eight buildings including 884, 909, 910 and 919 Hermosa
Court, 310 and 324 North Mary Avenue, and 345 Potrero Avenue, collectively
known as the "Central Research Park."

B.   Tenant desires to lease from Landlord and Landlord desires to lease to
Tenant the Property, including the Building (the floor plans for which are shown
on Exhibit B attached hereto and incorporated herein by this reference), and
land comprising the Property. The Building and the land are collectively
referred to herein as the "Premises".

C.   Landlord desires to lease to Tenant and Tenant desires to lease from
Landlord the Premises on the terms and conditions contained in this Lease.

     NOW THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Landlord and Tenant (collectively,
the "Parties") agree as follows:

Section 1. Lease of Premises.

Landlord leases to Tenant and Tenant leases from Landlord the Premises on the
terms and conditions contained in this Lease. The Premises will be improved with
the Base Building Improvements to be constructed by Landlord. The "Base Building
Improvements" are as defined in Section 1.02 of the Work Letter, attached as
Exhibit C attached hereto and incorporated herein by this reference. The
"Rentable Area of the Building" are deemed by the Parties, for the purposes of
this Lease, to be Forty-five Thousand Eight Hundred Twenty-three (45,823) square
feet.

Section 2. Term of Lease.

(a)  Commencement Date. The Term of this Lease will commence ("Commencement
Date") on July 1, 2001, except as the Commencement Date may be extended one (1)
day for each day that completion of the "Tenant Improvements" (as defined in
Section 1.03 of Exhibit C) is delayed after July 1, 2001 due to a delay in the
"Delivery Date" (as defined in Section 5.01 of Exhibit C) which is not caused by
a "Tenant Delay" (as defined in Section 5.04 of Exhibit C).

                                       1
<PAGE>

(b)  Term of the Lease. The term of the Lease ("Lease Term") will continue from
the Commencement Date for the period of time specified in the Summary of Terms
above, or until this Lease is terminated or extended as otherwise provided for
in this Lease.

(c)  Commencement Date Memorandum. Following the Commencement Date, Tenant shall
execute and deliver to Landlord a memorandum of the Commencement Date in the
form of attached Exhibit D ("Commencement Date Memorandum"). The Commencement
Date Memorandum will acknowledge: (i) the Commencement Date; and (ii) Tenant's
acceptance of the Premises.

Section 3. Early Occupancy.

Notwithstanding Section 2(a) hereof, to effect Tenant's program of improvements
to such space, immediately upon the full execution and delivery of this Lease to
Landlord accompanied by the Security Deposit and the Letter of Credit (which
Letter of Credit may be delivered within ten (10) days after such full
execution) required pursuant to Section 29, all terms of this Lease shall be in
full force and effect and Tenant shall have the right to enter into the
Premises, subject to the following terms and conditions:

(a)  Tenant's entry prior to the Commencement Date shall be on all the terms and
conditions of this Lease, other than the obligation to pay Rent;

(b)  Tenant shall provide evidence of the insurance coverage required by Section
15 of this Lease;

(c)  Tenant shall indemnify, defend, and hold harmless Landlord and Landlord's
agents, employees, and contractors against all claims, liability, and damages
arising from Tenant's entry prior to the Commencement Date, unless the same
arise from the (a) gross negligence or willful misconduct of Landlord, its
agents, contractors, or employees until such time as the Base Building
Improvements shall have been completed and (b) thereafter, subject to Section 14
herein, the negligence or willful misconduct of Landlord, its agents,
contractors, or employees.

(d)  Tenant's entry prior to the Commencement Date does not constitute the
commencement of the Lease and the expiration date shall not change as result of
such entry by Tenant; and

(e)  Between the Delivery Date and the Commencement Date, Tenant shall pay
directly for all utilities and services in connection with its construction of
the Tenant Improvements.

(f)  Commencing on the Commencement Date, Tenant shall pay directly for all
charges and assessments for telephone, water, sewer, gas, heat, electricity,
garbage disposal, trash disposal, fire sprinkler and alarm monitoring, real
property taxes, personal property taxes and all other utilities, and for its
share of maintenance charges and services of any kind, if any, that may be
furnished to the Property by Landlord based on Tenant's actual usage of same.
Notwithstanding the foregoing, if, in Landlord's reasonable opinion, such actual
usage cannot be reasonably ascertained, then Tenant's share shall be based on a
fraction equal to the Rentable Area of the Building divided by the number of
rentable square feet contained in the Central Research Park.

                                       2
<PAGE>

Section 4. Delay in Delivery of Possession.

If Landlord, for any reason whatsoever, cannot deliver possession of the
Premises to Tenant on or before the Estimated Delivery Date as the same may be
extended by any "Unavoidable Delays" or "Tenant Delays", neither Landlord nor
Landlord's agents (including Landlord's Managing Agent as defined in Exhibit C),
shall be liable to Tenant for any loss or damage resulting therefrom, provided,
Tenant shall have the right, as Tenant's sole and exclusive remedy hereunder to
terminate this Lease. The foregoing notwithstanding, the failure by Landlord to
complete the installation of the exterior windows of the Building on or before
April 30, 200l shall not be deemed a failure to deliver possession of the
Premises to Tenant hereunder. Tenant may give written notice to Landlord of
Tenant's intention to terminate this Lease. The notice will set forth an
effective date for the termination, which will be at least ten (10) days after
delivery of notice to Landlord. If Landlord delivers possession to Tenant on or
before this effective date, this Lease will remain in full force and effect. If
Landlord fails to deliver possession to Tenant on or before this effective date,
this Lease will be terminated. Upon such termination, all consideration
previously paid by Tenant to Landlord on account of this Lease will be returned
to Tenant, this Lease will have no further force or effect and Landlord will
have no further liability to Tenant because of this delay or termination.

Section 5. Monthly Rent and Additional Rent.

(a)  Tenant agrees to pay monthly rent ("Monthly Rent") during the Lease Term in
the amounts set forth in the Summary of Terms. Monthly Rent shall be payable
without deduction, offset, abatement, prior notice or demand, except as may
otherwise be provided herein.

(b)  The Monthly Rent shall be payable in advance on the first day of each month
at Landlord's address as provided herein or at such other address that Landlord
may from time to time designate by written notice to Tenant. In the event that
the Lease Term commences on a date other than the first day of a calendar month
then, on the Commencement Date, Tenant shall pay to Landlord as Monthly Rent for
the period from such Commencement Date to the first day of the next succeeding
calendar month that proportion of the first month's Monthly Rent due hereunder
which the number of days between such date of commencement and the first day of
the next succeeding calendar month bears to thirty (30). In the event that the
Lease Term for any reason ends on a date other than the last day of a calendar
month, then on the first day of the last partial calendar month of such term,
Tenant shall pay to Landlord as Monthly Rent for the period from said first day
of said last partial calendar month to and including the last day of the Lease
Term that proportion of that Monthly Rent then due hereunder which the number of
days between said first day of said last partial calendar month and the last day
of the Lease Term bears to thirty (30).

(c)  Upon execution of this Lease, Tenant shall pay One Hundred Eighty-One
Thousand and One Dollars ($181,00l), which amount shall be applied toward the
first payment of Monthly Rent due hereunder.

(d)  In the event of a "Chronic Delinquency" (as hereinafter defined), at
Landlord's option, Landlord shall have the right, in addition to all other
remedies under this Lease and at law, to require that Monthly Rent be paid by
Tenant quarterly, in

                                       3
<PAGE>

advance. This provision shall not limit in any way nor be construed as a waiver
of any rights and remedies of Landlord provided herein or by law in the event of
delinquency. "Chronic Delinquency" shall mean the failure by Tenant to pay
Monthly Rent, or any other payments required to be paid by Tenant under this
Lease, when due in any of three (3) months (consecutive or non-consecutive)
during any twelve (12) month period.

(e)   In addition to Monthly Rent, Tenant shall pay to Landlord as additional
rent ("Additional Rent") the following commercially reasonable amounts
(collectively, the "Operating Expenses") which shall be calculated and
determined solely by Landlord:

(i)   Taxes relating to the Premises (to the extent not paid by Tenant directly
to the taxing authority) as set forth in Section 8 hereof;

(ii)  Insurance premiums relating to the Premises, as set forth in Section 15
hereof, and any deductibles incurred under Section 19 hereof;

(iii) All commercially reasonable maintenance and repair costs directly
attributable to the Premises as set forth in Section 10(e) hereof; provided,
however, that if any such cost is based in whole or in part on real property
unrelated to the Premises (including Central Research Park and owned by Landlord
or its affiliates), then only that part of such expense that is fairly allocable
to the Premises shall be included in Operating Expenses;

(iv)  Landlords management fee, which shall not exceed three percent (3%) of
gross Rent paid under this Lease;

(v)   All charges, costs, expenses, and other amounts which Tenant is required
to pay hereunder, together with all interest, late charges, penalties, costs and
expenses, including, without limitation, reasonable attorneys fees, legal and
accounting expenses, collection costs, and court costs, that may accrue thereto
or be incurred in the event of Tenant's default, refusal, or failure to pay such
amounts, and all damages, costs, and expenses, including, but not limited to,
reasonable attorneys fees, which Landlord may incur by reason of any default by
Tenant or failure on Tenant's part to comply with the terms of this Lease.

(f)   The Operating Expenses shall be paid as follows. Prior to the commencement
of each calendar year of the Lease Term or as soon thereafter as practicable,
Landlord shall give Tenant notice of its reasonable estimate of the Operating
Expenses for the ensuing year of the Lease Term. On or before the first day of
each month during the ensuing year of the Lease Term, Tenant shall pay to
Landlord one-twelfth (l/l 2) of such estimated amount, provided that if such a
notice is not given prior to the commencement of the ensuing year of the Lease
Term, Tenant shall continue to pay on the basis of the prior year's estimate
until the month after such notice is given. If at any time or times it
reasonably appears to Landlord that the actual Operating Expenses for the
current year of the Lease Term will vary from its estimate, Landlord may, by
notice to Tenant, revise its estimate for such calendar year, and subsequent
monthly payments by Tenant for such calendar year shall be based on such revised
estimate.

(g)   Within ninety (90) days after the close of each calendar year of the Lease
Term or as soon after such ninety (90)-day period as practicable, Landlord shall
deliver to Tenant (i) a

                                       4
<PAGE>

statement of the Operating Expenses for such calendar year showing in reasonable
detail the actual Operating Expenses incurred by Landlord, certified by
Landlord, which certified statement shall be final and binding upon Landlord and
Tenant, subject only to Tenant's review as set forth in Section 5(h)
hereinbelow, and (ii) a statement of the payments made by Tenant under Section
5(f) above for such year. If on the basis of such statements Tenant owes an
amount that is less than the estimated Operating Expenses for such year
previously made by Tenant, Landlord at its election shall either promptly refund
the amount of the overpayment to Tenant or credit such excess against Tenant's
next-accruing subsequent obligations to Estimated Operating Expenses. If on the
basis of such statements Tenant owes an amount that is more than the estimated
Operating Expenses for such year previously made by Tenant, Tenant shall pay the
deficiency to Landlord within thirty (30) days after delivery of such
statements.

(h)   If Tenant disputes the amount of Additional Rent stated in the statement,
Tenant may designate, within thirty (30) days after receipt of that statement,
an independent certified public accountant reasonably acceptable to Landlord to
inspect Landlord's records. Tenant is not entitled to request that inspection
however, if there is then an Event of Default under this Lease. The accountant
must be a member of a nationally recognized accounting firm and must not charge
a fee based on the amount of Additional Rent that the accountant is able to save
Tenant by the inspection. Tenant shall give reasonable notice to Landlord of the
request for inspection, and the inspection must be conducted in Landlord's
offices, at a location in the Bay Area) at a reasonable time or times. If, after
that inspection, Tenant still disputes the Additional Rent, a certification of
the proper amount shall be made, at Tenant's expense, by an independent
certified public accountant mutually agreed to by the Parties, which certified
public accountant shall not have been engaged by either Landlord or Tenant for a
period of five (5) years prior to the Commencement Date. That certification
shall be final and conclusive. If said certified public accountant discovers an
excess of five percent (5%) or greater in the Operating Expenses charged to
Tenant, then, in addition to such discrepancy amount, Landlord shall reimburse
Tenant for the cost of the aforesaid certification.

(i)  Notwithstanding anything to the contrary herein, "Operating Expenses" shall
not include:

(A)  Costs or expenses paid by Tenant directly to third parties or as to which
Landlord is otherwise reimbursed by any third party, other tenant, or by
insurance or warranty proceeds; and the cost of providing any service directly
to and paid directly by Tenant.

(B)  Interest, principal, attorney's fees, costs of environmental investigations
or reports (except if and to the extent such investigations or reports are
performed on and with respect to the Premises), points, fees, and other lender
costs and closing costs on any mortgage or mortgages, ground lease payments, or
other debt instrument now or hereafter encumbering the Building, or the
Property, or any part thereof.

(C)  Insurance premiums to the extent of any refunds of those premiums.

(D)  Any bad debt loss, rent loss, or reserves for bad debt or rent loss.

(E)  Costs, fees, and compensation paid to Landlord, or to Landlord's
subsidiaries or affiliates, for services in or to the Building to the extent
that they exceed the charges for

                                       5
<PAGE>

comparable services rendered by an unaffiliated third party of comparable skill,
competence, stature, and reputation.

(F)       Costs or expenses associated with:

(1)       Operation of the business of the ownership of the Building, Property
or Central Research Park or the entity that constitutes Landlord or Landlord's
property manager, as distinguished from the cost of Building operations,
including the cost of partnership or corporate accounting and legal matters;
defending or prosecuting any lawsuit with any mortgagee, lender, ground lessor,
broker, tenant, occupant, or prospective tenant or occupant; and selling or
syndicating any of Landlord's interest in the Building, Property, or Central
Research Park or any part thereof; or

 (2)      Landlord's general corporate or partnership overhead and general
 administrative expenses, including the salaries of management personnel who are
 not directly related to the Building and primariIy engaged in the operation,
 maintenance, and repair of the Building.

 (G)      Advertising and promotional expenditures specifically directed toward
 leasing space in the Central Research Park.

 (H)      Leasing commissions, space-planning costs, attorney fees and costs,
disbursements, and other expenses:

 (1)      Incurred in connection with leasing, other lease negotiations, or
 disputes with tenants, occupants, prospective tenants, or other prospective
 occupants of the Central Research Park; or

 (2)      Associated with the enforcement of any leases of the Central Research
 Park.

 (I)      Costs or expenses incurred (including permit, license, and inspection
 fees but excluding utilities) or cash consideration paid in renovating or
 otherwise improving, decorating, painting, or redecorating lease premises for
 any individual tenant or other occupants of the Central Research Park,
 prospective tenants of the Central Research Park, or other occupants of Central
 Research Park or in renovating or redecorating vacant lease premises for
 exclusive lease to those tenants, prospective tenants, or other occupants.

 (J)      Costs or expenses arising from any substances, materials or wastes
 that were installed by Landlord, its agents, contractors or employees and that,
 at the time of installation, any of them knew or should have known to be
 Hazardous Substances; or

 (K)      Costs or expenses incurred to comply with Landlord's obligations under
 Sections 10(e), 19, or 44(k)(ii) hereof, except as specifically set forth
 herein.

 (L)      Costs of correction, modification, alteration, or repair of (A) any
 structural portion of the Building, Property or Central Research Park due to
 faulty construction (other than by Tenant) or (B) structural defects in the
 Building, Property or Central Research Park or any portion thereof.

 (M)      Entertainment, dining, or travel expenses for any purpose.

                                       6
<PAGE>

(N)  Other than (a) replacements of equipment or improvements that have a useful
life (as determined pursuant to commercially reasonable standards) of less than
five (5) years, (b) capital improvements installed on the Premises to reduce
Operating Expenses or (c) any capital expenses required for the Premises to
comply with any law, order, approval or regulation imposed after the Delivery
Date, any capital improvement, capital replacement, or related costs, including:

(1)  Costs or expenses incurred by Landlord that are considered to be capital
improvement under generally accepted accounting principles;

(2)  Depreciation and amortization as determined in accordance with generally
accepted accounting principles (except on materials, tools, supplies and vendor-
type equipment purchased by Landlord to enable Landlord to supply services that
Landlord might otherwise contract for with a third party to the extent that such
depreciation and amortization would otherwise have been included in the
determination of the charge for the third party's services); and

(O)  Costs or expenses incurred by Landlord to construct the shell improvements
or to otherwise perform its obligations under Exhibit C.

(P)  The Tenant Improvement Allowance.

(Q)  Any costs or expenses as may be expressly excluded from Operating Expenses
elsewhere in this Lease.

(R)  Despite any other provision of this Section 5(i), any time this Lease
expressly permits Landlord to include a capital improvement or capital
replacement expenditure as an Operating Expenses, that expenditure shall be
amortized in equal installments over the useful life of that capital improvement
or replacement pursuant to commercially reasonable amortization schedules.

(j)  If Tenant shall fail to pay any Additional Rent in accordance with the
terms hereof, Landlord shall have all the rights and remedies with respect
thereto as Landlord has for nonpayment of Monthly Rent.

(k)  Monthly Rent and Additional Rent are referred to collectively herein as
"Rent."

Section 6.   Use.

(a)  Tenant will occupy and use the Premises for research and development,
sales, engineering, general office use and other legal related uses.

(b)  Tenant shall not commit any acts on the Premises, nor use the Premises in
any manner that will increase the existing rates for or cause the cancellation
of any fire, liability, or other insurance policy insuring or hereinafter
insuring the Premises or the improvements thereon. Tenant shall, at Tenant's
sole cost and expense, comply with all requirements of Landlord's insurance
carriers that are necessary for the continued maintenance at commercially
reasonable rates of fire and liability insurance policies on the Premises and
the improvements on the

                                       7
<PAGE>

Premises. However, if such compliance would result in capital repairs or
improvements to the Property, Landlord shall have the right to effect such
compliance and Tenant shall pay to Landlord the cost of such improvement
amortized according to a commercially reasonable amortization schedule;
provided, however, that for any capital repair or improvement that is unique to
Tenant, the amortization shall not exceed the remainder of the Lease Term.

(c)  Tenant shall not allow the Premises to be used for any immoral or unlawful
purpose, nor shall Tenant cause, maintain or permit any nuisance, either private
or public, in, on or about the Premises. No sale by auction shall be permitted
on the Premises. Tenant shall not place any loads upon the floors, walls or
ceiling which might endanger or damage the structure; shall not place or spill,
nor suffer to be released or spilled, any harmful substances or Hazardous
Materials (defined herein) in the drainage system of the Building, nor on the
Premises, the Building, or the Property; and shall not overload any electrical,
mechanical, plumbing, sprinkler, or other systems. No waste materials or refuse
shall be permitted to remain on any part of the Premises or outside of the
Building in which the Premises are a part, except in trash container(s) placed
inside exterior enclosures approved by Landlord for that purpose, or inside of
the Building proper where designated by Landlord. No materials, supplies,
equipment, finished products or semi-finished products, raw materials or
articles of any nature shall be stored or permitted to remain on the roof (other
than air conditioning units and antenna installations approved by Landlord as
provided herein) nor outside the Premises. Tenant shall not place anything or
allow anything to be placed near any exterior window or door that is unsightly
from a vantage point outside the Building. No loudspeaker or other device,
system or apparatus which can be heard outside the Building that may injure or
annoy other tenants of Central Business Park shall be used in or at the
Premises. Tenant shall not commit or suffer to be committed any waste in or upon
the Premises. Tenant covenants and agrees Tenant shall not be entitled to any
reduction of Rent hereunder nor shall Landlord have any liability to Tenant
because of diminution of light, air or view by any structure which may be
hereafter erected (whether or not by Landlord), by the use of the Building by
other occupants, or by the use of neighboring buildings or areas by others.
Tenant shall comply with any covenant, condition or restriction affecting the
Premises that is of record as of the date of this Lease or, as to covenants,
conditions or restrictions not of record as of the date of this Lease, only such
covenants, conditions or restrictions which do not adversely affect the Tenant's
occupancy or use of the Premises. The provisions of this Section 6(c) are for
the benefit of Landlord only and shall not be construed to be for the benefit of
any other person, or occupant of the Premises.

(d)  Notwithstanding the foregoing Section 6(c), Landlord shall not erect any
new structures on the Property during the Lease Term that will materially
interfere with Tenant's permitted use and enjoyment of the Premises, or
significantly increase Tenant's costs.

(e)  Except as otherwise provided in Section 6(e) and in Landlord's Contractor's
warranties, following the Delivery Date, Tenant shall thereafter, during the
Lease Term, at Tenant's sole cost, promptly comply with all laws, statutes,
ordinances, rules, regulations, orders, recorded covenants and restrictions, and
requirements of all municipal, state, and federal authorities now or later in
force, including, but not limited to, all provisions of the Americans with
Disabilities Act (the "ADA"), all seismic and other earthquake protection
measures being required by any governmental entity with jurisdiction with regard
to the Tenant Improvements on the Premises,

                                       8
<PAGE>

any requirements of Title 24 of the California Code of Regulations, the
requirements of any board of fire underwriters or other similar body now or in
the future constituted, and the direction or occupancy certificate issued by
public officers (collectively, the "Legal Requirements"), insofar as they relate
to the condition, use, or occupancy of the Premises, or the construction of any
Alterations (as hereinafter defined) by Tenant. If Tenant's compliance with
Legal Requirements results in capital repairs or improvements to the Property,
Landlord shall effect such compliance and Tenant shall pay to Landlord the cost
of such improvement amortized over the useful life of such repair or improvement
as reasonably determined by Landlord, (which, in any case, shall not exceed the
remainder of the Lease Term for any repair to improvements unique to Tenant).
The judgment of any court of competent jurisdiction or the admission of Tenant
in any action or proceeding against Tenant that Tenant has violated any Legal
Requirement in the condition, use, or occupancy of the Premises, will be
conclusive of that fact as between Landlord and Tenant.

(f)  Except in such circumstances where Tenant's compliance with Legal
Requirements arises in connection with Tenant's particular use of the Premises,
the correction or remediation of a violation arising out of or in connection
with the construction of Tenant Improvements and Alterations done by or on
behalf of Tenant or which violation arises out of or results from the actions of
Tenant or any of Tenant's contractors, employees, licensees, invitees, or
agents, Landlord shall be responsible for compliance with Legal Requirements to
the extent that such compliance requires physical modifications to the
foundation, roof, structural walls or Outside Area.

Section 7.    Utilities.

Tenant shall pay promptly (as the same becomes due) directly to the entity or
authority providing and/or billing the same (or reimburse the entity paying for
the same, as the case may be), all charges for water, gas, electricity,
telephone, internet, broadband and other electronic communication service, sewer
service, waste and refuse collection, and any other utilities, materials, or
services furnished directly or indirectly to, for the benefit of, and/or used by
Tenant on or about the Premises during the Lease Term, including, without
limitation, any charges imposed after the Commencement Date. All such utility
services are separately metered to the Premises. In no event shall Landlord be
liable for billings, payment, advancement of money for payment, or reimbursement
to others for or with respect to any of the above services, materials, or
charges, and Tenant shall not be entitled to any abatement or reduction of Rent
nor any rights of constructive eviction or termination by reason of any
interruption or failure of utilities, material, or services to the Premises
during the Lease Term. The foregoing notwithstanding, Monthly Rent shall abate
on a day for day basis on the eighth day and each subsequent consecutive day of
any such interruption or failure of utilities, material, or services to the
Premises that results from the negligence or willful misconduct of Landlord or
any of Landlord's constituent members, partners, agents, employees or
contractors.

Section 8.    Taxes.

(a)  Tenant shall, as Additional Rent, pay directly to the taxing authority, all
Real Property Taxes (as hereinafter defined) and increases in Real Property
Taxes which result from reassessment of the Property due to changes in ownership
thereof during the Lease Term or

                                       9
<PAGE>

which result from the reassessment of the Property due to the improvement
thereof, and all installments of assessments that are due or become due from and
after the Commencement Date and on or prior to the expiration or sooner
termination of this Lease. As used herein the term "Real Property Taxes" shall
mean and include (i) all taxes, assessments, levies, and other charges of any
kind or nature whatsoever, general and special, foreseen and unforeseen
(including, without limitation, all installments of principal and interest
required to pay any general or special assessments of public improvements, and
any increases resulting from reassessments caused by any change in ownership of
the Premises or otherwise) now or hereafter imposed by any governmental or
quasi-governmental authority or special district having the direct or indirect
power to tax or levy assessments, which are levied or assessed against, or with
respect to the value, occupancy, or use of: all or any portion of the Premises
(as now constructed or as may at any time hereafter be constructed, altered, or
otherwise changed) or Landlord's interest therein; any improvements located
within the Premises (regardless of ownership); the fixtures, equipment and other
property of Landlord, real or personal, that are an integral part of and located
on the Premises; (ii) all charges, levies, or fees imposed by reason of
environmental regulation or other governmental control of the Premises,
(excluding any penalty or fine imposed on the Premises resulting solely from the
negligence or willful misconduct of Landlord, its agents, contractors or
employees); (iii) any and all permit, inspection, and license fees and other
public charges of whatever nature that are assessed against the Property or
arise because of the occupancy, use, or possession of the Property (including,
but not limited to transit charges, traffic impact fees, housing fund
assessments, open space charges, childcare fees, school fees, or any taxes on,
or which shall be measured by, any rents or rental income, taxes on personal
property, whether of Landlord (if used for the maintenance or operation of the
Building) or Tenant; and (iv) all costs and fees (including reasonable attorney
fees) incurred by Landlord or Tenant in reasonably contesting any Real Property
Tax and in negotiation with public authorities as to any Real Property Tax. If
at any time during the Lease Term, the taxation or assessment of the Premises
prevailing as of the Commencement Date shall be altered so that in lieu of or in
addition to any Real Property Tax described above there shall be levied,
assessed, or imposed (whether by reason of a change in the method of taxation or
assessment, creation of a new tax or charge, or any other cause) an alternate or
additional tax or charge: (v) on the value, use, or occupancy of the Premises or
Landlord's interest therein; (w) on or measured by the gross receipts, income,
or rentals from the Premises; (x) on Landlord's business of leasing the
Premises; (y) based on vehicular ownership, parking, employment, production, or
the like; or (z) computed in any manner with respect to the operation of the
Premises, then any such tax or charge, however, designated, shall be included
within the meaning of the term Real Property Taxes for purposes of this Lease.
If any Real Property Tax is based in part on property or rents unrelated to the
Premises (including adjacent real property owned by Landlord or its affiliates)
then only that part of such Real Property Tax, if any, that is fairly allocable
to the Premises shall be included within the meaning of the term Real Property
Taxes. Notwithstanding the foregoing, the term Real Property Taxes shall not
include and Tenant shall not be responsible for any taxes in the nature of
estate, inheritance, transfer, gift, or franchise taxes of Landlord or the
federal or state net income tax imposed on Landlord's income from all sources.

(b)  Real Property Tax Payments. Landlord shall have Real Property Tax invoices
sent directly by the taxing authority to Tenant and Tenant shall pay such
invoices in full no later than twenty (20) days prior to delinquency (and in any
case in a timely manner to avoid penalty) with

                                      10
<PAGE>

a copy of evidence of payment to Landlord. Tenant shall promptly provide
Landlord with copies of all current Real Property Tax bills and assessments upon
receipt by Tenant and Landlord shall promptly provide Tenant with copies of all
current Real Property Tax bills and assessments which may delivered to Landlord
by the taxing authority following the Commencement Date. If Tenant has
previously been delinquent in payment of any Real Property Tax, Landlord may
elect to collect Real Property Taxes from Tenant in advance, as Operating
Expenses under Section 5 and to pay such Real Property Taxes directly.

(c)    Contesting Real Property Taxes. Tenant shall have the right to contest in
good faith with the appropriate government authorities any material increase in
any Real Property Tax or assessment, provided that Tenant takes appropriate
measures to protect Landlord's property from liens relating to such disputed tax
and has reimbursed Landlord for any such tax which may have been actually paid
by Landlord as set forth above. Landlord agrees to cooperate with Tenant in
prosecuting any appeal taken by Tenant as a result of such increase, at no cost
or expense to Landlord, and shall promptly pay to Tenant any refund or reduction
received by Landlord (less any cost to Landlord in securing the refund or
reduction) that was previously paid or reimbursed to Landlord by Tenant.

(d)    Tenant shall pay directly to the public authorities charged with the
collection on or before the last day on which payment may be made without
penalty or interest, as Additional Rent, all taxes, permit, inspection, and
license fees, and other public charges of whatever nature that are assessed
against personal property or trade fixtures owned by Tenant or others and placed
by Tenant on or about the Premises, and any interest or penalties applicable
thereto (if any) for non-payment or late payments arising therefrom, and all
installments of assessments against such personal property or trade fixtures of
Tenant that are due or become due from and after the date of this Lease and on
or prior to the expiration or sooner termination of this Lease.

(e)    All Real Property Taxes levied on the Premises for the tax year in which
the Commencement Date falls shall be appropriately prorated between Landlord
and Tenant, so that Tenant's obligation will reflect the portion of that tax
year after the Commencement Date. Taxes levied on the Premises for the tax year
in which the Termination Date occurs shall be similarly prorated between
Landlord and Tenant to reflect the period of Tenant's possession of the Premises
during that tax year. Tenant's obligations for Real Property Taxes for the last
full or partial year of the Lease Term will survive the expiration or earlier
termination of this Lease.

(f)    If Tenant has not paid any Tax required by this Lease to be paid by
Tenant before its delinquency, or if a Tax is contested by Tenant and that Tax
has not been paid within thirty (30) days after a final determination of the
validity, legality, or amount of the Tax, then Landlord may, but shall not be
required to, pay and discharge the Tax. If a Tax is paid by Landlord, the amount
of that payment shall be due and payable to Landlord by Tenant with the next
succeeding rental installment, and shall bear interest at the lesser of ten
percent (10%) per annum or the highest rate allowed by law from the date of the
payment by Landlord until repayment by Tenant.

                                      11
<PAGE>

Section 9.    Condition of Premises.

(a)    Subject to (i) Landlord's enforcement of Landlord's Contractor's
warranties as set forth in Section 4.04 of Exhibit C and (ii) the completion of
Punch List Items as defined and described in Exhibit C, Tenant shall accept
possession of the Premises on the Delivery Date, in their then-existing as is
condition (but excluding any latent defects in the Base Building Improvements),
subject to (A) all applicable laws, ordinances, and regulations governing and
regulating the use of the Premises, (B) the J. Paul Access (as defined in
Section 46), if any, and (C) any easements, recorded covenants, conditions, and
restrictions, licenses, or rights-of-way. Except as specifically set forth
herein, Landlord makes no representation or warranty as to the condition of such
Premises or as to the use or occupancy that may be made thereof.

(b)    Landlord warrants that, as of the Delivery Date the structural elements,
elevator, subfloor plumbing, new roof, foundations, and exterior walls shall be
in good working order and condition.

(c)    Landlord represents, warrants and covenants that as of the date hereof it
has good and marketable title to the Premises in fee simple and that the same is
subject to no leases, tenancies, encumbrances, liens, defects in title or
restrictions on the transfer of all or a part thereof that would materially and
adversely affect Tenant's use or possession of the Premises. To Landlord's
knowledge, the Building is not located in a designated Flood Zone.

(d)    Landlords represents and warrants that as of the date hereof it has not
received written notice from any governmental agency that Landlord has violated,
or that the Premises are in violation of, any Environmental Laws, or any
governmental permit, license or other approval for the use or occupancy of the
Premises issued to Landlord by any Agencies.

Section 10.   Repairs and Maintenance.

(a)    Tenant shall, at Tenant's sole expense, keep and maintain the Premises,
including, without limitation, interior walls, roof membrane, heating,
ventilation and air conditioning systems, operating systems, fire sprinklers,
alarms, all windows (interior and exterior), window frames, plate glass and
glazing, truck doors, plumbing systems (such as water and drain lines, sinks,
toilets, faucets, drains, showers, and water fountains), electrical systems
(such as panels, conduits, outlets, and lighting fixtures, including lamps,
bulbs, tubes, and ballasts), heating and air conditioning systems (such as
compressors, fans, air handlers, ducts, mixing boxes, thermostats, time clocks,
supply and return grills), interior surfaces of the Premises, store fronts, down
mechanisms, latches, locks, skylights (if any), fire extinguishing systems and
equipment, and all other interior improvements of any nature whatsoever, that
are part of the Premises (collectively, the "Building Systems"). Tenant will
keep such items in good and clean condition and repair (and, subject to the
further provisions of this Section 10(a), by replacing such items as needed),
and deliver to Landlord physical possession of the Premises at the termination
of this Lease or any sooner expiration thereof, in good condition and repair,
reasonable wear and tear excepted. Except to the extent of Landlord's "Grounds
Maintenance" as set forth in Section 10(f), Tenant shall keep and maintain the
Outside Area in good, safe and sanitary order, condition and repair and in
compliance with Legal Requirements in accordance with Section 6(e). All repairs
and replacements required of Tenant shall be promptly made with new

                                      12
<PAGE>

materials of like kind and quality. If and to the extent Tenant's obligations
under this Section require replacement of a Building System, Tenant shall have
the right to cause Landlord to perform such replacement, and Tenant shall pay to
Landlord as Additional Rent the amortized cost of such improvement over the
useful life of such repair or improvement pursuant to a commercially reasonable
amortization schedule. If the work affects the structural elements of the
Premises or if the estimated cost of any item of repair or replacement is in
excess of Five Thousand Dollars ($5,000), Tenant shall first obtain Landlord's
written approval of the scope of the work, the plans for the work, the materials
to be used, and the contractor hired to perform the work, which approval shall
not be unreasonably withheld or delayed.

(b)    Tenant shall maintain a service contract with a licensed repair and
maintenance contractor reasonably approved by Landlord for the maintenance of
all heating, air conditioning, and ventilation equipment servicing the Premises.
The contract should provide for periodic inspections and servicing of the
heating, air conditioning, and ventilation equipment at least once every ninety
(90) days during the term of the Lease.

(c)    If at any time during the Lease Term, including renewals or extensions
thereof, Tenant fails to maintain the Premises, make any repairs or replacements
as required by this Section, or maintain service contracts required by this
Section, Landlord shall have the right to, but shall not be required to, enter
the Premises and perform the maintenance or make the repairs or replacements or
enter into appropriate service contracts, as the case may be. Any sums expended
by Landlord in so doing, together with interest at the lesser of ten percent
(10%) per annum or the highest rate allowed by law, shall be deemed Additional
Rent and shall be immediately due from Tenant on demand of Landlord.

(d)    Tenant waives the provisions of California Civil Code Sections 1941 and
1942 and any other law that would require Landlord to maintain the Premises in a
tenantable condition or would provide Tenant with the right to make repairs and
deduct the cost of those repairs from the rent.

(e)    Landlord shall maintain the structural elements of the Building,
including the foundation, the exterior wall structure, and the roof structure.
Except as set forth in Exhibit C, Landlord will not be required to make, and
Tenant shall be responsible for the cost of, any repair resulting from: any
Tenant Improvement, Alteration or modification to the Building or to mechanical
equipment within the Building performed by, for, or because of Tenant or to
special equipment or systems installed by, for, or because of Tenant; the
installation, use, or operation of Tenant's property, fixtures, and equipment;
the moving of Tenant's property in or out of the Building or in and about the
Premises; Tenant's use or occupancy of the Premises in violation of Section 6 of
this Lease; the acts or omissions of Tenant and Tenant's employees, agents,
invitees, subtenants, licensees, or contractors; fire and other casualty, except
as provided by Section 19 of this Lease; or condemnation, except as provided in
Section 20 of this Lease. Landlord shall have no obligation to commence repairs
under this Section until a reasonable time (not to exceed ten (10) business
days) after receipt of written notice from Tenant of the need for repairs.
Tenant waives any right to repair at the expense of Landlord under any
applicable governmental laws, ordinances, statutes, orders, or regulations now
or later in effect.

                                      13
<PAGE>

(f)    Subject to reimbursement pursuant to Section 5, Landlord shall keep and
maintain all grounds and landscaping in good condition and repair (collectively,
"Grounds Maintenance"). To the extent not included in Operating Expenses, upon
Landlord's election, within ten (10) days after receipt of an invoice from
Landlord, Tenant shall, as additional rent, reimburse Landlord for all
extraordinary costs incurred by Landlord in such Grounds Maintenance if and to
the extent such repair or maintenance arises out of or results from the actions
of Tenant or any of Tenant's contractors, employees, licensees, invitees, or
agents.

Section 11.    Alterations.

(a)    Following the completion of the Tenant Improvements, Tenant will not make
or allow any additions, alterations, installations, or improvements in or to the
Premises (collectively, the "Alterations") without the prior written consent of
Landlord, which consent shall not be unreasonably withheld or delayed. The
foregoing notwithstanding, Tenant shall be permitted to install non-structural
Alterations that do not cost in excess of Twenty-Five Thousand Dollars
($25,000.00) annually, do not adversely affect Building Systems or any
structural portion of the Building, and that do not involve the introduction of
any Hazardous Material onto the Premises, provided Tenant notifies Landlord at
least ten (10) days prior to the commencement of construction thereof and such
notice sets forth in reasonable detail the Alterations to be constructed. Such
consent may be conditioned on Landlord's receipt and approval of a set of plans
and specifications for the Alterations no later than fifteen (15) business days
prior to the scheduled construction of the Alterations as well as the use by
Tenant of a contractor or contractors reasonably approved by Landlord. Landlord
shall have the right to seek reimbursement from Tenant for any actual and
reasonable costs incurred by Landlord in the review of such plans. The
installation of furnishings, fixtures, equipment, or decorative improvements
that do not affect Building Systems or the structure of the Premises, shall not
constitute Alterations. All Alterations and any furnishings, fixtures,
equipment, or decorative improvements remaining on the Premises after the
termination or earlier expiration of this Lease shall immediately become
Landlord's property and shall remain on the Premises without compensation to
Tenant. At the time of Landlord's initial approval of Alterations, Landlord
shall notify Tenant whether Tenant shall be required to remove such Alteration
at the end of the Lease Term. For all such Alterations so identified by Landlord
as requiring removal, Tenant shall cause such removal and/or restoration to be
done at Tenant's sole cost and expense and Tenant shall restore the portions of
the Premises subject to such removal to the condition of as of the Commencement
Date of this Lease, reasonable wear and tear excepted. If Tenant fails to cause
such removal and/or restoration to the identified Alterations, or other
furnishings, fixtures, equipment or decorative improvement to be removed by
Tenant upon the termination or earlier expiration of this Lease, such failure
shall be deemed a holdover under Section 13(b) of this Lease. In addition to any
other damages owing Landlord under this Section, Tenant shall owe Holdover Rent
(as hereinafter defined) for each and every day of such failure. All
improvements, additions, alterations, and repairs and the removal and
restoration thereof, as the same may be required under this Lease, shall be
performed in accordance with all applicable laws and at Tenant's sole expense.
Tenant will indemnify and defend Landlord for all liens, claims, or damages
caused by remodeling, improvements, additions, Alterations, and repairs and the
removal and restoration thereof, if required under this Lease. Upon Landlord's
request, Tenant shall provide Landlord with as-built plans for any Alteration
installed by Tenant.

                                      14
<PAGE>

(b)    Before any contract or subcontract is let or other agreement executed for
the performance of any service, or the furnishing of any materials, the total
cost of which exceeds One Hundred Thousand Dollars ($100,000.00), and before
any work of any kind or nature is commenced on the construction of Alterations
for which Landlord's consent is required, upon Landlord's request, Tenant shall
procure and deliver to Landlord a completion bond and a payment bond, both in
form and substance reasonably satisfactory to Landlord, issued by reputable
surety corporations or bonding corporations qualified to do business in
California, guaranteeing or otherwise assuring Landlord that the construction of
the Alterations will proceed to completion with due diligence, that the
reconstruction, when completed, will be fully paid for, and that the Premises
will remain free of all mechanics', laborers' or materialmen's liens or claimed
liens on account of any services or materials furnished or labor or work
performed in connection with the construction of the Alterations.

(c)    At least ten (10) days before any construction commences or materials are
delivered for any Alterations that Tenant is making to the Premises, whether or
not Landlord's consent is required, Tenant shall give written notice to Landlord
as to when the construction is to commence or the materials are to be delivered.
Landlord shall then have the right to post and maintain on the Premises any
notices that are required to protect Landlord and Landlord's interest in the
Premises from any liens for work and labor performed or materials furnished in
making the alterations. It shall be Tenant's duty to keep the Premises free and
clear of all liens, claims, and demands for work performed, materials furnished,
or operations conducted on the Premises by or on behalf of Tenant. In the event
that Tenant fails to provide Landlord with the notice required by this Section
11(c), Landlord shall have the right to cause the cessation of such
construction and shall have the further right to file notices of cessation
and/or completion, so as to allow the Premises to be protected from mechanics'
liens.

(d)    Tenant will not at any time permit any mechanics', laborers', or
materialmen's liens to stand against the Premises for any labor or material
furnished to Tenant or claimed to hive been furnished to Tenant or to Tenant's
agents, contractors, or subtenants, in connection with work of any character
performed or claimed to have been performed on the Premises by or at the
direction or sufferance of Tenant. Tenant shall have the right to contest the
validity or amount of any lien or claimed lien, upon giving to Landlord a bond
assuring that the lien or claimed lien will be paid, when and to the extent that
the lien is finally determined to be valid and owing. On final determination of
the lien or claim of lien, Tenant will immediately pay any final judgment
rendered, with all property costs and charges, and shall have the lien released
or judgment satisfied at Tenant's sole expense. If, within ten (10) days of the
filing of any such lien, Tenant fails to pay or provide to Landlord a bond
assuring that the lien or claimed lien will be paid, Landlord shall have the
right, upon five (5) days' written notice to Tenant, to pay or bond over such
lien, and take such actions as are necessary to have the lien released and
prevent a judgment against the Premises or Property, and the amount paid by
Landlord shall be immediately due and payable to Landlord, and shall bear
interest at the lesser of ten percent (10%) per annum or the highest rate
allowed by law from the date of payment by Landlord until repayment by Tenant.

(e)    Landlord acknowledges Tenant's intent to install an emergency generator
on the Property which installation shall be permitted, at Tenant's sole cost and
expense, subject to Tenant's compliance with all of the foregoing requirements
of the Section 11, including but not limited to,

                                      15
<PAGE>

Landlord's approval of Tenant's proposed installation, ongoing maintenance and
closure plans (which must include reference to adequate sound, release, exhaust
and safety containment of exhaust and fueling components), Landlord's approval
of the make and model of the equipment to be installed and of the installation
contractor, and compliance with all applicable laws, orders, approvals and
regulations which may be applicable to such generator on the Property. Landlord
shall be provided with copies of all required applications and filings required
for such generator, including without limitation the Hazardous Material Response
Plans and Business Plans required by local public safety agencies. Tenant shall
not install any underground storage tanks associated with such generator. Tenant
shall be responsible, at Tenant's cost, for any additional improvements or
utility installations which may be required by any applicable governmental
agency which result from the installation and operation of the generator on the
Property. Landlord may require the removal of such generator in the event its
operation creates an unreasonable nuisance to other Tenants of Central Research
Park.

Section 12.    Entry.

(a)    Landlord and its agents, including Managing Agent (as defined in Section
7.01 of Exhibit C) may enter the Premises at any reasonable time upon reasonable
notice to Tenant, or immediately in the case of an emergency, for the purpose
of(i) inspecting the Premises and Building systems; (ii) posting notices of non-
responsibility; (iii) supplying any service to be provided by Landlord to
Tenant; (iv) upon reasonable prior notice, showing the Premises to prospective
purchasers, mortgagees or, during the last six months of the term, to
prospective tenants; (v) making necessary alterations, additions, or repairs as
required by this Lease or to otherwise perform Landlord's duties under this
Lease; (vi) determining whether Tenant is complying with the terms of this
Lease; (vii) performing Tenant's obligations when Tenant has failed to do so
after written notice from Landlord, if required by the terms of this Lease;
(viii) placing on the Premises ordinary for sale signs or, during the last six
(6) months of the Lease Term (as the same may be extended hereunder) for lease
signs; (ix) doing other reasonable and lawful acts that may be necessary to
protect Landlord's interest in the Premises under this Lease; and (x) responding
to an emergency.

(b)    Landlord shall have the right to use any reasonable means Landlord deems
necessary and proper to enter the Premises in an emergency. Any entry into the
Premises obtained by Landlord in accordance with this Section shall not be a
forcible or unlawful entry into, nor a detainer of, the Premises, or an
eviction, actual or constructive, of Tenant from the Premises, nor shall such
entry give rise to a claim for rent abatement.

Section 13.    Surrender of Premises; Holding Over.

(a)    Tenant agrees that, on the last day of the Lease Term, or on the sooner
termination of this Lease, to surrender the Premises, together with all Tenant
Improvements (excepting any Tenant Improvements as shall have been specifically
identified for removal by Landlord at the time that Landlord gives its written
approval of the "Tenant Improvement Plans" and the "Tenant Improvement Working
Drawings," as the same are defined in Section 2.02 of Exhibit C), Alterations,
additions, and improvements which may have been made in, to, or on the Premises
(except moveable trade fixtures installed at the expense of Tenant and Landlord
approved Alterations subject to Landlord's notice, if any, under Section 11 (a),
which shall be removed in

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<PAGE>

accordance with Section 11), promptly and peaceably to Landlord in good
condition and repair (normal wear and tear excepted), including, without
limitation: all interior walls cleaned; all tile floors cleaned and waxed; all
carpets cleaned and shampooed; all broken, marred, stained or nonconforming
acoustical ceiling tiles replaced; all windows washed inside; the air
conditioning and heating systems serviced by a reputable and licensed service
firm, left in good operating condition and repair as so certified to by such
firm; the plumbing, electrical, and lighting systems left in good order and
repair, including replacement of any burned out, discolored, or broken light
bulbs, ballasts, or lenses. If Tenant fails to surrender the Premises at the end
of the Lease Term or other sooner termination of this Lease (except if and to
the extent any such failure of surrender arises from the grossly negligent acts
or material omissions of Landlord, its contractors, agents or employees), then
Tenant shall indemnify Landlord against loss or liability resulting from the
delay by Tenant in so surrendering the Premises, including, without limitation,
any claims made by any succeeding tenant founded on such delay. No act or
conduct of Landlord, whether consisting of the acceptance of the keys to the
Premises, or otherwise, shall be deemed to be or constitute an acceptance of the
surrender of the Premises by Tenant prior to the expiration of the Lease Term,
and acceptance by Landlord of surrender by Tenant prior to the expiration of the
Lease Term shall only flow from and must be evidenced by a written
acknowledgment of acceptance of surrender signed by Landlord. The voluntary or
other surrender of this Lease or the Premises by Tenant or a mutual cancellation
of this Lease prior to the expiration of the Lease Term shall not work as a
merger and, at the option of Landlord, shall either terminate all existing
subleases or operate as an assignment or attornment to Landlord of such
subleases as Landlord may elect to retain. After the expiration or earlier
termination of this Lease, so long as Landlord is not in material default
hereunder, Tenant shall execute, acknowledge, and deliver to Landlord, within
ten (10) days after written demand from Landlord to Tenant, any quitclaim deed
or other document required by any reputable title company, licensed to operate
in the State of California, to remove the cloud or encumbrance created by this
Lease from the real property containing the Premises.

(b)    At the end of the Lease Term, or any extension, should Tenant
hold over for any reason, it is agreed that in the absence of a written
agreement to the contrary, that tenancy shall be at sufferance only and not a
renewal of this Lease, nor an extension for any further term. Tenant shall pay,
for each month or portion thereof of such holdover, Monthly Rent in an amount
equal to one hundred fifty percent (150%) of the Monthly Rent payable for the
month immediately prior to the end of the Lease Term or any extension thereof
thereafter ("Holdover Rent") and such tenancy shall be subject to every other
term, covenant, and condition in this Lease that is consistent with and not
contrary to a tenancy at sufferance.

Section 14.    Indemnity.

(a)    Except to the extent caused by the gross negligence or willful misconduct
of Landlord, its agents, contractors or invitees, Tenant agrees to indemnify,
defend, and hold Landlord, and Landlord's employees, agents (including Managing
Agent), constituent parties of Landlord, members, shareholders, directors,
lenders and affiliates harmless from all liability, penalties, losses, damages,
costs, expenses, causes of action, claims, or judgments, including, but not
limited to, attorney fees and costs, arising by reason of any death, bodily
injury, personal injury, or property damage resulting from: (i) any cause
occurring in or about or resulting from an

                                      17
<PAGE>

occurrence in or about the Premises during the Lease Term, (ii) any act, work,
or things done or permitted to be done or otherwise suffered, or any omission to
act, in or about the Premises by Tenant or by any of Tenant's agents,
subtenants, officers, directors, employees, contractors, licensees, or invitees,
(iii) the negligence or willful misconduct of Tenant or Tenant's agents,
subtenants, employees, invitees, licensees, contractors, and subcontractors,
wherever it occurs in or about the Central Research Park, or (iv) an Event of
Default by Tenant. The provisions of this Section 14(a) shall survive the
expiration or sooner termination of this Lease.

(b)    Except as otherwise specifically provided in this Lease, Landlord shall
not be liable to Tenant, nor shall Tenant be entitled to terminate this Lease or
to any abatement of Rent for any damage to Tenant's property or any injury to
Tenant or any of Tenant's employees, agents, or invitees, or loss to Tenant's
business arising out of any cause, other than the gross negligence or willful
misconduct of Landlord, its contractors, agents or employees, including, but not
limited to (i) the failure, interruption, or installation of any heating, air
conditioning, or ventilation equipment; (ii) the failure, interruption, or
installation of any fire sprinklers or alarms; (iii) the loss or interruption of
any utility service; (iv) the failure to furnish or delay in furnishing any
utilities or services; (v) the limitation, curtailment, rationing, or
restriction on the use of water or electricity, gas or any other form of
utility; (vi) vandalism, malicious mischief, or forcible entry by unauthorized
persons or the criminal act of any person; or (vii) seepage, flooding, or other
penetration of water into any portion of the Premises. The provisions of this
Section 14(b) shall survive the expiration or sooner termination of this Lease.

Section 15.    Insurance.

(a)    Landlord agrees at all times during the Lease Term and during any
extension thereof, to purchase and keep in force commercially reasonable
policy(ies) of insurance covering, with commercially reasonable deductibles: (i)
loss or damage to the Premises by reason of fire (extended coverage), flood,
systems breakdown and those perils included within the classification of all
risks insurance (with sprinkler damage and other appropriate endorsements),
which insurance shall be in the amount of the full replacement value of the
Premises as determined by insurance company appraisers or Landlord's insurance
agent; (ii) Landlord's liability insurance; and (iii) rental income insurance in
the amount of one hundred percent (100%) of up to twelve (12) months' Monthly
Rent (plus sums paid during such period as Additional Rent), and (iv) such other
commercially reasonable coverages as Landlord deems in Landlord's reasonable
discretion to be prudent, customary and necessary for the Premises, including
earthquake coverage, or as may be required by Landlord's lender having a first
lien on the Premises provided such coverage requirements are typical. Such
coverage shall exclude routine maintenance and repairs and incidental damage or
destruction caused by accidents or vandalism for which Tenant is responsible
under this Lease. Tenant agrees to pay Landlord as Additional Rent in accordance
with Section 5(e) of this Lease the cost of such insurance coverage. If the cost
of such insurance is based in part on property unrelated to the Premises
(including Central Research Park and adjacent real property owned by Landlord or
its affiliates) then only that part of such insurance premium that is fairly
allocable to the Premises shall be included in Tenant's Operating Expenses. If
and to the extent such insurance cost is increased due to Tenant's particular
use of the Premises, then Tenant agrees to pay to Landlord the full cost of such
increase. Tenant shall have no interest in nor any right to the proceeds of any
insurance

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<PAGE>

procured by Landlord for or with respect to the Premises, except for amounts
specifically designated by the carrier as compensation for (i) tenant
Alterations installed and paid for by Tenant; (ii) Tenant's furniture, fixtures,
and equipment; or (iii) Tenant's moving or relocation costs.

(b)    At all times during the Lease Term and during any holdover period,
Tenant, at its sole expense, shall procure and maintain the following types of
insurance:

(i)    General Liability and Workers' Compensation Insurance. Tenant shall, at
Tenant's expense, obtain and keep in force during the Lease Term a policy of
workers' compensation insurance and a policy of commercial general liability
insurance with Broad Form Liability, and cross-liability endorsements, insuring
Landlord and Tenant against any liability arising out of Tenant's use or
occupancy of the Premises. Such insurance shall be in an amount satisfactory to
Landlord of not less than $3,000,000 per occurrence and $3,000,000 annually in
the aggregate for all claims. Such policy shall insure performance by Tenant of
the indemnity provisions of Section 14 hereof.

(ii)   Insurance for Tenant's Personal Property, Fixtures and Equipment. Tenant
shall, at Tenant's expense, obtain and keep in force during the Lease Term an
all risk insurance policy with a sprinkler damage endorsement for Tenant's
personal property, inventory, alterations, fixtures, equipment, plate glass, and
any Tenant non-standard leasehold improvements located on the Premises, in an
amount not less than one hundred percent (100%) of their actual replacement
value, providing coverage for risk of direct physical loss or damage, including
sprinkler leakage, vandalism, and malicious mischief. The proceeds of such
insurance, so long as this Lease remains in effect, shall be used to repair or
replace the personal property, inventory, Alterations, fixtures, equipment, and
leasehold improvements so insured. Provided such proceeds are applied as set
forth in this Section 15(b)(ii), any insurance proceeds received by Tenant
under such policy shall be the sole property of Tenant, and Landlord shall have
no rights thereto.

(c)    Each policy of insurance required to be carried by Tenant shall be issued
by a responsible insurance company authorized to do business in California with
an A.M. Best rating of at least A, and shall be issued in the names of Landlord,
Tenant, and any beneficiary under any deed of trust covering the Premises, if
required by the deed of trust, as their respective interests may appear. Upon
execution of the Lease, Tenant shall deliver to Landlord a certificate for each
insurance policy with all relevant endorsements. Each policy of insurance shall
be primary and noncontributory with any policies carried by Landlord and, to the
extent obtainable, shall provide that any loss shall be payable notwithstanding
any act or negligence of Landlord or any of Landlord's agents (including
Managing Agent), employees, or contractors that might otherwise result in
forfeiture of insurance, shall contain a cross liability endorsement, a
severability clause and contractual liability endorsement covering Tenant's
indemnity obligations under this Lease. Each insurance policy shall provide that
a thirty (30) day notice of cancellation and of any material modification of
coverage shall be given to all named insureds. The insurance coverage required
under this Section may be carried by Tenant under a blanket policy insuring
other locations of Tenant's business, provided that the Premises covered by this
Lease are specifically identified as included under that policy. Tenant agrees
that upon the failure to insure as provided in this Lease, or to pay the
premiums in the insurance, Landlord may contract for the

                                      19
<PAGE>

insurance and pay the premiums, and all sums expended by Landlord for the
insurance shall be considered Additional Rent under this Lease and shall be
immediately repayable by Tenant.

(d)    At all times during the Lease Term and any extensions or renewals, Tenant
agrees to keep and maintain, or cause Tenant's agents, subtenants, contractors,
or subcontractors to keep and maintain, workers compensation insurance and other
forms of insurance as may from time to time be required by law or may otherwise
be necessary to protect Landlord and the Premises from claims of any person who
may at any time work on the Premises, whether as a servant, agent, or employee
of Tenant or otherwise. This insurance shall be maintained at the expense of
Tenant or Tenant's agents, subtenants, contractors, or subcontractors and not at
the expense of Landlord.

(e)    Landlord agrees that it will tender and turn over to Tenant or to
Tenant's insurers the defense of any claims, demands, or suits instituted, made,
or brought against Landlord or against Landlord and Tenant jointly, within the
scope of this Section 15. However, Landlord shall have the right reasonably to
approve the selection of legal counsel, to the extent that selection is within
Tenant's control, which approval shall not be unreasonably withheld or delayed.

(f)    The Parties release each other, and their respective agents (including
Managing Agent), and employees, from any liability for injury to any person or
damage to property that is caused by or results from any risk insured against
under any valid and collectible insurance policy carried by either of the
Parties which contains a waiver of subrogation by the insurer and is in force at
the time of such injury or damage. However, neither party shall be released from
any such liability to the extent any damages resulting from such injury or
damage are not covered by the recovery obtained by the damaged party from such
insurance. This release shall be in effect only so long as the applicable
insurance policy contains a clause to the effect that this release shall not
affect the right of the insured to recover under such policy. Each party shall
use reasonable efforts to cause each insurance policy obtained by it to provide
that the insurer waives all right of recovery by way of subrogation against
the other party and its agents (including Managing Agent), and employees in
connection with any injury or damage covered by such policy. However, if any
insurance policy cannot be obtained with such a waiver of subrogation, or if
such waiver of subrogation is available only at additional cost and the party
for whose benefit the waiver is to be obtained does not pay such additional
cost, then the party obtaining such insurance shall notify the other party of
that fact and thereupon shall be relieved of the obligation to obtain such
waiver of subrogation rights from the insurer with respect to the particular
insurance involved.

Section 16.    Trade Fixtures.

(a)    Tenant shall have the right, at any time and from time to time during the
Lease Term and any renewals or extensions, at Tenant's sole cost and expense, to
install and affix on the Premises items for use in Tenant's trade or business,
which Tenant, in Tenant's sole discretion, deems advisable (collectively, "Trade
Fixtures"). Trade Fixtures installed in the Premises by Tenant shall always
remain the property of Tenant and may be removed at the expiration or earlier
termination of the Lease Term or any extension, provided that any damage to the
Premises caused by the removal of the Trade Fixtures shall be repaired by
Tenant, and further provided that Landlord shall have the right to keep any
Trade Fixtures or to require Tenant to remove any

                                      20
<PAGE>

Trade Fixtures that Tenant might otherwise elect to abandon. Tenant shall not in
any case remove as Trade Fixtures or otherwise any equipment which includes any
integral portion of the Building mechanical, electrical or plumbing systems.

(b)  Any Trade Fixtures that are not removed from the Premises by Tenant within
thirty (30) days after the Termination Date shall be deemed abandoned by Tenant
and shall automatically become the property of Landlord as owner of the real
property to which they are affixed.

Section 17.    Communications Cables and Antennas.

Regardless of any provisions of this Lease to the contrary, Landlord and Tenant
agree as follows:

(a)  Cabling and Equipment. Tenant will be responsible, at Tenant's sole cost,
for the installation, maintenance, and repair of all telecommunication and
network cabling, wiring, and risers running throughout the Premises, together
with all of Tenant's telephones, telecopiers, computers, servers, telephone
switching, telephone panels, and related equipment. Tenant agrees to install,
maintain, and repair the telecommunication and network cabling, wiring, and
risers running throughout the Premises in a good and proper manner.

(b)  Right of Entry. In addition to Landlord's other rights of entry under this
Lease, Landlord may enter the Premises after advance reasonable notice to
inspect the antennas, telecommunication and network cabling, wiring, and risers
to assure that the installation, maintenance, and repair are being performed in
a good and proper manner.

(c)  Antennas. Tenant shall have the right, at Tenant's sole cost and expense,
to install a satellite receiving antenna, cellular telephone antennas to enhance
cellular telephone signals within the Building, and related equipment on the
roof of the Building for Tenant's exclusive use. Installation of the antennas
shall be subject to all of the requirements of Section 11 including Landlord's
reasonable consent. Landlord's consent to the installation of any antennas may
be reasonably conditioned upon Tenant's receipt of all governmentally required
rights, licenses and approvals for the installation and use of the antennas; the
installation of roof-screening or other aesthetic modifications required to
minimize the visual appearance of the satellite antennas; to the extent
necessary, Landlord's review of an electrical engineer report obtained by Tenant
confirming that Tenant's antennas will not cause any radio frequency
interference with existing antennas or communications facilities at Central
Research Park and, to the extent necessary in Landlord's reasonable discretion,
the use of Landlord's structural engineer, electrical engineer, Building
engineer, architect, roofing contractor or other consultants or contractors in
the location and installation of the satellite antenna to avoid the violation or
limitation of any third party rights and/or warranties or structural impairment
of the roof or Building. Plans for the antennas shall be designed in such a
manner as to minimize radio frequency and visual impacts to the greatest extent
possible and shall avoid any exterior cable trays or other equipment on the
facie of the Building. Tenant shall reimburse Landlord for all costs reasonably
associated with the review and approval of any antenna installations. Tenant
shall maintain and operate the antennas in a manner which will not injure or
annoy, nor cause radio frequency interference, with occupants of the buildings
adjacent to the Building nor the general public. Upon removal of any such
antennas, Tenant shall remove any and all structural improvements required for
installation and shall repair any damage to the Building or roof resulting from
such removal. Except for

                                      21
<PAGE>

sublessees of no less than twenty-five percent (25%) of the Rentable Area or
assignees of the Lease, the right to install the antennas granted herein shall
be personal to Tenant named herein and cannot be assigned or transferred.

(d)  Indemnity. Tenant agrees to indemnify, release, defend, and hold Landlord
harmless against any damages, claims, or other liability resulting from Tenant's
installation, repair, or maintenance of the antennas, telecommunication cabling,
wiring, and risers, including, but not limited to, the costs of repair.

(e)  Release. Tenant releases Landlord from all losses, claims, injuries,
damages, or other liability, including, but not limited to, consequential
damages, whether to persons or property and no matter how caused, in any way
connected with the interruption of radio, telecommunications or network services
due to the failure of any telecommunications and network cabling, wiring, or
risers. Tenant expressly waives the right to claim that any interruption
constitutes grounds for a claim of abatement of rent, constructive eviction, or
for termination of the Lease.

Section 18.    Signs.

Tenant shall comply with any criteria as to signs in applicable ordinances and
any covenants, conditions, and restrictions recorded prior to the date of this
Lease. Subject to such compliance, Tenant may place and maintain in the Common
Area adjacent to the Building on Landlord's existing monument sign Tenant's logo
at Tenant's sole cost and expense. Furthermore, except for temporary holiday or
special event decorations in compliance with any City of Sunnyvale approved
signage program and as may be otherwise approved by the City of Sunnyvale,
Tenant shall not place any decoration, lettering, or advertising matter on the
glass of any exterior window of the Premises. If Tenant maintains any sign,
awning, canopy, marquee, decoration, or advertising matter in accordance with
the terms of this Section, Tenant shall maintain it in good appearance and
repair at all times during the Lease Term. At the Termination Date, any of the
items mentioned in this Section that are not removed from the Premises by Tenant
may, without damage or liability, be removed and destroyed by Landlord and
Tenant shall be liable to Landlord for the reasonable cost of such removal and
destruction.

Section 19. Damage and Destruction.

(a)  If, during the Lease Term, the Premises or other improvements located
thereon or therein are damaged or destroyed, whether partially or entirely, from
any insured casualty, Landlord shall, within ninety (90) days after the
discovery of such damage or destruction, commence to restore the Premises to
substantially the same condition as prior to such casualty and, subject to the
availability of necessary governmental permits to complete such restoration,
diligently prosecute same to completion. Landlord's obligation shall not include
repair or replacement of Tenant's equipment, furnishings, fixtures, cabling,
signage, personal property or non-standard tenant improvements. Damage to or
destruction of any portion of the Building, fixtures, or other improvements on
the Premises by fire, the elements, or any other cause shall not terminate this
Lease or entitle Tenant to surrender the Premises or otherwise affect the
respective obligations of the Parties, any present or future law to the contrary
notwithstanding. If the existing laws do not

                                      22
<PAGE>

permit the Premises to be restored to substantially the same condition as they
were in immediately before such casualty and Landlord is unable to get a
variance to such laws to permit the commencement of restoration of the Premises
within the 90 day period, then either party may terminate this Lease by giving
written notice to the other party within thirty (30) days after the expiration
of such 90 day period, in which event this Lease shall terminate as of the date
of such notice. Notwithstanding the foregoing, in the event that Landlord
decides under this Section 19(a) or under Section 19(b) within ninety (90) days
following the discovery of such damage or destruction, to demolish the Premises
rather than rebuild them, Landlord may notify Tenant in writing within such 90-
day period of such election, in which event the Lease will terminate as of the
date of such notice to Tenant.

(b)  If the Premises are damaged or destroyed in whole or in part by any
uninsured or under insured casualty, Landlord may within ninety (90) days
following the date of discovery of damage: (i) commence to restore the Premises
to substantially the same condition as they were in immediately before the
destruction and, subject to the availability of necessary governmental permits
to complete such restoration, diligently prosecute same to completion, in which
event this Lease shall continue in full force and effect; or (ii) within the 120
day period, Landlord may elect not to so restore the Premises in which event the
Lease will terminate as of the date of such notice to Tenant. In either event,
Landlord shall give Tenant written notice of its intention within ninety (90)
days following such casualty.

(c)  If any casualty occurs to the Premises during the last six (6) months of
the initial Lease Term or within the last six (6) months of any extension
thereof so that Tenant's use or occupancy of the Premises is materially
impaired, either party shall have the right to terminate this Lease within
thirty (30) days following such casualty.

(d)  In the event that a casualty (not caused by Tenant or any of Tenant's
employees, agents, contractors, officers, directors, invitees, or licensees),
results in the material impairment of Tenant's use or occupancy of the Premises,
the Monthly Rent otherwise payable by Tenant shall be abated based on the extent
to which Tenant's use or occupancy of the Premises is materially impaired by
such casualty from the date of such casualty until (i) the Premises are
substantially completed or (ii) the Lease is terminated as provided in Sections
19(a) or (b), whichever occurs earlier. Except for the abatement of Monthly
Rent, all other obligations of Tenant under this Lease shall remain in full
force and effect and Tenant shall have no claim against Landlord for any loss
suffered by Tenant due to such casualty or any restoration or repair work
undertaken as herein provided.

(e)  The provisions of California Civil Code 1932(2) and 1933(4), and any
similar or successor statutes are hereby waived by Tenant and shall be
inapplicable with respect to any damage or destruction of the Premises, such
sections providing that a lease terminates on the destruction of the Premises
unless otherwise agreed between the Parties to the contrary.

(f)  The foregoing provisions of this Section 19 notwithstanding, any rights to
any insurance proceeds referenced above of Landlord's lender having a first lien
on the Premises shall supercede the use of such proceeds and Landlord's repair
obligations as set forth in this Section

                                      23
<PAGE>

19. In such event, and provided neither Landlord nor Landlord's lender elect to
rebuild within the timeframes set forth above, Tenant shall have an absolute
right to terminate this Lease.

(g)  Landlord shall provide notice to Tenant within forty-five (45) days of any
damage or destruction covered by this Section 19 if Landlord, in good faith,
believes that the Premises cannot be restored or repaired within one (1) year of
the date of such damage or destruction. Tenant shall have the right to terminate
this Lease for ten (10) days following the receipt of such notice upon written
notice to Landlord. The foregoing provisions of this Section 19 notwithstanding,
and absent the delivery of Landlord's notice under this Section 19(g), Tenant
shall have the right to terminate this Lease upon thirty (30) days notice to
Landlord in the event the Premises have not been substantially repaired within
one (1) year of the date of a damage or destruction covered by this Section 19.

Section 20.    Condemnation.

(a)  If, during the Lease Term or any renewal or extension, the whole of the
Premises shall be taken pursuant to any condemnation proceeding, this Lease
shall terminate as of 12:01 a.m. of the date that actual physical possession of
the Premises is taken, and after that, both Landlord and Tenant shall be
released from all obligations under this Lease.

(b)  If, during the Lease Term or any renewal or extension, (i) thirty-five
percent (35%) or more of the Premises is taken pursuant to any condemnation
proceeding; (ii) less than thirty-five percent (35%) of the Premises is taken
and the remaining portion is not suitable or adequate for the purposes for which
Tenant was using the Premises prior to the taking; or (iii) if by reason of any
law or ordinance the use of the Premises for the purposes specified in this
Lease shall become unlawful, then and after the taking or after the occurrence
of the foregoing described circumstance, Tenant shall have the option to
terminate this Lease by giving thirty (30) days' written notice to Landlord,
and, after the giving of such notice, Monthly Rent shall be paid only to the
date on which Tenant surrenders the affected portion of the Premises.

(c)  If only a part of the Premises is taken pursuant to any condemnation
proceeding under circumstances such that Tenant does not have the option to
terminate this Lease as provided in this Section, or if, having the option to
terminate, Tenant elects not to terminate, then Landlord shall at Landlord's
expense promptly proceed to restore the remainder of the Premises to a self-
contained architectural unit, and the Rent payable shall be reduced effective as
of the date of the taking to an amount that shall be in the same proportion to
Rent payable prior to the taking, as the number of square feet of floor area
remaining after the taking bears to the number of square feet of floor area
immediately prior to the taking.

(d)  If the whole or any part of the Premises are taken pursuant to any
condemnation proceeding, then Landlord shall be entitled to the entirety of any
condemnation award except that portion specifically allocable by the condemning
authority, if any, to (i) Alterations installed and paid for by Tenant; (ii)
Tenant's furniture, fixtures, and equipment; or (iii) Tenant's moving or
relocation costs. The foregoing notwithstanding, any rights of Landlord's lender
having a first lien on the Premises to any condemnation award referenced above
shall supersede the use of such proceeds and any rights to that award, if any,
granted under this Section 20.

                                      24
<PAGE>

Section 21.    Assignment and Subletting.

(a)  Except as specifically permitted pursuant to this Section 21, Tenant shall
not assign or hypothecate this Lease or any interest herein (by operation of law
or otherwise), shall not sublet the Premises or any part thereof, or permit the
use of the Premises by any party other than Tenant, shall not mortgage or
encumber the Lease (or otherwise use the Lease as a security device) in any
manner and shall not materially amend or modify an assignment, sublease, or
other transfer that has been previously approved by Landlord (each a "Transfer")
without the prior written consent of Landlord, which consent shall not be
unreasonably withheld or delayed. Any of the foregoing acts without such consent
shall be void and constitute an Event of Default under this Lease which, at the
option of Landlord, shall terminate this Lease. Notwithstanding anything to the
contrary contained in this Section, provided the use of the Premises does not
change and Tenant fully complies with the remaining provisions of this Section,
including but not limited to subsection (f) below, Tenant may Transfer this
Lease without first obtaining Landlord's consent (a "Permitted Transfer") to a
corporation or other entity which results from a merger, consolidation,
reorganization, or asset sale with Tenant in which the surviving entity (A)
acquires substantially all of the assets of Tenant as a going concern, (B)
assumes, or is deemed by law to be liable for, all of the liabilities of Tenant,
and (C) has after such merger, consolidation, reorganization, or asset sale a
net worth not less than the greater of Tenant's net worth immediately prior to
such Transfer, or as of the date of this Lease.

(b)  In the event that Tenant should desire to transfer this Lease, Tenant shall
provide Landlord with written notice of such desire at least thirty (30) days in
advance of the effective date of such proposed Transfer. Such notice shall
include (i) the name and legal composition of the proposed sublessee or
assignee; (ii) the nature of business to be conducted by the proposed sublessee
or assignee in the Premises; (iii) the terms and conditions of the proposed
Transfer; (iv) a current financial statement of the proposed sublessee or
assignee, financial statements of proposed sublessee or assignee covering the
preceding three (3) years, if they exist, and, if available, an audited
financial statement of the proposed sublessee or assignee for a period ending
not more than one (1) year prior to the proposed effective date of the Transfer,
all of which are to be prepared in accordance with generally accepted accounting
principles; (v) a statement of all consideration to be given on account of the
Transfer; and (vi) any other information that Landlord may reasonably request.
At any time (i) within fifteen (15) days following receipt of Tenant's notice,
Landlord may by written notice to Tenant elect to in Landlord's sole and
absolute discretion, if the portion of the Premises to be transferred include in
excess of the greater of (A) one floor or (B) fifty percent (50%) of the
Premises, for in excess of fifty percent (50%) of the then-remainder of the
Lease Term, terminate this Lease as to the space affected as of the effective
date of the proposed Transfer; or within thirty (30) days following receipt of
Tenant's notice (ii) consent to the proposed subletting of the Premises or
assignment of this Lease, or (iii) disapprove of the proposed Transfer, in which
event Landlord shall furnish to Tenant, in writing, its reason(s) for such
disapproval. If Landlord does not elect to terminate this Lease, however,
Landlord shall not unreasonably withhold its consent to a proposed Transfer if
Tenant is not in default under this Lease at the time Tenant requests such
consent. Without limiting other situations in which it may be reasonable for
Landlord to withhold its consent to any proposed assignment or sublease,
Landlord and Tenant agree that it shall be reasonable for Landlord to withhold
its consent in any one or more of the following situations: (i) if, in

                                      25
<PAGE>

Landlord's reasonable judgment, the net worth of the proposed assignee does not
equal or exceed the greater of Tenant's net worth at the time this Lease is
signed or Tenant's net worth immediately prior to the proposed assignment, (ii)
in Landlord's reasonable judgment, the net worth, business history and
reputation in the community of the proposed subtenant or assignee does not meet
the standards applied by Landlords and owners of similar buildings in the City
of Sunnyvale, or (iii) the proposed subtenant or assignee shall be a then
existing tenant of Landlord or prospective tenant of Landlord (with whom
Landlord or its agent have conducted written negotiations in the preceding six
(6) months), and Landlord is offering comparable space in another portion of the
Central Research Park. In any event, Landlord shall be entitled to exercise its
right of termination in lieu of consenting to a transfer, as set forth above.

(c)   Landlord and Tenant agree that fifty percent (50%) of any rent or other
consideration received or to be received by or on behalf of or for the benefit
of Tenant for occupancy of the Premises as a result of any Transfer, in excess
of the aggregate of (i) the Monthly Rent which Tenant is obligated to pay
Landlord under this Lease (prorated to reflect obligations allocable to that
portion of the Premises subject to such sublease), (ii) the leasing commissions,
reasonable attorneys fees and advertising costs paid by Tenant in connection
with the entry by it into the Transfer, and (iii) unamortized initial Tenant
Improvements allocable to the transferred premises (not to exceed fifteen
dollars ($15.00) per square foot amortized on a straight line basis over the
Lease Term at a 10% interest rate), each such amount for (ii) and (iii) prorated
over the remaining months of the Lease Term, shall be payable to Landlord as
Additional Rent under this Lease without affecting or reducing any other
obligation of Tenant hereunder. Landlord's share of such excess rent or other
consideration shall be paid monthly by the subtenant or assignee directly to
Landlord at the same time as such rent or other consideration is payable to
Tenant.

(d)   Regardless of Landlord's consent, no Transfer shall release Tenant of
Tenant's obligation or alter the primary liability of Tenant for Rent and
performance of all other obligations to be performed by Tenant hereunder.
Acceptance of Rent by Landlord from any other person shall not be deemed to be
a waiver by Landlord of any provision hereof. Consent to one assignment or
subletting shall not be deemed consent to any subsequent or further Transfers.
In the event of default by any assignee or successor of Tenant in performing any
of the terms hereof, Landlord may proceed directly against Tenant without the
necessity of exhausting remedies against said assignee or successor. Landlord
may, without the consent of Tenant or of any successor-in-interest of Tenant,
consent to subsequent Transfers of this Lease or amendments or modifications to
this Lease with assignees of Tenant, and shall so notify Tenant thereof, and
such action shall not relieve Tenant or any successor of Tenant of liability
under this Lease. Landlord shall reasonably attempt to notify Tenant of any such
Transfer, provided, however, that failure to provide such notice shall not
affect the validity of such Transfer.

(e)   Unless Landlord elects to terminate this Lease as to the space affected
pursuant to subsection 21 (b)(i) above, Tenant shall pay to Landlord, as
Additional Rent, all out of pocket and actual costs and attorney fees (up to a
maximum of Three Thousand Dollars ($3,000.00) per Transfer) reasonably incurred
by Landlord (or imposed on Landlord by its lender having a first lien on the
Premises) in connection with the evaluation, processing, or documentation of any
requested Transfer, whether or not Landlord's consent is granted. Landlord's
costs shall include the cost of any review or investigation performed by
Landlord or on behalf of Landlord of:

                                      26
<PAGE>

(i) any Hazardous Materials used, stored, released, or disposed of by the
proposed subtenant or assignee, or (ii) violations of any Environmental Law by
the Tenant or the proposed subtenant or assignee.

(f)   In order for any Transfer to be binding on Landlord, including any
Permitted Transfer, Tenant shall deliver to Landlord, promptly after execution
thereof an executed copy of such sublease or assignment whereby the sublessee or
assignee shall expressly assume the obligations of Tenant under this Lease. Any
Transfer approved by Landlord shall not be effective until Tenant has delivered
to Landlord an executed counterpart of the document evidencing the Transfer in
form and substance reasonably satisfactory to Landlord.

(g)   Any attempted Transfer without Landlord's consent shall constitute an
Event of Default. Landlord's consent to any one Transfer shall not constitute a
waiver of the provisions of Section 21 as to any subsequent Transfer or a
consent to any subsequent Transfer. Specifically excluding attorneys fees and
costs, Tenant hereby waives any and all actual, consequential or punitive
damages resulting from Landlord's unreasonably withholding its consent to a
Transfer.

Section 22.    Default.

Any of the following events or occurrences shall constitute a material breach
of this Lease by Tenant and, after the expiration of any applicable grace
period, shall constitute an event of default (each an "Event of Default"):

(a)   The failure by Tenant within three (3) days following receipt of written
notice from Landlord, to pay any amount in full when it is due under the Lease,
such notice shall fulfill the notice requirements of California Code of Civil
Procedure Section 1161 regarding notice upon non-payment of rent;

(b)   The failure by Tenant to perform any material obligation under this Lease,
which by its nature Tenant has no capacity to cure;

(c)   The failure by Tenant to perform any other material obligation under this
Lease, if the failure has continued for a period of ten (10) days after Landlord
demands in writing that Tenant cure the failure. If, however, by its nature the
failure cannot be cured within ten (10) days, Tenant may have a longer period as
is necessary to cure the failure, but this is conditioned on Tenant's promptly
commencing to cure within the ten (10) day period and thereafter completing the
cure within thirty (30) days after Landlord demands in writing that Tenant cure
the failure. Tenant shall indemnify and defend Landlord against any liability,
claim, damage, loss, or penalty that may be threatened or may in fact arise from
that failure during the period the failure is uncured;

(d)   Any of the following: a general assignment by Tenant for the benefit of
Tenant's creditors; any voluntary filing, petition, or application by Tenant
under any law relating to insolvency or bankruptcy, whether for a declaration of
bankruptcy, a reorganization, an arrangement, or otherwise; the abandonment,
vacation, or surrender of the Premises by Tenant without Landlord's prior
written consent; or the dispossession of Tenant from the Premises (other than by
Landlord) by process of law or otherwise;

                                      27
<PAGE>

(e)   Any of the following: the appointment of a trustee or receiver to take
possession of all or substantially all of Tenant's assets or the attachment,
execution or other judicial seizure of all or substantially all of Tenant's
assets located at the Premises or of Tenant's interest in this Lease, unless the
appointment or attachment, execution, or seizure is discharged within thirty
(30) days; or the involuntary filing against Tenant, or any general partner of
Tenant if Tenant is a partnership, of a petition to have Tenant, or any partner
of Tenant if Tenant is a partnership, declared bankrupt or for reorganization or
arrangement of Tenant under any law relating to insolvency or bankruptcy, unless
the petition is dismissed within thirty (30) days; or

(f)   Tenant's failure to timely provide a requested Estoppel Certificate
pursuant to Section 27 or Subordination, Attornment and Non-Disturbance
agreement under Section 38.

Section 23.    Remedies.

Upon the occurrence of an Event of Default, Landlord, in addition to any other
rights or remedies available to Landlord at law or in equity, shall have the
right to:

(a)   Terminate this Lease and all rights of Tenant under this Lease by giving
Tenant written notice that this Lease is terminated, in which case Landlord may
recover from Tenant the aggregate sum of:

(i)   the worth at the time of award of any unpaid rent that had been earned
at the time of termination;

(ii)  the worth at the time of award of the amount by which (A) the unpaid rent
that would have been earned after termination until the time of the award
exceeds (B) the amount of the rental loss, if any, as Tenant affirmatively
proves could have been reasonably avoided;

(iii) the worth at the time of award of the amount by which (A) the unpaid rent
for the balance of the term after the time of the award exceeds (B) the amount
of rental loss, if any, as Tenant affirmatively proves could be reasonably
avoided;

(iv)  any other amount necessary to compensate Landlord for all the detriment
caused by Tenant's failure to perform Tenant's obligations or that, in the
ordinary course of things, would be likely to result from Tenant's failure,
including, without limitation, the costs and expenses incurred by Landlord for:

(A)   retaking possession of the Premises;

(B)   cleaning and making repairs and alterations (including installation of
standard leasehold improvements for the uses permitted under this Lease, whether
or not the same shall be funded by a reduction of rent, direct payment, or
otherwise) necessary to return the Premises to good condition and preparing the
Premises for reletting, with any tenant improvements necessary to prepare the
Premises for reletting being amortized over the life of such improvements and
charged to Tenant based on the then remainder of the Lease Term;

                                      28
<PAGE>

(C)   removing, transporting, and storing any of Tenant's property left at the
Premises (although Landlord shall have no obligation to remove, transport, or
store any of the said property);

(D)   reletting the Premises, including, without limitation, brokerage
commissions, advertising costs, and attorney fees;

(E)   attorney fees, expert witness fees and court costs in terminating this
Lease and enforcing Landlord's rights thereunder;

(F)   any unamortized Tenant Improvements unique to Tenant and paid for by the
Allowance (as defined in Section 1.09 of Exhibit C) and real estate brokerage
commissions paid in connection with this Lease;

(G)   costs of carrying the Premises, such as repairs, maintenance, taxes,
insurance premiums, utilities, and security precautions, if any, (but explicitly
excluding debt service); and

(v)   all other amounts in addition to or in lieu of those previously set out as
may be permitted from time to time by applicable California law.

As used in clauses (i) and (ii) of Section 23(a), the worth at the time of
award is computed by allowing interest at the rate of ten percent (10%) per
annum. As used in clause (iii) of Section 23(a), the worth at the time of award
is computed by discounting that amount at the discount rate of the Federal
Reserve Bank of San Francisco at the time of award, plus one percent (1%). As
used in this Section, the term "rent" shall include Monthly Rent, Additional
Rent and any other payments required by Tenant under this Lease.

(b)   Continue this Lease pursuant to the remedy described in California Civil
Code Section 1951.4 (i.e. lessor may continue the lease in effect after
lessee's breach and abandonment and recover rent as it becomes due if lessee has
rights to sublet or assign subject only to reasonable limitations). In such
event Landlord may, without terminating this Lease:

(i)   recover all rent and other amounts payable as they become due; or

(ii)  relet the Premises or any part thereof on behalf of Tenant on terms and at
the rent that Landlord may reasonably deem advisable, all with the right to make
reasonable alterations and repairs to the Premises at Tenant's cost and apply
the proceeds of reletting to the rent and other amounts payable by Tenant. To
the extent that the rent and other amounts payable by Tenant under this Lease
exceed the amount of the proceeds from reletting, Landlord may recover the
excess from Tenant as and when due.

(c)   Re-enter the Premises, with or without terminating this Lease, and to
remove all persons and property from the Premises. Landlord may store the
property removed from the Premises in a public warehouse or elsewhere at the
expense and for the account of Tenant.

                                      29
<PAGE>

(d)   None of the following remedial actions, alone or in combination, shall be
construed as an election by Landlord to terminate this Lease unless Landlord has
in fact given Tenant written notice that this Lease is terminated or unless a
court of competent jurisdiction decrees termination of this Lease: any act by
Landlord to maintain or preserve the Premises; any efforts by Landlord to relet
the Premises; any re-entry, repossession, or reletting of the Premises; or any
re-entry, repossession, or reletting of the Premises by Landlord pursuant to
this Section. If Landlord takes any of the previous remedial actions without
terminating this Lease, Landlord may nevertheless at any later time terminate
this Lease by written notice to Tenant.

(e)   If Landlord relets the Premises, Landlord shall apply the revenue from the
reletting as follows: first, to the payment of any indebtedness other than rent
due from Tenant to Landlord; second, to the payment of any cost of reletting,
including, without limitation, finder's fees and leasing commissions; third, to
the payment of the cost of any maintenance and repairs to the Premises; and
fourth, to the payment of rent and other amounts due and unpaid under this
Lease. Landlord shall hold and apply the residue, if any, to payment of future
amounts payable under this Lease as the same may become due, and shall be
entitled to retain the eventual balance with no liability to Tenant. If the
revenue from reletting during any month, after application pursuant to the
previous provisions, is less than the sum of (i) Landlord's expenditures for the
Premises during that month and (ii) the amounts due from Tenant during that
month, Tenant shall pay the deficiency to Landlord immediately upon demand.

(f)   After the occurrence of an Event of Default, Landlord, in addition to or
in lieu of exercising other remedies, may, but without any obligation to do so,
cure the breach underlying the Event of Default for the account and at the
expense of Tenant. However, Landlord shall by prior notice first allow Tenant a
reasonable opportunity to cure, except in cases of emergency, when Landlord may
proceed without prior notice to Tenant. Tenant shall, upon demand, immediately
reimburse Landlord for all costs, including costs of settlements, defense, court
costs, and attorney fees, that Landlord may incur in the course of any cure.

(g)   No security or guaranty for the performance of Tenant's obligations that
Landlord may now or later hold shall in any way constitute a bar or defense to
any action initiated by Landlord for unlawful detainer or for the recovery of
the Premises, for enforcement of any obligation of Tenant, or for the recovery
of damages caused by a breach of this Lease by Tenant or by an Event of Default.

(h)   Except where specifically inconsistent with or contrary to any provisions
of this Lease, no right or remedy conferred on or reserved to either party is
intended to be exclusive of any other right or remedy, or any right or remedy
given or now or later existing at law or in equity or by statute. Except to the
extent that either party may have otherwise agreed in writing, no waiver by a
party of any violation or nonperformance by the other party of any obligations,
agreements, or covenants under this Lease shall be deemed to be a waiver of any
subsequent violation or nonperformance of the same or any other covenant,
agreement, or obligation, nor shall any forbearance by either party to exercise
a remedy for any violation or nonperformance by the other party be deemed a
waiver by that party of the rights or remedies with respect to that violation or
nonperformance.

Section 24.    Late Charge.

                                      30
<PAGE>

Tenant acknowledges that Tenant's failure to pay any installment of Rent, or any
other amounts due under this Lease, as and when due may cause Landlord to incur
costs not contemplated by Landlord when entering into this Lease, the exact
nature and amount of which would be extremely difficult and impracticable to
ascertain. Such costs include, without limitation, processing and accounting
charges, and late charges that may be imposed on Landlord by the terms of any
encumbrance and note secured by any encumbrance covering the Premises,
extraordinary interest charges, penalties, collection costs, attorney and
accountant fees, and the like. Accordingly, if any installment of Rent, or any
other amount due under the Lease is not received by Landlord as and when due,
following a five (5) day grace period, Tenant shall pay to Landlord an amount
equal to five percent (5%) of the past due amount, which the Parties agree
represents a fair and reasonable estimate of the costs incurred by Landlord as a
result of the late payment by Tenant (the "Late Charge").

Section 25.    Default Interest.

All Rent and other amounts payable by Tenant to Landlord hereunder, if not
received by Landlord when and as due, shall bear interest from the due date
until paid at lesser of ten percent (10%) per annum or the maximum rate
permitted by law. Interest due pursuant to this Section shall be in addition to
and not in lieu of late fees owing under Section 24 hereof. Acceptance of any
late charge or interest payment shall not constitute a waiver of Tenant's
default with respect to the overdue amount, nor prevent Landlord from exercising
any of the other rights and remedies available to Landlord under this Lease, at
law, or in equity.

Section 26.    Waiver.

Any express or implied waiver of a breach of any term of this Lease shall not
constitute a waiver of any further breach of the same or other term of this
Lease; and the acceptance of rent shall not constitute a waiver of any breach
of any term of this Lease, except as to the payment of rent accepted.

Section 27.    Estoppel Certificates.

At any time, upon at least ten (10) business days' prior notice by Landlord,
Tenant shall execute, acknowledge, and deliver to Landlord a certificate, in
the form prescribed by Landlord, certifying:

(a)   the Commencement Date, the occupancy date, and the Lease Term;

(b)   the amount of the Monthly Rent;

(c)   the dates to which rent and other charges have been paid;

(d)   that this Lease is unmodified and in full force or, if there have been
modifications, that this Lease is in full force, as modified, and stating the
date and nature of each modification;

(e)   that no notice has been received by Tenant of any default by Tenant that
has not been cured, except, if any exist, those defaults shall be specified in
the certificate, and Tenant shall

                                      31
<PAGE>

certify that no event has occurred that, but for the expiration of the
applicable time period or the giving of notice, or both, would constitute an
Event of Default under this Lease (to the extent that none exist);

(f)  that no default of Landlord is claimed by Tenant, except, if any, those
defaults shall be specified in the certificate; and

(g)  other matters as may be reasonably requested by Landlord.

Any certificate may be relied on by prospective purchasers, mortgagees, or
beneficiaries under any deed of trust on the Premises or any part of it.
Tenant's failure to execute and deliver a completed Estoppel Certificate within
fifteen (15) business days of Landlord's request therefor shall constitute an
Event of Default hereunder.

Section 28. Attorney Fees.

If as a result of any breach or default or alleged breach or alleged default on
the part of Tenant under this Lease, Landlord uses the services of an attorney
in order to secure compliance with this Lease, Tenant shall reimburse Landlord
upon demand as Additional Rent for any and all reasonable attorney fees and
expenses incurred by Landlord, whether or not formal legal proceedings are
instituted, unless such breach or default or alleged breach or alleged default
results in a judgment in favor of Tenant. If any action at law or in equity or
any other proceeding is brought to recover any Rent or other sums under this
Lease, or for or on account of any breach or alleged breach of or to enforce or
interpret any of the covenants, terms, or conditions of this Lease, or for the
recovery of the possession of the Premises, the prevailing party shall be
entitled to recover from the other party as part of prevailing party's costs its
actual attorney fees and other costs incurred in that action or proceeding,
including, but not limited to, expert expenses, in addition to any other relief
to which said party may be entitled. The prevailing party shall include, without
limitation, (a) a party who dismisses an action in exchange for sums allegedly
due; (b) the party who receives performance from the other party of an alleged
breach of covenant or a desired remedy where that is substantially equal to the
relief sought in an action; or (c) the party determined to be the prevailing
party by a court of law. In addition, if either party to this Lease becomes a
party to or is involved in any way in any action concerning this Lease or the
Premises by reason in whole or in part of any act, neglect, fault, or omission
of any duty by the other party, its employees or contractors, the party
subjected to said involvement shall be entitled to reimbursement for any and all
reasonable attorney fees and costs.

Section 29. Security for Tenant's Performance.

(a)  Security Deposit. Tenant agrees that, on or before execution of this Lease,
Tenant shall deposit with Landlord the amount of One Hundred Eighty One Thousand
and One Dollars ($181,001), which amount shall be held by Landlord as security
for the full and faithful performance of all of Tenant's covenants and
obligations under this Lease (as the same may be further increased pursuant to
Section 1(b) or Section 29(b)), (the "Security Deposit"), it being expressly
understood and agreed that the Security Deposit is not an advance rental deposit
or a measure of the Landlord's damages in case of Tenant's default. Upon the
occurrence of any default by Tenant hereunder, Landlord may (but shall not be
required to), from time to time and
<PAGE>

without prejudice to any other remedy provided by this Lease or by law, use the
Security Deposit to the extent necessary to make good any arrears of rent or
other payments or liability caused by such default or to compensate Landlord for
any other loss, damage, liability, or expense which Landlord may suffer by
reason of Tenant's default. Tenant shall within ten (10) days after written
demand therefor pay to Landlord the amount that was applied in order to restore
the Security Deposit to the amount held by Landlord prior to the application (as
such amount may be increased by Section 29(b) below). Tenant's failure to so
restore the Security Deposit shall constitute an Event of Default under this
Lease on the part of Tenant. Although the Security Deposit shall be deemed the
property of Landlord, if Tenant fully and faithfully performs and observes every
provision of this Lease to be performed and observed by Tenant, the Security
Deposit, or any then unused balance thereof, shall be returned to Tenant (or at
Landlord's option, to the last assignee of Tenant's interest hereunder) after
the expiration of the Lease Term and after Tenant has vacated and surrendered
the Premises in accordance with the terms hereof. Tenant shall not have the
right to apply this Security Deposit or any part thereof toward the payment of
any Rent or sums due hereunder. In the event of termination of Landlord's
interest in this Lease, Landlord shall transfer the unused balance of said
Deposit to Landlord's successor-in-interest whereupon Tenant hereby agrees to
release Landlord from liability for the return of such Deposit provided such
successor-in-interest agrees to return the Security Deposit to Tenant in
accordance with the terms hereof. Landlord shall not be required to keep the
Security Deposit separate from the general accounts of Landlord, and nor pay
Tenant any interest thereon.

(b)  Letter of Credit. Tenant agrees that, within ten (10) days follow the
execution of this Lease, Tenant shall deposit with Landlord and maintain
throughout the Lease Term (except as ' provided below) an One Million Nine
Hundred Ninety-One Thousand and Nine Dollars ($1,99 1,009) irrevocable letter of
credit in form and substance and issued by Bank of America, naming Landlord
(and, if required, Landlord's lender holding the first lien against the
Property) as beneficiary (the "Letter of Credit"). The Letter of Credit will
secure the full and faithful performance of each provision of this Lease to be
performed by Tenant. Landlord shall have the absolute right to draw down the
full amount of the Letter of Credit on Landlord's sworn statement of any Tenant
Event of Default; provided, however, that commencing upon such draw down and
continuing throughout the Lease Term, interest at one-half (1/2)the prime rate
shall accrue to Tenant's account and shall, at the end of the Lease Term, unless
Tenant has committed an uncured Event of Default hereunder, be added to the
then-outstanding balance of the Security Deposit. The draw down shall be added
to and increase the amount of the Security Deposit retained by Landlord and
thereafter required under Section 29(a) above. If Landlord does apply the
Security Deposit, as increased by the Letter of Credit amount, Tenant shall
within ten (10) days written demand replenish the Security Deposit to the
combined sum of the amount of the Letter of Credit and the Security Deposit as
required under Section 29(a). Following the first anniversary of the
Commencement Date and on each anniversary of the Commencement Date thereafter,
the face amount of the letter of credit may be reduced by Four Hundred Ninety
Seven Thousand Seven Hundred Fifty Two Dollars ($497,752) upon Tenant's written
request, provided such request confirms to Landlord in Landlord's reasonable
discretion, with such evidence as Landlord may reasonably require, that: (i) The
Letter of Credit is in full force and effect and has not been drawn upon by
Landlord; (ii) No Event of Default has occurred under the Lease nor has there
occurred any act of Tenant, event or omission which with the passage of time
would constitute an Event of Default; (iii) Tenant has experienced a minimum of
two (2) consecutive
<PAGE>

quarters of Profitability immediately prior to Tenant's request. As used in this
Section "Profitability" shall mean a positive sum resulting from actual revenues
minus actual expenses, excluding non-cash expenses items such as stock
compensation expense, amortization of goodwill and acquired in-process
technology as reasonably demonstrated to Landlord by Tenant.

Section 30. Authority.

If Tenant is a corporation, trust, limited liability company, or general or
limited partnership, all individuals executing this Lease on behalf of that
entity represent that they are authorized to execute and deliver this Lease on
behalf of that entity. Tenant has represented to Landlord that Tenant's stock is
traded on the NASDAQ.

Section 31. Notices.

Except as otherwise expressly provided by law, all notices or other
communications required or permitted by this Lease or by law to be served on or
given to either party to this Lease by the other party shall be in writing and
shall be deemed served when personally delivered to the party to whom they are
directed, or in lieu of the personal service, three (3) days following deposit
in the United States Mail, certified or registered mail, return receipt
requested, postage prepaid, addressed as set forth above in the Summary of Terms
or upon the date of signature for receipt if delivered by a nationally
recognized overnight courier service (such as Federal Express) which obtains a
signature confirming delivery to the address set forth in the Summary of Terms.
Either party, Tenant or Landlord, may change the address for the purpose of this
Section by giving written notice of the change to the other party in the manner
provided in this Section.

Section 32. Heirs and Successors.

This Lease shall be binding on and shall inure to the benefit of the heirs,
executors, administrators, successors, and assigns of Landlord and Tenant.

Section 33. Partial Invalidity.

Should any provision of this Lease be held by a court of competent jurisdiction
to be either invalid or unenforceable, the remaining provisions of this Lease
shall remain in effect, unimpaired by the holding.

Section 34. Entire Agreement.

This instrument constitutes the sole agreement between Landlord and Tenant
respecting the Premises, the leasing of the Premises to Tenant, and the
specified Lease Term, and correctly sets forth the obligations of Landlord and
Tenant. Any agreement or representations respecting the Premises or their
leasing by Landlord to Tenant not expressly set forth in this instrument are
void.

Section 35. Time of Essence.

Time is of the essence in this Lease.
<PAGE>

Section 36. Amounts Deemed Rent.

All monetary obligations of Tenant to Landlord under the Lease, including, but
not limited to, the Monthly Rent and any amounts deemed Additional Rent
hereunder shall be deemed rent ("Rent").

Section 37. Amendments.

This Lease may be modified only in writing and only if signed by the Parties at
the time of the modification.

Section 38. Subordination, Nondisturbance and Attornment.

(a)  This Lease and the rights of Tenant hereunder are subject and subordinate
to any ground or underlying lease and the lien of the holder of or beneficiary
under a mortgage or deed of trust which now or in the future encumbers the
Premises and to any and all advances made thereunder, and interest thereon, and
all modifications, renewals, supplements, consolidations, and replacements
thereof.

(b)  Tenant agrees that any ground or underlying lessor or lender may at its
option, unilaterally elect to subordinate in whole or in part, such ground or
underlying lease or the lien of such mortgage or deed of trust to this Lease.
With at least ten (10) business days' prior notice by Landlord Tenant agrees to
execute, acknowledge, and deliver to Landlord upon demand any and all
commercially reasonable instruments required by Landlord or any such ground or
underlying lessor or lender evidencing the subordination, attornment or priority
of this Lease, as the case may be, provided such instrument contains standard
non-disturbance and attornment provisions customarily provided by such lessor or
lender, acknowledging Tenant's interest in this Lease. Tenant's failure to so
execute, acknowledge, and deliver such instruments within fifteen, (15) business
days after written request therefor shall constitute an Event of Default
hereunder. Landlord shall use commercially reasonable efforts to obtain such
subordination, non-disturbance and attornment agreements from Landlord's
existing and future ground lessors, if any, and lenders holding the senior lien
on the Property.

(c)  Tenant agrees that this Lease and the rights of Tenant hereunder shall be
subject and subordinate to any existing reciprocal easements and/or covenants,
conditions and restrictions (collectively, the "REA"). Should Landlord desire to
place any additional REA on the Premises, Landlord shall request Tenant's
consent thereto, which consent shall not be unreasonably withheld; provided,
however, that it shall be reasonable for Tenant to withhold its consent if, in
Tenant's reasonable judgment, such REA would materially and adversely interfere
with Tenant's rights under this Lease or with Tenant's use of or access to the
Premises. Provided an REA is recorded in the Official Records of Santa Clara
County and that it is binding upon the Premises and upon any real property
adjacent to the Premises, the provisions of said REA shall prevail over the
terms and conditions of this Lease in the event of any conflict between them.

Section 39. Merger.

                                      35
<PAGE>

The voluntary or other surrender of this Lease by Tenant, or a mutual
cancellation of the Lease, or a termination by Landlord shall not work a merger,
and shall, at the option of Landlord, terminate all or any existing subtenancies
or may, at the option of Landlord, operate as an assignment to a Landlord of any
of the subtenancies.

Section 40. Right of Relocation. (Intentionally Deleted).

Section 41. Options To Extend Lease Term.

(a)  Tenant shall have one (1) option (the "Extension Option") to extend the
Lease Term for five (5) years ("Option Period") for the Premises in their
entirety by giving Landlord prior written notice of Tenant's election to
exercise this option not less than six (6) months before the expiration of the
Lease Term as the same may have been extended. However, if there exists an Event
of Default on Tenant's part either at the time of the exercise of any Extension
Option or at the time that any Option Period would commence, Landlord may cancel
Tenant's exercise of such Extension Option, in which case the Extension Option
shall be of no further force or effect and all subsequent Extension Options
shall be deemed canceled. Each Extension Option shall be on all the same terms
of this Lease provided that the Monthly Rent for each such Option Period shall
be increased in accordance with Section 42 of this Lease and in any case shall
not be less than the Monthly Rent due under this Lease for the final month of
the initial Lease Term.

(b)  The Extension Option is personal to the named tenant herein and any
Transfer of such tenant's interest in the Lease (other than a Permitted
Transfer), whether or not consented to by Landlord, shall cause such Extension
Option to terminate and be of no further force or effect.

Section 42. Determination of Monthly Rent for Extension Option.

For purposes of Section 41(a), Monthly Rent shall be determined as follows:

(a)  Parties shall have until the later to occur of (i) thirty (30) days from
the receipt by Landlord of Tenant's notice electing to exercise an Extension
Option, or (ii) five (5) months prior to the expiration of the initial Lease
Term (or an Option Period as the case may be) to agree on the Monthly Rent for
the upcoming Option Period. If the Parties agree on the Monthly Rent for the
upcoming Option Period by such date, they shall immediately execute an amendment
to this Lease stating the Monthly Rent for the Option Period and memorializing
the extension of the Lease Term in accordance with Section 41 hereof.

(b)  If the Parties are unable to agree upon the Monthly Rent for the Option
Period in accordance with Section 42(a), then within fourteen (14) days after
the Parties fail to agree on the Monthly Rent for the Option Period, each party
at its cost and by giving notice to the other party, shall appoint a real estate
appraiser with at least five (5) years full time MAI appraisal experience in
Santa Clara County, to determine the Monthly Rent for the Option Period, and
shall deliver to said appraiser as well as the other party, such party's
proposal for the Monthly Rent for the Option Period which in any case shall not
be less than the Monthly Rent due under this Lease for the final month of the
initial Lease Term. If a party does not appoint an appraiser within said
fourteen (14) day period and the other party has given notice of the name of its
appraiser, the single appraiser appointed shall be the sole appraiser and shall
determine the
<PAGE>

Monthly Rent for the Option Period which in any case shall not be less than the
Monthly Rent due under this Lease for the final month of the initial Lease Term.
If an appraiser is appointed by each of the Parties as provided in this section,
they shall meet promptly and attempt to set the Monthly Rent for the Option
Period, by agreeing on which party's proposal most closely reflects the Fair
Market Rental Value of the Premises for the Option Period. If they are unable to
agree within thirty (30) days after the second appraiser has been appointed, the
two appraisers shall within ten (10) days following the end of such thirty (30)-
day period chose a third appraiser or if the two appraisers cannot agree on a
third appraiser within such ten-day period, either of the Parties to this Lease,
by giving ten (10) days notice to the other party, can apply to the then
Presiding Judge of the Santa Clara County Superior Court for the appointment of
a third appraiser who meets the qualifications stated in this section. The third
appraiser, however, shall be a person who has not previously acted in any
capacity for either party or either appraiser during the prior three years.
Within thirty (30) days after the selection of the third appraiser, a majority
of the appraisers shall determine which party's proposal more closely reflects
the "Fair Market Rental Value" of the Premises for that Option Period. The party
whose proposal is not selected shall bear the cost of appointing the third
appraiser together with such third appraiser's fee. As used herein, "Fair Market
Rental Value" shall mean the then prevailing annual rental rate per square foot
of rentable area for office space in comparable buildings and with comparable
tenant improvements and equivalent free parking in the Sunnyvale area, for the
renewal of tenant designed premises which have been improved for tenant
occupancy similar to the Premises, comparable in area and location to the space
for which such rental rate is being determined (to the extent that quoted rental
rates vary with regard to location), being leased for a duration comparable to
the term for which such space is being leased and taking into consideration
rental concessions and abatements, tenant improvement allowances, and renewal
commissions, if any, being offered by Landlord, the present condition of the
space, operating expenses and taxes, other adjustments to basic rent and other
comparable factors to lease renewal, but excluding any concessions unique to
newly constructed space in the market including brokerage commissions, pre-
occupancy construction period rent allowances, moving allowances or other
similar concessions and which, in any case, shall not be less than the Monthly
Rent due under this Lease for the final month of the initial Lease Term.

(c) After the appraisers determine which party's proposal more closely reflects
the Fair Market Rental Value of the Premises for the Option Period, the
appraisers shall immediately notify the Parties of their findings and the
Parties shall immediately execute an amendment to this Lease stating the Monthly
Rent for the Option Period, which amendment shall memorialize the extension of
the Lease Term in accordance with Section 41 hereof.

Section 43. Improvements.

(a) Base Building Improvements. On or before April 1, 2001, Landlord shall
provide to Tenant, at Landlord's cost, a completed building shell as more
particularly shown in attached Exhibit C-1 (the "Base Building Improvements");
provided, however, that the removal and reinstallation of exterior windows shall
be completed on or before April 30, 2001.

(b) Tenant Improvements. Pursuant to Exhibit C hereto, Tenant shall construct
Tenant Improvements (as defined in Exhibit C) for the Premises at Tenant's cost.
Landlord shall

                                      37
<PAGE>

contribute a tenant improvement allowance (the "Allowance") to construct such
Tenant Improvements in the amount of One Million One Hundred Ninety-One Thousand
Three Hundred Ninety-Eight Dollars ($1,191,398) to be applied toward all
expenses associated with the construction, space planning, engineering,
construction drawings, construction management, signage and necessary permits
directly associated with the Tenant Improvements.

(c) Allowance. Under no circumstances shall the Allowance be used for Tenant's
due diligence review of the Premises (or this Lease) nor the design, acquisition
or planning costs of Tenant's personal property, furniture, trade fixtures or
equipment.

Section 44. Environmental Provisions.

(a)     Definitions. As used in this Section, the following terms have the
following definitions:

"Agencies" means any federal, state, or local governmental authorities,
agencies, or other administrative bodies with jurisdiction over the Premises or
the Property.

"Environmental Laws" means any federal, state, or local environmental, health,
or safety-related laws, regulations, standards, court decisions, ordinances,
rules, codes, orders, decrees, directives, guidelines, permits, or permit
conditions, currently existing and as amended, enacted, issued, or adopted in
the future that are or become applicable to Tenant or the Premises.

"Pre-Existing Environmental Conditions" means the conditions disclosed in the
report dated December 15, 1998, prepared for Landlord by PHE Environmental
Consultants, Inc., a copy of which the Parties acknowledge has been provided to
Tenant. Landlord shall document and advise Tenant of any Hazardous Material
discovered by Landlord in the course of construction of the Base Building
Improvements. Any such Hazardous Material so identified by Landlord to Tenant
shall be included within the meaning of Pre-Existing Environmental Conditions
for purposes of this Lease.

"Hazardous Material" means any chemical, substance, material, controlled
substance, object, condition, waste, living organism, or combination that is or
may be hazardous to human health or to the safety of the environment due to its
radioactivity, flammability, corrosivity, reactivity, explosivity, toxicity,
carcinogenicity, mutagenicity, phytotoxicity, infectiousness, or other harmful
or potentially harmful properties or effects, including, without limitation,
petroleum and petroleum products, asbestos, radon, polychlorinated biphenyls
(PCBs) and all of those chemicals, substances, materials, controlled substances,
objects, conditions, wastes, living organisms, or combinations that are now or
become in the future listed, defined, or regulated in any manner by any
Environmental Law based upon, directly or indirectly, their properties or
effects.

"Tenant's Parties" means Tenant's employees, agents, customers, visitors,
invitees, licensees, contractors, designees, or subtenants.

(b)     Use of Hazardous Materials. Tenant will not use or allow the use of the
Premises in a manner that may cause any "Hazardous Material" to be released in
violation of any

                                      38
<PAGE>

Environmental Laws, or to become present on, under, or about the Premises or
other properties in the vicinity of the Premises.

(c)    Environmental Compliance.

(i)    Except as permitted under Section 11 (e), Tenant and Tenant's Parties
will not, at any time during the Lease Term, cause or permit any Hazardous
Materials to be brought upon, stored, manufactured, generated, blended, handled,
recycled, treated, disposed, or used on, under, or about the Premises, the
Building, or Central Research Park for any purpose, except for common office and
cleaning supplies in usual quantities.

(ii)   No asbestos-containing materials will be manufactured or installed for
any purposes on or as part of the Premises, whether as part of Tenant's or
Tenant's Parties' business operations or as tenant improvements.

(iii)  Tenant will keep, operate, and maintain the Premises in compliance with
all, and will not cause or permit the Premises to be in violation of any,
Environmental Laws.

(iv)   Neither Tenant nor any of Tenant's Parties will install or use any
underground storage tanks on the Premises.

(d)    Landlord's Right of Entry and Testing. Landlord and Landlord's
representatives have the right, but not the obligation, at any reasonable time
upon twenty-four (24) hours prior notice to enter onto and to inspect the
Premises and to conduct reasonable testing, monitoring, sampling, digging,
drilling, and analysis to determine if Hazardous Materials are present on,
under, or about the Premises and to review and copy any documents, materials,
data, inventories or notices or correspondence to or from private Parties or
governmental authorities directly related to the possible release of Hazardous
Materials in, on or from the Premises (collectively, "Inspection"). If the
Inspection indicates the presence of any environmental condition that occurred
during the Lease Term as a result of Tenant's or Tenant's Parties' activities,
in connection with the Premises, Tenant will reimburse Landlord for the cost of
conducting the tests.

(e)    Environmental Assessment. In the event Landlord has reasonable cause to
believe Tenant is in violation of the provisions of this Section 44 during or
upon expiration of the Lease Term, Landlord may require Tenant to retain a duly
licensed environmental consultant reasonably acceptable to Landlord that will
perform an environmental compliance audit of the Premises and Tenant's and
Tenant's Parties' business activities and compliance with the provisions of
Section 44. If the results of the environmental compliance audit indicate that
Tenant is or may be in violation of Section 44, Tenant will be responsible for
the cost of any testing required by Landlord. Tenant shall promptly provide a
copy of the report from the consultant to Landlord upon receipt, and upon
request shall promptly provide to Landlord a copy of all data, documents, and
other information prepared or gathered in connection with the report. Tenant
acknowledges that Tenant has been provided an adequate opportunity to conduct
Tenant's own environmental investigation of the Premises with independent
environmental experts and consultants. If such audit is not the result of
Tenant's actual use of Hazardous Material on the Premises and the results of the
environmental compliance audit indicate that Tenant is not in violation of
Section 44, Landlord shall bear the cost of the audit.

                                      39
<PAGE>

(f)   Notification.

(i)   Tenant shall give immediate written notice to Landlord of:

(A)   any enforcement, remediation, or other regulatory action or order, taken
or threatened, by any Agency regarding, or in connection with, the presence,
release, or threat of release of any Hazardous Materials on, under, about, or
from the Premises, or any tanks on the Premises, or otherwise resulting from
Tenant's use of the Premises;

(B)   all demands or claims made or threatened by any third party against Tenant
or Tenant's Parties or the Premises relating to any liability, loss, damage, or
injury resulting from the presence, release, or threat of release of any
Hazardous Materials on, under, about, or from the Premises or otherwise
resulting from Tenant's use of the Premises;

(C)   any significant spill, release, or discharge of a Hazardous Materials on,
under, about, or from the Premises, including, without limitation, any spill,
release, or discharge required to be reported to any Agency under applicable
Environmental Laws; and

(D)   all incidents or matters where Tenant and Tenant's Parties are required to
give notice to any Agency pursuant to applicable Environmental Laws.

(ii)  Tenant shall promptly provide to Landlord copies of all materials,
reports, technical data, Agency inspection reports, notices and correspondence,
and other information or documents relating to incidents or matters subject to
notification under Section 44(g)(i). Also, Tenant shall promptly furnish to
Landlord copies of all permits, approvals, and registrations related to
Hazardous Materials that Tenant receives or submits with respect to Tenant's
operations on the Premises.

(g)   Remediation.

(i)   If any Hazardous Materials are released or found on, under, or about the
Premises arising out of Tenant's or Tenant's Parties' activities, in connection
with the Premises, Tenant shall promptly take all actions, at Tenant's sole
expense, necessary to investigate and remediate the release or presence of
Hazardous Materials on, under, or about the Premises in accordance with
Environmental Laws and the requirements of all Agencies. Tenant shall keep
Landlord fully and completely apprised of any such investigation and remediation
in a timely manner and will provide Landlord with at least three (3) business
days' advance notice of any soil or ground water sampling. Tenant will also
promptly provide Landlord with the results of any test, investigation, or
inquiry conducted by or on behalf of Tenant or Tenant's Parties in connection
with the presence or suspected presence of Hazardous Materials on, under, about,
or from the Premises. Tenant shall notify Landlord in advance and give Landlord
the right to participate in any oral or written communications with regulatory
agencies concerning environmental conditions on or arising from the Premises.
Landlord has the right, but not the obligation, to assume control of any
required remediation on the Premises at Tenant's expense if Tenant fails to
notify Landlord and seek Landlord's approvals as required under this Section
44(h). Within thirty (30) days after Tenant's completion of any remediation of
the Premises, Tenant shall deliver to Landlord a letter from the applicable
Agency stating that the remediation was undertaken in accordance with all

                                      40
<PAGE>

applicable Environmental Laws and that any residual contamination remaining
after the remediation does not pose a threat to human health or the environment.

(ii)  If Tenant or Tenant's Parties have caused or permitted a release of
Hazardous Materials that results in or threatens to result in Hazardous
Materials becoming present on, under, or about the Premises, threatens public
health or safety or the environment, or is in noncompliance with any applicable
Environmental Laws or requirements of Section 44, Landlord may demand that
Tenant promptly take action in accordance with Section 44(h)(i). If Tenant does
not respond within thirty (30) days (unless there is an emergency, in which case
Tenant shall respond as soon as practicable, but not less than three (3) days),
Landlord has the right, but not the obligation, to enter onto the Premises and
take all actions reasonably necessary to investigate and fully remediate the
release or noncompliance at Tenant's sole expense, which sums will be
immediately due and payable upon receipt of an invoice and will constitute
Additional Rent under this Lease.

(h)   Liability.

(i)   Tenant's Indemnification of Landlord. Except to the extent caused by the
active negligence or willful misconduct of Landlord, its agents, contractors or
invitees, Tenant agrees to indemnify, defend, and hold Landlord, and Landlords
employees, agents (including Managing Agent), constituent parties of Landlord,
members, shareholders, directors, lenders and affiliates, and each of their
respective successors and assigns (individually and collectively "Landlord
Indemnitees") from: (A) all claims, judgments, causes of action, damages,
penalties, fines, taxes, costs, liabilities, losses, and expenses arising
(directly or indirectly) as a result of or in connection with Tenant's or
Tenant's Parties' breach of any prohibition or provision of Section 44, or (B)
if, as a result (directly or indirectly) of Tenant's or Tenant's Parties'
activities, on or in connection with the arising from any Hazardous Materials
located on or under the Premises during the Lease Term or the migration of any
Hazardous Materials from the Premises $0 other properties during the Lease Term.
This obligation by Tenant to indemnify, protect, defend, and hold harmless
Landlord Indemnitees includes, without limitation: costs and expenses incurred
for or in connection with any investigation, cleanup, remediation, monitoring,
removal, restoration, or closure work required by the Agencies because of any
Hazardous Materials present on, under, or about the Premises, the costs and
expenses of restoring, replacing, or acquiring the equivalent of damaged natural
resources if required under any Environmental Law; all foreseeable consequential
damages; all reasonable damages for the loss or restriction on use of rentable
or usable space or of any amenity of the Premises; all reasonable sums paid in
settlement of claims; reasonable attorney fees; litigation, arbitration, and
administrative proceeding costs; and reasonable expert, consultant, and
laboratory fees. Neither the written consent of Landlord to Tenant's use,
storage or generation of Hazardous Materials on or under the Premises, nor the
strict compliance by Tenant with all Environmental Laws, will excuse Tenant from
the indemnification obligation. This indemnity will survive the expiration or
termination of this Lease. Further, if Tenant's performance under this indemnity
is deficient, and Tenant fails to correct the deficiency within ten (10) days
after receipt of written notice from Landlord, Landlord shall have the right to
join and participate in any legal proceedings or actions affecting the Premises
that are initiated in connection with any Environmental Laws. However, if the
correction of the deficiency takes longer than ten (10) days, Landlord may join
and participate if

                                      41
<PAGE>

Tenant fails to commence corrective action within the ten (10) day period and
after that diligently proceeds to correct the deficiency.

(ii)   Landlord's Indemnification of Tenant. Except to the extent caused by the
negligence or willful misconduct of Tenant, its agents, contractors or invitees,
Landlord agrees to indemnify, defend, and hold Tenant, and Tenant's employees,
agents, constituent parties, members, shareholders, directors, lenders and
affiliates, and each of their respective successors and assigns (individually
and collectively "Tenant Indemnitees") from: (A) all claims, judgments, causes
of action, damages, penalties, fines, taxes, costs, liabilities, losses, and
expenses arising (directly or indirectly) as a result of or in connection
Preexisting Hazardous Conditions (except to the extent exacerbated by activities
of Tenant) or the negligent activities of Landlord, its employees, agents or
invitees in the Outside Area. This obligation by Landlord to indemnify, protect,
defend, and hold harmless Tenant Indemnitees includes, without limitation: costs
and expenses incurred for or in connection with any investigation, cleanup,
remediation, monitoring, removal, restoration, or closure work required by the
Agencies because of any of the foregoing, the costs and expenses of restoring,
replacing, or acquiring the equivalent of damaged natural resources if required
under any Environmental Law; reasonable attorney fees; litigation, arbitration,
and administrative proceeding costs; and reasonable expert, consultant, and
laboratory fees. This indemnity will survive the expiration or termination of
this Lease. If Landlord's performance pursuant to this indemnity is deficient
and landlord fails to correct the deficiency within ten (10) days after receipt
of written notice from Tenant, Tenant shall have the right to join and
participate in any legal proceedings or actions affecting the Premises initiated
in connection with any Environmental Laws. However, if the correction of the
deficiency takes longer than ten (10) days, Tenant will have the right to join
and participate if Landlord fails to commence corrective action within the ten
(10) day period and after that diligently proceeds to correct the deficiency.

(iii)  Nothing in this Section 45 or in any other provision of this Lease shall
obligate Tenant to cleanup, investigate, monitor, remove, remediate or otherwise
respond to, or to indemnify, defend or hold harmless Landlord (or any other
person) as a result of, or pay as Operating Expenses, any costs or expenses
arising out of any Pre-existing Hazardous Conditions (except to the extent
exacerbated by Tenant's activities) or any Hazardous Material outside the
Premises except to the extent such Hazardous Material was introduced to Central
Research Park by Tenant.

Section 45. Publicity.

Tenant on behalf of itself and its agents and representatives expressly agrees
that it is not authorized to announce this Lease or the terms and conditions
contained therein to any third party without the prior written consent of
Landlord.

Section 46. Easements.

Landlord reserves the right to grant easements, rights, and dedications that
Landlord deems necessary or desirable, and to record parcel maps and
restrictions, so long as these easements, rights, dedications, maps, and
restrictions do not unreasonably interfere with Tenant's use or occupancy of the
Premises. Tenant agrees to sign any of these documents promptly upon request of
Landlord. Tenant acknowledges that a portion of the Parking Lot is currently
used as a

                                      42
<PAGE>

thoroughfare by occupants of the J. Paul property to the west of the Property
("J. Paul Access"). Landlord will prepare correspondence to advise the owners of
this adjacent property of Tenant's plans to retain the Parking Lot for Tenant's
exclusive use and eliminate the J. Paul Access, and Landlord shall use
reasonably diligent efforts to secure exclusive use of the Parking Lot for
Tenant but shall not be obligated to initiate or defend litigation, nor to
engage counsel to secure such exclusive use. Tenant hereby waives any claims
against Landlord with respect to any claimed J. Paul Access rights and Tenant
shall indemnify, hold harmless and defend Landlord from any claim made to
protect the J. Paul Access which result from Tenant's actions to limit such
access.

Section 47. Covenants and Conditions.

Each term of this Lease performable by Tenant shall be deemed both a covenant
and a condition.

Section 48. Recordation.

Upon request, Tenant shall execute, acknowledge, and record a memorandum of this
Lease in form and substance reasonably satisfactory to Landlord.

Section 49. Transfer by Landlord.

In the event of a sale or conveyance of the Building by any owner of the
reversion then constituting Landlord, the transferor shall thereby be released
from any liability thereafter accruing upon any of the terms, covenants or
conditions (express or implied) herein contained in favor of Tenant, and in such
event, insofar as such transferor is concerned, Tenant agrees to look solely to
the successor in interest of such transferor in and to the Building and this
Lease in connection with such thereafter accruing liability. Tenant agrees to
attorn to the successor in interest of such transferor. If Tenant provides
Landlord with security for Tenant's performance of its obligations hereunder,
and Landlord transfers, or provides a credit with respect to, such security to
the grantee or transferee, of Landlord's interest in the Property, Landlord
shall be released from any further responsibility or liability for such
security.

Section 50. Security Measures.

Tenant acknowledges that Landlord shall have no obligation to provide any guard
service or other security measures to the Premises, and Tenant assumes all
responsibility for the protection of Tenant, Tenant's agents, subtenants,
employees, invitees, and customers, and the property of Tenant and of Tenant's
agents, subtenants, employees, invitees, and customers from acts of third
parties.

Section 51. Brokers.

Tenant represents and warrants to Landlord that no real estate broker, agent, or
finder negotiated or was instrumental in negotiating or representing Tenant in
the negotiation of this Lease or the consummation hereof except for Tenant's
Broker. Landlord shall be responsible for the payment of the commission or fee,
if any, owed to Tenant's Broker pursuant to a separate fee agreement between
Landlord's Broker and Tenant's Broker. Tenant shall pay the commission or fee of
any

                                      43
<PAGE>

other broker, agent, or finder acting for Tenant or claiming any commissions or
fees on the basis of contacts or dealings with Tenant other than Tenant's Broker
and Tenant shall indemnify and hold Landlord harmless from and against any
claims made by any such broker, agent, or finder of Tenant and any and all costs
and damages suffered by Landlord as a consequence thereof, including without
limitation attorney fees.

Section 52. Liability of Landlord. Limitation of Landlord Liability.

Any liability of Landlord to Tenant under this Lease (including all persons and
entities that comprise Landlord, and any successor landlord) and any recourse by
Tenant against Landlord shall be limited to the equity interest of Landlord and
Landlord's successors in interest in and to the Building and Property. On behalf
of itself and all persons claiming by, through, or under Tenant, Tenant
expressly waives and releases Landlord from any personal liability for breach of
this Lease. Notwithstanding any other provision of this Lease, Landlord shall
not be liable for any consequential damages of any kind (including lost economic
opportunities, lost profits, lost proceeds and similar types of damages), nor
shall Landlord be liable for loss of or damage to artwork, currency, jewelry,
unique or valuable documents, securities, instruments, electronics or other
valuables, or for other property not in the nature of ordinary fixtures,
furnishings and equipment used in general administrative and office activities
and functions, which may result from any default of the Lease by the Landlord or
any action, omission, negligence or misconduct of the Landlord in connection
with the Property. Whenever in this Lease Tenant (a) releases Landlord from any
claim or liability, (b) waives or limits any right of Tenant to assert any claim
against Landlord or to seek recourse against any property of landlord or (c)
agrees to indemnify Landlord against any matters, the relevant release, waiver,
limitation or indemnity shall run in favor of and apply to Landlord, its agents
(including Managing Agent), its lenders, the constituent partners, members,
shareholders or other owners of Landlord or its agents, and the directors,
officers, and employees of Landlord and its agents and each such constituent
partner, member, shareholder or other owner.

Section 53. (Intentionally Deleted).

Section 54. Parking; Outside Area. The use of parking spaces in the Outside
Area shall be for the parking of motor vehicles used by Tenant, its officers,
employees and customers only, and shall be subject to all reasonable, uniform
and non-discriminatory applicable laws. Parking spaces may not be assigned or
transferred separate and apart from this Lease. Landlord shall not be liable for
any damage of any nature to, or any theft of, vehicles or contents thereof, in
or about the Outside Area. Landlord shall have the right to install such
structures in the Outside Area as may be required for the continued operation
and maintenance of Central Research Park or as may be required by any law,
ordinance, order, permit, approval, covenant, condition, easement or restriction
affecting Central Research Park. The foregoing notwithstanding, Landlord shall
not erect any new structures on the Property during the Lease Term that will
materially interfere with Tenant's permitted use and enjoyment of the Premises,
or significantly increase Tenant's costs.

Section 55. Force Majeure.

Except with respect to Landlord's obligation to substantially complete the Base
Building Improvements and deliver the Premises to Tenant on the Estimated
Delivery Date, if

                                      44
<PAGE>

performance by a party of any portion of this Lease is made impossible by any
prevention, delay, or stoppage caused by strikes; lockouts; labor disputes; acts
of God; inability to obtain services, labor, or materials or reasonable
substitutes for those items; government actions; civil commotion; fire or other
casualty; or other causes beyond the reasonable control of the party obligated
to perform, performance by that party for a period equal to the period of that
prevention, delay, or stoppage shall be excused. Tenant's obligation to pay
Rent, however, is not excused by this Section 55.

Section 56. Quiet Enjoyment.

Tenant, upon fully complying with and promptly performing all of the terms,
covenants and conditions of this Lease on its part to be performed, and upon the
prompt and timely payment of all sums due hereunder, shall have and quietly
enjoy the Premises for the Lease Term set forth herein, subject to all
provisions of this Lease and all matters of record against the Property.

Section 57. Offer.

Preparation of this Lease by Landlord or Landlord's agent (including Managing
Agent) and submission to Tenant shall not be deemed an offer to lease. This
Lease shall become binding on Landlord and Tenant only when fully executed by
Landlord and Tenant.

Section 58. Governing Law.

This Lease shall be governed by and construed in accordance with California law.

IN WITNESS WHEREOF, the Parties have executed this Lease as of the date first
set forth above.

LANDLORD:  Sunnyvale VIII Trust, a Maryland business trust

/s/ Robert G. Stucley
------------------------------------------------------------
Robert G. Stucley, Vice President

TENANT: CacheFlow, a Delaware corporation

/s/ B. M. NeSmith
------------------------------------------------------------
Brian NeSmith, President and CEO

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<PAGE>

                                 Attachment 1
                            Index of Defined Terms

Additional Rent                              Section 5(e)
Agencies                                     Section 44(a)
Allowance                                    Section 43(b)
Alterations                                  Section 11 (a)
Base Building Improvements                   Section 1.02 of Work Letter
Building                                     Recital A
Building Systems                             Section 10(a)
Central Research Park                        Recital A
Chronic Delinquency                          Section 5(d)
Commencement Date                            Section 2(a)
Commencement Date Memorandum                 Section 2(c)
Delivery Date                                Section 3(e)
Environmental Laws                           Section 44(a)
Estimated Delivery Date                      Summary of Terms/Section 2(a)
Event of Default                             Section 22
Extension Option                             Section 41(a)
Fair Market Rental Value                     Section 42(b)
Grounds Maintenance                          Section 10(f)
Hazardous Material                           Section 44(a)
Holdover Rent                                Section 13(b)
Inspection                                   Section 44(d)
J. Paul Access                               Section 46
Landlord Broker                              Summary of Terms
Landlord Indemnitees                         Section 44(h)(i)
Late Charge                                  Section 24
Lease Term                                   Section 2(b)
Legal Requirements                           Section 6(d)
Letter of Credit                             Section 29(b)
Managing Agent                               Section 7.01 of Work Letter
Monthly Rent                                 Section 5(a)
Operating Expenses                           Section 5(e)
Option Period                                Section 41(a)
Outside Area                                 Summary of Terms
Permitted Transfer                           Section 21(a)
Pre-Existing Environmental Conditions        Section 44(a)
Premises                                     Recital B
Profitability                                Section 29(b)
Property                                     Recital A
REA                                          Section 38(c)
Real Property Taxes                          Section 8(a)
Rent                                         Section 36
Rentable Area of the Building                Section 1

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<PAGE>

Security Deposit                             Section 29(a)
Tenant Broker                                Summary of Terms
Tenant Delays                                Section 5.04 of Exhibit C
Tenant Improvement Plans                     Section 2.02 of Exhibit C
Tenant Improvement Working Drawings          Section 2.02 of Exhibit C
Tenant Improvements                          Section 1.03 of Exhibit C
Tenant Indemnitees                           Section 44(h)(ii)
Tenant's Parties                             Section 44(a)
Trade Fixtures                               Section 16(a)
Transfer                                     Section 21(a)
Unavoidable Delays                           Section 5.05 of Work Letter

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<PAGE>

                                                                       Exhibit A

                                   Property
                               Legal Description

3.  The land referred to in this report is situated in the State of California,
    County of SANTA CLARA and is described as follows:

All that certain Real Property in the City of Sunnyvale, County of Santa Clara,
State of California, described as follows:

All of Parcel "A", as shown upon that certain map entitled, "Parcel Map being
all of Parcel 1 as shown on that 'Parcel Map' Recorded in Book 194 of Maps, at
Pages 56, Santa Clara County", which Map was filed for Record in the Office of
the Recorder of the County of Santa Clara, State of California, on May 22, 1978
in Book 418 of Maps, at page 46.

<PAGE>

                                   EXHIBIT B

                                   [Graphic]

                                   [Graphic]
<PAGE>

                                                                     EXHIBIT "C"

        WORK LETTER AND CONSTRUCTION AGREEMENT FOR INITIAL IMPROVEMENTS
               THE CENTRAL RESEARCH PARK, 477 POTRERO, SUNNYVALE

This Work Letter and Construction Agreement for Initial Improvement of the
Property ("Work Letter") is attached to and incorporated within that certain
Office/R&D Lease ("Lease") between Sunnyvale VIII Trust, a Maryland business
trust ("Landlord"), and CacheFlow Inc., a Delaware corporation ("Tenant").

                                   RECITALS

WHEREAS, the undersigned Landlord and Tenant have executed and delivered the
Lease to which this Work Letter is attached, and into which this Work Letter is
fully incorporated by reference;

WHEREAS, the Lease provides for the leasing of space (the "Premises") within the
building ("Building") located at 477 Potrero, Sunnyvale, California (the
"Property")

WHEREAS, Landlord and Tenant desire to set forth herein their respective
agreements regarding the improvement of the Premises and Building;

NOW, THEREFORE, in consideration of the foregoing recitals, the execution and
delivery of the Lease by the parties hereto, the mutual covenants contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Landlord and Tenant, intending to be legally
bound, hereby agree as follows:

Section 1. DEFINITIONS.

1.01. Defined Terms. Capitalized terms used in the Lease and this Work Letter
shall have the same meanings ascribed to them in the Lease. Otherwise, the
capitalized terms used in this Work Letter shall have the meaning ascribed to
them at the point where defined.

1.02. "Base Building Improvements" shall mean the shell improvements to the
Building provided by Landlord, at Landlord's sole cost and expense, shown in
Exhibit C-1.

1.03 "Tenant Improvements" shall mean the improvements constructed and installed
in the Premises by Tenant in accordance with the Tenant Improvement Plans and
the Tenant Improvement Working Drawings as defined in Section 2.02 below.

1.04 "Tenant Improvement Plan" shall mean the space plan for the Tenant
Improvements attached hereto as Exhibit C-2.

1.05 "Site Improvements" shall mean the improvements outside of the Building on
the Property to be constructed by Landlord, at Landlord's sole cost and expense,
prior to the Commencement Date shown in Exhibit C-1.

1.06 "Improvements" shall mean the combined Base Building Improvements and the
Tenant Improvements.

1.07 "Punch List Items" shall mean minor details of construction or decoration
or mechanical adjustments to the Base Building Improvements that do not
materially interfere with Tenant's occupancy of the Premises for the
construction by Tenant's Contractor of the Tenant Improvements.

1.08 "Tenant's Contractor" shall mean: MAI Industries.

1.09 "Tenant's Architect" shall include: API Design.

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<PAGE>

1.10 "Allowance" shall mean the amount set forth in Section 43 of the Lease
representing Landlord's contribution toward the construction of the Tenant
Improvements to be applied toward all expenses associated with the construction,
cabling space planning, engineering, construction drawings, construction
management, signage and other necessary permits directly associated with the
Tenant Improvements. Under no circumstances shall the Allowance be used for
Tenant's due diligence review of the Premises (or this Lease) nor the design,
acquisition or planning costs of Tenant's personal property, furniture, trade
fixtures or equipment.

1.11 "Tenant Improvement Costs" shall mean the total cost of (i) the preparation
of the Tenant Improvement Working Drawings, (ii) the construction and
installation of the Tenant Improvements, and (iii) all other construction costs
associated improving the Premises for Tenant's occupancy excluding the Base
Building Improvements.

1.12 "Tenant Costs" shall mean the total of all Tenant Improvement Costs in
excess of the Allowance.

1.13 "Landlord's Construction Representative" shall mean Mark Brannan of
Nicholson Construction.

1.14 "Landlord's Contractor" shall mean Nicholson Construction.

1.15 "Ready for Occupancy" shall mean when Landlord's Construction
Representative has in good faith furnished to Landlord a certificate that the
Base Building Improvements has been substantially completed for purposes of
Tenant's installation of the Tenant Improvements except for Punch List Work and
Site Improvements, which Punch List Work and Site Improvements shall not
materially and adversely interfere with Tenant's Work.

1.16 "Tenant's Work" shall mean the work of Tenant's Architect, engineer and
Tenant's Contractor to design and construct the Tenant Improvements.

1.17 "Unavoidable Delays" Delays caused by: acts of God, unexpected enforcement
actions of public agencies, labor disputes, fires, freight embargoes, lack of
access, or other causes or contingencies beyond the reasonable control of
Landlord.

Section 2. DRAWINGS AND SPECIFICATIONS

2.01 Approval of Base Building Improvements. The Base Building Improvements
attached hereto are hereby approved by the parties for construction by Landlord.

2.02 Tenant Improvement Plans. The Tenant Improvement Plans attached to this
Work Letter as Exhibit C-2 are preliminary plans and specifications for the
construction of the Tenant Improvements. These Tenant Improvement Plans are
hereby approved by Landlord and Tenant. Following the final execution of this
Work Letter, Tenant will cause to be prepared and delivered to Landlord periodic
progress prints and, on or before May 1, 2001, final plans and specifications
and working drawings for the construction of the Tenant Improvements that will
include structural, fire protection, life safety, mechanical and electrical
working drawings, and final architectural drawings for the Tenant Improvements
(collectively, Tenant Improvement Working Drawings). The Tenant Improvement
Working Drawings will substantially conform to Tenant Improvement Plans as well
as the Base Building Improvements Plans and shall not adversely affect the
mechanical, electrical, plumbing, heating, ventilating and air conditioning,
life-safety or other systems of the Building, the Base Building Improvements or
the structure or exterior appearance of the Building. No later than five (5)
business days following Landlord's receipt thereof, Landlord shall either
approve the Tenant Improvement Working Drawings or set forth in reasonable
detail (which may be a mark-up of the plans) any changes necessary to bring the
Tenant Improvement Working Drawings into substantial conformity with the Base
Building Improvement Plans or Tenant Improvement Plans. Any modification to the
Base Building Improvements required by the Tenant Improvement Working Drawings
shall be identified by Landlord as a Change Order (defined herein). Landlord
will not unreasonably object to any items in the Tenant Improvement Working
Drawings necessitated by applicable law or City of Sunnyvale requirements,
provided that any increased cost or delay resulting from such change, which
would not be applicable to the Base Building Improvements except for the

                                       2
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design of Tenant's Tenant Improvements, shall be a Tenant Cost and/or a Tenant
Delay. Upon receipt of Landlord's comments, Tenant shall undertake such
revisions as are reasonable and prepare final Tenant Improvement Working
Drawings. Tenant shall resubmit any disapproved plan to Landlord for approval
within five (5) business days which shall be reviewed by Landlord to confirm
that Landlord's response to the proposed Tenant Improvement Working Drawings has
been incorporated into the final Tenant Improvement Working Drawings and that
the final Tenant Improvement Working Drawings conform to the Base Building
Improvements Plans with such changes as Tenant may have determined. The above
process will be repeated until the Tenant Improvement Working Drawings are
approved by Landlord. Upon approval of the Tenant Improvement Working Drawings
by Landlord and Tenant, the final drawings and specifications will be referred
to as the Approved Tenant Improvement Working Drawings. Tenant acknowledges that
Landlord shall review Tenant's drawings for Landlord's sole benefit which cannot
be relied upon by Tenant with respect to the adequacy of such plans or their
conformance with applicable law. Failure of Tenant to prepare Tenant Improvement
Working Drawings which are approved by Landlord on or before May 1, 2001 shall
constitute a Tenant Delay hereunder.

2.03 Revisions to Approved Tenant Improvement Working Drawings. If at any time
after approval of the Approved Tenant Improvement Drawings Tenant desires to
make revisions, Tenant shall submit proposed working drawings and
specifications reflecting such changes to Landlord ("Change Order"). Landlord
shall promptly review such drawings and specifications and shall notify Tenant
of any comments thereon or proposed revisions thereto within three (3) business
days after receiving such drawings and specifications. Tenant shall resubmit to
Landlord any such drawings and specifications which are not approved by Landlord
within five (5) days after Landlord's disapproval, with such revisions as are
reasonably requested by Landlord. Upon Landlord approval of the drawings and
specifications, such drawings and specifications shall constitute the Approved
Tenant Improvement Working Drawings. Tenant shall be responsible for all costs
associated with any changes to the Working Drawings. In the event such changes
require modification to the Base Building Improvements, Landlord shall obtain
promptly from Landlord's Contractor the amount of any adjustment in the Tenant
Improvement Costs, Tenant Delay or Tenant Delay costs resulting from such
revisions and submit the amount thereof to Tenant for Tenant's approval. Within
five (5) days of receipt of Landlord's estimate, Tenant shall advise Landlord
whether to proceed or not to proceed with the Base Building Improvement
modifications. Upon Tenant's approval of the revised Tenant Costs, Tenant shall
be deemed to have given full authorization to Landlord to proceed with the work
of constructing and installing changes to the Base Building Improvements in
accordance with the Approved Tenant Improvement Working Drawings, as revised, at
Tenant's sole cost and expense.

2.04 Additional Provisions. Landlord may charge Tenant reasonable and actual
fees incurred to Landlord's Management Agent, Landlord's architect, Landlord's
Construction Representative or Landlord's outside engineers and consultants for
(A) work in reviewing Tenant requested revisions to the Approved Tenant
Improvement Working Drawings and any review of construction by Tenant's
Contractor related to such Tenant requested revisions or Change Orders; (B)
reasonable fees with respect to design and construction of structural
modifications to the Base Building Improvements necessitated by the Approved
Tenant Improvement Working Drawings or any Change Orders; and (C) other fees, if
any, specifically authorized under the Lease or this Work Letter. Tenant shall
use the HVAC and electrical engineers identified in attached Exhibit C-3 or as
reasonably approved by Landlord for design of the Tenant Improvements. If
Tenant's engineer is not approved by Landlord for the Tenant Improvements,
Tenant may nevertheless employ such engineer for such purpose, and Landlord
within Landlord's reasonable judgment, may consult with an independent engineer,
or other consultant with respect to such improvements and Tenant will reimburse
Landlord for the reasonable fees and expenses incurred by Landlord.

Section 3. PAYMENT OF COSTS

3.01 Tenant Contractor Payments. Tenant shall be responsible for all payments to
Tenant's Contractor. Landlord shall reimburse Tenant in the amount of the Tenant
Improvement Allowance in the following manner: Upon Tenant's request (but not
more often than once per month) as the Tenant Improvements are constructed and
subject to a retention of ten percent (l0%), Landlord shall make progress
payments, on a pro rata basis to Tenant from the Tenant Improvement Allowance in

                                       3
<PAGE>

the proportion that the Allowance bears to the total cost for the construction
of the Tenant Improvements, based upon paid invoices and properly executed
conditional lien releases submitted from Tenant's Contractor and the Tenant's
Architect's certification that such work has been properly completed through the
date of such progress payment. Landlord shall pay the balance of the Tenant
Improvement Allowance upon receipt of properly executed mechanics lien releases
in compliance with California Civil Code Section 3262(d)(4) (Unconditional
Waiver and Release Upon Final Payment). Landlord shall be entitled to suspend
construction of the Tenant Improvements and to declare an Event of Default under
the terms of the Lease if payment by Tenant of any amounts required to be paid
by Tenant under this Paragraph 3.01 are not received by Tenant's Contractor in a
timely manner.

3.02  Suspension of Landlord's Obligations. The obligation of Landlord to make
any one or more payments pursuant to this Work Letter or to proceed with the
construction of any Improvements shall be suspended without further act of the
Parties during any such time as there exists any Event of Default under the
Lease or any event or condition which, with the passage of time or the giving of
notice or both would constitute such an Event of Default.

3.03  Alterations. Nothing in this Work Letter shall affect the obligations of
Tenant under the Lease with respect to any Alterations, additions and
improvements within the Premises other than to the extent shown in the Approved
Tenant Improvement Working Drawings including without limitation, any obligation
to obtain the prior written consent of Landlord with respect thereto.

Section 4. CONSTRUCTION OF BASE BUILDING

4.01. Construction of Base Building Improvements. Landlord will apply for and
use diligent efforts to obtain the necessary permits and approvals for the
construction of the Base Building Improvements. Landlord shall execute a
construction contract with Landlord's Contractor who will diligently construct
and complete the Base Building Improvements subject to any approved Change
Orders required by the Approved Tenant Improvement Working Drawings. Provided
the same does not materially delay substantial completion of the Base Building
Improvements, Landlord specifically reserves the right to make at any time and
from time to time during the construction of the Base Building Improvements, any
changes necessary to obtain any permit or to comply with all applicable
regulations, laws, ordinances, codes and rules or to achieve the compatibility,
as reasonably determined by Landlord, of the Base Building Improvements with the
shell and the core and the mechanical, plumbing, life safety and electrical
systems of the Building and any third-party warranties. Landlord shall provide
timely notice of any material change to Tenant. If in the reasonable judgment of
Tenant's Architect any such change will require re-design or re-engineering of
the Tenant Improvements, Landlord's Construction Representative shall meet with
Tenant's Architect and attempt in good faith to modify any such change to avoid
such re-design or re-engineering.

4.02. Condition of Improvements. Landlord's Contractor's construction contracts
shall provide that all work performed will be performed in a good and
workmanlike manner, will be of good quality and free from defects in materials,
and workmanship, and will be completed in substantial compliance with Approved
Base Building Improvement Working Drawings, as the same may have been modified
by approved changes or other revisions, alterations or additions approved
hereunder.

4.03  Punch List Work. The Premises shall be Ready for Occupancy notwithstanding
Landlord's Construction Representative's submission of a punch list to
Landlord's Contractor. Tenant may add Punch List Items for the Base Building
Work at any time within ten (10) days after the Delivery Date. Landlord will
cause Contractor to diligently complete any Punch List Items promptly, but in no
event later than thirty (30) days from the Delivery Date with respect to the
Premises, or thirty (30) days after Tenant's notice as the case may be, except
for those items which would reasonably require in excess of thirty (30) days to
complete which items Contractor shall commence to complete during said thirty
day period and shall diligently prosecute to completion.

                                       4
<PAGE>

4.04. Warranties. Landlord shall obtain from Landlord's Contractor and
appropriate subcontractors all commercially reasonable warranties that may be
assigned in whole or in part to Tenant that all Base Building Improvements are
free from defects in workmanship or materials for a period of no less than one
year from the date of substantial completion thereof, provided that the roof
warranty shall be for no fewer than ten (10) years. Landlord warrants that upon
substantial completion thereof the Base Building Improvements installed by
Landlord in accordance with the Base Building Plans shall be in compliance with
applicable provisions of the Americans with Disabilities Act ("ADA"). Such
warranty shall not apply to the extent Base Building Improvements have been
modified by shell upgrades designed by Tenant's Architect or by installation of
the Tenant Improvements. Tenant's sole and exclusive remedy for breach of
Landlord's warranty shall be for Landlord to correct any non-compliant portions
of the Base Building Improvements. Landlord shall assign the Landlord Contractor
and equipment vendor warranties to Tenant upon request following the substantial
completion of the Base Building Improvements.

4.05  Security During Construction. As part of the Base Building Improvements
Landlord will relocate glass and glazing systems on the exterior of the
Building. Landlord shall provide adequate security to prevent access to the
Building through openings created by Landlord's glass and glazing work which
would permit vandalism to Tenant's Improvements under construction in the
Building.

Section 5. DELIVERY OF POSSESSION OF THE PREMISES; DELIVERY DATE

5.01  Delivery Date. Landlord shall be deemed to have delivered possession of
the Premises to Tenant on the earlier of: (i) the date on which the Premises are
Ready for Occupancy; or (ii) the date on which the Premises would have been
Ready for Occupancy but for Tenant Delays (the "Delivery Date").

5.02  Delays in Delivery Date. Landlord shall exercise due diligence to cause
Landlord's Contractor to cause the Delivery Date to occur on the Estimated
Delivery Date. Any delay in the Delivery Date shall be governed by Section 4(b)
of the Lease.

5.03  Approvals by Landlord. Any approval by Landlord of or consent by Landlord
to any plans, specifications or other items to be submitted to and/or reviewed
by Landlord for the Tenant Improvements pursuant to this Lease shall be deemed
to be strictly limited to an acknowledgment of approval or consent by Landlord
thereto and such approval or consent shall not constitute the assumption by
Landlord of any responsibility for the accuracy, sufficiency or feasibility
of any plans, specifications or other such items and shall not imply
acknowledgment, representation or warranty by Landlord that the design is safe,
feasible, structurally sound or will comply with any legal or any governmental
requirements.

5.04. Tenant Delay. If Landlord's Contractor shall be delayed in substantially
completing the Base Building Improvements as a result of: (a) Tenant's failure
to timely submit the Tenant Improvement Working Drawings; (b) Tenant's revisions
to the Approved Tenant Improvement Working Drawings which require modification
to the Base Building Improvements; (c) Tenant's interference with Landlord's
Contractor's schedule through Tenant's Work; (d) Change Orders; or (e) delays
caused by Tenant in Landlord's construction (all of the foregoing being referred
to herein collectively as "Tenant Delay"); then the Premises will be deemed to
have been Ready for Occupancy (and Tenant's obligation to pay Base Rent shall be
accelerated) one day earlier for each day of Tenant Delay, but in any case no
earlier than April 1, 2001.

5.05  Unavoidable Delays: Landlord must identify any claimed Unavoidable Delay
by written notice to Tenant ("Unavoidable Delay Notice"), which Notice shall
specify the cause of the Unavoidable Delay as well as the estimated number of
days that Delivery Date will be delayed by such Unavoidable Delay. Landlord may
not claim any Unavoidable Delay which has not been timely documented by an
Unavoidable Delay Notice, which does not actually cause a delay in the Delivery
Date beyond the Estimated Delivery Date, or that is offset by a time saving
caused by Tenant.

                                       5
<PAGE>

Section 6. CONSTRUCTION OF TENANT IMPROVEMENTS.

6.01. Pricing The Work. Tenant shall deliver a copy of the construction
contract for construction of the Tenant Improvements (or other documentation
verifying the construction budget and work to be performed) to Landlord, within
two (2) business days following Tenant's execution thereof.

6.02  Administration of Tenant's Work. Following the Delivery Date and execution
of a construction contract, Tenant's Contractor shall administer the
construction of the Tenant Improvements in accordance with the Approved Tenant
Improvement Working Drawings. Upon and following any entry into the Premises by
Tenant's Contractor prior to the Commencement Date of the Lease Term, Tenant
shall perform all of the obligations of Tenant applicable under the Lease during
the Term (except the obligation to pay Monthly Rent and Additional Rent),
including without limitation, obligations pertaining to insurance, indemnity,
compliance with laws, Hazardous Materials and Alterations (Section 11), except
to the extent specifically inconsistent with this Work Letter. If Tenant
requests the installation of any Tenant Improvements that do not conform to the
Approved Tenant Improvement Working Drawings or conflict with elements of the
Approved Tenant Improvement Working Drawings or Base Building Plan after such
administration begins, such request shall be deemed a Change Order and shall be
subject to the provisions of Paragraph 2.03 hereof. Tenant Improvements shall
comply with all applicable regulations, laws, ordinances, codes and rules, such
compliance being the obligation of Tenant.

6.03  Indemnification. Tenant will indemnify, defend (with counsel reasonably
satisfactory to Landlord), and hold Landlord harmless from all suits, claims,
actions, loss, liability, cost, or expense (including claims for workers'
compensation, attorney fees, and costs) based on personal injury or property
damaged or contract claims (excluding any contracts to which Landlord is a party
in which such case the terms of such contract shall apply) arising from the
construction of the Tenant's Improvements, except to the extent the same arises
from the negligence or willful misconduct of Landlord, its agents, contractors
and invitees. Tenant will repair or, if reasonably necessary, replace (or, at
Landlord's election, reimburse Landlord for the reasonable cost of repairing or
so replacing) any portion of the Building, Base Building Improvements or item of
Landlord's equipment or any of Landlord's real or personal property damaged,
lost, or destroyed by Tenant, its contractors, subcontractors or suppliers or
any other tenant, invitee or guest of Tenant in the performance of Tenant's
Improvements. Landlord shall give Tenant notice of any such claimed loss within
ninety (90) days of such loss.

6.04  Insurance. Tenant's Contractor will obtain and provide Landlord with
certificates evidencing Worker's Compensation, public liability, property damage
and Builder's All Risk insurance in amounts and forms and with companies in the
amounts set forth in Section 15 of the Lease or otherwise as reasonably approved
by Landlord, and in addition naming Landlord and Landlord's constituent members,
partners and agents (including Managing Agent) as additional insureds. Tenant
shall confirm that Tenant's Contractor requires and obtains evidence of such
insurance in customary amounts and forms from all of its subcontractors and
suppliers.

6.05  Rules and Regulations. Tenant and Tenant's Contractor will comply with any
reasonable rules, regulations, or requirements that Landlord or Landlord's
Contractor may impose by written notice to Tenant given sufficiency in advance
to permit such compliance. Tenant's agreement with Tenant's Contractor will
require each of the general contractor and subcontractors to keep the Premises
and Property in a reasonably safe, clean and orderly condition during the
performance of the Tenant's Improvements.

6.06  Tenant's Contractors. Tenant's Contractor will licensed in California and
bondable.

6.07  Early Entry. Pursuant to Section 3 of the Lease, and prior to the Delivery
Date, Landlord will permit entry of Tenant's Contractor and subcontractors into
the Premises for the purposes of performing Tenant's Improvements. Such entry
shall be at the times that Landlord's Contractor reasonably deems feasible under
the circumstances and pursuant to the requirements of this Section 6. Tenant's
license to enter before commencement of the Term is expressly conditioned on the
contractor retained by Tenant working in harmony and not interfering with the
workers, mechanics,

                                       6
<PAGE>

and contractors of Landlord. If at any time the entry or work by Tenant's
Contractor causes any unreasonable interference with the construction of the
Base Building Improvements, Landlord shall so notify Tenant and Tenant shall
instruct Tenant's Contractor to comply with the reasonable requests of
Landlord's contractor and cease the activity causing such interference. Tenant's
work shall not interfere with the completion of the Base Building Improvements
and any such interference may be considered a Tenant Delay hereunder.

6.08  Risk of Loss. All materials, work, installations, and decorations of any
nature brought on or installed in the Premises by or on behalf of Tenant before
the commencement of the Term will be at Tenant's risk, and neither Landlord nor
any party acting on Landlord's behalf will be responsible for any damage, loss,
or destruction except for damage arising from their gross negligence or willful
misconduct.

6.09  Condition of Tenant's Improvements. All work performed by Tenant will be
performed in a good and workmanlike manner, will be of good quality and free
from defects in design, materials, and workmanship, and will be completed in
strict compliance with the Approved Tenant Improvement Working Drawings, as the
same may have been modified by Tenant by Change Orders or otherwise. All work to
be performed by or for Tenant pursuant to this Work Letter will be performed
diligently, in a first-class manner, and in compliance with all applicable laws,
ordinances, regulations, and rules of any public authority having jurisdiction
over the Premises and Tenant and (if applicable) Landlord's insurance carriers.
Landlord will have the right, but not the obligation, to periodically inspect
the work on the Premises and, if any work fails to conform to the Approved
Tenant Improvement Working Drawings, may require changes in the method or
quality of the work to conform to such approved plans and specifications. Tenant
shall file and provide Landlord with a copy of the Notice of Completion,
Certificate of Occupancy (or equivalent document) and any other required permit
or notice for the Tenant Improvements. Upon completion of the Tenant
Improvements, which Tenant shall complete on or before August 1, 2001, Tenant
shall provide Landlord with Tenant's Architect's Certificate of Substantial
Completion (in substance reasonably equivalent to AIA Form G704) and a set of
"as-built" drawings for the completed Tenant Improvement work.

Section 7. MISCELLANEOUS.

7.01  Tenant's Representative. Tenant hereby designates Cindy Mallay of
CacheFlow, Inc., as its sole representative with respect to the matters set
forth in this Work Letter, who, until further notice to Landlord, shall have
full authority and responsibility to act on behalf of the Tenant as required in
this Work Letter, and Landlord shall be entitled to rely upon the decisions and
agreements made by such representative as binding upon Tenant.

7.02  Landlord's Representative. Landlord hereby designates Michael Newbro of
Makai Properties ("Managing Agent") as its sole representatives with respect to
the matters set forth in this Work Letter, who, until further notice to Tenant,
shall have full authority and responsibility to act on behalf of the Landlord as
required in this Work Letter.

7.03  Tenant's Lease Default. Notwithstanding any provision to the contrary
contained in this Lease, if an Event of Default as described in Section 22 of
the Lease or a material default by Tenant under this Work Letter has occurred at
any time on or before the Commencement Date, then (i) in addition to all other
rights and remedies granted to Landlord pursuant to the Lease, Landlord shall
have the right to withhold payment of all or any portion of the Allowance, and
(ii) all other obligations of Landlord under the terms of this Work Letter shall
be suspended until such time as such default is cured pursuant to the terms of
this Lease (in which case, Tenant shall be responsible for any delay in the
Delivery Date or Commencement Date caused by such inaction by Landlord),

7.04  Merger. The provisions of this Work Letter are deemed incorporated into
the Lease and together shall be interpreted as one document. Except as expressly
set forth in this Work Letter, Landlord has no other agreement with Tenant and
has no other obligation to do any work or pay any amounts with respect to the
Premises. Any other work on the Premises that may be permitted by

                                       7
<PAGE>

Landlord pursuant to the terms and conditions of the Lease shall be done at
Tenant's sole cost and expense and in accordance with the terms and conditions
of the Lease.

7.05  Applicability of Work Letter. This Work Letter shall not be deemed
applicable to any additional space added to the original Premises at any time or
from time to time, whether by any options under the Lease or otherwise, or to
any portion of the original Premises or any additions thereto in the event of
damage or destruction of the Premises, condemnation of the Premises, or renewal
or extension of the initial term of the Lease, whether by any options under the
Lease or otherwise, unless expressly so provided in the Lease or any amendment
or supplement thereto.

IN WITNESS WHEREOF, the parties have executed this Work Letter as of the date of
the Lease.

"Landlord": Sunnyvale VIH Trust, a Maryland business trust

/s/ [ILLEGIBLE]
---------------------------------
    [ILLEGIBLE], Vice President
Date: _________ ___, 2001

"Tenant": CacheFlow Inc., a Delaware corporation

/s/ Brian NeSmith
---------------------------------
Brian NeSmith, President and CEO
Date: _________ ___, 2001

                                       8
<PAGE>

                                                                     Exhibit C-l
                          BASE BUILDING IMPROVEMENTS
                             AND SITE IMPROVEMENTS

477-475 Potrero Avenue, Sunnyvale California

Base Building Improvements
--------------------------

     1.   Demolition of interior improvements and return to cold shell
          condition.
     2.   Relocate glass and glazing system to exterior wall location on first
          floor, in accordance with plans provided by Landlord's Architect dated
          3-2l-01 as previously approved by Tenant's Architect.
     3.   Complete seismic retrofit as defined in plans and specifications
          provided by A.S.E. Consulting Engineers, Inc. dated 12-20-00.
     4.   Install new roof membrane (including a 10-year manufacturers
          warranty).
     5.   Upgrade and refurbish the elevator, including new ADA phone and
          position indicator, hall stations with jamb braille and fire signage,
          microlight door detector, ADA car riding lantern and gong, handrails
          and pad buttons, and interior laminated panels with stainless steel
          reveals.

Site Improvements
-----------------
     1.   Upgrade landscaping in accordance with plans and specifications
          approved by the City of Sunnyvale and furnished by Winterbotham
          Partnership dated 03-29-01.
     2.   Upgrade the ADA access to the building by installing new access
          approaches at the North and South elevations, and furnishing a new
          ramp at the East entry in accordance with the Site Plan provided by
          Landlord's Architect dated 3-26-01 and as required by the City of
          Sunnyvale.
     3.   Tex-cote and paint the Building exterior with elastomeric paint
     4.   Re-seal and Re-stripe the Property parking lot, and remove speed
          bumps.

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