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                                 Tri Commercial

STANDARD OFFICE LEASE - FULL SERVICE

THIS LEASE is made and entered into this 26th day of July, 2000, by and between
Eureka Corporate Plaza., Ltd., L.P (hereinafter "Lessor") and Feather River
State Bank, a California corporation (hereinafter "Lessee").

For and in consideration of the rental and of the covenants and agreements
hereinafter set forth to be kept and performed by the Lessee, Lessor hereby
leases to Lessee and Lessee hereby leases from Lessor the Premises herein
described for the term, at the rental and subject to and upon all of the terms,
covenants and agreements hereinafter set forth.

1.    PREMISES

      1.1 Description. Lessor hereby leases to Lessee and Lessee hereby rents
      from Lessor those certain Premises (hereinafter "Premises") crosshatched
      on Exhibit A containing approximately 3,816 rentable square feet on the
      first floor of that certain office building (hereinafter "Building")
      located in the City of Roseville, County of Placer, California, commonly
      known as, 1552 Eureka Rd., and more particularly described as Suite 101.
      The above square footage contains a twelve percent (12%) load factor. 1.2
      Work of Improvement. The obligations of' Lessor and Lessee to perform the
      work and supply the necessary materials and labor to prepare the Premises
      for occupancy are set forth in detail in Exhibit "D". Lessor and Lessee
      shall expend all funds and do all acts required of them in Exhibit "D" and
      shall have the work performed promptly and diligently in a first class
      workmanlike manner. Upon mutual approval of a space plan for the Premises,
      said space plan shall be attached hereto as Exhibit "B".

2.    TERM

      2.1 Term. The term of this Lease shall be for sixty two (62) months
      commencing October 1, 2000 and ending on November 30, 2005 unless sooner
      terminated pursuant to this Lease.

      2.2 Delay in Commencement. Lessee agrees that in the event of the
      inability of Lessor for any reason to deliver possession of the Premises
      to Lessee on the commencement date set forth in Section 2.1, Lessor shall
      not be liable for any damage thereby nor shall such inability affect the
      validity of this Lease or the obligations of Lessee hereunder, but in such
      case Lessee shall not be obligated to pay rent or other monetary sums
      until possession of the Premises is tendered to Lessee. In the event of a
      delay in commencement, the lease expiration shall be adjusted to reflect a
      five (5) year term from the date possession of the lease space is tendered
      to Lessee. In the event Lessor shall not have delivered possession of the
      Premises within three (3) months from the scheduled commencement date,
      then Lessee may terminate this Lease and upon Lessor's return of any
      monies previously deposited by Lessee, the parties shall have no further
      rights or liabilities toward each other.

      2.3 Acknowledgement of Commencement Date. In the event the commencement
      date of the term of the Lease is other than as provided in Section 2.1,
      then Lessor shall provide Lessee with written notice establishing the date
      of Tender of Possession as defined below. Tender of Possession, or actual
      taking of possession by Lessee, whichever first occurs, shall be
      conclusive as the establishment of the Commencement Date for Section 2.1.

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      "Tender of Possession"-defined. See Exhibit "D".

      2.4 Early Possession. In the event that Lessor shall permit Lessee to
      occupy the Premises prior to the commencement date of the term, such
      occupancy shall be subject to all the provisions of this Lease. Said early
      possession shall not advance the termination date hereinabove provided.

3.    BASE RENT. Lessee shall pay to Lessor as base rent for the Premises in
      advance on the first day of each calendar month of the term of this Lease
      without deduction, offset, prior notice or demand, in lawful money of the
      United States, the sum of (See Addendum Paragraph 20) (subject to
      additional rental as provided in paragraph 5). If the commencement date is
      not the first day of a month, or if the Lease termination date is not the
      last day of a month, a prorated monthly installment shall be paid at the
      then current rate for the fractional month during which the Lease
      commences and/or terminates. Concurrently with Lessee's execution of this
      Lease, Lessee shall pay to Lessor the sum of' Six Thousand Two Hundred
      Ninety Six and 40/100ths Dollars ($6,296.40) as rent for the third month
      of the Lease term. Lessee acknowledges that the above Base Rent amount is
      based on the square footage of the lease space and is therefore subject to
      adjustment based on a final, mutually approved space plan.

4.    SECURITY DEPOSIT. Concurrently with Lessee's execution of this Lease,
      Lessee shall deposit with Lessor the sum of Six Thousand Two Hundred
      Ninety Six and 40/100ths Dollars ($6,296.40). Said sum shall be held by
      Lessor as a Security Deposit for the faithful performance by Lessee of all
      of the terms, covenants, and conditions of this Lease to be kept and
      performed by Lessee during the term hereof. If Lessee defaults with
      respect to any provision of this Lease, including but not limited to the
      provisions relating to the payment of rent and any of the monetary sums
      due herewith, Lessor may (but shall not be required to) use, apply or
      retain all or any part of this Security Deposit for the payment of any
      other amount which Lessor may spend by reason of Lessee's default or to
      compensate Lessor for any other loss or damage which Lessor may suffer by
      reason of Lessee's default. If any portion of said Deposit is so used or
      applied, Lessee shall, within ten (10) days after written demand therefor,
      deposit cash with Lessor in an amount sufficient to restore the Security
      Deposit to its original amount; Lessee's failure to do so shall be
      material breach of this Lease. Lessor shall not be required to keep this
      Security Deposit separate from its general funds, and Lessee shall not be
      entitled to interest on such deposit. If Lessee shall fully and faithfully
      perform every provision of this Lease to be performed by it, the Security
      Deposit or any balance thereof' shall be returned to Lessee (or, at
      Lessor's option, to the last assignee of Lessee's interests hereunder) at
      the expiration of the Lease term and after Lessee has vacated the
      Premises. In the event of termination of Lessor's interest in this lease,
      Lessor shall transfer said Deposit to Lessor's successor in interest
      whereupon Lessee agrees to release Lessor from liability for the return
      of' such Deposit or the accounting therefor. Lessee agrees that the amount
      of the Security Deposit is based on the square footage of the lease space
      and is therefore subject to adjustment based on a final, mutually approved
      space plan.

5.    TAX AND BUILDING OPERATING COST INCREASES

      5.1 Definitions. For purposes of this Section, the following terms are
      herein defined:

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            (a) Base Year: 2000.

            (b) Project: Eureka Corporate Plaza, Phase 1, Phase II and Phase
      III, consisting of approximately 90,350 gross square feet of building area
      along with landscaping and parking areas ("Common Area"). Said square
      footage is subject to change as additional phases of the project are
      completed.

            (c) Building Operating Costs: All reasonable costs and expenses of
      ownership, operation maintenance, of the Building (excluding depreciation
      on the Building, all amounts paid on loans of Lessor and expenses
      capitalized for federal income tax purposes) including by way of
      illustration but not limited to; real and personal property taxes and
      assessments, and any tax in addition to or in lieu thereof, other than
      taxes covered by Section 5.4, whether assessed against Lessor or Lessee or
      collected by Lessor or both; repairs, replacements and general maintenance
      of and for the Building and public common areas and facilities of and
      comprising the Building, the roof and roof membrane, windows, elevators,
      restrooms, lobbies, mezzanines, balconies, mechanical rooms, building
      exteriors, alarm systems, pest extermination, landscaped areas, parking
      and service areas, driveways, sidewalks, loading areas, fire sprinklers
      systems, sanitary and storm sewer lines, utility services,
      heating/ventilation/air conditioning systems, electrical, mechanical or
      other systems, Building telephone equipment, and wiring servicing,
      plumbing, lighting, and any other items or areas which affect the
      operation or appearance of the Building, (but excluding persons performing
      services not uniformly available or performed for substantially all
      Building Tenants), and rental expense or a reasonable allowance for
      depreciation of personal property used in the maintenance, operation and
      repair of the Building.

            In addition, the Building Operating Costs shall include the
      Building's proportionate share of the Owner's Association dues connected
      with day-to-day operating, maintenance and repair of the common area of
      the Project, its equipment the adjacent walks, malls and landscaped areas,
      including by way of illustration but not limited to scavenger, gardening,
      security, striping, sealing, asphalt repair or replacement, and the cost
      of compensation (including employment taxes and fringe benefits) of all
      persons who perform regular and recurring duties connected with the above
      duties. The Building's proportionate share of the Owner's Association dues
      shall be computed on the basis of the ratio between the Gross Building
      square footage and the total Project square footage, as may be adjusted
      from time to time as other phases of the project are completed.

            (d) Gross-Up. If the rentable area of the Building is less than
      ninety-five percent (95%) occupied during any calendar year of the term as
      determined by Lessor, Lessor shall make an appropriate adjustment to the
      variable components of Building Operating Costs (e.g., utilities,
      janitorial services and other component expenses that are affected by
      variations in occupancy levels) for such year so that Tenant pays an
      equitable portion of the increases in all variable items of Building
      Operating Costs, as reasonably determined by Lessor; provided, however,
      that in no event shall Lessor be entitled to collect in excess of one
      hundred percent (100%) of the total Building Operating Cost increases from
      all of the tenants in the Building.

            (e) Net Rentable Area: The net rentable area is computed by
      measuring to the window glass of outer building walls, to the middle of'
      the Premises side of' public corridors and/or other permanent partitions
      and to the center of partitions which separate the adjoining rentable
      areas with no deduction for columns and projections necessary to the
      Building structure. On multi-tenant floors, common corridors and toilets,
      air conditioning rooms, fan rooms, janitorial closets, electrical and
      telephone closets and any other areas within and

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      exclusively serving that floor are considered common area and for purposes
      of this Section shall be allocated prorata to the Tenants on the floor.

      5.2 Lessee's Share. In the event the Building Operating Costs incurred by
      Lessor during any calendar year following the Base Year shall exceed
      Building Operating Costs incurred by Lessor during the Base Year, Lessee
      shall pay to Lessor an amount equal to twenty-five and 61/100ths percent
      (25.61%) of such increase, which share is computed on the basis of the
      ratio between Net Rentable Area in the Premises and Net Rentable Area in
      the Building. Lessee acknowledges that Lessee's proportionate share is
      based on the square footage of the lease space and is therefore subject to
      adjustment based on a final, mutually approved space plan.

      5.3 Payment. Within ninety (90) days after the end of each calendar year
      following the Base Year, Lessor shall furnish Lessee a written statement
      showing in reasonable detail Lessor's Building Operating Costs for the
      preceding calendar year and the Base Year, and showing the amount, it'
      any, of any increase or decrease in the sums due from Lessee taking into
      account prior increases paid by Lessee (if any). However, the failure of
      Lessor to supply such statement within said ninety (90) day period shall
      not constitute a waiver of Lessor's right to collect for any current or
      past due Building Operating Cost overages during the term of this Lease.
      Lessor and Lessee intend that the obligations of the preceding sentence
      shall survive the expiration or earlier termination of this Lease.
      Concurrent with the monthly rent payment next due following Lessee's
      receipt of such statement, Lessee shall pay to Lessor (in the case of an
      increase), or Lessor shall credit against the next rent due from Lessee
      (in the case of a decrease), all amount equal to the sum of (1) the
      difference between Building Operating Costs for the preceding calendar
      year and the Base Year less increases paid by Lessee (if any); and (2)
      one-twelfth (1/12th) of said increases for the current calendar year
      multiplied by the number of rent payments (including the current one) then
      elapsed in such calendar year. Thereafter the one twelfth (1/12th) shall
      be paid monthly with the rent until the adjustment the following year
      pursuant hereto. In no event shall the adjustment entitled Lessee to
      receive the benefit of a reduction in Building Operating Costs below the
      level of the initial Base Year during the term hereof.

      5.4 New Taxes. In addition to rent and other charges to be paid by Lessee
      hereunder, Lessee shall reimburse to Lessor, within thirty (30) days of
      receipt of a demand therefor, any and all taxes payable by Lessor (other
      than net income taxes) whether or not now customary or within the
      contemplation of the parties hereto; (a) upon, allocable to, or measured
      by the area of the Premises or on the rent payable hereunder, including
      without limitation any gross income tax or excise tax levied by the State,
      any political subdivision thereof, City or Federal Government with respect
      to the receipt of such rent; or (b) upon or with respect to the
      possession, leasing, operation, management, maintenance, alteration,
      repair, use or occupancy by Lessee of the Premises or any portion thereof;
      or (c) upon or measured by the value of Lessee's personal property,
      equipment or fixtures located in the Premises; or (d) upon this
      transaction or any document to which Lessee is a party creating or
      transferring an interest or an estate in the Premises. Lessee agrees to
      pay, before delinquency, any and all taxes levied or assessed and which
      become payable during the term hereof upon Lessee's equipment, furniture,
      fixtures and other personal property located in the Premises. For the
      purpose of determining said amount, figures supplied by the County
      Assessor as to the amount so assessed shall be conclusive. Lessee shall
      comply with the provisions of any law, ordinance or rule of the taxing
      authorities which require Lessee to file a report of Lessee's property
      located in the Premises.

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6.    USE

      6.1 Use. The Premises shall be used and occupied by Lessee for bank retail
      and loan office purpose and for no other purpose without the prior written
      consent of Lessor,

      6.2 Suitability. Lessee acknowledges that neither Lessor nor any agent of
      Lessor has made any representation or warranty with respect to the
      Premises or the Building or with respect to the suitability of either for
      the conduct of Lessee's business, nor has Lessor agreed to undertake any
      modification, alteration or improvement to the Premises except as provided
      in this Lease.

      6.3 Uses Prohibited.

            (a) Lessee shall not do or permit anything to be done in or about
      the Premises nor bring or keep anything therein which will in any way
      increase the existing rate or affect any fire or other insurance upon the
      Building or any of its contents (unless Lessee shall pay any increased
      premium as a result of such use or acts), or cause a cancellation of any
      insurance policy covering said Building or any part thereof or any of its
      contents, nor shall Lessee sell or permit to be kept, used or sold in or
      about said Premises any articles which may be prohibited by a standard
      form policy of fire insurance.

            (b) Lessee shall not do or permit anything to be done in or about
      the Premises which will in any way obstruct or interfere with the rights
      of other Tenants or occupants of the Building or injure or annoy them or
      use or allow the Premises to be used for any unlawful or objectionable
      purpose, nor shall Lessee cause, maintain or permit any nuisance in or
      about the Premises. Lessee shall not commit or suffer to be committed any
      waste in or upon the Premises.

            (c) Lessee shall not use the Premises or permit anything to be done
      in or about the Premises which will in any way conflict with any law,
      statute, ordinance or governmental rule or regulation or requirement of
      duly constituted public authorities now in force or which may hereafter be
      enacted or promulgated. Lessee shall at its sole cost and expense promptly
      comply with all laws, statutes, ordinances and governmental rules,
      regulations or requirements now in force or which may hereafter be in
      force and with the requirements of any board of fire underwriters or other
      similar body now or hereafter constituted relating to or affecting the
      condition, use or occupancy of the Premises, excluding structural changes
      not relating to or affecting the condition, use or occupancy of the
      premises, or not related or afforded by Lessee's improvements or acts. The
      judgment of any court of competent jurisdiction or the admission of Lessee
      in any action against Lessee, whether Lessor be a party thereto or not,
      that Lessee his violated any law, statute, or ordinance or governmental
      rule, regulation or requirement, shall be conclusive of the fact as
      between Lessor and Lessee.

7.    SERVICE AND UTILITIES

      7.1 Lessor's Obligations. Lessor agrees to furnish to the Premises twenty
      four (24) hours a day (Monday through Friday) and 9:00 a.m. to 1:00 p.m.
      (Saturday), and subject to the Rules and Regulations of the Building
      (which are attached hereto as Exhibit "C") water, gas and electricity
      suitable for the intended use of the Premises, heat and air conditioning
      required in Lessor's judgment for the comfortable use and occupancy of the
      Premises, scavenger, janitorial and window washing service and elevator
      service, and security customary in similar buildings in the competing
      geographical areas. Lessor shall also maintain and keep lighted the common
      stairs, entries and toilet rooms in the Building. Any extra HVAC beyond
      these hours to be at Lessee's cost.

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      7.2 Lessee's Obligation. Lessee shall pay for, prior to delinquency, all
      telephone and all other materials and services, not expressly required to
      be paid by Lessor, which may be furnished to or used in, on or about the
      Premises during the term of this Lease.

      7.3 Lessee's Additional Requirements.

            (a) Lessee will not, without the written consent of Lessor, use any
      apparatus or device in the Premises, including but without limitation
      thereto, electronic data processing machines, punch card machines and
      machines using current in excess of I 10 volts, which will in any way
      increase the amount of electricity or water usually furnished or supplied
      for use of the Premises as general office space; nor connect with electric
      current, except through existing electrical outlets in the Premises, or
      water pipes, any apparatus or device, for the purposes of using electric
      current or water.

            (b) If Lessee shall require water or electric current in excess of
      that usually furnished or supplied for use of the Premises as general
      office space, Lessee shall first procure the consent of Lessor for the use
      thereof, which consent Lessor may refuse and Lessor may cause a water
      meter or electric current meter to be installed in the Premises, so as to
      measure he amount of water and electric current consumed for any such
      other use. The cost of such meters and of installation, maintenance and
      repair thereof shall be paid for by Lessee and Lessee agrees to pay Lessor
      promptly upon demand by Lessor for all such water and electric current
      consumed as shown by said meters, at the rates charged for such services
      by the City in which the Building is located or the local public utility,
      as the case may be, furnishing the same, plus any additional expense
      incurred in keeping account of the water and electric current so consumed.

            (c) Wherever heat generating machines or equipment are used in the
      Premises which affect the temperature otherwise maintained by the air
      conditioning system, Lessor reserves the right to install supplementary
      air conditioning units in the Premises and the cost thereof, including the
      cost of installation, operation, and maintenance thereof, shall be paid by
      Lessee to Lessor.

            7.4 Non-Liability. Lessor shall not be liable for, and Lessee shall
      not be entitled to, any abatement or reduction of rent by reason or
      Lessor's failure to furnish any of the foregoing when such failure is
      caused by accidents, breakage, repairs, strikes, lockouts or other labor
      disturbances or labor disputes of any character, or by any other cause
      similar or dissimilar, beyond the reasonable control of Lessor. Lessor
      shall not be liable under any circumstances, except for instances of
      Lessor's negligence, for loss of or injury to property, however occurring,
      through or in connection with or incidental to failure to furnish any of
      the foregoing.

8.    MAINTENANCE AND REPAIRS; ALTERATIONS AND ADDITIONS

      8.1 Maintenance and Repairs.

            (a) Lessor's Obligations. Lessor shall maintain in good order,
      condition and repair the Building and all other portions of the Premises
      not the obligation of Lessee or any other tenant in the Building.

            (b) Lessee's Obligations.

                  (i) Lessee at Lessee's sole cost and expense, except for
      services furnished by Lessor pursuant to Section 7 hereof, shall maintain
      the Premises in good order, condition and repair including the interior
      surfaces of the ceilings, walls and floors, all doors, interior windows,
      exterior windows at or below street level, all plumbing pipes, electrical
      wiring,

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      switches, fixtures and special items in excess of building standard
      furnishings, and equipment installed by or at the expense of Lessee.

                  (ii) Upon the expiration or earlier termination of this Lease,
      Lessee shall surrender the Premises in the same condition as received,
      ordinary wear and tear and damage by fire, earthquake, act of God or the
      elements alone excepted, and shall promptly remove or cause to be removed
      at Lessee's expense from the Premises and the Building any signs, notices
      and displays placed by Lessee.

                  (iii) Lessee agrees to repair any damage to the Premises or
      the Building caused by or in connection with the removal of any articles
      of personal property, business or trade fixtures, machinery, equipment,
      cabinetwork, furniture, movable partition or permanent improvements or
      additions, including without limitation thereto, repairing the floor and
      patching and painting the walls where required by Lessor to Lessor's
      reasonable satisfaction, all at Lessee's sole cost and expense. Lessee
      shall indemnify the Lessor against any loss or liability resulting from
      decay by Lessee in so surrendering the Premises, including without
      limitation any claims made by any succeeding tenant founded on such delay.

                  (iv) In the event Lessee fails to maintain the Premises in
      good order, condition and repair, Lessor shall give Lessee notice to do
      such acts as are reasonably required to so maintain the Premises. In the
      event Lessee fails to promptly commence such work and diligently prosecute
      it to completion, then Lessor shall have the right to do such acts and
      expend such funds at the expense of Lessee as are reasonably required to
      perform such work. Any amount so expended by Lessor shall be paid by
      Lessee promptly after demand with interest at ten percent (10%) per annum
      from the date of such work. Lessor shall have no liability to Lessee for
      any damage, inconvenience or interference with the use of the Premises by
      Lessee as a result of performing any such work.

            (c) Compliance with Law. Lessor and Lessee shall each do all acts
      required to comply with all applicable laws, ordinances, regulations and
      rules of any public authority relating to their respective maintenance
      obligations as set forth herein.

      8.2 Alterations and Additions.

            (a) Lessee shall make no alterations, additions or improvements to
      the Premises or any part thereof without obtaining the prior written
      consent of Lessor.

            (b) Lessor may impose as a condition to the aforesaid consent such
      requirements as Lessor may deem necessary in its sole discretion,
      including without limitation thereto, the manner in which the work is
      done, a right of approval of the contractor by whom the work is to be
      performed, the times during which is to be accomplished, and the
      requirement that upon written request of Lessor prior to the expiration or
      earlier termination of the Lease, Lessee will remove any and all permanent
      improvements or additions to the Premises installed at Lessee's expense
      and all movable partitions, counters, personal property, equipment,
      fixtures and furniture.

            (c) All such alterations, additions or improvements shall at the
      expiration or earlier termination of the Lease become the property of
      Lessor and remain upon and surrendered with the Premises, unless specified
      pursuant to Section 8.2(b) above.

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            (d) All articles of personal property and all business and trade
      fixtures, machinery and equipment, cabinetwork, furniture and movable
      partitions owned by Lessee or installed by Lessee at its expense in the
      Premises shall be and remain the property of Lessee and may be removed by
      Lessee at any time during the Lease term when Lessee is not in default
      hereunder.

9.    ENTRY BY LESSOR. Lessor reserves and shall at any and all times have the
      right to enter the Premises to inspect the same, to supply janitor service
      and any other service to be provided by Lessor to Lessee hereunder, to
      submit said Premises to prospective purchasers or Lessees, to post notices
      of non-responsibility and "for lease" signs, and to alter, improve or
      repair the Premises and any portion of the Building without abatement of
      rent, and may for that purpose erect scaffolding and other necessary
      structures where reasonably required by the character of the work to be
      performed, always providing the entrance to the Premises shall not be
      blocked thereby, and further providing that the business of Lessee shall
      not be interfered with unreasonably. Lessee hereby waives any claim for
      damages for any injury or inconvenience to or interference with Lessee's
      business, any loss of occupancy or quiet enjoyment of the Premises, and
      any other loss occasioned thereby. For each of the aforesaid purposes,
      Lessor shall at all times have and retain a key with which to unlock all
      of the doors in, upon and about the Premises, excluding Lessee's vaults
      and safes, and Lessor shall have the right to use any and all means which
      Lessor may deem proper to open said doors in an emergency, in order to
      obtain entry to the Premises and any entry to the Premises obtained by
      Lessor by any of said means, or otherwise, shall not under any
      circumstances be construed or deemed to be a forcible or unlawful entry
      into, or a detainer of, the Premises, or an eviction of Lessee from the
      Premises or any portion thereof. Any entry of Premises by Lessor shall be
      without liability to Lessee except for any failure to exercise due care
      for Lessee's property.

10.   LIENS. Lessee shall keep the Premises and any building of which the
      Premises are a part free from any liens arising out of work performed,
      materials furnished, or obligations incurred by Lessee and shall
      indemnify, hold harmless and defend Lessor from any liens and encumbrances
      arising out of any work performed or materials furnished by or at the
      direction of Lessee. In the event that Lessee shall not, within twenty
      (20) days following the imposition of any such lien, cause such lien to be
      released of record by payment or posting of a proper bond, Lessor shall
      have, in addition to all other remedies provided herein and by law, the
      right, but no obligation, to cause the same to be released by such means
      as it shall deem proper, including payment of the claim giving rise to
      such lien. All such sums paid by Lessor and all expenses incurred by it in
      connection therewith including attorney's fees and costs shall be payable
      to Lessor by Lessee on demand with interest at the rate of ten percent
      (10%) per annum. Lessor shall have the right at all times to post and keep
      posted on the Premises any notices permitted or required by law or which
      Lessor shall deem proper, for the protection of Lessor and the Premises,
      and any other party having an interest therein, from mechanics' and
      materialmen's liens, and Lessee shall give to Lessor at least ten (10)
      business days prior written notice of the expected date of commencement of
      any work relating to alterations or additions to the Premises.

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11.  INDEMNITY.

     11.1 Indemnity. Lessee shall indemnity and hold Lessor harmless from and
     defend Lessor against any and all claims of liability for any injury or
     damage to any person or property whatsoever; (1) occurring in, on or about
     the Premises or any part thereof; and (2) occurring in, on or about any
     facilities (including, without prejudice to the generality of the term
     "facilities," elevators, stairways, passageways, hallways, and parking
     areas), the use of which Lessee may have in conjunction with other tenants
     of the Building, when such injury or damage is caused in part or in whole
     by the act, neglect, fault or omission of any duty with respect to the same
     by Lessee, its agents, contractors, employees or invitees. Lessee shall
     further indemnify and hold Lessor harmless from and against any and all
     claims arising from any breach or default in the performance of any
     obligation on Lessee's part to be performed under the terms of this Lease,
     or arising from any act or negligence of Lessee, or any of its agents,
     contractors, employees and from and against all costs, attorney's fees,
     expenses and liabilities incurred in the defense of any such claim or any
     action or proceeding brought thereon. In case any action or proceeding be
     brought against Lessor by reason of any such claim, Lessee, upon notice
     from Lessor, shall defend the same at Lessee's expense by counsel
     reasonably satisfactory to Lessor, provided, however, that Lessee shall not
     be liable for damage or injury occasioned by the negligence or intentional
     acts of Lessor and its designated agents or employees unless covered by
     insurance Lessee is required to provide. Lessee, as a material part of the
     consideration to Lessor, hereby assumes all risk of damage to property or
     injury to persons in, upon or about the Premises from any cause and
     Lessee's hereby waives all claims in respect thereof against Lessor, except
     in instances where such damage or injury is caused by Lessors negligence.
     Lessor shall indemnify and hold Lessee harmless of all losses due to
     Lessor's negligence.

     11.2 Exemption of Lessor from Liability. Lessor shall not be liable for
     injury or damage which may be sustained by the person, goods, wares,
     merchandise or property of Lessee, its employees, invitees or customers, or
     any other person in or about the Premises caused by or resulting from fire,
     steam, electricity, gas, water or rain, which may leak or flow from or into
     any part of the Premises, or from the breakage, leakage, obstruction or
     other defects of the pipes, sprinklers, wires, appliances, plumbing, air
     conditioning or lighting fixtures of the same, whether the damage or injury
     results from conditions arising upon the Premises or upon other portions of
     the Building of which the Premises are a part, or from other sources.
     Lessor shall not be liable for any damages arising from any act or neglect
     of any other tenant of the Building.

12.  INSURANCE

      12.1 Coverage. Lessee shall, at all times during the term of this Lease,
      and at its own cost and expense procure and continue in force the
      following insurance coverage:

            (a) Bodily Injury and Property Damage Liability insurance with a
      combined single limit for bodily injury and property damage of not less
      than $1,000,000.

            (b) Fire and Extended Coverage Insurance, including vandalism and
      malicious mischief coverage, in an amount equal to the full replacement
      value of all fixtures, furniture and improvements.

     12.2 Insurance Policies. The aforementioned minimum limits of policies
     shall in no event limit the liability of Lessee hereunder. The aforesaid
     insurance shall name Lessor as an additional insured. Said insurance shall
     be with companies having a rating of not less

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      than AA in "Best's Insurance Guide." Lessee shall furnish from the
      insurance companies or cause the insurance companies to furnish
      certificates of coverage. No such policy shall be cancelable or subject to
      reduction of coverage or other modification or cancellation except after
      thirty (30) days prior written notice to Lessor by the insurer. All such
      policies shall be written as primary policies, not contributing with and
      not in excess of the coverage which Lessor may carry. Lessee shall, at
      least twenty (20) days prior to the expiration of such policies, furnish
      Lessor with renewals or binders. Lessee agrees that if Lessee does not
      take out and maintain such insurance, Lessor may (but shall not be
      required to) procure said insurance on Lessee's behalf and charge Lessee
      the premiums together with a twenty-five percent (25%) handling charge,
      payable upon demand. Lessee shall have the right to provide such insurance
      coverage pursuant to blanket policies obtained by Lessee provided such
      blanket policies expressly afford coverage to the Premises and to Lessee
      as required by this Lease. Lessee must provide certificate of insurance
      prior to initial occupancy of premises or Lessee shall be in default of
      Lease.

      12.3 Waiver of Subrogation. Lessor and Lessee each hereby waive any and
      all rights of recovery against the other or against the officers,
      employees, agents and representatives of the other, on account of loss or
      damage occasioned to such waiving party or its property or the property of
      others under its control to the extent that such loss or damage is insured
      against under any fire and extended coverage insurance policy which either
      may have in force at the time of such loss or damage. Lessee shall, upon
      obtaining the policies of insurance required under this Lease, give notice
      to the insurance carrier or carriers that the foregoing mutual waiver of
      subrogation is contained in this Lease.

13.   DAMAGE OR DESTRUCTION

      13.1 Partial Damage - Insured. In the event the Premises or the Building
      are damaged by any casualty which is covered under fire and extended
      coverage insurance carried by Lessor, then Lessor shall restore such
      damage provided insurance proceeds are available to pay eighty percent
      (80%) or more of the cost of restoration and provided such restoration can
      be completed within sixty (60) days after the commencement of the work in
      the opinion of a registered architect or engineer appointed by Lessor. In
      such event this Lease shall continue in full force and effect, except that
      Lessee shall be entitled to proportionate reduction of rent while such
      restoration takes place, such proportionate reduction to be based upon the
      extent to which the restoration efforts interfere with Lessee's business
      in the Premises.

      13.2 Partial Damage - Uninsured. In the event the Premises or the Building
      are damaged by a risk not covered by Lessor's insurance or the proceeds of
      available insurance are less than eighty percent (80%) of the cost of
      restoration, or if the restoration cannot be completed within sixty (60)
      days after the commencement of work in the opinion of the registered
      architect or engineer appointed by Lessor, then Lessor shall have the
      option either to (1) repair or restore such damage, this Lease continuing
      in full force and effect, but the rent to be proportionately abated as
      hereinabove provided, or (2) give notice to Lessee at any time within
      thirty (30) days after such damage terminating this Lease as of a date to
      be specified in such notice, which date shall be not less than thirty (30)
      nor more than sixty (60) days after giving such notice. In the event of
      the giving of such notice, this Lease shall expire and all interest of
      Lessee in the Premises shall terminate on such date so specified in such
      notice and the rent, reduced by any proportionate reduction based upon the
      extent, if any, to which said damage interfered with the use and occupancy
      of Lessee, shall be paid to the date of such termination; Lessor agrees to

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      refund to the Lessee any rent theretofore paid in advance for any period
      of time subsequent to such date.

      13.3 Total Destruction. In the event the Premises are totally destroyed or
      the Premises cannot be restored as required herein under applicable laws
      and regulations, not withstanding the availability of insurance proceeds,
      this Lease shall be terminated effective the date of the damage.

      13.4 Damage Near End of the Term. Notwithstanding anything to the contrary
      contained in Section 13, Lessor shall not have any obligation whatsoever
      to repair, reconstruct or restore the Premises when the damage resulting
      from any causality covered under this Section 13 occurs during the last
      twelve (12) months of the terms of this Lease or, any extension thereof.

      13.5 Lessor's Obligations. The Lessor shall not be required to repair any
      injury or damage by fire or other cause, or to make any restoration or
      replacement of any paneling, decorations, partitions, railings, floor
      covering, office fixtures or any other improvements or property installed
      in the Premises by Lessee or at the direct or indirect expense of Lessee.
      Lessee shall be required to restore or replace same in the event of
      damage. Except for abatement of rent, if any, Lessee shall have no claim
      against Lessor for any damage suffered by reason of any such damage,
      destruction, repair or restoration.

14.   CONDEMNATION. If all or any part of the Premises shall be taken or
      appropriated for public or quasi-public use by right of eminent domain
      with or without litigation or transferred by agreement in connection with
      such public or quasi-public use, either party hereto shall have the right
      at its option exercisable within thirty (30) days of receipt of notice of
      such taking to terminate this Lease as of the date possession is taken by
      the condemning authority, provided, however, that before Lessee may
      terminate this Lease by reason of taking or appropriation as provided
      hereinabove, such taking or appropriation shall be of such an extent and
      nature as to substantially handicap, impede or impair Lessee's use of the
      Premises. If any part of the Building other than the Premises shall be so
      taken or appropriated, Lessor shall have the right at its option to
      terminate this Lease. No award for any partial or entire taking shall be
      apportioned, and Lessee hereby assigns to Lessor any award which may be
      made in such taking or condemnation, together with any and all rights of
      Lessee now or hereafter arising in or to the same or any part thereof;
      provided, however, that nothing contained herein shall be deemed to give
      Lessor any interest in or to require Lessee to assign to Lessor any award
      made to Lessee for the taking of personal property and fixtures belonging
      to Lessee and/or for the interruption of or damage to Lessee's business
      and/or for Lessee's unamortized cost of leasehold improvements. In the
      event of a partial taking which does not result in a termination of this
      Lease, rent shall be abated in the proportion which the part of the
      premises so made unusable bears to the rented area of the Premises
      immediately prior to the taking. No temporary taking of the Premises
      and/or of Lessee's rights therein or under this Lease shall terminate this
      Lease or give Lessee any right to any abatement of rent thereunder; any
      award made to Lessee by reason of any such temporary taking shall belong
      entirely to Lessee and Lessor shall not be entitled to share therein.

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15.   ASSIGNMENT AND SUBLETTING

      15.1 Lessor's Consent Required. Lessee shall not assign, transfer,
      mortgage, pledge, hypothecate or encumber this Lease or any interest
      therein, and shall not sublet the Premises or any part thereof, without
      the prior written consent of Lessor and any attempt to do so without such
      consent being first had and obtained shall be wholly void and shall
      constitute a breach of this Lease.

      15.2 Reasonable Consent. If Lessee complies with the following conditions,
      Lessor shall not unreasonably withhold its consent to the subletting of
      the Premises or any portion thereof or the assignment of this Lease.
      Lessee shall submit in writing to Lessor (a) the name and legal
      composition of the proposed sublessee or assignee; (b) the nature of the
      business proposed to be carried on in the Premises; (c) the terms and
      provisions of the proposed sublease; (d) such reasonable financial
      information as Lessor may request concerning the proposed sublessee or
      assignee.

      15.3 No Release of Lessee. No consent by Lessor to any assignment or
      subletting by Lessee shall relieve Lessee of any obligation to be
      performed by Lessee under this Lease, whether occurring before or after
      such consent, assignment or subletting. The consent by Lessor to any
      assignment or subletting shall not relieve Lessee from the obligation to
      obtain Lessor's express written consent to any other assignment or
      subletting. The acceptance of rent by Lessor from any other person shall
      not be deemed to be a waiver by Lessor of any provision of this Lease or
      to be a consent to any assignment, subletting or other transfer. Consent
      to one assignment, subletting or other transfer shall not be deemed to
      constitute consent to any subsequent assignment, subletting or other
      transfer.

      15.4 Attorney's Fees. In the event Lessor shall consent to a sublease or
      assignment under this Section 15, Lessee shall pay Lessor's reasonable
      attorney's fees not to exceed $500 incurred in connection with giving such
      consent.

      15.5 Excess Rent. In the event Lessee sublets the entire Premises or any
      part thereof, Lessee shall deliver to Lessor any "excess rent" (as such
      term is herein defined) within thirty (30) days of Lessee's receipt
      thereof. As used herein, "excess rent" shall mean any sums or economic
      consideration received by Lessee pursuant to such subletting in excess of
      the amount of the rent payable by Tenant under this Lease applicable to
      the part or parts of the Premises so sublet.

16.   SUBORDINATION

      16.1 Subordination. This Lease at Lessor's option shall be subject and
      subordinate to all ground or underlying leases which now exist or may
      hereafter be executed affecting the Premises or the land upon which the
      Premises are situated or both, and to the lien of any mortgages or deeds
      of trust in any amount or amounts whatsoever now or hereafter placed on or
      against the land or improvements or either thereof, of which the Premises
      are a part, or on or against Lessor's interest or estate therein, or on or
      against any ground or underlying lease without the necessity of the
      execution and delivery of any further instruments on the part of Lessee to
      effectuate such subordination. Such subordination is subject to and any
      agreement executed evidencing such subordination shall reflect that the
      Lessee's possession of the premises shall not be diminished or interfered
      with provided Lessee complies with the terms of this agreement and is not
      in default in the payment of rent. If any mortgagee, trustee or ground
      lessor shall elect to have this Lease prior to the lien of its mortgage,
      deed of trust or ground lease, and shall give written notice thereof to
      Lessee, this Lease shall be deemed prior to such

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      mortgage, deed of trust or ground lease, whether this Lease is dated prior
      or subsequent to the date of said mortgage, deed of trust, or ground lease
      or the date of the recording thereof.

      16.2 Subordination Agreements. Lessee covenants and agrees to execute and
      deliver upon demand without charge therefore, such further instruments
      evidencing such subordination of this Lease to such ground or underlying
      leases and to the lien of any such mortgages or deeds of trust as may be
      required by Lessor. Lessee hereby appoints Lessor as Lessee's
      attorney-in-fact, irrevocably, to execute and deliver any such agreements,
      instruments, releases or other documents.

      16.3 Quiet Enjoyment. Lessor covenants and agrees with Lessee that upon
      Lessee paying rent and other monetary sums due under the Lease, performing
      its covenants and conditions under the Lease and upon recognizing
      purchaser as Lessor pursuant hereto, Lessee shall and may peaceably and
      quietly have, hold and enjoy the premises for the term subject, however,
      to the terms of the Lease and of any of the aforesaid ground leases,
      mortgages or deeds of trust described above.

      16.4 Attornment. In the event any proceedings are brought for default
      under ground or any underlying lease or in the event of foreclosure or the
      exercise of the power of sale under any mortgage or deed of trust made by
      the Lessor covering the Premises, the Lessee shall attorn to the purchaser
      upon any such foreclosure or sale and recognize such purchaser as the
      Lessor under this Lease, provided said purchaser expressly agrees in
      writing to be bound by the terms of the Lease.

17.   DEFAULTS; REMEDIES

      17.1 Default. The occurrence of any of the following shall constitute a
      material default and breach of this Lease by Lessee:

            (a) Any failure by Lessee to pay the rent or any other monetary sums
      required to be paid hereunder;

            (b) The abandonment or vacation of the Premises by Lessee,

            (c) A failure by Lessee to observe and perform any other provision
      of this Lease to be observed or performed by Lessee;

            (d) The making by Lessee of any general assignment or general
      arrangement for the benefit of creditors; the filing by or against Lessee
      of a petition to have Lessee adjudged a bankrupt or of a petition for
      reorganization or arrangement under any law relating to bankruptcy unless,
      in the case of a petition filed against Lessee, the same is dismissed
      within sixty (60) days, the appointment of a trustee or receiver to take
      possession of substantially all of Lessee's assets located at the Premises
      or of Lessee's interest in this Lease, where possession is not restored to
      Lessee within thirty (30) days; or the attachment, execution or other
      judicial seizure of substantially all of Lessee's assets located at the
      Premises or of Lessee's interest in this Lease, where such seizure is not
      discharged within thirty (30) days.

      17.2 Remedies. In the event of any such material default or breach by
      Lessee, Lessor may, at any time thereafter without limiting Lessor in the
      exercise of any right or remedy at law or in equity which Lessor may have
      by reasons of such default or breach:

            (a) Maintain this Lease in full force and effect and recover the
      rent and other monetary charges as they become due, without terminating
      Lessee's right to possession irrespective of whether Lessee shall have
      abandoned the Premises. In the event Lessor elects not to terminate the
      Lease, Lessor shall have the right to attempt to re-let the Premises at
      such rent and upon such conditions and for such a term, and to do all acts
      necessary to

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      maintain or preserve the Premises as Lessor deems reasonable and necessary
      without being deemed to have elected to terminate the lease, including
      removal of all persons and property from the Premises; such property may
      be removed and stored in a public warehouse or elsewhere at the cost of
      and for the account of Lessee. In the event any such re-letting occurs,
      this Lease shall terminate automatically upon the new Lessee taking
      possession of the Premises. Notwithstanding that Lessor fails to elect to
      terminate the Lease initially, Lessor at any time during the term of this
      Lease, may elect to terminate this Lease by virtue of such previous
      default of Lessee.

            (b) Terminate Lessee's right to possession by any lawful means, in
      which case this Lease shall terminate and Lessee shall immediately
      surrender possession of the Premises to Lessor. In such event Lessor shall
      be entitled to recover from Lessee all damages incurred by Lessor by
      reason of Lessee's default, including without limitation thereto, the
      following: (i) the worth at the time of award of any unpaid rent which has
      been earned at the time of such termination; plus (ii) the worth at the
      time of award of the amount by which the unpaid rent which would have been
      earned after termination until the time of award exceeds the amount of
      such rental loss that is could have been reasonably avoided; plus (iii)
      the worth at the time of award of the amount by which the rent for the
      balance of the term after the time of award exceeds the amount of such
      rental loss that is could be reasonably avoided; plus (iv) any other
      amount necessary to compensate Lessor for all the detriment proximately
      caused by Lessee's failure to perform his obligations under this Lease or
      which in the ordinary course of events would be likely to result
      therefrom; plus (v) at Lessor's election, such other amounts in addition
      to or in lieu of the foregoing as may be permitted from time to time by
      applicable State law. Upon any such re-entry Lessor shall have the right
      to make any reasonable repairs, alterations or modifications to the
      Premises, which Lessor in its sole discretion deems reasonable and
      necessary. As used in (i) above, the "worth at the time of award" is
      computed by allowing interest at the rate of ten percent (10%) per annum
      from the date of default. As used in (ii) and (iii) the "worth at the time
      of award" is computed by discounting such amount at the discount rate of
      the U.S. Federal Reserve Bank at the time of award plus one percent (1%).
      The term "rent," as used in this Section 17, shall be deemed to be and to
      mean the rent to be paid pursuant to Section 3 and all other monetary sums
      required to be paid by Lessee pursuant to the terms of this Lease.

      17.3 Late Charges. Lessee hereby acknowledges that late payment by Lessee
      to Lessor of rent and other sums due hereunder will cause Lessor to incur
      costs not contemplated by this Lease, the exact amount of which will be
      extremely difficult to ascertain. Such costs include, but are not limited
      to, processing and accounting charges, and late charges which may be
      imposed on Lessor by the terms of any mortgage or trust deed covering the
      Premises. Accordingly, it' any installment of rent or any other sum due
      from Lessee shall not be received by Lessor or Lessor's designee within
      ten (10) days after such amount shall be due, Lessee shall pay to Lessor a
      late charge equal to ten percent (10%) of such overdue amount. Failure of
      Lessee to pay said late fee within five (5) days of its becoming due shall
      be deemed a breach of this Lease. The parties hereby agree that such late
      charge represents a fair and reasonable estimate of the costs Lessor will
      incur by reason of late payment by Lessee. Acceptance of such late charge
      by Lessor shall in no event constitute a waiver of Lessee's default with
      respect to such overdue amount nor prevent Lessor from exercising any of
      the other rights and remedies granted hereunder.

      17.4 Default by Lessor. Lessor shall not be in default unless Lessor fails
      to perform obligations required of Lessor within a reasonable time, but in
      no event later than thirty (30)

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      days after written notice by Lessee to Lessor and to the holder of any
      first mortgage or deed of trust covering the Premises whose name and
      address shall have theretofore been furnished to Lessee in writing,
      specifying wherein Lessor has failed to perform such obligations,
      provided, however, that if the nature of Lessor's obligation is such that
      more than thirty (30) days are required for performance, then Lessor shall
      not be in default if Lessor commences performance within such thirty-day
      period and thereafter diligently prosecutes the same to completion.

18.   MISCELLANEOUS

      18.1 Estoppel Certificate.

            (a) Lessee shall at any time upon not less than five (5) day's prior
      written notice from Lessor execute, acknowledge and deliver to Lessor a
      statement in writing (i) certifying that this Lease is unmodified and in
      full force and effect (or, if modified, stating the nature of such
      modification and certifying that this Lease, as so modified, is in full
      force and effect) and the date to which the rent and other charges are
      paid in advance, if any, and (ii) acknowledging that there are not, to
      Lessee's knowledge, any uncured defaults on the part of Lessor hereunder,
      or specifying such defaults if any are claimed. Any such statement may be
      conclusively relied upon by any prospective purchaser or encumbrancer of
      the Premises.

            (b) Lessee's failure to deliver such statement within such time
      shall be conclusive upon Lessee (i) that this Lease is in full force and
      effect, without modification except as may be represented by Lessor, (ii)
      that there are no uncured defaults in Lessor's performance, and (iii) that
      not more than one month's rent has been paid in advance.

            (c) If Lessor desires to finance or refinance the Building, or any
      part thereof, Lessee hereby agrees to deliver to any lender designated by
      Lessor such financial statements of Lessee as may be reasonably required
      by such lender. Such statements shall include the past three years'
      financial statements of Lessee. All such financial statements shall be
      received by Lessor in confidence and shall be used only for the purposes
      herein set forth.

      18.2 Transfer of Lessor's Interest. In the event of a sale or conveyance
      by Lessor of Lessor's interest in the Premises or the Building other than
      a transfer for security purposes only, Lessor shall be relieved from and
      after the date specified in any such notice of transfer of all obligations
      and liabilities accruing thereafter on the part of Lessor, provided that
      any funds in the hands of Lessor at the time of transfer in which Lessee
      has an interest, shall be delivered to the successor of Lessor. This Lease
      shall not be affected by any such sale and Lessee agrees to attorn to the
      purchaser or assignee provided all Lessor's obligations hereunder are
      assumed in writing by the transferee.

      18.3 Captions; Attachments; Defined Terms.

            (a) The captions of the paragraphs of this Lease are for convenience
      only and shall not be deemed to be relevant in resolving any question of
      interpretation or construction of any section of this Lease.

            (b) Exhibits attached hereto, and addendums and schedules initiated
      by the parties, are deemed by attachment to constitute part of this Lease
      and are incorporated herein.

            (c) The words "Lessor" and "Lessee," as used herein, shall include
      the plural as well as the singular. Words used in neuter gender include
      the masculine and feminine and words in the masculine or feminine gender
      include the neuter. If there be more than one Lessor or Lessee, the
      obligations hereunder imposed upon Lessor or Lessee shall be joint and
      several;

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      as to a Lessee which consists of husband and wife, the obligations shall
      extend individually to their sole and separate property as well as
      community property. The term "Lessor" shall mean only the owner or owners
      at the time in question of the fee title or a tenant's interest in a
      ground lease of the land underlying the Building. The obligations
      contained in this Lease to be performed by Lessor shall be binding on
      Lessor's successor's and assigns only during their respective periods of
      ownership.

      18.4 Entire Agreement. This instrument along with any exhibits and
      attachments hereto constitutes the entire agreement between Lessor and
      Lessee relative to the Premises and this Agreement and the exhibits and
      attachments may be altered, amended or revoked only by an instrument in
      writing signed by both Lessor and Lessee. Lessor and Lessee agree hereby
      that all prior or contemporaneous oral agreements between and among
      themselves and their agents or representatives relative to the leasing of
      the Premises are written in or revoked by this Agreement.

      18.5 Severability. If any term or provision of this Lease shall, to any
      extent, be determined by a court of competent jurisdiction to be invalid
      or unenforceable, the remainder of this Lease shall not be affected
      thereby, and each term and provision of this Lease shall be valid and be
      enforceable to the fullest extent permitted by law.

      18.6 Costs of Suit.

            (a) If Lessee or Lessor shall bring any action for any relief
      against the other, declaratory or otherwise, arising out of this Lease,
      including any suit by Lessor for the recovery of rent or possession of the
      Premises, the losing party shall pay the successful party a reasonable sum
      for attorney's fees which shall be deemed to have accrued on the
      commencement of such action and shall be paid whether or not such action
      is prosecuted to judgment.

            (b) Should Lessor, without fault on Lessor's part, be made a party
      to any litigation instituted by Lessee or by any third party against
      Lessee, or by or against any person holding under or using the Premises by
      license of Lessee, or for the foreclosure of any lien for labor or
      material furnished to or for Lessee or any such other person or otherwise
      arising out of or resulting from any act or transaction of Lessee or of
      any such other person, Lessee covenants to save and hold Lessor harmless
      from any judgment rendered against Lessor or the Premises, or any part
      thereof, and all costs and expenses, including reasonable attorneys' fees,
      incurred by Lessor in or in connection with such litigation.

            (c) If Lessee or Lessor or their successors as assigns shall bring
      an action against Broker or make Broker a party to litigation arising out
      of this Lease, Broker shall be entitled to recover reasonable attorney's
      fees and court costs from either Lessor or Lessee if Broker is adjudged by
      a court of competent jurisdiction to be without fault in such matter.

      18.7 Time; Joint and Several Liability. Time is of the essence of this
      Lease and each and every provision hereof, except as to the conditions
      relating to the delivery of possession of the Premises to Lessee. All the
      terms, covenants and conditions contained in this Lease to be performed by
      either party, if such party shall consist of more than one person or
      organization, shall be deemed to be joint and several, and all rights and
      remedies of the parties shall be cumulative and nonexclusive of any other
      remedy at law or in equity.

      18.8 Binding Effect; Choice of Law. The parties hereto agree that all
      provisions hereof are to be construed as both covenants and conditions as
      though the words importing such covenants and conditions were used in each
      separate paragraph hereof. Subject to any provisions hereof restricting
      assignment or subletting by Lessee and subject to Section 18.2,

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      all of the provisions hereof shall bind and inure to the benefit of the
      parties hereto and their respective heirs, legal representatives,
      successors and assigns. This lease shall be governed by the laws of the
      State of California.

      18.9 Waiver. No covenant, term or condition or the breach thereof shall be
      deemed waived, except by written consent of the party against whom the
      waiver is claimed, and any waiver or the breach of any covenant, term or
      condition shall not be deemed to be a waiver of any preceding or
      succeeding breach of the same or any other covenant, term or condition.
      Acceptance by Lessor of any performance by Lessee after the time the same
      shall have become due shall not constitute a waiver by Lessor of the
      breach or default of any covenant, term or condition unless otherwise
      expressly agreed to by Lessor in writing.

      18.10 Surrender of Premises. The voluntary or other surrender of this
      Lease by Lessee, or a mutual cancellation thereof, shall not work a
      merger, and shall, at the option of the Lessor, terminate all or any
      existing subleases or subtenancies, or may, at the option of Lessor,
      operate as an assignment to it of any or all such subleases or
      subtenancies.

      18.11 Holding Over. If Lessee remains in possession of all or any part of
      the Premises after the expiration of the term hereof, with or without the
      express or implied consent of Lessor, such tenancy shall be from month to
      month only, and not a renewal hereof or an extension for any further term,
      and in such case, rent and other monetary still due hereunder shall be
      payable in the amount of 150% of the then current rent being paid and at
      the time specified in this Lease and such month to month tenancy shall be
      subject to every other term, covenant and agreement contained herein.

      18.12 Signs.

            (a) Lessee shall not place or permit to be placed in or upon the
      Premises, where visible from outside the Premises, or outside the Premises
      or any part of the Building any signs, notices, drapes, shutters, blinds
      or displays of any type without the prior written consent of Lessor.

            (b) Lessor reserves the right in Lessor's sole discretion to place
      and locate on the roof, exterior of the Building, and in any area of the
      Building not leased to Lessee such signs, notices, displays and similar
      items as Lessor deems appropriate in the proper operation of the Building.

      18.13 Reasonable Consent. Except as limited elsewhere in this Lease,
      wherever in this Lease Lessor or Lessee is required to give its consent or
      approval to any action on the part of the other, such consent or approval
      shall not be unreasonably withheld. In the event of failure to give any
      such consent, the other party shall be entitled to specific performance at
      law and shall have such other remedies as are reserved to it under this
      Lease, but in no event shall Lessor or Lessee be responsible in monetary
      damages for failure to give consent unless said consent is withheld
      maliciously or in bad faith.

      18.14 Interest on Past Due Obligations. Except as expressly provided, any
      amount due to Lessor not paid when due shall bear interest at eighteen
      percent (18%) per annum from the due date. Payment of such interest shall
      not excuse or cure any default by Lessee under this Lease.

      18.15 Rules and Regulations; Parking. Lessee shall have the right to park
      in the Project's parking facilities in common with other tenants of the
      Project upon terms and conditions as may from time to time be established
      by Lessor or the Project's Ownership Association. Parking for the Project
      is available at no cost and is on a nonexclusive, first-come, first served
      basis. The Project provides parking at the ratio of four spaces per
      thousand usable square feet of building area. Lessee agrees not to
      overburden the parking facilities and

                                       93
<PAGE>

      agrees to cooperate with Lessor and other Lessees in the use of the
      parking facilities. The term "overburden" shall mean any parking facility
      use in excess of the ratio provided above. In the event Lessee
      consistently overburdens the parking facilities, and is notified of such
      by Lessor, and Lessee does not comply with measures to alleviate said
      overburdening, Lessee shall be deemed in default of this Lease and shall
      be subject to any Lessor remedies provided for in this Lease.

      18.16 Notices. All Notices or demands of any kind required or desired to
      be given by Lessor or Lessee hereunder shall be in writing and shall be
      deemed delivered forty-eight (48) hours after depositing the notice or
      demand in the United States mail, certified or registered, postage
      prepaid, addressed to the Lessor or Lessee respectively at the addresses
      set forth after their signatures at the end of this Lease.

      18.17 Corporate Authority. If Lessee is a corporation, each individual
      executing this Lease on behalf of said corporation represents and warrants
      that he is duly authorized to execute and deliver this Lease on behalf of
      said corporation in accordance with the duly adopted resolution of the
      Board of Directors of said corporation or in accordance with the By-laws
      of said corporation, and that this Lease is binding upon said corporation
      in accordance with its terms. If Lessee is a corporation Lessee shall,
      within thirty (30) days after execution of this Lease, deliver to Lessor a
      certified copy of a resolution of the Board of Directors of said
      corporation authorizing or ratifying the execution of this Lease.

      18.18 Recordation. Neither Lessor nor Lessee shall record this Lease or a
      short form memorandum hereof without the prior written consent of the
      other party.

      18.19 Inability to Perform. This Lease and the obligations of the Lessee
      hereunder shall not be affected or impaired because the Lessor is unable
      to fulfill any of its obligations hereunder or is delayed in doing so, if
      such inability or delay is caused by reason of strike, labor troubles,
      acts of God, or any other cause beyond the reasonable control of the
      Lessor.

      18.20 Americans with Disabilities Act. Any other provision of this Lease
      notwithstanding, the parties hereby agree that the demised premises may be
      subject to the terms and conditions of the Americans with Disabilities Act
      of 1990 (hereinafter the "ADA"). The parties further agree and acknowledge
      that it shall be the sole responsibility of the Lessee to comply with any
      and all provisions of the ADA, as such compliance may be required to
      operate the demised premises. The Lessee further agrees to indemnify and
      hold the Lessor harmless against any claims which may arise out of
      Lessee's failure to comply with the ADA. Such indemnification shall
      include, but not necessarily be limited to reasonable attorney's fees,
      court costs and judgments as a result of said claims.

19.   Additional Paragraphs 20 through 24 are attached hereto and made a part of
      the Lease.

In Witness Whereof, Lessor and Lessee have executed this Lease the date and year
first above written.

LESSOR:                                         LESSEE:
Eureka Corporate Plaza Ltd., P.P.               Feather River State
1613 Eureka Road, Suite 100                     1227 Bridge Street, Suite C
Roseville, CA 95661                             Yuba City, CA 95992
By: Rodney A. Mitchell, General Partner         By: Larry Hartwig
Dated: 7/31/00                                  Dated: 7/28/00

                                       94
<PAGE>

                ADDENDUM TO THAT CERTAIN LEASE DATED JULY 26,2000
                                 BY AND BETWEEN

                   EUREKA CORPORATE PLAZA, LTD., LP., "LESSOR"
                                       AND
          FEATHER RIVER STATE BANK, A CALIFORNIA CORPORATION, "LESSEE"

20.   RENT SCHEDULE.

<TABLE>
<CAPTION>
           Months:   Rate/SF:   Base Monthly Rent on a Fully Serviced Basis:
           <S>       <C>        <C>
           01-02     $0.00      $0.00
           03-14     $1.65      Six Thousand Two Hundred Ninety Six and 40/100ths Dollars ($6,296 40)
           15-26     $1.65      Six Thousand Two Hundred Ninety Six and 40/100ths Dollars ($6,296.40).
           27-38     $1.75      Six Thousand Six Hundred Seventy Eight and no/ 100ths  Dollars ($6,678.00).
           39-50     $1.75      Six Thousand Six Hundred Seventy Eight and no/ 100ths Dollars ($6,678.00).
           51-62     $1.85      Seven Thousand Fifty Nine and 60/100ths Dollars ($7,059.60).
</TABLE>

      Lessee acknowledges that the above Base Rent amount is based on the square
      footage of the lease space and is therefore subject to adjustment based on
      a final, mutually approved space plan.

21.   OPTION TO RENEW: Lessor hereby grants to Lessee the option to renew this
      Lease for an additional term of five (5) years upon the same terms and
      conditions as herein contained, except as modified by this paragraph
      provided that Lessee not be in material default under this lease at the
      time the option is exercised. This option must be exercised by written
      notice to Lessor no later than ninety (90) days prior to the expiration of
      the existing lease. The total rent for the Premises in the event this
      lease is so extended shall be negotiated by the parties at the then
      current Fair Market Value, provided however, that the negotiated rent
      shall in no event be less than the then current rent being paid by Lessee.
      In the event that the parties hereto are not able to mutually agree upon a
      rental figure within ten (10) days after Lessee notifies Lessor of its
      election to extend the terms of this Lease, then Lessor and Lessee shall
      individually appoint in writing one real estate broker each with at least
      five (5) years experience in the Commercial Real Estate market. The two
      brokers so appointed shall select and appoint a third similarly qualified
      broker. The brokers shall, within (15) days of appointment, submit their
      opinions of Fair Market Value. Fair Market Value shall be the average of
      the two appraisal figures, which are the closest together. Each of the
      parties hereto shall pay for the services of its respective appointee and
      shall equally split the cost of the third. The fair market value opinions
      of the brokers shall be conclusive and binding on the parties. The maximum
      lease rate at the start of the initial renewal period shall be "capped" at
      $ 1.90 per square foot with $.05 per square foot per month annual
      increases.

22.   SIGNAGE: Landlord shall grant Lessee the right to place two (2) signs on
      the building. The locations of the signs are to be discussed. The signage
      shall conform to all City of Roseville signage criteria and shall be
      subject to Landlord's review and approval. The cost of the signs,
      installation, maintenance and removal shall be at Tenant's sole cost. The
      interior directory signage shall be paid for and installed by Landlord.
      Upon expiration of Lease or vacation of premises, Lessee shall return
      building back to its original condition that it was prior to the
      installment of the sign.

      Additionally, Lessee shall have the right to install a monument with
      Lessee's signage in accordance with the City of Roseville's signage
      criteria and subject to Landlord's review and approval.

23.   KEYS: Lessor shall provide Lessee with one key per lock. Lessee shall be
      entitled to have additional keys made with Lessor's approval.

24.   BROKERAGE FEE: Landlord shall pay a brokerage fee equal to five percent
      (5%) of the total rental consideration over the initial Lease term to be
      paid to TRI Commercial (Steve Lefler-Listing and Boyd Cahill-Procuring).
      The first half of the commission shall be paid upon the execution of the
      Lease, and the second half upon commencement of rent.

                                       95
<PAGE>

      This Agreement has been prepared for submission to your attorney for his
      approval. No representation or recommendation is made by the real estate
      Broker(s) or their agents or employees as to the legal sufficiency, legal
      effect, or tax consequences of this Agreement or the transaction involved
      herein.

      AGREED TO AND ACCEPTED

Eureka Corporate Plaza Ltd., P.P.             Feather River State
1613 Eureka Road, Suite 100                   1227 Bridge Street, Suite C
Roseville, CA 95661                           Yuba City, CA 95992
By: Rodney A. Mitchell, General Partner       By: Larry Hartwig
Dated: 7/31/00                                Dated: 7/28/00

                                   EXHIBIT "A"
                   (Site Plan - not include in this document)

                                   EXHIBIT "B"
                   (Floor Plan - not include in this document)

                                   EXHIBIT "C"
                              RULES AND REGULATIONS

1.    No sign, placard, picture, advertisement, name or notice shall be
      inscribed, displayed or printed or affixed on or to any part of the
      outside or inside of the Building or the Premises without the written
      consent of Lessor first hand and obtained and Lessor shall have the right
      to remove any such sign, placard, picture, advertisement, name or notice
      without notice to and at the expense of Lessee. Lessee shall not place
      anything or allow anything to be placed near the glass of any window,
      door, partition or wall which may appear unsightly from outside "the
      Premises"; provided, however, the Lessor is to furnish and install a
      building standard window drapery at all exterior windows.

2.    The bulletin board or directory of the Building will be provided
      exclusively for the display of the name and location of Lessee only and
      Lessor reserves the right to exclude any other names therefrom.

3.    The sidewalks, halls, passages, exits, entrances and stairways shall not
      be obstructed by any of the tenants or used by them for any purpose other
      than for ingress to and egress from their respective Premises. The halls,
      passages, exits, entrances, stairways, balconies and roof are not for the
      use of the general public, and the Lessor shall in all cases retain the
      right to control and prevent access thereto by all persons whose presence
      in the judgment of the Lessor shall be prejudicial to the safety,
      character, reputation and interests of the Building and its tenants,
      provided that nothing herein contained shall be construed to prevent such
      access to persons with whom the Lessee normally deals in the ordinary
      course of Lessee's business unless such persons are engaged in illegal
      activities. No tenant and no employees or invitees of any tenant shall go
      upon the roof of the Building.

4.    Lessee still not alter any lock or install any new or additional locks or
      any bolts on any door of the Premises without the written consent of
      Lessor.

5.    The toilet rooms, urinals, wash bowls and other apparatus shall not be
      used for any purpose other than that for which they were constructed and
      no foreign substance of any kind whatsoever shall be thrown therein and
      the expense of any breakage, stoppage or damage resulting from the
      violation of this rule shall be borne by the Lessee who, or whose
      employees or invitees shall have caused it.

6.    Lessee shall not overload the floor of the Premises or mark, drive nails,
      screw or drill into the partitions, woodwork or plaster or in any way
      deface the Premises or any part thereof. No boring, cutting or stringing
      of wires or laying of linoleum or other similar floor coverings shall he
      permitted except with the prior written consent of the Lessor and as the
      Lessor may direct.

7.    No furniture, freight or equipment of any kind shall he brought into the
      Building without the consent of Lessor and all moving of the same into or
      out of the Building shall be done at such time and in such manner as
      Lessor shall designate. Lessor shall have the right to prescribe the
      weight, size and position of all safes and other heavy equipment brought
      into

                                       96
<PAGE>

      the building and also the times and manner of moving the same in and out
      of the Building. Safes or other heavy objects shall, if considered
      necessary by Lessor, stand on wood strips of such thickness as is
      necessary to properly distribute the weight. Lessor will not be
      responsible for loss of or damage to any such sale or property from any
      cause and all damage done to the Building by moving or maintaining any
      such safe or other property shall be repaired at the expense of Lessee.
      There shall not be used in any space, or in the public halls of the
      Building, either by any tenant or others, any hand trucks except those
      equipped with rubber tires and side guards.

8.    Except with the written consent of Lessor, no person or persons other than
      those approved by Lessor shall be permitted to enter the building for the
      purpose of cleaning the same. Lessee shall not cause an unnecessary labor
      by reason of Lessee's carelessness or indifference in the preservation of
      good order and cleanliness. Lessor shall in no way be responsible to any
      Lessee for any loss of property on the Premises, however occurring, or for
      any damage done to the effects of any Lessee by the janitor or any other
      employee or any other person.

9.    Lessee shall not use, keep or permit to be used or kept any food or
      noxious gas or substance in the Premises, or permit or suffer the Premises
      to be occupied or used in a manner offensive or objectionable to the
      Lessor or other occupants of the Building by reason of noise, odors and/or
      vibrations, or interfere in any way with other tenants or those having
      business therein, nor shall any animals or birds be brought in or kept in
      or about the Premises or the Building. No Lessee shall make or permit to
      be made any unseemly or disturbing noises or disturb or interfere with
      occupants of this or neighboring Buildings or premises or those having
      business with them whether by the use of any musical instrument, radio,
      phonograph, unusual noise, or in any other way. No Lessee shall throw
      anything out of doors or down the passageways.

10.   The Premises shall not be used for manufacturing or for the storage of
      merchandise except as such storage may be incidental to the use of the
      Premises for general office purposes. No Lessee shall occupy or permit any
      portion of his treatises to be occupied as an office for a public
      stenographer or typist, or for the manufacture or sale of liquor, or
      tobacco in any form, or as a barber shop or manicure shop. No Lessee shall
      advertise for laborers giving an address at the Premises. The Premises
      shall not be used for lodging or sleeping or for any illegal purposes.

11.   Lessee shall not use or keep in the Premises or the Building any kerosene,
      gasoline or inflammable or combustible fluid or material, or use any
      method of heating or air conditioning other than that supplied by Lessor.

12.   Lessor will direct electricians as to where and how telephone and
      telegraph wires are to he introduced. No boring or cutting for wires will
      he allowed without the consent of Lessor. The location of telephones, call
      boxes and other office equipment affixed to the Premises shall be subject
      to the approval of Lessor.

13.   All keys to offices, rooms and toilet rooms shall be obtained from
      Lessor's Office and Lessee shall not from any other source duplicate,
      obtain keys or have keys made without Lessor's approval. The Lessee, upon
      termination of the tenancy, shall deliver to the Lessor the keys of the
      offices, rooms and toilet rooms which shall have been furnished or shall
      pay the Lessor the cost of replacing same or changing the lock or locks
      opened by such lost key if Lessor deems it necessary to make such change.

14.   No Lessee shall lay linoleum, tile, carpet or other similar floor covering
      so that the same shall be affixed to the floor of the Premises in any
      manner except as approved by the Lessor. The expense of repairing any
      damage resulting from a violation of this rule or removal of any floor
      covering shall be borne by the Lessee by whom, or by whose contractors,
      employees or invitees, the damage shall have been caused.

15.   No furniture, packages, supplies, equipment or merchandise will be
      received in the Building, except between such hours as shall be designated
      by Lessor.

16.   On Sundays, legal Holidays and on Saturday commencing at 12:00 noon, and
      on other days between the hours of 7:00 P.M. and 7:00 A.M. the following
      day, access to the building, or to the halls, corridors, or stairways in
      the Building, or to the Premises may be refused unless the person seeking
      access is known to the person or employee of the building in charge and
      has a pass or is properly identified. The Lessor shall in no case be
      liable for damages for any error with regard to the admission to or
      exclusion of Building of any person. The Lessor reserves the right to
      prevent access to the Building for the safety of the tenants and
      protection of property in the Building and the Building. Lessor reserves
      the right to close and keep locked all entrance and exit doors of the
      Building on Sundays, legal Holidays, and on Saturdays commencing at 12:00
      noon, and on other days between the hours of 7:00 P.M. and 7:00 A.M., and
      during such further hours as Lessor may deem advisable for the adequate
      protection of said Building and the property of its tenants.

                                       97
<PAGE>

17.   Lessee shall see that the doors of the Premises are closed and securely
      locked before leaving the Building and must observe strict care and
      caution that all water faucets or water apparatus are entirely shut off
      before Lessee or Lessee's employees leave the building, and that all
      electricity shall likewise be carefully shut off, so as to prevent waste
      or damage, and for any default or carelessness Lessee shall make good all
      injuries sustained by other tenants or occupants of the Building.

18.   Lessor reserves the right to exclude or expel from the Building any person
      who, in the judgment of Lessor, is intoxicated or under the influence of
      liquor or drugs, or who shall in any manner do any act in violation of any
      of the rules and regulations, of the Building.

19.   The requirements of Lessee will be attended to only upon application at
      the Office of the Building. Employees of Lessor shall not perform any work
      or do anything outside of their regular duties unless under special
      instructions from the Lessor, and no employee will admit any person
      (Lessee or otherwise) to any office without specific instructions from the
      Lessor.

20.   No vending machine or machines of any description shall be installed,
      maintained, or operated upon the Premises without the written consent of
      the Lessor.

21.   Lessor shall have the right, exercisable without notice and without
      liability to Lessee, to change the name and the street address of the
      Building of which the Premises are a part.

22.   Lessee agrees that it shall comply with all fire and security regulations
      that may be issued from time to time by Lessor and Lessee also shall
      provide Lessor with the name of a designated responsible employee to
      represent Lessee in all matters pertaining to such fire or security
      regulations.

23.   Lessor reserves the right by written notice to Lessee, to rescind, alter
      or waive any rule or regulation at any time prescribed for the Building
      when, in Lessor's judgement, it is necessary, desirable or proper for the
      best interest of the Building and its tenants.

24.   Lessees shall not disturb, solicit, or canvass any occupant of the
      Building and shall cooperate to prevent same.

25.   Without the written consent of Lessor, Lessee shall not use the name of
      the Building and shall cooperate to prevent same.

26.   Lessor shall furnish heating and air conditioning during the hours of 7:00
      A.M. to 7:00 P.M. Monday through Friday and 9:00 A.M. to 1:00 P.M. on
      Saturday, except for Holidays (or to common areas only if Lease is
      Modified Gross).

27.   Lessee shall have the right to park in the Project's parking facilities in
      common with other tenants of the Project upon terms and conditions as may
      from time to time be established by Lessor or the Project's Ownership
      Association. Parking for the Project is available at no cost and is on a
      non-exclusive, first-come, first served basis. The Project provides
      parking at the ratio of four spaces per thousand usable square feet of
      building area. Lessee agrees not to overburden the parking facilities and
      agrees to cooperate with Lessor and other Lessees in the use of the
      parking facilities. The term "overburden" shall mean any parking facility
      use in excess of the ratio provided above. In the event Lessee
      consistently overburdens the parking facilities, and is notified of such
      by Lessor, and Lessee does not comply with measures to alleviate said
      overburdening, Lessee shall be deemed in default of this Lease and shall
      be subject to any Lessor remedies provided for in this Lease.

28.   Keys shall not be changed without out the Lessor's knowledge and written
      approval.

                                    EXHIBIT D
                    AGREEMENT FOR THE COMPLETION OF PREMISES

TENANT IMPROVEMENTS:

In consideration of Lessee's execution of this Lease, Lessor, at Lessor's sole
cost and expense, shall provide Lessee with building standard improvements in a
turn-key buildout per the office floor plan attached in "Exhibit B".

Lessor and Lessee acknowledge that any change orders to Exhibit "B" shall be at
Lessee's sole cost and expense. The improvements shall be in accordance with the
following specifications:

                                       98
<PAGE>

                        BUILDING STANDARD SPECIFICATIONS

WALLS:            Knock down textured and painted with flat wall paint. Selected
                  from standard colors.

DOORS:            Paint grade doors with metal jams (all painted one color),
                  selected from standard colors. Size is 3080.

HARDWARE.         Falcon (B101D) commercial latch sets. All passage except entry
                  is lock set. Brushed aluminum finish.

CEILING:          2 x 2 5/8 grid white regular the.

BLINDS:           Standard color PVC vertical blinds. Selected from standard
                  colors.

FLOOR COVERING:   A. Carpet is to be selected from building standard samples.
                     Allowance is based on $1 5.00 per square yard installed,
                     including base.

                  B. Vinyl is to be selected from building standards.

                  C. Base is rubber, standard color, selected from building
                     standards.

LIGHT FIXTURES:   A. 2 x 4 "Lithonia" 2 PMGB340 ESB3-34W.

                  B. Fluorescent down light "Halo" H-274-400 1-F13DTT.

TELEPHONE & DATA: Lessee shall provide its own telephone and data cable and
                  installation and Lessor shall provide the "ring and (pull)
                  string" to each mutually agreed upon location.

SECURITY:         Should Lessee elect to have a security system, the cost to
                  supply and install the system shall be borne by Lessee.

Lessor and Lessee acknowledge that any change orders to the above specifications
or to the attached Exhibit "B" shall be at Lessee's sole cost and expense.

Tender of Possession: Possession of the Premises shall be deemed tendered to
Lessee ("Tender of Possession") when (1) the improvements to be provided by
Lessor under this Lease are substantially completed, and (2) full access to the
Premises has been granted to Lessee and keys have been provided to Lessee's
suite and common areas by Lessor, and (3) a punch list of items needing repair
or replacement has been created by Lessor and Lessee. Upon Tender of Possession,
Lessor and Lessee shall evaluate the Premises and create a punch list of items
considered to be defective or not complete. Once items are agreed upon by Lessor
and Lessee, no other items will be added to the list. Damages to the Premises
after move in shall be the responsibility of Lessee. When all items noted
therein are completed, the Premises shall be deemed complete. Items on the punch
list DO NOT constitute the abatement of rent and it is agreed that rent shall
commence on the date shown therein. With respect to matters not reasonably
apparent upon visual inspection, Tenant shall have a period of fifteen (15) days
following Tender of Possession to notify Lessor of any defects and Lessor shall
correct same.

This Agreement has been prepared for submission to your attorney for his
approval. No representation or recommendation is made by the real estate
Broker(s) or their agents or employees as to the legal sufficiency, legal
effect, or tax consequences of this Agreement or the transaction involved
herein.

     AGREED TO AND ACCEPTED

Eureka Corporate Plaza Ltd., P.P.            Feather River State
1613 Eureka Road, Suite 100                  1227 Bridge Street, Suite C
Roseville, CA 95661                          Yuba City, CA 95992
By: Rodney A. Mitchell, General Partner      By: Larry Hartwig
Dated: 7/31/00                               Dated: 7/28/00

                                       99<PAGE>

                                                                   EXHIBIT 10.1

                             CONFIDENTIAL TREATMENT

                           SOFTWARE LICENSE AGREEMENT

     This Software License Agreement ("AGREEMENT") is entered into as of the
21st day of September, 2000 ("EFFECTIVE DATE") by and between 3NO Systems, Inc.,
a New Jersey corporation having principal offices at One Sheila Drive, Tinton
Falls, NJ 07724 ("3NO"), and Larscom Incorporated, a Delaware corporation having
principal offices at 1845 McCandless Drive, Milpitas, CA 95035 ("LARSCOM").

                                    RECITALS

     WHEREAS, 3NO has developed a certain broadband remote access server
technology for use in advanced communication systems;

     WHEREAS, 3NO has developed a product known as the ISSANNI 1000 ("ISSANNI
1000" as further defined herein) which implements such broadband remote access
server technology;

     WHEREAS, Larscom is engaged in the business of developing, manufacturing
and selling communication products, and wishes to license and acquire certain
rights to the ISSANNI 1000 and related technology, and 3NO wishes to grant such
rights to Larscom;

     WHEREAS, Larscom wishes to develop and market products incorporating the
ISSANNI 1000 and related technology ("PRODUCTS," as further defined herein);
and,

     THEREFORE, in consideration of the recitals and the respective covenants,
representations, warranties and obligations contained herein, and intending to
be legally bound hereby, the parties agree as follows:

1.  DEFINITIONS.

     a. "Confidential Information" shall mean (i) the terms and conditions of
this Agreement (ii) the Intellectual Property, (iii) any information including,
without limitation, technical data, know-how, research, products, hardware,
software (source code and object code), Source Code, services, deployment,
inventions, processes, engineering, and (iv) marketing, customers, pricing,
business plans and finances identified by the disclosing party to be
confidential.

     b. "Customer" shall mean an entity to which Larscom licenses or sells a
Product.

     c. "Hardware" shall mean the commercially available hardware integrated in
the ISSANNI 1000 as described in the Specifications.

     d. "Intellectual Property" shall mean the Software and Specifications, and
any and all inventions, discoveries, know-how, concepts, research, works, ideas
and improvements conceived or developed by 3NO that relate to the ISSANNI 1000
regardless of whether a patent, copyright or another type of legal protection
covers that subject matter, and regardless of the tangible form of the subject
matter. Intellectual Property shall include all US and corresponding foreign
applications and registrations with respect to the ISSANNI 1000.

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY
FILED HEREWITH OMITS THE INFORMATION SUBJECT TO THE CONFIDENTIALITY REQUEST.
OMISSIONS ARE DESIGNATED AS *****. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN
FILED SEPARATELY WITH THE SECURITY AND EXCHANGE COMMISSION.

                               18

<PAGE>

                             CONFIDENTIAL TREATMENT

     e. "ISSANNI 1000" shall mean the broadband remote access server technology
system developed by 3NO and consisting of the Intellectual Property, and which
is known commercially as the ISSANNI 1000.

     f. "Net Sales" shall mean all revenues recognized in accordance with
generally accepted accounting principles from the sale of Products, less returns
and allowances (actually paid or allowed, including, but not limited to, prompt
payment and volume discounts, charge backs from wholesalers and other allowances
granted to customers or wholesalers of Products, whether in cash or trade),
freight packing, insurance, rebates, and sales and other taxes based on sales
prices when included in gross sales, but not including taxes when assessed on
income derived from such sales.

     g. "Net Unit Sales" shall mean the aggregate number of Products that are
sold by Larscom during the term of this Agreement minus returns. Net Unit Sales
shall be exclusive of internal use, sale or use on approval, or temporary
disposal as may be the custom in the industry.

     h. "Products" shall mean any products manufactured by or for Larscom or its
subsidiaries or affiliates that incorporate the Software.

     i. "Software" shall mean version 2.0 of the software component of the
ISSANNI 1000 and all enhancements, modifications, upgrades, revisions, and
derivative works thereto developed during the term of this Agreement.
Such Software specifically includes Third Party Software.

     j. "Source Code" shall mean the software or program code of the Software
expressed in a form suitable for modification by humans.

    k. "Specifications" shall mean the specifications, bills of materials, part
numbers used, design, source and vendor information for the Hardware, and all
modifications or developments thereto. Specifications shall be further described
on the Statement of Work, attached hereto as Exhibit A. "Specifications" shall
specifically exclude any modifications, augmentations, derivations or
developments thereto made by or for Larscom.

     l. "Territory" shall mean all countries in North America and all countries
which are members of the European Union or EFTA (European Free Trade
Association) as of the Effective Date. Upon express written agreement of the
parties, the Territory may be expanded to include additional countries of
Europe.

     m. "Third Party Software" shall mean the software programs licensed by 3NO
which are embedded in or necessary for the operation of the ISSANNI 1000.

     n. "Trademarks" shall mean the registered and unregistered trademarks of
the parties.

     o. "User Documentation" shall mean all user guides relating to the ISSANNI
1000 provided by 3NO to Larscom hereunder. Documentation shall only be
considered "User Documentation" if 3NO has indicated that the same is intended
that to be distributed to Customer.

2.  LICENSE.

     a. Subject to the terms of this Agreement, 3NO hereby grants to Larscom the
following:

                                     19

<PAGE>

                             CONFIDENTIAL TREATMENT

     (i) a nonexclusive, worldwide license to the ISSANNI 1000 (including
worldwide sublicensable sublicenses to the Third Party Software) in order to
make, have made, use, import, offer to sell, sell, lease or otherwise dispose of
Products anywhere in the world;

     (ii) an exclusive right and license to the ISSANNI 1000 (including
worldwide sublicenses to the Third Party Software) to make, have made, use,
import, offer to sell, sell, lease or otherwise dispose of Products in the
Territory upon payment, by September 29, 2000, unless extended by mutual
agreement of the parties, of the Fees as described in Paragraph 3a. Such
exclusive right shall be in force for a period of ***** commencing on *****.
Upon the sale ***** Net Unit Sales between the Effective Date and *****, such
exclusive right shall automatically be renewed.

     (iii) a worldwide license and right to sublicense to Customers the license
and right to use, resell or repair the Products transferred to them by Larscom;
and

    (iv) a right for Larscom to make an Equity Investment in the minimum amount
of $ ***** or more on the terms and conditions set forth in the Term Sheet
attached hereto as Exhibit B (the "Equity Investment").

     (v) a right for Larscom to appoint one (1) Board member to the Board of
Directors of 3NO upon 3NO's receipt of the Equity Investment as described in
Section 2(iv).

     b. Larscom will not disclose all or any part of any of the Software to any
person except as reasonably necessary to permit that person to use the Software
for the purposes explicitly permitted herein. Larscom may permit its employees
and consultants to have access to the Software, but only on a need-to-know basis
and only if each such employee or consultant is obligated under Larscom's
blanket agreement or a similar obligation of confidentiality.

     c. Larscom recognizes that the Software (excluding the Third Party
Software) is the property and Confidential Information of 3NO and that Larscom
has only such rights therein as are expressly licensed by 3NO hereunder. Larscom
recognizes that the Third Party Software is the Confidential Information of 3NO
and that Larscom has only such rights therein as are expressly licensed by 3NO
hereunder.

     d. All right, title and interest in and to the ISSANNI 1000, including, but
not limited to, ownership, copyright, patent and trade secret rights remain with
3NO.

     e. In the event any products or technologies, other than those licensed
hereunder, are developed by 3NO during the term of the agreement, or any
extension, 3NO shall first offer to license such products or technologies to
Larscom, but only in the event that 3NO decides to license any such products or
technologies to any third party for the purpose of commercial exploitation. The
parties agree to negotiate in good faith with respect to the foregoing. In the
event that the parties cannot reach an agreement with respect to the terms of
any such additional license agreement(s) after such good faith negotiations, 3NO
shall be free to license any such products or technologies to any third party.

***** CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR THE REDACTED PORTIONS. THE
CONFIDENTIAL REDACTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITY AND
EXCHANGE COMMISSION.

                                     20

<PAGE>

                             CONFIDENTIAL TREATMENT

     f. Larscom may, at its own discretion, develop and manufacture other target
platforms that accommodate the Software. Any such platform sold will be subject
to the royalty payment obligations set forth in this Agreement. The parties
acknowledge and agree that

         (i)   any modifications to the Specifications; or

         (ii) any other specifications, bills of materials, part numbers used,
designs, source and vendor information for hardware and all modifications
thereto;

         (iii) made or developed by or for Larscom whether in conjunction with
development of such platform shall be the sole property of Larscom.

     g. 3NO shall not disclose the Specifications or otherwise make available
the ISSANNI 1000 to any third party within the Territory. 3NO shall refer and
direct all potential marketing and sales opportunities for the Products of which
it is aware to Larscom.

Except for those rights expressly set forth above, Larscom shall have no other
rights with respect to the User Documentation or the ISSANNI 1000 by virtue of
this Agreement. Without limiting the foregoing, Larscom is expressly prohibited
from distributing the Software on a stand-alone basis, modifying the Software or
creating derivative works of the Software, except as otherwise described herein.

3. PAYMENTS. As consideration for the grant of the License and services provided
hereunder, Larscom shall pay to 3NO the fees and royalties set forth below. The
payments shall be made as follows:

     a. FEES. Larscom shall pay 3NO an advanced pre-paid royalty fee of $ *****
(the "Initial Fee"). The first $ ***** of the Initial Fee shall be the "First
Fee." The second $ ***** of the Initial Fee shall be the "Second Fee."

         (i) The Initial Fee shall be due as of the Effective Date or as
otherwise mutually agreed upon by the parties.

         (ii) The First Fee shall be the royalties for the first ***** Net Unit
Sales. In the event that fewer than ***** Net Unit Sales occur by *****, this
First Fee shall be for the time period from the Effective Date until *****.

         (iii) The Second Fee shall be the royalties for the second ***** Net
Unit Sales (numbered ***** to *****). In the event that fewer than ***** Net
Unit Sales occur by *****, this Second Fee will not be refundable and shall be
payment of royalties for ***** Net Unit Sales occurring after ******.

     b. ROYALTIES. After complete and final payment of the Initial Fee, Larscom
shall make royalty payments to 3NO of ***** percent of the Net Sales Price of
Larscom's Net Unit Sales of Products.

     c. All payments will be made in U.S. dollars. Royalty payments shall be
made quarterly no later than sixty (60) days after the end of each calendar
quarter, beginning with the calendar quarter after the first Net Unit Sale was
recorded. Any amount for which payment is not received by 3NO when due will bear
interest at the lesser of 1.5% per month or the maximum rate permitted by
applicable law. In addition to the royalty payments, Larscom shall deliver to
3NO a written report reflecting Net Unit Sales by calendar quarter, net royalty
payments, cumulative royalties and such other information to which the parties
agree.

***** CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR THE REDACTED PORTIONS. THE
CONFIDENTIAL REDACTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITY AND
EXCHANGE COMMISSION.

                                     21

<PAGE>

                             CONFIDENTIAL TREATMENT

     d. If 3NO grants a license to the Software to a third party anytime after
the Effective Date on terms that are similar to those granted to Larscom herein
and such license provides for a royalty rate more favorable than that granted to
Larscom pursuant to this Section 3, then Larscom shall be entitled to such lower
royalty rate as of the effective date of such more favorable license.

4.   3NO OBLIGATIONS; TRANSFER

     a. Upon receipt of the Initial Fee, 3NO will initiate the full disclosure
and transfer of all information, materials and manufacturing assets necessary
for the full realization of the license rights including, without limitation,
information and documentation related to the design layout, and sources of the
ISSANNI 1000 as identified in the Statement of Work attached hereto as Exhibit
A.

     b. 3NO will deliver the Specifications and three (3) copies of the Software
to Larscom by September 30, 2000. Such Software shall be on CD-ROM, or on other
media as mutually agreed upon by the parties.

     c. 3NO will provide Larscom with two (2) working demonstration units of the
ISSANNI 1000 for testing and Hardware development purposes. Delivery of such
demonstration units shall occur by September 30, 2000.

     d. 3NO will provide designated Larscom engineers, at no additional cost to
Larscom, with not less than eighty (80) hours training on the operation, use and
manufacture of the ISSANNI 1000, Software and Hardware. Such training shall take
place at the Larscom facility at a date and time mutually agreed.

     e. 3NO will furnish whatever additional information or technical assistance
Larscom may reasonably require.

     f. 3NO will assume all responsibility for Software warranty (as set forth
in this Agreement).

     g. 3NO will place the Source Code in an escrow account pursuant to the
Escrow Agreement attached hereto as Exhibit C ("Escrow Agreement").

5.   LARSCOM OBLIGATIONS.

     a.  LARSCOM SHALL USE ITS BEST EFFORTS TO:

         (i)   promote and market Products in the licensed Territory.

         (ii) maintain adequate facilities and trained personnel to manufacture,
distribute, maintain and support the Products.

         (iii) market and distribute Products consistent with good business
ethics and in a manner that will reflect favorably on the ISSANNI 1000 and the
goodwill and reputation of the parties.

        (iv) handle all Customer inquiries, quotations, and orders promptly and
efficiently.

     b. WARRANTY AND SUPPORT OBLIGATIONS OF LARSCOM. Larscom shall provide all
necessary and appropriate sales, technical, repair, service and warranty support
to the Customers in accordance with its applicable warranty obligations, normal
business practices and applicable law. Larscom shall be solely responsible for
providing first level support for the Products. Customers should be provided
with active support addresses and telephone numbers specifying Larscom. In
addition to any other actions that are necessary or appropriate to fulfill such
obligations,

                                     22

<PAGE>

                             CONFIDENTIAL TREATMENT

      Larscom agrees specifically to provide appropriate levels of sales and
technical support to Customers in the Territory to assure the satisfactory
installation, use and operation of the Products. Terms of providing technical
support shall be consistent with Larscom's current business practices in
connection with its other products.

     c. Larscom will develop manufacturing documentation for the Products that
Larscom manufactures. Larscom will then further develop the hardware for
compatibility with European standards and will promote the Products using its
selling resources for the sales and distribution of the Products.

     d. LARSCOM RESTRICTIONS. Except as expressly prohibited herein, Larscom
will not:

         (i) Reverse engineer, disassemble, decompile, copy, modify, or
otherwise change the Software in whole or in part, or assist in any way,
directly or indirectly, in any effort to do so, except in performing its
obligations under this Agreement.

         (ii) Use or transfer any copies of the Software, except in the
performance of this Agreement.

         (iii) Make any representation, guarantee or warranty to Customers or
any other party regarding the performance or functional characteristics of the
ISSANNI 1000 inconsistent with the User Documentation.

6.   MAINTENANCE.

     a. All maintenance necessary to keep the ISSANNI 1000 operational during
the term of this Agreement shall be performed by 3NO. Such maintenance
activities shall include bug fixes, updates, enhancements and/or modifications
to the ISSANNI 1000. 3NO shall maintain all Software revisions and
configurations and ensure that Larscom has the most current copy available.

     b. 3NO shall support, at no charge, Larscom Engineering and Customer
Service personnel, and support organization with technical assistance
specialists on a 24 hour-a-day, seven day-a-week basis. Such support shall
include appropriate escalation procedures. Larscom shall provide Level 1 support
to customers. 3NO shall provide Level 2 support. Level 1 and Level 2 support
requirements are defined in the Statement of Work.

     c. 3NO shall promptly notify Larscom of any improvements to the Hardware,
including but not limited to, additions, modifications, Enhancements, updates
and revisions, made at any time during the term of this Agreement.

     d. 3NO and Larscom shall develop protocols with respect to the resolution
of any problems in the Hardware and the implementation or embedding of the
Hardware in the Products.

7.   WARRANTIES

     a. 3NO warrants that it is the exclusive owner of, and has full power and
right to license the ISSANNI 1000 and to perform all other terms of this
Agreement.

     b. 3NO warrants and represents that it has full power and right to grant a
sublicensable sublicense for the Third Party Software to Larscom under the terms
and conditions of this Agreement.

     c. 3NO warrants (i) that the ISSANNI 1000 and all information and materials
furnished hereunder shall be free from defects in materials, design and
workmanship and (ii) that the ISSANNI 1000 will perform in accordance with

                                     23

<PAGE>

                             CONFIDENTIAL TREATMENT

the functional specifications as set forth in the Statement of Work attached
hereto as Exhibit A ("Functional Specifications") for a period of three (3)
years starting as of the Effective Date. Provided that 3NO receives notification
within the applicable warranty period that the ISSANNI 1000 does not so conform,
then 3NO, at its own cost will make such modifications as are necessary to make
the ISSANNI 1000 conform to the Functional Specifications.

     d. 3NO warrants to Larscom that the Software does not contain (i) software
traps, viruses, worms, trap doors, back doors or other means of function that
will interfere with or adversely affect Larscom's use of the Software in
connection with the Products or which will damage or destroy data or other
property of Larscom; or (ii) any master key access, ID, password feature or
other means of access.

     e. 3NO warrants to Larscom that the Software shall be Year 2000-compliant.
By way of example, products, programs, files, databases, user interfaces and
processes shall have or produce no operational, logical or arithmetic
inconsistencies when dealing with dates beyond 1999. The transition across
century boundaries must be seamless, requiring no manual intervention. Leap year
and century calculations must be per ISO 8601. The required date range is from
the year 1 to the year 9999.

     f. In addition to the foregoing, to the extent allowable in existing third
party contracts, 3NO agrees to assign, and hereby does assign, to Larscom any
other warranties and all benefits thereof as 3NO or any of its subcontractors or
affiliates may receive from third party suppliers. Any such assignment shall not
relieve 3NO of any of its responsibilities under this Agreement. 3NO shall
notify Larscom of each warranty and, upon receipt of such warranty, shall
deliver to Larscom any documents issued by the warrantor evidencing such
warranty.

     g. 3NO represents that it has not assigned, transferred, licensed, pledged
or otherwise encumbered the ISSANNI 1000, or any underlying technology or
intellectual property rights thereto in a manner inconsistent with the terms of
this Agreement.

     h. 3NO represents that it is not aware of any actual violation or potential
violation, infringement or misappropriation of any third party's rights,
including without limitation, patent, copyright, trademark and trade secret
rights (or any claim or potential claim thereof) by the ISSANNI 1000.

     i. Each party represents that entering into or performing under this
Agreement will not violate any right of or breach any obligation to any third
party under any agreement or arrangement between the representing party and such
third party.

     j. EXCEPT AS SET FORTH HEREIN, 3NO SYSTEMS MAKES NO PERFORMANCE
REPRESENTATIONS, WARRANTIES OR GUARANTIES, EITHER EXPRESS OR IMPLIED, ORAL OR
WRITTEN, WITH RESPECT TO THE TECHNOLOGY OR THE SOFTWARE, OR ANY SERVICES COVERED
BY OR FURNISHED PURSUANT TO THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO,
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR ARISING FROM
ANY COURSE OF PERFORMANCE, COURSE OF DEALING, OR USAGE OF TRADE.

8.   INDEMNIFICATION/LIMITATION OF LIABILITY.

     a. Each party shall, at its own expense, indemnify and hold the other
harmless from any loss, damage, liability or expense, on account of damage to
property and injuries, including death, to all persons, arising from any
occurrence caused by any act or omission of the indemnifying party related to
the performance of this Agreement. The indemnifying party shall defend any suit
or dispose of any claim or other proceedings brought against said indemnities on
account of such damage or injury, and shall pay all expenses, including
attorney's fees, and satisfy all judgments which may be incurred by or rendered
against said indemnities.

                                     24

<PAGE>

                             CONFIDENTIAL TREATMENT

     b. EXCEPT FOR A BREACH OF SECTION 9, IN NO EVENT SHALL EITHER PARTY BE
LIABLE TO THE OTHER, OR TO ANY THIRD PARTY CLAIMING THROUGH EITHER PARTY HERETO,
FOR INDIRECT, SPECIAL, EXEMPLARY, INCIDENTAL OR CONSEQUENTIAL LOSS OR DAMAGE,
INCLUDING BUT NOT LIMITED TO, LOST PROFITS, WHETHER ARISING OUT OF CONTRACT,
TORT, STRICT LIABILITY OR OTHERWISE, RESULTING FROM OR RELATING TO THIS
AGREEMENT (WHETHER OR NOT SUCH PARTY KNEW OR SHOULD HAVE KNOWN OF THE
POSSIBILITY OF ANY SUCH DAMAGES).

9.   CONFIDENTIALITY.

         Each party agrees, in the event it receives Confidential Information of
the other, to use such Confidential Information only for the purposes for which
it was disclosed to the party, to exercise reasonable care to protect and hold
such Confidential Information in confidence and to prevent its disclosure to
third parties, except as permitted under this Agreement. Except as otherwise
provided, all such Confidential Information will be returned to the disclosing
party upon termination of this Agreement. Neither party shall be required to
protect or hold in confidence any information received by it which:

          (i) is or becomes available to the public or to the industry without
the fault of the recipient;

         (ii) was rightfully in the possession of recipient before being
provided to the recipient by the other party;

         (iii) is independently developed by the recipient;

         (iv) is required to be disclosed by court order, or other legal
requirement, provided, however, that the recipient provides sufficient notice to
the other party, if possible, to permit such other party an opportunity to
obtain sufficient protective measures with regard to the information; or

         (v) is subsequently received by the recipient without obligation of
confidentiality from a third party, who the recipient had no reason to believe
was not legitimately authorized to provide it with such information;

10.   TRADEMARKS.

     a. Larscom shall designate and implement its own Trademark for the
Products.

     b. Larscom agrees to credit its use of the ISSANNI 1000 by use of a 3NO
Trademark on the Products. 3NO will provide the artwork to be utilized by
Larscom and Larscom, in its sole discretion, shall determine the size and
placement of such Trademark. The artwork shall be compatible with the Products
and Larscom's Trademarks. In addition, Larscom agrees to reasonably credit 3NO
on the packaging, Larscom's User Documentation, advertising and promotional
literature relating to the Products. Any additional desired use by Larscom of
3NO's Trademarks (including, without limitation, in advertising or marketing
materials) shall be submitted to 3NO for written approval prior to such use.

11.   AUDIT.

                                     25

<PAGE>

                             CONFIDENTIAL TREATMENT

     a. Larscom shall keep full, clear and accurate books and records with
respect to its Net Unit Sales and Net Sales subject to royalties hereunder. Such
books and records shall be kept at Larscom's principal place of business and
made in a manner such that the royalty reports made pursuant to Section 0, can
be verified.

     b. During the term of this Agreement and for two (2) years thereafter, 3NO
or its authorized agent, shall have the right to examine such books and records
upon reasonable notice during normal business hours, but not more than twice per
year. In case of any dispute as to the sufficiency or accuracy of such books and
records, 3NO may have an independent auditor examine and certify such records.
Such inspections shall be at the expense of 3NO, unless a variation or error to
the prejudice of 3NO exceeding five percent (5%) is discovered. In such event,
Larscom shall be responsible for all costs relating to the audit. Larscom shall
pay any deficiency discovered by 3NO, together with interest thereon at the then
current prime rate, within fifteen (15) days from the date on which notice of
such deficiency is given.

12.   TERM AND TERMINATION.

     a. Unless earlier terminated in accordance with the provisions hereof, the
term of this Agreement shall be five (5) years from the Effective Date. Subject
to the terms hereof, either party may notify the other in writing ninety (90)
days prior to the end of any term of its intention to renew, the Agreement and
it shall be renewed for an additional term of twelve (12) months each.

     b. This Agreement may be terminated by mutual agreement of the parties or
as follows:

         (i) By either party, upon material breach or default of the terms
hereof by the other and such breach or default is not cured by the defaulting
party within thirty (30) days from the date of written notice of such breach or
default by the non-defaulting party. The cure period may be extended by
agreement of the parties.

         (ii) By either party immediately upon written notice in the event the
other party, (a) admits its inability to pay its debts after they become due or
is in liquidation, (b) involuntarily, has instituted against it any proceeding
in bankruptcy or any other insolvency or reorganization proceeding, or (c)
voluntarily institutes any proceeding in bankruptcy or any other insolvency or
reorganization proceeding.

     c.  The effect of termination:

         (i) Upon termination of this Agreement for any reason, the following
sections shall survive: 2, 3, 6, 7, 8, 9, 11, 12, 13 and 14.

         (ii) No termination of this Agreement shall have any effect on Products
for which royalty payments have been made.

         (iii) Upon termination of this Agreement by 3NO for Larscom's breach,
insolvency, or bankruptcy, Larscom shall cease all use of the Software and all
Confidential Information disclosed by 3NO to Larscom (collectively, "3NO
Materials"). Larscom shall further return all 3NO Materials (including all
copies thereof in whatever form) in Larscom's possession to 3NO, or, upon
notification by 3NO that such return is unnecessary, destroy all 3NO Materials.
Notwithstanding the foregoing, upon termination of this Agreement, Larscom shall
be entitled to keep and use one copy of 3NO Materials to provide support to
Customers in possession of Products prior to or on the effective date of
termination. All outstanding payments shall be due and payable within thirty
(30) days of such termination.

                                     26

<PAGE>

                             CONFIDENTIAL TREATMENT

        (iv) Upon termination of this Agreement by mutual consent of the
parties, 3NO shall continue to provide support for so long as Larscom is
obligated to provide support to its Customers pursuant to existing agreements
between such Customers and Larscom, but in no event shall 3NO's obligation to
provide support continue for more than one (1) after the expiration of any
Larscom warranty.

         (v) In the event that this Agreement is terminated by Larscom due to
3NO's insolvency, liquidation, or bankruptcy, or in the event 3NO, or any
successor in interest attempts to terminate this Agreement, Larscom shall be
entitled to receive the Source Code from escrow pursuant to the Escrow
Agreement. Notwithstanding anything else contained herein: (a) the Source Code
shall be considered 3NO's Confidential Information; (b) Larscom shall be
entitled to use the Source Code for any purpose in connection with the Products
and to support Customers that are in possession of Products and (c) the Source
Code is provided to Larscom "AS IS," WITHOUT ANY WARRANTY OF ANY KIND INCLUDING
WITHOUT LIMITATION, THE IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE OR NON-INFRINGEMENT.

         (vi) In the event of any termination by Larscom for 3NO's breach, prior
to Larscom acceptance of the Software, Hardware and related information and
materials ("Acceptance"), 3NO shall immediately refund the all amounts paid by
Larscom hereunder. In the event of any termination by Larscom for breach
following Acceptance, Larscom's rights hereunder shall continue, and such
termination shall not prejudice any Larscom claim or cause of action against
3NO. In the event of any termination by Larscom for failure of 3NO to fulfill
the requirements described in Section 0 above, 3NO shall be in material default
and Larscom shall be entitled to withhold all payments until such maintenance or
improvements are resumed.

13.   INDEMNIFICATION/INFRINGEMENT.

     a. In the event that any lawsuit is brought against Larscom based on a
claim that the Intellectual Property or Hardware, or any modification thereto
approved by 3NO, infringes any patent, copyright, or trade secret, 3NO agrees
that it will (i) defend such claim at its expense, as long as it is notified in
writing, within a reasonable period of time, and is given whatever information
is available to defend the claim; (ii) indemnify and hold Larscom harmless from
and against all damages, costs and expenses, including reasonable attorneys'
fees and costs, and (iii) pay all damages and costs awarded against Larscom on
such claim, as well as all reasonable out-of-pocket expenses incurred and paid
by Larscom directly resulting from such claim. 3NO will not be responsible for
any cost or expense related to a compromise of such claim made by Larscom
without 3NO's written consent.

     b. In the event the Hardware, or any modification thereto approved by 3NO
is, or in 3NO's opinion is likely to become, the subject of a claim for patent,
copyright, or trade secret infringement, 3NO may at its option and expense (i)
procure for Larscom the right to continue using the same under the terms of this
Agreement, or (ii) to replace or modify the same so that it becomes
non-infringing and substantially equivalent in function.

THE FOREGOING IS 3NO SYSTEMS' EXCLUSIVE OBLIGATION WITH RESPECT TO INFRINGEMENT
OF INTELLECTUAL PROPERTY RIGHTS.

     c. 3NO shall not be liable to Larscom for any claim of infringement based
upon or resulting from modifications to the Hardware that it has not approved or
which results from combinations of the Hardware with Larscom or third party
software (specifically excluding Third Party Software) or Products, without
which combination(s) such claim would not have arisen.

                                     27

<PAGE>

                             CONFIDENTIAL TREATMENT

                            14.  GENERAL PROVISIONS.

     a. ASSIGNMENT/SUCCESSORS. Neither party may sell, assign, pledge or
transfer this Agreement (including by operation of law) or any of its rights or
obligations hereunder without the express written consent of the other party,
which consent shall not be unreasonably withheld. This Agreement shall be
binding upon and inure to the benefit of the successors and permitted assigns of
the parties hereto. Larscom shall not sublicense any of its rights or
obligations hereunder without the prior written consent of 3NO. Notwithstanding
the foregoing, Larscom may sublicense the Intellectual Property, the ISSANNI
1000 and any modifications thereto to Customers.

     b. FORCE MAJEURE. Neither party shall be liable for any failure to perform
or observe any of its obligations under this Agreement for as long as, and to
the extent that, such performance is prevented by any circumstances not within
the reasonable control of the party concerned. The party so prevented from
performing shall promptly give notice of such delay and the anticipated length
of its duration to the other party.

     c. WAIVER. The failure of a party to insist upon strict adherence to any
term of this Agreement, on any occasion, shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term, or any other term, of this Agreement. Any waiver must be in writing.

     d. NOTICE. Any notice, or other communication under this Agreement shall be
in writing and shall be considered "given" five (5) days after mailing by
registered mail, return-receipt requested, to the parties at the addresses first
specified above, or at such other addresses as a party may specify by written
notice to the other. The mailing address may be changed at any time upon written
notice by the moving party.

     e. INDEPENDENT CONTRACTORS. Larscom and 3NO are independent contractor
under this Agreement, and nothing herein shall be construed to create a
partnership, joint venture or agency relationship between the parties. Neither
Larscom nor 3NO shall have the authority to enter into agreements of any kind on
behalf of the other or otherwise to bind or obligate the other to any third
party in any manner whatsoever.

     f. WARRANT/TERM SHEET. This Agreement is conditioned upon the execution of
a Warrant Agreement in the form attached hereto as Exhibit D.

     g. SURVIVAL. The provisions of this Agreement that by their sense and
context are intended to survive the termination of this Agreement shall so
survive.

     h. GOVERNING LAW. This Agreement shall be governed by and construed under
the laws of the State of California, without regard to its principles of
conflict of law.

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<PAGE>

                             CONFIDENTIAL TREATMENT

     i. ARBITRATION. In the event of any dispute or disagreement under this
Agreement, such dispute or disagreement shall be submitted to arbitration in San
Francisco, California under the rules of the American Arbitration Association.
Any award or decision made in such arbitration process shall be final, binding
upon the parties and enforceable through application to any court of competent
jurisdiction. Each party shall bear its own costs in connection with such
proceeding, except that the prevailing party in any arbitration shall be
reimbursed by the other party for any reasonable expenses, including legal fees.
No arbitration award shall include punitive damages. Notwithstanding the
foregoing, the parties may seek equitable relief in any court of competent
jurisdiction.

     j. SEVERABILITY. The illegality or unenforceability of the whole or any
part of the provisions of this Agreement will not affect the continued operation
of the remaining provisions.

     k. FOREIGN CORRUPT PRACTICES ACT. Both parties hereby affirm that no
principal, officer, or employee or any of its affiliates is a public official of
any government or territory, and that no principal, officer, or employee or any
of its affiliates is a family member of any public official of any government or
territory or the United States of America. Accordingly, both parties shall
comply with the Foreign Corrupt Practices Act of 1977 which prohibits corrupt
payments to government officials or members of a political party in order to
obtain or maintain business. The Foreign Corrupt Practices Act specifically
prohibits the payment or offer of payment of anything of value to assist in
obtaining or retaining business.

     l. EXPORT CONTROL. The parties acknowledge that the manufacture and sale of
the Products is subject to the export control laws of the United States of
America, including the U.S. Bureau of Export Administration regulations, as
amended, and hereby agree to obey any and all such laws. Larscom shall not
export or transmit, directly or indirectly, the Software or any technical data
received from 3NO, not the direct product thereof, outside of the United States
without prior authorization of the U.S. Government if such authorization is
required. Larscom shall obtain all licenses, permits and approvals required by
any government. Larscom agrees to comply with all export laws, rules, policies,
procedures, restrictions and regulations of the Department of Commerce or other
United States or foreign agency or authority, and not to export, or allow the
export or re-export of any goods in violation of any such restrictions, laws or
regulations. Larscom will indemnify and hold harmless 3NO for any violation or
alleged violation by Larson of such laws, rules, policies, procedures,
restrictions or regulations.

     m. COMPLIANCE WITH LAWS AND REGULATIONS. The parties shall comply with all
federal and state laws and regulations relating to their respective duties,
obligations, and performance under this Agreement and shall procure all licenses
and pay all fees, taxes and other charges required thereby.

     n. ENTIRE AGREEMENT. This Agreement sets forth the entire understanding
between the parties concerning the subject matter hereof and incorporates all
present and prior negotiations and understandings between the parties. No
alteration, amendment, change or additions to this Agreement shall be binding
upon any party unless in writing and signed by the party to be charged.

     o. OPPORTUNITY TO CONSULT COUNSEL. The parties hereto each hereby affirm
and acknowledge that they have read this Agreement, that they know and
understand its terms, and have signed it voluntarily and on the advice of
counsel. The parties have had a full and unhindered opportunity to consult with
their attorneys, accountants, financial advisors and such other consultants as
they may have desired prior to executing this Agreement

                                     29

<PAGE>

                             CONFIDENTIAL TREATMENT

THE UNDERSIGNED BY THEIR AUTHORIZED AGENTS HAVE EXECUTED THIS AGREEMENT AS OF
THE DATE FIRST ABOVE WRITTEN.

3NO SYSTEMS INC.                         LARSCOM INCORPORATED

By:                                      By:
      ------------------------               ---------------------
Name                                     Name
        ----------------------                -------------------
Title:                                   Title:
       -----------------------                  --------------------

                                     30

<PAGE>

                             CONFIDENTIAL TREATMENT

                                    Exhibit A

                                Statement of Work

WORK PRODUCTS DUE TO LARSCOM:

<TABLE>

<S>                                   <C>
System Specification Document -         This document should provide detailed
                                        list of features, functions and
                                        performance ranges that are the design
                                        and acceptance criteria for the Issani
                                        1000.

High Level Design Documentation -       A high level design that shows the
                                        process flow and data flow through the
                                        Issani 1000.

Detailed Functional Specification -     This document should contain block diagrams,
                                        module definition and show the interrelation
                                        between code modules. Any hardware
                                        dependencies in terms of specific
                                        drivers should be identified in this
                                        document.

Source Code -                           Demonstration of fully documented code
                                        that demonstrates that it is a
                                        functional decomposition of the High
                                        Level Design Document and the Detailed
                                        Design Document.

Designer Test Documentation -           This document should show a clear plan
                                        to test the features, functions and
                                        performance criteria specified in the
                                        System Specification Document.

Designer Test Results -                 This document should contain the results
                                        of the Designer Tests.

Operations Manual-                      This document should contain
                                        instructions on the installation,
                                        operation and maintenance of the Issani
                                        1000

Hardware Documentation-                 A hardware Bill of Materials must be
(completed)                             provided

</TABLE>

                                     31

<PAGE>

                             CONFIDENTIAL TREATMENT

                           PRODUCT ACCEPTANCE CRITERIA

IN ADDITION TO PROVIDING ALL OF THE DOCUMENTATION MENTION IN THE STATEMENT OF
WORK, THE ISSANI 1000 PRODUCT MUST PROVIDE ALL OF THE FUNCTIONS AND FEATURES
LISTED BELOW UNDER THE HEADING SPECIFICATIONS AND MEET OR EXCEED THE PERFORMANCE
CRITERIA LIST BELOW UNDER THE HEADING PERFORMANCE CRITERIA

SPECIFICATIONS

SOFTWARE

<TABLE>

<S>                                                 <C>
-----------------------------------------------------------------------------------------------------------
LAN Protocols                                          IP, PPP, Ethernet
-----------------------------------------------------------------------------------------------------------
WAN Protocols                                          IP over ATM PVC, IP over Ethernet
-----------------------------------------------------------------------------------------------------------
Encapsulations                                         Ethernet, RFC 2516 PPP
                                                       over Ethernet, RFC 1483
                                                       (Bridged and Routed), RFC
                                                       2364 PPP over ATM
-----------------------------------------------------------------------------------------------------------
Packet Forwarding                                      Routed, Bridged, Tunneled
-----------------------------------------------------------------------------------------------------------
Routing Protocols                                      Static, RIP V1 and 2, OSPF (RFC 1583)
-----------------------------------------------------------------------------------------------------------
Subscriber Awareness                                   Name, Session, IP, MAC Address, ATM PVC
-----------------------------------------------------------------------------------------------------------
Address Management                                     DHCP, DNS
-----------------------------------------------------------------------------------------------------------
Bandwidth Management                                   Rate Reservation, Fair Rate Enforcement
-----------------------------------------------------------------------------------------------------------
VPN                                                    PPTP,L2TP
-----------------------------------------------------------------------------------------------------------
Security                                               PAP,CHAP,RADIUS, LDAP, packet filtering
-----------------------------------------------------------------------------------------------------------
Accounting                                             RADIUS, SNMP on per port, per service, per
                                                       subscriber
-----------------------------------------------------------------------------------------------------------
Network Management                                     Java, SNMP, command line
-----------------------------------------------------------------------------------------------------------
Advanced Features                                      Network Address Translation (NAT),Firewall, IP
                                                       Packet Filtering
-----------------------------------------------------------------------------------------------------------
</TABLE>

INTERFACES

<TABLE>
<S>                                                 <C>
-----------------------------------------------------------------------------------------------------------
10/100 Base-T                                          1 port Autosensing 10/100
-----------------------------------------------------------------------------------------------------------
ATM OC3-c                                              1 port Single Mode
                                                       ST, Multimode SC, ST
                                                       (4096 PVCs) (Support for
                                                       ***** concurrent
                                                       sessions)
-----------------------------------------------------------------------------------------------------------
ATM DS3                                                1 port 75 ohm BNC coax (4096 PVCs) (Support for
                                                       ***** concurrent sessions)
-----------------------------------------------------------------------------------------------------------
ATM T1 IMA                                             1-4 RJ-48 T1/E1 ports
-----------------------------------------------------------------------------------------------------------
</TABLE>

                              PERFORMANCE CRITERIA

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
                     PPP Sessions                                    ***** Concurrent Sessions
-----------------------------------------------------------------------------------------------------------
<S>                                                                <C>
       PACKET PER SECOND THROUGHPUT WITHOUT NAT                              ***** PPS
-----------------------------------------------------------------------------------------------------------
        PACKET PER SECOND THROUGHPUT WITH NAT                                ***** PPS
-----------------------------------------------------------------------------------------------------------
</TABLE>

***** CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR THE REDACTED PORTIONS. THE
CONFIDENTIAL REDACTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITY AND
EXCHANGE COMMISSION.

                                   32

<PAGE>

                             CONFIDENTIAL TREATMENT

PRODUCT MAINTENANCE AND SUPPORT
Larscom will supply first level support for the Issani 1000. In this role
Larscom will act as the single point of contact. In the end-user documentation a
phone number will be published which Larscom or one of its service delegates
will answer. The first level support will work with customers to trouble shoot
installation and basic operational issues. The first level support team will be
trained to the level that they can trouble shoot problems that can classified as
problems that could be solved by a person trained to operate the unit based on
the commands that are documented in the user manual. If the first level support
team is not able to resolve the problem based on the criteria define above, the
customer call will be escalated to the second tier support team, which is to be
staffed by 3no. Second tier support must be available on a seven day a week
basis, twenty-four (24) hours a day. Severe service effecting problems can also
be escalated based on the following criteria.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
                    LEVEL 1          LEVEL 2                            LEVEL 3
                  LARSCOM CSE        3NO PSE           LEVEL 2            3NO
                                                     LARSCOM PSE      DEVELOPMENT
                                                     (HARDWARE)       ENGINEERING
----------------------------------------------------------------------------------------
<S>           <C>              <C>              <C>                <C>
   PRIORITY      RESOLUTION /    RESOLUTION /      RESOLUTION /       RESOLUTION /
                  ESCALATION     ESCALATION        ESCALATION          ESCALATION
----------------------------------------------------------------------------------------

      1             2 Hours          4 Hours           4 Hours          6 Hours
----------------------------------------------------------------------------------------
      2             4 Hours          8 Hours           8 Hours          24 Hours
----------------------------------------------------------------------------------------

      3             4 Hours          6 Hours           6 Hours          24 Hours
----------------------------------------------------------------------------------------
      4             8 Hours            N/A               N/A            Product
                                                                       Dependant
                                                                        Schedule
----------------------------------------------------------------------------------------
</TABLE>

PRIORITIES DEFINED:
PRIORITY 1:       The customer's network is non-operational due to failure of
                  our product.

PRIORITY 2:       The customer's network has an intermittent problem that
                  impairs proper operation.

PRIORITY 3:       The customer's installing our product with-in the network and
                  requires assistance

PRIORITY 4:       The customer's inquiring for general information about
                  product or requests for enhancements to a product.

LEVELS DEFINED:
LEVEL 1:           CSE (Customer Service Engineer) is responsible for working
                  with the customer and / or the on-site technician to determine
                  if the problem can be rectified by telephone and or escalating
                  the problem to Product Support Engineering.

LEVEL 2:          PSE (Product Support Engineer) is responsible for working with
                  CSE and customer in order to rectify the problem, determine if
                  a dispatch is necessary and for escalation to the Manager of
                  Technical Support.

                                   33

<PAGE>

                             CONFIDENTIAL TREATMENT

LEVEL 3:          Manager of Technical Support is responsible for determining
                  the level of involvement from the home office support group or
                  from service partners, and for escalation to the Director of
                  Customer Service and Engineering (as necessary).

LEVEL 4:          Senior Director of Customer Service is responsible for
                  determining the severity of the problem with input from the
                  Manager of Technical Support, determining a corrective action
                  plan, and escalating the problem to the President's staff.

Issues that are determined to be hardware related and requiring replacement will
be turned back to the Larscom Customer Service Organization for resolution.

Problem Tracking -         Larscom has a problem tracking system in place.
                           3no will need to be able to receive problem
                           report tracking numbers and track progress against
                           these numbers, updates to Larscom will be made on a
                           daily basis, so that customers will be able to call
                           back and determine status and resolution forecast for
                           their problem reports.

                                   34

<PAGE>

                             CONFIDENTIAL TREATMENT

                                    Exhibit B

                             SUMMARY OF DRAFT TERMS
                                3NO SYSTEMS, INC.
                                 AUGUST __, 2000
This memorandum summarizes the principal terms of the Series A-round strategic
financing of 3NO Systems, Inc. ("Company"), by Larscom Incorporated (the
"Investor"). The Company was incorporated in New Jersey on April 6, 1999.

KEY PROVISIONS

<TABLE>

<S>                                         <C>
INVESTOR                                       Larscom Incorporated

SECURITY                                       Series A Convertible Preferred Stock of 3NO Systems, Inc.
                                               ("Series A Preferred Stock").

PRICE PER SHARE                                ***** ("Original Issue Price").

AGGREGATE PROCEEDS                             *****

EXPECTED CLOSING DATE                           *****

TERMS OF SERIES A PREFERRED STOCK

DIVIDEND PROVISIONS                            Annual ***** dividend on the
                                               Series A Preferred Stock.
                                               Dividends payable if, as and
                                               when determined by the Board of
                                               Directors ("Board"). Dividends
                                               are *****

                                               For any other dividends or
                                               distributions, Series A Preferred
                                               Stock participates with Common
                                               Stock on an as-converted basis.

LIQUIDATION PREFERENCE                         First pay original purchase price
                                               plus accrued dividends on each share
                                               of Series A Preferred Stock, balance of
                                               proceeds paid pro-rata to Series
                                               A Preferred Stock and Common
                                               Stock on an as-converted to
                                               Common Stock basis.

                                               A consolidation or merger of the
                                               Company or sale of all or
                                               substantially all of its assets
                                               shall be deemed to be a
                                               liquidation or winding up for
                                               purposes of the liquidation
                                               preference.

CONVERSION                                     Convertible at any time at option
                                               of holder into one share of
                                               Common Stock (subject to
                                               antidilution adjustments).

                                               ***** CONFIDENTIAL TREATMENT HAS
                                               BEEN REQUESTED FOR THE REDACTED
                                               PORTIONS. THE CONFIDENTIAL
                                               REDACTED PORTIONS HAVE BEEN FILED
                                               SEPARATELY WITH THE SECURITY AND
                                               EXCHANGE COMMISSION.

</TABLE>

                                       35

<PAGE>

                             CONFIDENTIAL TREATMENT

<TABLE>

<S>                                          <C>
AUTOMATIC CONVERSION                           The Series A Preferred Stock
                                               shall be automatically converted
                                               into Common Stock, at the then
                                               applicable conversion price, (i)
                                               in the event of an underwritten
                                               public offering of shares of the
                                               Common at a public offering
                                               price per share that is not less
                                               than ***** times the Original
                                               Issue Price and an aggregate
                                               offering price of *****
                                               ("Qualifying IPO") or (ii) on
                                               the date upon which the Company
                                               obtains the vote or consent of
                                               at least ***** of the then
                                               outstanding shares of Series A
                                               Preferred Stock to such
                                               conversion.

ANTIDILUTION PROVISION                         The Series A Preferred
                                               Stock shall be entitled to
                                               proportional antidilution
                                               protection for stock splits,
                                               stock dividends, etc. In
                                               addition, the Investor shall
                                               have standard weighted average
                                               anti-dilution rights in the
                                               event that the Company issues
                                               additional equity securities
                                               (other than the reserved
                                               employee shares under the
                                               Employee Pool) at a purchase
                                               price less than the applicable
                                               conversion price.

VOTING AND PROTECTIVE PROVISIONS               Series A Preferred votes on an
                                               as-converted to Common Stock
                                               basis, but also has a series
                                               vote, by ***** majority, on:

                                               1) Altering, changing or
                                               amending the preferences,
                                               privileges or rights of Series A
                                               Preferred Stock;

                                               2) Authorizing, creating and/or
                                               issuing a senior or PARI PASSU
                                               class or series of equity
                                               securities, other than an
                                               issuance pursuant to the existing
                                               Employee Pool;

                                               3) Increasing or decreasing the
                                               authorized number of directors
                                               constituting the Board of
                                               Directors;

                                               4) Any consolidation, sale or
                                               merger of the Company or other
                                               transaction in which control of
                                               the Company is transferred;

                                               5) Amending or waiving any
                                               provision of the Company's
                                               Certificate of Incorporation or
                                               Bylaws;

                                               6) Redeeming, repurchasing or
                                               declaring a dividend with
                                               regard to any security of the
                                               Company.

                                               ***** CONFIDENTIAL TREATMENT HAS
                                               BEEN REQUESTED FOR THE REDACTED
                                               PORTIONS. THE CONFIDENTIAL
                                               REDACTED PORTIONS HAVE BEEN FILED
                                               SEPARATELY WITH THE SECURITY AND
                                               EXCHANGE COMMISSION.

</TABLE>

                                   36

<PAGE>

                             CONFIDENTIAL TREATMENT

TERMS OF INVESTOR RIGHTS AGREEMENT

<TABLE>

<S>                                         <C>
RIGHT OF FIRST OFFER ON                        The holders of Series A
SUBSEQUENT ISSUANCES                           Preferred Stock shall have the
                                               right in the event the Company
                                               proposes to offer equity
                                               securities to any person (other
                                               than the securities issued
                                               pursuant to employee benefit
                                               plans or acquisitions, in each
                                               case as approved by the Board of
                                               Directors, including the
                                               director elected by holders of
                                               the Series A Preferred Stock) to
                                               purchase on a pro rata basis all
                                               or any portion of such shares.
                                               If the Investor does not
                                               purchase all of the securities,
                                               that portion that is not
                                               purchased may be offered to
                                               other parties on terms no less
                                               favorable to the Company for a
                                               period of sixty (60) days.

                                               This right shall not apply to the
                                               issuance by the Company of up to
                                               ***** shares of its Common Stock
                                               to employees, officers, or
                                               directors of, or advisors or
                                               consultants to, the Company
                                               pursuant to its stock purchase or
                                               option plans (the "Employee
                                               Pool") or for the exercise of
                                               warrants issued to lenders and
                                               other creditors approved by the
                                               Board of Directors. It shall also
                                               not apply to Common Stock issued
                                               in connection with strategic
                                               alliances or other partnering
                                               arrangements approved by the
                                               Board of Directors or Common
                                               Stock issued upon conversion of
                                               Series A Preferred Stock.

                                               This right shall terminate
                                               immediately prior to (i) the
                                               closing of a Qualifying IPO or
                                               (ii) the closing of any merger or
                                               consolidation of the Company.
REGISTRATION RIGHTS:

DEMAND RIGHTS                                  Beginning earlier of ***** from
                                               the purchase of the Series A
                                               Preferred Stock or ***** after
                                               initial registration, one demand
                                               registration upon initiation of
                                               holders of at least *** of the
                                               outstanding shares of Series A
                                               Preferred as a class, including
                                               Common Stock issued on
                                               conversion of the Series A
                                               Preferred Stock ("Registrable
                                               Securities"), with minimum
                                               aggregate offering price to the
                                               public of not less than *****.
                                               The Company will use its best
                                               efforts to cause such shares to
                                               be registered.

                                               ***** CONFIDENTIAL TREATMENT HAS
                                               BEEN REQUESTED FOR THE REDACTED
                                               PORTIONS. THE CONFIDENTIAL
                                               REDACTED PORTIONS HAVE BEEN FILED
                                               SEPARATELY WITH THE SECURITY AND
                                               EXCHANGE COMMISSION.

</TABLE>

                                   37

<PAGE>

                             CONFIDENTIAL TREATMENT

<TABLE>

<S>                                         <C>
COMPANY REGISTRATION                           Unlimited "piggy-back"
                                               registration rights subject to
                                               pro rata cutback at the
                                               underwriters' discretion. Full
                                               cutback on IPO, ***** minimum
                                               inclusion thereafter. If the
                                               Series A Preferred Stock holders
                                               are so limited, however, no
                                               party shall sell shares in such
                                               registration other than the
                                               Company or the Series A
                                               Preferred Stock holders, if any,
                                               invoking the demand
                                               registration.

                                               No stockholder of the Company
                                               shall be granted piggyback
                                               registration rights superior to
                                               those of the Series A Preferred
                                               Stock without the consent of the
                                               holders of at least fifty-one
                                               percent of the Registrable
                                               Securities.

S-3 RIGHTS                                     Up to ***** demand registrations on
                                               Form S-3 per year; minimum offering
                                               size of $*****.

TERMINATION OF REGISTRATION RIGHTS             Registration Rights terminate (i)
                                               ***** years after initial public
                                               offering; or (ii) when all shares
                                               held by an investor can be sold
                                               under Rule 144 within a ninety
                                               (90) day period and such investor
                                               then holds less than 1% of the
                                               outstanding capital stock of the
                                               Company.

                                               No future registration rights may
                                               be granted without consent of a
                                               majority of Series A Preferred
                                               Stock holding registration rights
                                               if such rights are superior to
                                               those of the Series A Preferred
                                               Stock.

EXPENSES                                       The Company shall bear
                                               registration expenses (exclusive
                                               of underwriting discounts and
                                               commissions) of all such demand,
                                               piggy-back, and S-3 registrations
                                               (including the expense of one
                                               special counsel of the selling
                                               shareholders).

TRANSFER OF RIGHTS                             The registration rights
                                               may be transferred to any
                                               transferee who acquires at least
                                               ***** shares of Registrable
                                               Securities; provided the Company
                                               is given written notice thereof.

STANDOFF PROVISION                             No Series A Preferred holder shall
                                               sell shares within 180 days of the
                                               effective date of the Company's initial
                                               public offering if all officers and
                                               directors are similarly bound.

                                               ***** CONFIDENTIAL TREATMENT HAS
                                               BEEN REQUESTED FOR THE REDACTED
                                               PORTIONS. THE CONFIDENTIAL
                                               REDACTED PORTIONS HAVE BEEN FILED
                                               SEPARATELY WITH THE SECURITY AND
                                               EXCHANGE COMMISSION.

</TABLE>

                                   38

<PAGE>

                             CONFIDENTIAL TREATMENT

<TABLE>

<S>                                          <C>
BOARD REPRESENTATION AND MEETINGS              The authorized number of
                                               directors shall initially be
                                               ***** The Series A Preferred
                                               Stock shall elect *****, the
                                               Common Stock (voting separately
                                               as a class) shall elect *****
                                               and the remaining ***** shall be
                                               elected by all shares having
                                               voting rights. The Board shall
                                               meet at least six times per
                                               year. Effective upon the closing
                                               of the Series A Preferred Stock
                                               financing (the "Closing"), the
                                               members of the Board shall be
                                               *****

INSPECTION AND INFORMATION RIGHTS              For so long as the Investor holds at
                                               least ***** shares of Series A
                                               Preferred Stock, the Investor
                                               shall have the right to inspect
                                               the Company's premises and books
                                               at times convenient to both
                                               parties. The Investor shall have
                                               the right to receive unaudited
                                               ***** financial statements (including
                                               income statements, balance
                                               sheets, cash flow statements, and
                                               summaries of bookings and
                                               backlog) and management
                                               commentary within ***** days of
                                               the close of each quarter, and
                                               audited annual financial
                                               statements within *****
                                               days of the close of the fiscal
                                               year, in each case showing
                                               changes from the applicable
                                               budget for the corresponding
                                               period. Prior to the beginning of
                                               each fiscal year (and prior to
                                               the initial Closing Date of this
                                               investment), the Company shall
                                               prepare and forward to the
                                               Investor detailed monthly
                                               financial projections for the
                                               year. Rights end upon
                                               consummation of Qualifying IPO.

TERMS OF PREFERRED STOCK PURCHASE AGREEMENT

REPRESENTATIONS AND WARRANTIES                 The investment shall be made
                                               pursuant to a Stock Purchase
                                               Agreement reasonably acceptable
                                               to the Company and the Investor,
                                               which shall contain, among other
                                               things, appropriate
                                               representations, warranties and
                                               covenants of the Company
                                               reflecting the provisions set
                                               forth herein and other standard
                                               provisions, and appropriate
                                               conditions to closing including
                                               a customary legal opinion of
                                               Company counsel regarding the
                                               financing.

EXPENSES                                       The Company and the Investor
                                               shall each bear their own legal
                                               and other expenses with respect
                                               to the transaction except that,
                                               assuming a successful completion
                                               of the transaction, the Company
                                               shall pay the legal fees and
                                               expenses of Brobeck, Phleger &
                                               Harrison LLP, counsel to the
                                               Investor, up to a maximum of
                                               $*****. Every effort will be made
                                               to minimize these expenses.

                                               ***** CONFIDENTIAL TREATMENT HAS
                                               BEEN REQUESTED FOR THE REDACTED
                                               PORTIONS. THE CONFIDENTIAL
                                               REDACTED PORTIONS HAVE BEEN FILED
                                               SEPARATELY WITH THE SECURITY AND
                                               EXCHANGE COMMISSION.

</TABLE>

                                   39

<PAGE>

                             CONFIDENTIAL TREATMENT

FOUNDERS AND EMPLOYEE AGREEMENTS

<TABLE>

<S>                                         <C>

STOCK VESTING                                  All stock and stock equivalents
                                               issued after the Closing to
                                               employees, directors and
                                               consultants shall be subject to
                                               vesting as follows: 25% to vest
                                               at the end of the first year
                                               following such issuance, with
                                               the remaining 75% to vest
                                               monthly over the next three
                                               years. The repurchase option
                                               shall provide that upon
                                               termination of the employment of
                                               the shareholder, with or without
                                               cause, the Company or its
                                               assignee (to the extent
                                               permissible under applicable
                                               securities law qualification)
                                               retains the option to repurchase
                                               at cost any unvested shares held
                                               by such shareholder.

RESTRICTIONS ON COMMON STOCK TRANSFERS         No transfers allowed prior to vesting.

                                               Right of first refusal on vested
                                               shares until initial public
                                               offering.

MARKET STANDOFF                                Holders of Common Stock and
                                               options must, at the request of
                                               the Company or an underwriter
                                               involved in the Company's
                                               initial public offering, agree
                                               not to sell or otherwise
                                               transfer any securities of the
                                               Company during a period of up to
                                               180 days following the effective
                                               date of the registration of such
                                               initial public offering.

PROPRIETARY INFORMATION AND INVENTIONS         Each officer, employee and
AGREEMENT                                      consultant of the Company shall
                                               enter into an acceptable
                                               proprietary information and
                                               inventions agreement.

KEY-MAN INSURANCE                              As soon as reasonably possible after
                                               the Closing, the Company shall procure
                                               a key-man life insurance policy for its CEO
                                               in the amount of $*****, naming
                                               the Company as beneficiary.

CO-SALE RIGHTS                                 Each holder of the Series A Preferred
                                               Stock shall have the right to participate
                                               on a pro-rata basis in transfers of
                                               stock for value by any Founder (*****).

                                               ***** CONFIDENTIAL TREATMENT HAS
                                               BEEN REQUESTED FOR THE REDACTED
                                               PORTIONS. THE CONFIDENTIAL
                                               REDACTED PORTIONS HAVE BEEN FILED
                                               SEPARATELY WITH THE SECURITY AND
                                               EXCHANGE COMMISSION.

</TABLE>

                                     40

<PAGE>

                             CONFIDENTIAL TREATMENT

OTHER PROVISIONS

<TABLE>

<S>                                        <C>
FINDERS                                        The Company and the Investor
                                               shall represent and warrant that
                                               it has no obligation to pay any
                                               finder's fee and shall indemnify
                                               the other parties to this
                                               transaction for any breach
                                               thereof.

CLOSING CONDITIONS                             Closing subject to negotiation of
                                               definitive legal documents and completion
                                               of legal and financial due diligence by
                                               Investor.

CAPITALIZATION                                 Upon the Closing of this financing there
                                               shall be (i) ***** shares of issued and
                                               outstanding Common Stock held by
                                               the founders and (ii) *****
                                               shares of Common Stock reserved
                                               for issuance pursuant to
                                               outstanding options or reserved
                                               for future issuance to key
                                               employees.

                                               ***** CONFIDENTIAL TREATMENT HAS
                                               BEEN REQUESTED FOR THE REDACTED
                                               PORTIONS. THE CONFIDENTIAL
                                               REDACTED PORTIONS HAVE BEEN FILED
                                               SEPARATELY WITH THE SECURITY AND
                                               EXCHANGE COMMISSION.

</TABLE>

                                     41

<PAGE>

                             CONFIDENTIAL TREATMENT

                                    EXHIBIT C

                                ESCROW AGREEMENT

         This agreement is entered into by and among Larscom Incorporated,
("LARSCOM"), ________________________________, ("ESCROW AGENT"), and 3NO
Systems, Inc. ("3NO").

         WHEREAS, Larscom has licensed, by means of an agreement of even date
("AGREEMENT"), rights to the Hardware and Software; and

         WHEREAS, Larscom requires access to the Hardware and Software for the
conduct of its business under certain limited circumstances.

         NOW THEREFORE, the parties hereto agree as follows:

1.       Escrow.

Simultaneously with the execution of this agreement, 3NO shall promptly deliver
to the Escrow Agent a true and correct copy of the Source Code (as such term is
defined in the Agreement) together with related documentation, and, as
developed, all new releases, enhancements, modifications and corrections thereof
or thereto that are the subject of the Agreement between Larscom and 3NO. The
Escrow Agent shall not be responsible for verifying the contents of the
delivered Source Code and is held harmless by Larscom for any missing or
incomplete items not delivered by 3NO to Escrow Agent. The Escrow Agent shall
hold the Documentation in escrow in a secure environmentally safe, locked
facility which is accessible only to Escrow Agent and shall not release the
Source Code to Larscom unless or until one or more of the following acts occur
(a "DEFAULT"):

         a.   A material default by 3NO, as described in this License Agreement,
              or

         b.   The insolvency, bankruptcy or dissolution of 3NO, for any reason,
              or

         c.   3NO has ceased business operations.

2.       Procedure.

In the event of a Default, the Escrow Agent shall release the Source Code held
in escrow in accordance with the following procedures.

Within five (5) business days following receipt of written notice from Larscom
of the occurrence of a Default (the "ESCROW NOTICE"), the Escrow Agent shall
give 3NO written notice thereof (the "3NO NOTICE") and shall confirm the giving
of the 3NO Notice in writing to Larscom.

In the event Escrow Agent receives from Larscom within such five (5) business
day period, a written statement withdrawing the Escrow Notice, the Escrow Agent
shall notify 3NO of such withdrawal and this Agreement shall continue in full
force and effect as if the Escrow Notice had not been provided to the Escrow
Agent.

In the event 3NO disputes the existence of a Default, 3NO shall, within five (5)
business days after receipt of the 3NO Notice from the Escrow Agent, give to the
Escrow Agent and Larscom written notice thereof (the "COUNTER-NOTICE"). The
Counter-Notice shall set forth (i) a demand to not provide the escrowed Source
Code to Larscom hereunder, and (ii) a statement setting forth facts supporting
the basis for 3NO's dispute

                                     42

<PAGE>

                             CONFIDENTIAL TREATMENT

If the Counter-Notice is received by the Escrow Agent before the close of
business on the last day of such five (5) day period, the Escrow Agent shall,
within five (5) business days after receipt of the Counter-Notice, give Larscom
written notice thereof and withhold provision of the escrowed Source Code to
Larscom pending receipt of either (i) a certified copy of the award of the
arbitrator pursuant to Section 3 hereof, or (ii) other instructions signed
jointly by authorized officers of Larscom and 3NO. If after giving 3NO Notice,
Escrow Agent does not receive written notice from 3NO or Larscom in accordance
with subsection (B) or (C) of this section 2, the Escrow Agent shall immediately
deliver the escrowed Source Code to Larscom. If Larscom receives the Source
Code, hereunder, it shall only it as necessary and in a manner that is
consistent with the terms of the Agreement.

Notwithstanding any other provisions of this agreement, the Escrow Agent shall
promptly deliver the escrowed Source Code to the party designated in writing
signed jointly by 3NO and Larscom.

3.       Arbitration.

In the event the Counter-Notice is given by 3NO, the controversy as to the
existence of a Default shall be settled by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association. The
hearing shall be held in San Francisco, or such other location as Larscom and
3NO may mutually agree before an arbitrator who was selected by the American
Arbitration Association as being reasonably familiar with telecommunications and
computer industries. In rendering a decision, the arbitrator shall make specific
findings of fact and take into account any applicable judicial precedents and
industry practice in the telecommunications and computer industries. The
decision of the arbitrator shall be binding and conclusive on all parties
involved, to the extent permitted by applicable law, and judgment upon the
decision may be entered in the highest court of any forum, federal or state,
having jurisdiction.

Immediately after receipt of a certified copy of an award from the arbitrator
that finds the existence of a Default, the Escrow Agent shall deliver to Larscom
the escrowed Source Code. In the event the arbitrator finds to the contrary, the
Escrow Agent shall withhold delivery of the escrowed Source Code and this Escrow
Agreement shall continue in full force and effect as if the Escrow Notice had
not been communicated to the Escrow Agent.

All fees charged by the American Arbitration Association and all attorney's fees
and costs shall be paid by the non-prevailing party to the arbitration. However,
each party shall be responsible for payment of all fees and expenses connected
with the presentation of its respective case.

The Escrow Agent shall receive from 3NO the sum of ____________ dollars for
operating the escrow account and the sum of _____________ dollars per annum
thereafter for continuation of same.

4.       Governing Law.

This Agreement shall be governed by the laws of the State of California without
regard to conflict of law rules. The successful party in any action brought as a
result of the Agreement shall be entitled to recover from the unsuccessful party
reasonable attorney's fees and costs of court, in addition to any other relief
to which it may be entitled by prosecution or defending such action.

5.       Validity.

If any provision herein, or party thereof, is held to be invalid, illegal or
unenforceable, the remainder of the Agreement, or other parts or applications of
such provision shall not be affected thereby.

6.       Term.

The initial period of this Agreement is for a period of two (2) years.
Thereafter, this Agreement shall automatically

                                     43

<PAGE>

                             CONFIDENTIAL TREATMENT

renew on a year to year basis unless (a) 3NO and Larscom jointly instruct Escrow
Agent in writing that this Agreement is terminated, (b) this Agreement is
terminated by 3NO for Larscom's default under the Agreement.

Executed ________________, 2000.

LARSCOM INCORPORATED                              3NO SYSTEMS INCORPORATED

By:                                           By:
   -----------------------------------           ------------------------

Robert Coackley, President & CEO
--------------------------------------        ---------------------------------
             Name and Title                           Name and Title

ESCROW AGENT

By:
          -------------------------------------------

          -------------------------------------------
                        Name and Title

          -------------------------------------------
                           Address

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

                                     44

<PAGE>

                             CONFIDENTIAL TREATMENT

                                    EXHIBIT D

                                  STOCK WARRANT

Upon the Effective Date of this [License] Agreement, 3NO Systems, Inc. ("3NO")
shall grant to Larscom, Inc. ("LARSCOM") a warrant (the "WARRANT") to acquire an
amount of shares of 3NO's common stock equal to ***** of 3NO's common stock
outstanding on a fully-diluted basis (including, without limitation, all
securities of 3NO issued, subject to outstanding options, warrants or other
rights to acquire such securities or reserved for issuance by 3NO) immediately
prior to the earlier of (i) the underwritten public offering pursuant to an
effective registration statement under the Securities Act of 1933, as amended,
covering the offer and sale of 3NO's common stock (an "IPO") or (ii) a merger,
consolidation or other reorganization of 3NO with or into any other corporation
or corporations, or a sale of all or substantially all of the assets of 3NO,
unless the stockholders of 3NO immediately prior to such merger, consolidation
or reorganization hold at least 50% of the outstanding voting equity securities
of the surviving corporation in such merger, consolidation, reorganization or
sale of assets (a "LIQUIDITY EVENT") at an exercise price per share equal to
***** of (a) the price at which shares are initially sold to the public in an
IPO, (b) the fair market value of a share of 3NO's common stock determined in
any other Liquidity Event or (c) if no such fair market value is determinable in
the Liquidity Event, the fair value of a share of 3NO's common stock at the
effective time of the Liquidity Event as determined in good faith by the board
of directors of 3NO. The Warrant will be in substantially the form attached to
this letter as Exhibit [X] with an exercise period of the longer of ten (10)
years or three (3) years after a Liquidity Event, will be exercisable at any
time beginning immediately prior to the earlier of a Liquidity Event or the
record date of such Liquidity Event (if exercised prior to such Liquidity Event,
the exercise price shall be based on the exercise price determinable in the
Liquidity Event) and will include registration rights (one (1) demand
registration, unlimited piggyback registrations, and, per year, up to two (2)
S-3 registrations, all of the expenses of each to be paid by 3NO).

NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE. NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE
UPON EXERCISE OF THIS WARRANT NOR ANY INTEREST OR PARTICIPATION HEREIN OR
THEREIN MAY BE SOLD, OFFERED FOR SALE, ASSIGNED, PLEDGED, HYPOTHECATED,
ENCUMBERED OR IN ANY OTHER MANNER TRANSFERRED OR DISPOSED OF IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT
AND SUCH LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.

***** CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR THE REDACTED PORTIONS. THE
CONFIDENTIAL REDACTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITY AND
EXCHANGE COMMISSION.

                                     45

<PAGE>

                             CONFIDENTIAL TREATMENT

No. W-___

                        WARRANT TO PURCHASE COMMON STOCK

                                       of

                                3NO SYSTEMS, INC.

                  This certifies that, for value received, LARSCOM INCORPORATED,
or registered assigns ("Holder"), is entitled, subject to the terms set forth
below, to purchase from 3NO SYSTEMS, INC. (the "Company"), a New Jersey
corporation, an amount of shares of the Company's common stock ("Common Stock")
***** of the capital stock of the Company outstanding on a fully-diluted basis
(including, without limitation, all securities of the Company issued, subject to
then outstanding options, warrants or other rights to acquire such securities or
then reserved for issuance (other than pursuant to Section 8 hereof) by the
Company) immediately prior the Liquidity Event (as defined below) ("Common
Shares"), upon surrender hereof, at the principal office of the Company referred
to below, with the subscription form attached hereto duly executed, and
simultaneous payment therefor in lawful money of the United States or otherwise
as hereinafter provided, at the Exercise Price as set forth in Section 2 below.
The number, character and Exercise Price of such Common Shares are subject to
adjustment as provided below. The term "Warrant" as used herein shall include
this Warrant, and any warrants delivered in substitution or exchange for this
Warrant as provided herein. For purposes of this Warrant, the "Liquidity Event"
shall mean the earlier of (i) the public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, covering
the offer and sale of Common Stock (an "IPO") or (ii) a merger, consolidation or
other reorganization of the Company with or into any other corporation or
corporations, or a sale of all or substantially all of the assets of the
Company, unless the stockholders of record of the Company as constituted
immediately prior to such merger, consolidation, reorganization or sale will
hold, immediately after such acquisition or sale (by virtue of securities issued
as consideration for such merger, consolidation, reorganization or sale or
otherwise) at least 50% of the outstanding voting power of the surviving
corporation in such merger, consolidation, reorganization or sale.

                  1. TERM OF WARRANT. Subject to the terms and conditions set
forth herein, this Warrant shall be exercisable, in whole or in part, during the
term commencing immediately prior to the earlier of a Liquidity Event or the
record date of such Liquidity Event and ending at 5:00 p.m., Pacific Standard
Time, on the later of September __, 2010 or three (3) years after the effective
date of the Liquidity Event (the "Expiration Date"), and shall be void
thereafter.

                  2. EXERCISE PRICE. The Exercise Price per Common Share at
which this Warrant may be exercised shall be equal to ***** of the Fair Market
Value of such Common Shares. For purposes of this Warrant, the Fair Market Value
of the Common Shares shall mean: (a) the price at which shares of Common Stock
are initially sold to the public in an IPO, (b) the fair market value of a
Common Share determined in any other Liquidity Event or (c) if no such fair
market value is determinable in the Liquidity Event, the fair value of a Common
Share at the effective time of the Liquidity Event as determined in good faith
by the Board of Directors of the Company, as adjusted from time to time pursuant
to Section 9 hereof.

 ***** CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR THE REDACTED PORTIONS. THE
CONFIDENTIAL REDACTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITY AND
EXCHANGE COMMISSION.

                                     46

<PAGE>

                             CONFIDENTIAL TREATMENT

                  3. EXERCISE OF WARRANT.

                  (a) The purchase rights represented by this Warrant are
exercisable by the Holder in whole or in part, at any time, or from time to
time, during the term hereof as described in Section 1 above, by the surrender
of this Warrant and the Notice of Exercise annexed hereto duly completed and
executed on behalf of the Holder, at the office of the Company (or such other
office or agency of the Company as it may designate by notice in writing to the
Holder at the address of the Holder appearing on the books of the Company),
upon:

                           (i)      (Cash Exercise) payment in cash, by check or
by wire transfer (to the account designated by the Company on the Account
Schedule attached hereto, as such may be amended from time to time by written
notice delivered by the Company to the Holder) of the purchase price of the
shares to be purchased; or

                           (ii)     (NET ISSUE EXERCISE) election to receive
shares equal to the value of this Warrant (or the portion thereof being
canceled) computed using the following formula:

                           X        =       (Y)(A-B)
                                            --------
                                               A

         Where:            X        -       The number of Common Shares to be
                                            issued to Holder.

                           Y        -       The number of Common Shares
                                            purchasable under this Warrant at
                                            such date.

                           A        -       The fair market value of one Common
                                            Share.

                           B        -       Exercise Price (as adjusted to the
                                            date of such calculations).

                           For purposes of Section 3(a)(ii), if the Common
Shares are, or have been converted into, Common Stock and if the Common Stock is
traded in a public market, the fair market value of the Common Stock shall be
the closing price of the Common Stock reported for the business day immediately
before Holder delivers its Notice of Exercise to the Company. If the Common
Shares are not traded in a public market, the Board of Directors of the Company
shall determine fair market value in its good faith judgment.

                  (b) This Warrant shall be deemed to have been exercised
immediately prior to the close of business on the date of its surrender for
exercise as provided above, or immediately prior to the Liquidity Event or
record date of the Liquidity Event, as applicable, and the person entitled to
receive the Common Shares issuable upon such exercise shall be treated for all
purposes as the holder of record of such shares as of the close of business on
such date. As promptly as practicable on or after such date, the Company at its
expense shall issue and deliver to the person or persons entitled to receive the
same a certificate or certificates for the number of shares issuable upon such
exercise. In the event that this Warrant is exercised in part, the Company at
its expense will execute and deliver a new Warrant of like tenor exercisable for
the number of shares for which this Warrant may then be exercised.

                                     47

<PAGE>

                             CONFIDENTIAL TREATMENT

                  4. NO FRACTIONAL SHARES OR SCRIP. No fractional shares or
scrip representing fractional shares shall be issued upon the exercise of this
Warrant. In lieu of any fractional share to which the Holder would otherwise be
entitled, the Company shall make a cash payment equal to the Exercise Price
multiplied by such fraction.

                  5. REPLACEMENT OF WARRANT. On receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction, or
mutilation of this Warrant and, in the case of loss, theft, or destruction,
on delivery of an indemnity agreement reasonably satisfactory in form and
substance to the Company and, at the reasonable discretion of the Company, an
indemnity bond or, in the case of mutilation, on surrender and cancellation
of this Warrant, the Company at its expense shall execute and deliver, in
lieu of this Warrant, a new warrant of like tenor and amount.

                  6. RIGHTS OF STOCKHOLDERS. Subject to Section 9 of this
Warrant, the Holder shall not be entitled to vote or receive dividends or be
deemed the holder of Common Shares or any other securities of the Company that
may at any time be issuable on the exercise hereof for any purpose, nor shall
anything contained herein be construed to confer upon the Holder, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action (whether
upon any recapitalization, issuance of stock, reclassification of stock, change
of par value, or change of stock to no par value, consolidation, merger,
conveyance, or otherwise) or to receive notice of meetings, or to receive
dividends or subscription rights or otherwise until the Warrant shall have been
exercised and the Common Shares or other securities purchasable upon the
exercise hereof shall have been issued, as provided herein.

                  7. TRANSFER OF WARRANT.

                  (a) WARRANT REGISTER. The Company will maintain a register
(the "Warrant Register") containing the names and addresses of the Holder or
Holders. Any Holder of this Warrant or any portion thereof may change his
address as shown on the Warrant Register by written notice to the Company
requesting such change. Any notice or written communication required or
permitted to be given to the Holder may be delivered or given by mail to such
Holder as shown on the Warrant Register and at the address shown on the Warrant
Register. Until this Warrant is transferred on the Warrant Register of the
Company, the Company may treat the Holder as shown on the Warrant Register as
the absolute owner of this Warrant for all purposes, notwithstanding any notice
to the contrary.

                  (b) WARRANT AGENT. The Company may, by written notice to the
Holder, appoint an agent for the purpose of maintaining the Warrant Register
referred to in Section 7(a) above, issuing the Common Shares or other securities
then issuable upon the exercise of this Warrant, exchanging this Warrant,
replacing this Warrant, or any or all of the foregoing. Thereafter, any such
registration, issuance, exchange, or replacement, as the case may be, shall be
made at the office of such agent.

                  (c) TRANSFERABILITY AND NON-NEGOTIABILITY OF WARRANT. Neither
this Warrant nor the Common Shares or other securities issuable upon exercise of
this Warrant (the "Purchased Shares") may be sold, offered for sale, assigned,
pledged, hypothecated, encumbered or in any other manner transferred or disposed
of, in whole or in part, without compliance with all applicable federal and
state securities laws by the transferor and the transferee.

                  (d) TRANSFEREE OBLIGATIONS. Each person (other than the
Company) to whom this Warrant or the Purchased Shares are transferred, in whole
or in part, by means of a permitted transfer must, as a condition precedent to
the validity of such transfer, acknowledge in writing to the Company that such
person is bound by the provisions of this Warrant to the same extent this
Warrant or the Purchased Shares would be so subject if retained by Holder.

                                     48

<PAGE>

                             CONFIDENTIAL TREATMENT

                  (e) REPRESENTATIONS AND WARRANTIES OF HOLDER. Holder hereby
represents and warrants that:

                           (i)      Holder is acquiring this Warrant, and will
acquire the Purchased Shares, for investment for the Holder's own account, not
as a nominee or agent, and not with a view to the resale or distribution of all
or any part of this Warrant or the Purchased Shares. Holder is prepared to hold
this Warrant and the Purchased Shares for an indefinite period and has no
present intention of selling, granting any participation in, or otherwise
distributing any portion of this Warrant or the Purchased Shares. Holder does
not have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant a participating interest in, any of the Purchased
Shares.

                           (ii)     Holder believes it has received all the
information it considers necessary or appropriate for deciding whether to invest
in the Purchased Shares, and Holder has had an opportunity to ask questions and
receive answers from the Company regarding the terms and conditions of the
issuance of the Purchased Shares. The foregoing, however, does not limit or
modify the representations and warranties of the Company that have been made to
the Holder or the right of the Holder to rely thereon.

                           (iii)    Holder is an "accredited investor" within
the meaning of Rule 501 of Regulation D promulgated by the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the
"Securities Act").

                           (iv)     Holder understands that neither this Warrant
nor the Purchased Shares have been registered under the Securities Act or under
any state securities laws, and, as a result thereof, are subject to substantial
restrictions on transfer. Holder acknowledges that this Warrant and the
Purchased Shares must be held indefinitely, unless subsequently registered under
the Securities Act and all applicable state securities laws or unless exemptions
from registration under the Securities Act and such laws are available.

                  (f) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties made in Section 7(e) of this Warrant will survive
the date of this Warrant and will expire upon the earlier of (a) the Expiration
Date or (b) the exercise of this Warrant for all of the remaining shares
purchasable upon exercise of this Warrant.

                  (g) FURTHER LIMITATIONS ON DISPOSITION. Without in any way
limiting the representations set forth in Section 7(e) of this Warrant, the
Holder further agrees not to make any disposition of all or any portion of this
Warrant or the Purchased Shares unless and until the transferee has agreed in
writing for the benefit of the Company to be bound by this Section 7, provided
and to the extent this Section is then applicable, and:

                           (i)      There is then in effect a registration
statement under the Securities Act covering such proposed disposition and such
disposition is made in accordance with such registration statement; or

                           (ii) (A) The Holder shall have notified the Company
of the proposed disposition, and (B) if reasonably requested by the Company, the
Holder shall have furnished the Company with an opinion of counsel, reasonably
satisfactory to the Company that such disposition will not require registration
of such shares under the Securities Act. It is agreed that the Company will not
require opinions of counsel for transactions made pursuant to Rule 144 except in
unusual circumstances.

                           (iii)    Notwithstanding the provisions of paragraphs
(i) and (ii) above, no such registration statement or opinion of counsel shall
be necessary for a transfer by (A) the Holder to any of its Affiliates (as
defined below), (ii) a Holder that is a partnership to a partner of such
partnership or a retired partner of such partnership who retires after the date
hereof, (iii) a limited liability company to its

                                     49

<PAGE>

                             CONFIDENTIAL TREATMENT

members or former members in accordance with their interest in the limited
liability company, or (iv) to the estate of any such partner, retired partner or
member or the transfer by gift, will or intestate succession of any partner or
member to his or her spouse or to the siblings, lineal descendants or ancestors
of such partner or his or her spouse, if the transferee agrees in writing to be
subject to the terms hereof to the same extent as if he, she or it were an
original Holder hereunder. For purposes of this Section, "Affiliate" means any
person and/or entity deemed an affiliate of an entity within the meaning of Rule
144 of the Rules and Regulations of the Securities Exchange Commission (the
"SEC") promulgated under the Securities Act for purposes of Accounting Series,
Releases 130 and 135, as amended, of the SEC.

                  (h) RESTRICTIVE LEGENDS. The stock certificates for the
Purchased Shares shall be endorsed with one or more of the following restrictive
legends:

                      (i)      "The shares represented by this certificate
have not been registered under the Securities Act of 1933, as amended. They may
be sold, offered for sale, pledged or hypothecated in the absence of a
registration statement in effect with respect to the shares under such Act or an
opinion of counsel satisfactory to the Company that such registration is not
required or unless sold pursuant to Rule 144 promulgated under such Act."

                      (ii)     Any legend required by the laws of the State
of California, including any legend required by the California Department of
Corporations and Sections 417 and 418 of the California Corporations Code.

                  (i) CALIFORNIA SECURITIES LAW. THE SALE OF THE SECURITIES THAT
ARE THE SUBJECT OF THIS WARRANT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.

                  8. RESERVATION OF STOCK. The Company covenants that during the
Term this Warrant is exercisable, the Company will reserve from its authorized
and unissued Common Stock or other applicable securities a sufficient number of
shares solely to provide for the issuance of Common Stock or other applicable
securities upon the exercise of this Warrant and, from time to time, will take
all steps necessary to amend its Certificate of Incorporation (the
"Certificate") to provide sufficient reserves of shares of Common Stock or other
applicable securities issuable upon exercise of the Warrant. The Company
covenants that it will at all times reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the issuance of Common
Stock upon the conversion of the Purchased Shares, if applicable, and, from time
to time, will take all steps necessary to amend the Certificate to provide
sufficient reserves of shares of Common Stock issuable, if applicable, upon
conversion of the Purchased Shares. The Company further covenants that all
shares that may be issued upon exercise of the rights represented by this
Warrant and payment of the Exercise Price or conversion of any such shares
pursuant to the Certificate, all as set forth herein, will be free from all
taxes, liens, and charges in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously or otherwise specified
herein). The Company agrees that its issuance of this Warrant shall constitute
full authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for shares of
Common Stock or other applicable securities upon the exercise of this Warrant
and, if applicable, for shares of Common Stock upon the conversion of the
Purchased Shares.

                  9. ADJUSTMENTS. The Exercise Price and the number of shares
purchasable hereunder are subject to adjustment from time to time as follows:

                                     50

<PAGE>

                            CONFIDENTIAL TREATMENT

                  (a) MERGER, SALE OF ASSETS, ETC. If at any time, while this
Warrant, or any portion thereof, is outstanding and unexpired there shall be (i)
a reorganization (other than a combination, reclassification, exchange or
subdivision of shares otherwise provided for herein), (ii) a merger or
consolidation of the Company with or into another corporation in which the
Company is not the surviving entity, or a reverse triangular merger in which the
Company is the surviving entity but the Common Shares outstanding immediately
prior to the merger are converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise, or (iii) a sale or
transfer of the Company's properties and assets as, or substantially as, an
entirety to any other person, then, as a part of such reorganization, merger,
consolidation, sale or transfer, lawful provision shall be made so that the
holder of this Warrant shall thereafter be entitled to receive upon exercise of
this Warrant, during the period specified herein and upon payment of the
Exercise Price then in effect, the number of shares of stock or other securities
or property of the successor corporation resulting from such reorganization,
merger, consolidation, sale or transfer which a holder of the shares deliverable
upon exercise of this Warrant would have been entitled to receive in such
reorganization, consolidation, merger, sale or transfer if this Warrant had been
exercised immediately before such reorganization, merger, consolidation, sale or
transfer, all subject to further adjustment as provided in this Section 9. The
foregoing provisions of this Section 9(a) shall similarly apply to successive
reorganizations, consolidations, mergers, sales and transfers and to the stock
or securities of any other corporation which are at the time receivable upon the
exercise of this Warrant. If the per share consideration payable to the holder
hereof for shares in connection with any such transaction is in a form other
than cash or marketable securities, then the value of such consideration shall
be determined in good faith by the Company's Board of Directors. In all events,
appropriate adjustment (as determined in good faith by the Company's Board of
Directors) shall be made in the application of the provisions of this Warrant
with respect to the rights and interests of the Holder after the transaction, to
the end that the provisions of this Warrant shall be applicable after that
event, as near as reasonably may be, in relation to any shares or other property
deliverable after that event upon exercise of this Warrant.

                  (b) RECLASSIFICATION, ETC. If the Company at any time while
this Warrant, or any portion thereof, remains outstanding and unexpired shall,
by reclassification of securities or otherwise, change any of the Series B
Preferred Stock as to which purchase rights under this Warrant exist into the
same or a different number of securities of any other class or classes, this
Warrant shall thereafter represent the right to acquire such number and kind of
securities as would have been issuable as the result of such change with respect
to the securities which were subject to the purchase rights under this Warrant
immediately prior to such reclassification or other change and the Exercise
Price therefor shall be appropriately adjusted, all subject to further
adjustment as provided in this Section 9.

                  (c) SPLIT, SUBDIVISION OR COMBINATION OF SHARES. If the
Company at any time while this Warrant, or any portion thereof, remains
outstanding and unexpired shall split, subdivide or combine the Series B
Preferred Stock as to which purchase rights under this Warrant exist, into a
different number of securities of the same class, the Exercise Price for such
securities shall be proportionately decreased in the case of a split or
subdivision or proportionately increased in the case of a combination.

                  (d) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment pursuant to this Section 9, the Company at its
expense shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and furnish to each holder of this Warrant a certificate
setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The Company shall, upon the
written request, at any time, of any such holder, furnish or cause to be
furnished to such holder a like certificate setting forth: (i) such adjustments
and readjustments; (ii) the Exercise Price at the time in effect; and (iii) the
number of shares and the amount, if any, of other property which at the time
would be received upon the exercise of the Warrant.

                  (e) NOTICE OF RECORD DATE. In the event of any taking by the
Company of a record of its shareholders for the purpose of determining
shareholders who are entitled to receive payment of any dividend or other
distribution, any right to subscribe for, purchase or otherwise acquire any
share of any class or any other securities or property, or to receive any other
right, or for the purpose of determining shareholders who are entitled to vote
in connection with any proposed merger or consolidation of the

                                     51

<PAGE>

                             CONFIDENTIAL TREATMENT

Company with or into any other corporation, or any proposed sale, lease or
conveyance of all or substantially all of the assets of the Company, or any
proposed liquidation, dissolution or winding up of the Company, the Company
shall deliver a written notice to Holder, at least ten (10) days prior to the
record date specified therein, specifying the date on which any such record is
to be taken for the purpose of such dividend, distribution, right or other
event, and the amount and character of such dividend, distribution, right or
other event.
                  10. RESTRICTIONS ON FUTURE LIQUIDATION PREFERENCE OR
COMPARABLE PROVISIONS. The Company agrees not to authorize, issue or grant any
class or series of securities, or any options, warrants or other rights to
acquire, or securities convertible into, a class or series of securities, of the
Company with a liquidation or comparable preference in the case of a Liquidity
Event (a) to any officer, director or employee of the Company, (b) to any
individual or entity that is an affiliate of the Company or (c) that either
participates with the Common Stock in a Liquidity Event or has a liquidation or
comparable preference greater than the original issue price of the applicable
class or series of securities of the Company (or, if applicable, the original
issue price of any options, warrants or other rights to acquire, or securities
convertible into, a class or series of securities of the Company together with
any additional issue price for the underlying class or series of securities of
the Company).

                  11. PAYMENT OF TAXES. The Company shall pay all taxes and
other governmental charges, other than income taxes incurred by the Holder or
its permitted transferees, that may be imposed in respect of the issue or
delivery of the Purchased Shares or any portion thereof. The Company shall not
be required, however, to pay any tax or other charge imposed in connection with
any transfer of the Warrant or involved in the issue of any certificate for the
Purchased Shares or any portion thereof in any name other than that of the
registered holder of the Warrant surrendered in connection with the purchase of
such shares, and in such case the Company shall not be required to issue or
deliver any certificate until such tax or other charge has been paid or it has
been established to the Company's satisfaction that no tax or other charge is
due.

                  12. MISCELLANEOUS.

                  (a) ENTIRE CONTRACT. This Warrant constitutes the full and
entire understanding and agreement among the parties with regard to the subject
of this Warrant and supersedes all prior agreements, understandings, inducements
or conditions, express or implied, oral or written, with respect to the subject
of this Warrant.

                  (b) AMENDMENTS; WAIVERS. This Warrant and any term hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of such change, waiver, discharge
or termination is sought. No waiver of any breach or condition of this Warrant
shall be deemed to be a waiver of any other or subsequent breach or condition,
whether of like or different nature.

                  (c) GOVERNING LAW; SEVERABILITY. This Warrant shall be
governed by, and construed in accordance with, the laws of the State of
California without resort to that State's conflict-of-laws rules. If any
provision of this Warrant is determined by a court of competent jurisdiction in
any jurisdiction to be illegal, invalid or unenforceable, then such provision
will, as to such jurisdiction, be ineffective to the extent declared illegal,
invalid or enforceable and the other provisions will remain in full force and
effect. If any action at law or in equity is necessary to enforce or interpret
the terms of this Warrant, the prevailing party shall be entitled to reasonable
attorneys' fees, costs and necessary disbursements, in addition to any other
relief to which the party may be entitled.

                  (e) SUCCESSORS AND ASSIGNS. The provisions of this Warrant
shall inure to the benefit of, and be binding upon, the Company and its
successors and assigns and upon Holder and Holder's permitted assigns, permitted
transferees and legal representatives, whether or not any such person shall have
become a party to this Warrant and have agreed in writing to join herein and be
bound by the terms hereof.

                                     52

<PAGE>

                             CONFIDENTIAL TREATMENT

                  (f) NOTICES. Any notice required to be given under this
Warrant shall be in writing and shall be deemed effective upon personal
delivery, upon deposit in the U.S. mail, registered or certified, postage
prepaid and properly addressed to the party entitled to such notice at the
address indicated below such party's signature line on this Warrant or at such
other address as such party may designate by ten (10) days advance written
notice under this paragraph to all other parties to this Warrant ("Address"),
upon deposit with a reputable overnight courier, postage prepaid and properly
addressed to the party entitled to such notice at its Address, or upon
transmission by facsimile (with request for immediate confirmation of receipt in
a manner customary for communications of such type and with physical delivery of
the communication being made by one of the other means specified in this Section
as promptly as practicable thereafter).

                  (g) COUNTERPARTS. This Warrant may be executed in
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.

                                     53

<PAGE>

                             CONFIDENTIAL TREATMENT

IN WITNESS WHEREOF, 3NO SYSTEMS, INC. has caused this Warrant to be executed and
delivered by its officers thereunto duly authorized.

Dated:  September ___, 2000

                                          3NO SYSTEMS, INC.

                                          By:_____________________________
                                             Name:
                                             Title:

                                          Address:

ACKNOWLEDGED AND AGREED BY HOLDER:

LARSCOM INCORPORATED

By: ___________________________________
    Name:
    Title:

Address:

                                     54

<PAGE>

                             CONFIDENTIAL TREATMENT

                               NOTICE OF EXERCISE

To:  3NO SYSTEMS, INC. (the "Company"):

                  (1)      The undersigned hereby elects to:

                           (a) purchase _________________ Common Shares of 3NO
SYSTEMS, INC., pursuant to the terms of the attached Warrant, and tenders
herewith payment of the purchase price for such shares in full; or

                           (b) make a Net Issue Exercise, as provided in Section
3(a)(ii) of the attached Warrant, to purchase Common Shares of 3NO SYSTEMS,
INC., pursuant to the terms of the attached Warrant.

                  (2) In exercising this Warrant, the undersigned hereby
confirms and acknowledges to the Company that the representations and warranties
made in Section 7(e) of the attached Warrant are true and correct on and as of
the date of this Notice and on and as of the issuance of the Purchased Shares
with the same effect as if such representations and warranties had been made on
and as of the date of this Notice and on and as of the issuance of the Purchased
Shares, and that the undersigned will not offer, sell, or otherwise dispose of
any such Purchased Shares except under circumstances that will not result in a
violation of the Securities Act of 1933, as amended, or any state securities
laws.
                  (3) Please issue a certificate or certificates representing
said Common Shares in the name of the undersigned or in such other name as is
specified below:

-------------------------------------------------------------------------------
                                     [Name]

                  (4) Please issue a new Warrant for the unexercised portion of
the attached Warrant in the name of the undersigned or in such other name as is
specified below:

-------------------------------------------------------------------------------
                                     [Name]

----------------------                      ------------------------------------
[Date]                                               [Name of Holder]

                                                     By:
------------------------------------
                                                              Name:
                                                              Title:

                                    55

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