Document:

<PAGE>

                                                                    EXHIBIT 10.5

                    * * * * * * * * * * * * * * * * * * * *

                                     Lease

                                VALLEY CENTRE I

                    * * * * * * * * * * * * * * * * * * * *

                                    Between

                         NUMERICAL TECHNOLOGIES, INC.

                                   (Tenant)

                                      and

                        CARRAMERICA REALTY CORPORATION

                                  (Landlord)
<PAGE>

                               TABLE OF CONTENTS
                               -----------------

                                                                          Page
                                                                          ----

1.   LEASE AGREEMENT                                                        3
A.   Commencement Date                                                      3
B.   Termination Date                                                       3
C.   Early Occupancy                                                        3

2.   RENT                                                                   3
A.   Types of Rent                                                          3
B.   Payment of Operating Cost Share Rent and Tax Share Rent                3
C.   Definitions                                                            5
D.   Computation of Base Rent and Rent Adjustments                          8

3.   CONDITION OF PREMISES AND POSSESSION                                   9
A.   Condition of Premises                                                  9
B.   Tenant's Possession                                                    9

4.   SERVICES AND UTILITIES                                                 9

5.   ALTERATIONS                                                            10
A.   Landlord's Consent and Conditions                                      10
B.   Damage to Systems                                                      11
C.   No Liens.                                                              11
D.   Ownership of Improvements                                              12
E.   Removal Upon Termination                                               12

6.   USE OF PREMISES                                                        12
A.   Limitation on Use                                                      12
B.   Signs                                                                  12
C.   Parking                                                                13
D.   Prohibition Against Use of Roof and Structure of Building              13

7.   GOVERNMENTAL REQUIREMENTS AND BUILDING RULES                           13

8.   REPAIR AND MAINTENANCE                                                 14
A.   Landlord's Obligations                                                 14
B.   Tenant's Obligations                                                   15

9.   WAIVER OF CLAIMS; INDEMNIFICATION; INSURANCE                           15
A.   Waiver of Claims                                                       15
B.   Indemnification                                                        16
C.   Tenant's Insurance                                                     16
D.   Insurance Certificates                                                 17
E.   Landlord's Insurance                                                   17

                                      (i)
<PAGE>

                               TABLE OF CONTENTS
                               -----------------
                                  (continued)

                                                                          Page
                                                                          ----

10.  FIRE AND OTHER CASUALTY                                                18
A.   Termination                                                            18
B.   Restoration                                                            18

11.  EMINENT DOMAIN                                                         18

12.  RIGHTS RESERVED TO LANDLORD                                            19
A.   Name                                                                   19
B.   Signs                                                                  19
C.   Window Treatments                                                      19
D.   Keys                                                                   19
E.   Access                                                                 19
F.   Preparation for Reoccupancy                                            19
G.   Heavy Articles                                                         19
H.   Show Premises                                                          19
I.   Relocation of Tenant                                                   20
J.   Use of Lockbox                                                         20
K.   Repairs and Alterations                                                20
L.   Landlord's Agents                                                      20
M.   Building Services                                                      20
N.   Use of Roof                                                            20
O.   Other Actions                                                          20

13.  TENANT'S DEFAULT                                                       21
A.   Rent Default                                                           21
B.   Assignment/Sublease or Hazardous Substances Default                    21
C.   Other Performance Default                                              21
D.   Credit Default                                                         21
E.   Abandonment Default                                                    21

14.  LANDLORD REMEDIES                                                      21
A.   Termination of Lease or Possession                                     21
B.   Possession Termination Damages                                         21
C.   Lease Termination Damages                                              22
D.   Landlord's Remedies Cumulative                                         23
E.   WAIVER OF TRIAL BY JURY                                                23
F.   Litigation Costs                                                       23

15.  SURRENDER                                                              23

16.  HOLDOVER                                                               24

17.  SUBORDINATION TO GROUND LEASES AND MORTGAGES                           24

                                     (ii)
<PAGE>

                               TABLE OF CONTENTS
                               -----------------
                                  (continued)

                                                                          Page
                                                                          ----

A.   Subordination                                                          24
B.   Termination of Ground Lease or Foreclosure of Mortgage                 25
C.   Security Deposit                                                       25
D.   Notice and Right to Cure                                               25
E.   Definitions                                                            25

18.  ASSIGNMENT AND SUBLEASE                                                25
A.   In General                                                             25
B.   Landlord's Consent                                                     26
C.   Procedure                                                              26
D.   Change of Management or Ownership                                      27
E.   Excess Payments                                                        27
F.   Recapture                                                              27

19.  CONVEYANCE BY LANDLORD                                                 27

20.  ESTOPPEL CERTIFICATE                                                   27

21.  LEASE DEPOSIT                                                          27

22.  FORCE MAJEURE                                                          29

23.  TENANT'S PERSONAL PROPERTY AND TRADE FIXTURES                          29

24.  NOTICES                                                                29
A.   Landlord                                                               29
B.   Tenant                                                                 30

25.  QUIET POSSESSION                                                       30

26.  REAL ESTATE BROKER                                                     30

27.  MISCELLANEOUS                                                          30
A.   Successors and Assigns                                                 30
B.   Date Payments Are Due                                                  30
C.   Meaning of "Landlord," "Re-Entry," "including" and "Affiliate"         30
D.   Time of the Essence                                                    31
E.   No Option                                                              31
F.   Severability                                                           31
G.   Governing Law                                                          31
H.   Lease Modification                                                     31
I.   No Oral Modification                                                   31
J.   Landlord's Right to Cure                                               31

                                     (iii)
<PAGE>

                               TABLE OF CONTENTS
                               -----------------
                                  (continued)

                                                                          Page
                                                                          ----

K.   Captions                                                               31
L.   Authority                                                              31
M.   Landlord's Enforcement of Remedies                                     31
N.   Entire Agreement                                                       31
O.   Landlord's Title                                                       31
P.   Light and Air Rights                                                   31
Q.   Singular and Plural                                                    32
R.   No Recording by Tenant                                                 32
S.   Exclusivity                                                            32
T.   No Construction Against Drafting Party                                 32
U.   Survival                                                               32
V.   Rent Not Based on Income                                               32
W.   Building Manager and Service Providers                                 32
X.   Late Charge and Interest on Late Payments                              32
Y.   Tenant's Financial Statements                                          32
Z.   Attorneys Fees                                                         32
AA.  Consents                                                               33

28.  UNRELATED BUSINESS INCOME                                              33

29.  HAZARDOUS SUBSTANCES                                                   33
A.   Prohibition Against Hazardous Substances                               33
B.   "Hazardous Substances"                                                 33
C.   Prior Contamination.                                                   33

30.  EXCULPATION                                                            34

31.  OPTION TO EXTEND.                                                      34

                                     (iv)
<PAGE>

                                     LEASE

     THIS LEASE (the "Lease") is made as of June 15, 1999 (dated for reference
                      -----
purposes only) between CarrAmerica Realty Corporation, a Maryland corporation
(the "Landlord") and the Tenant as named in the Schedule below. The term
      --------
"Project" means the two (2) buildings (the "Project Buildings") and other
 -------                                    -----------------
improvements commonly known as "Valley Centre I" located at 70 Plumeria Drive,
San Jose, California, as more particularly described in Exhibit A. The
                                                        ---------
"Premises" means that portion of the Project Buildings described in the Schedule
 --------
and outlined on Exhibit A, attached hereto. The Project Buildings in which the
Premises are located shall be collectively referred to herein as the "Building"
                                                                      --------
and the other Project Buildings shall be referred to as the "Other Buildings".
                                                             ---------------
The following schedule (the "Schedule") is an integral part of this Lease. Terms
                             --------
defined in this Schedule shall have the same meaning throughout the Lease.

                                   SCHEDULE

1.   TENANT: Numerical Technologies, Inc., a California corporation

2.   PREMISES: 70 Plumeria Drive, San Jose, California

3.   PROJECT: Valley Centre I

4.   RENTABLE SQUARE FEET OF THE PREMISES: 39,301

5.   TENANT'S PROPORTIONATE SHARE: 49.25% of the Building (based upon a
     total of 79,791 rentable square feet in the Building) and 38.42% of the
     Project (based upon a total of 102,291 rentable square feet in the
     Project)

6.   LEASE DEPOSIT: Prepaid Rent: $46,453.78, Security Deposit: $272,277.00 (of
     which $204,208.00 may be in the form of a letter of credit, subject to the
     requirements set forth in Section 21)

7.   PERMITTED USE: General Office

8.   TENANT'S REAL ESTATE BROKER FOR THIS LEASE: Cushman & Wakefield

9.   LANDLORD'S REAL ESTATE BROKER FOR THIS LEASE: None.

10.  TENANT IMPROVEMENTS: Landlord shall provide the Premises on a
     "turn-key" basis with those certain interior tenant improvements
     ("Tenant Improvements") within the Premises to be constructed by
     Landlord, at Landlord's cost, in accordance with the terms and
     conditions set forth in the Tenant Improvement Agreement attached
     hereto as Exhibit C.
               ---------

11.  COMMENCEMENT DATE: That date on which there is "Substantial Completion"
     of the "Tenant Improvements", subject to the terms and conditions set
     forth in the Tenant Improvement Agreement attached hereto as Exhibit C.
                                                                  ---------

     Landlord and Tenant shall

                                       1
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     execute a Commencement Date Confirmation in the form of Exhibit D, attached
                                                             ---------
     hereto, which shall set forth both the Commencement Date and the
     Termination Date for this Lease.

12.  TERM: Five years, with one (1) option to renew for three (3) years (see
     Section 31).

13.  TERMINATION DATE: Five years after the Commencement Date, provided that
     if the Commencement Date is not the first day of a month, then the
     Termination Date shall be the date which is five (5) years after the
     first day of the calendar month immediately following the Commencement
     Date, and as may be extended pursuant to Section 31 herein.

14.  GUARANTOR: None

15.  PARKING SPACES: 156 unassigned parking spaces

16.  BASE RENT:

Period                      Annual Base Rent            Monthly Base Rent
------                      ----------------            -----------------

Months 1 - 5:               N/A                         $46,453.78
Months 6 - 17:              $722,509.56                 $60,209.13
Months 18 - 29:             $746,090.16                 $62,174.18
Months 30 - 41:             $769,670.76                 $64,139.23
Months 42 - 53:             $793,251.36                 $66,104.28
Months 54 - 60:             N/A                         $68,069.33

Exhibit A - Site Plan Of Project
Exhibit B - Rules And Regulations
Exhibit C - Tenant Improvement Agreement
Exhibit C-1 - Layout of Tenant Improvements
Exhibit D - Commencement Date Confirmation
Exhibit E - Landlord's Signage Standards

                                       2
<PAGE>

     1.   LEASE AGREEMENT. On the terms stated in this Lease, Landlord leases
          ---------------
the Landlord to Tenant, and Tenant leases the Landlord from Landlord, for the
term beginning on the commencement date and ending on the termination date
unless extended or sooner terminated pursuant to this Lease.

          A.   Commencement Date. The commencement date ("Commencement Date")
               -----------------                          -----------------
for this Lease is the date set forth in the Schedule.

          B.   Termination Date. The Termination Date is that date set forth in
               ----------------
the Schedule.

          C.   Early Occupancy. During the period commencing on the date this
               ---------------
Lease is executed by both Landlord and Tenant and ending on the Commencement
Date (the "Early Occupancy Period"), Tenant shall be permitted to enter the
Premises for the sole purpose of installing certain trade fixtures, computer and
phone systems therein, provided that Tenant's occupancy of the Premises during
the Early Occupancy Period shall (i) not interfere with Landlord's construction
of the Tenant Improvements, and (ii) be subject to all of the terms, covenants
and conditions of this Lease (including, without limitation, Tenant's
obligations under Sections 5 (regarding obtaining Landlord's prior written
consent before commencing any alterations) and 9 (regarding Tenant's indemnity
and insurance obligations), except that Landlord agrees, subject to the last
sentence of this Section 1.C, that Tenant's obligation to pay Base Rent,
Operating Cost Share Rent and Tax Share Rent (as such terms are defined in
Sections 2.B(1), (2) and (3) below) during the Early Occupancy Period shall be
waived. If Tenant occupies any part of the Premises during the Early Occupancy
Period for purposes of doing business, then Tenant shall pay all Base Rent,
Operating Cost Share Rent and Tax Share Rent at the rate for the first Lease
Year as set forth in the Schedule prorated for any partial month.

     2.   RENT.
          ----

          A.   Types of Rent. Tenant shall pay the following Rent in the form
               -------------
of a check to Landlord at the following address:

                              CarrAmerica Realty Corporation
                              t/a Valley Centre I
                              P.O. Box 198291
                              Atlanta, GA 30384-8291

or by wire transfer as follows:

                              Account Name:       CarrAmerica Realty Corporation
                                                  t/a Valley Centre I
                              Bank Name:          NationsBank of Georgia
                              ABA Number:         061-000-052
                              Account Number:     3255807127
                              Notification:       Serina Arnold (CarrAmerica)
                              Telephone:          (202) 729-3852

or in such other manner as Landlord may notify Tenant:

                                       3
<PAGE>

               (1)  Base Rent in monthly installments in advance, the first
                    ---------
monthly installment payable concurrently with the execution of this Lease and
thereafter on or before the first day of each month of the Term in the amount
set forth on the Schedule.

               (2)  Operating Cost Share Rent in an amount equal to the Tenant's
                    -------------------------
Proportionate Share of the Operating Costs for the applicable fiscal year of the
Lease, paid monthly in advance in an estimated amount. Definitions of Operating
Costs and Tenant's Proportionate Share, and the method for billing and payment
of Operating Cost Share Rent are set forth in Sections 2.B, 2.C and 2.D.

               (3)  Tax Share Rent in an amount equal to the Tenant's
                    --------------
Proportionate Share of the Taxes for the applicable fiscal year of this Lease,
paid monthly in advance in an estimated amount. A definition of Taxes and the
method for billing and payment of Tax Share Rent are set forth in Sections 2.B,
2.C and 2.D.

               (4)  Additional Rent in the amount of all costs, expenses,
                    ---------------
liabilities, and amounts which Tenant is required to pay under this Lease,
excluding Base Rent, Operating Cost Share Rent, and Tax Share Rent, but
including any interest for late payment of any item of Rent.

               (5)  Rent as used in this Lease means Base Rent, Operating Cost
                    ----
Share Rent, Tax Share Rent and Additional Rent. Tenant's agreement to pay Rent
is an independent covenant, with no right of setoff, deduction or counterclaim
of any kind.

          B.   Payment of Operating Cost Share Rent and Tax Share Rent.
               -------------------------------------------------------

               (1)  Payment of Estimated Operating Cost Share Rent and Tax
                    ------------------------------------------------------
Share Rent. Landlord shall estimate the Operating Costs and Taxes of the
----------
Project by April 1 of each fiscal year, or as soon as reasonably possible
thereafter. Landlord may revise these estimates whenever it obtains more
accurate information, such as the final real estate tax assessment or tax rate
for the Project, provided in no event shall the estimate be revised more than
once in any calendar year. Within ten (10) days after receiving the original or
revised estimate from Landlord, Tenant shall pay Landlord one-twelfth (1/12th)
of Tenant's Proportionate Share of this estimate, multiplied by the number of
months that have elapsed in the applicable fiscal year to the date of such
payment including the current month, minus payments previously made by Tenant
for the months elapsed. On the first day of each month thereafter, Tenant shall
pay Landlord one-twelfth (1/12th) of Tenant's Proportionate Share of this
estimate, until a new estimate becomes applicable. Any interest or penalties
payable by Landlord as a result of Tenant's failure to timely pay such Taxes to
Landlord shall be deemed Additional Rent payable by Tenant hereunder upon
request by Landlord.

               (2)  Correction of Operating Cost Share Rent. Landlord shall
                    ---------------------------------------
deliver to Tenant a report for the previous fiscal year (the "Operating Cost
                                                              --------------
Report") by May 15 of each year, or as soon as reasonably possible thereafter,
------
setting forth (a) the actual Operating Costs incurred, (b) the amount of
Operating Cost Share Rent due from Tenant, and (c) the amount of Operating Cost
Share Rent paid by Tenant. Within twenty (20) days after such delivery, Tenant

                                       4
<PAGE>

shall pay to Landlord the amount due minus the amount paid. If the amount paid
exceeds the amount due, Landlord shall apply the excess to Tenant's payments of
Operating Cost Share Rent next coming due.

               (3)  Correction of Tax Share Rent. Landlord shall deliver to
                    ----------------------------
Tenant a report for the previous fiscal year (the "Tax Report") by May 15 of
                                                   ----------
each year, or as soon as reasonably possible thereafter, setting forth (a) the
actual Taxes, (b) the amount of Tax Share Rent due from Tenant, and (c) the
amount of Tax Share Rent paid by Tenant. Within twenty (20) days after such
delivery, Tenant shall pay to Landlord the amount due from Tenant minus the
amount paid by Tenant. If the amount paid exceeds the amount due, Landlord shall
apply any excess as a credit against Tenant's payments of Tax Share Rent next
coming due.

          C.   Definitions.
               -----------

               (1)  Included Operating Costs. "Operating Costs" means any
                    ------------------------   ----------------
expenses, costs and disbursements of any kind other than Taxes, paid or incurred
by Landlord in connection with the management, maintenance, operation, insurance
(including the related deductibles), repair and other related activities in
connection with any part of the Project and of the personal property, fixtures,
machinery, equipment, systems and apparatus used in connection therewith,
including the cost of providing those services required to be furnished by
Landlord under this Lease and a management fee in an amount equal to two percent
(2%) of Base Rent. Operating Costs shall also include the costs of any capital
improvements which are intended to reduce Operating Costs or improve safety, and
those made to keep the Project in compliance with governmental requirements
applicable from time to time or to replace existing capital improvements,
facilities and equipment within the Building or the common areas of the Project,
such as the roof membrane and resurfacing of the parking areas, such as the roof
membrane, parking and landscape areas and the utility pipes, conduits and lines
which run from the street to each Building and between each of the Buildings (to
the extent Landlord is responsible for the replacement or repair of such items
hereunder) (collectively, "Included Capital Items"); provided, that the costs of
                           ----------------------
any Included Capital Item shall be amortized by Landlord, together with an
amount equal to interest at ten percent (10%) per annum, over the estimated
useful life of such item and such amortized costs are only included in Operating
Costs for that portion of the useful life of the Included Capital Item which
falls within the Term, unless the cost of the Included Capital Item is less than
Ten Thousand Dollars ($10,000) in which case it shall be expensed in the year in
which it was incurred.

     If the Project contains more than one building, then Operating Costs shall
include (i) all Operating Costs fairly allocable to the Building, and (ii) a
proportionate share (based on the gross rentable area of the Building as a
percentage of the gross rentable area of all of the Buildings in the Project) of
all Operating Costs which relate to the Project in general and are not fairly
allocable to any one building in the Project.

     If the Project is not fully occupied during any portion of any Fiscal Year
(as defined in Section 2.C(6) below), Landlord may adjust (an "Equitable
                                                               ---------
Adjustment") Operating Costs to equal what would have been incurred by Landlord
----------
had the Project been fully occupied. This Equitable Adjustment shall apply only
to Operating Costs which are variable and therefore

                                       5
<PAGE>

increase as occupancy of the Project increases. Landlord may incorporate the
Equitable Adjustment in its estimates of Operating Costs.

     If Landlord does not furnish any particular service whose cost would have
constituted an Operating Cost to a Tenant other than Tenant who has undertaken
to perform such service itself, Operating Costs shall be increased by the amount
which Landlord would have incurred if it had furnished the service to such
Tenant.

               (2)  Excluded Operating Costs. Operating Costs shall not include:
                    ------------------------

                    (a)  costs of alterations of tenant premises;

                    (b)  costs of capital improvements other than Included
                         Capital Items;

                    (c)  interest and principal payments on mortgages or any
                         other debt costs, or rental payments on any ground
                         lease of the Project;

                    (d)  real estate brokers' leasing commissions;

                    (e)  legal fees, space planner fees and advertising expenses
                         incurred with regard to leasing the Building or
                         portions thereof;

                    (f)  any cost or expenditure for which Landlord is
                         reimbursed (or would have been had Landlord maintained
                         the insurance required to be maintained by Landlord
                         hereunder), by insurance proceeds, warranties, tort
                         claims or otherwise, except by Operating Cost Share
                         Rent;

                    (g)  the cost of any service furnished to any tenant of the
                         Project which Landlord does not make available to
                         Tenant;

                    (h)  depreciation, amortization or expense reserves (except
                         on any Included Capital Items as provided in Section
                         2.C(1));

                    (i)  franchise or income taxes imposed upon Landlord;

                    (j)  costs of correcting defects in construction of the
                         Building (as opposed to the cost of normal repair,
                         maintenance and replacement expected with the
                         construction materials and equipment installed in the
                         Building in light of their specifications);

                    (k)  legal and auditing fees which are for the benefit of
                         Landlord such as collecting delinquent rents, preparing
                         tax returns and other financial statements, and audits
                         other than

                                       6
<PAGE>

                         those incurred in connection with the preparation of
                         reports required pursuant to Section 2.B above;

                    (l)  the wages of any employee for services not related
                         directly to the management, maintenance, operation and
                         repair of the Building;

                    (m)  fines, penalties and interest;

                    (n)  any property management fee in excess of three percent
                         (3%) of the gross revenues for the Building; and

                    (o)  any costs incurred in connection with Pre-existing
                         Contamination (as defined in Section 29) or other
                         contamination originating from a source either not
                         located on the Project or which is caused or
                         contributed by other tenants within the Project.

               (3)  Taxes. "Taxes" means any and all taxes, assessments and
                    -----   -----
charges of any kind, general or special, ordinary or extraordinary, levied
against the Project, which Landlord shall pay or become obligated to pay in
connection with the ownership, leasing, renting, management, use, occupancy,
control or operation of the Project or of the personal property, fixtures,
machinery, equipment, systems and apparatus used in connection therewith. Taxes
shall include real estate taxes, personal property taxes, sewer rents, water
rents, special or general assessments, transit taxes, ad valorem taxes, and any
tax levied on the rents hereunder or the interest of Landlord under this Lease
(the "Rent Tax"). Taxes shall also include all fees and other costs and expenses
      --------
paid by Landlord in reviewing any tax and in seeking a refund or reduction of
any Taxes, whether or not the Landlord is ultimately successful. Taxes shall
also include any assessments or fees paid to any business park owners
association, or similar entity, which are imposed against the Project pursuant
to any Covenants, Conditions and Restrictions ("CC&R's") recorded against the
                                                ------
Land and any installments of principal and interest required to pay any existing
or future general or special assessments for public improvements, services or
benefits, and any increases resulting from reassessments imposed in connection
with any change in ownership or new construction.

     If the Project contains more than one building, then Taxes shall include
(i) all Taxes fairly allocable to the Building, and (ii) a proportionate share
(based on the gross rentable area of the Building as a percentage of the gross
rentable area of all of the Buildings in the Project) of all Taxes which relate
to the Project in general and are not fairly allocable to any one building in
the Project.

     For any year, the amount to be included in Taxes (a) from taxes or
assessments payable in installments, shall be the amount of the installments
(with any interest) due and payable during such year, and (b) from all other
Taxes, shall at Landlord's election be the amount accrued, assessed, or
otherwise imposed for such year or the amount due and payable in such year. Any
refund or other adjustment to any Taxes by the taxing authority shall apply
during the year in which the adjustment is made. Taxes shall not include any net
income (except Rent Tax),

                                       7
<PAGE>

capital, stock, succession, transfer, franchise, gift, estate or inheritance
tax, except to the extent that such tax shall be imposed in lieu of any portion
of Taxes.

               (4)  Lease Year. "Lease Year" means each consecutive twelve-month
                    ----------   ----------
period beginning with the Commencement Date, except that if the Commencement
Date is not the first day of a calendar month, then the first Lease Year shall
be the period from the Commencement Date through the final day of the twelve
months after the first day of the following month, and each subsequent Lease
Year shall be the twelve months following the prior Lease Year.

               (5)  Fiscal Year. "Fiscal Year" means the calendar year, except
                    -----------   -----------
that the first Fiscal Year and the last Fiscal Year of the Term may be a partial
calendar year.

          D.   Computation of Base Rent and Rent Adjustments.
               ---------------------------------------------

               (1)  Prorations. If this Lease begins on a day other than the
                    ----------
first day of a month, the Base Rent, Operating Cost Share Rent and Tax Share
Rent shall be prorated for such partial month based on the actual number of days
in such month. If this Lease begins on a day other than the first day, or ends
on a day other than the last day, of the Fiscal Year, Operating Cost Share Rent
and Tax Share Rent shall be prorated for the applicable Fiscal Year.

               (2)  Default Interest. Any sum due from Tenant to Landlord not
                    ----------------
paid when due shall bear interest from the date due until paid at the lesser of
eighteen percent (18%) per annum or the maximum rate permitted by law.

               (3)  Rent Adjustments. The square footage of the Premises,
                    ----------------
Building, and other Project Buildings, as set forth in the Schedule are
conclusively deemed to be the actual square footage thereof, without regard to
any subsequent remeasurement of the Premises, Building or other Project
Buildings. If any Operating Cost paid in one Fiscal Year relates to more than
one Fiscal Year, Landlord may proportionately allocate such Operating Cost among
the related Fiscal Years.

               (4)  Books and Records. Landlord shall maintain books and records
                    -----------------
reflecting the Operating Costs and Taxes in accordance with sound accounting and
management practices. Tenant and its certified public accountant shall have the
right to inspect Landlord's records at the then applicable local office of
Landlord upon at least seventy-two (72) hours' prior notice during normal
business hours during the ninety (90) days following the respective delivery of
the Operating Cost Report or the Tax Report. Tenant shall use good faith,
reasonable efforts and due diligence to (i) keep the results of any such
inspection confidential, and (ii) include a provision in any contract with its
certified public accountant for such audit which requires that the results of
such audit shall be confidential (i.e., the results shall not be made available
to any other tenant of the Project). Unless Tenant sends to Landlord any written
exception to either such report within said ninety (90) day period, such report
shall be deemed final and accepted by Tenant. Tenant shall pay the amount shown
on both reports in the manner prescribed in this Lease, whether or not Tenant
takes any such written exception, without any prejudice to such exception. If
Tenant makes a timely exception, Landlord and Tenant shall choose an independent
certified public accountant or another firm with at least five (5) years of

                                       8
<PAGE>

experience in auditing the books and records of commercial office projects to
issue a final and conclusive resolution of Tenant's exception. Tenant shall pay
the cost of such certification unless Landlord's original determination of
annual Operating Costs and Taxes in the aggregate overstated the amounts thereof
by more than five percent (5%) in which case, Landlord shall pay for the costs
of such certification.

               (5)  Miscellaneous. So long as Tenant is in default of any
                    -------------
obligation under this Lease, Tenant shall not be entitled to any refund of any
amount from Landlord. If this Lease is terminated for any reason prior to the
annual determination of Operating Cost Share Rent or Tax Share Rent, either
party shall pay the full amount due to the other within fifteen (15) days after
Landlord's notice to Tenant of the amount when it is determined. Landlord may
commingle any payments made with respect to Operating Cost Share Rent or Tax
Share Rent, without payment of interest.

     3.   CONDITION OF PREMISES AND POSSESSION.
          ------------------------------------

          A.   Condition of Premises. Except to the extent of the Tenant
               ---------------------
Improvements item on the Schedule, Landlord is leasing the Premises to Tenant
"as is," without any representations or warranties of any kind and without any
obligation to alter, remodel, improve, repair or decorate any part of the
Premises. Landlord shall cause the Premises to be completed in accordance with
the Tenant Improvement Agreement attached as Exhibit C.
                                             ---------

          Notwithstanding the forgoing, Landlord shall pay any costs associated
with the repair of the HVAC system during the sixty (60) day period immediately
following the Commencement Date.

          B.   Tenant's Possession. Tenant's taking possession of any portion
               -------------------
of the Premises shall be conclusive evidence that the Premises was in good
order, repair and condition. If Landlord authorizes Tenant to take possession of
any part of the Premises prior to the Commencement Date for purposes of doing
business, all terms of this Lease shall apply to such pre-Term possession,
including the obligation to pay Base Rent at the rate for the first Lease Year
as set forth in the Schedule prorated for any partial month.

     4.   SERVICES AND UTILITIES. Tenant shall promptly pay, as the same become
          ----------------------
due, all charges for water, gas, electricity, telephone, sewer service, waste
pick-up and any other utilities, materials and services furnished directly to or
used by Tenant on or about the Premises during the Term, including without
limitation, (i) meter, use and/or connection fees, hook-up fees, or standby fees
(excluding any connection fees or hook-up fees which relate to making the
existing electrical, gas, water and sewer service available to the Premises as
of the commencement date), and (ii) penalties for discontinued interrupted
service. If any utility service is not separately metered to the Premises, then
Tenant shall pay its pro rata share of the cost of such utility service with all
others served by the service not separately metered. However, if Landlord
reasonably determines that Tenant is using a disproportionate amount of any
utility service (whether or not separately metered), then Landlord at its
election may (i) periodically charge Tenant, as Additional Rent, a sum equal to
Landlord's reasonable estimate of the cost of Tenant's excess use of such
utility service, (ii) install, at Tenant's expense, a separate meter to measure
the utility service supplied to the Premises, and/or (iii) in the event Landlord
determines that Tenant is using a disproportionate share of the electrical
capacity available for the Building or Project (i.e., electrical usage in excess
of that which would typically be used for

                                       9
<PAGE>

general office purposes), Landlord may at Tenant's expense install additional
equipment to increase the electrical capacity for the Building or Project to
offset such excess usage by Tenant. Any interruption or cessation of utilities
resulting from any causes, including any entry for repairs pursuant to this
Lease, and any renovation, redecoration or rehabilitation of any area of the
Project shall not render Landlord liable for damages to either person or
property or for interruption or loss to Tenant's business, nor be construed as
an eviction of Tenant, nor work an abatement of any portion of Rent, nor relieve
Tenant from fulfillment of any covenant or agreement hereof.

     5.   ALTERATIONS.
          -----------

          A.   Landlord's Consent and Conditions. Tenant shall not make any
               ---------------------------------
improvements or alterations to the Premises (the "Work") without in each
instance submitting plans and specifications for the Work to Landlord and
obtaining Landlord's prior written consent which shall not be unreasonably
withheld, unless (a) the cost thereof is less than $10,000 per building per
occurrence, (b) such Work does not impact the base structural components or
systems of the Building, (c) such Work will not impact any other tenant's
premises, and (d) such Work is not visible from outside the Premises. Provided
that Landlord receives all necessary information and plans from Tenant, Landlord
agrees to respond to Tenant's request for Landlord's prior written consent to
such alterations within ten (10) business days. However, even if Landlord's
prior written consent is not required Tenant shall provide Landlord with prior
written notice at least five (5) days in advance of commencing the Work so that
Landlord may take appropriate actions (e.g., notify other tenants in the
Project, post and record notices of nonresponsibility or other notices deemed by
Landlord to be appropriate, request and review applicable insurance
certificates) before the commencement of such Work. Tenant shall pay Landlord's
actual out-of-pocket costs incurred for reviewing of all of the plans and all
other items submitted by Tenant. Landlord will be deemed to be acting reasonably
in withholding its consent for any Work which (a) impacts the base structural
components or systems of the Building, and (b) impacts any other tenant's
premises.

     Tenant shall pay for the cost of all Work, including the cost of any and
all approvals, permits, fees and other charges which may be required as a
condition of performing such Work. Upon completion all Work shall become the
property of Landlord, except for Tenant's trade fixtures and for items which
Landlord requires Tenant to remove at Tenant's cost at the termination of the
Lease pursuant to Section 5.E.

     The following requirements shall apply to all Work:

               (1)  Prior to commencement, Tenant shall furnish to Landlord
building permits, certificates of insurance satisfactory to Landlord, and, at
Landlord's request, security for payment of all costs.

               (2)  Tenant shall perform all Work so as to maintain peace and
harmony among other contractors serving the Project and shall avoid interference
with other work to be performed or services to be rendered in the Project.

                                      10
<PAGE>

               (3)  The Work shall be performed in a good and workmanlike
manner, meeting the standard for construction and quality of materials in the
Building, and shall comply with all insurance requirements and all applicable
governmental laws, ordinances and regulations ("Governmental Requirements").
                                                -------------------------

               (4)  Tenant shall perform all Work so as to minimize or prevent
disruption to other tenants, and Tenant shall comply with all reasonable
requests of Landlord in response to complaints from other tenants.

               (5)  Tenant shall perform all Work in compliance with any
"Policies, Rules and Procedures for Construction Projects" which may be in
 --------  -----     ----------     ---------------------
effect at the time the Work is performed.

               (6)  Tenant shall permit Landlord to supervise and observe all
Work. Landlord may charge a supervisory fee not to exceed three (3) percent (3%)
of labor, material, and all other costs of the Work, if Landlord's employees or
contractors perform the Work.

               (7)  Upon completion, Tenant shall furnish Landlord with
contractor's affidavits and full and final statutory waivers of liens, as-built
plans and specifications, and receipted bills covering all labor and materials,
and all other close-out documentation related to the Work, including any other
information required under any "Policies, Rules and Procedures for Construction
                                -----------------------------------------------
Projects" which may be in effect at such time.
--------

B.   Damage to Systems. If any part of the mechanical, electrical or other
     -----------------
systems in the Premises (e.g., HVAC, life safety or automatic fire
extinguisher/sprinkler system) shall be damaged during the performance of the
Work, Tenant shall promptly notify Landlord, and Landlord shall repair such
damage at Tenant's expense. Landlord may also at any reasonable time make any
repairs or alterations which Landlord deems necessary for the safety or
protection of the Project, or which Landlord is required to make by any court or
pursuant to any Governmental Requirement. The cost of any repairs made by
Landlord on account of Tenant's default, or on account of the misuse or neglect
by Tenant or its invitees, contractors or agents anywhere in the Project, shall
become Additional Rent payable by Tenant on demand.

          C.   No Liens. Tenant has no authority to cause or permit any lien or
               --------
encumbrance of any kind to affect Landlord's interest in the Project; any such
lien or encumbrance shall attach to Tenant's interest only. If any mechanic's
lien shall be filed or claim of lien made for work or materials furnished to
Tenant, then Tenant shall at its expense within ten (10) days thereafter either
discharge or contest the lien or claim. If Tenant contests the lien or claim,
then Tenant shall (i) within such ten (10) day period, provide Landlord adequate
security for the lien or claim, (ii) contest the lien or claim in good faith by
appropriate proceedings that operate to stay its enforcement, and (iii) pay
promptly any final adverse judgment entered in any such proceeding. If Tenant
does not comply with these requirements, Landlord may discharge the lien or
claim, and the amount paid, as well as attorney's fees and other expenses
incurred by Landlord, shall become Additional Rent payable by Tenant on demand.
Landlord shall not grant to tenants in the Project rights to more parking than
exist in the Project.

                                      11
<PAGE>

          D.   Ownership of Improvements. All Work as defined in this Section 5,
               -------------------------
partitions, hardware, equipment, machinery and all other improvements and all
fixtures except trade fixtures, constructed in the Premises by either Landlord
or Tenant, (i) shall become Landlord's property upon installation without
compensation to Tenant, unless Landlord consents otherwise in writing, and (ii)
shall at Landlord's option either (a) be surrendered to Landlord with the
Premises at the termination of the Lease or of Tenant's right to possession, or
(b) be removed in accordance with Subsection 5.E below (unless Landlord at the
time it gives its consent to the performance of such construction expressly
waives in writing the right to require such removal).

          E.   Removal Upon Termination. Upon the termination of this Lease or
               ------------------------
Tenant's right of possession, Tenant shall remove from the Premises and Project
its trade fixtures, furniture, moveable equipment and other personal property,
any improvements which Landlord elects pursuant to Section 5.D shall be removed
by Tenant, and any improvements to any portion of the Project other than the
Premises. Tenant shall repair all damage caused by the installation or removal
of the foregoing items. If Tenant does not timely remove such property, then
Tenant shall be conclusively presumed to have, at Landlord's election (i)
conveyed such property to Landlord without compensation or (ii) abandoned such
property, and Landlord may dispose of or store any part thereof in any manner at
Tenant's sole cost, without waiving Landlord's right to claim from Tenant all
expenses arising out of Tenant's failure to remove the property, and without
liability to Tenant or any other person. Landlord shall have no duty to be a
bailee of any such personal property. If Landlord elects abandonment, Tenant
shall pay to Landlord, upon demand, any expenses incurred for disposition.

     6.   USE OF PREMISES.
          ---------------

          A.   Limitation on Use. Tenant shall use the Premises only for the
               -----------------
Permitted Use stated in the Schedule. Tenant shall not allow any use of the
Premises which will negatively affect the cost of coverage of Landlord's
insurance on the Project. Tenant shall not allow any inflammable or explosive
liquids or materials to be kept on the Premises. Tenant shall not allow any use
of the Premises which would cause the value or utility of any part of the
Premises to diminish or would interfere with any other tenant or with the
operation of the Project by Landlord. Tenant shall not permit any nuisance or
waste to occur on the Project or upon the Premises, or allow any offensive noise
or odor in or around the Project. At the end of each business day, or more
frequently if necessary, Tenant shall deposit all garbage and other trash
(excluding any inflammable, explosive and/or hazardous materials) in trash bins
or containers approved by Landlord in locations designated by Landlord from time
to time. If any governmental authority shall deem the Premises to be a "place of
public accommodation" under the Americans with Disabilities Act or any other
comparable law as a result of Tenant's use, Tenant shall either modify its use
to cause such authority to rescind its designation or be responsible for any
alterations, structural or otherwise, required to be made to the Building or the
Premises under such laws.

          B.   Signs. Tenant shall not place on any portion of the Premises any
               -----
sign, placard, lettering, banner, displays or other advertising or communicative
material which is visible from the exterior of the Building without the prior
written approval of Landlord (including any signage to be installed on the
monument sign). Any approved signs shall strictly

                                      12
<PAGE>

conform to all Governmental Restrictions, any CC&R's recorded against the
Project, and any sign criteria which may be established by Landlord and in
effect at the time, and shall be installed (and removed upon the Termination
Date) at Tenant's expense. Tenant, at its sole cost, shall maintain such signs
in good condition and repair, including the repair of any damage caused to the
Building or Project upon Tenant's removal of such signs. Landlord current
Signage Standards are attached hereto as Exhibit E. Notwithstanding the
foregoing, Tenant, at Tenant's sole cost and expense, shall have the right to
place its name on the existing monument base for the Building.

          C.   Parking. Tenant shall have the nonexclusive 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 Landlord.
Tenant agrees not to overburden the parking facilities (i.e., use more than the
number of unassigned parking stalls indicated on the Schedule) and agrees to
cooperate with Landlord and other tenants in the Project in the use of the
parking facilities. Landlord reserves the right in its discretion to determine
whether the parking facilities are becoming crowded and to allocate and assign
parking spaces among Tenant and the other tenants in the Project. Landlord shall
have the right to charge Tenant the portion that Landlord deems allocable to
Tenant of any charges (e.g., fees or taxes) imposed by the Regional Air Quality
Control Board or other governmental or quasi-governmental agency in connection
with the parking facilities (e.g., in connection with operation or use of the
parking facilities). Landlord shall not be liable to Tenant, nor shall this
Lease be affected, if any parking is impaired by moratorium, initiative,
referendum, law, ordinance, regulation or order passed, issued or made by any
governmental or quasi-governmental body.

          D.   Prohibition Against Use of Roof and Structure of Building.
               ---------------------------------------------------------
Tenant shall be prohibited from using any all or any portion of the roof of the
Building or any portion of the structure of the Building during the Term of this
Lease (or any extensions thereof) for any purposes (including without limitation
for the installation, maintenance and repair of a satellite dish and/or other
telecommunications equipment), without the prior written consent of Landlord,
which consent Landlord may withhold in its sole and absolute discretion.
Notwithstanding the foregoing, Landlord shall grant Tenant with reasonable
access to the roof as may be reasonably necessary to allow Tenant to perform its
HVAC and other maintenance obligations hereunder, provided that such access
shall be subject to any reasonable rules and restrictions that Landlord may
impose from time to time. Nothing herein shall limit Landlord's rights under
Section 11.N, or require Landlord to obtain Tenant's consent prior to exercising
such rights.

     7.   GOVERNMENTAL REQUIREMENTS AND BUILDING RULES. Tenant shall comply
          --------------------------------------------
with all Governmental Requirements applying to its use, maintenance and repair
of the Premises. Tenant shall also comply with all reasonable rules for the
Project which may be established and amended from time to time by Landlord. The
present rules and regulations are contained in Exhibit B. Failure by another
tenant to comply with the rules or failure by Landlord to enforce them shall not
relieve Tenant of its obligation to comply with the rules or make Landlord
responsible to Tenant in any way. Landlord shall use reasonable efforts to apply
the rules and regulations uniformly with respect to Tenant and any other tenants
in the Project under leases containing rules and regulations similar to this
Lease. In the event of alterations and repairs performed by Tenant, Tenant shall
comply with the provisions of Section 5 of this Lease and any applicable
"Policies, Rules and Regulations for Construction Projects" which may be

                                      13
<PAGE>

established by Landlord and in effect at the time. Notwithstanding the
foregoing, Landlord shall perform any code compliance work, including ADA
compliance work, required in the common areas of the Project, except that Tenant
shall be solely responsible for all code compliance work, including ADA
compliance work, which is required in the common areas of the Project as a
result of Tenant's particular use or activities (e.g., Tenant's proposed
alterations or repairs). Except for Landlord's code compliance obligations as
set forth above, Tenant shall, at its sole cost and expense (i) perform all code
compliance work, including ADA compliance work, which is required in the common
areas of the Project as a result of Tenant's particular use or activities, and
(ii) take all proper and necessary action to cause the Premises, including any
repairs, replacements, alterations and improvements thereto, to be maintained,
constructed, used and occupied in compliance with applicable Governmental
Requirements, including any applicable code and ADA requirements, whether or not
such requirements are based on Tenant's use of the Premises, and further to
assume all responsibility to ensure the Premises' continued compliance with all
Governmental Requirements, including applicable code and ADA requirements,
throughout the Term. Landlord agrees that the Premises shall comply with
applicable code and ADA requirements as of the Commencement Date. Landlord makes
no representations or warranties regarding the Project's compliance with
applicable Governmental Requirements as of the date of this Lease. Tenant shall
pay as Additional Rent hereunder, Tenant's Proportionate Share of any code
compliance costs incurred by Landlord hereunder.

     8.   REPAIR AND MAINTENANCE.
          ----------------------

          A.   Landlord's Obligations. Landlord shall keep in good order,
               ----------------------
condition and repair (i) the structural parts of the Building, which structural
parts include only the foundation and subflooring of the Building and the
structural condition of the roof and the exterior walls of the Building (but
excluding the interior surfaces of exterior walls and exterior and interior of
all windows, doors, ceiling and plate glass which shall be maintained and
repaired by Tenant), (ii) the roof membrane, and (iii) the common areas of the
Project. The costs incurred by Landlord to perform the foregoing obligations to
the extent they are deemed "Operating Costs" (as defined in Section 2.C) shall
be passed through to Tenant and any other tenants in the Project, except that
any damage to any of the foregoing caused by the negligence or willful acts or
omissions of Tenant or of Tenant's agents, employees or invitees, or by reason
of the failure of Tenant to perform or comply with any terms of this Lease, or
caused by Tenant or Tenant's agents, employees or contractors during the
performance of any Work shall be repaired by Landlord, solely at Tenant's
expense, or at Landlord's election, such repairs shall be made by Tenant, at
Tenant's expense, with contractors approved by Landlord. It is an express
condition precedent to all obligations of Landlord to repair and maintain that
Tenant shall have notified Landlord of the need for such repairs or maintenance.
Tenant waives the provisions of Sections 1941 and 1942 of the California Civil
Code and any similar or successor law regarding Tenant's right to make repairs
and deduct the expenses of such repairs from the Rent due under this Lease.

     Notwithstanding the foregoing, in the event Tenant notifies Landlord in
writing of an item needing immediate repair and there is no dispute concerning
the need for such repair, the scope of the repair or that Landlord is the party
responsible for such repair, then (A) in the event of an emergency repair (e.g.,
roof leakage or other repairs which adversely and materially affect Tenant's
ability to conduct its normal business operations within the Premises), Landlord
shall commence and complete such repair within the five (5) day period following
Landlord's receipt

                                      14
<PAGE>

of Tenant's repair notice, unless the nature of the repair is such that more
than five (5) days is required to complete such repair in which case Landlord
shall commence the repair within such five (5) day period and thereafter
diligently prosecute the same to completion, or (b) in the event of any other
type of repair, Landlord shall commence and complete such repair within the
thirty (30) day period following Landlord's receipt of Tenant's repair notice,
unless the nature of the repair is such that more than thirty (30) days is
required to complete such repair in which case Landlord shall commence the
repair within such thirty (30) day period and thereafter diligently prosecute
the same to completion. In the event Landlord fails to dispute or commence the
repair within such thirty (30) day period, then Tenant shall have the right, but
not the obligation, to cause the repair of such item and to submit an invoice to
Landlord for the reasonable out-of-pocket costs incurred by Tenant for the same
(including reasonable supporting documentation for the same), and Landlord shall
pay such amount to Tenant within thirty (30) days of receipt of Tenant's invoice
and related documentation for such work.

          B.   TENANT'S OBLIGATIONS. Tenant shall at all times and at its own
               --------------------
expense clean, keep and maintain in good order, condition and repair every part
of the Premises (including Tenant's fixtures and personal property) which is not
within Landlord's obligation pursuant to Section 8.A. Tenant's repair and
maintenance obligations shall include, all plumbing and sewage facilities within
the Premises, fixtures, interior walls and ceiling, floors, windows (including
the repairing, resealing, cleaning and replacing of both interior and exterior
windows), doors, entrances, plate glass, showcases, skylights, all electrical
facilities and equipment, including lighting fixtures, lamps, fans and any
exhaust equipment and systems, electrical motors and all other appliances and
equipment of every kind and nature located in, upon or about the Premises.
Tenant shall also be responsible for all pest control within the Premises, and
for all trash removal and disposal for the Premises. Tenant shall obtain HVAC
systems preventive maintenance contracts with bimonthly or monthly service in
accordance with manufacturer recommendations, which shall be subject to the
reasonable prior written approval of Landlord and paid for by Tenant, and which
shall provide for and include replacement of filters, oiling and lubricating of
machinery, parts replacement, adjustment of drive belts, oil changes and other
preventive maintenance, including annual maintenance of duct work, interior unit
drains and caulking at sheet metal, and recaulking of jacks and vents on an
annual basis. Tenant shall have the benefit of all warranties available to
Landlord regarding the equipment in such HVAC systems. To the extent Tenant
fails to perform such repairs or maintenance as required herein, Landlord may
elect to perform all repairs and maintenance itself, at Tenant's expense, to the
Building's mechanical, electrical or other systems in the Premises (e.g., HVAC,
life safety and automatic fire extinguisher/sprinkler systems). Landlord may
also perform any maintenance or repairs itself, at Tenant's expense, to the
extent Tenant fails to perform such maintenance or repairs as required herein.

     9.   WAIVER OF CLAIMS; INDEMNIFICATION; INSURANCE.
          --------------------------------------------

          A.   Waiver of Claims. To the extent permitted by law, Tenant waives
               ----------------
any claims it may have against Landlord or its officers, directors, employees or
agents for business interruption or damage to property sustained by Tenant as
the result of any act or omission of Landlord, its agents or employees. To the
extent permitted by law, Landlord waives any claims it may have against Tenant
or its officers, directors, employees or agents for loss of rents (other

                                      15
<PAGE>

than Rent) or damage to property sustained by Landlord as the result of any act
or omission of Tenant, its agents or employees.

          B.   Indemnification. Tenant shall indemnify, defend and hold
               ---------------
harmless Landlord and its officers, directors, employees and agents against any
claim by any third party for injury to any person or damage to or loss of any
property occurring in or around the Project and arising from the use of the
Premises or from any other act or omission or negligence or intentional
misconduct of Tenant, its employees, agents or invitees, or Tenant's breach of
its obligations hereunder. Tenant's obligations under this section shall survive
the termination of this Lease.

     Landlord shall indemnify, defend and hold harmless Tenant and its officers,
directors, employees and agents against any claim by any third party for injury
or damage to person or the Premises to the extent caused by the gross negligence
or intentional misconduct of Landlord or any of Landlord's employees or agents,
or Landlord's beach of its obligations hereunder. Landlord's obligations under
this section shall survive the termination of this Lease.

          C.   Tenant's Insurance. Tenant shall maintain insurance as follows,
               ------------------
with such other terms, coverages and insurers, as Landlord shall reasonably
require from time to time:

               (1)  Commercial general liability insurance, with (a) contractual
liability including the indemnification provisions contained in this Lease, (b)
a severability of interest endorsement, (c) limits of not less than Two Million
Dollars ($2,000,000) combined single limit per occurrence and not less than Two
Million Dollars ($2,000,000) in the aggregate for bodily injury, sickness or
death, and property damage, and umbrella coverage of not less than Five Million
Dollars ($5,000,000).

               (2)  Property Insurance against "All Risks" of physical loss
                                                ---------
covering the replacement cost of all improvements, fixtures and personal
property and business interruption. Tenant waives all rights of subrogation, and
Tenant's property insurance shall include a waiver of subrogation in favor of
Landlord.

               (3)  Workers' compensation or similar insurance in form and
amounts required by law, and Employer's Liability with not less than the
following limits:

                    Each Accident                   $500,000
                    Disease--Policy Limit           $500,000
                    Disease--Each Employee          $500,000

     Such insurance shall contain a waiver of subrogation provision in favor
of Landlord and its agents.

     Tenant's insurance shall be primary and not contributory to that carried by
Landlord, its agents, or mortgagee. Landlord, and if any, Landlord's building
manager or agent, mortgagee and ground lessor shall be named as additional
insureds as respects to insurance required of the Tenant in Section 9.C(1). The
company or companies writing any insurance which Tenant is required to maintain
under this Lease, as well as the form of such insurance, shall at all times be
subject to Landlord's approval, and any such company shall be licensed to do
business in the

                                      16
<PAGE>

state in which the Building is located. Such insurance companies shall have a
A.M. Best rating of A VI or better.

               (4)  Tenant shall cause any contractor of Tenant performing work
on the Premises to maintain insurance as follows, with such other terms,
coverages and insurers, as Landlord shall reasonably require from time to time:

                    (a)  Commercial General Liability Insurance, including
                         contractor's liability coverage, contractual liability
                         coverage, completed operations coverage, broad form
                         property damage endorsement, and contractor's
                         protective liability coverage, to afford protection
                         with limits, for each occurrence, of not less than One
                         Million Dollars ($1,000,000) with respect to personal
                         injury, death or property damage:

                    (b)  Workers' compensation or similar insurance in form and
                         amounts required by law, and Employer's Liability with
                         not less than the following limits:

                    Each Accident                      $500,000
                    Disease--Policy Limit              $500,000
                    Disease--Each Employee             $500,000

     Such insurance shall contain a waiver of subrogation provision in favor
of Landlord and its agents.

     Tenant's contractor's insurance shall be primary and not contributory to
that carried by Tenant, Landlord, their agents or mortgagees. Tenant and
Landlord, and if any, Landlord's building manager or agent, mortgagee or ground
lessor shall be named as additional insured on Tenant's contractor's insurance
policies.

          D.   Insurance Certificates. Tenant shall deliver to Landlord
               ----------------------
certificates evidencing all required insurance no later than five (5) days prior
to the Commencement Date and each renewal date. Each certificate will provide
for thirty (30) days prior written notice of cancellation to Landlord and
Tenant.

          E.   Landlord's Insurance. Landlord shall maintain "All-Risk" property
               --------------------                           --------
insurance at replacement cost, including loss of rents, on the Building, and
commercial general liability insurance policies covering the common areas of the
Project, each with such terms, coverages and conditions as are normally carried
by reasonably prudent owners of properties similar to the Project. With respect
to property insurance, Landlord and Tenant mutually waive all rights of
subrogation, and the respective "All-Risk" coverage property insurance policies
                                 --------
carried by Landlord and Tenant shall contain enforceable waiver of subrogation
endorsements.

                                      17
<PAGE>

     10.  FIRE AND OTHER CASUALTY.
          -----------------------

          A.   Termination. If a fire or other casualty causes substantial
               -----------
damage to the Building or the Premises, and sufficient insurance proceeds will
be available to Landlord to cover the cost of any restoration to the Building
and the Premises, Landlord shall engage a registered architect to certify within
one (1) month of the casualty to both Landlord and Tenant the amount of time
needed to restore the Building and the Premises to tenantability, using standard
working methods without the payment of overtime and other premiums. If the time
needed exceeds twelve (12) months from the beginning of the restoration, or two
(2) months therefrom if the restoration would begin during the last twelve (12)
months of the Lease, then in the case of the Premises, either Landlord or Tenant
may terminate this Lease, and in the case of the Building, Landlord may
terminate this Lease, by notice to the other party within ten (10) days after
the notifying party's receipt of the architect's certificate. If sufficient
insurance proceeds will not be available to Landlord to cover the cost of any
restoration to the Building or the Premises, Landlord may terminate this Lease
by written notice to Tenant. Any termination pursuant to this Section 10.A shall
be effective thirty (30) days from the date of such termination notice and Rent
shall be paid by Tenant to that date, with an abatement for any portion of the
Premises which has been untenantable after the casualty. Notwithstanding any of
the foregoing, Landlord shall not have the right to terminate the Lease if the
damage to the Premises is relatively minor (for example, if the repair or
restoration would cost less than ten percent (10%) of the replacement cost of
the Premises.

          B.   Restoration. If a casualty causes damage to the Building or the
               -----------
Premises but this Lease is not terminated for any reason, then subject to the
rights of any mortgagees or ground lessors, Landlord shall obtain the applicable
insurance proceeds and diligently restore the Building and the Premises subject
to current Governmental Requirements. Landlord's obligation, should it elect or
be obligated to repair or rebuild, shall be limited to the basic Premises, the
building-standard Tenant Improvements, or the basic Building, as the case may
be, and Tenant shall, at Tenant's expense, replace or fully repair its damaged
improvements (including any Tenant Improvements in excess of the building
standard), personal property and fixtures. Rent shall be abated on a per diem
basis during the restoration for any portion of the Premises which is
untenantable, except to the extent that the casualty was caused by the
negligence or intentional misconduct of Tenant, its agents or employees. Tenant
shall not be entitled to any compensation or damages from Landlord for loss of
the use of the Premises, damage to Tenant's personal property and trade fixtures
or any inconvenience occasioned by such damage, repair or restoration. Tenant
hereby waives the provisions of Section 1932, Subdivision 2, and Section 1933,
Subdivision 4, of the California Civil Code, and the provisions of any similar
law hereinafter enacted.

     11.  EMINENT DOMAIN. If a part of the Project is taken by eminent domain
          --------------
or deed in lieu thereof which is so substantial that the Premises cannot
reasonably be used by Tenant for the operation of its business, then either
party may terminate this Lease effective as of the date of the taking. If any
substantial portion of the Project is taken without affecting the Premises, then
Landlord may terminate this Lease as of the date of such taking. Rent shall
abate from the date of the taking in proportion to any part of the Premises
taken. The entire award for a taking of any kind shall be paid to Landlord, and
Tenant shall have no right to share in the award; provided that (i) nothing
contained herein shall be deemed to give Landlord any interest

                                      18
<PAGE>

in or require Tenant to assign to Landlord any separate award made to Tenant for
the taking of Tenant's personal property and trade fixtures or its relocation
costs, and (ii) in the event of a temporary taking in which there was no Rent
abatement under this Lease, then Tenant shall be entitled to any portion of such
award which was intended to compensate Landlord for lost Rent for the Premises
during the period of the temporary taking. All obligations accrued to the date
of the taking shall be performed by the party liable to perform such obligation
as set forth herein. Tenant may pursue a separate award for its trade fixtures
and moving expenses in connection with the taking, but only if such recovery
does not reduce the award payable to Landlord.

     12.  RIGHTS RESERVED TO LANDLORD. Landlord may exercise at any time any of
          ---------------------------
the following rights respecting the operation of the Project without liability
to Tenant of any kind:

          A.   Name. To change the name of all or any of the Buildings or the
               ----
Project, or the street address of the Buildings or the suite number(s) of the
Premises.

          B.   Signs. To install, modify and/or maintain any necessary and
               -----
appropriate signs on the exterior and in the interior of the Buildings or on the
Project, and to approve at its sole discretion, prior to installation, any of
Tenant's signs in the Premises visible from the common areas or the exterior of
the Building.

          C.   Window Treatments. To approve, at its discretion, prior to
               -----------------
installation, any shades, blinds, ventilators or window treatments of any kind,
as well as any lighting within the Premises that may be visible from the
exterior of the Building or any interior common area.

          E.   Access. To have access to the Premises with twenty four hour
               ------
prior notice (except in the case of an emergency in which case Landlord shall
have the right to immediate access) to inspect the Premises, and to perform its
obligations, or make repairs, alterations, additions or improvements, as
permitted by this Lease.

          F.   Preparation for Reoccupancy. To decorate, remodel, repair,
               ---------------------------
alter or otherwise prepare the Premises for reoccupancy at any time after Tenant
abandons the Premises, without relieving Tenant of any obligation to pay Rent.

          G.   Heavy Articles. To approve the weight, size, placement and time
               --------------
and manner of movement within the Building of any safe, central filing system or
other heavy article of Tenant's property. Tenant shall move its property
entirely at its own risk.

          H.   Show Premises. To show the Premises to prospective purchasers,
               -------------
tenants, brokers, lenders, mortgagees, investors, rating agencies or others at
any reasonable time, provided that Landlord gives prior notice to Tenant and
does not materially interfere with Tenant's use of the Premises.

                                      19
<PAGE>

          J.   Use of Lockbox. To designate a lockbox collection agent for
               --------------
collections of amounts due Landlord. In that case, the date of payment of Rent
or other sums shall be the date of the agent's receipt of such payment or the
date of actual collection if payment is made in the form of a negotiable
instrument thereafter dishonored upon presentment. However, Landlord may reject
any payment for all purposes as of the date of receipt or actual collection by
mailing to Tenant within 21 days after such receipt or collection a check equal
to the amount sent by Tenant, provided that Tenant in then in "Default" under
the terms of this Lease (as defined in Section 13).

          K.   Repairs and Alterations. To make repairs or alterations to the
               -----------------------
Project and in doing so transport any required material through the Premises, to
close entrances, doors, corridors, elevators and other facilities in the
Project, to open any ceiling in the Premises, or to temporarily suspend services
or use of common areas in the Building. Landlord may perform any such repairs or
alterations during ordinary business hours, except that Tenant may require any
work in the Premises to be done after business hours if Tenant pays Landlord for
overtime and any other expenses incurred. Landlord may do or permit any work on
any nearby building, land, street, alley or way.

          L.   Landlord's Agents. If Tenant is in default under this Lease,
               -----------------
possession of Tenant's funds or negotiation of Tenant's negotiable instrument by
any of Landlord's agents shall not waive any breach by Tenant or any remedies of
Landlord under this Lease.

          M.   Building Services. To install, use and maintain through the
               -----------------
Premises, pipes, conduits, wires and ducts serving the Building, provided that
such installation, use and maintenance does not unreasonably interfere with
Tenant's use of the Premises.

          N.   Use of Roof. To permit Landlord (or any entity selected by
               -----------
Landlord) to install, operate, maintain and repair any satellite dish, antennae,
equipment, or other facility on the roof of the Building or to use the roof of
the Building in any other manner, provided that such installation, operation,
maintenance, repair or use does not unreasonably interfere with Tenant's use of
the Premises.

          O.   Other Actions. To take any other action which Landlord deems
               -------------
reasonable in connection with the operation, maintenance or preservation of the
Building and the Project.

                                      20
<PAGE>

     13.  TENANT'S DEFAULT. ANY OF THE FOLLOWING SHALL CONSTITUTE A DEFAULT BY
          ----------------
TENANT:

          A.   Rent Default. Tenant fails to pay any Rent within five (5) days
               ------------
after notice that such payment was not paid when due, provided that Tenant
acknowledges that such notice shall be in lieu of and not in addition to any
notice required to be given by Landlord to commence an unlawful detainer action
(or similar eviction proceeding) under the then applicable law;

          B.   Assignment/Sublease or Hazardous Substances Default. Tenant
               ---------------------------------------------------
defaults in its obligations under Section 18 Assignment and Sublease or Section
29 Hazardous Substances;

          C.   Other Performance Default. Tenant fails to perform any other
               -------------------------
obligation to Landlord under this Lease, and this failure continues for ten (10)
days after written notice from Landlord, except that if Tenant begins to cure
its failure within the ten (10) day period but cannot reasonably complete its
cure within such period, then, so long as Tenant continues to diligently attempt
to cure its failure, the ten (10) day period shall be extended to sixty (60)
days, or such lesser period as is reasonably necessary to complete the cure;

          D.   Credit Default. One of the following credit defaults occurs:
               --------------

               (1)  Tenant commences any proceeding under any law relating to
bankruptcy, insolvency, reorganization or relief of debts, or seeks appointment
of a receiver, trustee, custodian or other similar official for the Tenant or
for any substantial part of its property, or any such proceeding is commenced
against Tenant and either remains undismissed for a period of thirty (30) days
or results in the entry of an order for relief against Tenant which is not fully
stayed within seven (7) days after entry;

               (2)  Tenant becomes insolvent or bankrupt, does not generally pay
its debts as they become due, or admits in writing its inability to pay its
debts, or makes a general assignment for the benefit of creditors;

               (3)  Any third party obtains a levy or attachment under process
of law against Tenant's leasehold interest.

          E.   Abandonment Default. Tenant abandons the Premises.
               -------------------

     14.  LANDLORD REMEDIES. UPON A DEFAULT, LANDLORD SHALL HAVE THE FOLLOWING
          -----------------
REMEDIES, IN ADDITION TO ALL OTHER RIGHTS AND REMEDIES PROVIDED BY LAW OR
OTHERWISE PROVIDED IN THIS LEASE, TO WHICH LANDLORD MAY RESORT CUMULATIVELY OR
IN THE ALTERNATIVE:

          A.   Termination of Lease or Possession. If Tenant defaults, Landlord
               ----------------------------------
may elect by notice to Tenant either to terminate this Lease or to terminate
Tenant's possession of the Premises without terminating this Lease. In either
case, Tenant shall immediately vacate the Premises and deliver possession to
Landlord, and Landlord may repossess the Premises and may, at Tenant's sole
cost, remove any of Tenant's signs and any of its other property, without

                                      21
<PAGE>

relinquishing its right to receive Rent or any other right against Tenant. In
the latter case, this Lease shall continue in full force and effect as long as
Landlord does not terminate this Lease, and Landlord shall have the right to
collect Rent when due.

          B.   Possession Termination Damages. If Landlord elects to terminate
               ------------------------------
Tenant's possession without terminating this Lease and Landlord takes possession
of the Premises itself, then Landlord may relet for Tenant's account all or any
portion of the Premises for such rent, length of time and other terms as
Landlord in its sole discretion shall determine, without any obligation to do so
prior to renting other vacant areas in the Building. Tenant shall be liable
immediately to Landlord for all costs Landlord incurs in reletting the Premises
or any part thereof, including, without limitation, broker's commissions,
expenses of cleaning and redecorating the Premises required by the reletting and
like costs. Tenant shall pay to Landlord the Rent and other sums due under this
Lease on the date the Rent is due, less the rent and other sums received by
Landlord from any releasing of the Premises. No act by Landlord other than
giving written notice to Tenant shall terminate this Lease. Acts of maintenance,
efforts to relet the Premises or the appointment of a receiver on Landlord's
initiative to protect Landlord's interest under this Lease shall not constitute
a termination of Tenant's right to possession.

          C.   Lease Termination Damages. If Landlord elects to terminate this
               -------------------------
Lease, then this Lease shall terminate on the date for termination set forth in
such notice. Tenant shall immediately vacate the Premises and deliver possession
to Landlord, and Landlord may repossess the Premises and may, at Tenant's sole
cost, remove any of Tenant's signs and any of its other property, without
relinquishing its right to receive Rent or any other right against Tenant. On
termination, Landlord has the right to recover from Tenant as damages:

               (1)  The worth at the time of award of unpaid Rent and other sums
due and payable which had been earned at the time of termination; plus

               (2)  The worth at the time of award of the amount by which the
unpaid Rent and other sums due and payable which after termination until the
time of award exceeds the amount of such Rent loss that Tenant proves could have
been reasonably avoided; plus

               (3)  The worth at the time of award of the amount by which the
unpaid Rent and other sums due and payable for the balance of the Term after the
time of award exceeds the amount of such Rent loss that Tenant proves could be
reasonably avoided; plus

               (4)  Any other amount necessary to compensate Landlord for all
the detriment proximately caused by Tenant's failure to perform Tenant's
obligations under this Lease, or which, in the ordinary course of things, would
be likely to result therefrom, including, without limitation, any costs or
expenses incurred by Landlord: (i) in retaking possession of the Premises; (ii)
in maintaining, repairing, preserving, restoring, replacing, cleaning, altering
or rehabilitating the Premises or any portion thereof, including such acts for
reletting to a new tenant or tenants; (iii) for leasing commissions; or (iv) for
any other costs necessary or appropriate to relet the Premises; plus

               (5)  At Landlord's election, such other amounts in addition to or
in lieu of the foregoing as may be permitted from time to time by the laws of
the State of California.

                                      22
<PAGE>

     The "worth at the time of award" of the amounts referred to in Sections
14.C(1) and 14C(2) is computed by allowing interest at the maximum rate
permitted by law on the unpaid rent and other sums due and payable from the
termination date through the date of award. The "worth at the time of award" of
the amount referred to in Section 14.C(3) is computed by discounting such amount
at the discount rate of the Federal Reserve Bank of San Francisco at the time of
award plus one percent (1%). Tenant waives redemption or relief from forfeiture
under California Code of Civil Procedure Sections 1174 and 1179, or under any
other present or future law, in the event Tenant is evicted or Landlord takes
possession of the Premises by reason of any default of Tenant hereunder.

          D.   Landlord's Remedies Cumulative. All of Landlord's remedies under
               ------------------------------
this Lease shall be in addition to all other remedies Landlord may have at law
or in equity, including without limitation, the remedy described in California
Civil Code Section 1951.4 (i.e., Landlord may continue the Lease in effect after
Tenant's breach and abandonment and recover as rent as it becomes due if Tenant
has the right to sublet or assign the Lease, subject to reasonable limitations).
Waiver by Landlord of any breach of any obligation by Tenant shall be effective
only if it is in writing, and shall not be deemed a waiver of any other breach,
or any subsequent breach of the same obligation. Landlord's acceptance of
payment by Tenant shall not constitute a waiver of any breach by Tenant, and if
the acceptance occurs after Landlord's notice to Tenant, or termination of the
Lease or of Tenant's right to possession, the acceptance shall not affect such
notice or termination. Acceptance of payment by Landlord after commencement of a
legal proceeding or final judgment shall not affect such proceeding or judgment.
Landlord may advance such monies and take such other actions for Tenant's
account as reasonably may be required to cure or mitigate any default by Tenant.
Tenant shall immediately reimburse Landlord for any such advance, and such sums
shall bear interest at the default interest rate until paid.

          E.   WAIVER OF TRIAL BY JURY. EACH PARTY WAIVES TRIAL BY JURY IN THE
               -----------------------
EVENT OF ANY LEGAL PROCEEDING BROUGHT BY THE OTHER IN CONNECTION WITH THIS
LEASE. EACH PARTY SHALL BRING ANY ACTION AGAINST THE OTHER IN CONNECTION WITH
THIS LEASE IN A FEDERAL OR STATE COURT LOCATED IN CALIFORNIA, CONSENTS TO THE
JURISDICTION OF SUCH COURTS, AND WAIVES ANY RIGHT TO HAVE ANY PROCEEDING
TRANSFERRED FROM SUCH COURTS ON THE GROUND OF IMPROPER VENUE OR INCONVENIENT
FORUM.

          F.   Litigation Costs. Tenant shall pay Landlord's reasonable
               ----------------
attorneys' fees and other costs in enforcing this Lease, whether or not suit is
filed.

     15.  SURRENDER. Upon the expiration or earlier termination of this Lease
          ---------
for any reason, Tenant shall surrender the Premises to Landlord in its condition
existing as of the commencement date, normal wear and tear and damage by fire or
other casualty excepted, with all interior walls repaired and repainted if
marked or damaged, all carpets shampooed and cleaned, all broken, marred or
nonconforming acoustical ceiling tiles replaced, all windows washed, the
plumbing and electrical systems and lighting in good order and repair, including
replacement of any burned out or broken light bulb or ballasts, the HVAC
equipment serviced and repaired by a reputable and licensed service firm
acceptable to Landlord, and all floors

                                      23
<PAGE>

cleaned and waxed, all to the reasonable satisfaction of Landlord. Tenant shall
remove from the Premises all of Tenant's personal property and all of Tenant's
alterations required to be removed pursuant to Section 5.E, and restore the
Premises to its condition prior to their installation. If Tenant fails to remove
any alterations and/or Tenant's personal property, and such failure continues
after the termination of this Lease, Landlord may retain or dispose of such
property and all rights of Tenant with respect to it shall cease, or Landlord
may place all or any portion of such property in public storage for Tenant's
account. Tenant shall be liable to Landlord for costs of removal of any such
alterations and Tenant's personal property and storage and transportation costs
of same, and the cost of repairing and restoring the Landlord, together with
interest at the interest rate from the date of expenditure by Landlord. If the
Premises are not so surrendered at the termination of this Lease, Tenant shall
indemnify Landlord against all loss or liability, including attorneys' fees and
costs, resulting from delay by Tenant in so surrendering the Premises.

     16.  HOLDOVER. Tenant shall have no right to holdover possession of the
          --------
Premises after the expiration or termination of this Lease without Landlord's
prior written consent which Landlord may withhold in its sole and absolute
discretion. If, however, Tenant retains possession of any part of the Premises
after the term, Tenant shall become a tenant at sufferance only, for the entire
Premises upon all of the terms of this Lease as might be applicable to such
tenancy, except that Tenant shall pay all of the Base Rent, Operating Cost Share
Rent and Tax Share Rent at double the rate in effect immediately prior to such
holdover, computed on a monthly basis for each full or partial month Tenant
remains in possession. Tenant shall also pay Landlord all of Landlord's direct
and consequential damages resulting from Tenant's holdover. No acceptance of
rent or other payments by Landlord under these holdover provisions shall operate
as a waiver of Landlord's right to regain possession or any other of Landlord's
remedies.

     17.  SUBORDINATION TO GROUND LEASES AND MORTGAGES.
          --------------------------------------------

          A.   Subordination. This Lease shall be subordinate to any present or
               -------------
future ground lease or mortgage respecting the Project, and any amendments to
such ground lease or mortgage, at the election of the ground lessor or mortgagee
as the case may be, effected by notice to Tenant in the manner provided in this
Lease. The subordination shall be effective upon such notice, but at the request
of Landlord or ground lessor or mortgagee, Tenant shall within ten (10) days of
the request, execute and deliver to the requesting party any reasonable
documents provided to evidence the subordination. Any mortgagee has the right,
at its sole option, to subordinate its mortgage to the terms of this Lease,
without notice to, nor the consent of, Tenant. At any time that the Project is
made subject to any ground lease or mortgage, Landlord shall use commercially
reasonable efforts to cause the mortgagee or ground lessor to deliver to Tenant
a non-disturbance agreement reasonably acceptable to Tenant, providing that so
long as Tenant is not in default under the Lease after the expiration of any
applicable notice and cure periods, Tenant may remain in possession of the
Premises under the terms of this Lease, even if the ground lessor should
terminate the ground lease or if the mortgagee or its successor should acquire
Landlord's title to the Project. Landlord shall have no responsibility for and
Tenant shall pay for all costs associated with obtaining such non-disturbance
agreement (e.g., attorneys' fees and any fees charged by the ground lessor or
mortgagee).

                                      24
<PAGE>

          B.   Termination of Ground Lease or Foreclosure of Mortgage. If any
               ------------------------------------------------------
ground lease is terminated or mortgage foreclosed or deed in lieu of foreclosure
given and the ground lessor, mortgagee, or purchaser at a foreclosure sale shall
thereby become the owner of the Project, Tenant shall attorn to such ground
lessor or mortgagee or purchaser without any deduction or setoff by Tenant, and
this Lease shall continue in effect as a direct lease between Tenant and such
ground lessor, mortgagee or purchaser. The ground lessor or mortgagee or
purchaser shall be liable as Landlord only during the time such ground lessor or
mortgagee or purchaser is the owner of the Project. At the request of Landlord,
ground lessor or mortgagee, Tenant shall execute and deliver within ten (10)
days of the request any document furnished by the requesting party to evidence
Tenant's agreement to attorn.

          C.   Security Deposit. Any ground lessor or mortgagee shall be
               ----------------
responsible for the return of any security deposit by Tenant only to the extent
any security deposit is received by such ground lessor or mortgagee.

          D.   Notice and Right to Cure. Tenant agrees to send by registered or
               ------------------------
certified mail to any ground lessor or mortgagee identified in any notice from
Landlord to Tenant a copy of any notice of default sent by Tenant to Landlord.
If Landlord fails to cure such default within the required time period under
this Lease, but ground lessor or mortgagee begins to cure within ten (10) days
after such period and proceeds diligently to complete such cure, then ground
lessor or mortgagee shall have such additional time as is necessary to complete
such cure, including any time necessary to obtain possession if possession is
necessary to cure, and Tenant shall not begin to enforce its remedies so long as
the cure is being diligently pursued.

          E.   Definitions. As used in this Section 17, "mortgage" shall
               -----------
include "trust deed" and "deed of trust", and "mortgagee" shall include
"trustee", "beneficiary" and the mortgagee of any ground lessee, and "ground
lessor," "mortgagee," and "purchaser at a foreclosure sale" shall include, in
each case, all of its successors and assigns, however remote.

     18.  ASSIGNMENT AND SUBLEASE.
          -----------------------

          A.   In General. Except in the case of a "Permitted Transfer", Tenant
               ----------
shall not, without the prior consent of Landlord in each case, (i) make or allow
any assignment or transfer, by operation of law or otherwise, of any part of
Tenant's interest in this Lease, (ii) grant or allow any lien or encumbrance, by
operation of law or otherwise, upon any part of Tenant's interest in this Lease,
(iii) sublet any part of the Premises, or (iv) permit anyone other than Tenant
and its employees to occupy any part of the Premises. Tenant shall remain
primarily liable for all of its obligations under this Lease, notwithstanding
any assignment or transfer. No consent granted by Landlord shall be deemed to be
a consent to any subsequent assignment or transfer, lien or encumbrance,
sublease or occupancy. Tenant shall pay all of Landlord's attorneys' fees and
other expenses incurred in connection with any consent requested by Tenant or in
reviewing any proposed assignment or subletting. Any assignment or transfer,
grant of lien or encumbrance, or sublease or occupancy without Landlord's prior
written consent shall be void. If Tenant shall assign this Lease or sublet the
Premises in its entirety any rights of Tenant to renew this Lease, extend the
Term or to lease additional space in the Project shall be extinguished thereby
and will not be transferred to the assignee or subtenant, all such rights being
personal to the Tenant named herein. If Tenant shall assign this Lease or sublet
the Premises in its entirety (except in

                                      25
<PAGE>

the case of a "Permitted Transfer", as defined below) any rights of Tenant to
renew this Lease, extend the Term or to lease additional space in the Project
shall be extinguished thereby and will not be transferred to the assignee or
subtenant, all such rights being personal to the Tenant named herein. If no
default on the part of Tenant has occurred and is continuing (after notice and
expiration of applicable cure periods), Tenant may assign this Lease or sublet
any portion of the Premises (hereinafter collectively referred to as a
"Permitted Transfer") to (i) a parent or subsidiary of Tenant, or an entity
under common control with Tenant, (ii) an entity into which Tenant is merged or
consolidated, (iii) an entity which acquires substantially all of Tenant's
assets (collectively, any entity described in (i), (ii) and (iii) is deemed a
"Tenant Affiliate"), if Tenant (a) notifies Landlord at least ten (10) business
days prior to the Permitted Transfer, (b) provides Landlord with information
satisfactory to Landlord to determine that the net worth of the successor entity
is equal to or greater than the net worth of Tenant both as of the Commencement
Date and at the time immediately prior to such transfer or assignment, and (c)
furnishes Landlord with a written document executed by such assignee or
subtenant (including any Tenant Affiliate) in which such entity assumes all of
Tenant's obligations under this Lease. No Permitted Transfer shall release
Tenant from any of its obligations hereunder, nor result in any change in the
permitted "uses" of the Premises.

          B.   Landlord's Consent. Landlord will not unreasonably withhold its
               ------------------
consent to any proposed assignment or subletting. It shall be reasonable for
Landlord to withhold its consent to any assignment or sublease if (i) Tenant is
in default under this Lease, (ii) the proposed assignee or sublessee is a Tenant
in the Project or an affiliate of such a Tenant or a party that Landlord has
identified as a prospective Tenant in the Project, (iii) the financial
responsibility, nature of business, and character of the proposed assignee or
subtenant are not all reasonably satisfactory to Landlord, (iv) in the
reasonable judgment of Landlord the purpose for which the assignee or subtenant
intends to use the Premises (or a portion thereof) is not in keeping with
Landlord's standards for the Building or are in violation of the terms of this
Lease or any other leases in the Project, or (v) the proposed assignee or
subtenant is a government entity. The foregoing shall not exclude any other
reasonable basis for Landlord to withhold its consent.

          C.   Procedure. Tenant shall notify Landlord of any proposed
               ---------
assignment or sublease at least thirty (30) days prior to its proposed effective
date. The notice shall include the name and address of the proposed assignee or
subtenant, its corporate affiliates in the case of a corporation and its
partners in a case of a partnership, an execution copy of the proposed
assignment or sublease agreement, and sufficient information to permit Landlord
to determine the financial responsibility and character of the proposed assignee
or subtenant. As a condition to any effective assignment of this Lease, the
assignee shall execute and deliver in form satisfactory to Landlord at least
fifteen (15) days prior to the effective date of the assignment, an assumption
of all of the obligations of Tenant under this Lease. As a condition to any
effective sublease, subtenant shall execute and deliver in form satisfactory to
Landlord at least fifteen (15) days prior to the effective date of the sublease,
an agreement to comply with all of Tenant's obligations under this Lease, and at
Landlord's option, an agreement (except for the economic obligations which
subtenant will undertake directly to Tenant) to attorn to Landlord under the
terms of the sublease in the event this Lease terminates before the sublease
expires.

                                      26
<PAGE>

          D.   Change of Management or Ownership. Any transfer of the direct or
               ---------------------------------
indirect power to affect the management or policies of Tenant or direct or
indirect change in 49% or more of the ownership interest in Tenant shall
constitute an assignment of this Lease.

          E.   Excess Payments. If Tenant shall assign this Lease or sublet any
               ---------------
part of the Premises for consideration in excess of the pro-rata portion of Rent
applicable to the space subject to the assignment or sublet, then Tenant shall
pay to Landlord as Additional Rent 50% of any such excess immediately upon
receipt; provided that prior to sharing such excess rent with Landlord, Tenant
shall be entitled to reimburse itself for all reasonable leasing commissions,
attorneys' fees and tenant improvement costs which were specifically and
reasonably incurred in connection with such assignment of this Lease or sublet
of the Premises.

          F.   Recapture. Landlord may, by giving written notice to Tenant
               ---------
within thirty (30) days after receipt of Tenant's notice of assignment or
subletting, terminate this Lease with respect to the space described in Tenant's
notice, as of the effective date of the proposed assignment or sublease and all
obligations under this Lease as to such space shall expire except as to any
obligations that expressly survive any termination of this Lease.

     19.  CONVEYANCE BY LANDLORD. If Landlord shall at any time transfer its
          ----------------------
interest in the project or this Lease, Landlord shall be released of any
obligations occurring after such transfer, except the obligation to return to
Tenant any security deposit not delivered to its transferee, and Tenant shall
look solely to Landlord's successors for performance of such obligations. This
Lease shall not be affected by any such transfer.

     20.  ESTOPPEL CERTIFICATE. Each party shall, within ten (10) days of
          --------------------
receiving a request from the other party, execute, acknowledge in recordable
form, and deliver to the other party or its designee a certificate stating,
subject to a specific statement of any applicable exceptions, that the Lease as
amended to date is in full force and effect, that the Tenant is paying Rent and
other charges on a current basis, and that to the best of the knowledge of the
certifying party, the other party has committed no uncured defaults and has no
offsets or claims. The certifying party may also be required to state the date
of commencement of payment of Rent, the Commencement Date, the Termination Date,
the Base Rent, the current Operating Cost Share Rent and Tax Share Rent
estimates, the status of any improvements required to be completed by Landlord,
the amount of any security deposit, and such other matters as may be reasonably
requested. Failure to deliver such statement within the time required shall be
conclusive evidence against the non-certifying party that this Lease, with any
amendments identified by the requesting party, is in full force and effect, that
there are no uncured defaults by the requesting party, that not more than one
month's Rent has been paid in advance, that the non-certifying party has not
paid any security deposit, and that the non-certifying party has no claims or
offsets against the requesting party.

     21.  LEASE DEPOSIT. Tenant shall deposit with Landlord on the date Tenant
          -------------
executes and delivers this Lease to Landlord the cash sums set forth in the
Schedule for both Prepaid Rent, Security Deposit (collectively, the "Lease
Deposit"). The Prepaid Rent shall be applied by Landlord against the first full
month's Base Rent payment obligation hereunder. The Security Deposit shall be
held by Landlord during the Term as security for the performance of all of
Tenant's obligations hereunder. Notwithstanding the foregoing, Landlord agrees
that a

                                      27
<PAGE>

portion of the Security Deposit, not to exceed $200,433.00 may be in the form of
a "Letter of Credit", provided that the Letter of Credit shall (i) be in the
form of an unconditional and irrevocable letter of credit which is acceptable to
Landlord, (ii) name Landlord as a beneficiary, (iii) expressly allow Landlord to
draw upon it (including partial withdrawals) at any time from time to time by
delivering to the issuer written certification that Landlord is entitled to draw
thereunder as a result of Tenant's default hereunder, (iv) be drawable on an
FDIC-insured financial institution satisfactory to Landlord, (v) be redeemable
in the state of California in one of the nine counties comprises the San
Francisco-Oakland-San Jose area (the "Bay Area"), (vi) allow partial draws, and
(vii) be transferable to any successor to Landlord's interest in this Lease at
no cost to Landlord. As of the Commencement Date, and at all times during the
Term, the sum of the amount drawable under the Letter of Credit and the cash
portion of the Security Deposit held by Landlord shall be equal or greater than
the total amount of the Security Deposit as set forth in the Schedule. If Tenant
does not provide Landlord with a substitute Letter of Credit complying with all
of the requirements hereof at least thirty (30) days before the stated
expiration date of the current Letter of Credit, then Landlord shall have the
right to draw upon the current Letter of Credit and hold the funds drawn as part
of the Security Deposit. In the event Landlord notifies Tenant in writing that
the bank which issued the Letter of Credit has become financially unacceptable
(e.g., the bank is under investigation by governmental authorities, has filed
bankruptcy or reorganization proceedings, or has closed two or more of its
branches in the Bay Area), then Tenant shall have thirty (30) days to provide
Landlord with a substitute Letter of Credit complying with all of the
requirements hereof. The cash portion of the Security Deposit and the Letter of
Credit are collectively referred to herein as the "Security Deposit". In the
event Tenant initially pays the entire Security Deposit to Landlord in cash,
then Landlord agrees after it receives a Letter of Credit which satisfies the
requirements set forth above to promptly refund to Tenant an amount equal to the
lesser of (i) the amount of the Letter of Credit, or (ii) $204,208.00. If Tenant
defaults under this Lease, Landlord may apply all or any part of the Security
Deposit for the payment of any Rent or other sum in default, the repair of any
damage to the Premises caused by Tenant or the payment of any other amount which
Landlord may spend or become obligated to spend by reason of Tenant's default or
to compensate Landlord for any other loss or damage which Landlord may suffer by
reason of Tenant's default to the full extent permitted by law. Tenant hereby
waives any restriction on the use or application of the Security Deposit by
Landlord as set forth in California Civil Code Section 1950.7. To the extent any
portion of the Security Deposit is used, Tenant shall within five (5) days after
demand from Landlord restore the deposit to its full amount. Landlord may keep
the Security Deposit in its general funds and shall not be required to pay
interest to Tenant on the deposit amount. If Tenant shall perform all of its
obligations under this Lease and return the Premises to Landlord at the end of
the Term, Landlord shall return all of the remaining Security Deposit to Tenant
within thirty (30) days after the end of the Term. The Security Deposit shall
not serve as an advance payment of Rent or a measure of Landlord's damages for
any default under this Lease.

     If Landlord transfers its interest in the Project or this Lease, Landlord
may transfer the Security Deposit to its transferee. Upon such transfer,
Landlord shall have no further obligation to return the Security Deposit to
Tenant, and Tenant's right to the return of the Security Deposit shall apply
solely against Landlord's transferee.

                                      28
<PAGE>

     22.  FORCE MAJEURE. Landlord shall not be in default under this Lease to
          -------------
the extent Landlord is unable to perform any of its obligations on account of
any prevention, delay, stoppage due to strikes, lockouts, inclement weather,
labor disputes, inability to obtain labor, materials, fuels, energy or
reasonable substitutes therefor, governmental restrictions, regulations,
controls, actions or inaction, civil commotion, fire or other acts of God,
national emergency, or any other cause of any kind beyond the reasonable control
of Landlord (except financial inability) (collectively "Force Majeure").
                                                        -------------

     23.  TENANT'S PERSONAL PROPERTY AND TRADE FIXTURES. In addition to any
          ---------------------------------------------
statutory lien, Tenant hereby grants to Landlord a line against and a security
interest in all of Tenant's personal property and trade fixtures now or
hereafter located within the Premises as additional security for performance of
all of Tenant's obligations under this Lease. Tenant may replace such personal
property and fixtures with items of equal or better quality, but shall not
otherwise remove them from the Premises without the consent of Landlord until
all of the obligations of Tenant under this Lease have been performed. This
Lease constitutes a security agreement creating a security interest in such
property in favor of Landlord, subject only to the liens of existing creditors,
and Landlord may at any time file this Lease as a financing statement under the
Uniform Commercial Code of the state in which the Project is located.
Alternatively, if requested to do so by Landlord, Tenant shall execute and
deliver to Landlord within ten (10) days of such request a Form UCC-1 Financing
Statement wherein Landlord is the secured party and Tenant is the debtor.

     24.  NOTICES. All notices, consents, approvals and similar communications
          -------
to be given by one party to the other under this Lease, shall be given in
writing, mailed or personally delivered as follows:

          A.   Landlord. To Landlord as follows:
               --------

               CarrAmerica Realty Corporation
               1810 Gateway Drive, Suite 150
               San Mateo, California 94404
               Attn: Market Officer

               with a copy to:

               CarrAmerica Realty Corporation
               1850 K Street, N.W., Suite 500
               Washington, D.C. 20006
               Attn: Lease Administration

                                      29
<PAGE>

     or to such other person at such other address as Landlord may designate by
notice to Tenant.

          B.    Tenant. To Tenant as follows:
                ------
                Numerical Technologies, Inc.
                2630 Walsh Avenue
                Santa Clara, CA 95051
          Attn: Grace K. Fujiwara

     or to such other person at such other address as Tenant may designate by
notice to Landlord.

     Mailed notices shall be sent by United States certified or registered mail,
or by a reputable national overnight courier service, postage prepaid. Mailed
notices shall be deemed to have been given on the earlier of actual delivery or
three (3) business days after posting in the United States mail in the case of
registered or certified mail, and one business day in the case of overnight
courier.

     25.  QUIET POSSESSION. So long as Tenant shall perform all of its
          ----------------
obligations under this Lease, Tenant shall enjoy peaceful and quiet possession
of the Premises against any party claiming through the Landlord, subject to all
of the terms of this Lease.

     26.  REAL ESTATE BROKER. Tenant represents to Landlord that Tenant has not
          ------------------
dealt with any real estate broker with respect to this Lease except for any
broker(s) listed in the Schedule, and no other broker is in any way entitled to
any broker's fee or other payment in connection with this Lease. Tenant shall
indemnify and defend Landlord against any claims by any other broker or third
party for any payment of any kind in connection with this Lease.

     27.  MISCELLANEOUS.
          -------------

          A.    Successors and Assigns. Subject to the limits on Tenant's
                ----------------------
assignment contained in Section 18, the provisions of this Lease shall be
binding upon and inure to the benefit of all successors and assigns of Landlord
and Tenant.

          B.    Date Payments Are Due. Except for payments to be made by Tenant
                ---------------------
under this Lease which are due upon demand or which are due in advance (such as
Base Rent), Tenant shall pay to Landlord any amount for which Landlord renders a
statement of account within ten (10) days of Tenant's receipt of Landlord's
statement.

          C.   Meaning of "Landlord," "Re-Entry," "including" and "Affiliate".
               -------------------------------------------------------------
The term "Landlord" means only the owner of the Project and the lessor's
          --------
interest in this Lease from time to time. The words "re-entry" and "re-enter"
are not restricted to their technical legal meaning. The words "including" and
similar words shall mean "without limitation." The word "affiliate" shall mean a
person or entity controlling, controlled by or under common control with the
applicable entity. "Control" shall mean the power directly or indirectly, by
                    -------
contract or otherwise, to direct the management and policies of the applicable
entity.

                                      30
<PAGE>

          D.   Time of the Essence. Time is of the essence of each provision of
               -------------------
this Lease.

          E.   No Option. This document shall not be effective for any purpose
               ---------
until it has been executed and delivered by both parties; execution and delivery
by one party shall not create any option or other right in the other party.

          F.   Severability. The unenforceability of any provision of this
               ------------
Lease shall not affect any other provision.

          G.   Governing Law. This Lease shall be governed in all respects by
               -------------
the laws of the state in which the Project is located, without regard to the
principles of conflicts of laws.

          H.   Lease Modification. Tenant agrees to modify this Lease in any
               ------------------
way requested by a mortgagee which does not cause increased expense to Tenant or
otherwise materially adversely affect Tenant's interests under this Lease.

          I.   No Oral Modification. No modification of this Lease shall be
               --------------------
effective unless it is a written modification signed by both parties.

          J.   Landlord's Right to Cure. If Landlord breaches any of its
               ------------------------
obligations under this Lease, Tenant shall notify Landlord in writing and shall
take no action respecting such breach so long as Landlord promptly begins to
cure the breach and diligently pursues such cure to its completion. Landlord may
cure any default by Tenant; any expenses incurred shall become Additional Rent
due from Tenant on demand by Landlord.

          K.   Captions. The captions used in this Lease shall have no effect
               --------
on the construction of this Lease.

          L.   Authority. Landlord and Tenant each represents to the other that
               ---------
it has full power and authority to execute and perform this Lease.

          M.   Landlord's Enforcement of Remedies. Landlord may enforce any of
               ----------------------------------
its remedies under this Lease either in its own name or through an agent.

          N.   Entire Agreement. This Lease, together with all Appendices,
               ----------------
constitutes the entire agreement between the parties. No representations or
agreements of any kind have been made by either party which are not contained in
this Lease.

          O.   Landlord's Title. Landlord's title shall always be paramount to
               ----------------
the interest of the Tenant, and nothing in this Lease shall empower Tenant to do
anything which might in any way impair Landlord's title.

          P.   Light and Air Rights. Landlord does not grant in this Lease any
               --------------------
rights to light and air in connection with Project. Landlord reserves to itself,
the Land, the Building below the improved floor of each floor of the Premises,
the Building above the ceiling of each floor of the Premises, the exterior of
the Premises and the areas on the same floor outside the

                                      31
<PAGE>

Premises, along with the areas within the Premises required for the installation
and repair of utility lines and other items required to serve other tenants of
the Building.

          Q.   Singular and Plural. Wherever appropriate in this Lease, a
               -------------------
singular term shall be construed to mean the plural where necessary, and a
plural term the singular. For example, if at any time two parties shall
constitute Landlord or Tenant, then the relevant term shall refer to both
parties together.

          R.   No Recording by Tenant. Tenant shall not record in any public
               ----------------------
records any memorandum or any portion of this Lease.

          S.   Exclusivity. Landlord does not grant to Tenant in this Lease any
               -----------
exclusive right except the right to occupy its Premises.

          T.   No Construction Against Drafting Party. The rule of construction
               --------------------------------------
that ambiguities are resolved against the drafting party shall not apply to this
Lease.

          U.   Survival. All obligations of Landlord and Tenant under this
               --------
Lease shall survive the termination of this Lease.

          V.   Rent Not Based on Income. No Rent or other payment in respect of
               ------------------------
the Premises shall be based in any way upon net income or profits from the
Premises. Tenant may not enter into or permit any sublease or license or other
agreement in connection with the Premises which provides for a rental or other
payment based on net income or profit.

          W.   Building Manager and Service Providers. Landlord may perform any
               --------------------------------------
of its obligations under this Lease through its employees or third parties hired
by the Landlord.

          X.   Late Charge and Interest on Late Payments. Without limiting the
               -----------------------------------------
provisions of Section 13.A, if Tenant fails to pay any installment of Rent or
other charge to be paid by Tenant pursuant to this Lease within five (5)
business days after the same becomes due and payable, then Tenant shall pay a
late charge equal to the greater of two percent (2%) of the amount of such
payment or $250. In addition, interest shall be paid by Tenant to Landlord on
any late payments of Rent from the date due until paid at the rate provided in
Section 2.D(2). Such late charge and interest shall constitute Additional Rent
due and payable by Tenant to Landlord upon the date of payment of the delinquent
payment referenced above.

          Y.   Tenant's Financial Statements. Within ten (10) days after
               -----------------------------
Landlord's written request therefor, Tenant shall deliver to Landlord the
current financial statements of Tenant, and financial statements of the two (2)
years prior to the current financial statements year, with an opinion of a
certified public accountant, including a balance sheet and profit and loss
statement for the most recent prior year, all prepared in accordance with
generally accepted accounting principles consistently applied.

          Z.   Attorneys Fees. If either party defaults in the performance of
               --------------
any terms, covenants, agreements or conditions contained in this Lease and
Landlord places enforcement of this Lease or the collection of rent due or to
become due hereunder, or recovery of possession of

                                      32
<PAGE>

the Premises in the hands of any attorney, or either party files suit upon the
same, the non-prevailing party agrees to pay the prevailing party's reasonable
attorneys' fees and expenses.

          AA.  Consents. Except where expressly provided herein to the contrary,
               --------
whenever a party's consent or approval is required hereunder, such consent or
approval shall not be unreasonably withheld, delayed or conditioned.

     28.  UNRELATED BUSINESS INCOME. If Landlord is advised by its counsel at
          -------------------------
any time that any part of the payments by Tenant to Landlord under this Lease
may be characterized as unrelated business income under the United States
Internal Revenue Code and its regulations, then Tenant shall enter into any
amendment proposed by Landlord to avoid such income, so long as the amendment
does not require Tenant to make more payments or accept fewer services from
Landlord, than this Lease provides.

     29.  HAZARDOUS SUBSTANCES.
          --------------------

          A.   Prohibition Against Hazardous Substances. Tenant shall not cause
               ----------------------------------------
or permit any Hazardous Substances to be brought upon, produced, stored, used,
discharged or disposed of in or near the Project unless Landlord has consented
to such storage or use in its sole discretion. Any handling, transportation,
storage, treatment, disposal or use of any Hazardous Substances in or about the
Project by Tenant, its agents, employees, contractors or invitees shall strictly
comply with all applicable Governmental Requirements. Tenant shall indemnify,
defend and hold Landlord harmless from and against any liabilities, losses,
claims, damages, penalties, fines, attorneys' fees and court costs, remediation
costs, investigation costs and any other expenses which result from or arise out
of the use, storage, treatment, transportation, release, or disposal of any
Hazardous Substances on or about the Project by Tenant, its agents, employees,
contractors or invitees. If any lender or governmental agency shall require
testing for Hazardous Substances in the Premises, Tenant shall pay for such
testing. Tenant acknowledges receipt of that certain Updated Phase I
Environmental Assessment Report (Orchard Number 606) for the Project dated
September 23, 1996, prepared by ATC Environmental Inc. for Metropolitan Life
Insurance Company and Orchard Properties.

          B.   "Hazardous Substances". means any hazardous or toxic substances,
                ---------------------
materials or waste which are or become regulated by any local government
authority, the state in which the Project is located or the United States
government, including those substances described in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. Section 9601 et seq., the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. Section 6901 et seq., any other applicable federal, state or
                                -- ----
local law, and the regulations adopted under these laws.

          C.   Prior Contamination. If Tenant can demonstrate to the reasonable
               -------------------
satisfaction of Landlord that a release of Hazardous Substances occurred on the
Premises prior to the date on which Tenant took possession of the Premises and
that such release was not the result of the activities of Tenant or its
employees, agents, subtenants, licensees, contractors, subcontractors or
invitees ("Prior Contamination"), then Landlord agrees that it shall not seek to
recover from Tenant (either directly or as part of the Included Operating Costs)
any costs

                                      33
<PAGE>

incurred by Landlord in connection with such Prior Contamination (including any
investigation, remediation and disposal costs associated therewith.

     30.  EXCULPATION. Landlord shall have no personal liability under this
          -----------
Lease; its liability shall be limited to its interest in the Building and shall
not extend to any other property or assets of the Landlord. In no event shall
any officer, director, employee, agent, shareholder, partner, member or
beneficiary of Landlord be personally liable for any of Landlord's obligations
hereunder.

     31.  OPTION TO EXTEND. Subject to the terms and conditions set forth below,
          ----------------
Tenant may at its option extend the Term of this Lease for one (1) period of
three (3) years. Such period is called the "Renewal Term". The Renewal Term
shall be upon the same terms contained in this Lease, except that (i) Landlord
shall have no obligation to provide Tenant with any Tenant Improvement Allowance
in connection with such Renewal Term, (ii) the Base Rent during the Renewal Term
shall be calculated as set forth below, and (iii) any reference in the Lease to
the "Term" of the Lease shall be deemed to include the Renewal Term and apply
thereto, unless it is expressly provided otherwise. Tenant shall have no
additional extension options.

          A.   The Base Rent during the Renewal Term shall be the greater of (i)
the Base Rent applicable to the last month prior to the Renewal Term, or (ii)
the Market Rate (defined hereinafter) for such space for a term commencing on
the first day of the Renewal Term. "Market Rate" shall mean the then prevailing
market rate for a comparable term commencing on the first day of the Renewal
Term for tenants of comparable size and creditworthiness for comparable space in
the Building and other first class office buildings of comparable age with
similar projects in the vicinity of the Building.

          B.   To exercise any option, Tenant must deliver a binding notice to
Landlord not sooner than ten (10) months nor later than six (6) months prior to
the expiration of the initial Term of this Lease. Thereafter, the Market Rate
for the Renewal Term for the entire Renewal Term, including, if applicable,
periodic rental increases, shall be calculated pursuant to Subsection C below
and Landlord shall inform Tenant of the Market Rate. Such calculations shall be
final and shall not be recalculated at the actual commencement of such Renewal
Term. If Tenant fails to timely give its notice of exercise, Tenant will be
deemed to have waived its option to extend.

          C.   Market Rate shall be determined as follows:

               (i)  If Tenant provides Landlord with its binding notice of
exercise pursuant to Subsection B above, then prior to the commencement date of
such Renewal Term Landlord and Tenant shall commence negotiations to agree upon
the Market Rate. If Landlord and Tenant are unable to reach agreement within
twenty-one (21) days, then the Market Rate shall be determined in accordance
with (ii) below.

               (ii) If Landlord and Tenant are unable to reach agreement on the
Market Rate within said twenty-one (21) day period, then within seven (7) days,
Landlord and Tenant shall each simultaneously submit to the other in a sealed
envelope its good faith estimate of the Market Rate. If the higher of such
estimates is not more than one hundred five percent

                                      34
<PAGE>

(105%) of the lower, then the Market Rate shall be the average of the two.
Otherwise, the dispute shall be resolved by arbitration in accordance with (iii)
below.

               (iii) Within seven (7) days after the exchange of estimates, the
parties shall select as an arbitrator an independent MAI appraiser with at least
five (5) years of experience in appraising office space in the metropolitan area
in which the Project is located (a "Qualified Appraiser"). If the parties cannot
agree on a Qualified Appraiser, then within a second period of seven (7) days,
each shall select a Qualified Appraiser and within ten (10) days thereafter the
two appointed Qualified Appraisers shall select a third Qualified Appraiser and
the third Qualified Appraiser shall be the sole arbitrator. If one party shall
fail to select a Qualified Appraiser within the second seven (7) day period,
then the Qualified Appraiser chosen by the other party shall be the sole
arbitrator. The Qualified Appraiser, however selected, shall be a person who has
not previously acted in any capacity for either Landlord or Tenant (or an Tenant
Affiliate, or any of their subsidiaries or related entities). All of the
relevant information used by Landlord or Tenant to prepare their final offers
shall be delivered to the Qualified Appraiser.

               (iv)  Within twenty-one (21) days after submission of the matter
to the arbitrator, the arbitrator shall determine the Market Rate, provided in
no event shall the Market Rate be less than the lower of or more than the higher
of the two final offers submitted by Landlord and Tenant. The arbitrator shall
notify Landlord and Tenant of its decision, which shall be final and binding. If
the arbitrator believes that expert advice would materially assist him, the
arbitrator may retain one or more qualified persons to provide expert advice.
Landlord and Tenant shall each bear one-half (1/2) of the fees of the Qualified
Appraiser and the expenses of the appraisal process, including the fees of any
expert witnesses retained by the Qualified Appraiser. Notwithstanding the
foregoing, each party shall pay the fees of its respective counsel and the fees
of any witness called by that party.

          D.   Tenant's option to extend is personal to Tenant and may not be
exercised or assigned, voluntarily or involuntarily, by or to any person or
entity other than Tenant, without Landlord's prior written consent, which
Landlord may withhold in its sole and absolute discretion. Tenant's option to
extend this Lease is subject to the conditions that: (i) on the date that Tenant
delivers its binding notice exercising an option to extend, Tenant is not in
default under this Lease after the expiration of any applicable notice and cure
periods, and (ii) Tenant shall not have assigned the Lease, or sublet any
portion of the Premises under a sublease which is effective at any time during
the final twelve (12) months of the initial Term.

                                      35
<PAGE>

          E.   After the Market Rate has been established (whether by Landlord
and Tenant or the Qualified Appraiser), Landlord and Tenant shall execute an
amendment to this Lease to confirm the same.

     IN WITNESS WHEREOF, the parties hereto have executed this Lease.

LANDLORD:

CARRAMERICA REALTY CORPORATION,
a Maryland corporation

By:  Richard F. Katchuk
     ------------------
Print Name:   Richard F. Katchuk
Print Title:  Chief Financial Officer

Date of Execution: 6-21-99
                   -------

TENANT:

NUMERICAL TECHNOLOGIES, INC.,
a California corporation

By: /s/ Yagyensh C. Pati
Print Name:   __________________________________
Print Title:  __________________________________

Date of Execution: _____________________________

By: ____________________________________________
Print Name:   __________________________________
Print Title:  __________________________________
Date of Execution: _____________________________

                                [EXHIBIT OMITTED]

                                      36
<PAGE>

                                   EXHIBIT B

                             RULES AND REGULATIONS

     1.   Tenant shall not place anything, or allow anything to be placed near
the glass of any window, door, partition or wall which may, in Landlord's
judgment, appear unsightly from outside of the Project.

     2.   The Project directory, if any, shall be used by Landlord to display
names and locations of tenants in the Project. No tenant shall use or make any
changes to such directories without Landlord's prior written consent.

     3.   The sidewalks, halls, passages, exits, entrances, elevators and
stairways shall not be obstructed by Tenant or used by Tenant for any purposes
other than for ingress to and egress from the Premises, unless Tenant is the
sole occupant of the Building. Tenant shall lend its full cooperation to keep
such areas free from all obstruction and in a clean and sightly condition and
shall move all supplies, furniture and equipment as soon as received directly to
the Premises and move all such items and waste being taken from the Premises
(other than waste customarily removed by employees of the Building) directly to
the shipping platform at or about the time arranged for removal therefrom.
Neither Tenant nor any employee or invitee of Tenant shall go upon the roof of
the Project.

     4.   The toilet rooms, urinals, wash bowls and other apparatuses shall
not be used for any purposes other than that for which they were constructed,
and no foreign substance of any kind whatsoever shall be thrown therein, and to
the extent caused by Tenant or its employees or invitees, the expense of any
breakage, stoppage or damage resulting from the violation of this rule shall be
borne by Tenant.

     5.   Tenant shall not cause any unnecessary janitorial labor or services
by reason of Tenant's carelessness or indifference in the preservation of good
order and cleanliness.

     6.   Tenant shall not install or operate any refrigerating, heating or
air conditioning apparatus, or carry on any mechanical business without the
prior written consent of Landlord; use the Premises for housing, lodging or
sleeping purposes; or permit preparation or warming of food in the Premises
(warming of coffee and individual meals with employees and guests excepted).
Tenant shall not occupy or use the Premises or permit the Premises to be
occupied or used for any purpose, act or thing which is in violation of any
Governmental Requirement or which may be dangerous to persons or property.

     7.   Tenant shall not bring upon, use or keep in the Premises or the
Project any kerosene, gasoline or inflammable or combustible fluid or material,
or any other articles deemed hazardous to persons or property, or use any method
of heating or air conditioning other than that supplied by Landlord.

     8.   Landlord shall have sole power to direct electricians as to where
and how telephone and other wires are to be introduced. No boring or cutting for
wires is to be allowed

                                       1
<PAGE>

without the consent of Landlord. The location of telephones, call boxes and
other office equipment affixed to the Premises shall be subject to the approval
of Landlord.

     9.   No additional locks shall be placed upon any doors, windows or
transoms in or to the Premises. Tenant shall not change existing locks or the
mechanism thereof. Upon termination of the Lease, Tenant shall deliver to
Landlord all keys and passes for offices, rooms, parking lot and toilet rooms
which shall have been furnished Tenant.

     In the event of the loss of keys so furnished, Tenant shall pay Landlord
therefor. Tenant shall not make, or cause to be made, any such keys and shall
order all such keys solely from Landlord and shall pay Landlord for any keys in
addition to the two sets of keys originally furnished by Landlord for each lock.

     10.  Tenant shall not install linoleum, tile, carpet or other floor
covering so that the same shall be affixed to the floor of the Premises in any
manner except as approved by Landlord.

     11.  No furniture, packages, supplies, equipment or merchandise will be
received in the Project or carried up or down in the freight elevator, except
between such hours and in such freight elevator as shall be designated by
Landlord. Tenant shall not take or permit to be taken in or out of other
entrances of the Building, or take or permit on other elevators, any item
normally taken in or out through the trucking concourse or service doors or in
or on freight elevators.

     12.  Without the prior written consent of Landlord, Tenant shall not use
the name of the Project or any picture of the Project in connection with, or in
promoting or advertising the business of, Tenant, except Tenant may use the
address of the Project as the address of its business.

     13.  Tenant shall cooperate fully with Landlord to assure the most
effective operation of the Premises' or the Project's heating and air
conditioning. If Landlord provides HVAC: Tenant shall refrain from attempting to
adjust any controls, other than room thermostats installed for Tenant's use.
Tenant shall keep all corridor and exterior doors and windows closed, and during
periods which outside temperatures exceed 90 degrees F dry bulb Tenant shall
close all blinds and turn off any unnecessary equipment.

     14.  Tenant assumes full responsibility for protecting the Premises from
theft, robbery and pilferage, which may arise from a cause other than Landlord's
negligence, which includes keeping doors locked and other means of entry to the
Premises closed and secured.

     15.  Peddlers, solicitors and beggars shall be reported to the office of
the Project or as Landlord otherwise requests.

     16.  Tenant shall not advertise the business, profession or activities
of Tenant conducted in the Project in any manner which violates the letter or
spirit of any code of ethics adopted by any recognized association or
organization pertaining to such business, profession or activities.

     17.  No bicycle (except in those areas which may be designated for
bicycles by Landlord) or other vehicle and no animals or pets shall be allowed
in the Premises, halls, freight

                                       2
<PAGE>

docks, or any other parts of the Building, except that FOUR or fewer dogs will
be allowed to accompany employees within the Premises so long as they do not
cause a disturbance to other occupants of the Building. Tenant shall not make or
permit any noise, vibration or odor to emanate from the Premises, or do anything
therein tending to create, or maintain, a nuisance, or do any act tending to
injure the reputation of the Building.

     18.  Tenant acknowledges that Building security problems may occur which
may require the employment of extreme security measures in the day-to-day
operation of the Project.

     Accordingly:

          (a)  Landlord may, at any time, or from time to time, or for regularly
scheduled time periods, as deemed advisable by Landlord and/or its agents, in
their sole discretion, require that persons entering or leaving the Project or
the Property identify themselves to watchmen or other employees designated by
Landlord, by registration, identification or otherwise.

          (b)  Tenant agrees that it and its employees will cooperate fully with
Project employees in the implementation of any and all security procedures.

          (c)  Such security measures shall be the sole responsibility of
Landlord, and Tenant shall have no liability for any action taken by Landlord in
connection therewith, it being understood that Landlord is not required to
provide any security procedures and shall have no liability for such security
procedures or the lack thereof.

     19.  Tenant shall not do or permit the manufacture, sale, purchase, use
or gift of any fermented, intoxicating or alcoholic beverages without obtaining
written consent of Landlord.

     20.  Tenant shall not disturb the quiet enjoyment of any other tenant.

     22.  No equipment, mechanical ventilators, awnings, special shades or
other forms of window covering shall be permitted either inside or outside the
windows of the Premises without the prior written consent of Landlord, and then
only at the expense and risk of Tenant, and they shall be of such shape, color,
material, quality, design and make as may be approved by Landlord.

     23.  Tenant shall not during the term of this Lease canvas or solicit other
tenants of the Building for any purpose.

     24.  Tenant shall not install or operate any phonograph, musical or
sound- producing instrument or device, radio receiver or transmitter, TV
receiver or transmitter, or similar device in the Building or Project Common
Areas, nor install or operate any antenna, aerial, wires or other equipment
inside or outside the Building, nor operate any electrical device from which may

                                       3
<PAGE>

emanate electrical waves which may interfere with or impair radio or television
broadcasting or reception from or in the Building or elsewhere, without in each
instance the prior written approval of Landlord. The use thereof, if permitted,
shall be subject to control by Landlord to the end that others shall not be
disturbed.

     25.  Tenant shall promptly remove all rubbish and waste from the Premises.

     26.  Tenant shall not exhibit, sell or offer for sale, Rent or exchange
in the Premises or at the Project any article, thing or service, except those
ordinarily embraced within the use of the Premises specified in Section 6 of
this Lease, without the prior written consent of Landlord.

     27.  If required by Landlord, Tenant shall list all furniture, equipment
and similar articles Tenant desires to remove from the Premises or the Building
and deliver a copy of such list to Landlord and procure a removal permit from
Landlord (or the Project manager) authorizing Building employees to permit such
articles to be removed.

     28.  Tenant shall not overload any floors in the Premises or any public
corridors or elevators in the Building.

     29.  Tenant shall not do any painting in the Premises, or mark, paint,
cut or drill into, drive nails or screws into, or in any way deface any part of
the Premises or the Building, outside or inside, without the prior written
consent of Landlord.

     30.  Whenever Landlord's consent, approval or satisfaction is required
under these Rules, then unless otherwise stated, any such consent, approval or
satisfaction must be obtained in advance, such consent or approval may be
granted or withheld in Landlord's sole discretion, and Landlord's satisfaction
shall be determined in its sole judgment.

     31.  Tenant and its employees shall cooperate in all fire drills conducted
by Landlord in the Building.

                                       4
<PAGE>

                                   EXHIBIT C

                         TENANT IMPROVEMENT AGREEMENT

This Tenant Improvement Agreement ("Agreement") is an integral part of the Lease
("Lease") relating to the Premises (as defined in the Lease). Capitalized terms
used in this Agreement not otherwise defined herein shall have the meaning given
such terms in the Lease. Landlord and Tenant agree as follows with respect to
the Tenant Improvements, if any, to be installed in the Premises:

1.   INITIAL TENANT IMPROVEMENTS. Landlord shall select a general contractor
("Contractor"), to construct the initial interior tenant improvements (the
"Tenant Improvements") in the Premises in accordance with the drawing prepared
by Ambiance Associates ("Architect"), dated June 10, 1999, which was approved by
Tenant and Landlord (the "Preliminary Plans"), and which are further described
in Exhibit C-1 attached hereto.
   -----------

Landlord shall caused the final plans and construction drawings ("Final Plans")
to be prepared, at no cost to Tenant, by the Architect based on the Preliminary
Plans. After the completion of such Final Plans, Landlord shall submit the same
to Tenant for Tenant's review and approval, which approval shall not be
unreasonably withheld or delayed so long as such Final Plans are consistent with
the Preliminary Plans. Following the approval of the Final Plans by Tenant,
Landlord shall cause the Tenant Improvements to be constructed within the
Premises on a "turn-key" basis in accordance with the Final Plans at no cost to
Tenant, provided that Tenant shall be solely responsible for all costs
associated with any Change Orders (as defined below) requested by Tenant.
Landlord shall use commercially reasonable efforts (which efforts shall not
include incurring any overtime or other special charges) to cause the Tenant
Improvements to be substantially completed in accordance with the approved Final
Plans in a timely fashion, subject to delays caused by tenant and Force Majeure
(as defined in the Lease). Tenant acknowledges and agrees that the Commencement
Date shall not be affected by any Tenant Delays (as defined below).

Landlord, or an agent of Landlord, shall provide project management services in
connection with the construction of the Tenant Improvements and the Change
Orders (hereinafter defined).

2.   CHANGE ORDERS. If, prior to the Commencement Date, Tenant shall require
improvements or changes (individually or collectively, "Change Orders") to the
Final Plans, Tenant shall deliver to Landlord for its approval plans and
specifications for such Change Orders. If Landlord does not approve of the plans
for Change Orders, Landlord shall advise Tenant of the revisions required.
Tenant shall revise and redeliver the plans and specifications to Landlord
within five (5) business days of Landlord's advice or Tenant shall be deemed to
have abandoned its request for such Change Orders. Tenant shall pay all costs
associated with the Change Orders, including the preparations and revisions of
the Final Plans, and the construction of all Change Orders, within thirty (30)
days of Tenant's receipt of Landlord's invoice for the same.

                                       1
<PAGE>

3.   SUBSTANTIAL COMPLETION. As used herein and in the Lease, the term
"Substantial Completion of the Tenant Improvements" shall mean the date on which
the Tenant Improvements are sufficiently complete in accordance with the
approved Final Plans so that (i) a certificate of occupancy or other
governmental approval necessary for the Premises to be legally occupied can be
issued, and (ii) Tenant may reasonable commence using the Premises for the use
permitted under the Lease. Tenant agrees and acknowledges that the Substantial
Completion of the Tenant Improvements may occur notwithstanding the fact that
(i) neither a temporary or final certificate of occupancy for the Premises was
issued, and (ii) Landlord has yet to repair any punch list items noted by Tenant
so long as such punch list items do not materially interfere with Tenant's use
and occupancy of the Premises. Tenant shall note all punch list items within
thirty (30) days of the Substantial Completion of the Tenant Improvements.
Landlord shall commence the repair of any punch list items within ten (10) days
of such notice from Tenant.

4.   TENANT DELAYS. For purposes of this Agreement and the Lease, the following
events shall constitute delays caused by Tenant (a "Tenant Delay"):

          (a)  Tenant's request for Change Orders whether or not any such Change
Orders are actually performed; or

          (b)  Contractor's performance of any Change Orders; or

          (c)  Tenant's request for materials, finishes or installations
requiring unusually long lead times; or

          (d)  Tenant's delay in reviewing, revising or approving plans and
specifications beyond the periods set forth in the Performance Schedule; or

          (e)  Tenant's delay in providing information critical to the normal
progression of the project. Tenant shall provide such information as soon as
reasonably possible, but in no event longer than the time period specified
herein, or if no time period is specified, one week after receipt of such
request for information from the Landlord; or

          (f)  Tenant's delay in making payments to Landlord for costs of the
Tenant Improvements and/or Change Orders in excess of the Tenant Improvement
Allowance; or

          (g)  Any other act or omission by Tenant, its agents, contractors or
persons employed by any of such persons, including Tenant's delay in execution
this Lease.

     If any of the foregoing Tenant Delays occur, then Landlord shall cause
Landlord's Architect to certify the date on which the Tenant Improvements would
have been Substantially Completed but for such Tenant Delay, then such date
shall constitute the Commencement Date for all purposes hereunder and Landlord
and Tenant shall execute the Commencement Date Confirmation, confirming such
date.

5.   ACCESS BY TENANT PRIOR TO COMMENCEMENT OF TERM. Landlord at its discretion
may permit Tenant and its agents to enter the Premises prior to the Commencement

                                       2
<PAGE>

Date to prepare the Premises for Tenant's use and occupancy. Any such permission
shall constitute a license only, conditioned upon Tenant's;

     (a)  working in harmony with Landlord and Landlord's agents, contractors,
workmen, mechanics and suppliers and with other tenants and occupants of the
Building;

     (b)  obtaining in advance Landlord's approval of the contractors proposed
to be used by Tenant and depositing with Landlord in advance of any work (i)
security satisfactory to Landlord for the completion thereof, and (ii) the
contractor's affidavit for the proposed work and the waivers of lien from the
contractor and all subcontractors and suppliers of material; and

     (c)  furnishing Landlord with such insurance as Landlord may require
against liabilities which may arise out of such entry.

Landlord shall have the right to withdraw such license for any reason upon
twenty-four (24) hours' written notice to Tenant. Landlord shall not be liable
in any way for any injury, loss or damage which may occur to any of Tenant's
property or installations in the Premises prior to the Commencement Date. Tenant
shall protect, defend, indemnify and save harmless Landlord from all
liabilities, costs, damages, fees and expenses arising out of the activities of
Tenant or its agents, contractors, suppliers or workmen in the Premises or the
Building. Any entry and occupation permitted under this Section shall be
governed by all terms of the Lease.

6.   MISCELLANEOUS.

Terms used in this Exhibit C shall have the meanings assigned to them in the
                   ---------
Lease, and the Lease and the terms of this Exhibit C are subject to the terms
                                           ---------
of the Lease, as amended by the Lease.

                                [EXHIBIT OMITTED]

                                       3
<PAGE>

                                   EXHIBIT D

                        COMMENCEMENT DATE CONFIRMATION

Landlord:      CarrAmerica Realty Corporation, a Maryland corporation

Tenant:        Numerical Technologies, Inc., a California corporation

     This Commencement Date Confirmation is made by Landlord and Tenant pursuant
to that certain Lease dated as of June 15, 1999 (the "Lease") for certain
premises known as 70 Plumeria Drive, San Jose, California in the project
commonly known as Valley Centre I (the "Premises"). This Confirmation is made
pursuant to Item 11 of the Schedule to the Lease.

     1.   Lease Commencement Date, Termination Date. Landlord and Tenant hereby
          -----------------------------------------
agree that the Commencement Date of the Lease is __________, _________, and the
Termination Date of the Lease is ______________________, ___________.

     2.   Acceptance of Premises. Tenant has inspected the Premises and affirms
          ----------------------
that the Premises is acceptable in all respects in its current "as is"
condition.

     3.   Incorporation. This Confirmation is incorporated into the Lease, and
          -------------
forms an integral part thereof. This Confirmation shall be construed and
interpreted in accordance with the terms of the Lease for all purposes.

                              TENANT:

                              NUMERICAL TECHNOLOGIES, INC.,
                              a California corporation

                              By:_______________________________________
                              Print Name: ______________________________
                              Print Title: _____________________________

                              LANDLORD:

                              CARRAMERICA REALTY CORPORATION,
                              a Maryland corporation

                              By: ______________________________________
                              Print Name: ______________________________
                              Print Title: _____________________________

                                       1
<PAGE>

                                   EXHIBIT E

                         LANDLORD'S SIGNAGE STANDARDS

Attached you will find the signage standards for the following sign type:

EXTERIOR (PERMANENT)                                              PAGE #

         Entrance Identification                                  1
         Primary Directional                                      2
         Secondary Directional                                    3
         Primary Tenant Identification                            4
         Building Address                                         5
         Building Entry Logo Application                          6
         Driveway Entrance/Welcome                                7
         Miscellaneous                                            8

EXTERIOR (TEMPORARY)

Site/Leasing Sign                                                 9

INTERIOR (PERMANENT)

         Elevator (Corporate Identification)                      10
         Directory Identification                                 11
         Room Identification                                      12
         Tenant Plaque                                            13
         Suite Identification                                     14
         Suite Directional                                        15
         Reception Area Sign                                      16
<PAGE>

Exterior Signage Standards

Sign Type A

Product: 10'-0" wide by 5'-0" high by 8" deep double-sided, fabricated aluminum
panel with polyurethane enamel paint finish and applied graphics. Park name to
be 3/4" thick white acrylic letters with paint finish. Address to be 1/2" thick
white acrylic letters with paint finish. Secondary copy to be applied vinyl
lettering. Sign to be indirectly illuminated with wall-washing light fixtures
set flush to grade.

Finish: Upper panel to be painted gray to match Pratt & Lambert 12312 "Steel
Wool." Band to be painted white. Base to be painted maroon to match Pratt &
Lambert #1047 "Garnet." Reveals to be painted blue to match PMS 293c. All copy
to be white. On white band, "Carr" to be 3M "Intense Blue" #3650-47. "America"
to be 3M "Black" #3650-12. "A CarrAmerica Office Property" to be 3M "Medium
Gray" #3650-31. All painted surfaces to be primed and painted with a semi-glass
finish.

Type Style: All copy to be Times Roman, size and format as illustrated.
Alternate type face selection to be CarrAmerica Text. Artwork for CarrAmerica
logo will be provided in a digital format [Mac and PC formats are available].

Mounting: Panel to be permanently attached to an engineered concrete footing,
below grade.

Illumination: Indirect, ground illuminated by Kim Direct Burial/Sign Lighter -
250 w. T-4 Quartz Lamp [or approved equivalent].

                                [CHART OMITTED]

                                       1
<PAGE>

Exterior Signage Standards

                                                                     [Illegible]

Sign Type D

Product: 2'-9" wide by 6'-0" high by 6" deep single-sided, non-illuminated,
fabricated aluminum pylon with polyurethane enamel paint finish and applied
computer-cut, vinyl graphics.

Finish: Upper panel to be painted gray to match Pratt & Lambert [Illegible]2312
"Steel Wool." Band to be painted white. Base to be painted maroon to match Pratt
& Lambert #1047 "Garnet." Reveals to be painted blue to match PMS 293c. All copy
to be white. All painted surfaces to be primed and painted with a semi-glass
finish.

Type Style: All copy to be Times Roman, size and format as illustrated. Narrow
to match illustration below.

MOUNTING: Panel to be permanently attached to an engineered concrete footing,
below grade, with concealed mechanical fasteners.

ILLUMINATION: Non-illuminated

                                [CHART OMITTED]

                                       2
<PAGE>

                                                                     [Illegible]

Exterior Signage Standards

Sign Type E

Product: 2'-9" wide by 4`-4" high by 6" deep single-sided, non-illuminated,
fabricated aluminum pylon with polyurethane enamel paint finish and applied
computer-cut, vinyl graphics.

Finish: Upper panel to be painted gray to match Pratt & Lambert. [Illegible]1312
"Steel Wool." Band to be painted white. Base to be painted maroon to match Pratt
& Lambert #1047 "Garnet." Reveals to be printed blue to match PMS 293c. All copy
to be white. All painted surfaces to be primed and painted with a semi-glass
finish.

Type Style: All copy to be Times ROman, size and format as illustrated. Arrow to
match illustration below.

Mounting: Panel to be permanently attached to an engineered concrete footing,
below grade, with concealed mechanical fasteners.

Illumination: Non-Illuminated

                                [CHART OMITTED]

                                       3
<PAGE>

                                                                     [Illegible]

Exterior Signage Standards

Sign Type B

Product: 10'-0" wide by 5'-0" high by 12" deep double-sided, fabricated aluminum
panel with polyurethane enamel paint finish and applied graphics. Indirectly
illuminated with wall-washing fixtures set finish to grade.

Finish: Upper panel to be painted gray to match Pratt & Lambert [Illegible]312
"Steel Wool." Band to be painted white. Base to be painted maroon to match Pratt
& Lambert #1047 "Garnet." Reveals to be printed blue to match PMS 293c. All copy
to be white. All painted [Illegible]faces to be primed and painted with a
semi-glass finish.

Type Style: Tenant Logos/Logotypes.

Mounting: Panel to be permanently attached to an engineered concrete footing,
below grade, with cancealed mechanical fasteners.

Illumination: Indirect, ground illuminated by Kim Direct Burial/Sign Lighter -
250 w. T-4 Quartz Lamp for equivalent).

                                [CHART OMITTED]

                                       4
<PAGE>

Sign Type Q: Building Address

Product: 3/16" thick stainless steel numerals applied to existing mounted metal
fascio.

Finish: Letters to be polished smooth on the face and all sides to have
sandblast finish.

Typestyle: Numerals to be Times Roman Bold. Size and format as [Illegible]cated

Mounting: Numerals stud mount to existing painted metal fascio and secure with
silicone adhesive.

                                [CHART OMITTED]

                                       5
<PAGE>

[Illegible]n Standards

Logo Application at Entry Doors

Product: 1 1/2" and 3/4" surface-applied, computer-cut, opaque, adhesive-backed
vinyl graphics. Lettering to be pre-spaced, dual letters. Clear background
decals are not acceptable.

Finish: "Carr" to be 3M "Intense Blue" #7725-47. "America" to be Black"
#7725-12. "A CarrAmerica Office Property" to be White" #7725-10.

Type Style: Artwork for CarrAmerica logo will be provided in a [Illegible]
format (Mac and PC formats are available). Tagline to be New Roman Italic. Copy
to be flush left, size and format as indicated below. Letter spacing to be light
but not touching. Note: CarrAmerica is one word with a capital "C" and "A".

Mounting: Vinyl applies to first surface (exterior face) of glass sidelight with
equal spacing to left and right of logo. A maximum of two per entry should be
used as illustrated below. If mullion or other architectural feature does not
allow for placement at 5'-0" to baseline of logo, place as near to this location
as possible, working with the geometry and aestetics of the building entry.
Clean glass with ammonia-based window cleaner and allow to dry thoroughly prior
to installation.

                                [CHART OMITTED]

                                      6a
<PAGE>

CarrAmerica
     Douglas/Gallagher

[Illegible]n Standards

Exterior Logo Plaque - Bronze

Product: 7.1/2" by 7 1/2" by 1/8" thick bronze plaque with [Illegible]-etched
graphics and 45" beveled edge.

Finish: "Carr" to be infilled blue to match PMS 293c. "America" tagline to be
infilled black. Face of sign to be #6 satin finish horizontal grain. Beveled
edge to be mirror polished, Bronze [Illegible]to be Muntz Metal, alloy 280.
Clear-coat for exterior location. All graphics to be infilled with
chip-resistant glass [Illegible]ning enamel.

Type Style: Artwork for CarrAmerica logo will be provided in a [Illegible]d
format (Mac and PC formats are available). Supporting [Illegible]to be Times
Italic, size and format as illustrated.

Mounting: Applies to exterior face of stone building with metal studs and
appropriate silastic adhesive.

                                [CHART OMITTED]

                                      6b
<PAGE>

CarrAmerica
     Douglas/Gallagher

[Illegible]Standards

Exterior Logo Plaque-Bronze

Notes on previous page.

                                [CHART OMITTED]

                                      6c
<PAGE>

                                [CHART OMITTED]

Welcome Signage
---------------

2'- 0" by 2'- 0" by 1/4" thick painted aluminum faceplate with vinyl graphics
mounted to 3" square painted aluminum post. Border and post to be building
accent color or medium gray to match P&L 2246. Face to be dark gray to match P&L
2312. Copy to be white. Stripe to be blue to match PMS 293C. White signature
band to have gray copy with standard blue/black corporate logo.

                                       7
<PAGE>

Exterior Signage Standards

                                                                     [Illegible]

Sign Type G

Product: 1'-0" wide by 6'-0" by 1'-0" deep four sided, non-illuminated,
[Illegible]ated aluminum pylon with polyurethane enamel paint finish and
[Illegible]d computer cut, vinyl graphics.

Finish: Upper panel to be painted gray to match Pratt & Lambert [Illegible]2.
Base to be painted to match building accent color. Reveals to painted blue to
match PMS 293c. All copy to be matte while. All [Illegible]d surfaces to be
primed and painted with a semi-glass finish.

Type Style: All copy to be Times Roman, Times Bold and Times Italic, size and
format as illustrated.

Mounting: Panel to be permanently attached to an engineered concrete looting,
below grade, with concealed mechanical fasteners.

Illumination: Non-illuminated

                                [CHART OMITTED]

                                      8a
<PAGE>

Exterior Signage Standards

                                                                     [Illegible]

Sign Type H

Product: 12'-6" x 1'-4" x .080" painted pan breaked, aluminum panel [Illegible]
applied vinyl graphics attached to 1" square framework.

Finish: Upper panel to be painted gray to match Pratt & Lambert [Illegible]312.
Stripe to be painted white. Base to be painted Maroon to match [Illegible]f &
Lambert #1047. All copy to be white. All painted surfaces to be primed and
painted with a semi-glass finish.

Type Style: All copy to be Times Roman and Times Bold, size and format as
illustrated.

Mounting: Concealed frame to be permanently mounted to concrete with hilti
bolts. Sign panel to be mounted to frame with fasteners painted out to match
face.

Illumination: Non-illuminated.

Note: Replaces existing signage in same location.

                                [CHART OMITTED]

                                      8b
<PAGE>

                                                                     [Illegible]

Exterior Signage Standards

Sign Type I

Product: 18" x 20" .080" painted aluminum panel with applied vinyl graphics.

Finish: Upper panel to be painted gray to match Pratt & Lambert [Illegible]12.
Stripe to be painted white. Base to be painted maroon to match [Illegible] &
Lambert #1047. All copy to be white. All painted surfaces to be primeded and
painted with a semi-glass finish.

Type Style: All copy to be Times Roman, size and format as illustrated.

Mounting: Sign panel to be bolted through face, into concrete wall. Paint out
head of fastener to match sign face

Illumination: Non-illuminated

Note: Replaces existing signage in same location. All existing signs to be
removed or painted over. Owner to confirm if painting and sign removal are part
of sign fabricator's package.

                                [CHART OMITTED]

                                      8c
<PAGE>

                                                                     [Illegible]

Exterior Signage Standards

Sign Type J

Product: 18" x 20" .080" Reserved Parking Sign, [See previous drawing),
handicapped parking sign, or standard regulatory sign mounted to 3" square
painted aluminum post with dimensional reveal.

Finish: Upper panel to be painted gray to match Pratt & Lambert [Illegible]312.
Stripe to be painted white. Base to be painted maroon to match Pratt & Lambert
#1047. Posts to be painted gray to match Pratt & Lambert #2312. Reveals to be
painted blue to match PMS 293. All [Illegible]dy to be white. All painted
surfaces to be primed and painted with a semi-glass finish.

Type Style: All copy to be Times Roman, size and, format as illustrated.

Mounting: Concealed frame to be permanently mounted to concrete with hilti
bolts. Sign panel to be mounted to frame with fasteners painted out to match
face.

Illumination: Non-illuminated

Note: Replaces existing signage in same location.

                                [CHART OMITTED]

                                      8d
<PAGE>

                                                                     [Illegible]

Exterior Signage Standards

Sign Type K

Product: 12" x 48" x .080" painted pan breaked, aluminum panel with applied
vinyl graphics attached to 1" square framework.

Finish: Upper panel to be painted gray to match Pratt & Lambert [Illegible]312.
Stripe to be painted white. Base to be painted Maroon to match Pratt & Lambert
#1047. All copy to be white. All painted surfaces to be primed and painted with
a semi-glass finish.

Type Style: All copy to be Times Roman and Times Bold, size and format as
illustrated.

Mounting: Concealed frame to be permanently mounted to concrete with hiliti
bolts. Sign panel to be mounted to frame with fasteners painted out to match
face.

Illumination: Non-illuminated

Note: Replaces existing signage in same location.

                                [CHART OMITTED]

                                      8e
<PAGE>

LEASING SIGNAGE

[Illegible] appropriate signage to identify it immediately as a CarrAmerica
property. All signage should use only approved visual elements, so that the
consistency of the visual message reinforces the presence of CarrAmerica's
properties in the marketplace.

Signage works the same way that advertising does without the additional cost of
media. Because of this, it is probably the most inexpensive and valuable
advertising available.

[Illegible]

Size: 10 x 8 feet.

Materials: Framed 1/2 inch MDO plywood, enamel primer, enamel paint, white
vinyl.

Color: Top bar--black; vertical band--white; logo--Pantone 293 (blue) and black;
copy panel background--Pantone 293 (blue); bar under property name--black;
copy--white.

Logo: Measures 75 1/4 inches long.

Typography: Property name--7 1/4 inches tall CarrAmerica Display 8 Bold;
internet address--4 1/2 inches tall CarrAmerica Display 8 Regular; text--6
inches tall CarrAmerica Display B Regular and Bold.

                                [CHART OMITTED]

                                      9a
<PAGE>

LEASING SIGNAGE

[Illegible] vertical sign

Size: 8 x 10 feet.

Materials: Framed 1/2 inch MDO plywood, enamel primer, enamel paint, white
vinyl.

Color: Top bar--black; vertical band--white; logo--Pantone 293 (blue) and black;
copy panel background--Pantone 293 (blue); bar under property name--black;
copy--white.

Logo; Measures 75 1/4 inches long.

Typography: Property name--7 1/4 inches tall CarrAmerica Display B Bold;
Internet address--4 1/2 inches tall CarrAmerica Display B Regular; text--6
inches tall CarrAmerica Display B Regular and Bold.

                                [CHART OMITTED]

                                      9b
<PAGE>

LEASING SIGNAGE

Banner

Size: 22 x 4 feet.

Materials: Enamel receptive 12 ounce white vinyl, enamel gloss paint.

Color: Logo--Pantone 293 (blue) and black; phone number--black.

Logo: Measures 19 1/2 inches tall.

Typography: Phone numbers--15 1/2 inches tall CarrAmerica Display B Bold.

                                [CHART OMITTED]

                                      9c
<PAGE>

LEASING SIGNAGE

The following exhibits are to be used as a guide to produce retail and/or office
space leasing window signage. They define the design and material standards but
the components may need to be modified to accommodate the various sizes and
numbers of windows.

Retail Window Sign A.

Materials: Black and blue vinyl adhesive letters and graphics applied to window
exterior, white paint applied to window Interior.

Color: Logo--Pantone 293 (blue) and black; exterior squares--black; Interior
squares--Pantone 293 (blue); text--Pantone 293 (blue).

Logo: Size is determined by the horizontal measurement which is indicated by the
dotted lines.

Typography: All text--Times (New) Roman Italic; size is determined by the
horizontal measurement which is indicated by the dashed lines.

                                [CHART OMITTED]

                                      9d
<PAGE>

LEASING SIGNAGE

Window Sign B

Materials: Black and blue vinyl adhesive letters and graphics applied to window
exterior, white paint applied to window interior.

Color: Logo--Pantone 293 (blue) and black; exterior squares--black; Interior
squares--Pantone 293 (blue); text--Pantone 293 (blue).

Logo: Size is determined by the horizontal measurement which is indicated by the
dotted lines.

Typography: All text--Times (New) Roman Italic; size is determined by the
horizontal measurement which is indicated by the dashed lines.

                                [CHART OMITTED]

                                      9e
<PAGE>

terior Sign Standards

Sign Type: P.1

Product: 7 1/2" by 3 3/4" by 1/8" thick stainless steel plaque with
[Illegible]etched graphics and 45" beveled edge.

Finish:"Carr" to be infilled blue to match PMS 293c. "America" tagline to be
infilled black. Face of sign to be #6 satin finish horizontal grain. Beveled
edge to be mirror polished. Provide [Illegible]302 or 304 established by the
American Iron and Steel [Illegible] (AISI), in addition, comply with ASTM A 167.
All graphics infilled with chip-resistant glass screening enamel.

Type Style: Artwork for CarrAmerica logo will be provided in a [Illegible]format
(Mac and PC formats are available).

Mounting: Applies to interior face of elevator cab wall with double-sided tape
and appropriate silastic adhesive.

                                [CHART OMITTED]

                                      10a
<PAGE>

[Illegible]terior Sign Standards

Sign Type: P.2

Product: 7 1/2" by 3 3/4" by 1/8" thick bronze plaque with etched graphics and
45" beveled edge.

Sign Type: "Carr" to be infilled blue to match PMS 293c. "America" tagline to be
infilled black. Face of sign to be #6 satin finish horizontal grain. Beveled
edge to be mirror polished. Bronze [Illegible]to be Muntz Metal, alloy 280.
Clear-coat for interior location. All graphics to be infilled with
chip-resistant gloss [Illegible]ing enamel.

Type Style: Artwork for CarrAmerica logo will be provided in a [Illegible]
format (Mac and PC formats are available).

Mountings: Applies to interior face of elevator cab wall with double-sided tape
and appropriate silastic adhesive.

                                [CHART OMITTED]

                                      10b
<PAGE>

[Illegible]terior Sign Standards

Sign Type: P.3

Product: 7 1/2" by 7 1/2" by 1/8" thick stainless steel plaque with etched
graphics and 45degree beveled edge.

Finish: "Carr" to be infilled blue to match PMS 293c. "America" tagline to be
infilled black. Face of sign to be #6 satin finish horizontal grain. Beveled
edge to be mirror polished. Provide [Illegible]302 or 304 established by the
American Iron and Steel [Illegible]: (AISI), in addition, comply with ASTM A
167. All graphics infilled with chip-resistant gloss screening enamel.

Type Style: Artwork for CarrAmerica logo will be provided in a [Illegible]
format (Mac and PC formats are available).

Mounting: Applies to interior face of elevator cab wall with double-sided tape
and appropriate silastic adhesive.

                                [CHART OMITTED]

                                      10c
<PAGE>

[Illegible]terior Sign Standards

Sign Type: P.4

Product: 7 1/2" by 7 1/2" by 1/8" thick bronze plaque with etched graphics and
45degree beveled edge.

Finish: "Carr" to be infilled blue to match PMS 293c. "America" tagline to be
infilled black. Face of sign to be #6 satin finish horizontal grain. Beveled
edge to be mirror polished. Bronze [Illegible]to be Muntz Metal, alloy 280.
Clear-coat for interior location. All graphics to be infilled with chip-
resistant gloss [Illegible]ning enamel.

Type Style: Artwork for CarrAmerica logo will be provided in a [Illegible]l
format (Mac and PC formats are available).

Mounting: Applies to interior face of elevator cab wall with double-sided tape
and appropriate silastic adhesive.

                                [CHART OMITTED]

                                      10d
<PAGE>

[Illegible]terior Sign Standards

Sign Type: P.5

Product: 7 1/2" by 3 3/4" by 1/8" thick stainless steel plaque with etched
graphics and 45" beveled edge.

Finish: "Carr" to be infilled blue to match PMS 293c. "America" tagline to be
infilled black. Face of sign to be #6 satin finish horizontal grain. Beveled
edge to be mirror polished. Provide [Illegible]02 or 304 established by the
American Iron and Steel [Illegible][AISI], in addition, comply with ASTM A 167.
All graphics infilled with chip-resistant glass screening enamel.

Type Style: Artwork for CarrAmerica logo will be provided in a [Illegible]
format (Mac and PC formats are available).

Mounting: Applies to interior face of elevator cab wall with double-sided tape
and appropriate silastic adhesive.

                                [CHART OMITTED]

                                      10e
<PAGE>

[Illegible]terior Sign Standards

Sign Type: P.6

Product: 7 1/2" by 3 3/4" by 1/8" thick bronze plaque with [Illegible] etched
graphics and 45degree beveled edge.

Finish: "Carr" to be infilled blue to match PMS 293c. "America" tagline to be
infilled black. Face of sign to be #6 satin finish horizontal grain. Beveled
edge to be mirror polished. Bronze to be Muntz Metal, alloy 280. Clear-coat for
Interior [Illegible]ation. All graphics to be infilled with chip-resistant glass
etching enamel.

Type Style: Artwork for CarrAmerica logo will be provided in a [Illegible]
format (Mac and PC formats are available).

Mounting: Applies to interior face of elevator cab wall with double-sided tape
and appropriate silastic adhesive.

                                [CHART OMITTED]

                                      10f
<PAGE>

[Illegible]terior Sign Standards

Sign Type: P.7

Product: 7 1/2" by 7 1/2" by_1/8" thick stainless steel plaque with
[Illegible]o-etched graphics and 45degree beveled edge.

Finishh: "Carr" to be infilled blue to match PMS 293c. "America" tagline to be
infilled black. Face of sign to be #6 satin finish [Illegible]horizontal grain.
Beveled edge to be mirror polished. Provide [Illegible]s 302 or 304 established
by the American Iron and Steel Institute [AIS], in addition, comply with ASTM A
167. All graphics [Illegible] infilled with chip-resistant glass screening
enamel.

Type style: Artwork for CarrAmerica logo will be provided in a [Illegible]al
format (Mac and PC formats are available).

Mounting: Applies to interior face of elevator cab wall with double-sided tape
and appropriate silastic adhesive.

                                [CHART OMITTED]

                                      10g
<PAGE>

[Illegible]terior Sign Standards

Sign Type: P.8

Product: 7 1/2" by 7 1/2" by 1/8" thick bronze plaque with [Illegible]etched
graphics and 45degree beveled edge.

Finish: "Carr" to be infilled blue to match PMS 293c. "America" tagline to be
infilled black. Face of sign to be #6 satin finish [Illegible]horizontal grain.
Beveled edge to be mirror polished. Bronze [Illegible]to be Muntz Metal, alloy
280. Clear-coat for Interior location. All graphics to be infilled with chip-
resistant glass [Illegible]ing enamel.

Type Style: Artwork for CarrAmerica logo will be provided in a [Illegible]
format (Mac and PC formats are available).

Mounting: Applies to interior face of elevator cab wall with double-sided tape
and appropriate silastic adhesive.

                                [CHART OMITTED]

                                      10h
<PAGE>

[Illegible]terior Sign Standards

Directory Strips - CarrAmerica

Product:
[Illegible]ear-illuminated directory strips. Size and fabrication to match
existing directory format (ie: negative strip, engraved plastic.)

Finish:
Background to be black with white copy or to match existing standard.

Letter Style:
Body copy and phone numbers to match existing. CarrAmerica logo to be reproduced
from digital file provided by designer at time of fabrication.

Mounting:
n/a

                                [CHART OMITTED]

                                      11a
<PAGE>

[Illegible] Sign Standards

Directory Strips - CarrAmerica/CRES

Product:
[Illegible]ear-illuminated directory strips. Size and fabrication to match
existing directory format (ie: negative strip, engraved plastic.)

Finish:
Background to be black with white copy or to match existing standard.

Letter Style:
Body copy and phone numbers to match existing. CarrAmerica/CRES logo to be
reproduced from digital file provided by designer at time of fabrication. Note:
CRES logline is not proportional to Corporate standards. Cres tagline to be
increased to match line length of CarrAmerica.

Mounting:
n/a

                                [CHART OMITTED]

                                      11b
<PAGE>

[Illegible]terior Signage Standards

Sign Type L: Room Identification

Product: 8" by 8" by 1/4" thick laminated acrylic plaque with [Illegible]d
photopolymer on the lower panel and applied woodgrain [Illegible]ate face on the
accent strip. Graphics to be silkscreened on the [Illegible]panel and painted
raised lettering on the lower panel.

Finish: Upper panel to be painted cream to match Pratt & Lambert [Illegible]5.
Band to be woodgrain laminate, Nevamar ARP Fine [Illegible]ore, Textured #
W-8-351T. Lower panel to be painted warm to match Pratt & Lambert #2304. Reveals
to be painted blue to [Illegible]PMS 293c. Copy on upper panel to be warm gray
to match Pratt Lambert #2304. Copy on lower panel to be cream to match Pratt &
Lambert #2275. Braille to be painted to match background color. All [Illegible]d
surfaces to be have a semi-gloss finish.

Type Style: All copy to be Times Roman and Times Italic, size and format as
illustrated. Fabricator is responsible for all Grade 2 Braille translations.

Mounting: Plaque attaches to wall on latch side of door. Plaque mounts 4" from
jamb at 60" from floor to centerline of plaque.

                                [CHART OMITTED]

                                      12A
<PAGE>

[Illegible]terior Signage Standards

Sign Type L: Room Identification, continued

Alternate layouts are illustrated below.

                                [CHART OMITTED]

                                      12B
<PAGE>

[Illegible]terior Signage Standards

Sign Type M: Tenant Plaque

Product: 12" by 12" by 3/8" thick plaque composed of laminated [Illegible]lic,
aluminum and woodgrain laminant panels. Upper panel to be aluminum with photo
etched graphics with paint infill. Accent band to polished aluminum. Lower panel
to be acrylic with applied woodgrain laminant face and applied dimensional
numerals/braille. [Illegible]als to be painted.

Finish: Upper panel to be fine grain satin finish aluminum with a horizontal
grain. Accent band to be polished aluminum. Base to be woodgrain laminate,
Nevamar ARP Fine Sycamore, Textured # W-8-[Illegible]T. Reveals to be painted
blue to match PMS 293c. All copy and [Illegible]le to be black. Painted reveals
to be have a semi-glass finish.

Type Style: All copy to be Times Roman, size and format as illustrated.
Fabricator is responsible for all Grade 2 Braille translations.

Mounting: Plaque attaches to wall on latch side of door. Plaque mounts 4" from
jamb at 60" from floor to centerline of plaque. If plaques mounts to glass
sidelight, provide 1/16" thick satin finish aluminum back-up plate on inside
face of glass to conceal adhesives:

                                [CHART OMITTED]

                                      13
<PAGE>

[Illegible]terior Signage Standards

Sign Type N: Suite Identification, Option A

Product: 3/16" thick stainless steel letters, Braille strip to be 1/8" acrylic
with photopolymer face. Braille strip to be painted warm gray to match Pratt &
Lambert 2304.

Finish: Letters to be polished smooth on the face and all sides to have
[Illegible]fine sandblast finish. Braille strip to have semi-gloss polyurethane
enamel paint finish.

Type Style: Copy and numerals to be Times Roman. Size and format
[Illegible]indicated.

Mounting: Letters and plate adhere to wall surface with double stick tape and
silicone adhesive. Refer to mounting heights and locations.

Note: Copy aligns Rush left for left opening doors and flush right for right
opening doors.

                                [CHART OMITTED]

                                      14
<PAGE>

[[Illegible]

Sign Type O: Suite Directional

Product: 12" by 12" by 3/8" thick plaque composed of laminated acrylic, aluminum
and woodgrain laminant panels. Changable strips to aluminum with photo etched
graphics with paint infill. Accent band [Illegible] polished aluminum. Lower
panel to be acrylic with applied [Illegible]grain laminant face. Reveals to be
painted.

Finish: Upper panel strips to be fine grain satin finish aluminum with
horizontal grain. Accent band to be polished aluminum. Base to be woodgrain
laminate to match Nevamar ARP Fine Sycamore, Textured # [Illegible]351T. Reveals
to be painted blue to match PMS 293c. All copy to [Illegible]ock. Painted
reveals to be have a semi-glass finish.

Type Style: All copy to be Times Raman, size and format as illustrated.

Mounting: Plaque attaches to wall at 60" from floor to centerline of plaque.

                                [CHART OMITTED]

                                      15
<PAGE>

[Illegible]terior Signage Standards

February 14, 1997

CarrAmerica Identification at Reception Desk

Product: 8" initial cap height by 3/8" thick cut out black acrylic letters with
polyurethane enamel paint finish.

Finish: Face and returns of "Carr" to be painted blue to match PMS 293c. Face
[Illegible]d returns of "America" to be painted black. Painted surfaces to be
primed and printed with a semi-glass finish.

Type Style: CarrAmerica logo to be provided as a digital file in either mac or
pc format. Overall length indicated is approximate. Do not alter spacing or
proportions of digital file.

Mounting: Install with 1/16" thick double-sided foam tape and silicone adhesive
to wall behind reception desk at height indicated. Fabricator to provide
[Illegible]unce template for installation.

Alternate: For dark colored walls, including dark paint finishes, dark wood
veneers, dark stone or other dark colored wall materials where the preferred
standard blue and black letters will not read, the following two alternates may
be considered.

Alternate Product: 8" Initial cap height by 3/8" thick cut out aluminum or
bronze letters. Select aluminum or bronze based on existing, predominant
interior metalwork. Bronze alloy to be Muntz Metal, alloy 280.

Alternate Finish: Face of "Carr" to be #4 Satin finish, horizontal grain. Face
of "America" to be #8 mirror polished. Returns of all letters to have a fine
grain sandblast finish. All letters to be clear-coated for interior use.

Alternate Mounting: Pin mount, flush to wall and adhere with silicone adhesive
at location indicated behind reception desk. Fabricator to provide pounce
template for installation.

                                [CHART OMITTED]

Note: An 8" cop height is the suggested standard size. If you feel that your
lobby area warrants consideration of special size, please contact Corporate
Communications.

                                      16
<PAGE>

CARRAMERICA REALTY CORPORATION

2346 Bering Drive
San Jose, California 95131
Phone 408.544.9660
Fax 408.544.9669
www.carramerica.com

December 27, 1999

                                                                  CARRAMERICA

Ms. Grace Fujiwara
Numerical Technologies
70 Plumeria
San Jose, CA 95134

Re:  2000 NEW MONTHLY ESTIMATED OPERATING EXPENSES
     70 PLUMERIA, SAN JOSE

Dear Ms. Fujiwara:

Enclosed please find 2000 Operating Expense Prepayment Schedule and 2000
Estimated Operating Expenses Backup. The total amount due to CarrAmerica for
2000 Estimated Operating Expenses is $ 10,723.62.
                         -----------

The monthly amount and charges commenced as follows:

70 PLUMERIA       EFFECTIVE: JANUARY 1, 2000         MONTHLY AMOUNT: $ 10,723.62

Your account will be charged to reflect the total amount due according to the
attached invoice. Please refer to it for a detailed breakdown.

Please remit your payment at your earliest convenience to the following:

                         CARRAMERICA REALTY CORPORATION
                                T/A VALLEY CENTRE
                                 P.O. BOX 198291
                           ATLANTA, GEORGIA 30384-8291

If you have any questions or concerns with the above mentioned and attached
information, please do not hesitate to contact me directly.

Sincerely,
CARRAMERICA REALTY CORPORATION

/s/ Signature Illegible

Lisa Huntress
Assistant Property Manager

cc:  Iris Jimenez, Property Manager
     Lease File
<PAGE>

                                                                   CARRAMERICA.

NUMERICAL TECHNOLOGIES, INC.

SUITE 70

70 PLUMERIA/2720 ORCHARD PARKWAY

SAN JOSE, CA 95134                                            December 27, 1999

                       2000 OPERATING EXPENSE PREPAYMENT
                          ADJUSTMENT TO MONTHLY RENT

Estimated 2000 Operating Expenses
Excluding Management Fee and Real Estate Tax:                $       130,786.68
Proportionate Share:                                           X        49.2500%

Estimated Share Of 2000 Operating Expenses:                           64,412.44
Months in Estimated Billing Cycle:                             /             12

Estimated Monthly Operating Expense:                         $         5,367.70

Estimated 2000 Management Fee                                $        28,699.52
Proportionate Share:                                           X        49.2500%

Estimated Share of Management Fee                                     14,134.51
Months in Billing Cycle                                        /             12

Estimated Monthly Management Fee:                            $         1,177.88

Estimated 2000 Real Estate Tax:                                      101,800.00
Proportionate Share:                                           X        49.2500%

Estimated Share Of 2000 Real Estate Tax:                              50,136.50
Months in Estimated Billing Cycle:                             /          12.00

Estimated Monthly Real Estate Taxes:                                   4,178.04

NEW MONTHLY OPERATING EXPENSE PREPAYMENT
EFFECTIVE: JANUARY 1, 2000                                   $        10,723.62
           ---------------

     Please update your records to reflect this new Monthly Operating Expense
Prepayment. This amount
                             Will not change again until you are notified by us.
<PAGE>

                                                                    CARRAMERICA.

                       70 Plumeria/2720 Orchard Parkway
 SCHEDULE OF 2000 ESTIMATED OPERATING EXPENSES - January 1 through December 31
                     Weighted Average Occupancy = 100.00%

<TABLE>
<CAPTION>
                                                                                               As If
                                                      CarrAmerica           Total              100%
<S>                                                   <C>                  <C>                 <C>
MANAGEMENT
     Management Commissions                               33,358.00           33,358.00             33,358.00
     Leasing Commissions                                       0.00                0.00                  0.00
     Telephone                                               468.00              468.00                468.00
     Office                                               15,389.00           15,389.00             15,389.00
     TOTAL MANAGEMENT:                                    49,215.00           49,215.00             49,215.00

PAYROLL
     Payroll                                               2,826.00            2,826.00              2,826.00
     Payroll Security                                          0.00                0.00                  0.00
     Payroll Taxes                                           258.00              258.00                258.00
     Benefits                                                349.00              349.00                349.00
     TOTAL PAYROLL:                                        3,433.00            3,433.00              3,433.00

UTILITIES
     Electricity, Net                                      3,276.00            3,276.00              3,276.00
     Water & Sewer, Net                                        0.00                0.00                  0.00
     Lighting, Heating and Cooling System Retrofits        7,956.00            7,956.00              7,956.00
     Fuel                                                      0.00                0.00                  0.00
     TOTAL UTILITIES:                                     11,232.00           11,232.00             11,232.00

OPERATING SERVICES
     Porter Supplies                                           0.00                0.00                  0.00
     Janitorial Contract, Net                                  0.00                0.00                  0.00
     Security                                                  0.00                0.00                  0.00
     Access Control                                            0.00                0.00                  0.00
     Window Cleaning                                         936.00              936.00                936.00
     Trash Removal                                           390.00              390.00                390.00
     Food Court Expenses                                       0.00                0.00                  0.00
     Plaza Expenses                                        7,208.00            7,208.00              7,208.00
     Exterminating                                         1,591.00            1,591.00              1,591.00
     Uniforms                                                  0.00                0.00                  0.00
     Landscaping                                          36,923.00           36,923.00             36,923.00
     Other Services                                            0.00                0.00                  0.00
     TOTAL OPERATING SERVICES:                            47,048.00           47,048.00             47,048.00

REPAIRS AND MAINTENANCE
     Building and Grounds, Net                            13,577.00           13,577.00             13,577.00
     Garage/Parking                                          468.00              468.00                468.00
     Heating and Cooling                                     234.00              234.00                234.00
     Electrical                                            1,365.00            1,365.00              1,365.00
     Painting & Wallcovering                               1,560.00            1,560.00              1,560.00
     Plumbing                                                507.00              507.00                507.00
     Elevators                                                 0.00                0.00                  0.00
     Floor Coverings                                           0.00                0.00                  0.00
     TOTAL REPAIRS AND MAINTENANCE:                       17,711.00           17,711.00             17,711.00

TAXES, INSURANCE, AND PROFESSIONAL FEES
     Consultants - Passthrough                                 0.00                0.00                  0.00
     Real Estate Tax                                     101,800.00          101,800.00            101,800.00
     Tax Appeal Expenses                                       0.00                0.00                  0.00
     Vault Rental                                              0.00                0.00                  0.00
     Owners Association                                      234.00              234.00                234.00
     Professional & Cons Fees                                  0.00                0.00                  0.00
     Legal - Operating                                       468.00              468.00                468.00
     Insurance                                             5,195.00            5,195.00              5,195.00
     Other Passthrough                                         0.00                0.00                  0.00
     TOTAL TAXES, INSURANCE, AND PROFESSIONAL FEES:      107,697.00          107,697.00            107,697.00

TOTAL OPERATING EXPENSES:                              $ 236,336.00        $ 236,336.00          $ 236,336.00
</TABLE>
<PAGE>

                                                                    CARRAMERICA.

                      70 Plumeria / 2720 Orchard Parkway
 SCHEDULE OF 2000 ESTIMATED OPERATING EXPENSES - JANUARY 1 THROUGH DECEMBER 31
                     WEIGHTED AVERAGE OCCUPANCY = 100.00%

                                                    CARRAMERICA        Total

Other Costs
     Amortized Capital Expenditures                                   29,608.68
     Salaries above the level of Building Manager                          0.00<PAGE>

                                                                    EXHIBIT 10.6

                                     LEASE

THIS LEASE IS MADE ON THE TENTH DAY OF MAY, 1990, BY AND BETWEEN LOS GATOS
BUSINESS PARK, A CALIFORNIA LIMITED PARTNERSHIP (HEREINAFTER CALLED "LESSOR"),
AND TRANSCRIPTION ENTERPRISES, LIMITED, A CALIFORNIA CORPORATION (HEREINAFTER
CALLED "LESSEE").

IN CONSIDERATION OF THE MUTUAL PROMISES HEREIN CONTAINED, THE PARTIES AGREE AS
FOLLOWS:

1.   Premises. Lessor leases to Lessee, and Lessee leases from Lessor, upon the
     --------
     terms and conditions herein set forth, those certain Premises ("Premises")
     situated in the City of Los Gatos, County of Santa Clara, California, as
     outlined in Exhibit "A" attached hereto and described as follows:
     approximately 2,394 square feet of a larger 22,272 square foot building
     located at 101 Albright Way, Los Gatos, California.

2.   Term. The term of this Lease shall be for three (3) years, commencing on
     ----
     August 1, 1990, and ending on July 31, 1993, unless sooner terminated
     pursuant to any provision hereof.

3.   Rent. Lessee shall pay to Lessor rent for the Premises of Two Thousand,
     ----
     Eight Hundred Seventy-Three and 00/100 Dollars ($2,873.00) per month in
     lawful money of the United States of America. Rent shall be paid without
     deduction or offset, prior notice, or demand, at such place as may be
     designated from time to time by Lessor as follows: $2,873.00 shall be paid
     upon execution of the Lease, which sum represents the amount of the first
     month's rent. If Lessee is not in default of any provision of this Lease,
     this sum, without interest thereon, shall be applied toward the rent due
     for the last month of the term of this Lease or the extended term, pursuant
     to any extension of the initial term in accordance with the provisions of
     this Lease. Pursuant to Paragraph 5 of this Lease Agreement, a deposit of
     $2,490 shall be made by Lessee and held by Lessor. The deposit shall be
     paid upon execution of the Lease. $2,873.00 shall be paid on August 1,
     1990, and in advance on the first (1st) day of each succeeding calendar
     month until July 31, 1993. Rent for any period during the term hereof which
     is for less than one (1) full month shall be a pro-rata portion of the
     monthly rent payment. Lessee acknowledges that late payment by Lessee to
     Lessor of rent or any other payment due Lessor will cause Lessor to incur
     costs not contemplated by this Lease, the exact amount of such costs being
     extremely difficult and impracticable to fix. Such costs include, without
     limitation, processing and accounting charges, and late charges that may be
     imposed on Lessor by the terms of any encumbrance and note secured by any
     encumbrance covering the Premises. Therefore, if any installment of rent or
     other payment due from Lessee is not received by Lessor within five (5)
     days following the date it is due and payable, Lessee shall pay to Lessor
     an additional sum of ten percent (10%) of the overdue amount as a late
     charge. The parties agree that this late charge represents a fair and
     reasonable estimate of the costs that Lessor will incur by reason of late
     payment by Lessee. Acceptance of any late charge shall not constitute a
     waiver of Lessee's default with respect to the overdue amount, nor prevent
     Lessor from exercising any of the other rights and remedies available to
     Lessor.

          If, for any reason whatsoever, Lessor cannot deliver possession of the
     Premises on the commencement date set forth in Paragraph 2 above, this
     Lease shall not be void or voidable, nor shall Lessor be liable to Lessee
     for any loss or damage resulting therefrom; but in such event,

                                       1
<PAGE>

     Lessee shall not be obligated to pay rent until possession of the Premises
     is tendered to Lessee and the commencement and termination dates of this
     Lease shall be revised to conform to the date of Lessor's delivery of
     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 of the provisions of this Lease, including the obligation
     to pay rent at the same monthly rate as that prescribed for the first month
     of the Lease term.

4.   Option to Extend Term. In no event shall the monthly rent for any extended
     ---------------------
     term be less than the monthly rent paid immediately prior to such extended
     term.

5.   Security Deposit. Lessor acknowledges that Lessee has deposited with
     ----------------
     Lessor a Security Deposit in the sum of Two Thousand, Eight Hundred
     Seventy-Three and 00/100 Dollars ($2,490.00) to secure the full and
     faithful performance by Lessee of each term, covenant, and condition of
     this Lease. If Lessee shall at any time fail to make any payment or fail to
     keep or perform any term, covenant, or condition on its part to be made or
     performed or kept under this Lease, Lessor may, but shall not be obligated
     to and without waiving or releasing Lessee from any obligation under this
     Lease, use, apply, or retain the whole or any part of said Security Deposit
     (a) to the extent of any sum due to Lessor; or (b) to compensate Lessor for
     any loss, damage, attorneys' fees or expense sustained by Lessor due to
     Lessee's default. In such event, Lessee shall, within five (5) days of
     written demand by Lessor, remit to Lessor sufficient funds to restore the
     Security Deposit to its original sum. No interest shall accrue on the
     Security Deposit. Should Lessee comply with all the terms, covenants, and
     conditions of this Lease and, at the end of the term of this Lease, leave
     the Premises in the condition required by this Lease, then said Security
     Deposit or any balance thereof, less any sums owing to Lessor, shall be
     returned to Lessee within fifteen (15) days after the termination of this
     Lease and vacancy of the Premises by Lessee. Lessor can maintain the
     Security Deposit separate and apart from Lessor's general funds, or can
     co-mingle the Security Deposit with the Lessor's general and other funds.

6.   Use of the Premises. The Premises shall be used exclusively for the purpose
     -------------------
     of computer software marketing and engineering normal and customary to the
     industry.

          Lessee shall not use or permit the Premises, or any part thereof, to
     be used for any purpose or purposes other than the purpose for which the
     Premises are hereby leased; and no use shall be made or permitted to be
     made of the Premises, nor acts done, which will increase the existing rate
     of insurance upon the building in which the Premises are located, or cause
     a cancellation of any insurance policy covering said building, or any part
     thereof, nor shall Lessee sell or permit to be kept, used, or sold, in or
     about the Premises, any article which may be prohibited by the standard
     form of fire insurance policies. Lessee shall not commit or suffer to be
     committed any waste upon the Premises or any public or private nuisance or
     other act or thing which may disturb the quiet enjoyment of any other
     tenant in the building in which the Premises are located; nor, without
     limiting the generality of the foregoing, shall Lessee allow the Premises
     to be used for any improper, immoral, unlawful, or objectionable purpose.

          Lessee shall not place any harmful liquids in the drainage system of
     the Premises or of the building of which the Premises form a part. No waste
     materials or refuse shall be dumped upon or permitted to remain upon any
     part of the Premises outside of the building proper except in trash
     containers placed inside exterior enclosures designated for that purpose by
     Lessor, or inside the building proper where designated by Lessor. No
     materials, supplies, equipment, finished or semi-finished products, raw
     materials, or articles of any nature shall be stored upon or permitted to
     remain on any portion of the Premises outside of the building proper.
     Lessee shall

                                       2
<PAGE>

     comply with all the covenants, conditions, and/or restrictions ("C.C. &
     R.'s") affecting the Premises.

          Lessee shall abide by all laws, ordinances, and statutes, as they now
     exist or may hereafter be enacted by legislative bodies having jurisdiction
     thereof, relating to its use and occupancy of the Premises.

7.   Taxes and Assessments.
     ---------------------

     A.   Lessee shall pay before delinquency any and all taxes, assessments,
          license fees, and public charges levied, assessed, or imposed upon or
          against Lessee's fixtures, equipment, furnishings, furniture,
          appliances, and personal property installed or located on or within
          the Premises. Lessee shall cause said fixtures, equipment,
          furnishings, furniture, appliances, and personal property to be
          assessed and billed separately from the real property of Lessor. If
          any of Lessee's said personal property shall be assessed with Lessor's
          real property, Lessee shall pay to Lessor the taxes attributable to
          Lessee within ten (10) days after receipt of a written statement from
          Lessor setting forth the taxes applicable to Lessee's property.

     B.   All property taxes or assessments levied or assessed or hereafter
          levied or assessed by any governmental authority against the Premises
          or any portion of such taxes or assessments which becomes due or
          accrued during the term of this Lease shall be paid by Lessor. Lessee
          shall reimburse Lessor for Lessee's proportionate share of such taxes
          or assessments within ten (10) days of receipt of Lessor's invoice
          demanding such payment. Lessee's liability hereunder shall be prorated
          to reflect the commencement and termination dates of this Lease.

8.   Insurance.
     ---------

     A.   Indemnity. Lessee agrees to indemnify and defend Lessor against and
          ---------
          hold Lessor harmless from any and all demands, claims, causes of
          action, judgments, obligations, or liabilities, and all reasonable
          expenses incurred in investigating or resisting the same (including
          reasonable attorneys' fees) on account of, or arising out of, the
          condition, use, or occupancy of the Premises. This Lease is made on
          the express condition that Lessor shall not be liable for, or suffer
          loss by reason of, injury to person or property, from whatever cause,
          in any way connected with the condition, use, or occupancy of the
          Premises, specifically including, without limitation, any liability
          for injury to the person or property of Lessee, its agents, officers,
          employees, licensees, and invitees.

     B.   Liability Insurance. Lessee shall, at its expense, obtain and keep in
          -------------------
          force during the term of this Lease a policy of comprehensive public
          liability insurance insuring Lessor and Lessee, with cross-liability
          endorsements, against any liability arising out of the condition, use,
          or occupancy of the Premises and all areas appurtenant thereto,
          including parking areas. Such insurance shall be in an amount
          satisfactory to Lessor of not less than one million dollars
          ($1,000,000) for bodily injury or death as a result of one occurrence,
          and five hundred thousand dollars ($500,000) for damage to property as
          a result of any one occurrence. The insurance shall be with companies
          approved by Lessor, which approval Lessor agrees not to withhold
          unreasonably. Prior to possession, Lessee shall deliver to Lessor a
          certificate of insurance evidencing the existence of the policy which
          (1) names

                                       3
<PAGE>

          Lessor an additional insured, (2) shall not be canceled or altered
          without thirty (30) days' prior written notice to Lessor, (3) insures
          performance of the indemnity set forth in Section A of Paragraph 9,
          and (4) coverage is primary and any coverage by Lessor is in excess
          thereto.

     C.   Property Insurance. Lessor shall obtain and keep in force during the
          ------------------
          term of this Lease a policy or policies of insurance (including
          earthquake and flood coverage) covering loss or damage to the
          Premises, in the amount of the full replacement value thereof. Lessee
          shall pay to Lessor its pro-rata share of the cost of said insurance
          within ten (10) days of Lessee's receipt of Lessor's invoice demanding
          such payment.

     D.   Lessee hereby releases Lessor, and its partners, officers, agents,
          employees, and servants, from any and all claims, demands, loss,
          expense, or injury to the Premises or to the furnishings, fixtures,
          equipment, inventory, or other property of Lessee in, about, or upon
          the Premises, which is caused by or results from perils, events, or
          happenings which are the subject of insurance in force at the time of
          such loss.

9.   Utilities. Lessee shall pay for all water, gas, light, heat, power,
     ---------
     electricity, telephone, trash removal, landscaping, sewer charges, and all
     other services, including normal and customary property management fees,
     supplied to or consumed on the Premises. In the event that any such
     services are billed directly to Lessor, then Lessee shall reimburse Lessor
     for such expenses within ten (10) days of Lessee's receipt of Lessor's
     invoice demanding payment.

10.  Repairs and Maintenance.
     -----------------------

     A.   Subject to provisions of Paragraph 15, Lessor shall keep and maintain
          the roof, paving, structural elements, landscaping, irrigation, and
          exterior walls of the building in which the Premises are located in
          good order and repair. Lessee shall reimburse Lessor for its
          proportionate share of said expenses within ten (10) days of Lessee's
          receipt of Lessor's invoice demanding payment. If, however, any
          repairs or maintenance is required because of an act or omission of
          Lessee or its agents, employees, or invitees, Lessee shall pay to
          Lessor upon demand one hundred percent (100%) of the costs of such
          repair and maintenance.

     B.   Except as expressly provided in Subparagraph A above, Lessee shall, at
          its sole cost, keep and maintain the entire Premises and every part
          thereof, including, without limitation, the windows, window frames,
          plate glass, glazing, truck doors, doors, all door hardware, interior
          of the Premises, interior walls and partitions, and the electrical,
          plumbing, lighting, heating, and air conditioning systems in good and
          sanitary order, condition, and repair. Lessee shall, at its own
          expense, for the duration of this Lease, retain a service company,
          approved by Lessor, to provide routine maintenance and repairs of the
          heating, ventilation, and air conditioning systems.

               Should Lessee fail to maintain the Premises or make repairs
          required of Lessee hereunder forthwith upon notice from Lessor,
          Lessor, in addition to all other remedies available hereunder or by
          law, and without waiving any alternative remedies, may make the same,
          and in that event, Lessee shall reimburse Lessor as additional rent
          for the cost of such maintenance or repairs on the next date upon
          which rent becomes due. Lessee hereby expressly waives the provision
          of Subsection 1 of Section 1932, and Sections 1941

                                       4
<PAGE>

          and 1942 of the Civil Code of California and all rights to make
          repairs at the expense of Lessor, as provided in Section 1942 of said
          Civil Code.

11.  Alterations and Additions. Lessee shall not make, or suffer to be made, any
     -------------------------
     alterations, improvements, or additions in, on, or about, or to the
     Premises or any part thereof, without prior written consent of Lessor and
     without a valid building permit issued by the appropriate governmental
     authority. Lessor retains, at his sole option, the right to perform all
     repairs, alterations, improvements, or additions in, on, about, or to said
     Premises or any part thereof. As a condition to giving such consent, Lessor
     may require that Lessee agree to remove any such alterations, improvements,
     or additions at the termination of this Lease, and to restore the Premises
     to their prior condition. Any alteration, addition, or improvement to the
     Premises, shall become the property of Lessor upon installation, and shall
     remain upon and be surrendered with the Premises at the termination of this
     Lease. Lessor can elect, however, within thirty (30) days before expiration
     of the term or within five (5) days after termination of the term, to
     require Lessee to remove any alterations, additions, or improvements that
     Lessee has made to the Premises. If Lessor so elects, Lessee shall restore
     the Premises to the condition designated by Lessor in its election, before
     the last day of the term, or within thirty (30) days after notice of
     election is given, whichever is later. Alterations and additions which are
     not to be deemed as trade fixtures including heating, lighting, electrical
     systems, air conditioning, partitioning, electrical signs, carpeting, or
     any other installation which has become an integral part of the Premises.
     In the event that Lessor consents to Lessee's making any alterations,
     improvements, or additions, Lessee shall be responsible for the timely
     posting of notices of non-responsibility on Lessor's behalf, which shall
     remain posted until completion of the alterations, additions, or
     improvements. Lessee's failure to post notices of non-responsibility as
     required hereunder shall be a breach of this Lease.

          If, during the term hereof, any alteration, addition, or change of any
     sort through all or any portion of the Premises or of the building of which
     the Premises form a part, is required by law, regulation, ordinance, or
     order of any public agency, Lessee, at its sole cost and expense, shall
     promptly make the same.

12.  Acceptance of the Premises and Covenant to Surrender. By entry and taking
     ----------------------------------------------------
     possession of the Premises pursuant to this Lease, Lessee accepts the
     Premises as being in good and sanitary order, condition, and repair, and
     accepts the Premises in their condition existing as of date of such entry,
     and Lessee further accepts any tenant improvements to be constructed by
     Lessor, if any, as being completed in accordance with the plans and
     specifications for such improvements.

          Lessee agrees on the last day of the term hereof, or on sooner
     termination of this Lease, to surrender the Premises, together with all
     alterations, additions, and improvements which may have been made in, to,
     or on the Premises by Lessor or Lessee, unto Lessor in good and sanitary
     order, condition, and repair, excepting for such wear and tear as would be
     normal for the period of the Lessee's occupancy. Lessee, on or before the
     end of the term or sooner termination of this Lease, shall remove all its
     personal property and trade fixtures from the Premises, and all property
     not so removed shall be deemed abandoned by Lessee. Lessee further agrees
     that at the end of the term or sooner termination of this Lease, Lessee, at
     its sole expense, shall have the carpets steam cleaned, the walls and
     columns painted, the flooring waxed, any damaged ceiling tile replaced, the
     windows cleaned, the drapes cleaned, and any damaged doors replaced.

          If the Premises are not surrendered at the end of the term or sooner
     termination of this Lease, Lessee shall indemnify Lessor against loss or
     liability resulting from delay by Lessee in

                                       5
<PAGE>

     so surrendering the Premises, including, without limitation, any claims
     made by any succeeding tenant founded on such delay.

13.  Default. In the event of any breach of this Lease by the Lessee, or an
     -------
     abandonment of the Premises by the Lessee, the Lessor has the option of
     (1.) removing all persons and property from the Premises and repossessing
     the Premises, in which case any of the Lessee's property which the Lessor
     removes from the Premises may be stored in a public warehouse or elsewhere
     at the cost of, and for the account of, Lessee; or (2.) allowing the Lessee
     to remain in full possession and control of the Premises. If the Lessor
     chooses to repossess the Premises, the Lease will automatically terminate
     in accordance with the provisions of the California Civil Code, Section
     1951.2. In the event of such termination of the Lease, the Lessor may
     recover from the Lessee: (1.) the worth at the time of award of the unpaid
     rent which had been earned at the time of termination, including interest
     at the maximum rate an individual is permitted by law to charge; (2.) 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 the Lessee proves could have been
     reasonably avoided, including interest at the maximum rate an individual is
     permitted by law to charge; (3.) the worth at the time of award of the
     amount by which the unpaid rent for the balance of the term after the time
     of award exceeds the amount of such rental loss that the Lessee proves
     could be reasonably avoided; and (4.) any other amount necessary to
     compensate the Lessor for all the detriment proximately caused by the
     Lessee's failure to perform his obligations under the Lease or which, in
     the ordinary course of things, would be likely to result therefrom. "The
     worth at the time of award," as used in (1.) and (2.) of this Paragraph, is
     to be computed by allowing interest at the maximum rate an individual is
     permitted by law to charge. "The worth at the time of award," as used in
     (3.) of this Paragraph, is to be computed by discounting the amount at the
     discount rate of the Federal Reserve Bank of San Francisco at the time of
     award, plus one percent (1%).

          If the Lessor chooses not to repossess the Premises, but allows the
     Lessee to remain in full possession and control of the Premises, then, in
     accordance with provisions of the California Civil Code, Section 1951.4,
     the Lessor may treat the Lease as being in full force and effect, and may
     collect from the Lessee all rents as they become due through the
     termination date of the Lease, as specified in the Lease. For the purpose
     of this paragraph, the following do not constitute a termination of
     Lessee's right to possession: (1.) acts of maintenance or preservation, or
     efforts to relet the property; (2.) the appointment of a receiver on the
     initiative of the Lessor to protect his interest under this Lease.

          Lessee shall be liable immediately to Lessor for all costs Lessor
     incurs in reletting the Premises, including, without limitation, brokers'
     commissions, expenses of remodeling the Premises required by the reletting,
     and like costs. Reletting can be for a period shorter or longer than the
     remaining term of this Lease. Lessee shall pay to Lessor the rent due under
     this Lease on the dates the rent is due, less the rent Lessor receives from
     any reletting. No act by Lessor allowed by this Section shall terminate
     this Lease unless Lessor notifies Lessee that Lessor elects to terminate
     this Lease. After Lessee's default and for as long as Lessor does not
     terminate Lessee's right to possession of the Premises, if Lessee obtains
     Lessor's consent, Lessee shall have the right to assign of sublet its
     interest in this Lease, but Lessee shall not be released from liability.
     Lessor's consent to a proposed assignment or subletting shall not be
     unreasonably withheld.

          If Lessor elects to relet the Premises as provided in this Paragraph,
     rent that Lessor receives from reletting shall be applied to the payment
     of: (1.) any indebtedness from Lessee to Lessor other than rent due from
     Lessee; (2.) all costs, including for maintenance, incurred by

                                       6
<PAGE>

     Lessor in reletting; (3.) rent due and unpaid under this Lease. After
     deducting the payments referred to in this Paragraph, any sum remaining
     from the rent Lessor receives from reletting shall be held by Lessor and
     applied in payment of future rent as rent becomes due under this Lease. In
     no event shall Lessee by entitled to any excess rent received by Lessor.
     If, on the date rent is due under this Lease, the rent received from
     reletting is less than the rent due on that date, Lessee shall pay to
     Lessor, in addition to the remaining rent due, all costs, including for
     maintenance, Lessor incurred in reletting that remain after applying the
     rent received from the reletting, as provided in this Paragraph.

          Lessor, at any time after Lessee commits a default, can cure the
     default at Lessee's cost. If Lessor at any time, by reason of Lessee's
     default, pays any sum or does any act that requires the payment of any sum,
     the sum paid by Lessor shall be due immediately from Lessee to Lessor at
     the time the sum is paid, and if paid at a later date shall bear interest
     at the maximum rate an individual is permitted by law to charge form the
     date the sum is paid by Lessor until Lessor is reimbursed by Lessee. The
     sum, together with interest on it, shall be additional rent.

          Rent not paid when due shall bear interest at the maximum rate an
     individual is permitted by law to charge from the date due until paid.

14.  Destruction. In the event the Premises are destroyed in whole or in part
     -----------
     from any cause, Lessor may, at its option, (1.) rebuild or restore the
     Premises to their condition prior to the damage or destruction or (2.)
     terminate the Lease.

          If Lessor does not give Lessee notice in writing within thirty (30)
     days from the destruction of the Premises of its election either to rebuild
     and restore the Premises, or to terminate this Lease, Lessor shall be
     deemed to have elected to rebuild or restore them, in which event Lessor
     agrees, at its expense, promptly to rebuild or restore the Premises to its
     condition prior to the damage or destruction. If Lessor does not complete
     the rebuilding or restoration within one hundred eighty (180) days
     following the date of destruction (such period of time to be extended for
     delays caused by the fault or neglect of Lessee or because of acts of God,
     acts of public agencies, labor disputes, strikes, fires, freight embargoes,
     rainy or stormy weather, inability to obtain materials, supplies or fuels,
     acts of contractors or subcontractors, or delay of the contractors or
     subcontractors due to such causes or other contingencies beyond control of
     Lessor), then Lessee shall have the right to terminate this Lease by giving
     fifteen (15) days prior written notice to Lessor. Lessor's obligation to
     rebuild or restore shall not include restoration of Lessee's trade
     fixtures, equipment, merchandise, or any improvements, alterations, or
     additions made by Lessee to the Premises.

          Unless this Lease is terminated pursuant to the foregoing provisions,
     this Lease shall remain in full force and effect. Lessee hereby expressly
     waives the provisions of Section 1932, Subdivision 2, and Section 1933,
     Subdivision 4, of the California Civil Code. In the event that the building
     in which the Premises are situated is damaged or destroyed to the extent of
     not less than thirty-three and one-third percent (33 1/3%) of the
     replacement cost thereof, Lessor may elect to terminate this Lease, whether
     the Premises be injured or not.

15.  Condemnation. If any part of the Premises shall be taken for any public or
     ------------
     quasi-public use, under any statute of by right of eminent domain, or
     private purchase in lieu thereof, and a part thereof remains, which is
     susceptible of occupation hereunder, this Lease shall, as to the part so
     taken, terminate as of the date title shall vest in the condemnor or
     purchaser, and the rent payable hereunder shall be adjusted so that the
     Lessee shall be required to pay for the remainder of the term only such
     portion of such rent as the value of the part remaining after taking such
     bears to the value of the entire Premises prior to such taking. Lessor
     shall have the option to terminate

                                       7
<PAGE>

     this Lease in the event that such taking causes a reduction in rent payable
     hereunder by fifty percent (50%) or more. If all of the Premises or such
     part thereof be taken so that there does not remain a portion susceptible
     for occupation hereunder, as reasonably necessary for Lessee's conduct of
     its business as contemplated in this Lease, this Lease shall thereupon
     terminate. If a part of all of the Premises be taken, all compensation
     awarded upon such taking shall go to the Lessor, and the Lessee shall have
     no claim thereto, and the Lessee hereby irrevocably assigns and transfers
     to the Lessor any right to compensation or damages to which the Lessee may
     become entitled during the term hereof by reason of the purchase or
     condemnation of all or a part of the Premises. Each party waives the
     provisions of the Code of Civil Procedure, Section 1265.130, allowing
     either party to petition the Superior Court to terminate this Lease in the
     event of a partial taking of the Premises.

16.  Free from Liens: Lessee shall (1.) pay for all labor and services performed
     ---------------
     for materials used by or furnished to Lessee, or any contractor employed by
     Lessee with respect to the Premises, and (2.) indemnify, defend, and hold
     Lessor and the Premises harmless and free from any liens, claims, demands,
     encumbrances, or judgments created or suffered by reason of any labor or
     services performed for materials used by or furnished to Lessee or any
     contractor employed by Lessee with respect to the Premises, and (3.) give
     notice to Lessor in writing five (5) days prior to employing any laborer or
     contractor to perform services related, or receiving materials for use upon
     the Premises, and (4.) shall post, on behalf of Lessor, a notice of non-
     responsibility in accordance with the statutory requirements of the
     California Civil Code, Section 3904; or any amendment thereof. In the event
     an improvement bond with a public agency in connection with the above is
     required to be posted, Lessee agrees to include Lessor as an additional
     obligee.

17.  Compliance with Laws. Lessee shall, at its own cost, comply with and
     --------------------
     observe all requirements of all municipal, county, state, and federal
     authority now in force, or which may hereafter be in force, pertaining to
     the use and occupancy of the Premises.

18.  Subordination. Lessee agrees that this Lease shall, at the option of
     -------------
     Lessor, be subjected and subordinated to any mortgage, deed of trust, or
     other instrument of security, which has been or shall be placed on the land
     and building, or land or building of which the Premises form a part, and
     this subordination is hereby made effective without any further act of
     Lessee or Lessor. The Lessee shall, at any time hereinafter, on demand,
     execute any instruments, releases, or other documents that may be required
     by any mortgagee, mortgagor, trustor, or beneficiary under any deed of
     trust, for the purpose of subjecting or subordinating this Lease to the
     lien of any such mortgage, deed of trust, or other instrument of security.
     If Lessee fails to execute and deliver any such documents or instruments,
     Lessee irrevocably constitutes and appoints Lessor as Lessee's special
     attorney-in-fact to execute and deliver any such documents or instruments.

19.  Abandonment. Lessee shall not vacate or abandon the Premises at any time
     -----------
     during the term; and if Lessee shall abandon, vacate, or surrender said
     Premises, or be dispossessed by process of law, or otherwise, any personal
     property belonging to Lessee and left on the Premises shall be deemed to be
     abandoned, at the option of Lessor, except such property as may be
     mortgaged to Lessor; provided, however, that Lessee shall not be deemed to
     have abandoned or vacated the Premises so long as Lessee continues to pay
     all rents as and when due, and otherwise performs pursuant to the terms and
     conditions of this Lease.

                                       8
<PAGE>

20.  Assignment and Subletting. Lessee's interest in this Lease is not
     -------------------------
     assignable, by operation of law or otherwise, nor shall Lessee have the
     right to sublet the Premises, transfer any interest of Lessee's therein, or
     permit any use of the Premises by another party, without the prior written
     consent of Lessor to such assignment, subletting, or transfer of use.

          If Lessee is a partnership, a withdrawal or change, voluntary,
     involuntary, or by operation of law, of any partner(s) owning fifty percent
     (50%) or more of the partnership, of the dissolution of the partnership,
     shall be deemed as a voluntary assignment.

          If Lessee consists of more than one person, a purported assignment,
     voluntary, involuntary, or by operation of law, from one person to the
     other or from a majority of persons to the others, shall be deemed a
     voluntary assignment.

          If Lessee is a corporation, any dissolution, merger, consolidation, or
     other reorganization of Lessee, or the sale or other transfer of a
     controlling percentage of the capital stock of Lessee, or sale of at least
     fifty-one percent (51%) of the value of the assets of Lessee, shall be
     deemed a voluntary assignment. The phrase "controlling percentage" means
     the ownership of, and the right to vote, stock possessing at least
     fifty-one percent (51%) of the total combined voting power of all classes
     of Lessee's capital stock issued, outstanding, and entitled to vote for the
     election of directors. This Paragraph shall not apply to corporations the
     stock of which is traded through an exchange or over the counter.

          In the event of any subletting or transfer which is consented to, or
     not consented to, by Lessor, a subtenant or transferee agrees to pay monies
     or other consideration, whether by increased rent or otherwise, in excess
     of or in addition to those provided for herein, then all of such excess or
     additional monies or other consideration shall be paid solely to Lessor,
     and this shall be one of the conditions to obtaining Lessor's consent.

          Lessee immediately and irrevocably assigns to Lessor, as security for
     Lessee's obligations under this Lease, all rent from any subletting of all
     or a part of the Premises as permitted by this Lease, and Lessor, as
     assignee and as attorney-in-fact for Lessee, or a receiver for Lessee
     appointed on Lessor's application, may collect such rent and apply it
     toward Lessee's obligations under this Lease; except that, until the
     occurrence of an act of default by the Lessee, Lessee shall have the right
     to collect such rent.

          A consent to one assignment, subletting, occupation, or use by another
     party shall not be deemed to be a consent to any subsequent assignment,
     subletting, occupation, or use by another party. Any assignment or
     subletting without such consent shall be void and shall, at the option of
     the Lessor, terminate this Lease. Lessor's waiver or consent to any
     assignment or subletting hereunder shall not relieve Lessee from any
     obligation under this Lease unless the consent shall so provide. If Lessee
     requests Lessor to consent to a proposed assignment or subletting, Lessee
     shall pay to Lessor, whether or not consent is ultimately given, Lessor's
     reasonable attorneys' fees incurred in conjunction with each such request.

21.  Parking Charges. Lessee agrees to pay upon demand, based on its percent of
     ---------------
     occupancy of the entire Premises, its pro-rata share of any parking
     charges, surcharges, or any other cost hereafter levied or assessed by
     local, state, or federal governmental agencies in connection with the use
     of the parking facilities serving the Premises, including, without
     limitation, parking surcharge imposed by or under the authority of the
     Federal Environmental Protection Agency.

22.  Insolvency or Bankruptcy. Either (1.) the appointment of a receiver to
     ------------------------
     take possession of all or substantially all of the assets of Lessee, or
     (2.) a general assignment by Lessee for the benefit of creditors, or (3.)
     any action taken or suffered by Lessee under any insolvency or bankruptcy
     act shall constitute a breach of this Lease by Lessee. Upon the happening
     of any such event, this

                                       9
<PAGE>

     Lease shall terminate ten (10) days after written notice of termination
     from Lessor to Lessee. This section is to be applied consistent with the
     applicable state and federal law in effect at the time such event occurs.

23.  Lessor Loan or Sale. Lessee agrees promptly following request by Lessor to
     -------------------
     (1.) execute and deliver to Lessor any documents, including estoppel
     certificates presented to Lessee by Lessor, (a.) 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 (b.) acknowledging that there are
     not, to Lessee's knowledge, any uncured defaults on the part of Lessor
     hereunder, and (c.) evidencing the status of the Lease as may be required
     either by a lender making a loan to Lessor, to be secured by deed of trust
     or mortgage covering the Premises, or a purchaser of the Premises from
     Lessor, and (2.) to deliver to Lessor the current financial statements of
     Lessee with an opinion of a certified public accountant, including a
     balance sheet and profit and loss statement, for the current fiscal year
     and the two immediately prior fiscal years, all prepared in accordance with
     Generally Accepted Accounting Principles consistently applied. Lessee's
     failure to deliver an estoppel certificate within three (3) days following
     such request shall constitute a default under this Lease and shall be
     conclusive upon Lessee that this Lease is in full force and effect and has
     not been modified except as may be represented by Lessor. If Lessee fails
     to deliver the estoppel certificates within the three (3) days, Lessee
     irrevocably constitutes and appoints Lessor as its special attorney-in-fact
     to execute and deliver the certificate to any third party.

24.  Surrender of Lease. The voluntary or other surrender of this Lease by
     ------------------
     Lessee, or a mutual cancellation thereof, shall not work a merger nor
     relieve Lessee of any of Lessee's obligations under this Lease, and shall,
     at the option of Lessor, terminate all or any existing Subleases or
     Subtenancies, or may, at the option of Lessor, operate as an assignment to
     him of any or all such Subleases or Subtenancies.

25.  Attorneys' Fees. If, for any reason, any suit be initiated to enforce any
     ---------------
     provision of this Lease, the prevailing party shall be entitled to legal
     costs, expert witness expenses, and reasonable attorneys' fees, as fixed by
     the court.

26.  Notices. All notices to be given to Lessee may be given in writing,
     -------
     personally, or by depositing the same in the United States mail, postage
     prepaid, and addressed to Lessee at the said Premises, whether or not
     Lessee has departed from, abandoned, or vacated the Premises. Any notice or
     document required or permitted by this Lease to be given Lessor shall be
     addressed to Lessor at the address set forth below, or at such other
     address as it may have theretofore specified by notice delivered in
     accordance herewith:

          LESSOR:   LOS GATOS BUSINESS PARK
                    POST OFFICE BOX 10098
                    PALO ALTO, CALIFORNIA 94303-0854

          LESSEE:   TRANSCRIPTION ENTERPRISES LIMITED
                    101 ALBRIGHT WAY
                    LOS GATOS, CALIFORNIA 95030

                                      10
<PAGE>

27.  Transfer of Security. If any security be given by Lessee to secure the
     --------------------
     faithful performance of all or any of the covenants of this Lease on the
     part of Lessee, Lessor may transfer and/or deliver the security, as such,
     to the purchaser of the reversion, in the event that the reversion be sold,
     and thereupon Lessor shall be discharged from any further liability in
     reference thereto, upon the assumption by such transferee of lessor's
     obligations under this Lease.

28.  Waiver. The waiver by Lessor or Lessee of any breach of any term,
     ------
     covenant, or condition, herein contained shall not be deemed to be a waiver
     of such term, covenant, or condition, or any subsequent breach of the same
     or any other term, covenant, or condition herein contained. The subsequent
     acceptance of rent hereunder by lessor shall not be deemed to be a waiver
     of any preceding breach by Lessee of any term, covenant, or condition of
     this Lease, other than the failure of Lessee to pay the particular rental
     so accepted, regardless of Lessor's knowledge of such preceding breach at
     the time of acceptance of such rent.

29.  Holding Over. Any holding over after the expiration of the term or any
     ------------
     extension thereof, with the consent of lessor, shall be construed to be a
     tenancy from month-to-month, at a rental of one and one-half (1 1/2) times
     the previous month's rental rate per month, and shall otherwise be on the
     terms and conditions herein specified, so far as applicable.

30.  Covenants, Conditions, and Restrictions. Attached hereto, marked Exhibit
     ---------------------------------------
     "C" and by this reference incorporated as if set out in full, are
     Covenants, Conditions, and Restrictions pertaining to Los Gatos Business
     Park. As a condition to this Lease, Lessee agrees to abide by all of said
     Covenants, Conditions, and Restrictions. Moreover, such reasonable rules
     and regulations as may be hereafter adopted by Lessor for the safety, care,
     and cleanliness of the Premises and the preservation of good order thereon,
     are hereby expressly made a part hereof, and Lessee agrees to obey all such
     rules and regulations.

31.  Limitation on Lessor's Liability. If Lessor is in default of this Lease,
     --------------------------------
     and, as a consequence, Lessee recovers a money judgment against Lessor, the
     judgment shall be satisfied only out of the proceeds of sale received on
     execution of the judgment and levy against the right, title, and interest
     of Lessor in the Premises, or in the building, other improvements, and land
     of which the Premises are part, and out of rent or other income from such
     real property receivable by Lessor or out of the consideration received by
     Lessor from the sale or other disposition of all or any part of Lessor's
     right, title, and interest in the Premises or in the building, other
     improvements, and land of which the Premises are part. Neither Lessor nor
     any of the partners comprising the partnership designated as Lessor shall
     be personally liable for any deficiency.

                                      11
<PAGE>

32.  Miscellaneous.
     -------------

     A.   Time is of the essence of this Lease, and of each and all of its
          provisions.

     B.   The term "building" shall mean the building in which the Premises
          are situated.

     C.   If the building is leased to more than one tenant, then each such
          tenant, its agents, officers, employees, and invitees, shall have the
          non-exclusive right (in conjunction with the use of the part of the
          building leased to such Tenant) to make reasonable use of any
          driveways, sidewalks, and parking areas located on the parcel of land
          on which the building is situated, except such parking areas as may
          from time to time be leased for exclusive use by other Tenant(s).

     D.   Lessee's such reasonable use of parking areas shall not exceed that
          percent of the total parking areas which is equal to the ratio which
          floor space of the Premises bears to floor space of the building.

     E.   The term "assign" shall include the term "transfer."

     F.   The invalidity or unenforceability of any provision of this Lease
          shall not affect the validity or enforceability of the remainder of
          this Lease.

     G.   All parties hereto have equally participated in the preparation of
          this Lease.

     H.   The headings and titles to the Paragraphs of this Lease are not a part
          of this Lese and shall have no effect upon the construction or
          interpretation of any part thereof.

     I.   Lessor has made no representation(s) whatsoever to Lessee (express or
          implied) except as may be expressly stated in writing in this Lease
          instrument.

     J.   This instrument contains all of the agreements and conditions made
          between the parties hereto, and may not be modified orally or in any
          other manner than by agreement in writing, signed by all of the
          parties hereto or their respective successors in interest.

     K.   It is understood and agreed that the remedies herein given to Lessor
          shall be cumulative, and the exercise of any one remedy by Lessor
          shall not be to the exclusion of any other remedy.

     L.   The covenants and conditions herein contained shall, subject to the
          provisions as to assignment, apply to and bind the heirs, successors,
          executors, and administrators, and assigns of all the parties hereto;
          and all of the parties hereto shall jointly and severally be liable
          hereunder.

     M.   This Lease has been negotiated by the parties hereto and the language
          hereof shall not be construed for or against either party.

                                      12
<PAGE>

     N.   All exhibits to which reference is made are deemed incorporated into
          this Lease, whether covenants or conditions, on the part of Lessee
          shall be deemed to be both covenants and conditions.

IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease on the date first
above-written.

LESSOR:                                      LESSEE:

LOS GATOS BUSINESS PARK,                     TRANSCRIPTION ENTERPRISES LIMITED,
A CALIFORNIA LIMITED PARTNERSHIP             A CALIFORNIA CORPORATION

By: /s/ Howard J. White III                  By: /s/ Kevin MacLean
    HOWARD J. WHITE, III                         AUTHORIZED OFFICER
    GENERAL PARTNER

DATE: 7/16/90                                DATE: 7/12/90
      -------                                      -------

                                      13
<PAGE>

                                   ADDENDUM

TO THAT CERTAIN LEASE DATED MAY 10, 1990, BY AND BETWEEN LOS GATOS BUSINESS
PARK, A CALIFORNIA LIMITED PARTNERSHIP, LESSOR, AND TRANSCRIPTION ENTERPRISES,
LIMITED, A CALIFORNIA CORPORATION, LESSEE.

The following wording is added to the base Lease:

34.  First Right of Refusal. Lessor here by grants to Lessee a right of first
     ----------------------
     and second refusal to lease additional space in the building as shown in
     Exhibit "B." Lessee shall have three (3) business days after receipt of
     Lessor's notification of proposal to accept the same in writing, upon the
     --------
     identical terms and conditions outlined herein. Failure by Lessee to accept
     within three (3) days shall be deemed a rejection. Lessor's notification
     shall be defined as Lessor's written offer or proposal to a third party. If
     Lessee defaults under this Lease, this right of first refusal shall be null
     and void.

35.  Option to Extend.
     ----------------

     Lessor hereby grants to Lessee the right to extend the term of this Lease
     for one (1) three (3)-year period, provided that:

     (i)  Lessor receives written notice from Lessee six (6) months prior to the
          expiration date of said Lease.

     (ii) Lessee is not in default when exercising its option to extend term
          or when the option to extend term commences.

     Upon receipt by Lessor of Lessee's written notice, Lessor and Lessee shall
     have thirty (30) days to agree upon a fair market rental rate. If Lessor
     and Lessee are unable to agree within said thirty (30)-day period, this
     option to extend term shall be null and void, and neither party hereto
     shall have the right to seek Court or other third-party relief. In no event
     shall the rent paid during the option to extend term to less than the rent
     paid the last month of the original term of the Lease.

     All other terms and conditions of the Base Lease remain in full force
     and effect.

36.  The following wording shall be added to Paragraph 6:

     As a material consideration in making this Lease, Lessee reports to Lessor
     that it is not now nor shall be a user of toxic or hazardous chemicals. In
     the event that Lessee does at some future time use toxic materials, every
     legal remedy shall be applicable, and the following paragraph shall apply:

     Should, at any time during the term of this Lease, or for a period of five
     (5) years after the termination or expiration of this Lease, there be
     charges or findings of toxic waste, spillage, or other contaminants found
     by a governmental agency to be hazardous and requiring removal or remedial
     work of the same, Lessee hereunder shall be assumed responsible for, and
     hold Lessor harmless from, all claims, obligations, liabilities, and costs,
     including reasonable attorneys' fees,

                                      14
<PAGE>

     for the removal, remedial work, or other action required by the
     governmental agency so prescribing said action, or any other agency having
     jurisdiction unless lessee can demonstrate that such toxic waste, spillage,
     or other contaminants may be present on the Premises, Lessor may order a
     soils report, or its equivalent, at Lessee's expense. Lessee shall pay such
     costs within fifteen (15) days from the date of invoice by Lessor. If any
     such toxic waste, spillage, or other contaminants are found upon the
     Premises, Lessee shall deposit with Lessor, within fifteen (15) days of
     notice from Lessor to Lessee to do so, the amount necessary to remove such
     substances and remedy the problem.

AGREED AND ACCEPTED:                        AGREED AND ACCEPTED:

LESSOR                                      LESSEE
LOS GATOS BUSINESS PARK,                    TRANSCRIPTION ENTERPRISES LIMITED,
A CALIFORNIA LIMITED PARTNERSHIP            A CALIFORNIA CORPORATION

By: /s/ Signature Illegible^^               By: /s/ Signature Illegible^^
    HOWARD J. WHITE, III                        AUTHORIZED OFFICER
    GENERAL PARTNER

DATE: 7/16/90                               DATE: 7/12/90
      -------                                     -------

                                      15
<PAGE>

                               [EXHIBIT OMITTED]
<PAGE>

                               [EXHIBIT OMITTED]
<PAGE>

                               [EXHIBIT OMITTED]
<PAGE>

                                  ADDENDUM II

TO THAT CERTAIN LEASE DATED MAY 10, 1990, BY AND BETWEEN LOS GATOS BUSINESS
PARK, LESSOR, AND TRANSCRIPTION ENTERPRISES, LIMITED, LESSEE.

To that certain Lease the following wording is added:

37.  Exercise of Option
     ------------------

     Lessee and Lessor have agreed that Lessee will exercise the Option to
     Extend shown in the first Addendum #35, of one (1) three-(3)-year option.

     Rent for the option period shall be as follows:

              Date                                     Amount
              ----                                     ------

        8/1/93 - 7/31/96                             $2,873.00

All other terms and conditions of the base Lease remain in full force and
effect.

AGREED AND ACCEPTED:

LESSOR                                       LESSEE
Los Gatos Business Park                      Transcription Enterprises

/s/ Signature Illegible^^                    /s/ Signature Illegible^^
Howard J. White, III                         Authorized Officer
General Partner

Date: 4/12/93                                Date: April 8, 1993
      -------                                      -------------
<PAGE>

                                 ADDENDUM III

REFERENCE IS MADE TO THAT LEASE BY AND BETWEEN LOS GATOS BUSINESS PARK, LESSOR,
AND TRANSCRIPTION ENTERPRISES, LIMITED, INC., 101-A ALBRIGHT WAY, LOS GATOS,
LESSEE, DATED MAY 10, 1990.

To that certain Lease the following wording is added:

LEASE EXTENSION
---------------

Lessor and Lessee have agreed to extend the term of the Lease for a period of
three (3) years, August 1, 1996 and terminating July 31, 1999.

Rent for the extended term shall be as follows:

          Period                                      Monthly Rent/NNN
          ------                                      ----------------
       08/01/96 - 07/31/97                                $2,873.00
       08/01/97 - 07/31/98                                $2,993.00
       08/01/98 - 07/31/99                                $3,112.00

OPTION TO EXPAND
----------------

Lessor shall grant to Lessee the option to lease the additional plus or
minus2,106 square feet known as 101-B Albright Way, as shown on Exhibit D upon
expiration of the existing lease, December 31, 1996. Lessee shall exercise said
option by giving Lessor notice of its intention no later than July 1, 1996.
Should Lessee exercise its option to expand, Lessor and Lessee agree that the
term for both spaces (+/-4,500 square feet) shall be extended four (4) years,
commencing January 1, 1997 and terminating December 31, 2000. Total monthly rent
would be as follows:

          Period                                      Monthly Rent/NNN
          ------                                      ----------------
       01/01/97 - 12/31/97                                $5.400.00
       01/01/98 - 12/31/98                                $5,625.00
       01/01/99 - 12/31/99                                $5,850.00
       01/01/00 - 12/31/00                                $6,075.00

Provided that Lessee has exercised its option to expand, Lessor agrees to
provide Lessee with an allowance of $18,000 for mutually agreeable tenant
improvements to be installed by Lessor's contractor.

OPTION TO EXTEND TERM
---------------------

Lessor hereby grants to Lessee the right to extend the term of this Lease for
one (1) five (5) year period, provided that:

     (i)  Lessor receives written notice from Lessee six (6) months prior to the
     expiration date of said Lease.
<PAGE>

     (ii) Lessee is not in default when exercising its option to extend term
     or when the option to extend term commences.

Rent for the option period shall be the then prevailing market rent for similar
buildings in Los Gatos.

All other terms and conditions of the base Lease remain in full force and
effect.

AGREED AND ACCEPTED:
LESSOR                                       LESSEE
Los Gatos Business Park                      Transcription Enterprises, Ltd.

/s/ Signature Illegible^^                    /s/ Signature Illegible^^
Howard J. White, III                         Authorized Representative
General Partner

Date: 1/30/96                                Date: 1/29/96
      -------                                      -------
<PAGE>

                               [EXHIBIT OMITTED]
<PAGE>

                                  ADDENDUM IV

REFERENCE IS MADE TO THAT LEASE BY AND BETWEEN LOS GATOS BUSINESS PARK, LESSOR,
AND TRANSCRIPTION ENTERPRISES, LIMITED, INC., 101-A ALBRIGHT WAY, LOS GATOS,
LESSEE, DATED MAY 10, 1990.

To that certain Lease the following wording is added:

EXPANSION
---------

Lessee hereby exercises its option to lease the additional plus or minus2,106
square feet known as 101-B Albright Way, as shown on Exhibit upon expiration of
the existing lease, December 31, 1996. As per the terms of the expansion option,
Lessor and Lessee agree that the term for both spaces (+/-4,500 square feet)
shall be extended four (4) years, commencing January 1, 1997 and terminating
December 31, 2000. Total monthly rent will be as follows:

               Period                            Monthly Rent/NNN
               ------                            ----------------

            01/01/97 - 12/31/97                      $5,400.00
            01/01/98 - 12/31/98                      $5,625.00
            01/01/99 - 12/31/99                      $5,850.00
            01/01/00 - 12/31/00                      $6,075.00

Lessor agrees to provide Lessee with an allowance of $18,000 for mutually
agreeable tenant improvements to be installed by Lessor's contractor.

All other terms and conditions of the base Lease remain in full force and
effect.

AGREED AND ACCEPTED:
LESSOR                                     LESSEE
Los Gatos Business Park                    Transcription Enterprises, Ltd.

/s/ Signature Illegible>^^                 /s/ Signature Illegible>^^, PRESIDENT
Howard J. White, III                       Authorized Representative
General Partner

Date:6/26/96                               Date: June 21, 1996
     -------                                     -------------
<PAGE>

                       TRANSCRIPTION ENTERPRISES LIMITED
                               101 ALBRIGHT WAY
                              LOS GATOS, CA 95032

                             LIST OF BANK ACCOUNTS

NAME                                              ACCOUNT NUMBER

Merrill Lynch
Fairmont Plaza
50 West San Fernando Street
San Jose, CA 95113                                  233-07B70

Bank of America
Los Gatos Branch 0142
333 North Santa Cruz Avenue
Los Gatos, CA 95030                                 01422 31195

ABN AMRO Bank NV
Kloosterwandplein 120
Postbus 28
6040 AA Roermond                                    52 80 52 659
The Netherlands                                     52 80 53 841

Boram Bank
ChungAng Branch
85, Da-dong, Chung-gu
Seoul, Korea                                        002-13-02840-0
<PAGE>

                       TRANSCRIPTION ENTERPRISES LIMITED
                               101 ALBRIGHT WAY
                              LOS GATOS, CA 95032

                             LIST OF SHAREHOLDERS
                             --------------------

     SHAREHOLDER NAME/ADDRESS                        NUMBER OF SHARES OF COMMON
     ------------------------                        --------------------------
                                                           STOCK OWNED
                                                           -----------

     Roger Sturgeon                                          500,000
     16490 Lucky Road
     Los Gatos, CA 95030

     Kevin D. MacLean                                        250,000
     18550 Overlook Road
     Los Gatos, CA 95030

     Robert and Diana Schuyler                                 4,000
     2235 Westchester Drive
     San Jose, CA 95124

     Maxine Nation                                            18,500
     3390 Oxford Lane
     San Jose, CA 95117

     Verna McDonald                                            4,000
     439 Alberto Way #A103
     Los Gatos, CA 95032

     Mark R. Alamillo                                          2,000
     P.O. Box 542
     Spring Valley, CA 91976

     Camille Russell-Davis                                     2,000
     2584 Neptune Place
     Port Hueneme, CA 93041

     Linn Wenger                                              10,000
     207 Pau Hana Drive
     Soquel, CA 95073
<PAGE>

     SHAREHOLDER NAME/ADDRESS                        NUMBER OF SHARES OF COMMON
     ------------------------                        --------------------------
                                                            STOCK OWNED
                                                            -----------

     Todd Pegelow                                              5,000
     16369 Skyline Boulevard
     Woodside, CA 94062

     Monique Cary                                              2,000
     20 Crown Valley Court
     Danville, CA 94506

     TOTAL OUTSTANDING SHARES                                797,500
<PAGE>

                       TRANSCRIPTION ENTERPRISES LIMITED
                               101 ALBRIGHT WAY
                              LOS GATOS, CA 95032

                        LIST OF OFFICERS AND DIRECTORS
                        ------------------------------

     NAME                                            ANNUAL COMPENSATION
     ----                                            -------------------

     Roger Sturgeon                                  1999     0
     Director, President, Chief Executive Officer    1998     0
                                                     1997     0

     Kevin D. MacLean                                1999     0
     Director, Secretary, Treasurer                  1998     0
                                                     1997     0

     Marilyn Diola                                   1999     0
     Director                                        1998     0
                                                     1997     0

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