Document:

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                                                                   EXHIBIT 10.15

                   SINGLE-TENANT COMMERCIAL SPACE LEASE (NNN)
                   ------------------------------------------

LANDLORD: ONE SOUTH PARK INVESTORS, A CALIFORNIA GENERAL PARTNERSHIP; PAUL
      ENTERPRISES, A CALIFORNIA GENERAL PARTNERSHIP; and FKLM, A CALIFORNIA
      GENERAL PARTNERSHIP

TENANT: BSQUARE CORPORATION, A WASHINGTON CORPORATION

COMMENCEMENT DATE:     DECEMBER 1, 2000 (ESTIMATED)

SUBJECT PROPERTY:     255 SAN GERONIMO WAY, SUNNYVALE, CALIFORNIA

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                                TABLE OF CONTENTS

<TABLE>
<S>                                                                              <C>
TABLE OF CONTENTS .........................................................      i - iv

RECITALS ..................................................................       1

ARTICLE 1 - DEFINITIONS ...................................................       1
        1.1 Commencement Date .............................................       1
        1.2 Lease Term ....................................................       1
        1.3 Property ......................................................       1
        1.4 Leased Premises ...............................................       2
        1.5 Building ......................................................       2
        1.6 Tenant's Allocated Share ......................................       2
        1.7 Prepaid Rent ..................................................       2
        1.8 Security Deposit ..............................................       2
        1.9 Permitted Use .................................................       2
        1.10 Tenant's Minimum Liability Insurance Coverage ................       3
        1.11 Additional Definitions .......................................       3

ARTICLE 2 - DEMISE AND ACCEPTANCE .........................................       3
        2.1 Demise of Premises ............................................       3
        2.2 Term ..........................................................       3
        2.3 Construction of Landlord's Work and Tenant Improvements .......       3
        2.4 Delivery and Acceptance of Possession .........................       3
        2.5 Early Occupancy ...............................................       4

ARTICLE 3 - RENT ..........................................................       4
        3.1 Base Monthly Rent .............................................       4
        3.2 Additional Rent ...............................................       5
        3.3 Payment of Rent ...............................................       5
        3.4 Late Charge and Interest on Rent in Default ...................       6
        3.5 Security Deposit ..............................................       6
        3.6 No Accord and Satisfaction ....................................       7

ARTICLE 4 - USE OF LEASED PREMISES ........................................       7
        4.1 Limitation on Type ............................................       7
        4.2 Compliance with Laws and Private Restrictions .................       7
        4.3 Insurance Requirements ........................................       8
        4.4 Signs .........................................................       8
        4.5 Rules and Regulations .........................................       8
        4.6 Parking .......................................................       8

ARTICLE 5 - TRADE FIXTURES AND LEASEHOLD IMPROVEMENTS .....................      10
        5.1 Trade Fixtures ................................................      10
        5.2 Leasehold Improvements ........................................      10
        5.3 Alterations Required by Law ...................................      11
        5.4 Landlord's Improvements .......................................      11
        5.5 Liens .........................................................      11
</TABLE>

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                           TABLE OF CONTENTS - Cont'd

<TABLE>
<S>                                                                              <C>
ARTICLE 6 - REPAIR AND MAINTENANCE ........................................      11
        6.1 Tenant's Obligations to Maintain ..............................      11
        6.2 Landlord's Obligation to Maintain .............................      13
        6.3 Tenant's Negligence ...........................................      13

ARTICLE 7 - WASTE DISPOSAL AND UTILITIES ..................................      14
        7.1 Waste Disposal ................................................      14
        7.2 Utilities .....................................................      14
        7.3 Compliance with Rules, Regulations and Requirements ...........      14

ARTICLE 8 - REAL PROPERTY TAXES ...........................................      14
        8.1 Real Property Taxes Defined ...................................      15
        8.2 Tenant's Obligation to Reimburse ..............................      15
        8.3 Taxes on Tenant's Property ....................................      16

ARTICLE 9 - INSURANCE .....................................................      16
        9.1 Tenant's Insurance ............................................      16
        9.2 Release and Waiver of Subrogation .............................      17
        9.3 Landlord's Real Property Insurance ............................      18

ARTICLE 10 - LIMITATION ON LANDLORD'S LIABILITY AND INDEMNITY .............      18
        10.1 Limitation on Landlord's Liability ...........................      18
        10.2 Limitation on Tenant's Recourse ..............................      19
        10.3 Indemnification of Landlord ..................................      19

ARTICLE 11 - DAMAGE TO LEASED PREMISES ....................................      20
        11.1 Landlord's Duty to Restore ...................................      20
        11.2 Landlord's Right to Terminate ................................      20
        11.3 Tenant's Right to Terminate ..................................      21
        11.4 Abatement of Rent ............................................      22

ARTICLE 12 - CONDEMNATION .................................................      22
        12.1 Taking of Leased Premises ....................................      22
        12.2 Restoration Following the Taking .............................      22
        12.3 Abatement of Rent ............................................      23
        12.4 Temporary Taking .............................................      23
        12.5 Division of Condemnation Award ...............................      23

ARTICLE 13 - DEFAULT AND REMEDIES .........................................      23
        13.1 Events of Tenant's Default ...................................      23
        13.2 Landlord's Remedies ..........................................      25
        13.3 Landlord's Default and Tenant's Remedies .....................      27
        13.4 Waiver .......................................................      28

ARTICLE 14 - ASSIGNMENT ...................................................      29
        14.1 By Tenant ....................................................      29
        14.2 By Landlord ..................................................      30
</TABLE>

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                           TABLE OF CONTENTS - Cont'd

<TABLE>
<S>                                                                              <C>
ARTICLE 15 - TERMINATION ..................................................      31
        15.1 Surrender of the Leased Premises .............................      31
        15.2 Holding Over .................................................      32

ARTICLE 16 - LANDLORD'S RIGHT TO ENTER ....................................      33
        16.1 Landlord's Right to Enter ....................................      33

ARTICLE 17 - MORTGAGES & TRANSFER .........................................      33
        17.1 Subordination ................................................      33
        17.2 Tenant's Attornment ..........................................      34
        17.3 Mortgagee Protection .........................................      34
        17.4 Estoppel Certificates ........................................      34
        17.5 Financial Statements .........................................      35

ARTICLE 18 - GENERAL PROVISIONS ...........................................      35
        18.1 Force Majeure ................................................      35
        18.2 Notices ......................................................      35
        18.3 Fees and Expenses ............................................      36
        18.4 Corporate Authority ..........................................      36
        18.5 Additional Definitions .......................................      36
             18.5.1 Agreed Interest Rate ..................................      36
             18.5.2 CPI ...................................................      37
             18.5.3 Effective Date ........................................      37
             18.5.4 Law ...................................................      37
             18.5.5 Leasehold Improvements ................................      37
             18.5.6 Lender ................................................      37
             18.5.7 Private Restrictions ..................................      38
             18.5.8 Trade Fixtures ........................................      38
        18.6 Construction of Meaning and Other Miscellaneous Provisions ...      38
        18.7 Quiet Enjoyment ..............................................      39
        18.8 Landlord Representations .....................................      39
        18.9 Brokerage Commissions ........................................      39
        18.10 Entire Agreement ............................................      40
        18.11 Security Measures ...........................................      40
        18.12 Signatures Required/Non-Binding Offer .......................      40

ARTICLE 19 - ENVIRONMENTAL MATTERS ........................................      41
        19.1 Tenant's Covenants Regarding Hazardous Materials .............      41
        19.2 Indemnification of Landlord ..................................      42
        19.3 Tenant Indemnification .......................................      43

ARTICLE 20 - RIGHT OF FIRST OFFER .........................................      43
        20.1 Right of First Offer to Lease Adjacent Building ..............      43
        20.2 Notice of Availability of First Offer Space ..................      43
        20.3 Exercise of Right of First Offer .............................      44
        20.4 Determination of Fair Market Rent ............................      44
</TABLE>

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                           TABLE OF CONTENTS - Cont'd

<TABLE>
<S>                                                                              <C>
        20.5 Landlord's Right to Lease ....................................      46
        20.6 First Offer Space ............................................      46
        20.7 Termination ..................................................      46

ARTICLE 21 - OPTION TO EXTEND LEASE .......................................      46
        21.1 Option to Extend Lease Term ..................................      46

        Signature Page[s] .................................................      47

EXHIBITS:

    "A" - SITE PLAN                                                              49
    "B" - FLOOR PLAN                                                             50
    "C" - TENANT INTERIOR IMPROVEMENT AGREEMENT                                  51
    "D" - APPROVED SPECIFICATIONS                                                59
    "E" - COMMENCEMENT DATE / ACCEPTANCE AGREEMENT                               60
    "F" - RULES AND REGULATIONS                                                  62
</TABLE>

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                   SINGLE-TENANT COMMERCIAL SPACE LEASE (NNN)
                                    ("LEASE")

       THIS LEASE, dated as of August 30, 2000, (the "Reference Date"), is made
by and between ONE SOUTH PARK INVESTORS, A CALIFORNIA GENERAL PARTNERSHIP; PAUL
ENTERPRISES, A CALIFORNIA GENERAL PARTNERSHIP; AND FKLM, A CALIFORNIA GENERAL
PARTNERSHIP ("Landlord") and BSQUARE CORPORATION, A WASHINGTON CORPORATION
("Tenant"), with reference to those matters set forth hereinafter.

                                    RECITALS:

       WHEREAS, the parties desire to enter into a Lease upon the terms and
conditions set forth hereinafter.

                                    ARTICLE 1

                                   DEFINITIONS

       1.1. Commencement Date: The term "Commencement Date" shall mean whichever
of the following dates first occurs:

              1.1.1. Two (2) weeks after the date on which landlord completes
the installation of the Fire Sprinkler System to the interior of the building
(estimated to be December 1, 2000); or

              1.1.2. The date Tenant takes possession of the Leased Premises for
the purpose of operating Tenant's business.

       1.2. Lease Term: The term "Lease Term" shall mean the term of this Lease,
which shall be for a period of sixty (60) full calendar months (plus the partial
month, if any, immediately following the Commencement Date), commencing on the
Commencement Date and ending at midnight on the last day of the sixtieth (60th)
full calendar month thereafter, unless this Lease is sooner terminated according
to its terms or by mutual agreement.

       1.3. Property: The term "Property" shall mean that real property commonly
described as 255 San Geronimo Way, Sunnyvale, California, with all improvements
now or hereafter located thereon described by the Site Plan attached hereto as
EXHIBIT "A" containing a single story building, the aggregate gross leasable
area of which is approximately 20,000 square feet (the "Property Gross Leasable
Area"); together with all parking, landscaping,

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and other areas within the Property.

       1.4. Leased Premises: The term "Leased Premises" shall mean those certain
premises located as outlined in the Site Plan attached hereto as EXHIBIT "A" and
as shown by the Floor Plan attached hereto as EXHIBIT "B" containing
approximately 20,000 square feet of gross leasable area ("Tenant's Gross
Leasable Area").

       1.5. Building: The term "Building" shall mean the structure situated on
the Property in which the Leased Premises are located containing approximately
20,000 square feet of gross leasable area (the "Building Gross Leasable Area").

       1.6. Tenant's Allocated Share: The term "Tenant's Allocated Share" shall
mean the percentage obtained by dividing Tenant's Gross Leasable Area by the
Building Gross Leasable Area, which as of the Effective Date hereof is agreed to
be 100%.

       1.7. Prepaid Rent: The term "Prepaid Rent" shall mean the sum of
$95,000.00, representing the first (1st) month's Basic Rent which shall be paid
to Landlord upon execution of this Lease.

       1.8. Security Deposit: The term "Security Deposit" shall mean a cash
deposit in the sum of $105,000.00 to be paid to Landlord upon execution of this
Lease. In addition to the cash deposit of $105,000.00, if at any time during the
Lease Term the market capitalization value of Tenant's publicly traded shares of
common stock drops below $100,000,000 as indicated by the daily published WALL
STREET JOURNAL, Tenant shall provide Landlord with an Irrevocable Stand-By
Letter of Credit ("LOC") in an amount equal to six (6) times the Monthly Basic
Rent at the time such drop in value occurs. The LOC, in a form acceptable to
Landlord, shall be provided within fifteen (15) days of such drop in market
capitalization value below $100,000,000. Said LOC shall be renewed annually
until Tenant has reached a market capitalization value in excess of $100,000,000
for six (6) consecutive months at which time the LOC may be canceled until a
subsequent drop in value below said $100,000,000 value which would automatically
trigger the obligation of Tenant to obtain an LOC again as described herein
above.

       1.9. Permitted Use: The term "Permitted Use" shall mean general office,
R&D, light manufacturing and assembly, computer programming, storage/warehouse
and related uses.

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       1.10. Tenant's Minimum Liability Insurance Coverage: The term "Tenant's
Minimum Liability Insurance Coverage" shall mean Two Million ($2,000,000)
Dollars.

       1.11. Additional Definitions: As used in this Lease or any addendum or
amendment thereto, the following terms shall have the meanings set forth in
paragraph 18.5: "Agreed Interest Rate," "Effective Date," "Private
Restrictions," "Lender," "Law," "Leasehold Improvements," and "Trade Fixtures."

                                    ARTICLE 2

                              DEMISE AND ACCEPTANCE

       2.1. Demise of Premises: Landlord hereby leases to Tenant, and Tenant
leases from the Landlord, for the Lease Term upon the terms and conditions of
this Lease, the Leased Premises. Tenant's lease of the Leased Premises shall be
subject to all Laws, all Private Restrictions, easements, and other matters of
public record.

       2.2. Term: The term of this Lease shall be the Lease Term and shall
commence upon the Commencement Date and continue for the period set forth in
paragraph 1.2.

       2.3. Construction of Landlord's Work and Tenant Improvements: Prior to
the Commencement Date, Landlord shall construct and/or provide the following
improvements to the Leased Premises at Landlord's sole cost and expense
("Landlord's Work"): (1) a new roof covering system to the Building, including
the cost of removal of the existing roof covering system; (2) replace old
heating, ventilation and air-conditioning ("HVAC") units with new HVAC units of
equal or greater tonnage as currently exists at the Building; (3) paint the
exterior of the Building; (4) bring electrical, lighting and plumbing systems to
good operating condition, as required, including the removal of existing data
and telephone cabling above the ceiling grid; and (5) install fire sprinkler
system. Landlord shall also provide Tenant with a Tenant Improvement Allowance
based upon a 20,000 s.f. Building at $5.00/s.f. in the amount of One Hundred
Thousand ($100,000) Dollars for Tenant's use in the Leased Premises pursuant to
the terms and conditions of the Tenant Improvement Agreement executed
concurrently with this Lease by Landlord and Tenant and attached hereto as
EXHIBIT "C" and in accordance with the Approved Specifications attached hereto
as EXHIBIT "D."

       2.4. Delivery and Acceptance of Possession: Landlord shall

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deliver possession of the Leased Premises to Tenant on the Commencement Date
with all building systems and components thereof in good working order and
repair. Provided, however, if Landlord is unable to deliver possession of the
Leased Premises to Tenant on the Commencement Date for any reason whatsoever,
this Lease shall not be void or voidable for a period of three (3) months
thereafter, nor shall Landlord be liable to Tenant for any loss or damage
resulting therefrom, but the rent shall abate until Landlord delivers possession
of the Leased Premises to Tenant. In the event of such a delay, the Commencement
and Termination Dates of the Lease and all other dates affected thereby shall be
revised to conform to the date of Landlord's actual delivery of possession to
Tenant and at such time the parties shall execute a Commencement Date/Acceptance
Agreement in the form of EXHIBIT "E" hereto. By taking possession of the Leased
Premises, Tenant shall be conclusively deemed to have accepted the Leased
Premises in their then existing condition and any construction work required of
Landlord as satisfactorily completed, subject only to matters noted in the
supplemental agreement executed by Landlord and Tenant as punchlist items and
latent defects discovered during the first year of occupancy by Tenant.

       2.5. Early Occupancy: If Tenant enters into occupancy of the Leased
Premises prior to the Commencement Date with the written permission of Landlord,
it shall do so upon all of the terms of this Lease. Notwithstanding anything in
Article 2 to the contrary, Tenant and Tenant's agents, contractors and employees
will be provided access to the Premises without incurring any rental obligation,
prior to the Commencement Date on the later of November 1, 2000 or when the
current tenant vacates the Leases Premises for the limited purpose of performing
Tenant's installation of its interior improvements, trade fixtures and
furnishings. Tenant promises and agrees to coordinate its fit-out with
Landlord's contractors so as not to interfere with or delay the performance of
Landlord's work required by this Lease to be performed prior to the Commencement
Date.

                                    ARTICLE 3

                                      RENT

       3.1. Base Monthly Rent: Commencing on the Commencement Date and
continuing throughout the Lease Term, Tenant shall pay to Landlord the Base
Monthly Rent determined as follows:

              3.1.1. Base Monthly Rent for the first 12 months of

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this Lease Agreement shall be $95,000.00.

              3.1.2. Base Monthly Rent for months 13 thru 24 of this Lease
Agreement shall be $98,800.00.

              3.1.3. Base Monthly Rent for months 25 thru 36 of this Lease
Agreement shall be $102,752.00.

              3.1.4. Base Monthly Rent for months 37 thru 48 of this Lease
Agreement shall be $106,862.00.

              3.1.5. Base Monthly Rent for months 49 thru 60 of this Lease
Agreement shall be $111,137.00.

       3.2. Additional Rent: Within ten (10) days after receipt of invoices(s)
therefore, Tenant shall pay to Landlord or to Landlord's designated agent or
entity as Additional Rent, the following:

              (1) All Real Property Taxes relating to the Premises as set forth
in Article 8, and

              (2) All Tenant's Insurance relating to the Premises, as set forth
in Article 9.3, and

              (3) An additional amount equal to three (3%) percent of the Base
Monthly Rent as compensation to Landlord for its accounting, administration, and
management services rendered by Landlord, and

              (4) All charges, costs, expenses and other amounts which Tenant is
required to pay hereunder, together with all interest, late charges, penalties,
costs and expenses including, without limitation, reasonable attorneys' fees,
legal and accounting expenses necessary to enforce the Lease, collection costs,
and court costs, that may accrue thereto or be incurred in the event of Tenant's
default, refusal or failure to pay such amounts, and all damages, reasonable
costs and expenses which Landlord may incur by reason of any default by Tenant
or failure on Tenant's part to comply with the terms of this Lease. In the event
of failure by Tenant to pay such Additional Rent in accordance with the terms
hereof, Landlord shall have all the rights and remedies with respect thereto as
Landlord has for nonpayment of Basic Rent. The term "rent" shall include without
limitation "Rent" and "Additional Rent."

       3.3. Payment of Rent: All rent required to be paid in

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monthly installments shall be paid in advance on the first day of each calendar
month during the Lease Term. All rent shall be paid in lawful money of the
United States, without any abatement, deduction or offset whatsoever, and
without any prior demand therefor, to Landlord at its address set forth above or
at such other place as Landlord may designate from time-to-time. Tenant's
obligation to pay rent shall be prorated at the commencement and expiration of
the Lease Term.

       3.4. Late Charge and Interest on Rent in Default: Tenant acknowledges
that the late payment by Tenant of any monthly installment of Base Monthly Rent
or any Additional Rent will cause Landlord to incur certain costs and expenses
not contemplated under this Lease, the exact amount of which are extremely
difficult or impractical to fix. Such costs and expenses will include, without
limitation, administration and collection costs and processing and accounting
expenses. Therefore, if any such rent is not received by Landlord from Tenant
within ten (l0) days after the same becomes due, Tenant shall immediately pay to
Landlord a late charge equal to five percent (5%) of such delinquent rent.
Landlord and Tenant agree that this late charge represents a reasonable estimate
of such costs and expenses and is fair compensation to Landlord for its loss
suffered by Tenant's failure to make timely payment. In no event shall this
provision for a late a charge be deemed to grant to Tenant a grace period or
extension of time within which to pay any rental installment or prevent Landlord
from exercising any right or remedy available to Landlord upon Tenant's failure
to pay each rental installment due under this Lease in a timely fashion. If any
rental installment should become delinquent for a period in excess of thirty
(30) days then, in addition to such late charge Tenant shall pay to Landlord
interest on any rent that is not paid when due at the Agreed Interest Rate from
the thirtieth (30th) day following the date such amount became due until paid.

       3.5. Security Deposit: Tenant has deposited with Landlord the amount set
forth in paragraph 1.8 concurrently with its execution of the Lease (the
"Security Deposit") as security for the performance by Tenant of the terms of
this Lease to be performed by Tenant, and not as prepayment of rent. Landlord
may apply such portion or portions of the Security Deposit as are reasonably
necessary for the following purposes: (i) to remedy any default by Tenant in the
payment of rent; (ii) to repair damage to the Leased Premises caused by Tenant;
(iii) to clean the Leased Premises upon termination of the Lease; and (iv) to
remedy any other default of Tenant as permitted by law. In the

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event the Security Deposit or any portion thereof is so used, Tenant agrees to
pay to Landlord promptly upon demand an amount in cash sufficient to restore the
Security Deposit to the full original sum. Landlord shall not be deemed a
trustee of the Security Deposit. Landlord may use the Security Deposit in
Landlord's ordinary business and shall not be required to segregate it from its
general accounts. Tenant shall not be entitled to any interest on the Security
Deposit. If Landlord transfers the Leased Premises during the Lease Term,
Landlord may pay the Security Deposit to any subsequent owner in conformity with
the provisions of Section l950.7 of the California Civil Code and/or any
successor statute, in which event the transferring Landlord will be released
from all liability for the return of the Security Deposit.

       3.6. No Accord and Satisfaction: No payment by Tenant or receipt by
Landlord of a lesser amount than the rent herein provided shall be deemed to be
other than on account of the earliest rent due and payable hereunder, nor shall
any endorsement or statement on any check or any letter accompanying any check
or payment as rent be deemed an accord and satisfaction, and Landlord may accept
any such check or payment without prejudice to Landlord's right to recover the
balance of such rent or pursue any other remedy provided in this Lease.

                                    ARTICLE 4

                             USE OF LEASED PREMISES

       4.1. Limitation on Type: Tenant shall use the Leased Premises solely for
the Permitted Use (as described in paragraph 1.9) and for no other use unless
Tenant shall have first obtained Landlord's prior written consent. Tenant shall
not do or permit anything to be done in or about the Leased Premises which might
interfere with the rights of other tenants of Landlord to use the Property or
cause structural injury to the Leased Premises or the Building. Tenant shall not
commit nor permit to be committed any waste in or about the Leased Premises, and
Tenant shall keep the Leased Premises in a clean, attractive and wholesome
condition, free of any objectionable noises, odors, dust or nuisances.

       4.2. Compliance with Laws and Private Restrictions: Tenant shall not use
or permit any person to use the Leased Premises in any manner which violates any
Laws or Private Restrictions. Tenant shall abide by and promptly observe and
comply with all Laws and Private Restrictions and shall indemnify and hold
Landlord harmless from any liability resulting from Tenant's failure to do so.

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       4.3. Insurance Requirements: Tenant shall not use or permit any person to
use the Leased Premises in any manner which will cause the initial rate of
insurance upon the Building or any of its contents to be increased or cause a
cancellation of any insurance policy covering the Building. Tenant shall not
sell, or permit to be kept, used, or sold in or about the Leased Premises any
article which may be prohibited by the standard form of fire insurance policy.
Tenant shall comply with all reasonable requirements of any insurance company,
insurance underwriter, or Board of Fire Underwriters which are necessary to
maintain, at standard rates, the insurance coverage carried by either Landlord
or Tenant pursuant to this Lease.

       4.4. Signs: Tenant shall not place on any portion of the Leased Premises,
the Building or the Property any sign, placard, lettering in or on windows,
banner, displays or other advertising or communicative material which is visible
from the exterior of the Building without the prior written approval of
Landlord, which approval shall not unreasonably be withheld. All such approved
signs shall strictly conform to all Laws, Private Restrictions and Landlord's
sign criteria, if any, and shall be installed at the expense of Tenant. If
Landlord so elects, Tenant shall, at the expiration or sooner termination of
this Lease, remove all signs installed by it and repair any damage caused by
such removal. Tenant shall at all times maintain such signs in good condition
and repair. Tenant may utilize the entire monument provided to the Building for
signage.

       4.5. Rules and Regulations: Landlord from time-to-time may elect to
promulgate reasonable and non-discriminatory rules and regulations applicable to
all occupants of the Property for the care and orderly management of the
Property and the safety of its tenants and invitees. Such rules and regulations
shall be binding upon Tenant upon delivery of a copy thereof to Tenant, and
Tenant agrees to abide by such rules and regulations. If there is a conflict
between the rules and regulations and any of the provisions of this Lease, the
provisions of this Lease shall prevail. Landlord shall not be responsible for
the violation by any other tenant of the Property of any such rules and
regulations.

       4.6. Parking: Tenant is allocated a minimum of eighty (80) parking spaces
and shall have the exclusive right to use the parking spaces contained within
the Property described in paragraph 2.1 for its use and the use of its employees
and invitees, the location of which may be designated from time-to-time by
Landlord. All trucks and delivery vehicles shall be (i)

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parked at the rear of the Building, (ii) loaded and unloaded in a manner which
does not interfere with the businesses of other occupants of the Property, and
(iii) permitted to remain on the Property only so long as is reasonably
necessary to complete loading and unloading.

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                                    ARTICLE 5

                    TRADE FIXTURES AND LEASEHOLD IMPROVEMENTS

       5.1. Trade Fixtures: Throughout the Lease Term, Tenant shall provide,
install, and maintain in good condition all Trade Fixtures required in the
conduct of its business in the Leased Premises. All Trade Fixtures shall remain
Tenant's property.

       5.2. Leasehold Improvements: Tenant shall not construct any Leasehold
Improvements or otherwise alter the Leased Premises without Landlord's prior
approval, if the cost thereof exceeds Ten Thousand Dollars ($l0,000.00), and not
until Landlord shall have first approved the plans and specifications therefor,
which approvals shall not be unreasonably withheld. In no event shall Tenant
make any alterations to the Lease Premises which could affect the structural
integrity or the design of the Building. All Leasehold Improvements constructed
by Tenant shall be constructed by Tenant at Tenant's expense using a licensed
contractor first approved by Landlord in substantial compliance with the
approved plans and specifications therefor. All construction done by Tenant
shall be done in accordance with all Laws and in a good and workmanlike manner
using new materials of good quality. Tenant shall not commence construction of
any Leasehold Improvements until (i) all required governmental approvals and
permits shall have been obtained, (ii) all requirements regarding insurance
imposed by this Lease have been satisfied, (iii) Tenant shall have given
Landlord at least five (5) days prior written notice of its intention to
commence such construction, (iv) Tenant shall have notified Landlord by
telephone of the commencement of construction on the day it commences, and (v)
if requested by Landlord, Tenant shall have obtained contingent liability and
broad form builders risk insurance in an amount satisfactory to Landlord if
there are any perils relating to the proposed construction not covered by
insurance carried pursuant to Article 9. All Leasehold Improvements shall remain
the property of Tenant during the Lease Term but shall not be damaged, altered,
or removed from the Leased Premises. At the expiration or sooner termination of
the lease term, all leasehold improvements shall be surrendered to landlord as a
part of the realty and shall then become landlord's property, and landlord shall
have no obligation to reimburse tenant for all or any portion of the value or
cost thereof; provided, however, that if landlord shall require tenant to

                                       10
<PAGE>   16

remove any leasehold improvements in accordance with the provisions of paragraph
15.1, then tenant shall so remove such leasehold improvements prior to the
expiration of the lease term.

       5.3. Alterations Required by Law: Tenant shall make any alteration,
addition or change of any sort, whether structural or otherwise, to the Leased
Premises that is required by any Law because of (i) Tenant's use or change of
use of the Leased Premises, (ii) Tenant's application for any permit or
governmental approval, or (iii) Tenant's construction or installation of any
Leasehold Improvements or Trade Fixtures. Notwithstanding the above to the
contrary, Landlord agrees that in the event Landlord's Work described in
paragraph 2.3. causes the City of Sunnyvale to demand that the Premises be
brought into compliance with handicap accessibility standards as provided in the
Americans With Disabilities Act ("ADA") that Landlord shall be solely
responsible for the cost and performance of the work required. It is further
agreed that if the construction of Tenant's Improvements constructed with the
Tenant Improvement Allowance provided for in paragraph 2.3. and EXHIBIT "C"
triggers a requirement by the City of Sunnyvale that the Premises be brought
into compliance with applicable Federal, State and local codes relating to such
handicap accessibility standards that any such cost and work required shall be
the sole responsibility of Tenant.

       5.4. Landlord's Improvements: All fixtures, improvements or equipment
which are installed, constructed on or attached to the Property by Landlord at
its expense shall become a part of the realty and belong to Landlord.

       5.5. Liens: Tenant shall keep the Leased Premises and the Property free
from any liens and shall pay when due all bills arising out of any work
performed, materials furnished, or obligations incurred by Tenant, its agents,
employees or contractors relating to the Leased Premises. If any claim of lien
is recorded, Tenant shall bond against or discharge the same within ten (10)
days after the same has been recorded against the Leased Premises and/or the
Property.

                                    ARTICLE 6

                             REPAIR AND MAINTENANCE

       6.1. Tenant's Obligations to Maintain: Except as otherwise provided in
Article 11 regarding the restoration of damage caused

                                       11
<PAGE>   17

by fire and other perils, Tenant shall, at all times during the Lease Term,
clean, keep, and maintain in good order, condition, and repair (reasonable wear
and tear excepted) the Leased Premises and every part thereof, through regular
inspections and servicing, including but not limited to (i) all plumbing and
sewage facilities (including all sinks, toilets, faucets and drains), and all
ducts, pipes, vents, or other parts of the HVAC or plumbing system, (ii) all
fixtures, interior walls, floors, carpets and ceilings, (iii) all windows,
doors, entrances, plate glass, showcases, including cleaning both interior and
exterior surfaces, (iv) all electrical facilities and all equipment including
all lighting fixtures, lamps, bulbs and tubes, fans, vents, exhaust equipment
and systems, (v) any automatic fire extinguisher equipment in the Leased
Premises, (vi) ceilings, roofs, skylights, roof gutters and drains, and (vii)
landscaping, driveways, parking lots, retaining walls, signs, sidewalks, and
parkways located in, on, about or adjacent to the Premises. Tenant, in keeping
the Premises in good order, condition and repair, shall exercise and perform
good maintenance practices. Tenant's obligations shall include restorations,
replacements or renewals when necessary to keep the Premises and all
improvements thereon or a part thereof in good order, condition and state of
repair. If Tenant occupies the Premises for seven (7) years or more, Landlord
may require Tenant to repaint the exterior of the buildings on the Premises as
reasonably required, but not more frequently than once every seven (7) years.
Tenant shall replace any damaged or broken glass in the Leased Premises
(including all interior and exterior doors, windows, and showcases) with glass
of the same kind, size and quality. Tenant shall repair any damage to the Leased
Premises (including exterior doors and windows) caused by vandalism or any
unauthorized entry. Tenant shall (i) maintain, repair, and replace when
necessary all HVAC equipment, roof covering, landscaping and parking lot surface
areas which serves the Leased Premises and shall keep the same in good condition
through regular inspection and servicing, and (ii) maintain continuously
throughout the Lease Term a service contract for the maintenance of all such
HVAC equipment with a licensed HVAC repair and maintenance contractor approved
by Landlord which provides for the periodic inspection and servicing of the HVAC
equipment at least once every sixty (60) days during the Lease Term. Landlord
may elect at any time to assume responsibility for the maintenance, repair and
replacement of such HVAC equipment, roof covering, landscaping, and parking lot
surface which serves the Leased Premises, and if it does so, all costs incurred
by it in performing such maintenance, repair and replacement shall be paid for
by Tenant on a periodic basis as Additional Rent within ten (l0) days after
receipt of a statement

                                       12
<PAGE>   18

therefor from Landlord. Tenant shall also maintain continuously throughout the
Lease Term a service contract for the washing of all windows in the Leased
Premises (exterior surfaces) with a contractor approved by Landlord which
provides for the periodic washing of all such windows at least once every six
(6) months during the Lease Term. Tenant shall furnish Landlord with copies of
all such service contracts, which shall provide that they may not be canceled or
changed without at least thirty (30) days prior written notice to Landlord. All
repairs and replacements required of Tenant shall be promptly made with new
materials of like kind and quality. If the work affects the structural parts of
the Building or if the estimated cost of any item of repair or replacement is in
excess of Ten Thousand Dollars ($l0,000.00), then Tenant shall first obtain
Landlord's written approval of the scope of work, plans therefor, materials to
be used, and the contractor.

       6.2. Landlord's Obligation to Maintain: Landlord shall maintain and
repair (i) the structural portions of the roof; (ii) the foundation (but not the
floor covering) of the Building; (iii) the exterior walls of the Building
(subject to Section 6.1., above) so that the same is kept in good order and
repair, reasonable wear and tear excepted; and (iv) any damages to the Premises
caused by the negligence or willful misconduct of Landlord or Landlord's
Parties. Landlord shall not be responsible for repairs required by any accident,
fire or other peril except as otherwise required by Article 11, or for damage
caused to any part of the Property by any act, negligence or omission of Tenant
or its agents, contractors, or employees or invitees. Landlord may engage
contractors of its choice to perform the obligations required of it by this
Article, and the necessity of any expenditure to perform such obligations shall
be at the reasonable discretion of Landlord. It is an express condition
precedent to all obligations of Landlord to repair and maintain that Tenant
shall have notified Landlord in writing of the need for such repairs and
maintenance, after which Landlord shall be given a reasonable opportunity to
repair same. Notwithstanding the foregoing, if any repair or replacement is
required to be made to the Leased Premises which would constitute a capital
expenditure under GAAP, then Landlord shall be required to make such repair or
replacement, and Tenant shall be required to pay the costs therefor as
Additional Rent to the extent such costs are amortized over the useful life of
such capital items during the Lease Term.

       6.3. Tenant's Negligence: Anything in this Article to the contrary
notwithstanding, Tenant shall pay for all damage to the

                                       13
<PAGE>   19

Leased Premises or the Property caused by the negligent act or omission of
Tenant, its employees, contractors, or invitees or by the failure of Tenant to
promptly discharge its obligations under this Lease or comply with the terms of
this Lease, but only to the extent such damage is not covered by insurance
proceeds actually recovered by Landlord. Tenant shall make payment therefore on
damages incurred by Landlord.

                                    ARTICLE 7

                          WASTE DISPOSAL AND UTILITIES

       7.1. Waste Disposal: Tenant shall store its waste either inside the
Leased Premises or within existing outside trash enclosures. All entrances to
such outside trash enclosures shall be kept closed, and waste shall be stored in
such manner as not to be visible from the exterior of such outside enclosures.
Tenant shall cause all of its waste to be regularly removed from the Property at
Tenant's sole cost. Tenant shall keep all fire corridors and mechanical
equipment rooms in the Leased Premises free and clear of all obstructions at all
times.

       7.2. 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 or services furnished directly to or used by
Tenant on or about the Leased Premises during the Lease Term.

       7.3. Compliance with Rules, Regulations and Requirements: Landlord shall
comply with all rules, regulations and requirements promulgated by national,
state or local governmental agencies or utility suppliers concerning the use of
utility services, including any rationing, limitation or other control. Tenant
shall not be entitled to terminate this Lease nor to any abatement in rent by
reason of such compliance. Furthermore, Landlord shall be entitled to cooperate
voluntarily in a reasonable manner with the efforts of all governmental agencies
or utility suppliers in reducing energy or other resources consumption. Tenant
agrees at all times to cooperate fully with Landlord and to abide by all rules
and regulations and requirements which Landlord may prescribe in order to
maximize the efficient operation of the HVAC system and all other utility
systems.

                                    ARTICLE 8

                               REAL PROPERTY TAXES

                                       14
<PAGE>   20

       8.1. Real Property Taxes Defined: The term "Real Property Taxes" as used
herein shall mean (i) all taxes, assessments, levies, and other charges of any
kind or nature whatsoever, general and special, foreseen and unforeseen
(including all installments or principal and interest required to pay any
general or special assessments for public improvements and any increases
resulting from reassessments caused by any change in ownership) or hereafter
imposed by any governmental or quasi-governmental authority or special district
having the direct or indirect power to tax or levy assessments, which are levied
or assessed against, or with respect to the value, occupancy or use of, all or
any portion of the Property (as now constructed or as may at any time hereafter
be constructed, altered, or otherwise changed) or Landlord's interest therein;
the fixtures, equipment and other property of Landlord, real or personal, that
are an integral part of and located on the Property; or the use of parking
areas, public utilities, or energy within the Property; (ii) all charges, levies
or fees imposed by reason of environmental regulation or other governmental
control of the Property, and (iii) all costs and fees (including attorneys'
fees) incurred by Landlord in contesting any Real Property Tax and in
negotiating with public authorities as to any Real Property Tax. If at any time
during the Lease Term the taxation or assessment of the Property prevailing as
of the Effective Date shall be altered so that in lieu of or in addition to any
Real Property Tax described above there shall be levied, assessed or imposed
(whether by reason of a change in the method of taxation or assessment, creation
of a new tax or charge, or any other cause) an alternate or additional tax or
charge (i) on the value, use or occupancy of the Property of Landlord's interest
therein or (ii) on or measured by the gross receipts, income, or rentals from
the Property, on Landlord's business of leasing the Property, or computing in
any manner with respect to the operation of the Property, then any such tax or
charge, however designated, shall be included within the meaning of the term
"Real Property Taxes" for purposes of this Lease. If any Real Property Tax is
based upon property or rents unrelated to the Property, then only that part of
such Real Property Tax that is fairly allocable to the Property shall be
included within the meaning of the term "Real Property Taxes". Notwithstanding
the foregoing, the term "Real Property Taxes" shall not include estate,
inheritance, transfer, gift or franchise taxes of Landlord or the federal or
state net income tax imposed on Landlord's income from all sources.

       8.2. Tenant's Obligation to Reimburse: As Additional Rent,

                                       15
<PAGE>   21

Tenant shall pay Tenant's Allocable Share of all Real Property Taxes (i) within
ten (10) days after being billed for the same by Landlord, or (ii) no later than
ten (10) days before such Real Property Tax becomes delinquent, whichever last
occurs. If any part of the Property is separately assessed for purposes of any
Real Property Tax, then Tenant shall pay that portion of such Real Property Tax
as is fairly allocable to the Leased Premises. If requested by Tenant in writing
within thirty (30) days of receipt of a bill for Tenant's allocated Share of
Real Property Taxes, Landlord shall furnish Tenant with such evidence as is
reasonably available to Landlord with respect to the amount of any Real Property
Tax which is part of such bill. Tenant may not withhold payment of such bill
pending receipt and/or review of such evidence. If any Lender requires Landlord
to impound Real Property Taxes on a periodic basis during the Lease Term, then
Tenant, on notice from Landlord indicating this requirement, shall pay a sum of
money toward its liability under this Article to Landlord on the same periodic
basis in accordance with the lender's requirements. Landlord shall impound the
Real Property Tax payments received from Tenant in accordance with requirements
of the Lender.

       8.3. Taxes on Tenant's Property: Tenant shall pay before delinquency any
and all taxes, assessments, license fees, and public charges levied, assessed,
or imposed against Tenant or Tenant's estate in this Lease or the property of
Tenant situated within the Leased Premises which become due during the Lease
Term. On demand by Landlord, Tenant shall furnish Landlord with satisfactory
evidence of these payments.

                                    ARTICLE 9

                                    INSURANCE

       9.1. Tenant's Insurance: Tenant shall maintain in full force and effect
during the Lease Term the following insurance:

              9.1.1. Tenant shall maintain a policy or policies of commercial
general liability insurance, including property damage, against liability for
personal injury, bodily injury, death, and damage to property occurring in or
about, or resulting from an occurrence in or about, the Leased Premises with
combined single limit coverage of not less than the amount of Tenant's Minimum
Liability Insurance set forth in paragraph 1.10. Such comprehensive general
liability insurance shall contain "fire legal" endorsement coverage and a
"contractual liability" endorsement insuring Tenant's performance of Tenant's
obligation

                                       16
<PAGE>   22

to indemnify Landlord contained in paragraph 10.2. If Landlord's Lender,
insurance advisor or counsel reasonably determines at any time that the amount
of such coverage is not adequate, Tenant shall increase such coverage to such
amount as Landlord's Lender, insurance advisor or counsel reasonably deem
adequate, not to exceed the level of coverage then commonly carried by
comparable businesses similarly situated.

              9.1.2. Tenant shall maintain a policy or policies of fire and
property damage insurance in "all risk" form with a sprinkler leakage
endorsement (if the Building contains fire sprinklers) insuring the personal
property, inventory, Trade Fixtures, and Leasehold Improvements within the
Leased Premises for the full replacement value thereof. The proceeds from any of
such policies shall be used for the repair or replacement of such items so
insured.

              9.1.3. Tenant shall maintain a policy or policies of worker's
compensation insurance and any other employee benefit insurance sufficient to
comply with all Laws.

              9.1.4. Landlord and such others it designates shall be named as
additional insureds on the policies of insurance described in subparagraphs
9.1.1 and 9.1.2 above. All insurance required by this paragraph (i) shall be
primary insurance which provides that the insurer shall be liable for the full
amount of the loss up to and including the total amount of liability set forth
in the declarations without the right of contribution from any other insurance
coverage of Landlord, (ii) shall be in a form satisfactory to Landlord, (iii)
shall be carried with companies reasonably acceptable to Landlord, (iv) shall
provide that such policies shall not be subject to cancellation or change except
after at least thirty (30) days prior written notice to Landlord, and (v) shall
not have a "deductible" in excess of twenty-five thousand Dollars ($25,000.00)
per occurrence. Copies of such policy or policies, or duly executed certificates
for them, together with satisfactory evidence of the payment of the premium
thereon shall be deposited with Landlord prior to the time Tenant enters into
possession of the Leased Premises and upon renewal of such policies, but not
less than thirty (30) days prior to the expiration of the term of such coverage.

       9.2. Release and Waiver of Subrogation: The parties hereto release each
other, and their respective agents, employees, and contractors, from any claims
for injury to any persons or damage to property that are caused by or result
from risks insured against under any insurance policies carried by the parties
and

                                       17
<PAGE>   23

in force at the time of such damage, but only to the extent such claims are
covered by such insurance. This release shall be in effect only so long as the
applicable insurance policies contain a clause to the effect that this release
shall not affect the right of the insured to recover under such policies. Each
party shall cause each insurance policy obtained by it to provide that the
insurance company waives all rights of recovery by way of subrogation against
either party in connection with any damage covered by such policy so long as
such waiver is available without unreasonable additional cost.

       9.3. Landlord's Real Property Insurance: Landlord shall pur- chase and
keep in force policy(ies) of insurance covering loss or damage to the Premises
by reason of fire (extended coverage), flood and/or earthquake (if available and
available at commercially reasonable costs in Landlord's sole discretion, or if
required by a lender) and those perils included within the classification of
"all risks" insurance (with sprinkler damage and other appropriate
endorsements), which insurance shall be in the amount of the full replacement
value of the Premises as determined by insurance company appraisers or
Landlord's insurance broker; plus Landlord's liability insurance; plus rental
income insurance in the amount of one hundred (100%) percent of up to twelve
(12) months Basic Rent (plus sums paid during such period as Additional Rent).
Such coverage shall exclude routine maintenance and repairs and incidental
damage caused by accidents or vandalism for which Tenant is responsible under
Section 9. Tenant agrees to pay to Landlord as Additional Rent in accordance
with Section 3.2(2) of this Lease the costs of such insurance coverage,
including the premiums and deductibles for any such coverage obtained by
Landlord; or, if Tenant does not lease the entire Building, then Tenant's
proportional share of the costs of such insurance coverage which shall be
allocated during the term of this Lease to the Premises by building square
footage. If such insurance cost is increased due to Tenant's particular use of
the Premises, Tenant agrees to pay to Landlord the full costs of such increase.
Tenant shall have no interest in nor any right to the proceeds of any insurance
procured by Landlord for or with respect to the Premises.

                                   ARTICLE 10

                            LIMITATION ON LANDLORD'S
                             LIABILITY AND INDEMNITY

       10.1. Limitation on Landlord's Liability: Landlord shall not be liable to
Tenant, nor shall Tenant be entitled to any

                                       18
<PAGE>   24

abatement of rent, for any injury to Tenant, its agents, employees, contractors,
or invitees; damage to Tenant's property; or loss to Tenant's business resulting
from any cause, including without limitation any (i) failure, interruption or
installation of any HVAC or other utility system or service; (ii) failure to
furnish or delay in furnishing any utilities or services when such failure or
delay is caused by acts of God or the elements, labor disturbances of any
character, any other accidents or other conditions beyond the reasonable control
of Landlord, or by the making of repairs or improvements to the Leased Premises
or Building; (iii) the limitation, curtailment, rationing or restriction on the
use of water or electricity, gas or any other form of energy or any services or
utility whatsoever serving the Leased Premises or Building; (iv) vandalism or
forcible entry by unauthorized person; or (iv) penetration of water into or onto
any portion of the Leased Premises through roof leaks or otherwise.
Notwithstanding the foregoing, Landlord shall be liable for such injury, damage
or loss which is proximately caused by Landlord's active negligence or willful
misconduct, but only to the extent such injury, damage or loss is not covered by
insurance actually carried or required to be carried pursuant to this Lease.

       10.2. Limitation on Tenant's Recourse: Tenant expressly agrees that so
long as the Landlord under this Lease shall be and remains a corporation, a
trust, a partnership, a joint venture, an unincorporated association, or other
form of business entity, (i) the obligations of the Landlord under this Lease
shall not constitute personal obligations of the officers, directors, trustees,
partners, joint venturers, members, owners, stockholders, or other principals or
representatives of such business entity, and (ii) Tenant shall have recourse
only to the assets of such business entity for the satisfaction of such
obligations and not against the assets of such officers, directors, trustees,
partners, joint venturers, members, owners, stockholders, principals, or
representatives, other than to the extent of their interest in the assets owned
by such business entity.

       10.3. Indemnification of Landlord: Tenant shall hold harmless, indemnify
and defend Landlord, and its employees, agents, and contractors, with competent
counsel reasonably satisfactory to Landlord, from all liability, penalties,
losses, damages, costs, expenses, causes of action, claims and/or judgments
arising by reason of any death, bodily injury, personal injury or property
damage (i) resulting from any cause or causes whatsoever (other than the active
negligence or willful

                                       19
<PAGE>   25

misconduct of Landlord) occurring in or about or resulting from any occurrence
in or about the Leased Premises during the Lease Term, or (ii) resulting from
the negligence or willful misconduct of Tenant, its agents, employees and
contractors, wherever the same may occur. The provisions of this paragraph shall
survive the expiration or termination of this Lease with respect to any claims
or liability occurring prior to such expiration or sooner termination.

                                   ARTICLE 11

                            DAMAGE TO LEASED PREMISES

       11.1. Landlord's Duty to Restore: If the Leased Premises are damaged by
any Covered Peril (as hereinafter defined in Section 11.2.1) after the Effective
Date of this Lease, Landlord shall restore the Leased Premises unless the Lease
is terminated by Landlord pursuant to paragraph 11.2 or by Tenant pursuant to
paragraph 11.3. All insurance proceeds available from the fire and property
damage insurance carried by Landlord pursuant to paragraph 9.2 shall be paid to
and become the property of Landlord. All insurance proceeds available from
insurance carried by Tenant which covers loss to property that is Landlord's
property or would become Landlord's property on termination of this Lease shall
be paid to and become the property of Landlord. If this Lease is not so
terminated, then upon receipt of the insurance proceeds (if the loss is covered
by insurance) and the issuance of all necessary governmental permits, Landlord
shall commence and diligently prosecute to completion the restoration of the
Leased Premises, to the extent then allowed by Law, to substantially the same
condition in which the Leased Premises were immediately prior to such damage.
Landlord's obligation to restore shall be limited to the Leased Premises and
interior improvements constructed by Landlord as they existed as of the
Commencement Date, excluding any Leasehold Improvements, Trade Fixtures and/or
personal property constructed or installed by Tenant in the Leased Premises.
Tenant shall forthwith replace or fully repair all Leasehold Improvements and
Trade Fixtures installed by Tenant and existing at the time of such damage or
destruction.

       11.2. Landlord's Right to Terminate: Landlord shall have the option to
terminate this Lease in the event any of the following occurs, which option may
be exercised only by delivery to Tenant of a written notice of election to
terminate within thirty (30) days after the date of such damage.

                                       20
<PAGE>   26

              11.2.1. The Building is damaged by any peril covered by valid and
collectible insurance actually carried by Landlord and in force at the time of
such damage or destruction ("Covered Peril"), to such an extent that the
estimated cost to restore the Building equals or exceeds fifty percent (50%) of
the then replacement value thereof;

              11.2.2. The Building is damaged by any peril not covered by valid
and collectible insurance actually carried by Landlord and in force at the time
of such damage or destruction, to such an extent that the estimated cost to
restore the Building equals or exceeds twenty-five percent (25%) of the then
replacement value thereof;

              11.2.3. The Leased Premises are damaged by any Covered Peril
within six (6) months of the last day of the Lease Term to such an extent that
the estimated cost to restore equals or exceeds an amount equal to six (6) times
the Base Monthly Rent then due; provided, however, that Landlord may not
terminate this Lease pursuant to this subparagraph 11.2.3 if Tenant, at the time
of such damage, has an express written option to further extend the term of this
Lease and Tenant exercises such option to so further extend the Lease Term
within fifteen (15) days following the date of such damage; or

              11.2.4. The Building is damaged by any Covered Peril and, because
of the Laws then in force, (i) may not be restored at reasonable cost to
substantially the same condition in which it was prior to such damage, or (ii)
may not be used for the same use being made thereof before such damage whether
or not restored as required by this Article.

       11.3. Tenant's Right to Terminate: If the Leased Premises are damaged by
any peril and Landlord does not elect to terminate this Lease or is not entitled
to terminate this Lease pursuant to paragraph 11.2, then as soon as reasonably
practicable, Landlord shall furnish Tenant with the written opinion of
Landlord's architect or construction consultant as to when the restoration work
required of Landlord may be completed. Tenant shall have the option to terminate
this Lease in the event any of the following occurs, which option may be
exercised only by delivery to Landlord of a written notice of election to
terminate within seven (7) days after Tenant receives from Landlord the estimate
of the time needed to complete such restoration:

              11.3.1. The Leased Premises are damaged by any peril and, in the
reasonable opinion of Landlord's architect or

                                       21
<PAGE>   27

construction consultant, the restoration of the Leased Premises cannot be
substantially completed within one hundred eighty (180) days after the date of
such damage; or

              11.3.2. The Leased Premises are damaged by any peril within twelve
(12) months of the last day of the Lease Term and in the reasonable opinion of
Landlord's architect or construction consultant the restoration of the Leased
Premises cannot be substantially completed within ninety (90) days after the
date of such damage.

       11.4. Abatement of Rent: In the event of damage to the Leased Premises
which does not result in the termination of this Lease, the Base Monthly Rent
shall be temporarily abated during the period of restoration in proportion to
the degree to which Tenant's use of the Leased Premises is impaired by such
damage. Tenant shall not be entitled to any compensation or damages from
Landlord for loss of Tenant's property or any inconvenience or annoyance caused
by such damage 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.

                                   ARTICLE 12

                                  CONDEMNATION

       12.1. Taking of Leased Premises: If all or any part of the Leased
Premises are taken by means of: (i) any taking by the exercise of the power of
eminent domain, whether by legal proceedings or otherwise, (ii) a voluntary sale
or transfer by Landlord to any condemnor under threat of condemnation or while
legal proceedings for condemnation are pending, or (iii) any taking by inverse
condemnation (a "Condemnation"), then Landlord shall have the option to
terminate this Lease. If all or any part of the Leased Premises are taken by
Condemnation and the Leased Premises cannot be reconstructed within a reasonable
period of time and thereby made reasonably suitable for Tenant's continued
occupancy for the Permitted Use, then Tenant shall have the option to terminate
this Lease. Any such option to terminate by either Landlord or Tenant must be
exercised within a reasonable period of time, to be effective as of the date
that possession of the Leased Premises is taken by the condemnor.

       12.2. Restoration Following the Taking: If any part of the Leased
Premises is taken by Condemnation and this Lease is not terminated, then
Landlord shall make all repairs and alterations that are reasonably necessary to
make that which is not taken a

                                       22
<PAGE>   28

complete architectural unit, but such work shall not exceed the scope of the
work done by Landlord in originally constructing the Property.

       12.3. Abatement of Rent: Except in the case of a temporary taking, if any
portion of the Leased Premises is taken by Condemnation and this Lease is not
terminated, then as of the date possession is taken, the Base Monthly Rent and
Additional Rent shall be reduced in the same proportion that the floor area of
that part of the Leased Premises so taken (less any addition thereto by reason
of any reconstruction) bears to the original floor area of the Leased Premises.

       12.4. Temporary Taking: If any portion of the Leased Premises is
temporarily taken by Condemnation for a period which either exceeds one (1) year
or which extends beyond the natural expiration of the Lease Term, then Landlord
and Tenant shall each independently have the option to terminate this Lease,
effective on the date possession is taken by the condemnor.

       12.5. Division of Condemnation Award: Any award made as a result of any
Condemnation of the Leased Premises shall belong to and be paid to Landlord, and
Tenant hereby assigns to Landlord all of its right, title and interest in any
such award; provided, however, that Tenant shall be entitled to receive any
Condemnation award that is made directly to Tenant (i) for the taking of
personal property or Trade Fixtures belonging to Tenant, (ii) for the
interruption of Tenant's business or its moving costs, (iii) for loss of
Tenant's goodwill, or (iv) for any temporary taking where this Lease is not
terminated as a result of such taking. The rights of Landlord and Tenant
regarding any Condemnation shall be determined as provided in this Article, and
each party hereby waives the provisions of Section 1265.130 of the California
Code of Civil Procedure and the provisions of any similar law hereinafter
enacted allowing either party to petition the Superior Court to terminate this
Lease in the event of a partial taking of the Leased Premises.

                                   ARTICLE 13

                              DEFAULT AND REMEDIES

       13.1. Events of Tenant's Default: Tenant shall be in default of its
obligations under this Lease if any of the following events shall occur:

              13.1.1. Tenant shall have failed to pay Base Monthly

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<PAGE>   29

Rent or any other rent or payment due Landlord when due within three (3) days
after written notice from Landlord identifying the breach; or

              13.1.2. Tenant shall have failed to perform any term, covenant, or
condition of this Lease except those requiring the payment of money, and Tenant
shall have failed to cure such breach within thirty (30) days after written
notice from Landlord specifying the nature of such breach where such breach
reasonably could be cured within said thirty (30) day period; provided, that
where such failure reasonably could not be cured within said thirty (30) day
period, that Tenant shall not be in default unless it has failed to commence
cure of such default promptly within said thirty (30) day period and thereafter
to continue to make diligent and reasonable efforts to cure such failure as soon
as practicable; or

              13.1.3. Tenant shall have made a general assignment of its assets
for the benefit of its creditors; or

              13.1.4. Tenant shall have sublet the Leased Premises or assigned
its interest in the Lease in violation of the provisions contained in Article
14, whether voluntarily or by operation of law; or

              13.1.5. Tenant shall have permitted the sequestration or
attachment of, or execution on, or the appointment of a custodian or receiver
with respect to, all or any substantial part of the property of Tenant or any
property essential to the conduct of Tenant's business and Tenant shall have
failed to obtain a return or release of such property within thirty (30) days
thereafter, or prior to sale pursuant to such sequestration, attachment or levy,
whichever is earlier; or

              13.1.6. Tenant shall have abandoned the Leased Premises; or

              13.1.7. A court shall have made or entered any decree or order
with respect to Tenant or Tenant shall have submitted to or sought a decree or
order (or a petition or pleading shall have been filed in connection therewith)
which: (i) grants or constitutes (or seeks) an order for relief, appointment of
a trustee, or confirmation of a reorganization plan under the bankruptcy laws of
the United States; (ii) approves as properly filed (or seeks such approval of) a
petition seeking liquidation or reorganization under said bankruptcy laws or any
other debtor's relief law or statute of the United States or any state

                                       24
<PAGE>   30

thereof; or (iii) otherwise directs (or seeks) the winding up or liquidation of
Tenant; and such petition, decree or order shall have continued in effect for a
period of thirty (30) or more days.

       13.2. Landlord's Remedies: In the event of any default by Tenant,
Landlord shall have the following remedies, in addition to all other rights and
remedies provided by any Law or otherwise provided in this Lease, to which
Landlord may resort cumulatively, or in the alternative:

              13.2.1. Landlord may, at Landlord's election, keep this Lease in
effect and enforce by an action at law or in equity all of its rights and
remedies under the Lease, including (i) the right to recover the rent and other
sums as they become due by appropriate legal action, (ii) the right to make
payments required of Tenant or perform Tenant's obligations and be reimbursed by
Tenant for the cost thereof with interest at the Agreed Interest Rate from the
date the sum is paid by Landlord until Landlord is reimbursed by Tenant, and
(iii) the remedies of injunctive relief and specific enforcement to compel
Tenant to perform its obligations under this Lease.

              13.2.2. Landlord may, at Landlord's election, terminate this Lease
by giving Tenant written notice of termination, in which event this Lease shall
terminate on the date set forth for termination in such notice. Any termination
under this subparagraph shall not relieve Tenant from its obligation to pay any
sums then due Landlord or from any claim against Tenant for damages or rent
previously accrued or then accruing. In no event shall any one or more of the
following actions by Landlord, in the absence of a written election by Landlord
to terminate this Lease, constitute a termination of this Lease:

                     A. Appointment of a receiver or keeper in order to protect
Landlord's interest hereunder;

                     B. Consent to any subletting of the Leased Premises or
assignment of this Lease by Tenant, whether pursuant to the provisions hereof or
otherwise; or

                     C. Any other action by Landlord or Landlord's agents
intended to mitigate the adverse effects of any breach of this Lease by Tenant,
including without limitation any action taken to maintain and preserve the
Leased Premises or any action taken to relet the Leased Premises or any portions
thereof, for

                                       25
<PAGE>   31

the account of Tenant and in the name of Tenant.

              13.2.3. In the event Tenant breaches this Lease and abandons the
Leased Premises, this Lease shall not terminate unless Landlord gives Tenant
written notice of its election to so terminate this Lease. No act by or on
behalf of Landlord intended to mitigate the adverse effect of such breach,
including those described by subparagraphs 13.2.2 A, B and C immediately
preceding, shall constitute a termination of Tenant's right to possession unless
Landlord gives Tenant written notice of termination. Should Landlord not
terminate this Lease by giving Tenant written notice, Landlord may enforce all
its rights and remedies under this Lease, including the right to recover the
rent as it becomes due under the Lease as provided in California Civil Code
Section 1951.4, as in effect on the Effective Date of this Lease.

              13.2.4. In the event Landlord terminates this Lease, Landlord
shall be entitled, at Landlord's election, to damages in an amount as set forth
in California Civil Code Section 1951.2 as in effect on the Effective Date of
this Lease. For purposes of computing damages pursuant to Section 1951.2, (i)
the Agreed Interest Rate shall be used where permitted, and (ii) rent due under
this Lease shall include Base Monthly Rent and all other rent hereunder,
prorated on a monthly basis where necessary to compute such damages. Such
damages shall include without limitation:

                     A. 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 Tenant proves could be reasonably avoided,
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%); and

                     B. Any other amount necessary to compensate Landlord for
all 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, the following: (i)
expenses for cleaning, repairing or restoring the Leased Premises; (ii) expenses
for altering, remodeling or otherwise improving the Leased Premises for the
purpose of reletting, including installation of leasehold improvements (whether
such installation be funded by a reduction of rent, direct payment or allowance
to a new tenant, or otherwise); (iii) broker's fees, advertising costs and other
expenses of reletting the Leased Premises; (iv)

                                       26
<PAGE>   32

costs of carrying the Leased Premises, such as taxes, insurance premiums,
utilities, and security precautions; (v) expenses in retaking possession of the
Leased Premises; and (vi) attorneys' fees and court costs incurred by Landlord
in retaking possession of the Leased Premises and in re-leasing the Leased
Premises or otherwise incurred as a result of Tenant's default.

                     C. For purposes of this Article, the rent due for any
calendar month after which Tenant has terminated the operation of its business
as herein specified or has abandoned the Leased Premises shall be deemed to be
the average monthly rent, including the Base Monthly Rent and all additional
rent hereunder, which were due for the twelve (l2) month period immediately
prior to such termination or for such shorter period of time as this Lease shall
have been in effect.

              13.2.5. Nothing in this paragraph shall limit Landlord's right to
indemnification from Tenant as provided in paragraph 10.2.

       13.3. Landlord's Default and Tenant's Remedies: In the event Landlord
fails to perform any of its obligations under this Lease and fails to cure such
default within thirty (30) days after written notice from Tenant specifying the
nature of such default where such default could reasonably be cured within said
thirty (30) day period, or fails to commence such cure within said thirty (30)
day period and thereafter continuously with due diligence prosecute such cure to
completion where such default could not reasonably be cured within said thirty
(30) day period, then Tenant shall have the following remedies only:

              13.3.1. Tenant may proceed in equity or at law to compel Landlord
to perform its obligations and/or to recover damages proximately caused by such
failure to perform (except to the extent Tenant has waived its right to damages
resulting from injury to person or damage to property as provided herein).

              13.3.2. Tenant, at its option, may cure any default of Landlord at
Landlord's cost. If Tenant at any time by reason of Landlord's default
reasonably pays any sum or does any act that requires the payment of any sum,
the sum paid by Tenant shall be immediately due from Landlord to Tenant at the
time the sum is paid, and shall bear interest at the Agreed Interest Rate from
the date the sum is paid by Tenant until Tenant is reimbursed by Landlord.

              13.3.3. Tenant waives the provisions of Sections

                                       27
<PAGE>   33

1932(1), 1941, and 1942 of the California Civil Code and/or any similar or
successor law regarding Tenant's right to terminate this Lease or to make
repairs and deduct the expenses of such repairs from the rent due under the
Lease. Tenant hereby waives any right of redemption or relief from forfeiture
under the laws of the State of California, or under any other present or future
law, in the event Tenant is evicted or Landlord takes possession of the Leased
Premises by reason of any default by Tenant.

       13.4. Waiver: One party's consent to or approval of any act by the other
party requiring the first party's consent or approval shall not be deemed to
waive or render unnecessary the first party's consent to or approval of any
subsequent similar act by the other party. The receipt by Landlord of any rent
or payment with or without knowledge of the breach of any other provision hereof
shall not be deemed a waiver of any such breach unless such waiver is in writing
and signed by Landlord. No delay or omission in the exercise of any right or
remedy accruing to either party upon any breach by the other party under this
Lease shall impair such right or remedy or be construed as a waiver of any such
breach theretofore or hereafter occurring. The waiver by either party of any
breach of any provision of this Lease shall not be deemed to be a waiver of any
subsequent breach of the same or any other provisions herein contained.

                                       28
<PAGE>   34

                                   ARTICLE 14

                                   ASSIGNMENT

       14.1. By Tenant: Tenant shall not sublet the Leased Premises or assign or
encumber its interest in this Lease, whether voluntarily or by operation of law
without Landlord's prior written consent, which consent shall not be
unreasonably withheld. In this regard:

              14.1.1. Any attempted subletting, assignment, or encumbrance
without Landlord's prior consent shall be voidable and, at Landlord's election,
shall constitute a default.

              14.1.2. Tenant agrees to reimburse Landlord all reasonable costs
and attorneys fees incurred by Landlord in conjunction with the processing and
documentation of any such requested subletting, assignment or encumbrance, none
of which shall be effective until Tenant shall have paid such costs and fees.

              14.1.3. Consent by Landlord to one or more assignments or
encumbrances of this Lease or to one or more sublettings of the Leased Premises
shall not be deemed to be a consent to any subsequent assignment, encumbrances,
or subletting.

              14.1.4. No subletting or assignment, even with the consent of
Landlord, shall relieve Tenant of its personal and primary obligation to pay the
rent and to perform all of the other obligations to be performed by Tenant
hereunder. The acceptance of rent by Landlord from any person shall not be
deemed to be a waiver by Landlord of any provision of this Lease or to be a
consent to any assignment or subletting.

              14.1.5. If Tenant is a corporation, any dissolution, merger,
consolidation, or other reorganization of Tenant, or the sale or other transfer
in a single transaction during the Lease Term of a controlling percentage of the
capital stock of Tenant, shall be deemed a voluntary assignment of Tenant's
interest in this Lease. The phrase "controlling percentage" means the ownership
of and the right to vote stock possessing more than fifty percent (50%) of the
total combined voting power of all classes of Tenant's capital stock issued,
outstanding and entitled to vote for the election of directors.

                                       29
<PAGE>   35

If Tenant is a partnership, a withdrawal or change, voluntary, involuntary or by
operation of law, of any general partner, or the dissolution of the partnership,
shall be deemed a voluntary assignment.

              14.1.6. If Tenant assigns its interest in this Lease in accordance
with this Article, then Tenant shall pay to Landlord fifty percent (50%) of all
net consideration received by Tenant as a result of such assignment as and when
received by Tenant. If Tenant sublets all or part of the Leased Premises in
accordance with this Article, then Tenant shall pay to Landlord fifty percent
(50%) of the positive difference, if any, between (i) all rent and other
consideration paid by the subtenant to Tenant less (ii) all costs incurred by
Tenant incident to the sublease agreement (including an amount equal to the
resulting product of the rent payable hereunder to Landlord by Tenant during the
time period covered by such payments by the subtenant times a fraction whose
numerator is the leasable area of that portion of the Leased Premises so sublet
and whose denominator is Tenant's Gross Leasable Area). Said consideration shall
be payable to Landlord on the same basis, whether periodic or in lump sum, that
such consideration is paid to Tenant by its subtenant, and, in calculating
Landlord's share of any periodic payments, all costs incurred by Tenant incident
to the sublease agreement shall be amortized over the term of the sublease.
Immediately following its execution, Tenant shall deliver to Landlord a true
copy of any permitted assignment or sublease. At the time Tenant makes any
payment to Landlord required by this Subparagraph, Tenant shall deliver an
itemized statement of the method by which the amount due Landlord was
calculated, certified by Tenant as true and correct. Landlord shall have the
right to inspect Tenant's books and records relating to the payments due
pursuant to this subparagraph.

              14.1.7. Notwithstanding the provisions of para. 14.1.through
14.1.6. to the contrary, Tenant may, without Landlord's consent, sublet all or
any portion of the Premises or assign the Lease to (i) a subsidiary, parent,
affiliate, division or corporation controlled by or under common control with
Tenant or (ii) a successor corporation related to Tenant by merger,
consolidation, reorganization or government action. However, no such subletting
or assignment, even without the consent of Landlord, shall relieve Tenant of its
primary obligation to pay rent and perform all of the other obligations to be
performed by Tenant hereunder for which it will remain liable.

       14.2. By Landlord: Landlord and its successors in interest

                                       30
<PAGE>   36

shall have the right to transfer their interest in the Leased Premises and the
Property at any time and to any person or entity. In event of any such transfer
the Landlord originally named herein (and in the case of any subsequent
transfer, the transferor) from the date of such transfer, (i) shall be
automatically relieved, without any further act by any person or entity, of all
liability for the performance of the obligations of the Landlord hereunder which
may accrue after the date of such transfer, and (ii) shall be relieved of all
liability for the performance of the obligations of the Landlord hereunder which
have accrued before the date of transfer only if its transferee agrees to assume
and be bound by the terms of this Lease and to perform all obligations of the
Landlord hereunder.

                                   ARTICLE 15

                                   TERMINATION

       15.1. Surrender of the Leased Premises: Immediately prior to the
expiration or upon the sooner termination of this lease, tenant shall remove all
tenant's trade fixtures and other personal property and vacate and surrender the
leased premises to landlord in the same condition as existed at the commencement
date, reasonable wear and tear excepted, with all interior walls cleaned, all
carpets shampooed and cleaned, all HVAC equipment within the Leased Premises in
operating order and in good repair, and all floors cleaned, all to the
reasonable satisfaction of Landlord. Landlord may, at Tenant's expense, hire
independent contractors to inspect any HVAC system serving the Leased Premises
or electrical system within the Leased Premises for the purpose of determining
whether they have been properly maintained by Tenant, and Tenant shall pay the
cost thereof within ten (10) days after receipt of a statement therefore from
Landlord. If landlord so requests, tenant shall, prior to the expiration or
sooner termination of this lease, remove any leasehold improvements designated
by landlord and repair all damage caused by such removal. if the leased premises
are not so surrendered at the termination of this lease, tenant shall be liable
to Landlord for all costs incurred by Landlord in returning the Leased Premises
to the required condition, plus interest on all costs incurred at the Agreed
Interest Rate. Tenant shall indemnify Landlord against loss or liability
resulting from delay by Tenant in so surrendering the Leased Premises,
including, without limitation, any claims made by and succeeding tenant or
losses to Landlord due to lost opportunities to lease to succeeding tenants.

                                       31
<PAGE>   37

       15.2. Holding Over: This Lease shall terminate without further notice at
the expiration of the Lease Term. Any holding over by Tenant after expiration of
the Lease Term shall not constitute a renewal or extension of the Lease or give
Tenant any rights in or to the Leased Premises except as expressly provided in
this Lease. Any holding over after such expiration with the consent of Landlord
shall be construed to be a tenancy from month-to-month on the same terms and
conditions herein specified insofar as applicable except that Base Monthly Rent
shall be increased to an amount equal to one hundred fifty percent (150%) of the
Base Monthly Rent required during the last month of the Lease Term.

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                                   ARTICLE 16

                            LANDLORD'S RIGHT TO ENTER

        16.1. Landlord's Right to Enter: Tenant shall permit Landlord and its
agents to enter the Leased Premises at reasonable times escorted by Tenant for
the purpose of (i) inspecting the same; (ii) posting notices of
non-responsibility; (iii) supplying any service to be provided by Landlord to
Tenant; (iv) showing the Leased Premises to prospective purchasers, mortgagees
or tenants; (v) making necessary alterations, additions, or repairs; (vi)
performing Tenant's obligation when Tenant has failed to do so after written
notice from Landlord; (vii) placing upon the Leased Premises ordinary "for
lease" or "for sale" signs; and/or (viii) in the case of an emergency. Landlord
may enter the Leased Premises by means of a master key for emergencies, and
Landlord shall have the right to use any and all means Landlord may deem
necessary and proper to open the doors of the Leased Premises in an emergency.
Any entry to the Leased Premises or portions thereof obtained by Landlord by any
of said means, or otherwise, shall not under any circumstances be construed or
deemed to be a forcible or unlawful entry into, or a detainer of, the Leased
Premises, or an eviction, actual or constructive, of Tenant from the Leased
Premises or any portion thereof.

                                   ARTICLE 17

                              MORTGAGES & TRANSFER

        17.1. Subordination: This Lease is subject and subordinate to all
underlying ground leases, mortgages and deeds of trust which affect the Property
and are of public record as of the Effective Date of this Lease, and to all
renewals, modifications, consolidations, replacements and extensions thereof.
However, if the lessor under any such lease or any Lender holding such mortgage
or deed of trust shall advise Landlord that it desires or requires this Lease to
be prior and superior thereto, then, upon written request of Landlord to Tenant,
Tenant shall promptly execute, acknowledge and deliver any and all documents or
instruments which Landlord or such lessor or Lender deems necessary or desirable
to make this Lease prior thereto. At Landlord's election, this Lease shall
become and thereafter remain subject and subordinate to any and all future
ground leases, mortgages or deeds of trust affecting the Property which

                                       33
<PAGE>   39

may hereafter be executed and placed of public record after the Effective Date
of this Lease, or any renewals, modifications, consolidations, replacements or
extensions thereof, for the full amount of all advances made or to be made
thereunder and without regard to the time or character of such advances, so long
as the lessor of such ground lease or the Lender holding the mortgage or deed of
trust to which this Lease is to be subordinated agrees that it will recognize
Tenant's rights under this Lease and not disturb its quiet possession of the
Leased Premises so long as Tenant is not in default hereunder. Tenant agrees,
within ten (10) days after Landlord's written request therefor to execute,
acknowledge and deliver upon request of Landlord any and all documents or
instruments requested by Landlord or such lessor or mortgage holder(s) as may be
necessary or proper to assure the subordination of this Lease to any such ground
lease, mortgage or deed of trust.

        17.2. Tenant's Attornment: Tenant shall attorn (i) to any purchaser of
the Building or Property at any foreclosure sale or private sale conducted
pursuant to any security instrument encumbering the Building and/or the
Property, (ii) to any grantee or transferee designated in any deed given in lieu
of foreclosure, or (iii) to the lessor under any underlying ground lease should
such ground lease be terminated.

        17.3. Mortgagee Protection: In the event of any default on the part of
Landlord, Tenant will give notice by registered mail to any Lender or lessor
under any underlying ground lease whose name has been provided to Tenant and
shall offer such Lender or lessor a reasonable opportunity to cure the default,
including time to obtain possession of the Leased Premises by power of sale or
judicial foreclosure or other appropriate legal proceedings, if such should
prove necessary to effect a cure.

        17.4. Estoppel Certificates: At all times during the Lease Term, Tenant
agrees, following any request by Landlord, to promptly execute and deliver to
Landlord an estoppel certificate, except as otherwise set forth in such request,
(i) certifying that this Lease is unmodified and in full force and effect, or,
if modified, stating the nature of such modification and certifying that this
Lease, as so modified, is in full force and effect, (ii) stating the date to
which the rent and other charges are paid in advance, if any, (iii)
acknowledging that there is not, to Tenant's knowledge, any uncured defaults on
the part of Landlord hereunder, and if there are uncured defaults on the part of
Landlord, stating the nature of such uncured defaults, and (iv) certifying such
other information about the Lease as may be

                                       34
<PAGE>   40

reasonably required by Landlord. Tenant's failure to deliver an estoppel
certificate within ten (10) days after delivery of Landlord's request therefore
shall be a conclusive admission by Tenant that, as of the date of the request
for such statement, (i) this Lease is unmodified except as may be represented by
Landlord in said request and is in full force and effect, (ii) there are no
uncured defaults in Landlord's performance, and (iii) no rent has been paid in
advance.

        17.5. Financial Statements: At any time during the Lease Term, Tenant
shall, upon fifteen (15) days' prior written notice from Landlord, provide
Tenant's most recent financial statement and financial statements covering the
twenty-four (24) month period prior to the date of such most recent financial
statements to Landlord and to any existing Lender, potential Lender or buyer or
potential buyer of the Premises. Such statements shall be prepared in accordance
with generally accepted accounting principles and, if such is the normal
practice of Tenant, shall be audited by an independent certified public
accountant.

                                   ARTICLE 18

                               GENERAL PROVISIONS

        18.1. Force Majeure: Any prevention, delay, or stoppage due to strikes,
lockouts, inclement weather, labor disputes, inability to obtain labor,
materials, fuels or reasonable substitutes therefor, governmental restrictions,
regulations, controls, action or inaction, civil commotion, fire other acts of
God, and other causes beyond the reasonable control of the party obligated to
perform (except financial inability) shall excuse the performance, for a period
equal to the period of any said prevention, delay, or stoppage, of any
obligation hereunder except the obligation of Tenant to pay rent or any other
sums due hereunder.

        18.2. Notices: Any notice required or desired to be given regarding this
Lease shall be in writing and shall be personally served, or in lieu of personal
service may be given by certified mail. If served by mail, such notice shall be
deemed to have been given (i) on the third business day after mailing if such
notice was deposited in the United States Mail, certified mail and postage
prepaid, addressed to the party to be served at its address first above set
forth and (ii) in all other cases when actually received. Either party may
change its address by giving notice of same in accordance with this paragraph.

                                       35
<PAGE>   41

        18.3. Fees and Expenses: All sums reasonably incurred by Landlord in
connection with any event of Tenant Default, enforcing or implementing the terms
of this Lease, or holding over of possession by Tenant after the expiration or
earlier termination of this Lease, including, without limitation, all costs,
expenses and actual accountants, appraisers, attorneys and other professional
fees, and any collection agency or other collection charges, shall be due and
payable by Tenant to Landlord on demand, and shall bear interest thereon at the
Interest Rate regardless of whether legal proceedings are or have been commenced
to enforce the Lease, including attorneys' fees and expenses arising in or
related to a case brought by Tenant, its successors, assignees or subtenant(s),
under Title 11, U.S.C., Bankruptcy Code provisions. If either Landlord or Tenant
commences or engages in, or threatens to commence or engage in an action by or
against the other party arising out of or in connection with the interpretation
of or enforcement of the terms, conditions and obligations of this Lease,
including, but not limited to, any action for recovery of Rent due and unpaid,
to recover possession or for damages for breach of this Lease, the prevailing
party shall be entitled to have and recover from the losing party reasonable
attorneys' fees, expert's fees and costs, arbitrator's fees and costs, discovery
costs and expenses and other costs incurred in connection with the action,
preparation for such action, any appeals relating thereto and enforcing any
judgments rendered in connection therewith.

        18.4. Corporate Authority: If Tenant is a corporation (or a
partnership), each individual executing this Lease on behalf of said corporation
(or partnership) represents and warrants that he is duly authorized to execute
and deliver this Lease on behalf of said corporation in accordance with the
by-laws of said corporation (or partnership in accordance with the partnership
agreement of said partnership) and that this Lease is binding upon said
corporation (or partnership) in accordance with its terms. If Tenant is a
corporation, each of the persons executing this Lease on behalf of Tenant does
hereby covenant and warrant that Tenant is a duly authorized and existing
corporation, that Tenant has and is qualified to do business in California and
that the corporation has full right and authority to enter into this Lease. If
Tenant is a corporation Tenant shall, within thirty (30) days after execution of
this Lease, deliver to Landlord a certified copy of the resolution of the board
of directors of said corporation authorizing or ratifying the execution of this
Lease.

        18.5. Additional Definitions: Any term that is given a

                                       36
<PAGE>   42

special meaning by any provision in this Lease shall have such meaning when used
in this Lease or any addendum or amendment hereto. As used herein, the following
terms shall have the following meanings:

               18.5.1. Agreed Interest Rate: The term "Agreed Interest Rate"
shall mean an interest rate of twelve percent (12%) per annum.

               18.5.2. CPI: The term "CPI" shall mean the Consumer Price Index
for All Items, for All Urban Consumers (base year 1982-1984 = 100) for San
Francisco-Oakland-San Jose, California published by the United States Department
of Labor, Bureau of Labor Statistics. If the CPI is changed so that the base
year differs from that used as of the Commencement Date, the CPI shall be
converted in accordance with the conversion factor published by the U.S.
Department of Labor, Bureau of Labor Statistics. If the CPI is discontinued or
revised during the term, such other government index or computation with which
it is replaced shall be used in order to obtain substantially the same result as
would be obtained if the CPI had not been discontinued or revised.

               18.5.3. Effective Date: The term "Effective Date" shall mean the
date the last signatory to this Lease whose execution is required to make it
binding on the parties hereto shall have executed this Lease.

               18.5.4. Law: The term "Law" shall mean any judicial decision,
statute, constitution, ordinance, resolution, regulation, rule, administrative
order, or other requirement of any municipal, county, state, federal or other
government agency or authority having jurisdiction over the parties to this
Lease or the Leased Premises or both, in effect either at the Effective Date of
this Lease or any time during the Lease Term, including, without limitation, any
regulation, order, or policy of any quasi entity or body (e.g., board of fire
examiners, public utilities or special district).

               18.5.5. Leasehold Improvements: The term "Leasehold Improvements"
shall mean all improvements, additions, alterations, and fixtures installed in
the Leased Premises by Tenant at its expense which are not Trade Fixtures.

               18.5.6. Lender: The term "Lender" shall mean any beneficiary,
mortgagee, secured party, or other holder of any deed of trust, mortgage or
other written security device or agreement affecting the Property, and the note
or other

                                       37
<PAGE>   43

obligations secured by it.

               18.5.7. Private Restrictions: The term "Private Restrictions"
shall mean all recorded covenants, conditions and restrictions, private
agreements, reciprocal easement agreements, and any other recorded instruments
affecting the use of the Leased Premises as they may exist from time-to-time.

               18.5.8. Trade Fixtures: Anything affixed to the Leased Premises
by Tenant at its expense for the purposes of trade, manufacture, ornament, or
domestic use (except replacement of similar work or material originally
installed by Landlord) which can be removed without injury to the Leased
Premises unless such thing has, by the manner in which it is affixed, become an
integral part of the Leased Premises; provided, however, that all of Tenant's
signs shall be Trade Fixtures regardless of how affixed to the Leased Premises.

        18.6. Construction of Meaning and Other Miscellaneous Provisions: (1)
Should any provision of this Lease prove to be invalid or illegal, such
invalidity or illegality shall in no way affect, impair or invalidate any other
provision hereof, and such remaining provisions shall remain in full force and
effect. (2) Time is of the essence with respect to the performance of every
provision of this Lease in which time of performance is a factor. (3) The
captions used in this Lease are for convenience only and shall not be considered
in the construction or interpretation of any provision hereof. (4) Any executed
copy of this Lease shall be deemed an original for all purposes. (5) This Lease
shall, subject to the provisions regarding assignment, apply to and bind the
respective heirs, successors, executors, administrators, and assigns of Landlord
and Tenant. (6) "Party" shall mean Landlord or Tenant, as the context implies.
(7) If Tenant consists of more than one person or entity, then all members of
Tenant shall be jointly and severally liable hereunder. (8) This Lease shall be
construed and enforced in accordance with the laws of the State of California.
(9) The language in all parts of this Lease shall in all cases be construed as a
whole according to its fair meaning, and not strictly for or against either
Landlord or Tenant. (10) When the context of this Lease requires, the neuter
gender includes the masculine, the feminine, a partnership or corporation or
joint venture, and the singular includes the plural. (11) The terms "shall",
"will", and "agree" are mandatory. The term "may" is permissive. (12) When a
party is required to do something by this Lease, it shall do so at its sole cost
and expense without right of reimbursement from the other party unless specific
provision is made therefor. (13) All

                                       38
<PAGE>   44

measurements of gross leasable area shall be made from the outside faces of
exterior walls and the centerline of joint partitions. (14) Landlord makes no
covenant nor warranty as to the exact square footage of any area. (15) Where
Tenant is obligated not to perform any act, Tenant is also obligated to restrain
any others within its control from performing said act, including agents,
invitees, contractors, subcontractors and employees. (16) Landlord shall not
become or be deemed a partner nor a joint venturer with Tenant by reason of the
provisions of this Lease.

        18.7. Quiet Enjoyment: Upon the observance and performance of all the
covenants, terms, and conditions on Tenant's part to be observed and performed,
and subject to the other provisions of this Lease, Tenant shall peaceably and
quietly hold and enjoy the Premises for the Term without hindrance or
interruption by Landlord or any other person claiming by or through Landlord.
Landlord agrees to make reasonable efforts to protect Tenant from interference
or disturbance by other tenants or third parties; however, Landlord shall not be
liable for any interference or disturbance, nor shall Tenant be released from
any of the obligations of this Lease because of such interference or
disturbance.

        18.8. Landlord Representations: Landlord represents to Tenant that it is
the owner of the Property with full power and authority to enter into this
Lease.

        18.9. Brokerage Commissions: Tenant warrants that it has not had any
dealings with any real estate brokers, leasing agents, salesmen, or incurred any
obligations for the payment of real estate brokerage commissions or finder's
fees which would be earned or due and payable by reason of the execution of this
Lease other than the BT Commercial Company. Landlord warrants that it has not
had any dealings with any real estate brokers, leasing agents, salesmen, or
incurred any obligations for the payment of real estate brokerage commissions or
finder's fees which would be earned or due and payable by reason of the
execution of this Lease other than the Cornish & Carey Commercial and Deerfield
Realty Corporation. Landlord shall be solely responsible for the payment of
Brokerage Commissions pursuant to a separate agreement between Landlord and
Cornish & Carey Commercial. Landlord shall pay the Brokerage Commissions
one-half (1/2) upon Lease execution and the remaining one-half (1/2) upon the
Commencement Date of the Lease.

                                       39
<PAGE>   45

        18.10. Entire Agreement: The Lease, EXHIBITS "A" (SITE PLAN), "B" (FLOOR
PLAN), "C" (TENANT INTERIOR IMPROVEMENT AGREEMENT), "D" (APPROVAL
SPECIFICATIONS), "E" (COMMENCEMENT DATE/ACCEPTANCE Agreement), and "F" (RULES
AND REGULATIONS) which are attached hereto (and by this reference incorporated
herein), constitute the entire agreement between the parties, and there are no
binding agreements or representations between the parties except as expressed
herein. Tenant acknowledges that neither Landlord nor Landlord's agent(s) has
made any representation or warranty as to (i) whether the Leased Premises may be
used for Tenant's intended use under existing law or (ii) the suitability of the
Leased Premises or the Common Area for the conduct of Tenant's business or the
condition of any improvements located thereon. Tenant's business or the
condition of any improvements located thereon. Tenant expressly waives all
claims for damage by reason of any statement, representation, warranty, promise
or other agreement of Landlord or Landlord's agent(s), if any, not contained in
this Lease or in any addendum or amendment hereto. No subsequent change or
addition to this Lease shall be binding unless in writing and signed by the
parties hereto.

        18.11. Security Measures: Tenant hereby acknowledges that the Rent
payable to Landlord hereunder does not include the costs of guard service or
other security measures, and that Landlord shall have no obligation whatsoever
to provide same. Tenant assumes all responsibility for the protection of Tenant,
Tenants' Parties and their property from acts of third parties.

        18.12. Signatures Required/Non-Binding Offer: Submission of this Lease
for examination or signature by Tenant does not constitute an offer or option
for lease, and it is not effective as a lease or otherwise until executed and
delivered by both Landlord and Tenant.

                                       40
<PAGE>   46

                                   ARTICLE 19

                              ENVIRONMENTAL MATTERS

        19.1. Tenant's Covenants Regarding Hazardous Materials:

               19.1.1. Tenant shall at all times and in all respects comply with
all federal, state and local laws, ordinances, and regulations ("Hazardous
Materials Laws") relating to industrial hygiene, environmental protection, or
the use, analysis, generation, manufacturer, storage, disposal or transportation
of any oil, flammable explosives, asbestos, urea formaldehyde, radioactive
materials or waste, or other hazardous, toxic, contaminated or polluting
materials, substances or wastes, including, without limitation, any "hazardous
substances," "Hazardous Materials").

               19.1.2. Tenant shall at its own expense procure, maintain in
effect and comply with all conditions of any and all permits, licenses and other
governmental and regulatory approvals required for Tenant's use of the Leased
Premises, including, without limitation, discharge of (appropriately treated)
materials or waste into or through any sanitary sewer serving the Leased
Premises. Except as discharged into the sanitary sewer in strict accordance and
conformity with all applicable Hazardous Materials, Tenant shall cause any and
all Hazardous Materials removed from the Leased Premises to be removed and
transported solely by duly licensed haulers to duly licensed facilities for
final disposal of such materials and waste. Tenant shall in all respects handle,
treat, deal with and manage any and all Hazardous Materials in, or under or
about the Leased Premises in total conformity with all applicable Hazardous
Materials Laws and prudent industry practices regarding management of such
Hazardous Materials. Upon expiration or earlier termination of the term of the
Lease, Tenant shall cause all Hazardous Materials to be removed from the Leased
Premises and transported for use, storage or disposal in accordance and in
compliance with all applicable Hazardous Materials Laws. Tenant shall not take
any remedial action in response to the presence of any Hazardous Materials in or
about the Leased Premises or any building, nor enter into any settlement
agreement, consent decree or other compromise in respect to any claims relating
to any Hazardous Materials in any way connected with the Leased Premises,
without first notifying Landlord of Tenant's intention to do so and affording
Landlord ample opportunity to appear, intervene or otherwise appropriately

                                       41
<PAGE>   47

assert and protect Landlord's interest with respect thereto.

               19.1.3. Tenant shall immediately notify Landlord in writing of:

                      A. Any enforcement, cleanup, removal or other governmental
or regulatory action instituted, completed or threatened pursuant to any
Hazardous Materials Laws;

                      B. Any claim made or threatened by any person against
Tenant or the Leased Premises relating to damage, contribution, cost recovery
compensation, loss or injury resulting from or claimed to result from any
Hazardous Materials; and

                      C. Any reports made to any environmental agency arising
out of or in connection with any Hazardous Materials in or removed from the
Leased Premises, including any complaints, notices, warnings or asserted
violations in connection therewith. Tenant shall also supply to Landlord as
promptly as possible, and in any event within five (5) business days after
Tenant first receives or sends the same, with copies of all claims, reports,
complaints, notices, warnings or asserted violations related in any way to the
existence of Hazardous Materials at, in, under or about the Premises or Tenant's
use thereof. Tenant shall promptly deliver to Landlord copies of Hazardous waste
manifest reflecting the legal and proper disposal of all Hazardous Materials
removed from the Leased Premises.

        19.2. Indemnification of Landlord: To the fullest extent permitted by
law, Tenant shall indemnify, defend by counsel reasonably acceptable to
Landlord, protect, and hold Landlord and each of Landlord's partners, employees,
agents, attorneys, successors, and assigns, free and harmless from and against
any and all claims, liabilities, penalties, forfeitures, damages, losses or
expenses (including reasonable attorney's fees) or death of or injury to any
person or damage to any property whatsoever arising from or caused in whole or
in part, directly or indirectly by (A) the presence in, or under or about the
Leased Premises as a result of Tenant's act(s) or discharge by Tenant in or from
the Leased Premises caused by Tenant of any Hazardous Materials or Tenant's use,
analysis, storage, transportation, disposal, release, threatened release,
discharge or generation of Hazardous Materials to, in, on, under, about or from
the Leased Premises, or (B) Tenant's failure to comply with any Hazardous
Materials Law. Tenant's obligations hereunder

                                       42
<PAGE>   48

shall include, without limitation, whether foreseeable or unforeseeable, all
costs, of any required or necessary repair, cleanup or detoxification or
decontamination of the Leased Premises, and the preparation and implementation
of any closure, remedial action or other required plans in connection therewith,
and shall survive the expiration or earlier termination of the term of this
Lease. For purposes of the release and indemnity provision hereof, any actions
or omissions of Tenant or by employees, agents, assignees, contractors or
subcontractors of Tenant or others acting for or on behalf of Tenant (whether or
not they are negligent, intentional, willful or unlawful) shall be strictly
attributable to Tenant.

        19.3. Tenant Indemnification. Landlord shall defend, indemnify, protect,
and hold Tenant and each of Tenant's partners, employees, agents, attorneys,
successors, and assigns, free and harmless from and against any and all claims,
liabilities, penalties, forfeitures, losses or expenses (including reasonable
attorney's fees) or death of or injury from any person or damage to any property
to the extent not arising from or caused directly or indirectly by Tenant's use,
analysis, storage, transportation, disposal, release, threatened release,
discharge or generation of Hazardous Materials to, in, on, under, about or from
the Leased Premises.

                                   ARTICLE 20

                              RIGHT OF FIRST OFFER

        20.1. Right of First Offer to Lease Adjacent Building. Landlord hereby
grants to Tenant a right of First Offer to lease the adjacent building
identified in paragraph 20.6 (the "First Offer Space") on the terms contained in
this paragraph. Tenant shall retain such right to the First Offer Space so long
as Tenant is not in default under this Lease Agreement or until Tenant fails to
exercise such right after having been given an opportunity to do so under the
provisions of Article 20. A further limitation on Tenant's Right of First Offer
shall be the requirement that at the time of notification of Tenant by Landlord
of the availability of the First Offer Space that Tenant's market capitalization
value shall be $100,000,000 or more.

        20.2. Notice of Availability of First Offer Space. If the First Offer
Space becomes available at any time after the Effective Date of this Lease and
before the expiration or earlier termination of this right of First Offer Space,
then Landlord

                                       43
<PAGE>   49

shall notify Tenant in writing of the availability of the First Offer Space.

        20.3. Exercise of Right of First Offer. If Tenant, within two (2) weeks
after receipt of Landlord's notice which shall be given no later than March 31,
2002, indicates in writing its agreement to lease such First Offer Space, then
Landlord and Tenant shall enter into a lease agreement (the "Second Lease")
whereby Landlord shall lease to Tenant and Tenant shall lease from Landlord such
First Offer Space on the terms stated in Landlord's written notice which shall
include the following essential business terms: (1) Five (5) year lease term;
(2) Basic Monthly Rent to commence at fair market rent for similar buildings in
the immediate vicinity at the date of such election; (3) First Offer Space to be
taken "AS-IS"; (4) Security Deposit to be in amount of first month's Basic Rent;
and (5) lease to be on Landlord's standard, single tenant, triple net lease form
similar in form to the instant Lease.

        20.4. Determination of Fair Market Rent. In the event it becomes
necessary to determine by appraisal the fair market rent of the First Offer
Space for the purpose of establishing the Base Monthly Rent during the five (5)
year lease term, then such fair market monthly rent shall be determined by three
(3) real estate appraisers, all of whom shall be members of the American
Institute of Real Estate Appraisers with not less than five (5) years experience
appraising real property (other than residential or agricultural property)
located in Santa Clara County, California, in accordance with the following
procedures:

               (1) The party demanding an appraisal (the "Notifying Party")
shall notify the other party (the "Non-Notifying Party") thereof by delivering a
written demand for appraisal, which demand, to be effective, must give the name,
address, and qualifications of an appraiser selected by the Notifying Party.
Within ten (10) days of receipt of said demand, the Non-Notifying Party shall
select its appraiser and notify the Notifying Party, in writing, of the name,
address, and qualifications of an appraiser selected by it. Failure by the
Non-Notifying Party to select a qualified appraiser within said ten (10) day
period shall be deemed a waiver of its right to select a second appraiser on its
own behalf and the Notifying Party shall select a second appraiser on behalf of
the Non-Notifying Party within five (5) days after the expiration of said ten
(10) day period. Within ten (10) days from the date the second appraiser shall
have been appointed, the two (2) appraisers so selected shall appoint a third
appraiser. If the two appraisers fail to select

                                       44
<PAGE>   50

a third qualified appraiser, the third appraiser shall be selected by the
American Arbitration Association or if it shall refuse to perform this function,
then at the request of either Landlord or Tenant, such third appraiser shall be
promptly appointed by the then Presiding Judge of the Superior Court of the
State of California for the County of Santa Clara.

               (2) The three (3) appraisers so selected shall meet in Sunnyvale,
California, not later than twenty (20) days following the selection of the third
appraiser. At said meeting the appraisers so selected shall attempt to determine
the fair market monthly rent of the Premises for the option period in question
(including the timing and amount of periodic increases).

               (3) If the appraisers so selected are unable to complete their
determinations in one meeting, they may continue to consult at such times as
they deem necessary for a fifteen (15) day period from the date of the first
meeting, in an attempt to have at least two (2) of them agree. If, at the
initial meeting or at any time during said fifteen (15) day period, two (2) or
more of the appraisers so selected agree on the fair market rent of the Leased
Premises, such agreement shall be determinative and binding on the parties
hereto, and the agreeing appraisers shall, in simple letter form executed by the
agreeing appraisers, forthwith notify both Landlord and Tenant of the amount set
by such agreement.

               (4) If two (2) or more appraisers do not so agree within said
fifteen (15) day period, then each appraiser shall, within five (5) days after
the expiration of said fifteen (15) day period, submit his independent appraisal
in simple letter form to Landlord and Tenant stating his determination of the
fair market rent of the Promises for the option period in question. The parties
shall then determine the fair market rent for the Premises by determining the
average of the fair market rent set by each of the appraisers. However, if the
lowest appraisal is less than eighty-five percent (85%) of the middle appraisal
then such lowest appraisal shall be disregarded and/or if the highest appraisal
is greater than one hundred fifteen percent (115%) of the middle appraisal then
such highest appraisal shall be disregarded. If the fair market rent set by any
appraisal is so disregarded, then the average shall be determined by computing
the average set by the other appraisals that have not been disregarded.

               (5) Nothing contained herein shall prevent Landlord and Tenant
from jointly selecting a single appraiser to determine

                                       45
<PAGE>   51

the fair market rent of the Promises, in which event the determination of such
appraisal shall be conclusively deemed the fair market rent of the Premises.

               (6) Each party shall bear the fees and expenses of the appraiser
selected by or for it, and the fees and expenses of the third appraiser (or the
joint appraiser if one joint appraiser if one joint appraiser is used) shall be
borne fifty percent (50%) by Landlord and fifty percent (50%) by Tenant.

               20.5. Landlord's Right to Lease. If Tenant does not indicate in
writing its agreement to enter into the Second Lease on the terms contained in
Landlord's written notice within the allowed period of time, then Tenant's Right
of First Offer shall terminate and Landlord thereafter shall have the right to
lease such space to the current tenant or any other prospective tenant.

               20.6. First Offer Space. The term "First Offer Space" shall mean
that building commonly described as 740 Arques Avenue, Sunnyvale, California,
consisting of approx. 20,000 s.f. Such First Offer Space is currently being
leased by Landlord to, and is occupied by, Navigational Technologies pursuant to
a lease with an expiration date of October 31, 2002 which lease does not contain
an option to extend the term thereof beyond October 31, 2002.

               20.7. Termination. The provisions of this Article 20 shall
terminate upon the earliest of the following to happen: (i) the expiration or
earlier termination of the Lease, or except as provided in Paragraphs 14.1.5 and
14.1.7 of the Lease (ii) any assignment by Tenant of its interest in this Lease
or subletting by Tenant of substantially all of the Premises for substantially
all of the remainder of the Lease Term.

                                   ARTICLE 21

                             OPTION TO EXTEND LEASE

               21.1. Option to Extend Lease Term. In the event Tenant exercises
its Right of First Offer as set forth in Article 20 herein above, then and only
then, Landlord grants to Tenant an option to extend the Lease Term for a period
required to make this Lease conterminous with the term of the Second Lease for
the Right of First Offer Space term on the following terms and conditions:

               21.1.l. Tenant must give Landlord notice in writing

                                       46
<PAGE>   52

of its exercise of the option in question no later than ninety (90) days before
the date the Lease Term would end but for said exercise and Tenant must exercise
such option, if at all, for the entire Leased Premises than occupied by Tenant.
Tenant's option rights shall terminate as to any space for which the option to
extend is not exercised.

               21.1.2. Tenant may not extend the Lease Term pursuant to any
option granted by this paragraph if Tenant is materially in default beyond any
applicable cure period as of the date of exercise of the option in question or
as to the date this Lease would have been terminated but for said exercise.

               21.1.3. All terms, covenants, and conditions of this Lease shall
apply during the option period, except that the Base Monthly Rent for the option
period shall be determined as provided in paragraph 20.1.4.

               21.1.4. The Base Monthly Rent for the option period shall be the
Monthly Basic Rent payable for the last month of the previous Lease Term with
annual increases of four (4%) percent per annum calculated in the same manner as
the Base Monthly Rent in this Lease.

               21.1.5. The option rights of Tenant under this Article 21, and
the Extended Term thereunder, are granted for Tenant's personal benefit and may
not be assigned or transferred by Tenant, except as provided in Paragraphs
14.1.5 and 14.1.7 of the Lease. In the event that Landlord consents to a
sublease or assignment under Article 14, the option granted herein and any
Extended Term thereunder shall be void and of no force and effect, whether or
not Tenant shall have purported to exercise such option prior to such assignment
or sublease.

               IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease
with the intent to be legally bound thereby, to be effective as of the Effective
Date of this Lease.

     AS LANDLORD:                          AS TENANT:

ONE SOUTH PARK INVESTORS,            BSQUARE, A Washington
A California General Partnership     Corporation

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

                                       47
<PAGE>   53

Its:                                 Its:
    -------------------------            ---------------------------
Date:                                Date:
     ------------------------             --------------------------

PAUL ENTERPRISES,
A California General Partnership

By:
   --------------------------
Its:
    -------------------------
Date:
     ------------------------

FKLM,
A California General Partnership

By:
   --------------------------
Its:
    -------------------------
Date:
     ------------------------

                                       48
<PAGE>   54

                                    EXHIBIT A

                            (SEE ATTACHED SITE PLAN)

                                       49
<PAGE>   55

                                  EXHIBIT "B"

                            (SEE ATTACHED FLOOR PLAN)

                                       50
<PAGE>   56

                                   EXHIBIT "C"

                      TENANT INTERIOR IMPROVEMENT AGREEMENT

        This Tenant Interior Improvement Agreement ("Agreement") is made part of
that Lease dated as of August 30, 2000, (the "Lease") by and between ONE SOUTH
PARK INVESTORS, a California General Partnership; PAUL ENTERPRISES, a California
General Partnership; and FKLM, a California General Partnership ("Landlord"),
and BSQUARE CORPORATION, a Washington Corporation ("Tenant"). Landlord and
Tenant agree that the following terms are part of the Lease.

        1. Purpose of Improvement Agreement: The purpose of this Improvement
Agreement is to set forth the rights and obligations of Landlord and Tenant with
respect to the construction of Interior Improvements within the Premises prior
to the Commencement Date.

        2. Definitions: As used in this Agreement, the following terms shall
have the following meanings, and terms which are not defined below, but which
are defined in the Lease and which are used in this Agreement, shall have the
meanings ascribed to them by the Lease:

               a. Approved Specifications: The term "Approved Specifications"
shall mean those floor plans and specifications for the Interior Improvements
designed by JPC, Inc. ("Project Architect") to be constructed for Tenant by
Hollander Smith, Inc., or other mutually agreed upon general contractor
("Project Contractor") for approximately 20,000 s.f. of the Building which are
set forth in EXHIBIT "D" to the Lease.

               b. Interior Improvements: The term "Interior Improvements" shall
mean all interior improvements to be constructed by Tenant for the Premises in
accordance with the Approved Specifications.

               c. Interior Improvement Costs: The term "Interior Improvement
Costs" shall mean the ' following: (i) the total amount due pursuant to the
general construction contract entered into by Tenant with the Project Contractor
to construct the Interior Improvements; (ii) the cost of all governmental
approvals required as a condition to the construction of the Interior
Improvements (including all construction taxes imposed

                                       51
<PAGE>   57

by the City of Sunnyvale) in connection with the issuance of a building permit
for the Interior Improvements; (iii) all utilities' connection or use fees; (iv)
fees of architects or engineers for services rendered in connection with the
design and construction of the Interior Improvements; and (v) the cost of
payment and performance bonds obtained by Tenant or Project Contractor to assure
completion of the Interior Improvements. The parties acknowledge that the City
of Sunnyvale imposes certain taxes as a condition to the issuance of building
permits in certain circumstances. The parties further acknowledge that any
imposition of such taxes that must be paid in order to obtain building permits
for the Interior Improvements shall be "Interior Improvement Costs."

               d. Tenant Improvement Allowance: Landlord agrees to grant to
Tenant a Tenant Improvement Allowance of One Hundred Thousand ($100,000.00)
Dollars based upon 20,000 s.f. of Leased Premises at $5.00 per square feet of
Rentable Area leased by Tenant under the Lease, to be applied to the Interior
Improvement costs. In the event the total amount of the Interior Improvement
costs exceeds the total amount of the Tenant Improvement Allowance, then Tenant
shall pay any amounts over and above the Tenant Improvement Allowance. Tenant
shall, on a monthly basis, submit to Landlord copies of Project Contractor's
progress billings to Tenant for work completed. Landlord shall, within 20
calendar days after receipt of progress billings reimburse Tenant for the billed
Tenant Improvement costs until Tenant Improvement Allowance has been expended.

               e. Substantial Completion and Substantially Complete: The terms
"Substantial Completion" and "Substantially Complete" shall each mean the date
when all of the following have occurred with respect to the Interior
Improvements in question: (i) the construction of the Interior Improvements in
question has been substantially completed in accordance with the requirements of
this Lease; (ii) the Project Architect responsible for preparing the plans shall
have executed a certificate or statement representing that the Interior
Improvements in question have been substantially completed in accordance with
the plans and specifications therefor; or (iii)two (2) weeks after the date on
which Landlord completes the installation of the fire sprinkler system to the
interior of the Building, if such event occurs earlier.

        3. Construction of Interior Improvements: Tenant desires to cause
certain Interior Improvements to be constructed in the Premises and Tenant
agrees to construct such Interior

                                       52
<PAGE>   58

Improvements in the Premises in conformance with the terms and conditions of the
Lease and this Agreement, provided, however, that Landlord shall not be required
to approve any Interior Improvements that: (i) do not conform to applicable
government regulations or are, disapproved by any governmental agency having
jurisdiction; (ii) overload the floors of the Premises or the Building; or (iii)
are, in Landlord's reasonable judgment, of a nature or quality inconsistent with
the nature and quality of the remainder of the Premises or the Building. Such
Interior Improvements will be constructed by Tenant in accordance with the
following:

               a. Development of Preliminary Plans for the Interior
Improvements: Landlord and Tenant shall approve a conceptual plan for the
Interior Improvements, (the "Interior Plan"]. Tenant shall on or before
September 12, 2000, reasonably develop and Landlord shall reasonably approve
Preliminary Plans and Specifications for the Interior Improvements [that are
consistent with the Interior Plan) in the following manner: (i) Tenant shall
cause the Project Architect to prepare such plans and specifications for
Landlord's approval; (ii) as Preliminary Plans and Specifications for the
Interior, Improvements are developed by Tenant, they shall be submitted to
Landlord for approval; (iii) Landlord shall have five (5) working days after
receipt of any information from Tenant regarding the Preliminary Plans and
Specifications to approve such information or respond specifically in writing as
to why and in what particular regard the information so submitted is not
acceptable, and a failure to so respond shall be deemed Landlord's approval of
the information submitted; and (iv) if Landlord proposes changes to the
Preliminary Plans and Specifications, Landlord and Tenant shall confer in good
faith to complete development and approval of the Preliminary Plans and
specifications as soon as reasonably practicable. The Preliminary Plans And
Specifications so developed and approved by Landlord and Tenant pursuant to this
subsection are referred to herein as the "Approved Preliminary Plans."

               b. Development of Final Plans for Interior Improvements. As soon
as possible after Landlord and Tenant have agreed upon the Approved Preliminary
Plans, Tenant shall cause such Project Architect to prepare and deliver to
Landlord for Landlord's. approval, copies of Final Plans,

                                       53
<PAGE>   59

Specifications and Working Drawings for the Interior Improvements that are
consistent with and/or logical evolutions from the Approved Preliminary Plans.
Landlord shall have ten (10) working days after such delivery to reasonably
approve such Final Plans, Specifications and Working Drawings in writing or to
respond in writing specifying the exact changes required for approval, and a
failure by Landlord to so respond in writing shall be deemed its approval of the
matters submitted to it. Tenant shall then cause such changes to be made and
resubmit the same to Landlord for its approval as aforementioned, which approval
Landlord agrees not to unreasonably withhold or delay. The parties shall at all
times act in good faith to reach agreement on Final Plans, specifications and
Working Drawings for the Interior Improvements, with each party using its best
efforts so that the Final Plans, Specifications, and Working Drawings will be
completed on or before October 13, 2000. As soon as so approved by Landlord,
Tenant shall submit such Final Plans, Specifications, and Working Drawings to
all appropriate governmental agencies for approval. If any changes are required
by such governmental agencies, Tenant shall report back to Landlord and the
parties shall confer and make such changes as are necessary to satisfy the
requirements of such governmental agencies. As soon as all such governmental
approvals have been obtained, four (4) copies of such Final Plans,
Specifications, and Working Drawings shall be initialed and dated by Landlord
and Tenant. The Final Plans, Specifications, and Working Drawings so approved,
and all change orders specifically permitted by this Lease shall be referred to
herein as the "Final Approved Interior Plans." The parties acknowledge that the
commencement of the terms of this Lease depends upon when the Interior
Improvements are completed and that such completion depends in part upon
Tenant's submission of its requirements for such improvements and its response
to approving plans prepared by Tenant. The parties agree to each use their best
efforts to process the preparation and approval of plans for the Interior
Improvements within the schedule set forth herein.

               c. Construction Contract: Landlord and Tenant anticipate that the
Interior Improvements per EXHIBIT "D" shall be constructed by Hollander Smith,
Inc. (hereinafter the "Project Contractor").

               d. Commencement and Completion for the Interior Improvements: As
soon as the Approved Specifications have been developed as provided above, all
necessary governmental approvals have been obtained and the Tenant has entered
into a general construction contract with the Project Contractor, then Tenant
shall thereafter commence construction of the Interior Improvements and shall
diligently prosecute such construction to completion, using its best efforts so
that the Interior Improvements may be Substantially Completed by the "Scheduled
Commencement Date."

                                       54
<PAGE>   60

        4. Changes to Approved Specifications: Neither Landlord nor Tenant shall
have the right to order extra work or change orders to the Approved
Specifications described in EXHIBIT "D" without the prior written consent of the
other. All extra work or change orders requested by either Landlord or Tenant
shall be made in writing, shall specify any added or reduced cost and/or
construction time resulting therefrom, and shall become effective and a part of
the Approved Specifications once approved in writing by both parties. If a
change order-requested by Tenant results or causes an increase in the Interior
Improvements Costs above the amount of the Tenant Improvement Allowance, then
Tenant shall pay the amount of such increase over the Tenant Improvement
Allowance caused by the change order requested by Tenant at the time the change
order is approved by both Landlord and Tenant. If a change order results in an
increase in the amount of construction time needed by Tenant to complete the
Interior Improvements, paragraph 5 hereof may apply.

        5. Delay in completion Caused by Tenant: The parties hereto acknowledge
that the date on which Tenant's obligation to pay the Base Monthly Rent and the
Additional Rent would otherwise commence may be delayed because of (i) Tenant's
failure to submit necessary information to Landlord when required, (ii) Tenant's
failure to promptly develop and submit the plans for the Interior Improvements,
(iii) any act by Tenant which interferes with or delays the completion of the
plans for the Interior Improvements or Landlord's construction work, (iv) change
orders requested by Tenant and approved by Landlord, or (v) special materials or
equipment ordered or specified by Tenant that cannot be obtained by Tenant at
normal cost within a reasonable period of time because of limited availability.
It is the intent of the parties hereto that the commencement of Tenant's
obligation to pay the Base Monthly Rent and all Additional Rent not be delayed
by any of such causes or by any other act of Tenant, and in the event it is go
delayed, Tenant's obligation to pay the base Monthly Rent and all Additional
Rent shall commence as of the date it would otherwise have commenced absent
delay caused by Tenant, provided that within a reasonable period of time after
learning of the occurrence of the cause of any such delay, Tenant notifies
Landlord in writing of the fact that such delay has occurred and the known or
anticipated extent of any such delay.

        6. Delivery of Possession and Acceptance Agreement. As soon as the
Interior Improvements are Substantially Completed,

                                       55
<PAGE>   61

Landlord and Tenant shall together walk through the Premises and inspect all
Interior Improvements so completed using reasonable efforts to discover all
uncompleted or defective construction in the Interior Improvements. After such
inspection has been completed, each party shall sign an Acceptance Agreement in
the form attached to the Lease as EXHIBIT "E", which shall state the
Commencement Date and the Base Monthly Rent. As soon as such inspection has been
completed and such acceptance agreement executed, Landlord shall deliver
possession of the Premises to Tenant. Landlord shall have no obligation to
deliver possession of the Premises to Tenant until the execution of the
acceptance agreement has been completed. Tenant's taking possession of any part
of the Premises shall be deemed to be an acceptance by Tenant of the Premises in
accordance with the terms of the Lease except latent defects that could not
reasonable have been discovered by Tenant. Notwithstanding anything contained
herein, Tenant's obligation to pay the Base Monthly Rent and Additional Rent
shall commence as provided in the Lease, regardless of whether Tenant completes
such inspection or executes such acceptance agreement.

        7. Standard of construction and Warranty: Tenant hereby warrants that
the Interior Improvements shall be constructed substantially in accordance with
the Approved Specifications (as modified by change orders approved by Landlord
and Tenant), all Private Restrictions and all Laws, in a good and workmanlike
manner, and all materials and equipment furnished shall conform to such final
plans and shall be new and otherwise of good quality. The foregoing warranty
shall be subject to, and limited by, the following:

               a. Once Tenant is notified in-writing of any breach of the
above-described warranty, Tenant shall promptly commence the cure of such breach
and complete such cure with diligence at Landlord's sole cost and expense.

               b. Tenant's liability pursuant to such warranty shall be limited
to the cost of correcting the defect or other matter in question. In no event
shall Landlord be liable to Tenant for any damages or liability incurred by
Tenant as a result of such defect or other matter, including without limitation
damages resulting from any loss of business by Tenant or other consequential
damages.

               c. Upon request by Landlord, Tenant shall inform Landlord of all
written construction and equipment warranties existing in favor of Tenant which
affect the Interior

                                       56
<PAGE>   62

Improvements. Landlord shall cooperate with Tenant in enforcing such warranties
and in bringing any suit that may be necessary to enforce liability-with regard
to any defect for which Landlord is not responsible pursuant to this paragraph
so long as Tenant pays all costs reasonably incurred by Landlord in so acting.

               d. Tenant makes no other express or implied warranty with respect
to the design, construction or operation of the Interior Improvements except as
set forth in this paragraph.

                                          AS LANDLORD:

                                    ONE SOUTH PARK INVESTORS,
                                    A California General Partnership

                                    By:
                                       ------------------------------
                                    Its:
                                        -----------------------------
                                    Date:
                                         ----------------------------

                                    PAUL ENTERPRISES,
                                    A California General Partnership

                                    By:
                                       ------------------------------
                                    Its:
                                        -----------------------------
                                    Date:
                                         ----------------------------

                                    FKLM,
                                    A California General Partnership

                                    By:
                                       ------------------------------
                                    Its:
                                        -----------------------------
                                    Date:
                                         ----------------------------

                                          AS TENANT:

                                    BSQUARE CORPORATION,
                                    A Washington Corporation

                                    By:
                                       ------------------------------
                                    Its:
                                        -----------------------------
                                    Date:
                                         ----------------------------

                                       57
<PAGE>   63

                                    EXHIBIT D

                             APPROVED SPECIFICATIONS

        At the time of the execution of the Lease, Landlord's Work and Tenant's
Improvement Allowance of $100,00.00 as set forth in paragraph 2.3 of the Lease
had been agreed to, but Tenant's Interior Plan and Approved Specifications had
not yet been completed. It is the intent of the parties to develop the Approved
Specifications after the execution of the Lease pursuant to the procedures set
forth in Exhibit "C" hereto.

                                       59
<PAGE>   64

                                    EXHIBIT E

                    COMMENCEMENT DATE / ACCEPTANCE AGREEMENT

This Commencement Date/Acceptance Agreement is made as of , 2000 with regard to
that Lease dated _______________, 2000, by and between ONE SOUTH PARK INVESTORS,
a California General Partnership; PAUL ENTERPRISES, a California General
Partnership; and FKLM, a California General Partnership ("Landlord"), and
BSQUARE CORPORATION, a Washington Corporation ("Tenant"), affecting those
Premises commonly known as 255 San Geronimo Way, Sunnyvale (Santa Clara County),
California. The parties hereto agree as follows:

1. All improvements required to be constructed by Landlord by the Lease have
been completed in accordance with the terms of the Lease and are hereby accepted
by Tenant, except for latent defects discovered during the first year of the
construction of the tenant improvements.

2. Possession of the Premises has been delivered to Tenant and Tenant has
accepted and taken possession of the Premises subject to any latent defects
provided for in paragraph 1 above.

3. The Commencement Date of the Lease Term is ___________, 2000, and the Lease
Term shall expire for the Premises on , 2000 unless sooner terminated or
extended according to the terms of the Lease or by mutual agreement.

4. The Base Monthly Rent initially due _________, 200_, pursuant to the Lease is
_________________________ ($ ) per month, subject to any subsequent adjustments
required by the Lease.

5. Landlord has received a Security Deposit in the amount of
_____________________________ ($__________). In addition, Tenant has prepaid
rent in the amount of ($_______), which shall be applied to the first
installment of Base Monthly Rent.

6. To the best of Landlord's and/or Tenant's knowledge, the Lease is in full
force and effect, neither party is in default of its obligations under the
Lease, and Tenant has no set-offs, claims, or defenses to the enforcement of the

                                       60
<PAGE>   65

Lease. Landlord acknowledges that the Base Monthly Rent for the Premises has
been paid current by Tenant through ________, 200_ .

     AS LANDLORD:                          AS TENANT:

ONE SOUTH PARK INVESTORS,            BSQUARE, A Washington
A California General Partnership     Corporation

By:                                  By:
   --------------------------           -------------------------
Its:                                 Its:
    -------------------------            ------------------------
Date:                                Date:
     ------------------------             -----------------------

PAUL ENTERPRISES,
A California General Partnership

By:
   --------------------------
Its:
    -------------------------
Date:
     ------------------------

FKLM,
A California General Partnership

By:
   --------------------------
Its:
    -------------------------
Date:
     ------------------------

                                       61
<PAGE>   66

                                   EXHIBIT "F"

                              (RULES & REGULATIONS)

        1. Sidewalks, halls, passages, exits, entrances, and stairways shall not
be obstructed by Tenant or used by Tenant for any purpose other than for ingress
and egress from the Premises. Tenant, Tenant's employees and invitees shall not
go upon the roof of the Building or any other buildings on the Property, except
as authorized by Landlord.

        2. No sign, placard, picture, name, advertisement or notice visible from
the exterior of the Premises or the Building shall be inscribed, painted,
affixed, installed or otherwise displayed by Tenant either on the Premises or
any part of the Building or anywhere else on the Property without the prior
written consent of Landlord, and Landlord shall have the right to remove any
such sign, placard, picture, name, advertisement or notice without notice to and
at the expense of Tenant.

        All approved signs or lettering on doors and walls shall be printed,
painted, affixed or inscribed at the expense of Tenant by a person approved by
Landlord.

        3. No curtains, draperies, blinds, shutters, shades, screens or other
coverings, awnings, hangings or decorations shall be attached to, hung or placed
in, or used in connection with any window, door or patio on the Premises without
the prior written consent of Landlord. In any event with the prior written
consent of Landlord, all such items shall be installed inboard of Landlord' s
window coverings and shall not in any way be visible from the exterior of the
Building. No articles shall be placed or kept on the window sills so as to be
visible from the exterior of the Building. No articles shall be placed against
glass partitions or doors which might appear unsightly from outside the
Building.

        4. Landlord reserves the right to exclude from the Building between the
hours of 6:00 p.m. and 8:00 a.m. and at all hours on Saturdays, Sundays and
holidays all persons who are not clients, guests or employees of tenants of the

                                       62
<PAGE>   67

Building.

        5. Tenant shall not employ any person or persons other than the janitor
of Landlord for the purpose of cleaning the Premises unless otherwise agreed to
by Landlord in writing. Except with written consent of Landlord, no person or
persons other than those approved by Landlord shall be permitted to enter the
Building for the purpose of cleaning the same. Tenant shall not cause any
unnecessary labor by reason of Tenant's carelessness or indifference in the
preservation of good order and cleanliness of the Premises.

        6. All entrance doors in the Premises shall be locked when the Premises
are not in use, and all doors opening to pubic corridors shill be kept closed
except for normal ingress and egress from the Premises.

        7. As more specifically provided in the Lease, Tenant shall not waste
electricity, water heating or air conditioning and agrees to cooperate fully
with Landlord to assure the most effective operation of the Building's heating
and air conditioning, and shall refrain from attempting to adjust any controls
other than room thermostats installed for Tenant's use.

        8. Tenant shall keep and cause to be kept closed all window coverings
when necessary because of the sun's position.

        9. Tenant shall not alter any lock or access device or install a new or
additional lock or access device or any bolt on any door of the Premises without
the prior written consent of Landlord. If Landlord shall give its consent,
Tenant shall in each case furnish Landlord with a key for any such lock.

        10. Tenant shall not make or have made additional copies of any keys or
access devices provided by Landlord. Tenant, upon the termination of the
tenancy, shall deliver to Landlord all the keys or access devices for the
Building, offices, rooms and toilet rooms which shall have been furnished to
Tenant or which Tenant shall have had made. In the event of the loss of any keys
or access devices so furnished by Landlord, Tenant shall pay Landlord therefor.
Tenant shall be responsible for all keys and access devices issued to Tenant's
employees.

                                       63
<PAGE>   68

        12. The toilet rooms, toilets, urinals, wash bowls and other apparatus
shall not be used for any purpose other than that for which they were
constructed and no foreign substance of any kind whatsoever shall be thrown
therein, and the expense of any breakage, stoppage or damage resulting from the
violation of this rule by Tenant or Tenant's employees or invitees shall be
borne by Tenant.

        13. Tenant shall not use or keep in the Premises or the Building any
kerosene, gasoline or inflammable or combustible fluid or material other than
limited quantities necessary (or the operation or maintenance of office
equipment. Tenant shall not use any method of heating or air conditioning other
than that supplied by Landlord.

        14. Tenant shall not use, keep or permit to be used or kept in the
Premises any foul or noxious gas or substance or permit or suffer the Premises
to be occupied or used in a manner offensive or objectionable to Landlord or
other occupants of the Building by reason of noise, odors and/or vibrations or
interfere in any way with other tenants or those having business therein, nor
shall any animals or birds be brought or kept in or about the Premises or the
Building.

        15. No cooking shall be done or permitted by Tenant on the Premises
except the use by the Tenant of approved equipment provided by landlord in the
designated kitchen area for the preparation or coffee, tea, hot chocolate and
similar beverages for Tenant and its employees. Such equipment and use shall be
in accordance with all applicable federal, state and city laws, codes,
ordinances, rules and regulations. The Premises shall not be used for lodging.

        16. If Tenant requires telegraphic, telephonic, burglar alarm or similar
services, it shall first obtain and comply with Landlord's instructions in their
installation.

        17. Landlord will direct electricians as to where and how telephone,
telegraph and electrical wires are to be introduced or installed. No boring or
cutting for wires or penetration of any kind will be allowed without the prior
written consent of Landlord. The location of burglar alarms, telephones, call
boxes, TV antennae and other office equipment affixed to the Premises shall be
subject

                                       64
<PAGE>   69

to the written approval of Landlord.

        18. Except with the prior written consent of Landlord, Tenant shall not
sell or permit the sale, at retail, of newspapers, magazines, periodicals,
theater tickets or any other goods or merchandise in or on the Premises, nor
shall Tenant carry on, or permit or allow any employee or other person to carry
on, the business of stenography, typewriting or any similar business in or from
the Premises, nor shall the Premises be used for the storage of merchandise or
for manufacturing of any kind, nor shall the Premises be used for any unlawful
purpose, or any business or activity other than that specifically provided for
in Tenant's Lease. 19. Tenant shall not lay linoleum, tile, carpet, or any other
floor covering so that the same shall be affixed to the floor of the Premises in
any manner except as approved in writing by Landlord. The expense of repairing
any damage resulting from a violation of this rule by Tenant or Tenant's
contractors, employees or invitees or the removal of any floor covering shall be
borne by Tenant.

        20. Tenant shall not place a load upon any floor of the Premises which
exceeds the load per square foot which such floor was designed to carry and
which is allowed by law. Tenant shall not mark or drive nails, screw or drill
into the partitions, woodwork or plaster or in any way deface the Premises or
any part thereof.

                                       65<PAGE>   1
                                                                   EXHIBIT 10.31

                              EMPLOYMENT AGREEMENT

                                     BETWEEN

                             AREMISSOFT CORPORATION

                                       AND

                                   PAUL BLOOM

     THIS EMPLOYMENT AGREEMENT (the "Agreement"), dated April 18, 2000, is
entered into by and between AremisSoft Corporation, a Delaware corporation (the
"Company") and Paul Bloom (the "Executive") collectively referred to herein as
the "parties."

     WHEREAS, the Company wishes to employ the Executive to serve as its
Executive Vice President-Corporate Development as well as to perform other
duties on behalf of the Company, as determined by the Company's Chief Executive
Officer, President, or the Board of Directors of the Company (the "Board").

     NOW, THEREFORE, for and in consideration of the mutual promises and
conditions made herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows.

                                    ARTICLE 1

                        EMPLOYMENT AND TERM OF EMPLOYMENT

     1.1  EMPLOYMENT AND TERM. The Company hereby employs Executive to render
full-time services to the Company on an exclusive basis, on the terms and
conditions set forth below, commencing on or before May 15, 2000 (the
"Commencement Date") until the employment relationship is terminated in
accordance with the provisions of this Agreement. This Agreement is for a term
of three (3) years (the "Stated Term") unless terminated earlier as provided for
herein (the "Employment Term").

     1.2  ACCEPTANCE. Executive hereby accepts employment with the Company and
agrees to devote his full-time attention and best efforts exclusively to
rendering the services described below from and after the Commencement Date. The
Executive shall accept and follow the direction and authority of the Company's
President and/or Chief Executive Officer in the performance of his duties, and
shall comply with all existing and future regulations applicable to employees of
the Company and to the Company's business.

<PAGE>   2

                                    ARTICLE 2

                               DUTIES OF EMPLOYEE

     2.1  GENERAL DUTIES. Executive shall serve as the Company's Executive Vice
President--Corporate Development. In such capacities, Executive shall do and
perform all services, acts, or other things necessary or advisable to assist the
Company's Executive management in the areas of mergers and acquisitions,
investment banking, strategic relationships and public relations, predominantly
in the United States. To the extent consistent with the Company's Certificate of
Incorporation ("articles") and Bylaws ("bylaws"), Executive shall have all
powers, authority and responsibilities necessary to carry out his duties, and
such other powers and duties as the Board may prescribe consistent with the
Company's articles and bylaws.

     2.2  EXCLUSIVE SERVICES. It is understood and agreed that the Executive may
not engage in any other business activity during the Employment Term, whether or
not for profit or other remuneration, without the prior written consent of the
Company; provided, however, that the Executive may make personal financial
investments which do not involve any material active participation on his part,
and may engage in charitable, philanthropic, educational, religious, civic and
similar types of activities to the extent that such activities do not hinder or
otherwise interfere with the business of the Company or any affiliate or
subsidiary of the Company, or the performance of the Executive's duties under
this Agreement. Notwithstanding the foregoing, during the Employment Term,
Executive shall not directly or indirectly acquire any stock or interest in any
corporation, partnership, or other business entity that competes, directly or
indirectly, with the business of the Company without obtaining the prior written
consent of the Company, but this shall not be construed as preventing Executive
from (a) investing his personal assets in businesses that do not compete with
the Company and in which his participation is solely that of an investor; (b)
purchasing securities in any business the securities of which are regularly
traded provided that such purchase shall not result in his collectively owning
beneficially at any time five percent (5%) or more of the equity securities of
any entity engaged in a business competitive to that of the Company; (c)
purchasing securities of mutual funds and other pooled investment vehicles,
indices or baskets; or (d) participating in conferences, preparing or publishing
papers or books or teaching, with the prior approval of the board of directors.
Prior to commencing any activity described in clause (d), the Executive shall
inform the board of directors of the Company in writing of such activity. It is
also understood and agreed that the Executive will not compete with the Company
during the Employment Term. For purposes of this Agreement, the phrase "compete
with the Company," or the substantial equivalent thereof, means that Executive,
either alone or as a partner, member, director, employee, shareholder or agent
of any other business, or in any other individual or representative capacity,
directly or indirectly owns, manages, operates, controls, or participates in the
ownership, management, operation or control of, or works for or provides
consulting services to, or permits the use of his name by, or lends money to,
any business or activity which is or which becomes, at the time of the acts or
conduct in question, directly or indirectly competitive with the development,
financing and/or marketing of the products, proposed products or services of the
Company.

                                       2
<PAGE>   3

     2.3  REPORTING OBLIGATIONS. In connection with the performance of his
duties hereunder, unless otherwise instructed by the Board, the Executive shall
report directly to the President of the Company and shall be subject to the
President's day to day supervision of Executive's activities.

                                    ARTICLE 3

                      COMPENSATION AND BENEFITS OF EMPLOYEE

     3.1  ANNUAL BASE SALARY; BONUS. The Company shall pay the Executive salary
for the services to be rendered by him during the term of this Agreement at the
rate of one hundred fifty thousand dollars ($150,000) annually (prorated for any
portion of a year), subject to increases, if any, as the Company may determine
in its sole discretion after periodic review of the Executive's performance of
his duties hereunder. Such base salary shall be payable in periodic installments
in accordance with the terms of the Company's regular payroll practices in
effect from time to time during the term of this Agreement, but in no event less
frequently than once each month. The Executive shall be entitled to participate
in any bonus or incentive compensation plan or program adopted by the Company
for any of its employees on the same terms as any other executive officer of the
Company (other than the Company's Chief Executive Officer and President).

     3.2  STOCK OPTIONS. Under the Company's 2000 Stock Option Plan, Executive
shall be entitled to receive stock options entitling Executive to purchase a
total of two hundred thousand (200,000) shares of the Company's common stock
with an exercise price of $18.06 per share which is the fair market value of a
share of the Company's common stock on the date of this Agreement. One half of
the options shall vest on the Commencement Date and the other half of the
options shall vest on January 1, 2001. The options shall have a term of five
years and shall be subject to other standard terms and conditions generally
applicable to stock options issued under the Company's 2000 Stock Option Plan or
otherwise approved by the Board. The Company's Board shall ratify the issuance
of the options granted pursuant to this Agreement on or before the Commencement
Date.

     3.3  EXPENSES. The Company shall pay or reimburse the Executive for all
reasonable, ordinary and necessary business expenses actually incurred or paid
by the Executive in the performance of Executive's services under this Agreement
in accordance with the expense reimbursement policies of the Company in effect
from time to time during the Employment Term, upon presentation of proper
expense statements or vouchers or such other written supporting documents as the
Company may reasonably require.

     3.4  VACATION. The Executive shall be entitled to three (3) weeks paid
vacation for each calendar year (prorated for any portion of a year, as
applicable). Notwithstanding anything to the contrary in this Agreement,
vacation time shall cease to accrue beyond eight weeks at any given time during
the Employment Term.

                                       3
<PAGE>   4

     3.5  INDEMNIFICATION. Consistent with the terms of the Company's articles
and bylaws, the Company shall indemnify and defend the Executive against any
losses, costs, damages or expenses incurred as a direct consequence of the
discharge of his duties or by reason of his status as an agent of the Company
and hold Executive harmless for any actions taken or decisions made by him in
good faith while performing services for the Company during the Employment Term.
This Section 3.5 shall survive the termination of Executive's employment and
termination of this Agreement. If the Company shall enter into indemnification
agreements with any other officer or directors of the Company, the Company
agrees to enter into a similar agreement with the Executive, and the Executive
shall thereafter be entitled to the benefits of any subsequent amendments
thereto made for any other officer or director of the Company.

     3.6  GENERAL EMPLOYMENT BENEFITS. The Executive shall be entitled to
participate in, and to receive the benefits under, any pension, health, life,
accident and disability insurance plans or programs and any other employee
benefit or fringe benefit plans that the Company makes available generally to
its employees, as the same may be in effect from time to time during the
Employment Term.

     3.7  OFFICE SPACE/HOUSING. During the Employment Term, the Executive will
have the right, while in New York City for business purposes, to use the
Company's office space for office and housing purposes. If the Company enters
into a long term lease in order to provide the Employee with office space, then
Employee agrees to indemnify and hold the Company harmless from any rental or
other liability under the lease if, and only if, this Agreement is terminated
for any reason other than by the Company "without cause" pursuant to Section 4.4
below.

                                    ARTICLE 4

                            TERMINATION OF EMPLOYMENT

     4.1  TERMINATION. This Agreement may be terminated earlier as provided for
in this Article IV, or extended by further written agreement of the parties.

     4.2  TERMINATION FOR CAUSE. The Company reserves the right to terminate
this Agreement for cause upon: (a) Executive's willful and continued failure to
substantially perform his duties with the Company (other than such failure
resulting from his incapacity due to physical or mental illness) (b) Executive's
willful engagement in gross misconduct, as determined by the Board, which is
materially and demonstrably injurious to the Company; or (c) Executive's
commission of a felony, or an act of fraud against the Company or its
affiliates. Executive shall not be entitled to any severance benefits and all
options that have not vested shall be canceled upon termination for cause in
accordance with the terms and conditions of the 2000 Stock Option Plan.

     4.3  TERMINATION WITHOUT CAUSE. Notwithstanding anything to the contrary in
this Agreement, the Company reserves the right to terminate this Agreement at
any time upon ninety

                                       4
<PAGE>   5

(90) days written notice to Executive, without cause. Executive shall not be
entitled to any severance benefits and all options that have not vested shall be
canceled upon termination without cause in accordance with the terms and
conditions of the 2000 Stock Option Plan.

     4.4  VOLUNTARY TERMINATION BY EXECUTIVE. Notwithstanding anything to the
contrary in this Agreement, Executive may terminate this Agreement at any time
upon ninety (90) days written notice to the Company. Executive shall not be
entitled to any severance benefits and all options that have not vested shall be
canceled upon termination by the Executive in accordance with the terms and
conditions of the 2000 Stock Option Plan.

     4.5  DISABILITY. If Executive becomes permanently and totally disabled,
this Agreement shall automatically terminate. Executive shall be deemed
permanently and totally disabled if he is unable to engage in the activities
required by this Agreement by reason of any medically determinable physical or
mental impairment, as confirmed by three independent physicians, which can be
expected to result in death or which has lasted or can be expected to last for a
continuous period of not less than 12 months.

     4.6  DEATH. If Executive dies during the term of this Agreement, this
Agreement shall automatically terminate. Upon termination due to death, the
Executive's designated beneficiary, or his estate or representative, shall be
entitled to receive a lump sum payment equal to his annual base salary, as
contained in Section 3.1 of this Agreement, then in effect.

     4.7  EFFECT OF TERMINATION. The termination of employment shall not impair
any obligation that accrued prior to termination, nor shall it excuse the
performance of any obligation that is required or contemplated hereunder to be
performed after termination, and any such obligation shall survive the
termination of employment and this Agreement.

                                    ARTICLE 5

                    COVENANTS AND REPRESENTATIONS OF EMPLOYEE

     5.1  UNFAIR AND NON-COMPETITION. The Executive acknowledges that he will
have access at the highest level to, and the opportunity to acquire knowledge
of, the Company's customer lists, customer needs, business plans, trade secrets
and other confidential and proprietary information from which the Company may
derive economic or competitive advantage, and that he is entering into the
covenants and representations in this Article V in order to preserve the
goodwill and going concern value of the Company, and to induce the Company to
enter into this Agreement. The Executive agrees not to compete with the Company
or to engage in any unfair competition with Employer during the Employment Term,
but not limited to the acts and conduct described below.

     5.2  CONFIDENTIAL INFORMATION. During the Employment Term, Executive agrees
to keep secret and to retain in the strictest confidence all confidential
matters which relate to the Company or its "affiliate" (as that term is defined
in the Exchange Act), including, without

                                       5
<PAGE>   6

limitation, customer lists, client lists, trade secrets, pricing lists, business
plans, financial projections and reports, business strategies, internal
operating procedures, and other confidential business information from which the
Company derives an economic or competitive advantage, or from which the Company
might derive such advantage in its business, labeled "secret" or "confidential"
or some similar term, and not to disclose any such information to anyone outside
of the Company, whether during or after the Employment Term, except as required
in connection with performing the services to the Company.

     5.3  NON-SOLICITATION OF CUSTOMERS. During the Employment Term, the
Executive will have access to confidential records and data pertaining to the
Company's customers, their needs, and the relationship between the Company and
its customers. Such information is considered secret and is disclosed during the
Employment Term in confidence. Accordingly, during the Employment Term,
Executive and any entity controlled by him or with which he is associated (as
the terms "control" and "associate" are defined in the Exchange Act) shall not,
directly or indirectly (i) solicit for a competitive purpose, interfere with,
induce or entice away any person or entity that is or was a client, customer or
agent of the Company or its affiliates (as the term "affiliate" is defined in
the Exchange Act), or (ii) in any manner persuade or attempt to persuade any
such person or entity (A) to discontinue its business relationship with the
Company or its affiliates, or (B) to enter into a business relationship with any
other entity or person the loss of which the Executive should reasonably
anticipate would be detrimental to the Company or its affiliates in any respect.

     5.4  NON-SOLICITATION OF EXECUTIVES. The Executive and any entity
controlled by him or with which he is associated (as the terms "control" and
"associate" are defined in the Exchange Act) shall not, during the Employment
Term, directly or indirectly solicit, interfere with, offer to hire or induce
any person who is or was an officer or employee of the Company or any affiliate
(as the term "affiliate" is defined in the Exchange Act) (other than secretarial
personnel) to discontinue his or her relationship with the Company or an
affiliate of the Company, in order to accept employment by, or enter into a
business relationship with, any other entity or person. (These acts are
hereinafter referred to as the "prohibited acts of solicitation.") The foregoing
restriction, however, shall not apply to any business with which Executive may
become associated after the Employment Term.

     5.5  RETURN OF PROPERTY. Upon termination of employment, and at the request
of the Company, the Executive agrees to promptly deliver to the Company all
Company or affiliate memoranda, notes, records, reports, manuals, drawings,
designs, computer files in any media, and other documents (including extracts
and copies thereof) relating to the Company or its affiliates, and all other
property of the Company.

     5.6  INVENTIONS. All processes, inventions, patents, copyrights,
trademarks, and other intangible rights that may be conceived or developed by
the Executive, either alone or with others, during the Employment Term, whether
or not conceived or developed during Executive's working hours, and with respect
to which the equipment, supplies, facilities or trade secret information of the
Company was used, or that relate at the time of conception or reduction to

                                       6
<PAGE>   7

practice of the invention to the business of the Company, or to the Company's
actual or demonstrably anticipated research or development, or that result from
any work performed by Executive for the Company, shall be the sole property of
the Company. Upon the request of the Company, Executive shall disclose to the
Company all inventions or ideas conceived during the Employment Term, whether or
not the property of the Company under the terms of this provision, provided that
such disclosure shall be received by the Company in confidence. Upon the request
of the Company, Executive shall execute all documents, including patent
applications and assignments, required by the Company to establish the Company's
rights under this provision.

     5.7  REPRESENTATIONS. The Executive represents and warrants to the Company
that he has full power to enter into this Agreement and perform his duties
hereunder, and that he does not possess (in physical or electronic form) and
will not use or disclose, other than pursuant to an express right, any trade
secrets or other confidential or proprietary information or intellectual
property in which any other person has any right, title or interest.

                                    ARTICLE 6

                            MISCELLANEOUS PROVISIONS

     6.1  NOTICES. All notices to be given by either party to the other shall be
in writing and may be transmitted by personal delivery, facsimile transmission,
overnight courier or mail, registered or certified, postage prepaid with return
receipt requested; provided, however, that notices of change of address or telex
or facsimile number shall be effective only upon actual receipt by the other
party. Notices shall be delivered at the following addresses, unless changed as
provided for herein.

     To the Executive:

          Paul Bloom
          111 Estates Drive
          Piedmont, CA  94611-3313
          (510) 482-0420

     To the Company:

          AremisSoft Corporation
          200 Central Park South
          New York, NY  10019
          Attn:  Roys Poyiadjis, President

                                       7
<PAGE>   8

      With Copy to:

          Scott E. Bartel
          BARTEL ENG & SCHRODER
          300 Capitol Mall, Suite 1100
          Sacramento, California 95814
          Facsimile:  (916) 442-3442

     6.2  ASSIGNMENT. The rights and obligations of the parties under this
Agreement shall be binding upon and inure to the benefit of their respective
successors, assigns, executors, administrators and heirs; provided, however,
that Executive may not delegate any of his duties under this Agreement.

     6.3  WITHHOLDING TAXES. All amounts payable under this Agreement, whether
such payment is to be made in cash or other property, including without
limitation stock of the Company, shall be subject to withholding for Federal,
state and local income taxes, employment and payroll taxes, and other legally
required withholding taxes and contributions to the extent appropriate in the
determination of the Company.

     6.4  SEVERABILITY. If any provision of this Agreement is held to be invalid
or unenforceable by any judgment of a tribunal of competent jurisdiction, the
remaining provisions and terms of this Agreement shall not be affected by such
judgment, and this Agreement shall be carried out as nearly as possible
according to its original terms and intent and, to the full extent permitted by
law, any provision or restrictions found to be invalid shall be amended with
such modifications as may be necessary to cure such invalidity, and such
restrictions shall apply as so modified, or if such provisions cannot be
amended, they shall be deemed severable from the remaining provisions and the
remaining provisions shall be fully enforceable in accordance with law.

     6.5  EFFECT OF WAIVER. The failure of either party to insist on strict
compliance with any provision of this Agreement by the other party shall not be
deemed a waiver of such provision, or a relinquishment of any right thereunder,
or to affect either the validity of this Agreement, and shall not prevent
enforcement of such provision, or any similar provision, at any time.

     6.6  APPLICABLE LAW. This Agreement shall be governed by the laws of the
State of California.

     6.7  ATTORNEYS FEES. In the event of any litigation arising out of this
Agreement, or the parties' performance as outlined herein, the prevailing party
shall be entitled to an award of costs, including an award of reasonable
attorney's fees.

                                       8
<PAGE>   9

     6.8  COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which when taken together shall constitute one and the
same instrument.

IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of
the date first above written.
COMPANY:                                AREMISSOFT CORPORATION

                                        By:
                                           -------------------------------------
                                           Dr. Lycourgos K. Kyprianou
                                           Chief Executive Officer

EXECUTIVE:
                                           -------------------------------------
                                           Paul Bloom

                                       9

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