Document:

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                                      LEASE
                                 BY AND BETWEEN

                        TRINET ESSENTIAL FACILITIES XXVI,
                             A MARYLAND CORPORATION

                                   AS LANDLORD

                                       AND

                                 POLYCOM, INC.,
                             A DELAWARE CORPORATION

                                    AS TENANT

                              NOVEMBER ____ , 1999

                              --------------------
                              MILPITAS, CALIFORNIA

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                                  TABLE OF CONTENTS
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<S>                                                                              <C>
ARTICLE 1 REFERENCE  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
     1.1     REFERENCES  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

ARTICLE 2 LEASED PREMISES, TERM AND POSSESSION . . . . . . . . . . . . . . . . . . .3
     2.1     DEMISE OF LEASED PREMISES . . . . . . . . . . . . . . . . . . . . . . .3
     2.2     RIGHT TO USE OUTSIDE AREAS  . . . . . . . . . . . . . . . . . . . . . .3
     2.3     LEASE COMMENCEMENT DATE AND LEASE TERM  . . . . . . . . . . . . . . . .3
     2.4     DELIVERY OF POSSESSION; DELAY; EARLY ACCESS . . . . . . . . . . . . . .3
     2.5     TENANT IMPROVEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . .4
     2.6     SURRENDER OF POSSESSION . . . . . . . . . . . . . . . . . . . . . . . .5

ARTICLE 3 RENT, LATE CHARGES AND SECURITY DEPOSITS . . . . . . . . . . . . . . . . .5
     3.1     BASE MONTHLY RENT . . . . . . . . . . . . . . . . . . . . . . . . . . .5
     3.2     ADDITIONAL RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
     3.3     YEAR-END ADJUSTMENTS; AUDITS  . . . . . . . . . . . . . . . . . . . . .6
     3.4     LATE CHARGE, AND INTEREST ON RENT IN DEFAULT  . . . . . . . . . . . . .7
     3.5     PAYMENT OF RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
     3.6     PREPAID RENT  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
     3.7     SECURITY DEPOSIT  . . . . . . . . . . . . . . . . . . . . . . . . . . .7

ARTICLE 4 USE OF LEASED PREMISES AND OUTSIDE AREA  . . . . . . . . . . . . . . . . .8
     4.1     PERMITTED USE . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
     4.2     GENERAL LIMITATIONS ON USE  . . . . . . . . . . . . . . . . . . . . . .8
     4.3     NOISE AND EMISSIONS . . . . . . . . . . . . . . . . . . . . . . . . . .9
     4.4     TRASH DISPOSAL  . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
     4.5     PARKING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
     4.6     SIGNS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
     4.7     COMPLIANCE WITH LAWS AND PRIVATE RESTRICTIONS . . . . . . . . . . . . 10
     4.8     COMPLIANCE WITH INSURANCE REQUIREMENTS  . . . . . . . . . . . . . . . 10
     4.9     LANDLORD'S RIGHT TO ENTER . . . . . . . . . . . . . . . . . . . . . . 10
     4.10    USE OF OUTSIDE AREAS  . . . . . . . . . . . . . . . . . . . . . . . . 10
     4.11    ENVIRONMENTAL PROTECTION  . . . . . . . . . . . . . . . . . . . . . . 11

ARTICLE 5 REPAIRS, MAINTENANCE, SERVICES AND UTILITIES . . . . . . . . . . . . . . 12
     5.1     REPAIR AND MAINTENANCE  . . . . . . . . . . . . . . . . . . . . . . . 12
     5.2     UTILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
     5.3     SECURITY  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
     5.4     ENERGY AND RESOURCE CONSUMPTION . . . . . . . . . . . . . . . . . . . 14
     5.5     LIMITATION OF LANDLORD'S LIABILITY  . . . . . . . . . . . . . . . . . 14

ARTICLE 6 ALTERATIONS AND IMPROVEMENTS . . . . . . . . . . . . . . . . . . . . . . 14
     6.1     BY TENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
     6.2     OWNERSHIP OF IMPROVEMENTS . . . . . . . . . . . . . . . . . . . . . . 15
     6.3     ALTERATIONS REQUIRED BY LAW . . . . . . . . . . . . . . . . . . . . . 15
     6.4     LIENS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

ARTICLE 7 ASSIGNMENT AND SUBLETTING BY TENANT  . . . . . . . . . . . . . . . . . . 15
     7.1     BY TENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
     7.2     MERGER, REORGANIZATION, OR SALE OF ASSETS . . . . . . . . . . . . . . 16
     7.3     LANDLORD'S ELECTION . . . . . . . . . . . . . . . . . . . . . . . . . 17
     7.4     CONDITIONS TO LANDLORD'S CONSENT  . . . . . . . . . . . . . . . . . . 17
     7.5     ASSIGNMENT CONSIDERATION AND EXCESS RENTALS DEFINED . . . . . . . . . 18
     7.6     PAYMENTS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
     7.7     GOOD FAITH  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
     7.8     EFFECT OF LANDLORD'S CONSENT  . . . . . . . . . . . . . . . . . . . . 19

                                       i.
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     7.9     OPTIONS PERSONAL  . . . . . . . . . . . . . . . . . . . . . . . . . . 19
     7.10    TENANT'S REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . 19

ARTICLE 8  LIMITATION ON LANDLORD'S LIABILITY AND INDEMNITY  . . . . . . . . . . . 19
     8.1     LIMITATION ON LANDLORD'S LIABILITY AND RELEASE  . . . . . . . . . . . 19
     8.2     TENANT'S INDEMNIFICATION OF LANDLORD  . . . . . . . . . . . . . . . . 20

ARTICLE 9  INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
     9.1     TENANT'S INSURANCE  . . . . . . . . . . . . . . . . . . . . . . . . . 20
     9.2     LANDLORD'S INSURANCE  . . . . . . . . . . . . . . . . . . . . . . . . 21
     9.3     MUTUAL WAIVER OF SUBROGATION  . . . . . . . . . . . . . . . . . . . . 22

ARTICLE 10  DAMAGE TO LEASED PREMISES  . . . . . . . . . . . . . . . . . . . . . . 22
     10.1    LANDLORD'S DUTY TO RESTORE  . . . . . . . . . . . . . . . . . . . . . 22
     10.2    INSURANCE PROCEEDS  . . . . . . . . . . . . . . . . . . . . . . . . . 23
     10.3    LANDLORD'S RIGHT TO TERMINATE . . . . . . . . . . . . . . . . . . . . 23
     10.4    TENANT'S RIGHT TO TERMINATE . . . . . . . . . . . . . . . . . . . . . 23
     10.5    TENANT'S WAIVER.  . . . . . . . . . . . . . . . . . . . . . . . . . . 24
     10.6    ABATEMENT OF RENT . . . . . . . . . . . . . . . . . . . . . . . . . . 24

ARTICLE 11  CONDEMNATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
     11.1    TENANT'S RIGHT TO TERMINATE . . . . . . . . . . . . . . . . . . . . . 24
     11.2    LANDLORD'S RIGHT TO TERMINATE . . . . . . . . . . . . . . . . . . . . 24
     11.3    RESTORATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
     11.4    TEMPORARY TAKING  . . . . . . . . . . . . . . . . . . . . . . . . . . 24
     11.5    DIVISION OF CONDEMNATION AWARD  . . . . . . . . . . . . . . . . . . . 25
     11.6    ABATEMENT OF RENT . . . . . . . . . . . . . . . . . . . . . . . . . . 25
     11.7    TAKING DEFINED  . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

ARTICLE 12  DEFAULT AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . 25
     12.1    EVENTS OF TENANT'S DEFAULT  . . . . . . . . . . . . . . . . . . . . . 25
     12.2    LANDLORD'S REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . 26
     12.3    LANDLORD'S DEFAULT AND TENANT'S REMEDIES  . . . . . . . . . . . . . . 27
     12.4    LIMITATION OF TENANT'S RECOURSE . . . . . . . . . . . . . . . . . . . 27
     12.5    TENANT'S WAIVER.  . . . . . . . . . . . . . . . . . . . . . . . . . . 28

ARTICLE 13  GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 28
     13.1    TAXES ON TENANT'S PROPERTY  . . . . . . . . . . . . . . . . . . . . . 28
     13.2    HOLDING OVER  . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
     13.3    SUBORDINATION TO MORTGAGES  . . . . . . . . . . . . . . . . . . . . . 29
     13.4    TENANT'S ATTORNMENT UPON FORECLOSURE  . . . . . . . . . . . . . . . . 29
     13.5    MORTGAGEE PROTECTION  . . . . . . . . . . . . . . . . . . . . . . . . 29
     13.6    ESTOPPEL CERTIFICATE  . . . . . . . . . . . . . . . . . . . . . . . . 29
     13.7    TENANT'S FINANCIAL INFORMATION  . . . . . . . . . . . . . . . . . . . 30
     13.8    TRANSFER BY LANDLORD  . . . . . . . . . . . . . . . . . . . . . . . . 30
     13.9    FORCE MAJEURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
     13.10   NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
     13.11   ATTORNEYS' FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
     13.12   DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
     13.13   GENERAL WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
     13.14   MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

ARTICLE 14  CORPORATE AUTHORITY BROKERS AND ENTIRE AGREEMENT . . . . . . . . . . . 34
     14.1    CORPORATE AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . 34
     14.2    BROKERAGE COMMISSIONS . . . . . . . . . . . . . . . . . . . . . . . . 34
     14.3    ENTIRE AGREEMENT  . . . . . . . . . . . . . . . . . . . . . . . . . . 34
     14.4    LANDLORD'S REPRESENTATIONS  . . . . . . . . . . . . . . . . . . . . . 34

ARTICLE 15  OPTIONS TO EXTEND  . . . . . . . . . . . . . . . . . . . . . . . . . . 34

ARTICLE 16  TELEPHONE SERVICE  . . . . . . . . . . . . . . . . . . . . . . . . . . 36
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                                       ii.
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                                      LEASE

       THIS LEASE, dated November , 1999 for reference purposes only, is made by
and between TRINET ESSENTIAL FACILITIES XXVI, INC., a Maryland corporation
("Landlord") and POLYCOM, INC., a Delaware corporation ("Tenant"), to be
effective and binding upon the parties as of the date the last of the designated
signatories to this Lease shall have executed this Lease (the "Effective Date of
this Lease").

                                     ARTICLE 1

                                     REFERENCE

1.1 REFERENCES. All references in this Lease (subject to any further
clarifications contained in this Lease) to the following terms shall have the
following meaning or refer to the respective address, person, date, time period,
amount, percentage, calendar year or fiscal year as below set forth:

       Tenant's Address for Notice:       Polycom, Inc.
                                          1565 Barber Lane
                                          Milpitas, California 95035

       Tenant's Representative:           Tom Perkins

       Landlord's Address for Notices:    c/o TriNet Corporate Realty Trust,
                                          Inc.
                                          One Embarcadero Center
                                          Suite 3300
                                          San Francisco, CA 94111

       Landlord's Representative:         Asset Management

       Phone Number:                      (415) 391-4330

       Intended Commencement Date:        December 1, 1999

       Rent Commencement Date:            Earlier of February 1, 2000 or
                                          Substantial Completion of Tenant
                                          Improvements pursuant to Paragraph
                                          2.5.

       Intended Term:                     Approximately seven (7) years

       Lease Expiration Date:             January 31, 2007, unless earlier
                                          terminated by Landlord in accordance
                                          with the terms of this Lease, or
                                          extended by Tenant pursuant to Article
                                          15.

       Options to Renew:                  Two (2) option(s) to renew, each for a
                                          term of five (5) years

       First Month's Prepaid Rent:        $159,494.40

       Tenant's Security Deposit:         $190,166.40

       Late Charge Amount:                Five Percent (5%) of the Delinquent
                                          Amount

       Tenant's Required Liability

       Coverage:                          $3,000,000 Combined Single Limit

       Tenant's Broker(s):                Phil Mahoney and Greg Cary of Cornish
                                          & Carey Commercial

       Property:                          That certain real property situated in
                                          the City of Milpitas, County of Santa
                                          Clam, State of California, together
                                          with all

                                       1.
<PAGE>

                                          buildings and Improvements thereon,
                                          which real property is shown on the
                                          Site Plan attached hereto as Exhibit
                                          "A" and is commonly known as or
                                          otherwise described as follows: 1565
                                          Barber Lane, Milpitas, California.

       Building:                          That certain building within the
                                          Property in which the Leased Premises
                                          are located, which building is shown
                                          outlined on Exhibit "A" hereto (the
                                          "Building"). The Building is commonly
                                          known as or otherwise described as
                                          follows: 1565 Barber Lane, Milpitas,
                                          California.

       Outside Areas:                     The "Outside Areas" shall mean all
                                          areas within the Property which are
                                          located outside the buildings, such as
                                          pedestrian walkways, parking areas,
                                          landscaped area, open areas and
                                          enclosed trash disposal areas.

       Leased Premises:                   All the interior space within the
                                          Building, including stairwells,
                                          connecting walkways, and atriums,
                                          consisting of approximately 102,240
                                          square feet and, for purposes of this
                                          Lease, agreed to contain said number
                                          of square feet.

       Base Monthly Rent:                 The term "Base Monthly Rent" shall
                                          mean the following:

                                          $133,934.40 per month from the Rent
                                          Commencement Date until January 31,
                                          2001. On February 1, 2001, and on
                                          every February 1 thereafter during the
                                          Lease Term, including the First
                                          Extension Period and the Second
                                          Extension Period, as applicable, Base
                                          Monthly Rent shall be increased 3.5%.

       Use:                               Systems development, research and
                                          administration, light manufacturing,
                                          and general office in conformity with
                                          the municipal zoning requirements of
                                          the City of Milpitas, California.

       Tenant's Project
       Proportionate Share:               100%

       Tenant's Building
       Proportionate Share:               100%

       Exhibits:                          The term "Exhibits" shall mean the
                                          Exhibits of this Lease which are
                                          described as follows:

                                          Exhibit "A" - Site Plan showing the
                                          Property and delineating the Building
                                          in which the Leased Premises are
                                          located.

                                          Exhibit "B" - Floor Plan outlining the
                                          Leased Premises

                                          Exhibit "C" - HVAC Specifications

                                          Exhibit "D" - Form of Tenant Estoppel

                                       2.
<PAGE>

                                     ARTICLE 2

                        LEASED PREMISES, TERM AND POSSESSION

2.1    DEMISE OF LEASED PREMISES. Landlord hereby leases to Tenant and Tenant
hereby leases from Landlord for the Lease Term and upon the terms and subject to
the conditions of this Lease, that certain interior space described in Article 1
as the Leased Premises, reserving and excepting to Landlord the right to fifty
percent (50%) of all assignment consideration and excess rentals as provided in
Article 7 below. Tenant's lease of the Leased Premises, together with the
appurtenant right to use the Outside Areas as described in Paragraph 2.2 below,
shall be conditioned upon and be subject to the continuing compliance by Tenant
with (i) all the terms and conditions of this Lease, (ii) all Laws governing the
use of the Leased Premises and the Property, (iii) all Private Restrictions,
easements and other matters now of public record respecting the use of the
Leased Premises and Property, and (iv) all reasonable rules and regulations from
time to time established by Landlord.

2.2    RIGHT TO USE OUTSIDE AREAS. As an appurtenant right to Tenant's right
to the use and occupancy of the Leased Premises, Tenant shall have the
exclusive right to use the Outside Areas in conjunction with its use of the
Leased Premises solely for the purposes for which they were designated and
intended and for no other purposes whatsoever. Tenant's right to so use the
Outside Areas shall be subject to the limitations on such use as set forth in
this Lease and shall terminate concurrently with any termination of this
Lease.

2.3    LEASE COMMENCEMENT DATE AND LEASE TERM. Subject to Paragraph 2.4
below, the term of this Lease shall begin, and the Lease Commencement Date
shall be deemed to have occurred, upon actual delivery of the Leased Premises
to Tenant pursuant to Paragraph 2.4 (the "Lease Commencement Date"). The term
of this Lease shall in all events end on the Lease Expiration Date (as set
forth in Article 1). The Lease Term shall be that period of time commencing
on the Lease Commencement Date and ending on the Lease Expiration Date (the
"Lease Term").

2.4    DELIVERY OF POSSESSION; DELAY; EARLY ACCESS.

       (a) Landlord shall deliver to Tenant possession of the Leased Premises on
the Intended Commencement Date, and Tenant shall accept such delivery of the
Leased Premises, which acceptance shall constitute agreement by Tenant that the
Leased Premises are in the condition required by this Lease, except for any
repairs or replacements of the roof, the heating, ventilating and air
conditioning systems, or other mechanical systems that are required due to
failure (excluding normal maintenance) during the first ninety (90) days
following the Lease Commencement Date. Landlord agrees to deliver the Leased
Premises water-tight and to deliver in good working order all existing plumbing,
lighting, heating, ventilating and air conditioning systems within the Leased
Premises. Except (i) as provided in the immediately foregoing sentence and (ii)
for the existing furniture, wiring and other items located within the premises,
Tenant shall accept the Leased Premises in "as-is" condition." In addition,
Tenant may elect, by providing written notice to Landlord within two (2)
business days following the date of this Lease, to purchase such existing items
(furniture, wiring, etc.) of the Building from Landlord for a price of one
hundred twenty-five thousand dollars ($125,000) to be paid upon deliver)., of
possession of the Leased Premises. In the event that Tenant does not elect to
purchase such furniture, Landlord shall remove all such furniture from the
Leased Premises prior to the delivery of possession of the Leased Premises or
the commencement of construction of any new tenant improvements on the Leased
Premises. Landlord represents to Tenant that Landlord has not received any
written notification from any local, state or federal authority regarding any
violation of or non-compliance with any applicable law, code or regulation
related to the Leased Premises. Landlord shall transfer to Tenant, to the extent
possible and in Landlord's possession, any warranties or service contracts for
systems in the Premises that Tenant is responsible to maintain during the Lease
Term pursuant to this Lease. Except as otherwise provided in this Section 2.4(a)
and Section 2.4(b) and except for provision of the Allowance and Supplemental
Allowance pursuant to Paragraph 2,5, Landlord shall have no obligation to
improve, or pay for the improvement of, the Leased Premises.

       (b) Landlord shall, at its sole cost, replace the heating, ventilating
and air conditioning systems servicing the Building in accordance with the
specifications attached hereto as Exhibit C. Such replacement shall be completed
no later than February 1, 2000.

                                       3.
<PAGE>

       (c) Notwithstanding Paragraph 2.4(a), if Landlord is unable to deliver
possession of the Leased Premises to Tenant in the agreed condition on or before
the Intended Commencement Date, Landlord shall not be in default under this
Lease, nor shall this Lease be void, voidable or cancelable by Tenant until the
lapse of ninety (90) days after the Intended Commencement Date (the "delivery
grace period"); however, the delivery grace period above set forth shall be
extended for such number of days as Landlord may be delayed in delivering
possession of the Leased Premises to Tenant by reason of Force Majeure or the
action or inaction of Tenant. If Landlord is unable to deliver possession of the
Leased Premises in the agreed condition to Tenant within the described delivery,
grace period (including any extension thereof by reason of Force Majeure or the
actions or inactions of Tenant), then Tenant's sole remedy shall be to terminate
this Lease, and in no event shall Landlord be liable in damages to Tenant for
such delay. Tenant may not terminate this Lease at any time after the date
Landlord notifies Tenant that the Leased Premises have been put into the agreed
condition and are available for deliver), to Tenant, unless Landlord's notice is
not given in good faith.

       (d) Upon execution of this Lease, Tenant shall be permitted early access
to the Leased Premises for the purpose of fixturing, furniture placement, tenant
improvement construction and communication cabling within the Leased Premises.
Commencement of such access shall constitute delivery of possession to Tenant of
the Leased Premises and all provisions of this Lease, except Tenant's obligation
to pay rent pursuant to Article 3, shall be in effect from and after such
commencement of access.

2.5    TENANT IMPROVEMENTS.

       (a) Landlord shall provide Tenant with an improvement allowance of one
minion twenty-two thousand four hundred dollars ($1,022,400) (the "Allowance").
The Allowance shall be used to reimburse Tenant for direct costs incurred by
Tenant in designing, constructing and installing typical, generic improvements
in the Leased Premises (the "Tenant Improvements"); provided, however, (i) that
no more than three hundred six thousand seven hundred twenty dollars ($306,720)
of the Allowance shall be used to reimburse Tenant for costs incurred in
installing communication cabling in the Leased Premises, and (ii) that the
Allowance shall not be used to reimburse Tenant for any costs incurred by Tenant
in connection with signage, furniture or moving or for any third party
consulting or contracting fees (except Tenant's architectural and design
charges). The Tenant Improvements shall be designed, constructed and installed
in accordance with plans and specification to be approved in advance by
Landlord, which approval shall not be unreasonably withheld or delayed, and in
accordance with all applicable laws, ordinances and regulations, and shall be
constructed by a general contractor that is licensed in the State of California
and approved in advance by Landlord, which approval shall not be unreasonably
withheld or delayed. Tenant Improvement work may commence upon the completion
and execution of all required documentation and receipt of all required
approvals and permits. In addition, if requested by Tenant on or before the Rent
Commencement Date, Landlord shall provide Tenant with a supplemental improvement
allowance of five hundred eleven thousand two hundred dollars ($511,200) (the
"Supplemental Allowance"). If Tenant does not request the Supplemental Allowance
on or before the Rent Commencement Date, Tenant shall have no further right to
receive the Supplemental Allowance. The Supplemental Allowance shall be in
addition to any rent and other charges payable under this Lease and shall bc
payable by Tenant in equal monthly installments of principal and interest
sufficient fully to amortize the Supplemental Allowance over the remainder of
the Lease Term at an interest rate of ten percent (10%) per annum. Landlord
shall pay to Tenant the Allowance and the Supplemental Allowance, if any, when
Tenant provides to Landlord receipts for all Tenant Improvement work and
evidence that all such work has been completed free of all mechanics and
materialmen's liens.

       (b) For purposes of this Lease, "Substantial Completion" of tenant
improvements shall occur upon completion of such improvements to the Leased
Premises in accordance with the plans and specification to be approved in
advance by Landlord, which approval shall not be unreasonably withheld or
delayed, with the exception of any normal punch list items or work that does not
interfere with Tenant's intended use of the Leased Premises.

2.6    SURRENDER OF POSSESSION. Immediately prior to the expiration or upon
the sooner termination of this Lease, Tenant shall remove all of Tenant's
signs from the exterior of the Building and shall remove all of Tenant's
equipment, trade fixtures, furniture, supplies, wall decorations and other
personal property from within the Leased Premises, the Building and the
Outside Areas, and shall vacate and surrender the Leased Premises, the
Building, the Outside Areas and the Properly to Landlord in the same
condition, broom clean, as existed at the Lease

                                       4.
<PAGE>

Commencement Date, reasonable wear and tear excepted and excluding damage by
condemnation, fire or other peril. Tenant shall repair all damage to the Leased
Premises, the exterior of the Building and the Outside Areas caused by Tenant's
removal of Tenant's property. Tenant shall patch and refinish, to Landlord's
reasonable satisfaction, all penetrations made by Tenant or its employees to the
floor, walls or ceiling of the Leased Premises, whether such penetrations were
made with Landlord's approval or not. Tenant shall repair or replace all stained
or damaged ceiling tiles, wall coverings and floor coverings to the reasonable
satisfaction of Landlord. Tenant shall repair all damage caused by Tenant to the
exterior surface of the Building and the paved surfaces of the Outside Areas
and, where necessary, replace or resurface same. Additionally, to the extent
that Landlord shall have notified Tenant in writing at the time the improvements
were completed that it desired to have certain improvements removed at the
expiration or sooner termination of the Lease, Tenant shall, upon the expiration
or sooner termination of the Lease, remove any such improvements constructed or
installed by Landlord or Tenant and repair all damage caused by such removal. If
the Leased Premises, the Building, the Outside Areas and the Property are not
surrendered to Landlord in the condition required by this paragraph at the
expiration or sooner termination of this Lease, Landlord may, at Tenants
expense, so remove Tenant's signs, property and/or improvements not so removed
and make such repairs and replacements not so made or hire, at Tenant's expense,
independent contractors to perform such work. Tenant shall be liable to Landlord
for all costs incurred by Landlord in returning the Leased Premises, the
Building and the Outside Areas to the required condition, together with interest
on all costs so incurred from the date paid by Landlord at the then maximum rate
of interest not prohibited or made usurious by law until paid. In addition to
Tenant's obligations set forth in Paragraph 13.2, Tenant shall pay to Landlord
the amount of all costs so incurred plus such interest thereon, within ten (10)
days of Landlord's billing Tenant for stone. Tenant shall indemnify Landlord
against loss or liability resulting from delay by Tenant in surrendering the
Leased Premises, including, without limitation, any claims made by any
succeeding Tenant or any losses to Landlord with respect to lost opportunities
to lease to succeeding tenants.

                                     ARTICLE 3

                      RENT, LATE CHARGES AND SECURITY DEPOSITS

3.1    BASE MONTHLY RENT. Commencing on the Rent Commencement Date (as
determined pursuant to Article 2 above) and continuing throughout the Lease
Term, Tenant shall pay to Landlord, without prior demand therefor, in advance
on the first day of each calendar month, the amount set forth as "Base
Monthly Rent" in Article 1 (the "Base Monthly Rent").

3.2    ADDITIONAL RENT. Commencing on the Rent Commencement Date (as
determined pursuant Article 2 above) and continuing throughout the Lease
Term, in addition to the Base Monthly Rent and to the extent not required by
Landlord to be contracted for and paid directly by Tenant, Tenant shall pay
to Landlord as additional rent (the "Additional Rent") the following amounts:

       (a) An amount equal to all Property Operating Expenses (as defined in
Article 13) incurred by Landlord. Payment shall be made by whichever of the
following methods (or combination of methods) is (are) from time to time
designated by Landlord:

              (i) Landlord may forward invoices or bills for such expenses to
Tenant, and Tenant shall, no later than ten (10) days prior to the due date, pay
such invoices or bills and deliver satisfactory evidence of such payment to
Landlord, and/or

              (ii) Landlord may bill to Tenant, on a periodic basis not more
frequently than monthly, the amount of such expenses (or group of expenses) as
paid or incurred by Landlord, and Tenant shall pay to Landlord the amount of
such expenses within ten days after receipt of a written bill therefor from
Landlord, and/or

              (iii) Landlord may deliver to Tenant Landlord's reasonable
estimate of any given expense (such as Landlord's Insurance Costs or Real
Property Taxes), or group of expenses, which it anticipates will be paid or
recurred for the ensuing calendar or fiscal year, as Landlord may determine, and
Tenant shall pay to Landlord an amount equal to the estimated amount of such
expenses for such year in equal monthly installments during such year with the
installments of Base Monthly Rent.

                                       5.
<PAGE>

Landlord reserves the right, to change from time to time the methods of billing
Tenant for any given expense or group of expenses or the periodic basis on which
such expenses are billed.

       (b) Landlord's share of the consideration received by Tenant upon certain
assignments and sublettings as required by Article 7.

       (c) Any legal fees and costs that Tenant is obligated to pay or reimburse
to Landlord pursuant to Article 13; and

       (d) Any other charges or reimbursements due Landlord from Tenant pursuant
to the terms of this Lease.

Notwithstanding the foregoing, Landlord may elect by written notice to Tenant to
have Tenant pay Real Property Taxes or any portion thereof directly to the
applicable taxing authority, in which case Tenant shall make such payments and
deliver satisfactory evidence of payment to Landlord no later than ten (10) days
before such Real Property Taxes become delinquent.

3.3    YEAR-END ADJUSTMENTS; AUDITS. If Landlord shall have elected to bill
Tenant for the Property Operating Expenses (or any group of such expenses) on
an estimated basis in accordance with the provisions of Paragraph 3.2(a)(iii)
above, Landlord shall furnish to Tenant within three months following the end
of the applicable calendar or fiscal year, as the case may be, a statement
setting forth (i) the amount of such expenses paid or recurred during the
just ended calendar or fiscal year, as appropriate, and (ii) the amount that
Tenant has paid to Landlord for credit against such expenses for such period.
If Tenant shall have paid more than its obligation for such expenses for the
stated period, Landlord shall, at its election, either (i) credit the amount
of such overpayment toward the next ensuing payment or payments of Additional
Rent that would otherwise be due or (ii) refund in cash to Tenant the amount
of such overpayment. If such year-end statement shall show that Tenant did
not pay its obligation for such expenses in full, then Tenant shall pay to
Landlord the amount of such underpayment within ten (10) days from Landlord's
bluing of same to Tenant. The provisions of this Paragraph shall survive the
expiration or sooner termination of this Lease. In the event Tenant objects
in writing to any such year-end statement or other billing for Additional
Rent within sixty (60) days after receipt of such statement or billing, then
Tenant shall have the right, during the six (6) month period following
delivery, of such statement or billing, at Tenant's sole cost, to review in
Landlord's offices Landlord's records relevant to such statement or billing.
Such review shall be carried out only by a "Big Five" accounting firm (i.e.,
PricewaterhouseCoopers, KMPG Peat Marwick, Ernst & Young, Deloitte & Touche
and Arthur Andersen or their successors) and not by any other person, and
shall be subject to Landlord's reasonable audit procedures. No person
conducting such an audit shall be compensated on a "contingency" or other
incentive basis. If, as of the date sixty (60) days after Tenant's receipt of
such year-end statement or billing, Tenant shall not have objected thereto in
writing, or if, during the six (6) month period following delivery of such
statement or billing, Tenant shall not have carried out a review of
Landlord's records, then such year-end statement or billing, as the case may
be, shall be final and binding upon Landlord and Tenant, and Tenant shall
have no further right to object to such statement or billing. If Tenant
timely delivers a written objection to a year-end statement or billing and,
within such six (6) month period, Tenant conducts an audit and delivers to
Landlord a written statement specifying objections to such annual statement,
then Tenant and Landlord shall meet to attempt to resolve such objection
within ten (10) days after delivery of the objection statement. If such
objection is not resolved within such tell (10) day period, then either party
shall have the right, at any time within sixty (60) days after the expiration
of such ten (10) day period, to require that the dispute be submitted to
binding arbitration under the rules of the American Arbitration Association.
If neither Landlord nor Tenant commences an arbitration proceeding within
such sixty (60) day period, then the year-end statement or other billing in
question shall be final and binding on Landlord and Tenant. Notwithstanding
that any such dispute remains unresolved, Tenant shall be obligated to pay
Landlord all amounts payable in accordance with this Paragraph 3 (including
any disputed amount). The audit and arbitration procedures set forth in this
Paragraph 3.3 shall be Tenant's exclusive remedy with respect to the
calculation of the amount of Tenant's obligations under Paragraph 3.2.

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 amounts of which are
extremely difficult or impractical to fix. Such costs and expenses will
include without limitation, administration and collection costs and
processing and

                                       6.
<PAGE>

accounting expenses. Therefore, if any installment of Base Monthly Rent is not
received by Landlord from Tenant within ten (10) calendar days after the same
becomes due, Tenant shall immediately pay to Landlord a late charge in amount
equal to the amount set forth in Article 1 as the "Late Charge Amount," and if
any Additional Rent is not received by Landlord within ten (10) calendar days
after same becomes due, Tenant shall immediately pay to Landlord a late charge
in an amount equal to 5% of the Additional Rent not so paid. Landlord and Tenant
agree that this late charge represents a reasonable estimate of such costs and
expenses and is fair compensation to Landlord for the anticipated loss Landlord
would suffer by reason of Tenant's failure to make timely payment. In no event
shall this provision for a late 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 renal installment due under this Lease when due,
including the right to terminate this Lease. If any rent remains delinquent for
a period in excess of ten (10) calendar days, then, in addition to such late
charge, Tenant shall pay to Landlord interest on any rent that is not so paid
from the date due until paid at the then maximum rate of interest not prohibited
or made usurious by Law.

3.5    PAYMENT OF RENT. Except as specifically provided otherwise in this
Lease, all rent shall be paid in lawful money of the United States, without
any abatement, reduction or offset for any reason whatsoever, to Landlord at
such address as Landlord may designate from time to time. Tenant's obligation
to pay Base Monthly Rent and all Additional Rent shall be appropriately
prorated at the commencement and expiration of the Lease Term. The failure by
Tenant to pay any Additional Rent as required pursuant to this Lease when due
shall be treated the same as a failure by Tenant to pay Base Monthly, and
Landlord shall have the same rights and remedies against Tenant as Landlord
would have had Tenant failed to pay the Base Monthly Rent when due.

3.6    PREPAID RENT. Tenant shall, upon execution of this Lease, pay to
Landlord the amount set forth in Article 1 as "First Month's Prepaid Rent" as
prepayment of rent for credit against the first payment of Base Monthly Rent
due hereunder.

3.7    SECURITY DEPOSIT. Upon Tenant's execution of this Lease, Tenant shall
deposit with Landlord the amount set forth in Article I as 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 Base Monthly Rent or Additional Rent or a late charge or interest
on defaulted rent, or any other monetary payment obligation of Tenant under
this Lease; (ii) to repair damage to the Leased Premises, the Building or the
Outside Areas caused or permitted to occur by Tenant; (iii)to clean and
restore and repair the Leased Premises, the Building or the Outside Areas
following their surrender to Landlord if not surrendered in the condition
required pursuant to the provisions of Article 2, and (iv) to remedy any
other default of Tenant to the extent permitted by Law including, without
limitation, paying in full on Tenant's behalf any sums claimed by materialmen
or contractors of Tenant to be owing to them by Tenant for work done or
improvements made at Tenant's request to the Leased Premises. In this regard,
Tenant hereby waives any restriction on the uses to which the Security
Deposit may be applied as contained in Section 1950.7(c) of the California
Civil Code and/or any successor statute. In the event the Security Deposit or
any portion thereof is so used, Tenant shall pay to Landlord, promptly upon
demand, an amount in cash sufficient to restore the Security Deposit to the
full original san. If Tenant fails to promptly restore the Security Deposit
and if Tenant shall have paid to Landlord any sums as "Last Month's Prepaid
Rent," Landlord may, in addition to any other remedy Landlord may have under
this Lease, reduce the amount of Tenant's Last Month's Prepaid Rent by
transferring all or portions of such Last Month's Prepaid Rent to Tenant's
Security Deposit until such Security Deposit is restored to the amount set
forth in Article 1. 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 Landlord's general
accounts. Tenant shall not be entitled to any interest on the Security
Deposit. If Landlord transfers the Building or the Property during the Lease
Term, Landlord may pay the Security Deposit to any subsequent owner in
conformity with the provisions of Section 1950.7 of the California Civil Code
and/or any successor statute, in which event the transferring landlord shall
be released from all liability for the return of the Security Deposit. Tenant
specifically grants to Landlord (and Tenant hereby waives the provisions of
California Civil Code Section 1950.7 to the contrary) a period of ninety (90)
days following a surrender of the Leased Premises by Tenant to Landlord
within which to inspect the Leased Premises, make required restorations and
repairs, receive and verify workmen's billings therefor, and prepare a final
accounting with respect to the Security Deposit. In no event shall the
Security Deposit or any portion thereof, be considered prepaid rent.

                                       7.
<PAGE>

                                   ARTICLE 4

                      USE OF LEASED PREMISES AND OUTSIDE AREA

4.1    PERMITTED USE. Tenant shall be entitled to use the Leased Premises
solely for the "Permitted Use" as set forth in Article 1 and for no other
purpose whatsoever. Tenant shall continuously and without interruption use
the Leased Premises for such purpose for the entire Lease Term, and
additionally if the Leased Premises are partially or fully sublet, then the
Leased Premises shall be considered in use. Any discontinuance of such use
for a period of twelve (12) consecutive months shall be, at Landlord's
election, a default by Tenant under the terms of this Lease. Tenant shall
have the right to use the Outside Areas in conjunction with its Permitted Use
of the Leased Premises solely for the purposes for which they were designed
and intended and for no other purposes whatsoever.

4.2    GENERAL LIMITATIONS ON USE. Tenant shall not do or permit anything to
be done in or about the Leased Premises, the Building, the Outside Areas or
the Property which does or could (i) jeopardize the structural integrity of
the Building or (ii) cause damage to any part of the Leased Premises, the
Building, the Outside Areas or the Property. Tenant shall not operate any
equipment within the Leased Premises which does or could (i) injure, vibrate
or shake the Leased Premises or the Building, (ii) damage, overload or impair
the efficient operation of any electrical, plumbing, heating, ventilating or
air conditioning systems within or sentencing the Leased Premises or the
Building, or (iii) damage or impair the efficient operation of the sprinkler
system (if any) within or servicing the Leased Premises or the Building.
Tenant shall not install any equipment or antennas on or make any
penetrations of the exterior walls or roof of the Building. Tenant shall not
affix any equipment to or make any penetrations or cuts in the floor,
ceiling, walls or roof of the Leased Premises. Tenant shall not place any
loads upon the floors, walls, ceiling or roof systems which could endanger
the structural integrity of the Building or damage its floors, foundations or
supporting structural components. Tenant shall not place any explosive,
flammable or harmful fluids or other waste materials in the drainage systems
of the Leased Premises, the Building, the Outside Areas or the Property.
Tenant shall not drain or discharge any fluids in the landscaped areas or
across the paved areas of the Property. Tenant shall not use any of the
Outside Areas for the storage of its materials, supplies, inventory or
equipment and all such materials, supplies, inventory or equipment shall at
all times be stored within the Leased Premises. Tenant shall not commit nor
permit to be committed any waste in or about the Leased Premises, the
Building, the Outside Areas or the Property.

4.3    NOISE AND EMISSIONS. All noise generated by Tenant in its use of the
Leased Premises shall be confined or muffled so that it does not interfere
with the businesses of or annoy the occupants and/or users of adjacent
properties. All dust, fumes, odors and other emissions generated by Tenant's
use of the Leased Premises shall be sufficiently dissipated in accordance
with sound environmental practice and exhausted from the Leased Premises in
such a manner so as not to interfere with the businesses of or annoy the
occupants and/or users of adjacent properties, or cause any damage to the
Leased Premises, the Building, the Outside Areas or the Property or any
component part thereof or the property of adjacent property owners.

4.4    TRASH DISPOSAL. Tenant shall provide trash bills or other adequate
garbage disposal facilities within the trash enclosure areas provided or
permitted by Landlord outside the Leased Premises sufficient for the interim
disposal of all of its trash, garbage and waste. All such trash, garbage and
waste temporarily stored in such areas shall be stored in such a manner so
that it is not visible from outside of such areas, and Tenant shall cause
such trash, garbage and waste to be regularly removed from the Property in a
clean, safe and neat condition free and clear of all trash, garbage, waste
and/or boxes, pallets and containers containing same at all times.

4.5    PARKING. Tenant shall have the exclusive right to park in three
hundred forty-nine (349) parking spaces on the legal parcel on which the
Building is located as shown on the site plan attached as Exhibit A hereto
and in no other location on the Property. Tenant shall not, at any time, park
or permit to be parked any recreational vehicles, inoperative vehicles or
equipment in the Outside Areas or on any portion of the Property. Tenant
agrees to assume responsibility for compliance by its employees and invitees
with the parking provisions contained herein. If Tenant or its employees park
any vehicle within the Property in violation of these provisions, then
Landlord may, upon prior written notice to Tenant giving Tenant one (1) day
(or any applicable statutory, notice period, if longer than one (1) day) to
remove such vehicle(s), in addition to any other remedies Landlord may have
under this Lease, charge

                                       8.
<PAGE>

Tenant, as Additional Rent, and Tenant agrees to pay, as Additional Rent, One
Hundred Dollars ($100) per day for each day or partial day that each such
vehicle is so parked within the Property.

4.6    SIGNS. Tenant shall not place or install on or within any portion of
the Leased Premises, the exterior of the Building, the Outside Areas or the
Property any sign, advertisement, banner, placard, or picture which is
visible from the exterior of the Leased Premises provided, however, that
Tenant shall have the right, and Landlord shall use reasonable efforts to
assist Tenant, in exercising the right, to place one (1) sign on the front
entry building facade and one (1) monument sign on the Property, as long as
such signs comply in all respects with all applicable laws, ordinances and
regulations. Tenant shall not place or install on or within any portion of
the Leased Premises, the exterior of the Building, the Outside Areas or the
Property any business identification sign which is visible from the exterior
of the Leased Premises until Landlord shall have approved in writing (which
approval shall not be unreasonably withheld or delayed) the location, size,
content, design, method of attachment and material to be used in the making
of such sign; PROVIDED, HOWEVER, that so long as such signs are normal and
customary business directional or identification signs within the Building,
Tenant shall not be required to obtain Landlord's approval. Any sign, once
approved by Landlord, shall be installed at Tenant's sole cost and expense
and only in strict compliance with Landlord's approval, using a person
approved by Landlord to install same. Landlord may remove any signs (which
have not been approved in writing by Landlord), advertisements, banners,
placards or pictures so placed by Tenant on or within the Leased Premises,
the exterior of the Building, the Outside Areas or the Property and charge to
Tenant the cost of such removal, together with any costs incurred by Landlord
to repair any damage caused thereby, including any cost incurred to restore
the surface (upon which such sign was so affixed) to its original condition.
Tenant shall remove all of Tenant's signs, repair any damage caused thereby,
and restore the surface upon which the sign was affixed to its original
condition, all to Landlord's reasonable satisfaction, upon the termination of
this Lease.

4.7    COMPLIANCE WITH LAWS AND PRIVATE RESTRICTIONS. Tenant shall abide by
and shall promptly observe and comply with, at its sole cost and expense, all
Laws and Private Restrictions respecting the use and occupancy of the Leased
Premises, the Building, the Outside Areas or the Property including, without
limitation, all Laws governing the use and/or disposal of hazardous materials
(Tenant's obligations with respect to hazardous materials being governed by
Section 4.11), and shall defend with competent counsel, indemnify and hold
Landlord harmless from any claims, damages or liability resulting from
Tenant's failure to so abide, observe, or comply. Tenant's obligations
hereunder shall survive the expiration or sooner termination of this Lease.

4.8    COMPLIANCE WITH INSURANCE REQUIREMENTS. With respect to any insurance
policies required or permitted to be carried by Landlord in accordance with
the provision of this Lease, copies of which have been or will, upon Tenant's
written request therefor, be provided to Tenant, Tenant shall not conduct nor
permit any other person to conduct any activities nor keep, store or use (or
allow any other person to keep, store or use) any item or thing within the
Leased Premises, the Building, the Outside Areas or the Property which (i) is
prohibited under the terms of any such policies, (ii) could result in the
termination of the coverage afforded under any of such policies, (iii) could
give to the insurance carrier the right to cancel any of such policies, or
(iv) could cause an increase in the rates (over standard rates) charged for
the coverage afforded under any of such policies. Tenant shall comply with
all requirements of any insurance company, insurance underwriter, or Board of
Fire Underwriters which are necessary to maintain, at standard rates, the
insurance coverages carried by either Landlord or Tenant pursuant to this
Lease.

4.9    LANDLORD'S RIGHT TO ENTER. Landlord and its agents shall have the
right to enter the Leased Premises during normal business hours after giving
Tenant twenty-four (24) hours notice and subject to Tenant's reasonable
security measures for the purpose of (i) inspecting the same; (ii) showing
the Leased Premises to prospective purchasers, mortgagees or tenants; (iii)
making necessary alterations, additions or repairs; and (iv) performing any
of Tenant's obligations when Tenant has failed to do so. Landlord shall have
the right to enter the Leased Premises during normal business hours (or as
otherwise agreed), subject to Tenant's reasonable security measures, for
purposes of supplying any maintenance or services agreed to be supplied by
Landlord. Landlord shall have the right to enter the Outside Areas during
normal business hours for purposes of (i) inspecting the exterior of the
Building and the Outside Areas; (ii) posting notices of nonresponsibility
(and for such purposes Tenant shall provide Landlord at least thirty days'
prior written notice of any work to be performed on the Leased Premises); and
(iii) supplying any services to be provided by Landlord. Any entry into the
Leased Premises or the Outside Areas obtained by Landlord in accordance with
this paragraph shall not under any circumstances be construed or deemed

                                       9.
<PAGE>

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, but only so long as Landlord, in making any such entry, uses
reasonable efforts to minimize interference with Tenant's business operations.

4.10    USE OF OUTSIDE AREAS. Tenant, in its use of the Outside Areas, shall
at all times keep the Outside Areas in a safe condition free and clear of all
materials, equipment, debris, trash (except within existing enclosed trash
areas), inoperable vehicles, and other items which are not specifically
permitted by Landlord to be stored or located thereon by Tenant. If, in the
opinion of Landlord, unauthorized persons are using any of the Outside Areas
by reason of, or under claim of, the express or implied authority or consent
of Tenant, then Tenant, upon demand of Landlord, shall restrain, to the
fullest extent then allowed by Law, such unauthorized use, and shall initiate
such appropriate proceedings as may be required to so restrain such use.

4.11    ENVIRONMENTAL PROTECTION. Tenant's obligations under this Section
4.11 shall survive the expiration or termination of this Lease.

       (a) As used herein, the term "Hazardous Materials" shall mean any toxic
or hazardous substance, material or waste or any pollutant or infectious or
radioactive material, including but not bruited to those substances, materials
or wastes regulated now or in the future under any of the following statutes or
regulations and any and all of those substances included within the definitions
of "hazardous substances," "hazardous materials," "hazardous waste," "hazardous
chemical substance or mixture," "imminently hazardous chemical substance or
mixture," "toxic substances," "hazardous air pollutant," "toxic pollutant," or
"solid waste" in the (a) Comprehensive Environmental Response, Compensation and
Liability Act of 1990 ("CERCLA" or "Superfund"), as amended by the Superfund
Amendments and Reauthorization Act of 1986 ("SARA"), 42 U.S.C. Section 9601 ET
SEQ., (b) Resource Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C.
Section 6901 ET SEQ., (c) Federal Water Pollution Control Act ("FSPCA"), 33
U.S.C. Section 1251 ET SEQ., (d) Cleat Air Act ("CAA"), 42 U.S.C. Section 7401
ET SEQ., (e) Toxic Substances Control Act ("TSCA"), 14 U.S.C. Section 2601 ET
SEQ., (f) Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, ET
SEQ., (g) Carpenter-Presley-Tanner Hazardous Substance Account Act California
Superfund"), Cal. Health & Safety Code 25300 ET SEQ., (h) California Hazardous
Waste Control Act, Cal. Health & Safety code Section 25100 ET SEQ., (i)
Porter-Cologne Water Quality Control Act ("Porter-Cologne Act"), Cal. Water Code
Section 13000 ET SEQ., (j) Hazardous Waste Disposal Land Use Law, Cal. Health &
Safety codes Section 25220 ET SEQ., (k) Safe Drinking Water and Toxic
Enforcement Act of 1986 ("Proposition 65"), Cal. Health & Safety code Section
25249.5 ET SEQ., (1) Hazardous Substances Underground Storage Tank Law, Cal.
Health & Safely code Section 25280 ET SEQ., (m) Air Resources Law, Cal. Health &
Safety Code Section 39000 ET SEQ., and (n) regulations promulgated pursuant to
said laws or any replacement thereof, or as similar terms are defined in the
federal, state and local laws, statutes, regulations, orders or rules. Hazardous
Materials shall also mean any and all other biohazardous wastes and substances,
materials and wastes which are, or in the future become, regulated under
applicable Laws for the protection of health or the environment, or which are
classified as hazardous or toxic substances, materials or wastes, pollutants or
contaminants, as defined, listed or regulated by any federal, state or local
law, regulation or order or by common law decision, including, without
limitation, (i) trichloroethylene, tetrachloroethylene, perchloroethylene and
other chlorinated solvents, (ii) any petroleum products or fractions thereof,
(iii) asbestos, (iv) polychlorinated biphenyls, (v) flammable explosives, (vi)
urea formaldehyde, (vii) radioactive materials and waste, and (viii) materials
and wastes that are harmful to or may threaten human health, ecology or the
environment.

       (b) Notwithstanding anything to the contrary in this Lease, Tenant, at
its sole cost, shall comply with all Laws relating to the storage, use and
disposal of Hazardous Materials; PROVIDED, HOWEVER, that Tenant shall not be
responsible for contamination of the Leased Premises by Hazardous Materials
existing as of the date the Leased Premises are delivered to Tenant (whether
before or after the Scheduled Delivery Date) unless caused by Tenant, nor shall
Tenant be responsible for contamination of the Leased Premises caused by
Hazardous Materials which migrate to the Property through groundwater
contamination originating from off-site sources. Tenant shall not store, use or
dispose of any Hazardous Materials except for those Hazardous Materials listed
in a Hazardous Materials management plan ("HMMP") which Tenant shall deliver to
Landlord upon execution of this Lease and update at least annually with Landlord
("Permitted Materials") which may be used, stored and disposed of provided (i)
such Permitted Materials are used, stored, transported, and disposed of in
strict compliance with applicable laws, (ii) such Permitted Materials shall he
limited to the materials listed on and may he used only in the quantifies
specified in the HMMP, and (iii) Tenant shall provide Landlord with copies of
all material safety data sheets and other documentation required under
applicable Laws in connection with Tenant's use of Permitted Materials as and
when

                                      10.
<PAGE>

such documentation is provided to any regulatory authority having jurisdiction,
in no event shall Tenant cause or permit to be discharged into the plumbing or
sewage system of the Building or onto the land underlying or adjacent to the
Building any Hazardous Materials. Tenant shall be solely responsible for and
shall defend, indemnify, and hold Landlord and its agents harmless from and
against all claims, costs and liabilities, including attorneys' fees and costs,
arising out of or in connection with Tenant's storage, use and/or disposal of
Hazardous Materials. If the presence of Hazardous Materials on the Leased
Premises caused or permitted by Tenant results in contamination or deterioration
of water or soil, then Tenant shall promptly take any and all action necessary
to clean up such contamination, but the foregoing shall in no event be deemed to
constitute permission by Landlord to allow the presence of such Hazardous
Materials. At any time prior to the expiration of the Lease Term if Tenant has a
reasonable basis to suspect that there has been any release or the presence of
Hazardous Materials in the ground or ground water on the Premises which did not
exist upon commencement of the Lease Term, Tenant shall have the right to
conduct appropriate tests of water and soil and to deliver to Landlord the
results of such tests to demonstrate that no contamination in excess of
permitted levels has occurred as a result of Tenant's use of the Leased
Premises. Tenant shall further be solely responsible for, and shall defend,
indemnify, and hold Landlord and its agents harmless from and against all
claims, costs and liabilities, including attorneys' fees and costs, arising out
of or in connection with any removal, cleanup and restoration work and materials
required hereunder to return the Leased Premises and any other property of
whatever nature to their condition existing prior to the appearance of the
Hazardous Materials stored, used and/or disposed of by Tenant.

       (c) Upon termination or expiration of the Lease, Tenant at its sole
expense shall cause all Hazardous Materials placed in or about the Leased
Premises, the Building and/or the Property by Tenant; its agents, contractors,
or invitees, and all installations (whether interior or exterior) made by or on
behalf of Tenant relating to the storage, use, disposal or transportation of
Hazardous Materials to be removed from the property and transported for use,
storage or disposal in accordance and compliance with all Laws and other
requirements respecting Hazardous Materials used or permitted to be used by
Tenant. Tenant shall apply for and shall obtain from all appropriate regulatory
authorities (including any applicable fire department or regional water quality
control board) all permits, approvals and clearances necessary for the closure
of the Property and shall take all other actions as may be required to complete
the closure of the Building and the Property. In addition, prior to vacating the
Premises, Tenant shall undertake and submit to Landlord an environmental site
assessment from all environmental consulting company reasonably acceptable to
Landlord which site assessment shall evidence Tenant's compliance with this
Paragraph 4.11.

       (d) At any time prior to expiration of the Lease term, subject to
reasonable prior notice (not less than forty-eight (48) hours) and Tenant's
reasonable security requirements and provided such activities do not
unreasonably interfere wilt the conduct of Tenant's business at the Leased
Premises, Landlord shall have the right to enter in and upon the Property,
Building and Leased Premises in order to conduct appropriate tests of water and
soil to determine whether levels of any Hazardous Materials in excess of legally
permissible levels has occurred as a result of Tenant's use thereof. Landlord
shall furnish copies of all such test results and reports to Tenant and, at
Tenant's option and cost, shall permit split sampling for testing and analysis
by Tenant. Such testing shall be at Tenant's expense if Landlord has a
reasonable basis for suspecting and confirms the presence of Hazardous Materials
in the soil or surface or ground water in, on, under, or about the Property, the
Building or the Leased Premises, which has been caused by or resulted from the
activities of Tenant, its agents, contractors, or invitees.

       (e) Landlord may voluntarily cooperate in a reasonable manner with the
efforts of all governmental agencies in reducing actual or potential
environmental damage. Tenant shall not be entitled to terminate this Lease or to
any reduction in or abatement of rent by reason of such compliance or
cooperation. Tenant agrees at all times to cooperate fully with the requirements
and recommendations of governmental agencies regulating, or otherwise involved
in, the protection of the environment.

                                     ARTICLE 5

                    REPAIRS, MAINTENANCE, SERVICES AND UTILITIES

5.1 REPAIR AND MAINTENANCE. Except in the case of damage to or destruction of
the Leased Premises, the Building, the Outside Areas or the Property caused by
an act of God or other peril, in which case the provisions of

                                      11.
<PAGE>

Article 10 shall control, the parties shall have the following obligations and
responsibilities with respect to the repair and maintenance of the Leased
Premises, the Building, the Outside Areas, and the Property.

       (a) Tenant's Obligations. Tenant shall, at all times during the Lease
Term and at its sole cost and expense, regularly clean and continuously keep and
maintain in good order, condition and repair the Leased Premises and every part
thereof including, without limiting the generality of the foregoing, (i) all
interior walls, floors and ceilings, (ii) all windows, doors and skylights,
(iii) all electrical wiring, conduits, conductors and fixtures, (iv) all
plumbing, pipes, sinks, toilets, faucets and drains, (v) all lighting fixtures,
bulbs and lamps and all heating, ventilating and air conditioning equipment, and
(vi) all entranceways to the Leased Premises. Tenant, if requested to do so by
Landlord, shall hire, at Tenant's sole cost and expense, a licensed heating,
ventilating and air conditioning contractor to regularly and periodically (not
less frequently than every three months) inspect and perform required
maintenance on the heating, ventilating and air conditioning equipment and
systems serving the Leased Premises, or alternatively, Landlord may, at its
election, contract in its own name for such regular and periodic inspections of
and maintenance on such heating, ventilating and air conditioning equipment and
systems and charge to Tenant, as Additional Rent, the cost thereof. Tenant, if
requested to do so by Landlord, shall hire, at Tenant's sole cost and expense, a
licensed roofing contractor to regularly and periodically (not less frequently
than every three months) inspect and perform required maintenance on the roof of
the Leased Premises, or alternatively, Landlord may, at its election, contract
in its own name for such regular and periodic inspections of and maintenance on
the roof and charge to Tenant, as Additional Rent, the cost thereof. Tenant
shall, at all times during the Lease Term, keep in a clean and safe condition
the Outside Areas. Tenant shall regularly and periodically sweep and clean the
driveways and parking areas. Tenant shall, at its sole cost and expense, repair
all damage to the Leased Premises, the Building, the Outside Areas or the
Property caused by the activities of Tenant, its employees, invitees or
contractors promptly following written notice from Landlord to so repair such
damages. If Tenant shall fail to perform the required maintenance or fail to
make repairs required of it pursuant to this paragraph within a reasonable
period of time following notice from Landlord to do so, then Landlord may, at
its election and without waiving any other remedy it may otherwise have under
this Lease or at law, perform such maintenance or make such repairs and charge
to Tenant, as Additional Rent, the costs so incurred by Landlord for same. All
glass within or a part of the Leased Premises, both interior and exterior, is at
the sole risk of Tenant and any broken glass shall promptly be replaced by
Tenant at Tenant's expense with glass of the same kind, size and quality.

       (b) Landlord's Obligation. Landlord shall, at all times during the Lease
Term, at its sole cost and expense and without right of reimbursement from
Tenant, maintain in good condition and repair the foundation, roof structure,
load-bearing and exterior walls of the Building

5.2    UTILITIES. Tenant shall arrange at its sole cost and expense and in
its own name, for the supply of gas and electricity to the Leased Premises.
In the event that such services are not separately metered, Tenant shall, at
its sole expense, cause such meters to be installed. Landlord shall maintain
the water meter(s) in its own name; provided, however, that if at any time
during the Lease Term Landlord shall require Tenant to put the water service
in Tenant's name, Tenant shall do so at Tenant's sole cost. Tenant shall be
responsible for determining if the local supplier of water, gas and
electricity can supply the needs of Tenant and whether or not the existing
water, gas and electrical distribution systems within the Building and the
Leased Premises are adequate for Tenant's needs. Tenant shall be responsible
for determining If the existing sanitary and storm sewer systems now
servicing the Leased Premises and the Properly are adequate for Tenant's
needs. Tenant shall pay all charges for water, gas, electricity and storm and
sanitary sewer services as so supplied to the Leased Premises, irrespective
of whether or not the services are maintained in Landlord's or Tenant's name.

5.3    SECURITY. Tenant acknowledges that Landlord has not undertaken any
duty whatsoever to provide security for the Leased Premises, the Building,
the Outside Areas or the Property and, accordingly, Landlord is not
responsible for the security of same or the protection of Tenant's property
or Tenant's employees, invitees or contractors. To the extent Tenant
determines that such security or protection services are advisable or
necessary, Tenant shall arrange for and pay the costs of providing same.

5.4    ENERGY AND RESOURCE CONSUMPTION. Landlord may voluntarily cooperate in
a reasonable matter with the efforts of governmental agencies and/or utility
suppliers in reducing energy or other resource consumption within the
Property. Tenant shall not be entitled to terminate this Lease or to any
reduction in or abatement of rent

                                      12.
<PAGE>

by reason of such compliance or cooperation. Tenant agrees at all times to
cooperate fully with Landlord and to abide by all reasonable rules established
by Landlord (i) in order to maximize the efficient operation of the electrical,
heating, ventilating and air conditioning systems and all other energy or other
resource consumption systems with the Properly and/or (ii) in order to comply
with the requirements and recommendations of utility suppliers and governmental
agencies regulating the consumption of energy and/or other resources.

5.5    LIMITATION OF LANDLORD'S LIABILITY. Landlord shall not be liable to
Tenant for injury to Tenant, its employees, agents, invitees or contractors,
damage to Tenant's property, or loss of Tenant's business or profits, nor
shall Tenant be entitled to terminate this Lease or to any reduction in or
abatement of rent by reason of (i) Landlord's failure to provide security
services or systems within the Property for the protection of the Leased
Premises, the Building or the Outside Areas, or the protection of Tenant's
property or Tenant's employees, invitees, agents or contractors, or (ii)
Landlord's failure to perform any maintenance or repairs to the Leased
Premises, the Building, the Outside Areas or the Property until Tenant shall
have first notified Landlord, in writing, of the need for such maintenance or
repairs, and then only after Landlord shall have had a reasonable period of
time following its receipt of such notice within which to perform such
maintenance or repairs, or (iii) any failure, interruption, rationing or
other curtailment in the supply of water, electric current, gas or other
utility service to the Leased Premises, the Building, the Outside Areas or
the Property from whatever cause (other than Landlord's active negligence or
willful misconduct), or (iv) the unauthorized intrusion or entry into the
Leased Premises by third parties (other than Landlord).

                                     ARTICLE 6

                            ALTERATIONS AND IMPROVEMENTS

6.1    BY TENANT. Tenant shall not make any alterations to or modifications
of the Leased Premises or construct any improvements within the Leased
Premises until Landlord shall have first approved, in writing, the plans and
specifications therefor, which approval shall not be unreasonably withheld.
Without limiting the generality of the foregoing, Tenant acknowledges that it
shall be reasonable for Landlord to withhold its consent to any modification,
alteration or improvement if, in Landlord's reasonable judgment, such
modification, alteration or improvement would adversely affect the structure
of the Building, any of the Building's systems, the appearance of the
Building or the value or utility of the Building or the Property. All such
modifications, alterations or improvements, once so approved, shall be made,
constructed or installed by Tenant at Tenant's expense (including all permit
fees and governmental charges related thereto), using a licensed contractor
first approved by Landlord, in substantial compliance with the
Landlord-approved plans and specifications therefor. All work undertaken by
Tenant shall be done in accordance with all Laws and in a good and
workmanlike matter using new materials of good quality. Tenant shall not
commence the making of any such modifications or alterations or the
construction of any such 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 lease five (5) business days prior written
notice of its intention to commence such work so that Landlord may post and
the notices of non-responsibility, and (iv) if requested by Landlord, Tenant
shall have obtained contingent liability and broad form builder's risk
insurance in pal amount satisfactory to Landlord in its reasonable discretion
to cover any perils relating to the proposed work not covered by insurance
carried by Tenant pursuant to Article 9. In no event shall Tenant make any
modification, alterations or improvements whatsoever to the Outside Areas or
the exterior or structural components of the Building including, without
limitation, any cuts or penetrations in the floor, roof or exterior walls of
the Leased Premises. As used in this Article, the term "modifications,
alterations and/or improvements" shall include, without limitation, the
installation of additional electrical outlets, overhead lighting fixtures,
drains, sinks, partitions, doorways, or the like. Notwithstanding the
foregoing, Tenant, without Landlord's prior written consent (but subject it
the other terms and conditions of this Article 6), shall be permitted to make
alterations to the Premises which do not affect the structure of the Building
or the Premises, do not affect the plumbing, electrical, mechanical or other
systems of the Building and do not affect the appearance of the Premises
viewed from the exterior, provided that: (a) such alterations do not exceed
$25,000 individually or $100,000 in the aggregate, (b) Tenant shall timely
provide Landlord the notice required pursuant to Paragraph 4.9 above, (c)
Tenant shall notify Landlord in writing within thirty (30) days of completion
of the alteration and deliver to Landlord a set of the plans and
specifications therefor, either "as built" or marked to show construction
changes made, and (d) Tenant shall, upon Landlord's request, remove the
alteration at the termination of the Lease and restore the Leased Premises to
their condition prior to such alteration.

                                      13.
<PAGE>

6.2    OWNERSHIP OF IMPROVEMENTS. All modifications, alterations and
improvements made or added to the Leased Premises by Tenant (other than
Tenant's inventory, equipment, movable furniture, wall decorations and trade
fixtures) shall be deemed real property and a part of the Leased Premises,
but shall remain the property of Tenant during the Lease. Any such
modifications, alterations or improvements, once completed, shall not be
altered or removed from the Leased Premises during the Lease Term without
Landlord's written approval first obtained in accordance with the provisions
of Paragraph 6.1 above. At the expiration or sooner termination of this
Lease, all such modifications, alterations and improvements other than
Tenant's inventory, equipment, movable furniture, wall decorations and trade
fixtures, shall automatically become the property of Landlord and shall be
surrendered to Landlord as part of the Leased Premises as required pursuant
to Article 2, unless Landlord shall require Tenant to remove any of such
modifications, alterations or improvements in accordance with the provisions
of Article 2, in which case Tenant shall so remove same. Landlord shall have
no obligations to reimburse Tenant for all or any portion of the cost or
value of any such modifications, alterations or improvements so surrendered
to Landlord. All modifications, alterations or improvements which are
installed or constructed on or attached to the Leased Premises by Landlord
and/or at Landlord's expense shall be deemed real property and a part of the
Leased Premises and shall be property of Landlord. All lighting, plumbing,
electrical, heating, ventilating and air conditioning fixtures, partitioning,
window coverings, wall coverings and floor coverings installed by Tenant
shall be deemed improvements to the Leased Premises and not trade fixtures of
Tenant.

6.3    ALTERATIONS REQUIRED BY LAW. Tenant shall make all modifications,
alterations and improvements to the Leased Premises, at its sole cost, that
are required by any Law because of (i) Tenant's use or occupancy of the
Leased Premises, the Building, the Outside Areas or the Property, (ii)
Tenant's application for any permit or governmental approval, or (iii)
Tenant's making of any modifications, alterations or improvements to or
within the Leased Premises. If Landlord shall, at any time during the Lease
Term, be required by any governmental authority to make any modifications,
alterations or improvements to the Building or the Property, the cost
incurred by Landlord in making such modifications, alterations or
improvements, including interest at a rate equal to the greater of (a) 12%,
or (b) the sum of that rate quoted by Wells Fargo Bank, N.T. & S.A. from time
to time as its prime rate, plus two percent (2%) ("Wells Prime Plus Two"),
shall be amortized by Landlord over the useful life of such modifications,
alterations or improvements, as determined in accordance with generally
accepted accounting principles, and the monthly amortized cost of such
modifications, alterations and improvements as so amortized shall be
considered a Property Maintenance Cost.

6.4    LIENS. Tenant shall keep the Property and every part thereof free from
any lien, 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 rim Property. If any such claim of lien is
recorded against Tenant's interest in this Lease, the Property or any part
thereof, Tenant shall bond against, discharge or otherwise cause such lien to
be entirely released within ten days after the same has been recorded.
Tenant's failure to do so shall be conclusively deemed a material default
under the terms of this Lease.

                                     ARTICLE 7

                        ASSIGNMENT AND SUBLETTING BY TENANT

7.1    BY TENANT. Tenant shall not sublet the Leased Premises or any portion
thereof or assign its interest in this Lease, whether voluntarily or by
operation of Law, without Landlord's prior written consent which shall not be
unreasonably withheld; provided, however, that Landlord's consent shall not
be required for Tenant to sublet the Leased Premises or any portion thereof
or to assign its interest in this Lease to any wholly owned subsidiary of
Tenant as long as Tenant promptly provides Landlord with written notice of
any such sublet or assignment. Any attempted subletting or assignment without
Landlord's prior written consent, at Landlord's election, shall constitute a
default by Tenant under the terms of this Lease. The acceptance of rent by
Landlord from any person or entity other than Tenant, or the acceptance of
rent by Landlord from Tenant with knowledge of a violation of the provisions
of this paragraph, shall not be deemed to be a waiver by Landlord of any
provision of this Article or this Lease or to be a consent to any subletting
by Tenant or any assignment of Tenant's interest in this Lease. Without
limiting the circumstances in which it may be reasonable for Landlord to
withhold its consent to an assignment or subletting, Landlord and Tenant
acknowledge that it shall be reasonable for Landlord to withhold its consent
in the following instances:

                                      14.
<PAGE>

       (a) in Landlord's reasonable judgment, the use of the Premises by the
proposed assignee or sublessee would entail any alterations which would lessen
the value of the leasehold improvements in the Premises or would require
increased services by Landlord;

       (b) in Landlord's reasonable judgment, the financial worth of the
proposed assignee does not meet the credit standards applied by Landlord;

       (c) the proposed assignee or sublessee (or any of its affiliates) has
been in material default under a lease, has been in litigation with a previous
landlord, or in the ten years prior to the assignment or sublease has riled for
bankruptcy protection, has been the subject of an involuntary bankruptcy, or has
been adjudged insolvent;

       (d) Landlord has experienced a previous default by or is in litigation
with the proposed assignee or sublessee;

       (e) in Landlord's reasonable judgment, the Premises, or the relevant part
thereof, will be used in a manner that will violate any negative covenant as to
use contained in this Lease;

       (f) the use of the Premises by the proposed assignee or sublessee will
violate any applicable law, ordinance or regulation;

       (g) the proposed assignment or sublease fails to include all of the terms
and provisions required to be included therein pursuant to this Article 7;

       (h) Tenant is in default of a monetary obligation or material
non-monetary obligation of Tenant under this Lease (after the giving of notice
where notice is required and the expiration of applicable cure periods), and
such default is susceptible of being cured but has not been cured by Tenant, or
Tenant has defaulted under this Lease on three or more occasions during the 12
months preceding the date that Tenant shall request consent; or

       (i) in the case of a subletting of less than the entire Premises, if the
subletting would result in the division of the Building into more than two
tenant spaces or would require improvements to be made outside of the Premises.

7.2    MERGER, REORGANIZATION, OR SALE OF ASSETS. Any dissolution, merger,
consolidation, recapitalization or other reorganization of Tenant, or the
sale or other transfer in the aggregate over the Lease Term of a controlling
percentage of the capital stock of Tenant (excluding transfers of stock in a
public company where stock is traded over a national exchange or Nasdaq), or
the sale or transfer of all or a substantial portion of the assets of Tenant,
shall be deemed a voluntary assignment of Tenant's interest in this Lease;
provided that, a merger, consolidation, recapitalization, reorganization or
sale of assets shall not require Landlord's consent hereunder if (i) Tenant's
tangible net worth (determined in accordance with generally accepted
accounting principles) immediately after such transaction is not less than
Tenant's tangible net worth immediately prior to such transaction, (ii) in
the event of a merger, the surviving entity assumes all obligations of Tenant
under this Lease, and (iii) in the event of a sale of assets or stock of
Tenant, the parent entity, if required by Landlord, assumes in writing all
obligations of Tenant under this Lease. The phrase "controlling percentage"
means the ownership of and the right to vote stock possessing more than fifty
percent 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.
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 of Tenant's interest in
this Lease.

7.3    LANDLORD'S ELECTION. If Tenant shall desire to assign its interest
under the Lease or to sublet the Leased Premises, Tenant must first notify
Landlord, in writing, of its intent to so assign or sublet, at least thirty
(30) days in advance of the date it intends to so assign its interest in this
Lease or sublet the Leased Premises but not sooner than one hundred eighty
days in advance of such date, specifying in detail the terms of such proposed
assignment or subletting, including the name of the proposed assignee or
sublessee, the properly assignee's or sublessee's intended use of the Leased
Premises, current financial statements (including a balance sheet, income
statement and statement of cash flow, all prepared in accordance with
generally accepted accounting principles) of such proposed assignee or

                                      15.
<PAGE>

sublessee, the form of documents to be used in effectuating such assignment or
subletting and such other information as Landlord may reasonably request.
Landlord shall have a period of ten (10) business days following receipt of such
notice and the required information within which to do one of the following: (i)
consent to such requested assignment or subletting subject to Tenant's
compliance with the conditions set forth in Paragraph 7.4 below, or (ii) refuse
to so consent to such requested assignment or subletting, provided that such
consent shall not be unreasonably refused, or (iii) in the event the portion of
the Leased Premises that is the subject of the proposed assignment or subletting
is fifty percent (50%) or more (including all) of the Leased Premises, terminate
this Lease as to such portion. During such ten (10) business day period, Tenant
covenants and agrees to supply to Landlord, promptly upon request, all necessary
or relevant information which Landlord may reasonably request respecting such
proposed assignment or subletting and/or the proposed assignee or sublessee.

7.4    CONDITIONS TO LANDLORD'S CONSENT. If Landlord elects to consent, or
shall have been ordered to so consent by a court of competent jurisdiction,
to such requested assignment or subletting, such consent shall be expressly
conditioned upon the occurrence of each of the conditions below set forth,
and any purported assignment or subletting made or ordered prior to the full
and complete satisfaction of each of the following conditions shall be void
and, at the election of Landlord, which election may be exercised at any time
following such a purported assignment or subletting but prior to the
satisfaction of each of the stated conditions, shall constitute a material
default by Tenant under this Lease until cured by satisfying in full each
such condition by the assignee or sublessee. The conditions are as follows:

       (a) Landlord having approved in form and substance the assignment or
sublease agreement and any ancillary documents, which approval shall not be
unreasonably withheld by Landlord if the requirements of this Article 7 are
otherwise complied with.

       (b) Each such sublessee or assignee having agreed, in writing
satisfactory to Landlord and its counsel and for the benefit of Landlord, to
assume, to be bound by, and to perform the obligations of this Lease to be
performed by Tenant which relate to space being subleased.

       (c) Tenant having fully and completely performed all of its obligations
under the terms of this Lease through and including the date of such assignment
or subletting.

       (d) Tenant having reimbursed to Landlord all reasonable costs and
reasonable attorneys' fees incurred by Landlord in conjunction with the
processing and documentation of any such requested subletting or assignment.

       (e) Tenant having delivered to Landlord a complete and fully-executed
duplicate original of such sublease agreement or assignment agreement (as
applicable) and all related agreements.

       (f) Except in the case of (i) an assignment or sublease to a company
which controls, is controlled by, or under common control with Tenant, (ii) an
assignment in connection with a merger or sale of assets, or (iii) a transfer of
a controlling percentage of the capital stock of Tenant, Tenant having paid, or
having agreed in writing to pay as to future payments, to Landlord fifty percent
(50%) of all assignment consideration or excess rentals to be paid to Tenant or
to any other on Tenant's behalf or for Tenant's benefit for such assignment or
subletting as follows:

              (i) If Tenant assigns its interest under this Lease and if all or
a portion of the consideration for such assignment is to be paid by the assignee
at the time of the assignment, that Tenant shall have paid to Landlord and
Landlord shall have received an amount equal to fifty percent (50%) of the
assignment consideration so paid or to be paid (whichever is the greater) at the
time of the assignment by the assignee; or

              (ii) If Tenant assigns its interest under this Lease and if Tenant
is to receive all or a portion of the consideration for such assignment in
future installments, that Tenant and Tenant's assignee shall have entered into a
written agreement with and for the benefit of Landlord satisfactory to Landlord
and its counsel whereby Tenant and Tenant's assignee jointly agree to pay to
Landlord an amount equal to fifty percent (50%) of all such future assignment
consideration installments to be paid by such assignee as and when such
assignment consideration is so paid.

                                      16.
<PAGE>

              (iii) If Tenant subleases the Leased Premises, that Tenant and
Tenant's sublessee shall have entered into a written agreement with and for the
benefit of Landlord satisfactory to Landlord and its counsel whereby Tenant and
Tenant's sublessee jointly agree to pay to Landlord fifty percent (50%) of all
excess rentals to be paid by such sublessee as and when such excess rentals are
so paid.

7.5    ASSIGNMENT CONSIDERATION AND EXCESS RENTALS DEFINED. For purposes of
this Article, including any amendment to this Article by way of addendum or
other writing, the term "assignment consideration" shall mean all
consideration to be paid by the assignee to Tenant or to any other party on
Tenant's behalf or for Tenant's benefit as consideration for such assignment,
after deduction of any leasing commissions paid by Tenant, but without
deduction for any other costs or expenses (including, without limitation,
tenant improvements, capital improvements, building upgrades, permit fees,
attorneys' fees, and other consultants' fees) incurred by Tenant in
connection with such assignment, and the term "excess rentals" shall mean all
consideration to be paid by the sublessee to Tenant or to any other party on
Tenant's behalf or for Tenant's benefit for the sublease of the Leased
Premises in excess of the rent due to Landlord under the terms of this Lease
for the same period, after deduction for any leasing commissions paid by
Tenant, but without deduction for any other costs or expenses (including,
without limitation, tenant improvements, capital improvements, building
upgrades, permit fees, attorneys' fees, and other consultants' fees) incurred
by Tenant in connection with such sublease. Tenant agrees that the potion of
any assignment consideration and/or excess rentals arising from any
assignment or subletting by Tenant which is to be paid to Landlord pursuant
to this Article now is and shall then be the properly of Landlord and not the
property of Tenant.

7.6    PAYMENTS. All payments required by this Article to be made to Landlord
shall be made in cash in full as and when they become due. At the time
Tenant, Tenant's assignee or sublessee makes each such payment to Landlord,
Tenant or Tenant's assignee or sublessee, as the case may be, shall deliver
to Landlord an itemized statement in reasonable detail showing the method by
which the amount due Landlord was calculated and certified by the party
making such payment as line and correct.

7.7    GOOD FAITH. The rights granted to Tenant by this Article are granted
in consideration of Tenant's express covenant that all pertinent allocations
which are made by Tenant between the rental value of the Leased Premises and
the value of any of Tenant's personal property which may be conveyed or
leased generally concurrently with and which may reasonably be considered a
part of the same transaction as the permitted assignment or subletting shall
be made fairly, honestly and in good faith. If Tenant shall breach this
covenant, Landlord may immediately declare Tenant to be in default under the
terms of this Lease and terminate this Lease and/or exercise any other rights
and remedies Landlord would have under the terms of this Lease in the case of
a material default by Tenant under this Lease.

7.8    EFFECT OF LANDLORD'S CONSENT. No subletting or assignment, even with
the consent of Landlord, shall relieve Tenant of its personal and primary
obligation to pay rent and to perform all of the other obligations to be
performed by Tenant hereunder. Consent by Landlord to one or more assignments
of Tenant's interest in this Lease or to one or more sublettings of the
Leased Premises shall not be deemed to be a consent to any subsequent
assignment or subletting. If Landlord shall have been ordered by a court of
competent jurisdiction to consent to a requested assignment or subletting, or
such an assignment or subletting shall have been ordered by a court of
competent jurisdiction over the objection of Landlord, such assignment or
subletting shall not be binding between the assignee (or sublessee) and
Landlord until such time as all conditions set forth in Paragraph 7.4 above
have been fully satisfied (to the extent not then satisfied) by the assignee
or sublessee, including, without limitation, the payment to Landlord of all
agreed assignment considerations and/or excess rentals then due Landlord.

7.9    OPTIONS PERSONAL. If Landlord consents to an assignment or subletting
hereunder and this Lease contains any renewal options, expansion options,
rights of first refusal, rights of first negotiation or any other rights or
options pertaining to additional space in the Building or the Property, such
rights and/or options shall not run to the assignee or subtenant, it being
agreed by the parties hereto that any such rights and options are personal to
the original Tenant named herein and may not be transferred. Notwithstanding
the foregoing, such rights and options shall be transferable and run to the
assignee or subtenant in connection with any of the following: (i) an
assignment or sublease to a company which controls, is controlled by, or
under common control with Tenant, (ii) an assignment

                                      17.
<PAGE>

in connection with a merger or sale of assets, or (iii) a transfer of a
controlling percentage of the capital stock of Tenant.

7.10    TENANT'S REMEDIES. Notwithstanding any contrary provision of law,
including California Civil Code section 1995.310, Tenant shall have no right,
and Tenant hereby waives and relinquishes any right, to cancel or terminate
this Lease in the event Landlord is determined to have unreasonably withheld
or delayed its consent to a proposed Transfer.

                                     ARTICLE 8

                  LIMITATION ON LANDLORD'S LIABILITY AND INDEMNITY

8.1    LIMITATION ON LANDLORD'S LIABILITY AND RELEASE. Landlord shall not be
liable to Tenant for, and Tenant hereby releases Landlord and its partners,
principals, members, officers, agents, employees, lenders, attorneys, and
consultants from, any and all liability, whether in contract, tort or on any
other basis, for any injury to or any damage sustained by Tenant, Tenant's
agents, employees, contractors or invitees, any damage to Tenant's property,
or any loss to Tenant's business, loss of Tenant's profits or other financial
loss of Tenant resulting from or attributable to the condition of, the
management of, the repair or maintenance of, the protection of, the supply of
services or utilities to, the damage in or destruction of the Leased
Premises, the Building, the Properly or the Outside Areas, including without
limitation (i) the failure, interruption, rationing or other curtailment or
cessation in the supply of electricity, water, gas or other utility service
to the Property, the Building or the Leased Premises; (ii) the vandalism or
forcible entry into the Building or the Leased Premises; (iii) the
penetration of water into or onto any portion of the Leased Premises; (ix,)
the failure to provide security and/or adequate lighting in or about the
Property, the Building or the Leased Premises, (v) the existence of any
design or construction defects within the Property, the Building or the
Leased Premises; (vi) the failure of any mechanical systems to function
properly (such as the HVAC systems); (vii) the blockage of access to any
portion of the Property, the Building or the Leased Promises, except that
Tenant does not so release Landlord from such liability to the extent such
damage was proximately caused by Landlord's or its agent's or employee's
active negligence, willful misconduct; or Landlord's failure to perform an
obligation expressly undertaken pursuant to this Lease after a reasonable
period of time shall have lapsed following receipt of written notice from
Tenant to so perform such obligation. In this regard, Tenant acknowledges
that it is fully apprised of the provisions of Law relating to releases, and
particularly to those provisions contained in Section 1542 of the California
Civil Code which reads as follows:

       "A general release does not extend to claims which the creditor does not
       know or suspect to exist in his favor at the time of executing the
       release, which if known by him must have materially affected his
       settlement with the debtor."

Notwithstanding such statutory provision, and for the purpose of implementing a
full and complete release and discharge, Tenant hereby (i) waives the benefit of
such statutory provision and (ii) acknowledges that, subject to the exceptions
specifically set forth herein, the release and discharge set forth in this
paragraph is a full and complete settlement and release and discharge of all
claims and is intended to include in its effect, without limitation, all claims
which Tenant, as of the date hereof, does not know of or suspect to exist in its
favor.

8.2    TENANT'S INDEMNIFICATION OF LANDLORD. Tenant shall defend with
competent counsel satisfactory to Landlord any claims made or legal actions
filed or threatened against Landlord with respect to the violation of any
Law, or the death, bodily injury, personal injury, property damage, or
interference with contractual or property rights suffered by any third part),
occurring within the Leased Premises or resulting from Tenant's use or
occupancy of the Leased Premises, the Building or the Outside Areas, or
resulting from Tenant's activities in or about the Leased Premises, the
Building, the Outside Areas or the Property, and Tenant shall indemnify and
hold Landlord, Landlord's partners, principals, members, employees, agents
and contractors harmless from any loss liability, penalties, or expense
whatsoever (including any loss attributable to vacant space which otherwise
would have been leased, but for such activities) resulting therefrom, except
to the extent proximately caused by the active negligence or willful
misconduct of Landlord or its agents or employees. This indemnity agreement
shall survive the expiration of this Lease.

                                      18.
<PAGE>

                                    ARTICLE 9

                                    INSURANCE

9.1    Tenant's Insurance. Tenant shall maintain insurance complying with all
of the following:

       (a) Tenant shall procure, pay for and keep in full force and effect, at
all times during the Lease Term, the following:

              (i) Comprehensive general liability insurance insuring Tenant
against liability for personal injury, bodily injury, death and damage to
property occurring within the Leased Premises, or resulting from Tenant's use or
occupancy of the Leased Premises, the Building, the Outside Areas or the
Property, or resulting from Tenant's activities in or about the Leased Premises
or the Property, with coverage in all amount equal to Tenant's Required
Liability Coverage (as set forth in Article 1), which insurance shall contain a
"broad form liability" endorsement insuring Tenant's performance of Tenant's
obligations to indemnify Landlord as contained in this Lease.

              (ii) Fire and property damage insurance in so-called "fire and
extended coverage" form insuring Tenant against loss from physical damage to
Tenant's personal property, inventory, trade fixtures and improvements within
the Leased Premises with coverage for the full actual replacement cost thereof;

              (iii) Plate glass insurance, at actual replacement cost;

              (iv)   Pressure vessel insurance, if applicable;

              (v) Product liability insurance (including, without limitation, if
food and/or beverages are distributed, sold and/or consumed within the Leased
Premises, to the extent obtainable, coverage for liability arising out of the
distribution, sale, use or consumption of food and/or beverages (including
alcoholic beverages, if applicable) at the Leased Premises for not less than
Tenant's Required Liability Coverage (as set forth in Article 1);

              (vi) Workers' compensation insurance and any other employee
benefit insurance sufficient to comply with all laws; and

              (vii) With respect to making of alterations or the construction of
improvements or the like undertaken by Tenant, contingent liability and
builder's risk insurance, in an amount and with coverage reasonably satisfactory
to Landlord.

       (b) Each policy of liability insurance required to be carried by Tenant
pursuant to this paragraph or actually carried by Tenant with respect to the
Leased Premises or the Property: (i) shall, except with respect to insurance
required by subparagraph (a)(vi) above, name Landlord, and such others as are
designated by Landlord, as additional insureds; (ii) shall be primary insurance
providing 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 declaration of
coverage, without the right of contribution from or prior payment by any other
insurance coverage of Landlord; (iii) shall be in a form reasonably satisfactory
to Landlord; (iv) shall be carried with companies reasonably acceptable to
Landlord with Best's ratings of at least A and XI; (v) shall provide that such
policy shall not be subject to cancellation, lapse or change except after at
least thirty days prior written notice to Landlord, and (vi) shall contain a
so-called "severability" or "cross liability" endorsement. Each policy of
property insurance maintained by Tenant with respect to the Leased Premises or
the Property or any property therein (i) shall provide that such policy shall
not be subject to cancellation, lapse or change except after at least thirty
days prior written notice to Landlord and (ii) shall contain a waiver and/or a
permission to waive by the insurer of any right of subrogation against Landlord,
its partners, principals, members, officers, employees, agents and contractors,
which might arise by reason of any payment under such policy or by reason of any
act or omission of Landlord, its partners, principals, members, officers,
employees, agents and contractors.

                                       19.
<PAGE>

       (c) Prior to the time Tenant or any of its contractors enters the Leased
Premises, Tenant shall deliver to Landlord, with respect to each policy of
insurance required to be carried by Tenant pursuant to this Article, a copy of
such policy (appropriately authenticated by the insurer as having been issued,
premium paid) or a certificate of the insurer certifying in form satisfactory to
Landlord that a policy has been issued, premium paid, providing the coverage
required by this Paragraph and containing the provisions specified herein. With
respect to each renewal or replacement of an), such insurance the requirements
of this Paragraph must be complied with not less than thirty days prior to the
expiration or cancellation of the policies being renewed or replaced. Landlord
may, at any time and from time to time, inspect and/or copy any and all
insurance policies required to be carried by Tenant pursuant to this Article. If
Landlord's Lender, insurance broker, advisor or counsel reasonably determines at
any time that the amount of coverage set forth in Paragraph 9. l(a) for any
policy of insurance Tenant is required to carry pursuant to this Article is not
adequate, then Tenant shall increase the amount of coverage for such insurance
to such greater amount as Landlord's Lender, insurance broker, advisor or
counsel reasonably deems adequate.

9.2    LANDLORD'S INSURANCE. With respect to insurance maintained by Landlord:

       (a) Landlord shall maintain, as the minimum coverage required of it by
this Lease, fire and property damage insurance in so-called "fire and extended
coverage" form insuring Landlord (and such others as Landlord may designate)
against loss from physical damage to the Building with coverage of not less than
one hundred percent (100%) of the full actual replacement cost thereof and
against loss of rents for a period of not less than six months. Such fire and
properly damage insurance, at Landlord's election but without any requirements
on Landlord's behalf to do so, (i) may be written in so-called "all risk" forth,
excluding only those perils commonly excluded from such coverage by Landlord's
then property damage insurer; (ii) may provide coverage for physical damage to
the improvements so insured for up to the entire full actual replacement cost
thereof; (iii)may be endorsed to cover loss or damage caused by any additional
perils against which Landlord may elect to insure, including earthquake and/or
flood; and/or (iv) may provide coverage for loss of rents for a period of up to
twelve months. Landlord shall not be required to cause such insurance to cover
any of Tenant's personal property, inventory, and trade fixtures, or any
modifications, alterations or improvements made or constructed by Tenant to or
within the Leased Premises. Landlord shall use commercially reasonable efforts
to obtain such insurance at competitive rates.

       (b) Landlord shall maintain comprehensive general liability insurance
insuring Landlord (and such others as are designated by Landlord) against
liability for personal injury, bodily injury, death, and damage to property
occurring in, on or about, or resulting from the use or occupancy of the
Property, or any portion thereof, with combined single limit coverage of at
least Three Minion Dollars ($3,000,000). Landlord may carry such greater
coverage as Landlord or Landlord's Lender, insurance broker, advisor or counsel
may from time to time determine is reasonably necessary for the adequate
protection of Landlord and the Property.

       (c) Landlord may maintain any other insurance which in the opinion of its
insurance broker, advisor or legal counsel is prudent in carry under the given
circumstances, provided such insurance is commonly carried by owners of properly
similarly situated and operating under similar circumstances.

9.3    MUTUAL WAIVER OF SUBROGATION. Landlord hereby releases Tenant, and
Tenant hereby releases Landlord and its respective partners, principals,
members, officers, agents, employees and servants, from any and all liability
for loss, damage or injury to the property of the other in or about the
Leased Premises or the Property which is caused by or results from a peril or
event or happening which is covered by insurance actually carried and in
force at the time of the loss by the party sustaining such loss; PROVIDED,
HOWEVER, that such waiver shall be effective only to the extent permitted by
the insurance covering such loss and to the extent such insurance is not
prejudiced thereby.

                                     ARTICLE 10

                             DAMAGE TO LEASED PREMISES

10.1    LANDLORD'S DUTY TO RESTORE. if the Leased Premises, the Building or
the Outside Area are damaged by any peril after the Effective Date of this
Lease, Landlord shall restore the same, as and when required by this
paragraph, unless this Lease is terminated by Landlord pursuant to Paragraph
10.3 or by Tenant pursuant to

                                      20.
<PAGE>

Paragraph 10.4. If this Lease is not so terminated, then upon the issuance of
all necessary governmental permits, Landlord shall commence and diligently
prosecute to completion the restoration of the Leased Premises, the Building or
the Outside Area, as the case may be, to the extent then allowed by law, to
substantially the same condition in which it existed as of the Lease
Commencement Date. Landlord's obligation to restore shall be limited to actual
receipt of insurance proceeds plus any additional amounts contributed by Tenant
at Tenant's election and to the improvements constructed by Landlord. Landlord
shall have no obligation to restore any improvements made by Tenant to the
Leased Premises or any of Tenant's personal properly, inventory or trade
fixtures. Upon completion of the restoration by Landlord, Tenant shall forthwith
replace or fully repair all of Tenant's personal property, inventory, trade
fixtures and other improvements constructed by Tenant to like or similar
conditions as existed at the time immediately prior to such damage or
destruction.

10.2    INSURANCE PROCEEDS. All insurance proceeds available from the fire
and property damage insurance canted by Landlord shall be paid to and become
the property of Landlord. If this Lease is terminated pursuant to either
Paragraph 10.3 or 10.4, all insurance proceeds available from insurance
carded by Tenant which cover loss of 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, and the remainder of such proceeds
shall be paid to and become the property of Tenant. If this Lease is not
terminated pursuant to either Paragraph 10.3 or 10.4, all insurance proceeds
available from insurance carried by Tenant which cover loss to property that
is Landlord's property shall be paid to and become the property of Landlord,
and all proceeds available from such insurance which cover loss to property
which would only become the property of Landlord upon the termination of this
Lease shall be paid to and remain the property of Tenant. The determination
of Landlord's property and Tenant's property shall be made pursuant to
Paragraph 6.2.

10.3    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 days after the date of such damage or destruction:

       (a) 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 (an "insured peril") to such an extent that the estimated cost to
restore the Building exceeds the lesser of (i) the insurance proceeds available
from insurance actually castled by Landlord, plus the deductible amount
specified in such insurance policy, or (ii) fifty percent of the then actual
replacement cost thereof;

       (b) The Building is damaged by an uninsured peril, which peril Landlord
was not required to insure against pursuant to the provisions of Article 9 of
this Lease.

       (c) The Building is damaged by any peril and, because of the laws then in
force, the Building (i) cannot be restored at reasonable cost or (ii) If
restored, cannot be used for the same use being made thereof before such damage.

       Notwithstanding Landlord's election to terminate this Lease pursuant to
clauses (a) or (b) of this Section 10.3, Tenant shall have the right to continue
this Lease in full force and effect by contributing to the cost of restoring the
Building any and all amounts by which such cost exceeds the available insurance
proceeds (in the case of an insured peril) or the entire amount of such cost (in
the case of an uninsured peril), which right shall be exercised only by delivery
to Landlord of a written notice of Tenant's election to contribute within seven
(7) days after receipt of Landlord's written notice of election to terminate
pursuant to this Section 10.3.

10.4    TENANT'S RIGHT TO TERMINATE. If the Leased Premises, the Building or
the Outside Area are damaged by any peril and Landlord does not elect to
terminate this Lease or is not entitled to terminate this Lease pursuant to
this Article, 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
complete. 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 days
after Tenant receives from Landlord the estimate of the time needed to
complete such restoration (which estimate Landlord shall deliver within
thirty (30) days following the date of damage):

                                      21.
<PAGE>

       (a) If the time estimated to substantially complete the restoration
exceeds nine (9) months from and after the date the architect's or construction
consultant's written opinion is delivered;

       (b) If the damage occurred within twelve months of the last day of the
Lease Term and the time estimated to substantially complete the restoration
exceeds one hundred eighty days from and after the date such restoration is
commenced.

10.5    TENANT'S WAIVER. Landlord and Tenant agree that the provisions of
Paragraph 10.4 above, captioned "Tenant's Right To Terminate", are intended
to supersede and replace the provisions contained in California Civil Code,
Section 1932, Subdivision 2, and California Civil Code, Section 1934, and
accordingly, Tenant hereby waives the provisions of such Civil Code Sections
and the provisions of any successor Civil Code Sections or similar laws
hereinafter enacted.

10.6    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
(and any Additional 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.

                                     ARTICLE 11

                                    CONDEMNATION

11.1    TENANT'S RIGHT TO TERMINATE. Except as otherwise provided in
Paragraph 11.4 below regarding temporary takings, Tenant shall have the
option to terminate this Lease if, as a result of any taking, (i) all of the
Leased Premises is taken, or (ii) twenty-five percent (25%) or more of the
rentable area Leased Premises is taken and the pint of the Leased Premises
that remains cannot, within a reasonable period of time, be made reasonably
suitable for the continued operation of Tenant's business. Tenant must
exercise such option within a reasonable period of time, to be effective on
the later to occur of (i) the date that possession of that portion of the
Leased Premises that is condemned is taken by the condemnor or (ii) the date
Tenant vacated the Leased Premises.

11.2    LANDLORD'S RIGHT TO TERMINATE. Except as otherwise provided in
Paragraph 11.4 below regarding temporary takings, Landlord shall have the
option to terminate this Lease if, as a result of any taking, (i) all of the
Leased Premises is taken, (ii) twenty-five percent (25%) or more of the
Leased Premises is taken and the part of the Leased Premises that remains
cannot, within a reasonable period of time, be made reasonably suitable for
the continued operation of Tenant's business, or (iii) because of the laws
then in force, the Leased Premises may not be used for the same use being
made before such taking, whether or not restored as required by Paragraph
11.3 below. Any such option to terminate by Landlord must be exercised within
a reasonable period of time, to be effective as of the date possession is
taken by the condemnor.

11.3    RESTORATION. If any part of the Leased Premises or the Building is
taken and this Lease is not terminated, then Landlord shall, to the extent
not prohibited by laws then in force, repair any damage occasioned thereby to
the remainder thereof to a condition reasonably suitable for Tenant's
continued operations and otherwise, to the extent practicable, in the manner
and to the extent provided in Paragraph 10.1.

11.4    TEMPORARY TAKING. If a portion of the Leased Premises is temporarily
taken for a period of one year or less and such period does not extend beyond
the Lease Expiration Date, this Lease shall remain in effect, If any portion
of the Leased Premises is temporarily taken for a period which exceeds one
year or which extends beyond the Lease Expiration Date, then the rights of
Landlord and Tenant shall be determined in accordance with Paragraphs 11.1
and 11.2 above.

11.5    DIVISION OF CONDEMNATION AWARD. Any award made for any taking of the
Property, the Building, or the Leased Premises, or any portion thereof, 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 portion of the award that is made
specifically (i) for the taking of personal property, inventory or trade i
fixtures belonging to Tenant, (ii) for the interruption of Tenant's business
or its moving costs, or (iii) for the value of

                                      22.
<PAGE>

any leasehold improvements installed and paid for by Tenant. 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 Supreme Court to
terminate this Lease and/or otherwise allocate condemnation awards between
Landlord and Tenant in the event of a taking of the Leased Premises.

11.6   ABATEMENT OF RENT. In the event of a taking of the Leased Premises
which does not result in a termination of this Lease (other than a temporary
taking), then, as of the date possession is taken by the condemning
authority, the Base Monthly Rent shall be reduced in the same proportion that
the area of that part of the Leased Premises so taken (less any addition to
the area of the Leased Premises by reason of any reconstruction) bears to the
area of the Leased Premises immediately prior to such taking.

11.7   TAKING DEFINED. The term "taking" or "taken" as used in this Article
11 shall mean any transfer or conveyance of all or any portion of the
Property to a public or quasi-public agency or other entity having the power
of eminent domain pursuant to or as a result of the exercise of such power by
such an agency, including any inverse condemnation and/or any sale or
transfer by Landlord of all or any portion of the Property to such an agency
under threat of condemnation or the exercise of such power.

                                     ARTICLE 12

                                DEFAULT AND REMEDIES

12.1   EVENTS OF TENANT'S DEFAULT. Tenant shall be in default of its
obligations under this Lease if any of the following events ("Events of
Default") occur:

       (a) Tenant shall have failed to pay Base Monthly Rent or any regularly
scheduled Additional Rent when due. and such failure continues for more than
three (3) days after Landlord gives written notice thereof to Tenant; provided,
however, flint after the second such failure in a calendar year, only the
passage of time, but no further notice, shall be required to establish an Event
of Default in the same calendar year; or

       (b) Tenant shall have failed to pay any other Additional Rent or other
amount of money or charge payable by Tenant hereunder as and when such
additional rent or amount or charge becomes due and payable and such failure
continues for more than ten (10) days after Landlord gives written notice
thereof to Tenant; provided, however, that, after the second such failure in a
calendar year, only the passage of time, but no further notice, shall be
required to establish an Event of Default in the same calendar year; or

       (c) Tenant shall have failed to perform any term, covenant or condition
of this Lease (except those requiring the payment of Base Monthly Rent or
Additional Rent, which failures shall be governed by subparagraphs (a) and (b)
above) within fifteen (15) days after written notice from Landlord to Tenant
specifying the nature of such failure and requesting Tenant to perform same;
provided, however, that if, by the nature of such term, covenant or condition,
such failure cannot reasonably be cured within such period of fifteen (15) days,
an Event of Default shall not exist as long as Tenant commences with due
diligence and dispatch the curing of such failure within such period of fifteen
(15) days and, having so commenced, thereafter prosecutes with diligence and
dispatch and completes the curing of such failure within a reasonable time; or

       (d) Tenant shall have sublet the Leased Premises or assigned or
encumbered its interest in this Lease in violation of the provisions contained
in Article 7, whether voluntarily or by operation of law; or

       (e) Tenant shall have abandoned the Leased Premises; or

       (f) Tenant or any guarantor of this Lease shall have permitted or
suffered the sequestration or attachment of, or execution on, or the appointment
of a custodial or receiver with respect to, all or any substantial part of the
property or assets of Tenant (or such guarantor) or any property or asset
essential to the conduct of Tenant's (or such guarantor's) business, and Tenant
(or such guarantor) shall have failed to obtain a return or release

                                      23.
<PAGE>

of the same within thirty days thereafter, or prior to sale pursuant to such
sequestration, attachment or levy, whichever is earlier; or

       (g) Tenant or any guarantor of this Lease shall have made a general
assignment of all or a substantial part of its assets for the benefit of its
creditors; or

       (h) Tenant or any guarantor of this Lease shall have allowed (or sought)
to have entered against it a decree or order which: (i) grants or constitutes an
order for relief, appointment of a trustee, or condemnation or a reorganization
plan under the bankruptcy laws of the United States; (ii) approves as properly
filed a petition seeking liquidation or reorganization under said bankruptcy
laws or any other debtor's relief law or similar statute of the United States or
any state thereof; or (iii) otherwise directs the winding up or liquidation of
Tenant; provided, however, if any decree or order was entered without Tenant's
consent or over Tenant's objection, Landlord may not terminate riffs Lease
pursuant to this Subparagraph if such decree or order is rescinded or reversed
within thirty days after its original entry.

12.2   LANDLORD'S REMEDIES. In the event of any default by Tenant, and
without limiting Landlord's right to indemnification as provided in Article
8.2, Landlord shall have the following remedies, in addition to all other
rights and remedies provided by law or otherwise provided in this Lease, to
which Landlord may resort cumulatively, or in the alternative:

       (a) 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
this Lease including, without limitation, (i) the right to recover the rent trod
other sums as they become due by appropriate legal action, (ii) the right to
make payments required by Tenant, or perform Tenant's obligations and be
reimbursed by Tenant for the cost thereof with interest at the then maximum rate
of interest not prohibited by law from the date the sum is paid by Landlord
until Landlord is reimbursed by Tenant, and (iii) the remedies of injunctive
relief and specific performance to prevent Tenant from violating the terms of
this Lease and/or to compel Tenant to perform its obligations under this Lease,
as the case may be.

       (b) 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 to Landlord all
Base Monthly Rent and Additional Rent then or thereafter due, or any other sums
due or thereafter accruing to Landlord, or from any claim against Tenant for
damages previously accrued or then or thereafter 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:

              (i)    Appointment of a receiver or keeper in order to protect
       Landlord's interest hereunder;

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

              (iii) Any action taken by Landlord or its partners, principals,
members, officers, agents, employees, or servants, which is 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 on any
action taken to relet the Leased Premises or any portion thereof for the account
at Tenant and in the name of Tenant.

       (c) In the event Tenant breaches this Lease and abandons the Leased
Premises, Landlord may terminate this Lease, but this Lease shall not terminate
unless Landlord gives Tenant written notice of termination. If Landlord does not
terminate this Lease by giving written notice of termination, Landlord may
enforce all its rights and remedies under this Lease, including the right and
remedies provided by California Civil Code Section 1951.4 ("lessor may continue
lease in effect after lessee's breach and abandonment and recover rent as it
becomes due, If lessee has right to sublet or assign, subject only to reasonable
limitations"), as in effect on the Effective Date of this Lease.

       (d) In the event Landlord terminates this Lease, Landlord shall be
entitled, at Landlord's election, to the rights and remedies provided in
California Civil Code Section 1951.2, as in effect on the Effective Date of this

                                      24.
<PAGE>

Lease. For purposes of computing damages pursuant to Section 1951.2, an interest
rate equal to the maximum rate of interest then not prohibited by law shall be
used where permitted. Such damages shall include, without limitation:

              (i) 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; and

              (ii) 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 fixings 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 removal of existing leasehold improvements and/or
installation of additional leasehold improvements (regardless of how the same is
funded, including reduction of rent, a direct payment or allowance to a new
tenant, or otherwise), (iii) broker's fees allocable to the remainder of the
term of this Lease, advertising costs and other expenses of reletting the Leased
Premises; (iv) costs of carrying and maintaining the Leased Premises, such as
taxes, insurance premiums, utility charges and security precautions, (v)
expenses incurred in removing, disposing of and/or storing any of Tenant's
personal property, inventory or trade fixtures remaining therein; (vi)
reasonable attorney's fees, expert witness fees, court costs and other
reasonable expenses incurred by Landlord (but not limited to taxable costs) in
reletting possession of the Leased Premises, establishing damages hereunder, and
releasing the Leased Premises; and (vii) any other expenses, costs or damages
otherwise incurred or suffered as a result of Tenant's default.

12.3   LANDLORD'S DEFAULT AND TENANT'S REMEDIES. In the event Landlord fails
to perform its obligations under this Lease, Landlord shall nevertheless not
be in default under the terms of this Lease until such time as Tenant shall
have first given Landlord written notice specifying the nature of such
failure to perform its obligations, and then only after Landlord shall have
had thirty (30) days following its receipt of such notice within which to
perform such obligations; PROVIDED THAT, if longer than thirty (30) days is
reasonably required in order to perform such obligations, Landlord shall have
such longer period. In the event of Landlord's default as above set forth,
then, and only then, Tenant may then 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 as and to the extent Tenant has
waived its right to damages as provided in this Lease).

12.4   LIMITATION OF TENANT'S RECOURSE. Tenant's recourse shall be limited to
Landlord's interest in the Property. In addition, if Landlord is a
corporation, trust, partnership, joint venture, limited liability company,
unincorporated association, or other form of business entity, Tenant agrees
that (i) the obligations of Landlord under this Lease shall not constitute
personal obligations of the officers, directors, trustees, partners, joint
venturers, members, owners, stockholders, or other principals of such
business entity, and (ii) Tenant shall have no recourse to the assets of such
officers, directors, trustees, pampers, joint venturers, members, owners,
stockholders or principals. Additionally, if Landlord is a partnership or
limited liability company, then Tenant covenants and agrees:

       (a) No partner or member of Landlord shall be sued or named as a part),
in any suit or action brought by Tenant with respect to any alleged breach of
this Lease (except to the extent necessary to secure jurisdiction over the
partnership and then only for that sole purpose);

       (b) No service of process shall be made against any partner or member of
Landlord except for the sole propose of securing jurisdiction over the
partnership; and

       (c) No writ of execution will ever be levied against the assets of any
partner or member of Landlord other than to the extent of his or her interest in
the assets of the partnership or limited liability company constituting
Landlord.

Tenant further agrees that each of the foregoing covenants and agreements shall
be enforceable by Landlord and by any partner or member of Landlord and shall be
applicable to any actual or alleged misrepresentation or nondisclosure made
regarding this Lease or the Leased Premises or any actual or alleged failure,
default or breach of

                                      25.
<PAGE>

any covenant or agreement either expressly or implicitly contained in this Lease
or imposed by statute or at common law.

12.5   TENANT'S WAIVER. Landlord and Tenant agree that the provisions of
Paragraph 12.3 above are intended to supersede and replace the provisions of
California Civil Code Sections 1932(1), 1941 and 1942, and accordingly,
Tenant hereby waives the provisions of California Civil Code Sections
1932(1), 1941 and 1942 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 this Lease.

                                     ARTICLE 13

                                 GENERAL PROVISIONS

13.1   TAXES ON TENANT'S PROPERTY. Tenant shall pay before delinquency any
and all taxes, assessments, license fees, use fees, permit fees and public
charges of whatever nature or description levied, assessed or imposed against
Tenant or Landlord by a governmental agency arising out of, caused by reason
of or based upon Tenant's estate in this Lease, Tenant's ownership of
property, improvements made by Tenant to the Leased Premises or the Outside
Areas, improvements made by Landlord for Tenant's use within the Leased
Premises or the Outside Areas, Tenant's use (or estimated use) of public
facilities or services or Tenant's consumption (or estimated consumption) of
public utilities, energy, water or other resources (collectively, "Tenant's
Interest"). Upon demand by Landlord, Tenant shall furnish Landlord with
satisfactory evidence of these payments, If any such taxes, assessments, fees
or public charges are levied against Landlord, Landlord's property, the
Building or the Property, or if the assessed value of the Building or the
Property is increased by the inclusion therein of a value placed upon
Tenant's Interest, regardless of the validity thereof, Landlord shall have
the right to require Tenant to pay such taxes, and if not paid and
satisfactory evidence of payment delivered to Landlord at least ten days
prior to delinquency, then Landlord shall have the right to pay such taxes on
Tenant's behalf and to invoice Tenant for the same. Tenant shall, within the
earlier to occur of (a) fifty (30) days of the date it receives an invoice
from Landlord setting forth the amount of such taxes, assessments, fees, or
public charge so levied, or (b) the due date of such invoice, pay to
Landlord, as Additional Rent, the amount set forth in such invoice. Failure
by Tenant to pay the amount so invoiced within such time period shall be
conclusively deemed a default by Tenant under this Lease. Tenant shall have
the right to bring suit in any court of competent jurisdiction to recover
from the taking authority the amount of any such taxes, assessments, fees or
public charges so paid.

13.2   HOLDING OVER. This Lease shall terminate without further notice on the
Lease Expiration Date (as set forth in Article 1). Any holding over by Tenant
after expiration of the Lease Term shall neither constitute a renewal nor
extension of this Lease nor give Tenant any rights in or to the Leased
Premises except as expressly provided in this Paragraph. Any such holding
over to which Landlord has consented shall be construed to be a tenancy from
month to month, on the same terms and conditions herein specified insofar as
applicable, except that the Base Monthly Rent shall be increased to an amount
equal to one hundred fifty percent (150%) of the Base Monthly Rent payable
during the last full month immediately preceding such holding over.

13.3   SUBORDINATION TO MORTGAGES. This Lease is subject to and subordinate
to all ground leases, mortgages and deeds of trust which affect the Building
or the Property and which 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 ground lease or
any lender holding any such mortgage or deed of trust shall advise Landlord
that it desires or requires this Lease to be made prior and superior thereto,
then, upon written request of Landlord to Tenant, Tenant shall promptly
execute, acknowledge and deliver any and all customary or reasonable
documents or instruments which Landlord and such lessor or lender deems
necessary or desirable to make this Lease prior thereto. Tenant hereby
consents to Landlord's ground leasing the land underlying the Building or the
Property and/or encumbering the Building or the Property as security for
future loans on such terms as Landlord shall desire, all of which future
ground leases, mortgages or deeds of trust shall be subject to and
subordinate to this Lease. However, if any lessor under any such future
ground lease or any lender holding such future mortgage or deed of trust
shall desire or require that this Lease be made subject to and subordinate to
such future ground lease, mortgage or deed of trust, then Tenant agrees,
within ten days after Landlord's written request therefor, to execute,
acknowledge and deliver to Landlord any and all documents or instruments
requested by Landlord or by such lessor or lender as may be necessary or
proper to assure the subordination of this Lease to such future ground lease,

                                      26.
<PAGE>

mortgage or deed of trust, but only if such lessor or lender agrees to recognize
Tenant's rights under this Lease and agrees not to disturb Tenant's quiet
possession of the Leased Premises so long as Tenant is not in default under this
Lease. If Landlord assigns the Lease as security for a loan, Tenant agrees to
execute such documents as are reasonably requested by the lender and to provide
reasonable provisions in the Lease protecting such lender's security interest
which are customarily required by institutional lenders making loans secured by
a deed of trust.

13.4   TENANT'S ATTORNMENT UPON FORECLOSURE. Tenant shall, upon request,
attorn (i) to any purchaser of the Building or the Property at any
foreclosure sale or private sale conducted pursuant to any security
instruments encumbering the Building or the Property, (ii) to any grantee or
transferee designated in any deed given in lieu of foreclosure of any
security interest encumbering the Building or the Property, or (iii) to the
lessor under an underlying ground lease of the land underlying the Building
or the Property, should such ground lease be terminated; provided that such
purchaser, grantee or lessor recognizes Tenant's rights under this Lease.

13.5   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 who shall have requested, in writing, to
Tenant that it be provided with such notice, and Tenant 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 reasonably necessary to
effect a cure.

13.6   ESTOPPEL CERTIFICATE. Tenant will, following any request by Landlord,
promptly execute and deliver to Landlord an estoppel certificate in the form
attached as Exhibit D (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 are not, to Tenant's
knowledge, any uncured defaults on the pat of Landlord hereunder, or
specifying such defaults if any are claimed, and (iv) certifying such other
information about this Lease as may be reasonably requested by Landlord, its
Lender or prospective lenders, investors or purchasers of the Building or the
Property. Tenant's failure to execute and deliver such estoppel certificate
within ten (10) days after Landlord's request therefor shall be a material
default by Tenant under this Lease, and Landlord shall have all of the rights
and remedies available to Landlord as Landlord would otherwise have in the
case of any other material default by Tenant, including the right to
terminate this Lease and sue for damages proximately caused thereby, it being
agreed and understood by Tenant that Tenant's failure to so deliver such
estoppel certificate in a timely manner could result in Landlord being unable
to perform committed obligations to other third parties which were made by
Landlord in reliance upon this covenant of Tenant. Landlord and Tenant intend
that any statement delivered pursuant to this paragraph may be relied upon by
any Lender or purchaser or prospective Lender or purchaser of the Building,
the Property, or any interest in them.

13.7   TENANT'S FINANCIAL INFORMATION. Tenant shall, within ten business days
after Landlord's request therefor, deliver to Landlord a copy of Tenant's
(and any guarantor's) current financial statements (including a balance
sheet, income statement and statement of cash flow, all prepared in
accordance with generally accepted accounting principles) and any such other
information reasonably requested by Landlord regarding Tenant's financial
condition. Landlord shall be entitled to disclose such financial statements
or other information to its Lender, to any present or prospective principal
of or investor in Landlord, or to any prospective Lender or purchaser of the
Building, the Property, or any portion thereof or interest therein. Any such
financial statement or other reformation which is marked "confidential" or
"company secrets" (or is otherwise similarly marked by Tenant) shall be
confidential and shall not be disclosed by Landlord to any third party except
as specifically provided in this paragraph, unless the same becomes a part of
the public domain without the fault of Landlord.

13.8   TRANSFER BY LANDLORD. Landlord and its successors in interest shall
have the right to transfer their interest in the Building, the Property, or
any portion thereof at any time and to any person or entity. In the 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 if its
transferee agrees to assume and perform all such prior

                                      27.
<PAGE>

obligations of the Landlord hereunder. Tenant shall attorn to any such
transferee. After the date of any such transfer, the term "Landlord" as used
herein shall mean the transferee of such interest in the Building or the
Property.

13.9   FORCE MAJEURE, The obligations of each of the parties under this Lease
(other than the obligations to pay money) shall be temporarily excused if
such party is prevented or delayed in performing such obligations by reason
of any strikes, lockouts or labor disputes; government restrictions,
regulations, controls, action or inaction; civil commotion; or extraordinary
weather, fire or other acts of God.

13.10  NOTICES. Any notice required or desired to be given by a party
regarding this Lease shall be in writing and shall be personally served, or
in lieu of personal service may be given by reputable overnight courier
service, postage prepaid, addressed to the other party as follows:

       IF TO LANDLORD:      TriNet Milpitas Associates, LLC
                            c/o TriNet Corporate Realty Trust, Inc.
                            One Embarcadero Center
                            Suite 3300
                            San Francisco, CA 94111
                            Attention: Asset Management

       with a copy to:      Pillsbury Madison & Sutro LLP
                            235 Montgomery Street, 14th Floor
                            San Francisco, CA 94104
                            Attention: Glenn Q. Snyder, Esq.

       IF TO TENANT:        Polycom, Inc.
                            1565 Barber Lane
                            Milpitas, California 95035
                            Attention: Tom Perkins

       with a copy to:      Wilson Sonsini Goodrich & Rosati
                            650 Page Min Road
                            Palo Alto, California 94304-1050
                            Attention: Bradford C. O'Brien, Esq.

Any notice given in accordance with the foregoing shall be deemed received upon
actual receipt or refusal to accept delivery.

13.11   ATTORNEYS' FEES. In the event any party shall bring any action,
arbitration proceeding or legal proceeding alleging a breach of any provision
of this Lease, to recover rent, to terminate this Lease, or to enforce,
protect, determine or establish any term or covenant of this Lease or rights
or duties hereunder of either party, the prevailing party shall be entitled
to recover from the non-prevailing party as a part of such action or
proceeding, or in a separate action for that purpose brought within one year
from the determination of such proceeding, reasonable attorneys' fees, expert
witness fees, court costs and other reasonable expenses incurred by the
prevailing party.

13.12   DEFINITIONS. Any term that is given a special meaning by any
provision in this Lease shall, unless otherwise specifically stated, have
such meaning wherever used in this Lease or in any Addenda or amendment
hereto. In addition to the terms defined in Article 1, the following terms
shall have the following meanings:

       (a) REAL PROPERTY TAXES. The term "Real Property Tax" or "Real Property
Taxes" shall each mean Tenant's Project Percentage Share of (i) all taxes,
assessments, levies and other charges of any kind or nature whatsoever, general
and special, foreseen and unforeseen (including all instruments of 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 new construction), now or hereafter imposed by any governmental
or quasi-governmental authority or special district having the direct or
indirect power to tax or levy assessments, which are levied or assessed for
whatever reason against the Property or any portion thereof, or

                                      28.
<PAGE>

Landlord's interest herein, or the fixtures, equipment and other property, of
Landlord that is an integral part of the Property and located thereon, or
Landlord's business of owning, leasing or managing the Property or the gross
receipts, income or rentals from the Properly, (ii) all charges, levies or fees
imposed by any governmental authority against Landlord by reason of or based
upon the use of or number of parking spaces within the Property, the amount of
public services or public utilities used or consumed (E.G. water, gas,
electricity, sewage or waste water disposal) at the Property, the number of
person employed by tenants of the Property, the size (whether measured in area,
volume, number of tenants or whatever) be the value of the Property, or the type
of use or uses conducted within the Property, and all costs and fees (including
attorneys' fees) reasonably incurred by Landlord in contesting any Real Property
Tax and in negotiating with public authorities as to any Real Property Tax, and
(iii) all tax increases due to improvements made to the Leased Premises by
Tenant or by Landlord on behalf of Tenant. If, at any time during the Lease
Term, the taxation or assessment of the Property prevailing as of the Effective
Date of this Lease shall be altered so that in lieu of or in addition to any the
Real Property Tax described above there shall be levied, awarded 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, substitute, or
additional use or charge (i) on the value, size, use or occupancy of the
Property or Landlord's interest therein or (ii) on or measured by the gross
receipts, income or rentals from the Property, or on Landlord's business of
owning, leasing or managing the Property or (iii) computed 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 terms "Real Property
Tax" or "Real Property Taxes" for purposes of this Lease. If any Real Properly
Tax is partly 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 terms "Real Property Tax" or "Real
Property Taxes." Notwithstanding the foregoing, the terms "Real Properly Tax" or
"Real Property Taxes" shall not include estate, inheritance, transfer, gift or
franchise taxes of Landlord or the federal or state income tax imposed on
Landlord's income from all sources.

       (b) LANDLORD'S INSURANCE COSTS. The term "Landlord's Insurance Costs"
shall mean Tenant's Project Proportionate Share of the costs to Landlord to
carry and maintain the policies of fire and property damage insurance for the
Building and the Property and general liability and any other insurance required
or permitted to be carried by Landlord pursuant to Article 9, together with any
deductible amounts paid by Landlord upon the occurrence of any insured casualty
or loss, but excluding any earthquake insurance policy deducible amounts in
excess of five percent (5%) of the cost of the Building.

       (c) PROPERTY MAINTENANCE COSTS. The term "Property Maintenance Costs"
shall mean Tenant's Project Proportionate Share of all costs and expenses
(except Landlord's Insurance Costs, Real Properly Taxes and Building Maintenance
Costs) paid or incurred by Landlord in protecting, operating, maintaining,
repairing and preserving the Property and all parts thereof, including without
limitation, (i) professional management fees of 3% gross receivables (including
recoverable expenses), (ii) the amortizing portion of any costs incurred by
Landlord in the making of any modifications, alterations or improvements
required by any governmental authority as set forth in Article 6, which are so
amortized during the Lease Term, and (iii) such other costs as may be paid or
incurred with respect to operating, maintaining, and preserving the Property,
such as repairing and resurfacing paved areas, and repairing and replacing, when
necessary, electrical, plumbing, heating, ventilating and air conditioning
systems serving the Building.

       (d) BUILDING MAINTENANCE COSTS. The term "Building Maintenance Costs"
shall mean Tenant's Building Proportionate Share of all capital expenditures
allocable to the Building and of all other costs as may be insurance with
respect to operating, maintaining and preserving the Building, including,
without limitation, repair and resurfacing the exterior surfaces of the Building
(including costs) and repairing and replacing, when necessary, electrical
plumbing, heating, ventilating and air conditioning systems serving the
Building, and excluding costs incurred by Landlord in performing its obligations
under Paragraph 5. l(b). All such capital expenditures and other costs incurred
by Landlord in excess of twenty-five thousand dollars ($25,000) per project,
including interest at a rate of twelve percent (12%), shall be amortized by
Landlord over the useful life of such capital items, as determined in accordance
with generally accepted accounting principles. All such capital expenditures and
other costs incurred by Landlord up to and including twenty-five thousand
($25,000) per project shall not be amortized and shall be included in their
entirety as Building Maintenance Costs as and when incurred.

                                      29.
<PAGE>

       (e) PROPERTY OPERATING EXPENSES. The term "Properly Operating Expenses"
shall mean and include all Real Property Taxes, plus all Landlord's Insurance
Costs, plus all Property Maintenance Costs and Building Maintenance Costs but
shall exclude the following costs and expenses: (i) costs related to remediation
of Hazardous Materials; (ii) costs resulting from damage caused by the active
negligence or willful misconduct of Landlord or its agents or employees; and
(iii) expense reserves, depreciation, and any other non-cash item not currently
paid.

       (f) LAW. The term "Law" shall mean any judicial decisions and any
statute, constitution, ordinance, resolution, regulation, rule, administrative
order, or other requirements of any municipal, county, state, federal, or other
governmental agency or authority having jurisdiction over the parties to this
Lease, the Leased Premises, the Building or the Property, or any of them, in
effect either at the Effective Date of this Lease or at any time during the
Lease Term, including, without limitation, any regulation, order, or policy of
any quasi-official entity or body (e.g. a board of fire examiners or a public
utility or special district).

       (g) LENDER. The term "Lender" shall mean the holder of any promissory
note or other evidence of indebtedness secured by the Property or any portion
thereof.

       (h) PRIVATE RESTRICTIONS. The term "Private Restrictions" shall mean (as
they may exist from time to time) any and all covenants, conditions and
restrictions, private agreements, easements, and any other recorded documents or
instruments affecting the use of the Property, the Building, the Leased
Premises, or the Outside Areas.

       (i) RENT. The term "Rent" shall meal collectively Base Monthly Rent and
all Additional Rent.

13.13   GENERAL WAIVERS. 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. No waiver of any
provision hereof, or any waiver of any breach of any provision hereof, shall
be effective unless in writing and signed by the waiving 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.
No waiver of any provision of this Lease shall be deemed a continuing waiver
unless such waiver specifically states so in writing and is signed by both
Landlord and Tenant. 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 thereafter 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.

13.14   MISCELLANEOUS. Should any provisions of this Lease prove to be
invalid or illegal, such invalidity or illegality shall in no way affect,
impair or invalidate any other provisions hereof, and such remaining
provisions shall remain in full force and effect. Time is of the essence with
respect to the performance of every provision of this Lease in which time of
performance is a factor. Any copy of this Lease which is executed by the
parties shall be deemed an original for all purposes. 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. The term "party" shall mean Landlord or Tenant as the
context implies. If Tenant consists of more than one person or entity, then
all members of Tenant shall be jointly and severally liable hereunder. This
Lease shall be construed and enforced in accordance with the Laws of the
State in which the Leased Premises are located. The captions in this Lease
are for convenience only and shall not be construed in the construction or
interpretation of any provision hereof. When the context of this Lease
requires, the neuter gender includes the masculine, the feminine, a
partnership, corporation, limited liability company, joint venture, or other
form of business entity, and the singular includes the plural. The terms
"must," "shall," "will," and "agree" are mandatory. The term "may" is
permissive. 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. Where Landlord's
consent is required hereunder, the consent of any Lender shall also be
required if Landlord is contractually obligated to obtain the consent of such
Lender pursuit to such Lender's loan documents. Landlord and Tenant shall
both be deemed to have drafted this Lease, and the rule of construction flint
a document is to be construed against the drafting party shall not be
employed in the construction or interpretation of this Lease. Where Tenant is
obligated not to perform any act or is not permitted to perform any act,
Tenant is also obligated to restrain any others reasonably within its
control, including agents, invitees, contractors, subcontractors and
employees, from performing such act. Landlord

                                      30.
<PAGE>

shall not become or be deemed a partner or a joint venturer with Tenant by
reason of any of the provisions of this Lease.

                                     ARTICLE 14

                                CORPORATE AUTHORITY
                            BROKERS AND ENTIRE AGREEMENT

14.1    CORPORATE AUTHORITY. If Tenant is a corporation, each individual
executing this Lease on behalf of such corporation represents and warrants
that Tenant is validly formed and duly authorized and existing, that Tenant
is qualified to do business in the State in which the Leased Premises are
located, that Tenant has the full right and legal authority to enter into
this Lease, and that he or she is duly authorized to execute and deliver this
Lease on behalf of Tenant in accordance with its terms. Tenant shall, within
thirty days after execution of this Lease, deliver to Landlord a certified
copy of the resolution of its board of directors authorizing or ratifying the
execution of this Lease and if Tenant fails to do so, Landlord at its sole
election may elect to terminate this Lease.

14.2    BROKERAGE COMMISSIONS. Tenant represents, warrants and agrees that it
has not had any dealings with any real estate broker(s), leasing agent(s),
finder(s) or salesmen, other than the Brokers (as named in Article 1) with
respect to the lease by it of the Leased Premises pursuant to this Lease, and
that it will assume all obligations and responsibility with respect to the
payment of such Brokers, and that it will indemnify, defend with competent
counsel, and hold Landlord harmless from any liability for the payment of any
real estate brokerage commissions, leasing commissions or finder's fees
claimed by any other real estate broker(s), leasing agent(s), finder(s), or
salesmen to be earned or due and payable by reason of Tenant's agreement or
promise (implied or otherwise) to pay (or to have Landlord pay) such a
commission or finder's fee by reason of its leasing the Leased Premises
pursuant to this Lease.

14.3    ENTIRE AGREEMENT. This Lease and the Exhibits (as described in
Article 1), which Exhibits are by this reference incorporated herein,
constitute the entire agreement between the parties, and there are no other
agreements, understandings or representations between the parties relating to
the lease by Landlord of the Leased Premises to Tenant, except as expressed
herein. No subsequent changes, modifications or additions to this Lease shall
be binding upon the parties unless in writing and signed by both Landlord and
Tenant.

14.4    LANDLORD'S REPRESENTATIONS. Tenant acknowledges that neither Landlord
nor any of its agents made any representations or warranties respecting the
Property, the Building or the Leased Premises, upon which Tenant relied in
entering into the Lease, which are not expressly set forth in this Lease.
Tenant further acknowledges that neither Landlord nor any of its agents made
any representations 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 for the conduct of Tenant's business, or (iii) the exact
square footage of the Leased Premises, and that Tenant relies solely upon its
own investigations with respect to such matters. Tenant expressly waives any
and 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 Exhibit attached hereto.

                                     ARTICLE 15

                                 OPTIONS TO EXTEND

15.1   So long as Polycom, Inc. (and, to the extent provided in Section 7.9,
its successors and assigns in connection with transfers to affiliates,
transfers in connection with mergers or sales of assets, or transfers of a
controlling percentage of its capital stock) is the Tenant hereunder and
occupies more than fifty percent (50%) of the Leased Premises, and subject to
the condition set forth in clause (b) below, Tenant shall have two options to
extend the term of this Lease with respect to the entirety of the Premises,
the first for a period of five (5) years from the Lease Expiration Date (the
"First Extension Period"), and the second (the "Second Extension Period") for
a period of five (5) years from the expiration of the First Extension Period,
subject to the following conditions:

                                      31.
<PAGE>

       (a) Each option to extend shall be exercised, if at all, by notice of
exercise given to Landlord by Tenant not less than two hundred seventy (270)
days prior to the Lease Expiration Date of the Lease Term or the expiration of
the First Extension Period, as applicable;

       (b) Anything herein to the contrary notwithstanding, if Tenant is in
default of a monetary obligation or material non-monetary obligation (after
written notice has been given and cure periods, if applicable, have expired),
either at the time Tenant exercises either extension option or on the
commencement date of the First Extension Period or the Second Extension Period,
as applicable, Landlord shall have, in addition to all of Landlord's other
rights and remedies provided in this Lease, the right to terminate such
option(s) to extend upon notice to Tenant.

15.2   In the event the applicable option is exercised in a timely fashion,
the Lease shall be extended for the term of the applicable extension period
upon all of the terms and conditions of this Lease, provided that the Base
Monthly Rent for each extension period shall be the "Fair Market Rent" for
the Leased Premises, increased after 12 months in accordance with Article 1.
For purposes hereof, "Fair Market Rent" shall mean the base rent for the
Premises, based upon the rental rate per square foot that an unaffiliated
landlord and tenant would agree to for a lease on the terms of this Lease for
the relevant Extension Period for comparable premises in the vicinity of the
Property, determined pursuant to the process described below. In no event,
however, shall any adjustment of Base Monthly Rent pursuant to this paragraph
result in a decrease of the Base Monthly Rent for the Premises below the
amount due from Tenant for the preceding portion of the initial Lease Term
(or the First Extension Period, if applicable) for which Base Monthly Rent
had been fixed.

15.3   Within 30 days after receipt of Tenant's notice of exercise, Landlord
shall notify Tenant in writing of Landlord's estimate of the Base Monthly
Rent for the applicable extension period, based on the provisions of
Paragraph 15.2 above. Within 30 days after receipt of such notice from
Landlord, Tenant shall have the right either to (i) accept Landlord's
statement of Base Monthly Rent as the Base Monthly Rent for the applicable
extension period; or (ii) elect to arbitrate Landlord's estimate of Fair
Market Rent, such arbitration to be conducted pursuant to the provisions
hereof. Failure on the part of Tenant to require arbitration of Fair Market
Rent within such 30-day period shall constitute acceptance of the Base
Monthly Rent for the applicable extension period as calculated by Landlord.
If Tenant elects arbitration, the arbitration shall be concluded within 90
days after the date of Tenant's election, subject to extension for an
additional 30-day period if a third arbitrator is required and does not act
in a timely manner. To the extent that arbitration has not been completed
prior to the expiration of any preceding period for which Base Monthly Rent
has been determined, Tenant shall pay Base Monthly Rent at the rote
calculated by Landlord, with the potential for an adjustment to be made once
Fair Market Rent is ultimately determined by arbitration.

15.4   In the event of arbitration, the judgment or the award rendered in any
such arbitration may be entered in any court having jurisdiction and shall be
final and binding between the parties. The arbitration shall be conducted and
determined in the City and County of San Francisco in accordance with the
then prevailing roles of the American Arbitration Association or its
successor for arbitration of commercial disputes except to the extent that
the procedures mandated by such roles shall be modified as follows:

       (a) Tenant shall make demand for arbitration in writing within 30 days
after service of Landlord's determination of Fair Market Rent given under
Paragraph 15.3 above, specifying therein the name and address of the person to
act as the arbitrator on its behalf. The arbitrator shall be qualified as a real
estate appraiser familiar with the Fair Market Rent of similar industrial,
research and development, or office space in the Silicon Valley area who would
qualify as an expert witness over objection to give opinion testimony addressed
to the issue in a court of competent jurisdiction. Failure on the part of Tenant
to make a proper demand in a timely matter for such arbitration shall constitute
a waiver of the right thereto. Within 15 days after the service of the demand
for arbitration, Landlord shall give notice to Tenant, specifying the name and
address of the person designated by Landlord to act as arbitrator on its behalf
who shall be similarly qualified. If Landlord fails to notify Tenant of the
appointment of its arbitrator, within or by the time above specified, then the
arbitrator appointed by Tenant shall be the arbitrator to determine the issue.

       (b) In the event that two arbitrators are chosen pursuant to Paragraph
15.4(a) above, the arbitrators so chosen shall, within 15 days after the second
arbitrator is appointed determine the Fair Market Rent. If the two

                                      32.
<PAGE>

arbitrators shall be unable to agree upon a determination of Fair Market Rent
within such 15-day period, they, themselves, shall appoint a third arbitrator,
who shall be a competent and impartial person with qualifications similar to
those required of the first two arbitrators pursuant to Paragraph 15.4(a). In
the event they are unable to agree upon such appointment within seven days after
expiration of such 15-day period, the third arbitrator shall be selected by the
parties themselves, if they can agree thereon, within a further period of 15
days. If the parties do not so agree, then either party, on behalf of both, may
request appointment of such a qualified person by the then Chief Judge of the
United States District Court having jurisdiction over the County of Santa Clara,
acting in his private and not in his official capacity, and the driver party
shall not raise any question as to such Judge's full power and jurisdiction to
entertain the application for and make the appointment. The three arbitrators
shall decide the dispute if it has not previously been resolved by following the
procedure set forth below.

       (c) Where all issue cannot be resolved by agreement between the two
arbitrators selected by Landlord and Tenant or settlement between the parties
during Ore course of arbitration, the issue shall be resolved by the three
arbitrators within 15 days of the appointment of the third arbitrator in
accordance with the following procedure. The arbitrator selected by each of the
parties shall state in writing his determination of the Fair Market Rent
supported by the reasons therefor with counterpart copies to each part),. The
arbitrators shall arrange for a simultaneous exchange of such proposed
resolutions. The role of the third arbitrator shall be to select which of the
two proposed resolutions most closely approximates his determination of Fair
Market Rent. The third arbitrator shall have no right to propose a middle ground
or any modification of either of the two proposed resolutions. The resolution he
chooses as most closely approximating his determination shall constitute the
decision of the arbitrators and be fired and binding upon the parties.

       (d) In the event of a failure, refusal or inability of any arbitrator to
act, his successor shall be appointed by him, but in the case of the third
arbitrator, his successor shall be appointed in the same manner as provided for
appointment of the third arbitrator. The arbitrators shall decide the issue
within 15 days after the appointment of the third arbitrator. Any decision in
which the arbitrator appointed by Landlord and the arbitrator appointed by
Tenant concur shall be binding and conclusive upon the parties. Each party shall
pay the fee and expenses of its respective arbitrator and both shall share the
fee and expenses of the third arbitrator, if any, and the attorneys' fees and
expenses of counsel for the respective parties and of witnesses shall be paid by
the respective party engaging such counsel or calling such witnesses.

       (e) The arbitrators shall have the right to consult experts and competent
authorities to obtain factual information or evidence pertaining to a
determination of Fair Market Rent, but any such consultation shall be made in
the presence of both parties with full right on their part to cross-examine. The
arbitrators shall render their decision and award in writing with counterpart
copies to each party. The arbitrators shall have no power to modify the
provisions of this Lease.

                                   ARTICLE 16

                                TELEPHONE SERVICE

       Notwithstanding any other provision of riffs Lease to the contrary:

       (a) So long as the entirety of the Leased Premises is leased to Tenant:

              (i) Landlord shall have no responsibility for providing to Tenant
any telephone equipment, including wiring, within the Leased Premises or for
providing telephone service or connections from the utility to the Leased
Premises; and

              (ii) Landlord makes no warranty as to the quality, continuity or
availability of the telecommunications services in the Building, and Tenant
hereby waives any claim against Landlord for any actual or consequential damages
(including damages for loss of business) in the event Tenant's
telecommunications services in any way are interrupted, damaged or rendered less
effective, except to rite extent caused by the grossly negligent or willful act
or omission by Landlord, its agents or employees. Tenant accepts the telephone
equipment (including, without limitation, the INC, as defined below) in its
"AS-IS" condition, and Tenant shall be solely responsible for contracting with a
reliable third part), vendor to assume responsibility for the maintenance and
repair thereof (which

                                      33.
<PAGE>

contract shall contain provisions requiring such vendor to inspect the INC
periodically (the frequency of such inspections to be determined by such vendor
based on its experience and professional judgment), and requiring such vendor to
meet local and federal requirements for telecommunications material and
workmanship). Landlord shall not be liable to Tenant and Tenant waives all
claims against Landlord whatsoever, whether for personal injury, property
damage, loss of use of the Leased Premises, or otherwise, due to the
interruption or failure of telephone services to the Leased Premises. Tenant
hereby holds Landlord harmless and agrees to indemnify, protect and defend
Landlord from and against any liability for any damage, loss or expense due to
any failure or interruption of telephone service to the Leased Premises for any
reason. Tenant agrees to obtain loss of rental insurance adequate to cover any
damage, loss or expense occasioned by the interruption of telephone service.

       (b) At such time as the entirety of the Leased Premise is no longer
leased to Tenant, Landlord shall in its sole discretion have the right, by
written notice to Tenant, to elect to assume limited responsibility for INC, as
provided below, and upon such assumption of responsibility by Landlord, This
subparagraph (b) shall apply prospectively.

              (i) Landlord shall provide Tenant access to such quantity of pairs
in the Building intra-building network cable ("INC") as is determined to be
available by Landlord in its reasonable discretion. Tenant's access to the INC
shall be solely by arrangements made by Tenant, as Tenant may elect, directly
with Pacific Bell or Landlord (or such vendor as Landlord may designate), and
Tenant shall pay all reasonable charges as may be imposed in connection
therewith. Pacific Bell's charges shall be deemed to be reasonable. Subject to
the foregoing, Landlord shall have no responsibility for providing to Tenant any
telephone equipment, including wiring, within the Leased Premises or for
providing telephone service or connections from the utility to the Leased
Premises, except as required by law.

              (ii) Tenant shall not alter, modify, add to or disturb any
telephone wiring in the Leased Premises or elsewhere in the Building without the
Landlord's prior written consent. Tenant shall be liable to Landlord for any
damage to the telephone wiring in the Building due to the act, negligent or
otherwise, of Tenant or any employee, contractor or other agent of Tenant.
Tenant shall have no access to the telephone closets within the Building, except
in the manner and under procedures established by Landlord. Tenant shall
promptly notify Landlord of any actual or suspected failure of telephone service
to the Leased Premises.

              (iii) All costs incurred by Landlord for the installation,
maintenance, repair and replacement of telephone wiring in the Building shall be
a Property Maintenance Cost.

              (iv) Landlord makes no warranty as to the quality, continuity or
availability of the telecommunications services in the Building, and Tenant
hereby waives any claim against Landlord for any actual or consequential damages
(including damages for loss of business) in the event Tenant's
telecommunications services in any way are interrupted, damaged or rendered less
effective, except to the extent caused by the actively negligent or willful act
or omission by Landlord, its agents or employees. Tenant acknowledges that
Landlord meets its duty of care to Tenant with respect to the Building INC by
contracting with a reliable third party vendor to assume responsibility for the
maintenance and repair thereof (which contract shall contain provisions
requiring such vendor to inspect the INC periodically (the frequency of such
inspections to be determined by such vendor based on its experience and
professional judgment), and requiring such vendor to meet local and federal
requirements for telecommunications material and workmanship). Subject to the
foregoing, Landlord shall not be liable to Tenant and Tenant waives all claims
against Landlord whatsoever, whether for personal injury, property damage, loss
of use of the Leased Premises, or otherwise, due to the interruption or failure
of telephone services to the Leased Premises. Tenant hereby holds Landlord
harmless and agrees to indemnify, protect and defend Landlord from and against
any liability for any damage, loss or expense due to any failure or interruption
of telephone service to the Leased Premises for any reason. Tenant agrees to
obtain loss of rental insurance adequate to cover any damage, loss or expense
occasioned by the interruption of telephone service.

                                      34.
<PAGE>

       IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of
the respective dates below set forth with the intent to be legally bound thereby
as of the Effective Date of this Lease first above set forth.

                              LANDLORD:

                              TRINET ESSENTIAL FACILITIES XXVI,
                              INC., a Maryland
                              corporation

Dated: 12/1/99                By:    /s/ XXX
       ---------------------      ---------------------------------------
                              Title: VICE PRESIDENT
                                     ------------------------------------

                              TENANT:

                              POLYCOM, INC., a Delaware corporation

Dated: 11/30/99               By:    /s/ XXX
       ---------------------      ---------------------------------------
                              Title: CFO
                                     ------------------------------------

Dated: 11/30/99               By:    /s/ XXX
       ---------------------      ---------------------------------------
                              Title: PRESIDENT & CEO
                                     ------------------------------------

                                      35.
<PAGE>

                                     EXHIBIT A

                                  1565 Barber Lane
                                         Map

<PAGE>

                                     EXHIBIT B

                            1565; BARBER LANE, MILPITAS

                                    First Floor
                                    [Floorplan]

<PAGE>

                                     EXHIBIT C

                   ROOF-MOUNTED MECHANICAL EQUIPMENT REPLACEMENT
                       1565 BARBER LANE MILPITAS, CALIFORNIA

SCOPE OF WORK

The scope of work includes the removal of forty (40) existing HVAC units and
replacement with forty (40) new HVAC units of equal tonnage. The project is
intended to be an "in kind" replacement of the existing HVAC units, and is not
an upgrade of the building's existing cooling capacity. The project does not
include modifications to the existing air distribution system, which may be
required to supply conditioned air to the tenant's reconfigured interior space.
Redistribution of the existing interior ducting and controls is the
responsibility of the tenant. The project generally consists of the following:

a)   Disconnect gas, electric, and plumbing service from the existing units.
b)   Remove the existing air conditioning units for the site.
c)   Structurally support the roof as per specification.
d)   Install new curbs to new structural supports.
e)   Install forty (40) new air conditioning units to the roof curbing.
f)   Re-connect existing gas lines with new gas valves.
g)   Reconnect electrical with new disconnects.
h)   Reconnect plumbing to proper drainage point (reusing existing).
i)   Start up new systems.

EQUIPMENT INVENTORY

The following is a schedule and description of the new HVAC package units
included in the Roof-Mounted Mechanical Equipment Replacement Project:

<TABLE>
<CAPTION>
         UNIT ID             QUANTITY (NO. UNITS)     CAPACITY (TONS PER UNIT)
--------------------------------------------------------------------------------
<S>                          <C>                      <C>
            A1                         5                          15
--------------------------------------------------------------------------------
            A2                         14                          5
--------------------------------------------------------------------------------
            A3                         3                          7.5
--------------------------------------------------------------------------------
            A4                         5                          25
--------------------------------------------------------------------------------
            A5                         11                          3
--------------------------------------------------------------------------------
            A6                         1                           4
--------------------------------------------------------------------------------
            A7                         1                          20
--------------------------------------------------------------------------------
           TOTAL                       40                  349.5 Tons total
--------------------------------------------------------------------------------
</TABLE>

The new HVAC package equipment consists of high efficiency gas/electric units
with special factory installed options (FIOPS). FIOPS included down flow airflow
with an economizer and communication interface; power exhaust; and a return and
supply air smoke detector.

EXCLUSIONS
Additional items not included in the Roof-Mounted Mechanical Equipment
Replacement Project are as follows:

a)   Permits or fees of any kind.
b)   Interior air system modifications or repair.
c)   Gas or electrical modifications other than specified.
d)   Control system replacement or repair.
e)   Structural engineering.
f)   Compensate piping other than specified.

<PAGE>

                                    EXHIBIT D

                             FORM OF TENANT ESTOPPEL

                           TENANT ESTOPPEL CERTIFICATE

To:  TriNet Essential Facilities XXVI, Inc.
     c/o TriNet Corporate Realty Trust, Inc.
     One Embarcadero Center, Suite 3300
     San Francisco, CA 94111
     ATTN: Asset Management

     --------------------------
     --------------------------
     --------------------------
       ATTN:
            -------------------

              Re: Lease, dated as of November___, 1999 between Polycom, Inc., a
              Delaware corporation, as tenant (the original named tenant under
              the Lease, together with such tenant's successors and assigns,
              being hereinafter referred to collectively as the "Tenant"), and
              TriNet Essential Facilities XXVI, a Maryland corporation
              ("Landlord"), covering certain premises known by the street
              address 1565 Barber Lane in the City of Milpitas, County of Santa
              Clara, State of California (the "Leased Premises"), as amended as
              noted on attached Schedule A (collectively, the "Lease")

Gentlemen:

       The undersigned Tenant hereby represents, warrants and certifies to
___________________("___________") and Landlord, that:

       1. The Lease has not been modified, changed, altered or amended in any
respect, either orally or in writing, except as may be indicated on Schedule A
attached hereto, and constitutes the entire agreement between Tenant and
Landlord affecting Tenant's leasing of the Leased Premises. A true and correct
copy of the Lease is attached as Schedule B. The Lease is in full force and
effect and is not subject to any contingencies or conditions not set forth in
the Lease.

       2. The term of the Lease commenced on,______________ ,_________ and will
expire on ______________,__________ ; the Tenant has two (2) options to renew
the Lease Term each for a period of five (5) years.

       3. The monthly base rent payable under the Lease as of the current month
is $ _______ Tenant has paid all fixed and additional rent and other sums which
are due and

<PAGE>

payable under the Lease through the date hereof, and Tenant has not made and
will not make any prepayments of fixed rent for more than one month in advance.
There are no presently unexpired rental concessions or abatements due under the
Lease except as set forth on Schedule A attached hereto. Tenant has no credits,
offsets, abatements, defenses, counterclaims or deductions against any rental or
other payments due under the Lease or with respect to its performance of the
other terms and conditions of the Lease, and has asserted no claims against
Landlord.

       4. Tenant has paid to Landlord a security deposit in the amount of
$___ . Landlord is the beneficiary under a letter of Credit in the amount of
$___ required by the Lease as additional security. Tenant has not made any
other payments to Landlord as a security deposit, advance or prepaid rent.

       5. Landlord has completed, and, if required under the Lease, paid for,
any and all tenant work required under the Lease and Tenant has accepted the
Leased Premises. Tenant is not entitled to any further payment or credit for
tenant work.

       6. To Tenant's best knowledge, Landlord is not in default in the
performance of any of the terms of the Lease, nor is there now any fact or
condition which, with notice or lapse of time or both, will become such a
default. Tenant has not delivered to Landlord any notice of default with respect
to the Landlord's obligations under the Lease.

       7. Tenant is in actual possession of the entire Leased Premises and, to
Tenant's best knowledge, is not in any respect in default under any of the terms
and conditions of the Lease, nor is there now any fact or condition which, with
notice or lapse of time or both, will become such a default. Tenant has not
received from Landlord any notice of default with respect to the Tenant's
obligations under the Lease.

       8. Tenant has not assigned, transferred, mortgaged or otherwise
encumbered its interest under the Lease, nor subleased any of the Leased
Premises, nor permitted any person or entity to use the Leased Premises, except
as otherwise indicated on Schedule A annexed hereto.

       9. Except as expressly provided in the Lease, Tenant:

              (i)    does not have any right to renew or extend the term of the
                     lease,

              (ii)   does not have any right to cancel or surrender the Lease
                     prior to the expiration of the term of the Lease,

              (iii)  does not have any option or rights of first refusal or
                     first offer to purchase or lease all or any part of the
                     Leased Premises or the real property of which the Leased
                     Premises are a part,

              (iv)   does not have any right, title or interest with respect to
                     the Leased Premises other than as lessee under the lease,
                     and

<PAGE>

              (v)    does not have any right to relocate into other property
                     owned by Landlord or any of landlord's affiliates.

       10. There has not been filed by or against Tenant a petition in
bankruptcy, voluntary or otherwise, any assignment for the benefit of creditors,
any petition seeking reorganization or arrangement under the bankruptcy laws of
the United States, or any state thereof, or any other action brought under said
bankruptcy laws with respect to Tenant.

       11. If Tenant is required to provide insurance coverage under the Lease,
Tenant has not given or received written notice that Tenant's insurance coverage
will be canceled or will not be renewed.

       12. Tenant is not aware of any material defects or deficiencies in the
systems, elements or components of the Leased Premises. Tenant has not received
any written notice, citation or other claim alleging any material violation of
any applicable building, zoning, land use, environmental, anti-pollution,
health, fire, safety, access accommodations for the physically handicapped,
subdivision, energy and resource conservation or similar laws, statutes, rules,
regulations or ordinances, or any covenants, conditions and restrictions
applicable to the Leased Premises.

       13. To the best knowledge of Tenant, any and all brokerage and leasing
commissions relating to and/or resulting from Tenant's execution and delivery of
the Lease and occupancy of the Leased Premises have been paid in full.

       14. The individual executing this Tenant Estoppel Certificate on behalf
of Tenant represents and warrants that he has the power and the authority to
execute this Tenant Estoppel Certificate on behalf of Tenant.

       15. This Tenant Estoppel Certificate shall inure to the benefit of
___________ and Landlord and their respective nominees, successors, assigns,
participants and designees and shall be binding upon Tenant and its successors
and assigns.

Dated this ______ day of _________________ , ______.

Tenant: _________________________ , a ________________

By: _______________________

Its: ______________________<PAGE>

                                HEARTPORT, INC.
                             1996 STOCK OPTION PLAN
                   (Restated October 21, 1996 and May 7, 1999)

                                   ARTICLE ONE
                               GENERAL PROVISIONS

I.       PURPOSE OF THE PLAN

                  This 1996 Stock Option Plan is intended to promote the
interests of Heartport, Inc., a Delaware corporation, by providing eligible
persons with the opportunity to acquire a proprietary interest, or otherwise
increase their proprietary interest, in the Corporation as an incentive for
them to remain in the service of the Corporation.

                  Capitalized terms shall have the meanings assigned to such
terms in the attached Appendix.

II.      STRUCTURE OF THE PLAN

         A.  The Plan shall be divided into two separate equity programs:

                                (i)      the Discretionary Option Grant Program
         under which eligible persons may, at the discretion of the Plan
         Administrator, be granted options to purchase shares of Common Stock,
         and

                                (ii)     the Automatic Option Grant Program
         under which Eligible Directors shall automatically receive option
         grants at periodic intervals to purchase shares of Common Stock.

         B.  The provisions of Articles One and Four shall apply to all
equity programs under the Plan and shall accordingly govern the interests of
all persons under the Plan.

III.     ADMINISTRATION OF THE PLAN

         A.  The Primary Committee shall have authority to administer the
Discretionary Option Grant Program with respect to Section 16 Insiders.
Administration of the Discretionary Option Grant Program with respect to all
other persons eligible to participate in that program may, at the Board's
discretion, be vested in the Primary Committee or a Secondary Committee. In
addition, the Board may retain the power to administer the Plan with respect
to all persons. The members of the Secondary Committee may be Board members
who are Employees eligible to receive discretionary option grants under the
Plan or any stock option, stock appreciation, stock bonus or other stock plan
of the Corporation (or any Parent or Subsidiary).
<PAGE>

         B.  Members of the Primary Committee or any Secondary Committee shall
serve for such period of time as the Board may determine and shall be subject
to removal by the Board at any time. The Board may also at any time terminate
the functions of any committee and reassume all powers and authority
previously delegated to such committee.

         C.  The Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority to
establish such rules and regulations as it may deem appropriate for proper
administration of the Discretionary Option Grant Program and to make such
determinations under, and issue such interpretations of, the provisions of
such program and any outstanding options thereunder as it may deem necessary
or advisable. Decisions of the Plan Administrator within the scope of its
administrative functions under the Plan shall be final and binding on all
parties who have an interest in the Discretionary Option Grant Program under
its jurisdiction or any option thereunder.

         D.  Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee
shall accordingly be entitled to full indemnification and reimbursement as
Board members for their service on such committee. No member of the Primary
Committee or the Secondary Committee shall be liable for any act or omission
made in good faith with respect to the Plan or any option grants made under
the Plan.

         E.  Administration of the Automatic Option Grant Program shall be
self-executing in accordance with the terms of that program. However, the
Plan Administrator (other than the Secondary Committee) shall exercise any
discretionary functions with respect to option grants made thereunder as it
deems advisable.

IV.      ELIGIBILITY

         A.  The persons eligible to participate in the Discretionary Option
Grant Program are as follows:

                                (i)      Employees,

                                (ii)     non-employee members of the Board or
         of the board of directors of any Parent or Subsidiary, and

                                (iii)    consultants and other independent
         advisors who provide services to the Corporation (or any Subsidiary).

         B.  The Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority (subject to
the provisions of the Plan) to determine, with respect to the option grants
under the Discretionary Option Grant Program, which eligible persons are to
receive option grants, the time or times when such option grants are to be
made, the number of shares to be covered by each such grant, the status of
the granted option as either an Incentive Option or a Non-Statutory Option,
the time or times at which each option is to

                                       2

<PAGE>

become exercisable and the vesting schedule (if any) applicable to the option
shares and the maximum term for which the option is to remain outstanding.

         C.  The individuals eligible to receive option grants under the
Automatic Option Grant Program shall be (i) those individuals who are serving
as non-employee Board members on the Automatic Option Grant Program Effective
Date or who are first elected or appointed as non-employee Board members
after such date, whether through appointment by the Board or election by the
Corporation's stockholders, and (ii) those individuals who continue to serve
as non-employee Board members after one or more Annual Stockholders Meetings
held after the Automatic Option Grant Program Effective Date. A non-employee
Board member who has previously been in the employ of the Corporation (or any
Parent or Subsidiary) shall not be eligible to receive an option grant under
the Automatic Option Grant Program on the Automatic Option Grant Program
Effective Date or at the time he or she first becomes a non-employee Board
member, but such individual shall be eligible to receive periodic option
grants under the Automatic Option Grant Program upon his or her continued
service as a non-employee Board member following one or more Annual
Stockholders Meetings. A non-employee Board member shall not be eligible for
an initial grant or annual grant if at the time a grant would be made
pursuant to the terms of the Automatic Option Grant Program he or she is
receiving remuneration from the Corporation. Such remuneration may take the
form of continued vesting of options previously granted by the Corporation
(excluding options granted pursuant to the Automatic Option Grant Program),
severance pay, or salary or consulting fees (excluding director fees).

V.       STOCK SUBJECT TO THE PLAN

         A.  The stock issuable under the Plan shall be shares of authorized
but unissued or reacquired Common Stock, including shares repurchased by the
Corporation on the open market. The maximum number of shares of Common Stock
which may be issued over the term of the Plan shall not exceed 5,500,000
shares.

         B.  No one person participating in the Plan may receive options or
separately exercisable stock appreciation rights for more than One Million
(1,000,000) shares of Common Stock over the term of the Plan, exclusive of
any option grants received prior to January 1, 1996.

         C.  Shares of Common Stock subject to outstanding options shall be
available for subsequent issuance under the Plan to the extent (i) the
options (including any options incorporated from the Predecessor Plan) expire
or terminate for any reason prior to exercise in full or (ii) the options are
canceled in accordance with the cancellation-regrant provisions of Article
Two. All shares issued under the Plan (including shares issued upon exercise
of options incorporated from the Predecessor Plan), whether or not those
shares are subsequently repurchased by the Corporation pursuant to its
repurchase rights under the Plan, shall reduce on a share-for-share basis the
number of shares of Common Stock available for subsequent issuance under the
Plan. In addition, should the exercise price of an option under the Plan
(including any option incorporated from the Predecessor Plan) be paid with
shares of Common Stock or should shares of Common Stock otherwise issuable
under the Plan be withheld by the Corporation in

                                       3
<PAGE>

satisfaction of the withholding taxes incurred in connection with the
exercise of an option under the Plan, then the number of shares of Common
Stock available for issuance under the Plan shall be reduced by the gross
number of shares for which the option is exercised, and not by the net number
of shares of Common Stock issued to the holder of such option.

         D.  Should any change be made to the Common Stock by reason of any
stock split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as
a class without the Corporation's receipt of consideration, appropriate
adjustments shall be made to (i) the maximum number and/or class of
securities issuable under the Plan, (ii) the number and/or class of
securities for which any one person may be granted options and separately
exercisable stock appreciation rights per calendar year or over the term of
the Plan, (iii) the number and/or class of securities for which automatic
option grants are to be subsequently made per Eligible Director under the
Automatic Option Grant Program and (iv) the number and/or class of securities
and the exercise price per share in effect under each outstanding option
(including any option incorporated from the Predecessor Plan) in order to
prevent the dilution or enlargement of benefits thereunder. The adjustments
determined by the Plan Administrator shall be final, binding and conclusive.

                                       4
<PAGE>

                                  ARTICLE TWO
                       DISCRETIONARY OPTION GRANT PROGRAM

I.       OPTION TERMS

              Each option shall be evidenced by one or more documents in the
form approved by the Plan Administrator; PROVIDED, however, that each such
document shall comply with the terms specified below. Each document
evidencing an Incentive Option shall, in addition, be subject to the
provisions of the Plan applicable to such options.

         A.  EXERCISE PRICE.

             1.  The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than eighty-five percent (85%) of the
Fair Market Value per share of Common Stock on the option grant date.

             2.  The exercise price shall become immediately due upon
exercise of the option and shall, subject to the provisions of Section I of
Article Four and the documents evidencing the option, be payable in one or
more of the forms specified below:

                                (i)   cash or check made payable to the
         Corporation,

                                (ii)   shares of Common Stock held for the
         requisite period necessary to avoid a charge to the Corporation's
         earnings for financial reporting purposes and valued at Fair Market
         Value on the Exercise Date, or

                                (iii) to the extent the option is exercised for
         vested shares, through a special sale and remittance procedure pursuant
         to which the Optionee shall concurrently provide irrevocable written
         instructions to (a) a Corporation-designated brokerage firm to effect
         the immediate sale of the purchased shares and remit to the
         Corporation, out of the sale proceeds available on the settlement date,
         sufficient funds to cover the aggregate exercise price payable for the
         purchased shares plus all applicable Federal, state and local income
         and employment taxes required to be withheld by the Corporation by
         reason of such exercise and (b) the Corporation to deliver the
         certificates for the purchased shares directly to such brokerage firm
         in order to complete the sale.

                  Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be made
on the Exercise Date.

         B.  EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable
at such time or times, during such period and for such number of shares as
shall be determined by the Plan Administrator and set forth in the documents
evidencing the option. However, no option shall have a term in excess of ten
(10) years measured from the option grant date.

                                       5
<PAGE>

         C.  EFFECT OF TERMINATION OF SERVICE.

             1. The following provisions shall govern the exercise of any
options held by the Optionee at the time of cessation of Service or death:

                                (i)     Any option outstanding at the time of
         the Optionee's cessation of Service for any reason shall remain
         exercisable for such period of time thereafter as shall be determined
         by the Plan Administrator and set forth in the documents evidencing the
         option, but no such option shall be exercisable after the expiration of
         the option term.

                                (ii)    Any option exercisable in whole or in
         part by the Optionee at the time of death may be subsequently exercised
         by the personal representative of the Optionee's estate or by the
         person or persons to whom the option is transferred pursuant to the
         Optionee's will or in accordance with the laws of descent and
         distribution.

                                (iii)    During the applicable post-Service
         exercise period, the option may not be exercised in the aggregate for
         more than the number of vested shares for which the option is
         exercisable on the date of the Optionee's cessation of Service. Upon
         the expiration of the applicable exercise period or (if earlier) upon
         the expiration of the option term, the option shall terminate and cease
         to be outstanding for any vested shares for which the option has not
         been exercised. However, the option shall, immediately upon the
         Optionee's cessation of Service, terminate and cease to be outstanding
         to the extent it is not exercisable for vested shares on the date of
         such cessation of Service.

                                (iv)     Should the Optionee's Service be
         terminated for Misconduct, then all outstanding options held by the
         Optionee shall terminate immediately and cease to be outstanding.

                                (v)      In the event of a Corporate
         Transaction, the provisions of Section III of this Article Two shall
         govern the period for which the outstanding options are to remain
         exercisable following the Optionee's cessation of Service and shall
         supersede any provisions to the contrary in this section.

         2.  The Plan Administrator shall have the discretion, exercisable
either at the time an option is granted or at any time while the option
remains outstanding, to:

                                (i)      extend the period of time for which the
         option is to remain exercisable following the Optionee's cessation of
         Service from the period otherwise in effect for that option to such
         greater period of time as the Plan Administrator shall deem
         appropriate, but in no event beyond the expiration of the option term,
         and/or

                                (ii)     permit the option to be exercised,
         during the applicable post-Service exercise period, not only with
         respect to the number of vested shares of

                                       6
<PAGE>

         Common Stock for which such option is exercisable at the time of the
         Optionee's cessation of Service but also with respect to one or more
         additional installments in which the Optionee would have vested under
         the option had the Optionee continued in Service.

         D.  STOCKHOLDER RIGHTS. The holder of an option shall have no
stockholder rights with respect to the shares subject to the option until
such person shall have exercised the option, paid the exercise price and
become a holder of record of the purchased shares.

         E.  REPURCHASE RIGHTS. The Plan Administrator shall have the
discretion to grant options which are exercisable for unvested shares of
Common Stock. Should the Optionee cease Service while holding such unvested
shares, the Corporation shall have the right to repurchase, at the exercise
price paid per share, any or all of those unvested shares. The terms upon
which such repurchase right shall be exercisable (including the period and
procedure for exercise and the appropriate vesting schedule for the purchased
shares) shall be established by the Plan Administrator and set forth in the
document evidencing such repurchase right.

         F.  LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the
Optionee, the option shall be exercisable only by the Optionee and shall not
be assignable or transferable other than by will or by the laws of descent
and distribution following the Optionee's death. However, a Non-Statutory
Option may be assigned (i) to a member of the immediate family of the
optionee or to a trust established for the benefit of one or more members of
the immediate family of the optionee, provided that the assignment shall not
be effective until written notice of the assignment is received by the Plan
Administrator, or (ii) in accordance with terms approved in advance by the
Plan Administrator. The terms applicable to the assigned option (or portion
thereof) shall be the same as those in effect for the option immediately
prior to such assignment and shall be set forth in such documents issued to
the assignee as the Plan Administrator may deem appropriate.

II.      INCENTIVE OPTIONS

                  The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Four shall be applicable to Incentive
Options. Options which are specifically designated as Non-Statutory Options when
issued under the Plan shall NOT be subject to the terms of this Section II.

         A.  ELIGIBILITY.  Incentive Options may only be granted to Employees.

         B.  EXERCISE PRICE. The exercise price per share shall not be less
than one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the option grant date.

         C.  DOLLAR LIMITATION. To the extent required by Code Section 422,
the aggregate Fair Market Value of the shares of Common Stock (determined as
of the respective date or dates of grant) for which one or more options
granted to any Employee under the Plan (or any other option plan of the
Corporation or any Parent or Subsidiary) may for the first time become
exercisable as Incentive Options during any one (1) calendar year shall not
exceed the sum of

                                       7
<PAGE>

One Hundred Thousand Dollars ($100,000). To the extent the Employee holds two
(2) or more such options which become exercisable for the first time in the
same calendar year, the foregoing limitation on the exercisability of such
options as Incentive Options shall be applied on the basis of the order in
which such options are granted.

         D.  10% STOCKHOLDER. If any Employee to whom an Incentive Option is
granted is a 10% Stockholder, to the extent required by Code Section 422,
then the exercise price per share shall not be less than one hundred ten
percent (110%) of the Fair Market Value per share of Common Stock on the
option grant date, and the option term shall not exceed five (5) years
measured from the option grant date.

III.     CORPORATE TRANSACTION/CHANGE IN CONTROL

         A.  In the event of any Corporate Transaction, each outstanding
option shall automatically accelerate so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable for all of the shares of Common Stock at the time subject
to such option and may be exercised for any or all of those shares as
fully-vested shares of Common Stock. However, an outstanding option shall NOT
so accelerate if and to the extent: (i) such option is, in connection with
the Corporate Transaction, either to be assumed by the successor corporation
(or parent thereof) or to be replaced with a comparable option to purchase
shares of the capital stock of the successor corporation (or parent thereof),
(ii) such option is to be replaced with a cash incentive program of the
successor corporation which preserves the spread existing on the unvested
option shares at the time of the Corporate Transaction and provides for
subsequent payout in accordance with the same vesting schedule applicable to
such option or (iii) the acceleration of such option is subject to other
limitations imposed by the Plan Administrator at the time of the option
grant. The determination of option comparability under clause (i) above shall
be made by the Plan Administrator, and its determination shall be final,
binding and conclusive.

         B.  All outstanding repurchase rights shall also terminate
automatically, and the shares of Common Stock subject to those terminated
rights shall immediately vest in full, in the event of any Corporate
Transaction, except to the extent: (i) those repurchase rights are to be
assigned to the successor corporation (or parent thereof) in connection with
such Corporate Transaction or (ii) such accelerated vesting is precluded by
other limitations imposed by the Plan Administrator at the time the
repurchase right is issued.

         C.  The Plan Administrator shall have the discretion, exercisable
either at the time the option is granted or at any time while the option
remains outstanding, to provide for the automatic acceleration of one or more
outstanding options (and the automatic termination of one or more outstanding
repurchase rights with the immediate vesting of the shares of Common Stock
subject to those rights) upon the occurrence of a Corporate Transaction,
whether or not those options are to be assumed or replaced (or those
repurchase rights are to be assigned) in the Corporate Transaction.

                                       8
<PAGE>

         D.  Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).

         E.  Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction
had the option been exercised immediately prior to such Corporate
Transaction. Appropriate adjustments shall also be made to (i) the number and
class of securities available for issuance under the Plan on both an
aggregate and per Optionee basis following the consummation of such Corporate
Transaction and (ii) the exercise price payable per share under each
outstanding option, PROVIDED the aggregate exercise price payable for such
securities shall remain the same.

         F.  Any options which are assumed or replaced in the Corporate
Transaction and do not otherwise accelerate at that time, shall automatically
accelerate (and any of the Corporation's outstanding repurchase rights which
do not otherwise terminate at the time of the Corporate Transaction shall
automatically terminate and the shares of Common Stock subject to those
terminated rights shall vest) in the event the Optionee's Service should
subsequently terminate by reason of an Involuntary Termination within twelve
(12) months following the effective date of such Corporate Transaction. Any
options so accelerated (and any of the Corporation's outstanding repurchase
rights so terminated) shall vest, as if the Optionee's Service continued for
an additional twelve (12) months following the Involuntary Termination and
shall remain exercisable for all of the shares which are then exercisable
and/or vested until the EARLIER of (i) the expiration of the option term or
(ii) the expiration of the one (1)-year period measured from the effective
date of the Involuntary Termination.

         G.  The Plan Administrator shall have the discretion, exercisable
either at the time the option is granted or at any time while the option
remains outstanding, to (i) provide for the automatic acceleration of one or
more outstanding options (and the automatic termination of one or more
outstanding repurchase rights with the immediate vesting of the shares of
Common Stock subject to those rights) upon the occurrence of a Change in
Control or (ii) condition any such option acceleration (and the termination
of any outstanding repurchase rights) upon the subsequent Involuntary
Termination of the Optionee's Service within a specified period following the
effective date of such Change in Control. Any options accelerated in
connection with a Change in Control shall remain fully exercisable until the
expiration or sooner termination of the option term.

         H.  The portion of any Incentive Option accelerated in connection
with a Corporate Transaction or Change in Control shall remain exercisable as
an Incentive Option only to the extent the applicable One Hundred Thousand
Dollar limitation is not exceeded. To the extent such dollar limitation is
exceeded, the accelerated portion of such option shall be exercisable as a
Non-Statutory Option under the Federal tax laws.

                                       9
<PAGE>

         I.  The grant of options under the Discretionary Option Grant
Program shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure
or to merge, consolidate, dissolve, liquidate or sell or transfer all or any
part of its business or assets.

IV.      STOCK APPRECIATION RIGHTS

         A.  The Plan Administrator shall have full power and authority to
grant to selected Optionees tandem stock appreciation rights.

         B.  The following terms shall govern the grant and exercise of
tandem stock appreciation rights:

                                (i)      One or more Optionees may be granted
         the right, exercisable upon such terms as the Plan Administrator may
         establish, to elect between the exercise of the underlying option for
         shares of Common Stock and the surrender of that option in exchange for
         a distribution from the Corporation in an amount equal to the excess of
         (A) the Fair Market Value (on the option surrender date) of the number
         of shares in which the Optionee is at the time vested under the
         surrendered option (or surrendered portion thereof) over (B) the
         aggregate exercise price payable for such shares.

                                (ii)     No such option surrender shall be
         effective unless it is approved by the Plan Administrator. If the
         surrender is so approved, then the distribution to which the Optionee
         shall be entitled may be made in shares of Common Stock valued at Fair
         Market Value on the option surrender date, in cash, or partly in shares
         and partly in cash, as the Plan Administrator shall in its sole
         discretion deem appropriate.

                                (iii)    If the surrender of an option is
         rejected by the Plan Administrator, then the Optionee shall retain
         whatever rights the Optionee had under the surrendered option (or
         surrendered portion thereof) on the option surrender date and may
         exercise such rights at any time prior to the LATER of (A) five (5)
         business days after the receipt of the rejection notice or (B) the last
         day on which the option is otherwise exercisable in accordance with the
         terms of the documents evidencing such option, but in no event may such
         rights be exercised more than ten (10) years after the option grant
         date.

                                       10
<PAGE>

                                 ARTICLE THREE
                         AUTOMATIC OPTION GRANT PROGRAM

I.       OPTION TERMS

         A.  GRANT DATES.  Option grants shall be made on the dates specified
below:

             1.  Each Eligible Director who is first elected or appointed as
a non-employee Board member after the Automatic Option Grant Program
Effective Date shall automatically be granted on the date of such initial
election or appointment (as the case may be), a Non-Statutory Option to
purchase thirty-two thousand (32,000) shares of Common Stock.

             2.  On the date of each Annual Stockholders Meeting, beginning
with the first Annual Meeting after the Corporation's initial public
offering, each individual who was an Eligible Director on the Automatic
Option Grant Program Effective Date and continues to serve as an Eligible
Director after such meeting, shall automatically be granted, whether or not
such individual is standing for re-election as a Board member at that Annual
Meeting, a Non-Statutory Option to purchase an additional six thousand four
hundred (6,400) shares of Common Stock. On the date of each Annual
Stockholders Meeting, each Eligible Director who is elected or appointed as a
non-employee Board member after the Automatic Option Grant Program Effective
Date and continues to serve as an Eligible Director after such meeting, shall
automatically be granted, whether or not such individual is standing for
re-election as a Board member at that Annual Meeting, a Non-Statutory Option
to purchase an additional six thousand four hundred (6,400) shares of Common
Stock, beginning on the first anniversary of the grant date of such Eligible
Director's initial automatic option grant. There shall be no limit on the
number of such 6,400-share option grants any one Eligible Director may
receive over his or her period of Board service.

         B.  EXERCISE PRICE.

             1.  The exercise price per share shall be equal to one hundred
percent (100%) of the Fair Market Value per share of Common Stock on the
option grant date.

             2.  The exercise price shall be payable in one or more of the
alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale and remittance procedure specified thereunder
is utilized, payment of the exercise price for the purchased shares must be
made on the Exercise Date.

         C.   OPTION TERM. Each option shall have a term of ten (10) years
measured from the option grant date.

         D.  EXERCISE AND VESTING OF OPTIONS. Each option granted under this
Article Three on or after May 7, 1999 shall become exercisable in full on the
fourth anniversary of the date on which such annual grant was made,
regardless of whether the optionee remains a Board member. Each initial
option granted after October 21, 1996 shall become exercisable in a series of
five (5)

                                       11
<PAGE>

equal and successive annual installments over the Optionee's period of
continued service as a Board member, with the first such installment to
become exercisable upon the Optionee's completion of one (1) year of Board
service measured from the option grant date. Each subsequent annual automatic
option grant shall become fully exercisable on the fifth anniversary of the
date on which such annual grant was made.

         E.  EFFECT OF TERMINATION OF BOARD SERVICE. Each option granted
under this Article Three on or after May 7, 1999 shall remain outstanding and
exercisable in full until the date that is twelve (12) months following the
fourth anniversary of the date on which such annual grant was made,
regardless of whether the optionee remains a Board member. The provisions of
subsections (i) and (ii) shall govern the exercise of any options granted
before May 7, 1999 and held by the Optionee at the time the Optionee ceases
to serve as a Board member:

                                (i)    The Optionee (or, in the event of
         Optionee's death, the personal representative of the Optionee's estate
         or the person or persons to whom the option is transferred pursuant to
         the Optionee's will or in accordance with the laws of descent and
         distribution) shall have a twelve (12)-month period following the date
         of such cessation of Board service in which to exercise each such
         option.

                                (ii)   During the twelve (12)-month exercise
         period, the option may not be exercised in the aggregate for more than
         the number of vested shares of Common Stock for which the option is
         exercisable at the time of the Optionee's cessation of Board service.

                                (iii)  Should the Optionee cease to serve as a
         Board member by reason of death or Permanent Disability, then each
         option granted on or after May 7, 1999 shall become exercisable as if
         twelve (12) additional months had elapsed from the date of grant.
         Should the Optionee cease to serve as a Board member by reason of death
         or Permanent Disability, then each option granted before May 7, 1999
         shall become exercisable and shares at the time subject to the option
         shall immediately vest as if the Optionee had continued to serve as a
         Board member for an additional twelve (12) month period following the
         Optionee's cessation of Board service, so that such option may, during
         the twelve (12)-month exercise period following such cessation of Board
         service, be exercised for all or any portion of such shares of Common
         Stock to the extent so vested and exercisable.

                                (iv)   In no event shall any option granted
         under this Article Three remain exercisable after the expiration of the
         option term. Upon the expiration of the twelve (12)-month exercise
         period or (if earlier) upon the expiration of the option term, the
         option shall terminate and cease to be outstanding for any vested
         shares for which the option has not been exercised. However, each
         option granted before May 7, 1999 shall, immediately upon the
         Optionee's cessation of Board service, terminate and cease to be
         outstanding to the extent it is not exercisable for vested shares on
         the date of such cessation of Board service.

                                       12
<PAGE>

II.      CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER

         A.  In the event of any Corporate Transaction, the shares of Common
Stock at the time subject to each outstanding option but not otherwise vested
shall automatically vest so that each such option shall, immediately prior to
the effective date of the Corporate Transaction, be exercisable for an
additional number of vested shares of Common Stock subject to such option as
if the Board member continued to serve as a Board member for an additional
twelve (12) months and may be exercised for all or any portion of such shares
of Common Stock to the extent so vested. Immediately following the
consummation of the Corporate Transaction, each automatic option grant shall
terminate and cease to be outstanding, except to the extent assumed by the
successor corporation (or parent thereof).

         B.  In connection with any Change in Control, the shares of Common
Stock at the time subject to each outstanding option but not otherwise vested
shall automatically vest so that each such option shall, immediately prior to
the effective date of the Change in Control, be exercisable for an additional
number of vested shares of Common Stock as if the Board member continued to
serve as a Board member for an additional twelve (12) months and may be
exercised for all or any portion of such shares of Common Stock to the extent
so vested. Each such option shall remain exercisable for such option shares
so vested until the expiration or sooner termination of the option term or
the surrender of the option in connection with a Hostile Take-Over.

         C.  Upon the occurrence of a Hostile Take-Over, each automatic
option granted before October 21, 1996 and held by the Optionee for a period
of at least six (6) months shall be automatically canceled. The Optionee
shall in return be entitled to a cash distribution from the Corporation in an
amount equal to the excess of (i) the Take-Over Price of the shares of Common
Stock at the time subject to the canceled option (to the extent such option
is vested) over (ii) the aggregate exercise price payable for such shares.
Such cash distribution shall be paid within five (5) days following the
cancellation of the option by the Corporation. No approval or consent of the
Board shall be required in connection with such option cancellation and cash
distribution.

         D.  The grant of options under the Automatic Option Grant Program
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.

III.     REMAINING TERMS

             The remaining terms of each option granted under the Automatic
Option Grant Program shall be the same as the terms in effect for option
grants made under the Discretionary Option Grant Program.

                                       13
<PAGE>

                                  ARTICLE FOUR
                                  MISCELLANEOUS

I.       FINANCING

         A.  The Plan Administrator may permit any Optionee to pay the option
exercise price under the Plan by delivering a promissory note payable in one
or more installments. The terms of any such promissory note (including the
interest rate and the terms of repayment) shall be established by the Plan
Administrator in its sole discretion. Promissory notes may be authorized with
or without security or collateral. In all events, the maximum credit
available to the Optionee may not exceed the sum of (i) the aggregate option
exercise price payable for the purchased shares plus (ii) any Federal, state
and local income and employment tax liability incurred by the Optionee in
connection with the option exercise.

         B.  The Plan Administrator may, in its discretion, determine that
one or more such promissory notes shall be subject to forgiveness by the
Corporation in whole or in part upon such terms as the Plan Administrator may
deem appropriate.

II.      CANCELLATION AND REGRANT OF OPTIONS

             The Plan Administrator shall have the authority to effect, at
any time and from time to time, with the consent of the affected option
holders, the cancellation of any or all outstanding options under the Plan
(including outstanding options incorporated from the Predecessor Plan) and to
grant in substitution new options covering the same or different number of
shares of Common Stock but with an exercise price per share based on the Fair
Market Value per share of Common Stock on the new option grant date.

III.     TAX WITHHOLDING

         A.  The Corporation's obligation to deliver shares of Common Stock
upon the exercise of options or stock appreciation rights under the Plan
shall be subject to the satisfaction of all applicable Federal, state and
local income and employment tax withholding requirements.

         B.  The Plan Administrator may, in its discretion, provide any or
all holders of Non-Statutory Options under the Plan with the right to use
shares of Common Stock in satisfaction of all or part of the Taxes incurred
by such holders in connection with the exercise of their options. Such right
may be provided to any such holder in either or both of the following formats:

                                (i)     STOCK WITHHOLDING: The election to have
         the Corporation withhold, from the shares of Common Stock otherwise
         issuable upon the exercise of such Non-Statutory Option, a portion of
         those shares with an aggregate Fair Market Value equal to the
         percentage of the Taxes (not to exceed one hundred percent (100%))
         designated by the holder.

                                       14
<PAGE>

                                (ii)     STOCK DELIVERY: The election to deliver
         to the Corporation, at the time the Non-Statutory Option is exercised,
         one or more shares of Common Stock previously acquired by such holder
         (other than in connection with the option exercise triggering the
         Taxes) with an aggregate Fair Market Value equal to the percentage of
         the Taxes (not to exceed one hundred percent (100%)) designated by the
         holder.

IV.      EFFECTIVE DATE AND TERM OF THE PLAN

         A.  The Discretionary Option Grant Program became effective on April
25, 1996, the Plan Effective Date and options may be granted under the
Discretionary Option Grant Program from and after the Plan Effective Date.
The Automatic Option Grant Program became effective on April 25, 1996, the
Automatic Option Grant Program Effective Date and the initial option grants
under the Automatic Option Grant Program shall be made to the Eligible
Directors at that time. On October 21, 1996, the Plan was amended to increase
the number of shares issuable thereunder to 5,500,000 shares and to make
certain other amendments and to delete provisions no longer required by
Section 16 of the 1934 Act as a result of the SEC's revision of Rule 16b-3.
The Plan was amended on May 7, 1999 to provide for the grant of fully-vested
options under the Automatic Option Grant Program subject to a deferral of
exercisability.

         B.  The Plan shall serve as the successor to the Predecessor Plan,
and no further option grants shall be made under the Predecessor Plan after
the Plan Effective Date. All options outstanding under the Predecessor Plan
as of such date shall, immediately upon approval of the Plan by the
Corporation's stockholders, be incorporated into the Plan and treated as
outstanding options under the Plan. However, each outstanding option so
incorporated shall continue to be governed solely by the terms of the
documents evidencing such option, and no provision of the Plan shall be
deemed to affect or otherwise modify the rights or obligations of the holders
of such incorporated options with respect to their acquisition of shares of
Common Stock.

         C.  The option/vesting acceleration provisions of Article Two
relating to Corporate Transactions and Changes in Control may, in the Plan
Administrator's discretion, be extended to one or more options incorporated
from the Predecessor Plan which do not otherwise provide for such
acceleration.

         D.  The Plan shall terminate upon the EARLIEST of (i) February 28,
2006, (ii) the date on which all shares available for issuance under the Plan
shall have been issued pursuant to the exercise of the options under the Plan
or (iii) the termination of all outstanding options in connection with a
Corporate Transaction. Upon such Plan termination, all options outstanding on
such date shall thereafter continue to have force and effect in accordance
with the provisions of the documents evidencing such options.

V.       AMENDMENT OF THE PLAN

         A.  The Board shall have complete and exclusive power and authority
to amend or modify the Plan in any or all respects. However, no such
amendment or modification shall adversely affect the rights and obligations
with respect to options or stock appreciation rights at

                                       15
<PAGE>

the time outstanding under the Plan unless the Optionee consents to such
amendment or modification. Notwithstanding the foregoing clause, the Plan
Administrator may amend an outstanding option to reduce the number of option
shares previously granted to an optionee provided the reduction applies
solely to unvested shares or shares which have not yet become exercisable as
of the date of the amendment. In addition, the Board shall not, without the
approval of the Corporation's stockholders, (i) materially increase the
maximum number of shares issuable under the Plan, the number of shares for
which options may be granted under the Automatic Option Grant Program or the
maximum number of shares for which any one person may be granted options or
separately exercisable stock appreciation rights in the aggregate over the
term of the Plan, except for permissible adjustments in the event of certain
changes in the Corporation's capitalization, or (ii) materially modify the
eligibility requirements for Plan participation.

         B.  Options to purchase shares of Common Stock may be granted under
the Plan that are in excess of the number of shares then available for
issuance under the Plan, provided any excess shares actually issued under the
Plan are held in escrow until there is obtained stockholder approval of an
amendment sufficiently increasing the number of shares of Common Stock
available for issuance under the Plan. If such stockholder approval is not
obtained within twelve (12) months after the date the first such excess
issuances are made, then (i) any unexercised options granted on the basis of
such excess shares shall terminate and cease to be outstanding and (ii) the
Corporation shall promptly refund to the Optionees the exercise price paid
for any excess shares issued under the Plan and held in escrow, together with
interest (at the applicable Short Term Federal Rate) for the period the
shares were held in escrow, and such shares shall thereupon be automatically
canceled and cease to be outstanding.

VI.      USE OF PROCEEDS

             Any cash proceeds received by the Corporation from the sale of
shares of Common Stock under the Plan shall be used for general corporate
purposes.

VII.     REGULATORY APPROVALS

         A.  The implementation of the Plan, the granting of any option or
stock appreciation right under the Plan and the issuance of any shares of
Common Stock upon the exercise of any option or stock appreciation right
shall be subject to the Corporation's procurement of all approvals and
permits required by regulatory authorities having jurisdiction over the Plan,
the options and stock appreciation rights granted under it and the shares of
Common Stock issued pursuant to it.

         B.  No shares of Common Stock or other assets shall be issued or
delivered under the Plan unless and until there shall have been compliance
with all applicable requirements of Federal and state securities laws,
including the filing and effectiveness of the Form S-8 registration statement
for the shares of Common Stock issuable under the Plan, and all applicable
listing requirements of any stock exchange (or the Nasdaq National Market, if
applicable) on which Common Stock is then listed for trading.

                                       16
<PAGE>

VIII.    NO EMPLOYMENT/SERVICE RIGHTS

             Nothing in the Plan shall confer upon the Optionee any right to
continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining such person) or of the Optionee, which
rights are hereby expressly reserved by each, to terminate such person's
Service at any time for any reason, with or without cause.

                                       17
<PAGE>

                                    APPENDIX

             The following definitions shall be in effect under the Plan:

         A.  AUTOMATIC OPTION GRANT PROGRAM shall mean the automatic option
grant program in effect under the Plan.

         B.  AUTOMATIC OPTION GRANT PROGRAM EFFECTIVE DATE shall mean the
Section 12(g) Registration Date.

         C.  BOARD shall mean the Corporation's Board of Directors.

         D.  CHANGE IN CONTROL shall mean a change in ownership or control of
the Corporation effected through either of the following transactions:

                                (i)  the acquisition, directly or indirectly, by
         any person or related group of persons (other than the Corporation or a
         person that directly or indirectly controls, is controlled by, or is
         under common control with, the Corporation), of beneficial ownership
         (within the meaning of Rule 13d-3 of the 1934 Act) of securities
         possessing more than fifty percent (50%) of the total combined voting
         power of the Corporation's outstanding securities pursuant to a tender
         or exchange offer made directly to the Corporation's stockholders which
         the Board does not recommend such stockholders to accept, or

                                (ii) a change in the composition of the Board
         over a period of thirty-six (36) consecutive months or less such that
         a majority of the Board members ceases, by reason of one or more
         contested elections for Board membership, to be comprised of
         individuals who either (A) have been Board members continuously since
         the beginning of such period or (B) have been elected or nominated for
         election as Board members during such period by at least a majority of
         the Board members described in clause (A) who were still in office at
         the time the Board approved such election or nomination.

         E.  CODE shall mean the Internal Revenue Code of 1986, as amended.

         F.  COMMON STOCK shall mean the Corporation's common stock.

         G.  CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:

                               (i)  a merger or consolidation in which
         securities possessing more than fifty percent (50%) of the total
         combined voting power of the Corporation's outstanding securities are
         transferred to a person or persons different from the persons holding
         those securities immediately prior to such transaction; or

                                       A-1
<PAGE>

                                (ii) the sale, transfer or other disposition of
         all or substantially all of the Corporation's assets in complete
         liquidation or dissolution of the Corporation.

         H.  CORPORATION shall mean Heartport, Inc., a Delaware corporation.

         I.  DISCRETIONARY OPTION GRANT PROGRAM shall mean the discretionary
option grant program in effect under the Plan.

         J.  ELIGIBLE DIRECTOR shall mean a non-employee Board member
eligible to participate in the Automatic Option Grant Program in accordance
with the eligibility provisions of Article One.

         K.  EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and
direction of the employer entity as to both the work to be performed and the
manner and method of performance.

         L.  EXERCISE DATE shall mean the date on which the Corporation shall
have received written notice of the option exercise.

         M.  FAIR MARKET VALUE per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:

                                (i)  If the Common Stock is at the time traded
         on the Nasdaq National Market, then the Fair Market Value shall be the
         closing selling price per share of Common Stock on the date in
         question, as such price is reported by the National Association of
         Securities Dealers on the Nasdaq National Market or any successor
         system. If there is no closing selling price for the Common Stock on
         the date in question, then the Fair Market Value shall be the closing
         selling price on the last preceding date for which such quotation
         exists.

                                (ii) If the Common Stock is at the time listed
         on any Stock Exchange, then the Fair Market Value shall be the closing
         selling price per share of Common Stock on the date in question on the
         Stock Exchange determined by the Plan Administrator to be the primary
         market for the Common Stock, as such price is officially quoted in the
         composite tape of transactions on such exchange. If there is no closing
         selling price for the Common Stock on the date in question, then the
         Fair Market Value shall be the closing selling price on the last
         preceding date for which such quotation exists.

                                (iii) For purposes of option grants made on the
         date the Underwriting Agreement is executed and the initial public
         offering price of the Common Stock is established, the Fair Market
         Value shall be deemed to be equal to the established initial offering
         price per share. For purposes of option grants made prior to such date,
         the Fair Market Value shall be determined by the Plan Administrator
         after taking into account such factors as the Plan Administrator shall
         deem appropriate.

                                       A-2
<PAGE>

         N.  HOSTILE TAKE-OVER shall mean a change in ownership of the
Corporation effected through the following transaction:

                                (i)  the acquisition, directly or indirectly, by
         any person or related group of persons (other than the Corporation or a
         person that directly or indirectly controls, is controlled by, or is
         under common control with, the Corporation) of beneficial ownership
         (within the meaning of Rule 13d-3 of the 1934 Act) of securities
         possessing more than fifty percent (50%) of the total combined voting
         power of the Corporation's outstanding securities pursuant to a tender
         or exchange offer made directly to the Corporation's stockholders which
         the Board does not recommend such stockholders to accept, AND

                                (ii) more than fifty percent (50%) of the
         securities so acquired are accepted from persons other than Section 16
         Insiders.

         O.  INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.

         P.  INVOLUNTARY TERMINATION shall mean the termination of the
Service of any individual which occurs by reason of:

                                (i)  such individual's involuntary dismissal or
         discharge by the Corporation for reasons other than Misconduct, or

                                (ii) such individual's voluntary resignation
         following (A) a change in his or her position with the Corporation
         which materially reduces his or her level of responsibility, (B) a
         reduction in his or her level of compensation (including base salary,
         fringe benefits and participation in corporate-performance based bonus
         or incentive programs) by more than fifteen percent (15%) or (C) a
         relocation of such individual's place of employment by more than fifty
         (50) miles, provided and only if such change, reduction or relocation
         is effected by the Corporation without the individual's consent.

         Q.  MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee, any unauthorized use or
disclosure by such person of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary), or any other intentional
misconduct by such person adversely affecting the business or affairs of the
Corporation (or any Parent or Subsidiary) in a material manner. The foregoing
definition shall not be deemed to be inclusive of all the acts or omissions
which the Corporation (or any Parent or Subsidiary) may consider as grounds
for the dismissal or discharge of any Optionee or other person in the Service
of the Corporation (or any Parent or Subsidiary).

         R.  1934 ACT shall mean the Securities Exchange Act of 1934, as
amended.

                                       A-3
<PAGE>

         S.  NON-STATUTORY OPTION shall mean an option not intended to
satisfy the requirements of Code Section 422.

         T.  OPTIONEE shall mean any person to whom an option is granted
under the Discretionary Option Grant or Automatic Option Grant Program.

         U.  PARENT shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations ending with the Corporation, provided
each corporation in the unbroken chain (other than the Corporation) owns, at
the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the
other corporations in such chain.

         V.  PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the
inability of the Optionee to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment expected
to result in death or to be of continuous duration of twelve (12) months or
more.

         W.  PLAN shall mean the Corporation's 1996 Stock Option Plan, as set
forth in this document.

         X.  PLAN ADMINISTRATOR shall mean the particular entity, whether the
Primary Committee, the Board or the Secondary Committee, which is authorized
to administer the Discretionary Option Grant Program with respect to one or
more classes of eligible persons, to the extent such entity is carrying out
its administrative functions under those programs with respect to the persons
under its jurisdiction.

         Y.  PLAN EFFECTIVE DATE shall mean the Section 12(g) Registration Date.

         Z.  PREDECESSOR PLAN shall mean the Corporation's existing 1993
Stock Option Plan.

         AA. PRIMARY COMMITTEE shall mean the committee of two (2) or more
non-employee Board members appointed by the Board to administer the
Discretionary Option Grant Program with respect to Section 16 Insiders.

         BB. SECONDARY COMMITTEE shall mean a committee of one (1) or more
Board members appointed by the Board or Primary Committee to administer the
Discretionary Option Grant Program with respect to eligible persons other
than Section 16 Insiders.

         CC. SECTION 16 INSIDER shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of
the 1934 Act.

         DD. SECTION 12(g) REGISTRATION DATE shall mean the first date on
which the Common Stock is registered under Section 12(g) of the 1934 Act.

         EE. SERVICE shall mean the provision of services to the Corporation
(or any Parent or Subsidiary) by a person in the capacity of an Employee, a
non-employee member of the board of

                                       A-4
<PAGE>

directors or a consultant or independent advisor, except to the extent
otherwise specifically provided in the documents evidencing the option grant.

         FF. STOCK EXCHANGE shall mean either the American Stock Exchange or
the New York Stock Exchange.

         GG. SUBSIDIARY shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in
the unbroken chain owns, at the time of the determination, stock possessing
fifty percent (50%) or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.

         HH. TAKE-OVER PRICE shall mean the GREATER of (i) the Fair Market
Value per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest
reported price per share of Common Stock paid by the tender offeror in
effecting such Hostile Take-Over. However, if the surrendered option is an
Incentive Option, the Take-Over Price shall not exceed the clause (i) price
per share.

         II. TAXES shall mean the Federal, state and local income and
employment tax liabilities incurred by the holder of Non-Statutory Options or
unvested shares of Common Stock in connection with the exercise of those
options or the vesting of those shares.

         JJ. STOCKHOLDER shall mean the owner of stock (as determined under
Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any
Parent or Subsidiary).

         KK. UNDERWRITING AGREEMENT shall mean the agreement between the
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.

                                       A-5

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