Document:

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                                                                    EXHIBIT 10.2

1.      BASIC LEASE TERMS

        a.     DATE OF LEASE: November 4, 1996

        b.     TENANT: EDEN Bioscience Corporation, a Washington Corporation
               Trade Name: _____________________________________________________
               Address (Leased Premises): 11816 North Creek Parkway N., Bothell,
                                          WA 98011
               Building/Unit: 05/All
               Address (For Notices): (same as above)
               Facsimile:_______________________________________________________

        c.     LANDLORD: North Creek Associates, a Joint Venture
               Address (For Notices): 19515 North Creek Parkway, Suite 214,
                                      Bothell, WA 98011
               Facsimile: (206) 343-7966
               with a copy to Koll Management Services, 4343 Von Karman Avenue,
               Newport Beach, CA 92660, Facsimile: (714) 833-3755; or to such
               other place as Landlord may from time to time designate by notice
               to Tenant.

        d.     TENANT'S USE OF PREMISES: Research and development and
               manufacturing of plant vaccine and biocontrol products.

        e.     PREMISES AREA:               17,900       Rentable Square Feet

        f.     PROJECT AREA:                127,582      Rentable Square Feet

        g.     TERM OF LEASE: This Lease shall commence on January 9, 1999 or
               such earlier or later date as is provided in Section 3 (the
               "Commencement Date"), and shall terminate on December 31, 2001
               (the "Expiration Date").

        h.     BASE MONTHLY RENT: $8,500.00

        i.     RENT ADJUSTMENT (Initial One):

               (1) Step Increase: If this provision is initialed, the step
               adjustment provisions of Section 4.b(2) apply as follows:

                                DATES                       BASE MONTHLY RENT
                                -----                       -----------------
               April 1, 1999 - April 30, 1999                  $13,050.00
               May 1, 1999 - December 31, 1999                 $15,000.00
               January 1, 2000 - December 31, 2000             $16,000.00
               January 1, 2001 - December 31, 2001             $17,000.00

        j.     PREPAID RENT: $0.00

        k.     SECURITY DEPOSIT: $ 17,000.00 NON-REFUNDABLE CLEANING FEE: $ 0.00

        1.     BROKER(S): Paul Jerue, CB Commercial

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        m.     GUARANTORS:   N/A

        n.     ADDITIONAL SECTIONS:
               Additional sections of this lease numbered 30 are attached hereto
               and made a part hereof.

        o.     ADDITIONAL EXHIBITS:
               Additional exhibits lettered A through E are attached hereto and
               made a part hereof.

2.      PREMISES/COMMON AREAS/PROJECT.

        a.     PREMISES. Landlord leases to Tenant the premises described in
               Section 1 and in Exhibit A (the "Premises"), located in this
               project described on Exhibit B (the "Project"). By entry on the
               Premises, Tenant acknowledges that it has examined the Premises
               and accepts the Premises in their present condition, subject to
               any additional work Landlord has agreed to do. Tenant represents
               and warrants that it agrees with the square footage specified for
               the Premises and the Project in Section 1 and will not hereafter
               challenge such determination and agreement.

        b.     COMMON AREAS. As used in this Lease, "Common Areas" shall mean
               all portions of the Project not leased or demised for lease to
               specific tenants. During the Lease Term, Tenant and its
               licensees, invitees, customers and employees shall have the
               non-exclusive right to use the public portions of the Common
               Areas, including all parking areas, landscaped areas, entrances,
               lobbies, elevators, stairs, corridors, and public restrooms in
               common with Landlord, other Project tenants and their respective
               licensees, invitees, customers and employees. Landlord shall at
               all times have exclusive control and management of the Common
               Areas and no diminution thereof shall be deemed a constructive or
               actual eviction or entitle Tenant to compensation or a reduction
               or abatement of rent, provided such change does not materially
               interfere with Tenant's use of the Premises. Landlord in its
               discretion may increase, decrease or change the number, locations
               and dimensions of any Common Areas and other improvements shown
               on Exhibit A which are not within the Premises, provided such
               change does not materially interfere with Tenant's use of the
               Premises.

        c.     PROJECT.

               Landlord reserves the right in its sole discretion to modify or
               alter the configuration or number of buildings in the Project,
               provided only that upon such modification or alteration, the
               Project Area as set forth in Section l(f) shall be adjusted to
               reflect such modification or alteration.

3.      TERM. The Commencement Date listed in Section 1 of this Lease represents
        an estimate of the Commencement Date based on the scheduled expiration
        date of Tenant's sublease with Synrad under a master lease between
        Landlord and Synrad dated as of November 27, 1996 (the "Existing
        Lease"). Tenant is responsible for the transition from the Existing
        Lease/sublease to this Lease. This Lease shall be for a term ("Lease
        Term") beginning on the Commencement Date and ending on the Expiration
        Date, unless extended or sooner terminated in accordance with the terms
        of this Lease. During the term of the sublease (and notwithstanding that
        such period is prior to the Commencement Date), all terms and conditions
        of this Lease relating to insurance and indemnity shall be in full force
        and effect and shall apply directly as between Landlord and Tenant under
        this Lease. As Tenant is in possession of the Premises, Tenant hereby
        agrees to accept the

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        Premises in the condition existing on the date of termination of the
        Existing Lease, subject only to Landlord's maintenance obligations under
        the Existing Lease.

4.      RENT

        a.      BASE MONTHLY RENT. Tenant shall pay Landlord monthly base rent
                in the initial amount in Section 1 which shall be payable
                monthly in advance on the first day of each and every calendar
                month ("Base Monthly Rent") provided, however, the first month's
                Base Monthly Rent for January 1999, in the prorated amount of
                $6,306.45 and Tenant's Share of Expenses is due and payable on
                October 1, 1998. If the term of this Lease contains any rental
                abatement period, Tenant hereby agrees that if Tenant breaches
                the Lease and fails to cure such breach within the applicable
                cure period, if any, and/or abandons the Premises before the end
                of the Lease term, or if Tenant's right to possession is
                terminated by Landlord because of Tenant's breach of the Lease,
                the rental abatement period shall be deemed extinguished, and
                there shall be immediately due from Tenant to Landlord, in
                addition to any damages otherwise due Landlord under the terms
                and conditions of the Lease, Base Monthly Rent prorated for the
                entirety of the rental abatement period at the average Base
                Monthly Rent for the Lease, plus any and all other charges (such
                as Expenses) that were abated during such rental abatement
                period.

                For purposes of Section 467 of the Internal Revenue Code, the
                parties to this Lease hereby agree to allocate the stated Rents,
                provided herein, to the periods which correspond to the actual
                Rent payments as provided under the terms and conditions of this
                agreement.

        b.      RENT ADJUSTMENT.

                1)      COST OF LIVING ADJUSTMENT. [Intentionally Omitted.]

                2)      STEP INCREASE. If Section 1.i.(2) is initialed, Base
                Monthly Rent shall be increased periodically to the amounts and
                at the times set forth in Section 1.i.(2).

        c.      EXPENSES. The purpose of this Section 4.c is to ensure that
                Tenant bears a share of all Expenses related to the use,
                maintenance, ownership, repair or replacement, and insurance of
                the Project. Accordingly, beginning on the date Tenant takes
                possession of the Premises, Tenant shall each month pay to
                Landlord one-twelfth (1/12) of Tenant's Share of Expenses
                related to the Project. As used in this Lease, "Tenant's Share"
                shall mean the Premises Area, as defined in Section 1.e, divided
                by the Project Area, as defined in Section 1.f, and "Tenant's
                Share of Expenses" shall mean total Expenses for the Project,
                multiplied by Tenant's Share, provided that Landlord may
                specially allocate individual expenses where and in the manner
                necessary, in Landlord's discretion, to appropriately reflect
                the consumption of the expense or service. For example where
                some but not all premises in the Project have HVAC, Landlord may
                reallocate Project Expenses for HVAC to all premises utilizing
                HVAC to be apportioned on a per square foot basis, or could
                allocate to each premises utilizing HVAC the cost of maintaining
                that space's individual unit. In the event the average occupancy
                level of the Project for any year is less than ninety five
                percent (95%), the actual Expenses for such year shall be
                proportionately adjusted to reflect those costs which Landlord
                estimates would have been incurred, had the Project been ninety
                five percent (95%) occupied during such year.

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                1)      EXPENSES DEFINED. The term "Expenses" shall mean all
                costs and expenses of the ownership, operation, maintenance,
                repair or replacement, and insurance of the Project, including
                without limitation, the following costs:

                        (a)     All supplies, materials, labor, equipment, and
                        utilities used in or related to the operation and
                        maintenance of the Project;

                        (b)     All maintenance, management, janitorial, legal,
                        accounting, insurance, and service agreement costs
                        related to the Project;

                        (c)     All maintenance, replacement and repair costs
                        relating to the areas within or around the Project,
                        including, without limitation, air conditioning systems,
                        sidewalks, landscaping, service areas, driveways,
                        parking Areas (including resurfacing and restriping
                        parking areas), walkways, building exteriors (including
                        painting), signs and directories, repairing roofs,
                        walls, etc.

                        (d)     Amortization (along with reasonable financing
                        charges) of capital improvements made to the Project
                        which may be required by any government authority or
                        which will improve the operating efficiency of the
                        Project (provided, however, that the amount of such
                        amortization for improvements not mandated by government
                        authority shall not exceed in any year the amount of
                        costs reasonably determined by Landlord in its sole
                        discretion to have been saved by the expenditure either
                        through the reduction or minimization of increases which
                        would have otherwise occurred).

                        (e)     Real Property Taxes including all taxes,
                        assessments (general and special) and other impositions
                        or charges which may be taxed, charged, levied, assessed
                        or imposed upon all or any portion of or in relation to
                        the Project or any portion thereof, any leasehold estate
                        in the Premises or measured by Rent from the Premises,
                        including any increase caused by the transfer, sale or
                        encumbrance of the Project or any portion thereof. "Real
                        Property Taxes" shall also include any form of
                        assessment, levy, penalty, charge or tax (other than
                        estate, inheritance, net income, or franchise taxes)
                        imposed by any authority having a direct or indirect
                        power to tax or charge, including, without limitation,
                        any city, county, state federal or any improvement or
                        other district, whether such tax is (1) determined by
                        the value of the Project or the Rent or other sums
                        payable under this Lease; (2) upon or with respect to
                        any legal or equitable interest of Landlord in the
                        Project or any part thereof; (3) upon this transaction
                        or any document to which Tenant is a party creating a
                        transfer in any interest in the Project, (4) in lieu of
                        or as a direct substitute in whole or in part of or in
                        addition to any real property taxes on the Project, (5)
                        based on any parking spaces or parking facilities
                        provided in the Project, or (6) in consideration for
                        services, such as police protection, fire protection,
                        street, sidewalk and roadway maintenance, refuse removal
                        or other services that may be provided by any
                        governmental or quasi-governmental agency from time to
                        time which were formerly provided without charge or with
                        less charge to property owners or occupants.

                        (f)     Landlord agrees that Expenses as defined in
                        Section 4(c) shall not include leasing commissions;
                        payments of principal and interest on any mortgages,
                        deeds of trust or other encumbrances upon the Project;
                        depreciation

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                        of the capital cost of capital improvements except as
                        provided at 4(c)(1)(d); Landlord's executive salaries,
                        management fees in excess of market rates; costs
                        resulting from defective design or construction of the
                        Project; costs incurred in connection with entering into
                        new leases; or costs of disputes under existing leases.
                        In no event shall Expenses include any charge for which
                        Landlord receives reimbursement from insurance or from
                        another Tenant, nor shall any item of Expense he counted
                        more than once, nor shall Landlord collect more than one
                        hundred percent (100%) of Expenses.

                        (g)     Notwithstanding anything to the contrary
                        contained in the Lease, the following items shall be
                        excluded (or, as applicable, deducted) from Expenses:

                                (i)     Items, services and/or goods to the
                        extent Tenant or any other tenant, occupant, person or
                        other party is obligated to reimburse Landlord or to pay
                        third parties;

                                (ii)    Estate, inheritance, gift, franchise and
                        income taxes of Landlord;

                                (iii)   The costs and expenses of maintenance
                        and operation of any parking facility in or serving the
                        Building or Project for which a separate charge is made,
                        except to the extent that such expenses exceed any
                        revenues for parking received from such operation;

                                (iv)    Interest, fines, penalties or damages
                        incurred by Landlord for violation of any law, late
                        payment of taxes or assessments or under any agreement
                        to which Landlord is a party by reason of the breach or
                        default of Landlord;

                                (v)     Expenses incurred in connection with
                        relocating tenants in the Building or Project;

                                (vii)   Amounts received by Landlord through
                        proceeds of insurance to the extent the proceeds are
                        compensation for Expenses that were previously charged
                        to tenants;

                                (viii)  The cost of structural repairs and
                        replacements that are Landlord's responsibility pursuant
                        to the terms of this Lease.

                                (ix)    The cost of repairs or other work
                        occasioned by fire, windstorm or other casualty loss in
                        excess of the insurance proceeds therefor, provided that
                        the deductibles under applicable insurance companies
                        shall be chargeable as a Expense so long as Tenant's
                        share of such deductible shall not exceed $5,000 with
                        respect to any single loss.

                                (x)     Amounts paid to an affiliate of Landlord
                        to the extent same is in excess of the reasonable cost
                        of said item or service in an arms length transaction.

                                (xi)    Except as otherwise provided herein, the
                        cost of items required to be capitalized under commonly
                        accepted accounting principles, provided that where the
                        cost of an item would be chargeable as an Expense if
                        rented (e.g.,

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                        maintenance equipment), the amortized cost of such item
                        when purchased shall be chargeable as an Expense.

                                (xii)   The cost of remediating or defending
                        against claims in regard to the existence or release of
                        hazardous substances or materials in the Premises or
                        Project existing as of the Commencement Date or
                        introduced thereafter by Landlord.

                2)      ANNUAL ESTIMATE OF EXPENSES, TENANT'S SHARE. When Tenant
                takes possession of the Premises, Landlord shall estimate
                Tenant's share of Expenses for the remainder of the calendar
                year, and at the commencement of each calendar year thereafter,
                Landlord shall estimate Tenant's Share of Expenses for the
                coming year by multiplying the estimated annual Project Expenses
                by Tenant's Share.

                3)      MONTHLY PAYMENT OF EXPENSES. Tenant shall pay to
                Landlord, monthly in advance, as Additional Rent, one-twelfth
                (1/12) of the Annual Estimate of Tenant's Share of Expenses
                beginning on the date Tenant takes possession of the Premises.
                As soon as practical following each calendar year, Landlord
                shall prepare an accounting of actual Expenses incurred during
                the prior calendar year and such accounting shall reflect
                Tenant's Share of Expenses. If the Additional Rent paid by
                Tenant under this Section 4.c.3 during the preceding calendar
                year was less than the actual amount of Tenant's Share of
                Expenses, Landlord shall so notify Tenant and Tenant shall pay
                such amount to Landlord within 30 days of receipt of such
                notice. Such amount shall be deemed to have accrued during the
                prior calendar year and shall be due and payable from Tenant
                even though the term of this Lease has expired or this Lease has
                been terminated prior to Tenant's receipt of this notice. Tenant
                shall have thirty (30) days from receipt of such notice to
                contest the amount due, failure to so notify Landlord shall
                represent final determination of Tenant's Share of Expenses. If
                Tenant's payments were greater than the actual amount, then such
                overpayment shall be credited by Landlord to Tenant's Share of
                Expenses due under this Section 4.c.3.

                Tenant or its accountants shall have the right to inspect and
                audit Landlord's books and records with respect to this Lease
                once each calendar to verify actual Expenses for the prior
                calendar year. Tenant may not use a property manager or
                developer (or an affiliate of a property manager or developer)
                to conduct such an audit. The books and records shall be kept in
                accord with generally accepted accounting principles. If
                Tenant's audit of the Expenses reveals an overcharge of more
                than three percent (3%), Landlord promptly shall reimburse
                Tenant for the out-of-pocket cost of the audit paid to
                third-party auditors. Any overcharge or underpayment of Expenses
                shall be due from one party to the other within thirty (30) days
                after the amount of the overcharge or underpayment has been
                fixed.

                4)      RENT WITHOUT OFFSET AND LATE CHARGE. As used herein,
                "Rent" shall mean all monetary sums due from Tenant to Landlord.
                All Base Monthly Rent shall be paid by Tenant to Landlord
                without prior notice or demand in advance on the first day of
                every calendar month, at the address shown in Section 1, or such
                other place as landlord may designate in writing from time to
                time. Whether or not so designated, all other sums due from
                Tenant under this Lease shall constitute Additional Rent,
                payable without prior notice or demand when specified in this
                Lease, but if not specified, then within ten (10) days of
                demand. All Rent shall be paid without any deduction or offset
                whatsoever. All

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                Rent shall be paid in lawful currency of the United States of
                America. Proration of Rent due for any partial month shall be
                calculated by dividing the number of days in the month for which
                Rent is due by the actual number of days in that month and
                multiplying by the applicable monthly rate. Tenant acknowledges
                that late payment by Tenant to Landlord of any Rent or other
                sums due under this Lease will cause Landlord to incur costs not
                contemplated by this Lease, the exact amount of such cost being
                extremely difficult and impracticable to ascertain. Such costs
                include, without limitation, processing and accounting charges
                and late charges that may be imposed on Landlord by the terms of
                any encumbrance or note secured by the Premises. Therefore, if
                any Rent or other sum due from Tenant is not received within
                five (5) days of the date due, Tenant shall pay to Landlord an
                additional sum equal to 5% of such overdue payment. Landlord and
                Tenant hereby agree that such late charge represents a fair and
                reasonable estimate of the costs that Landlord will incur by
                reason of any such late payment and that the late charge is in
                addition to any and all remedies available to the Landlord and
                that the assessment and/or collection of the late charge shall
                not be deemed a waiver of any other default. Additionally, all
                such delinquent Rent or other sums, plus this late charge, shall
                bear interest at the rate of 18 percent per annum. If the
                interest rate specified in this Lease is higher than the rate
                permitted by law, the interest rate is hereby decreased to the
                maximum legal interest rate permitted by law. Any payments of
                any kind returned for insufficient funds will be subject to an
                additional handling charge of $25.00, and thereafter, Landlord
                may require Tenant to pay all future payments of Rent or other
                sums due by money order or cashier's check.

5.      [INTENTIONALLY OMITTED.]

6.      DEPOSIT. Upon commencement of this Lease, Tenant shall deposit a
        security deposit as set forth in Section l.k with Landlord. If Tenant is
        in default, Landlord, after notice to Tenant, can use the security
        deposit or any portion of it to cure the default or to compensate
        Landlord for any damages sustained by Landlord resulting from Tenant's
        default. Upon demand, Tenant shall immediately pay to Landlord a sum
        equal to the portion of the security deposit expended or applied by
        Landlord to restore the security deposit to its full amount. In no event
        will Tenant have the right to apply any part of the security deposit to
        any Rent or other sums due under this Lease. If Tenant is not in default
        at the expiration of termination of this Lease, Landlord shall return
        the security deposit to Tenant. Landlord's obligations with respect to
        the deposit are those of a debtor and not of a trustee, and Landlord can
        commingle the security deposit with Landlord's general funds. Landlord
        shall not be required to pay Tenant interest on the deposit. Landlord
        shall be entitled to immediately endorse and cash Tenant's prepaid
        deposit; however, such endorsement and cashing shall not constitute
        Landlord's acceptance of this Lease. In the event Landlord does not
        accept this Lease, Landlord shall return said prepaid deposit.

7.      USE OF PREMISES AND PROJECT FACILITIES. Tenant shall use the Premises
        solely for the purposes set forth in Section 1 and for no other purpose
        without obtaining the prior written consent of Landlord. Tenant
        acknowledges that neither Landlord nor any agent of Landlord has made
        any representation or warranty with respect to the Premises or with
        respect to the suitability of the Premises or the Project for the
        conduct of Tenant's business, nor has Landlord agreed to undertake any
        modification, alteration or improvement to the Premises or the Project,
        except as provided in writing in this Lease. Tenant acknowledges that
        Landlord may from time to time, at its sole discretion, make such
        modifications, alterations, deletions or improvements to the Project as
        Landlord may deem necessary or desirable, without compensation or notice
        to Tenant. Tenant shall promptly comply with all laws, ordinances,
        orders and regulations affecting

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        the Premises and the Project, including, without limitation, any rules
        and regulations that may be attached to this Lease and to any reasonable
        modifications to these rules and regulations as Landlord may adopt from
        time to time. Tenant acknowledges that, except for Landlord's
        obligations pursuant to Section 13, Tenant is solely responsible for
        ensuring that the Premises comply with any and all governmental
        regulations applicable to Tenant's conduct of business on the Premises,
        and that Tenant is solely responsible for any alterations or
        improvements that may be required by such regulations, now existing or
        hereafter adopted. Tenant shall not do or permit anything to be done in
        or about the Premises or bring or keep anything in the Premises that
        will in any way increase the premiums paid by Landlord on its insurance
        related to the Project or which will in any way increase the premiums
        for fire or casualty insurance carried by other tenants in the Project.
        Tenant will not perform any act or carry on any practices that injure
        the Premises or the Project; that are a nuisance or menace to other
        tenants in the Project; or that shall in any way interfere with the
        quiet enjoyment of such other tenants. Tenant shall not use the Premises
        for sleeping, washing clothes, or the preparation, manufacture or mixing
        of anything that emits any objectionable strong odor, noises, vibrations
        or lights onto such other tenants. If sound insulation is required to
        muffle noise produced by Tenant on the Premises, Tenant at its own cost
        shall provide all necessary insulation. Tenant shall not do anything on
        the premises which will overload any existing parking or service to the
        Premises. Pets and/or animals of any type shall not be kept on the
        Premises.

8.      EMISSIONS; STORAGE, USE AND DISPOSAL OF WASTE.

        a.      EMISSIONS. Tenant shall not violate any Environmental Law
                concerning emissions. Specifically, but not by way of
                limitation, Tenant shall not:

                (1)     Violate any Environmental Law regarding vehicle
        emissions;

                (2)     Discharge, emit or permit to be discharged or emitted,
        in violation of any Environmental Law, any liquid, solid or gaseous
        matter, or any combination thereof, into the atmosphere, the ground or
        any body of water;

                (3)     Produce, or permit to be produced, in violation of any
        Environmental Law, any intense glare, light or heat;

                (4)     Create, or permit to be created, in violation of any
        Environmental Law, any sound pressure level which will interfere with
        the quiet enjoyment of any real property outside the Property, or which
        will create a nuisance or violate any governmental law, rule, regulation
        or requirement;

                (5)     Create, or permit to be created, in violation of any
        Environmental Law, any ground vibration that is discernible outside the
        Property; or

                (6)     Transmit, receive or permit to be transmitted or
        received, in violation of any Environmental Law, any electromagnetic,
        microwave or other radiation.

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        b.     STORAGE AND USE

               (1)    STORAGE

               Subject to the uses permitted and prohibited to Tenant under this
        Lease, Tenant shall comply with all Environmental Laws concerning
        storage of hazardous or toxic substances or wastes. Specifically, but
        not by way of limitation, where required by Environmental Laws, Tenant
        shall store in appropriate leak-proof containers all solid, liquid or
        gaseous matter, or any combination thereof, which matter, if discharged
        or emitted into the atmosphere, the ground or any body of water, does or
        may violate any Environmental Law.

               (2)    USE

               In addition, Tenant shall not use, store or permit to remain on
        the Property any solid, liquid or gaseous matter which is, or may
        become, radioactive except in compliance with Environmental Laws.

               (3)    DISPOSAL OF WASTE

                      a.     Refuse Disposal

                      Tenant shall not keep any trash, garbage, waste or other
        refuse on the Property except in sanitary containers and shall regularly
        and frequently remove same from the Property. Tenant shall keep all
        incinerators, containers or other equipment used for storage or disposal
        of such materials in a clean and sanitary condition.

                      b.     Sewage Disposal

                      Tenant shall properly dispose of all sanitary sewage and
        shall not use the sewage disposal system (a) for the disposal of
        anything except sanitary sewage and industrial wastewater or (b) for
        disposal of materials in excess of the lesser of the amount (i)
        reasonably contemplated by the uses permitted under this Lease or (ii)
        permitted by any governmental entity. Tenant shall keep the sewage
        disposal system free of all obstructions and in good operating
        condition.

                      c.     Disposal of Other Waste

                      Tenant shall properly dispose of all other waste or other
        matter delivered to, stored upon, located upon or within, used on or
        removed from the Property in compliance with Environmental Laws.

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        c.      INFORMATION. Upon request, but no more frequently than
        quarterly, Tenant shall provide Landlord with copies of all reports
        regarding hazardous or toxic materials in the Property that Tenant has
        provided to any governmental agency in the previous quarter. In the
        event of any accident, spill or other incident involving hazardous or
        toxic matter that Tenant is required to report to any governmental
        agency, Tenant shall report the same to Landlord as promptly as is
        practicable under the circumstances and supply Landlord with copies of
        all information and reports provided to any governmental agency. All
        information described herein shall be provided to Landlord regardless of
        any claim by Tenant that it is confidential or privileged, provided that
        Landlord shall not publish or disclose the information to any third
        party.

        d.      To the best of Landlord's actual knowledge, no hazardous wastes
        or hazardous substances, as defined in applicable federal, state and/or
        local statutes or regulations are or have been in the past generated,
        treated, stored or discharged on or at the Premises or Project except in
        accordance with applicable laws; and

        Landlord will not in the future generate, treat, store or discharge such
        hazardous wastes or substances on or at the Premises or Project except
        in accordance with applicable laws. Landlord will not knowingly allow
        another tenant or Landlord's contractors to generate, treat, store or
        discharge hazardous wastes or hazardous substances on or at the Premises
        or Building except in accordance with applicable laws.

        e.      INDEMNIFICATION. Landlord and Tenant shall each defend,
        indemnify and hold the other harmless from any loss, claim, liability or
        expense, including attorneys' fees and costs, arising out of or in
        connection with its failure to observe or comply with the provisions of
        this Section 8.

9.      SIGNAGE. All signing shall comply with reasonable rules and regulations
        set forth by Landlord as may be modified from time to time. Current
        rules and regulations relating to signs are described on Exhibit C.
        Tenant shall place no window covering (e.g., shades, blinds, curtains,
        drapes, screens, or tinting materials), stickers, signs, lettering,
        banners or advertising or display material on or near exterior windows
        or doors if such materials are visible from the exterior of the
        Premises, without Landlord's prior written consent. Similarly, Tenant
        may not install any alarm boxes, foil protection tape or other security
        equipment on the Premises without Landlord's prior written consent;
        provided that Tenant may install central station motion detectors,
        vibration sensors and point-of-entry security devices at its own
        expense; Tenant shall remove such devices at the termination of this
        Lease, and Tenant shall repair any damage caused by such removal. Any
        material violating this provision may be destroyed by Landlord without
        compensation to Tenant.

        PERSONAL PROPERTY TAXES. Tenant shall pay before delinquency all taxes,
        assessments, license fees and public charges levied, assessed or imposed
        upon its business operations as well as upon all trade fixtures,
        leasehold improvements, merchandise and other personal property in or
        about the Premises.

11.     PARKING. Landlord grants to Tenant and Tenant's customers, suppliers,
        employees and invitees a non-exclusive license to use the designated
        parking areas in the Project for the use of motor vehicles during the
        term of this Lease. Landlord reserves the right at any time to grant
        similar non-exclusive use to other tenants, to promulgate rules and
        regulations relating to the use of such parking areas, including
        reasonable restrictions on parking by tenants and employees, to
        designate specific spaces for the use of any tenant, to make changes in
        the parking layout from time to time, and to establish reasonable time
        limits on parking. The Project's current parking

                                      -10-
<PAGE>   11
        ratio is 3.23 stalls per 1,000 square feet of rentable area, which shall
        not be reduced below three stalls per 1,000 square feet of rentable area
        except as may be needed to accomplish compliance with changes in
        governmental regulations. Occasional overnight parking of vehicles is
        permitted so long as they are moved at least daily. Any vehicle
        violating this or any other vehicle regulation adopted by Landlord is
        subject to removal at the owner's expense.

12.     UTILITIES. (Strike clause which does not apply).

        a.      OFFICE SPACE. [Intentionally Omitted.]

        b.      INDUSTRIAL SPACE. Tenant shall pay for all water, gas, heat,
                light, power, sewer, electricity, telephone or other service
                metered, chargeable or provided to the Premises and not
                otherwise charged as part of Tenant's Share of Expenses and
                shall be responsible for procuring and paying for janitorial and
                waste disposal services. Landlord reserves the right to install
                separate meters for any such utility.

13.     MAINTENANCE. Landlord shall maintain, in good condition, the structural
        parts of the Premises, which shall include only the foundations, bearing
        and exterior walls (excluding glass), subflooring and roof, the
        unexposed electrical, plumbing and sewerage systems, including those
        portions of the systems lying outside the Premises, gutters and
        downspouts on the Building and the heating, ventilating and air
        conditioning system servicing the Premises; provided, however, the cost
        of all such maintenance shall be considered "Expenses" for purposes of
        Section 4.c. Landlord shall also maintain, as Expenses, in good
        condition, the common areas, elevators, parking areas and landscaping.
        Except as provided above, Tenant shall maintain and repair the Premises
        in good condition, including, without limitation, maintaining and
        repairing all walls, storefronts, floors, ceilings, interior and
        exterior doors, exterior and interior windows and fixtures and interior
        plumbing as well as damage caused by Tenant, its agents, employees or
        invitees. Upon expiration or termination of this Lease, Tenant shall
        surrender the Premises to Landlord in the same condition as existed at
        the commencement of the term, except for reasonable wear and tear or
        damage caused by fire or other casualty that is not otherwise Tenant's
        obligation under this Lease to repair.

14.     ALTERATIONS. Tenant shall not make any alterations to the Premises, or
        to the Project. including any change to the existing landscaping,
        without Landlord's prior written consent. If Landlord gives its consent
        to such alterations, Landlord may post notices in accordance with the
        laws of the state in which the premises are located. Any alterations
        made shall remain on and be surrendered with the Premises upon
        expiration or termination of this Lease, except that Landlord may,
        within 30 days before or 30 days after expiration of the term, elect to
        require Tenant to remove any alterations which Tenant may have made to
        the Premises. If Landlord so elects, at its own cost Tenant shall
        restore the Premises to the condition designated by Landlord in its
        election, before the last day of the term or within 30 days after notice
        of its election is given, whichever is later. At the time Tenant submits
        plans for alterations to Landlord for Landlord's approval, Tenant may
        request that Landlord elect whether such alterations shall be removed at
        the termination of this Lease, and Landlord shall make such election
        simultaneous with its approval of the alterations.

        Should Landlord consent in writing to Tenant's alteration of the
        Premises, Tenant shall contract with a contractor reasonably approved by
        Landlord for the construction of such alterations, shall secure all
        appropriate governmental approvals and permits, and shall complete such
        alterations with due diligence in compliance with plans and
        specifications reasonably approved by

                                      -11-
<PAGE>   12
        Landlord. All such construction shall be performed in a manner which
        will not interfere with the quiet enjoyment of other tenants of the
        Project. Tenant shall pay all costs for such construction and shall keep
        the Premises and the Project free and clear of all mechanics' liens
        which may result from construction by Tenant.

                                      -12-
<PAGE>   13
15.     RELEASE AND INDEMNITY.

        a.      TENANT INDEMNITY. Except as otherwise provided in this section,
                Tenant shall indemnify, defend (using legal counsel reasonably
                acceptable to Landlord) and save Landlord harmless from all
                claims, suits, losses, damages, fines, penalties, liabilities
                and expenses (including Landlord's personnel and overhead costs
                and attorneys fees and other costs incurred in connection with
                claims, regardless of whether such claims involve litigation but
                excluding consequential damages such as lost profits) resulting
                from any actual or alleged injury (including death) of any
                person or from any actual or alleged loss of or damage to, any
                property arising out of or in connection with (i) Tenant's
                occupation, use or improvement of the Premises, or that of its
                employees, agents or contractors, (ii) Tenant's breach of its
                obligations hereunder, or (iii) any act or omission of Tenant or
                any subtenant, licensee, assignee or concessionaire of Tenant,
                or of any officer, agent, employee, guest or invitee of Tenant,
                or of any such entity in the Premises. Tenant agrees that the
                foregoing indemnity specifically covers actions brought by its
                own employees. This indemnity with respect to acts or omissions
                during the term of this Lease shall survive termination or
                expiration of this Lease. The foregoing indemnity is
                specifically and expressly intended to, constitute a waiver of
                Tenant's immunity under Washington's Industrial Insurance Act,
                RCW Title 51, to the extent necessary to provide Landlord with a
                full and complete indemnity from claims made by Tenant and its
                employees, to the extent provided herein. Tenant shall promptly
                notify Landlord of casualties or accidents occurring in or about
                the Premises. LANDLORD AND TENANT ACKNOWLEDGE THAT THE
                INDEMNIFICATION PROVISIONS OF SECTION 8.F AND THIS SECTION 15
                WERE SPECIFICALLY NEGOTIATED AND AGREED UPON BY THEM.

        b.      LANDLORD INDEMNITY. Except as otherwise provided in this Section
                15, Landlord shall indemnify, defend (using legal counsel
                reasonably acceptable to Tenant) and save Tenant harmless from
                all claims, suits, losses, fines, penalties, liabilities and
                expenses (including Tenant's personnel and overhead costs and
                attorneys' fees and other costs incurred in connection with
                claims, regardless of whether such claims involve litigation,
                but excluding consequential damages such as lost profits)
                resulting from any actual or alleged injury (including death) of
                any person or from any actual or alleged loss of or damage to,
                any property arising out of or in connection with any act of
                Landlord on the Common Areas. Landlord agrees that the foregoing
                indemnity specifically covers actions brought by its own
                employees. This indemnity with respect to actions or omissions
                during the term of this Lease shall survive termination or
                expiration of this Lease. The foregoing indemnity is
                specifically and expressly intended to constitute a waiver of
                Landlord's immunity under Washington's Industrial Insurance Act,
                RCW Title 51, to the extent necessary to provide Tenant with a
                full and complete indemnity from claims made by Landlord and its
                employees to the extent of their negligence. LANDLORD AND TENANT
                ACKNOWLEDGE THAT THE INDEMNIFICATION PROVISIONS OF SECTION 15
                WERE SPECIFICALLY NEGOTIATED AND AGREED UPON BY THEM.

        c.      RELEASE. Notwithstanding any other provision of this Lease,
                Tenant hereby fully and completely waives and releases all
                claims against Landlord for any losses or other damages
                sustained by Tenant or any person claiming through Tenant
                resulting from any accident or occurrence in or upon the
                Premises, including but not limited to: any defect in or failure
                of Project equipment; any failure to make repairs; any defect,
                failure, surge

                                      -13-
<PAGE>   14
                in, or interruption of Project facilities or services; any
                defect in or failure of Common Areas; broken glass; water
                leakage; the collapse of any Building component; or any act,
                omission or negligence of co-tenants, licensees or any other
                persons or occupants of the Building, provided only that the
                release contained in this Section 15.c shall not apply to claims
                for actual damage to persons or property (excluding
                consequential damages such as lost profits) resulting directly
                from Landlord's gross negligence or breach of its express
                obligations under this Lease which Landlord has not cured within
                a reasonable time after receipt of written notice of such breach
                from Tenant. This release shall not apply to items for which
                Landlord has given an express indemnity.

        d.      LIMITATION ON INDEMNITY. In compliance with RCW 4.24.115 as in
                effect on the date of this Lease, all provisions of this Lease
                pursuant to which Landlord or Tenant (the "Indemnitor") agrees
                to indemnify the other (the "Indemnitee") against liability for
                damages arising out of bodily injury to Persons or damage to
                property relative to the construction, alteration, repair,
                addition to, subtraction from, improvement to, or maintenance
                of, any building, road, or other structure, project,
                development, or improvement attached to real estate, including
                the Premises, (i) shall not apply to damages caused by or
                resulting from the sole negligence of the Indemnitee, its agents
                or employees, and (ii) to the extent caused by or resulting from
                the concurrent negligence of (a) the Indemnitee or the
                Indemnitee's agents or employees, and (b) the Indemnitor or the
                Indemnitor's agents or employees, shall apply only to the extent
                of the Indemnitor's negligence; PROVIDED, HOWEVER, the
                limitations on indemnity set forth in this Section shall
                automatically and without further act by either Landlord or
                Tenant be deemed amended so as to remove any of the restrictions
                contained in this Section no longer required by then applicable
                law.

        e.      DEFINITIONS. As used in any Section establishing indemnity or
                release of Landlord, "Landlord" shall include Landlord, its
                partners, officers, employees and management agent for the
                Property, and "Tenant" shall include Tenant and any person or
                entity claiming through Tenant.

16.     INSURANCE. Tenant, at its cost, shall maintain public liability and
        property damage insurance and products liability insurance with a single
        combined liability limit of $1,000,000, insuring against all liability
        of Tenant and its representatives, employees, invitees, and agents
        arising out of or in connection with Tenant's use or occupancy of the
        Premises. Public liability insurance, products liability insurance and
        property damage insurance shall insure performance by Tenant of the
        indemnity provisions of Section 15. Landlord shall be named as
        additional insured and the policy shall contain cross-liability
        endorsements. On all its personal property, at its cost, Tenant shall
        maintain a policy of standard fire and extended coverage insurance with
        vandalism and malicious mischief endorsements and "all risk" coverage on
        all Tenant's improvements and alterations, including without limitation,
        all items of Tenant responsibility described in Section 13 in or about
        the Premises, to the extent of at least 90% of their full replacement
        value. The proceeds from any such policy shall be used by Tenant for the
        replacement of personal property and the restoration of Tenant's
        improvements or alterations. All insurance required to be provided by
        Tenant under this Lease: (a) shall be issued by Insurance companies
        authorized to do business in the state in which the premises are located
        with a financial rating of at least an A-IX status as rated in the most
        recent edition of Best's Insurance Reports; (b) shall be issued as a
        primary policy, and "premises and operations" insurance shall be
        on an occurrence basis; and (c) shall contain an endorsement requiring
        at least 30 days prior written notice of cancellation to Landlord and
        Landlord's lender, before cancellation or change in coverage, scope or
        amount of

                                      -14-
<PAGE>   15
        any policy. Tenant shall deliver a certificate or copy of such policy
        together with evidence of payment of all current premiums to Landlord at
        least thirty (30) days before the Commencement Date. If Tenant fails at
        any time to maintain the insurance required by this Lease, and fails to
        cure such default within five (5) business days of written notice from
        Landlord then, in addition to all other remedies available under this
        Lease and applicable law, Landlord may purchase such insurance on
        Tenant's behalf and the cost of such insurance shall be Additional Rent
        due within ten (10) days of written invoice from Landlord to Tenant.

        Landlord and Tenant release and relieve the other, and waive their
        entire right of recovery for loss or damage to property located within
        or constituting a part or all of the Premises or the Project to the
        extent that the loss or damage is covered by (a) the injured company's
        insurance, or (b) the insurance the injured party is required to carry
        under this Article 16, whichever is greater. This waiver applies whether
        or not the loss is due to the negligent acts or omissions of Landlord or
        Tenant, or their respective officers, directors, employees, agents,
        contractors, or invitees. Each of Landlord and Tenant shall have their
        respective property insurers endorse the applicable insurance policies
        to reflect the foregoing waiver of claims, provided however, that the
        endorsement shall not be required if the applicable policy of insurance
        permits the named insured to waive rights of subrogation on a blanket
        basis, in which case the blanket waiver shall be acceptable.

17.     DESTRUCTION. If during the term, the Premises or Project are destroyed
        from any cause, or rendered inaccessible or unusable from any cause such
        that in Landlord's reasonable estimation the Premises cannot be restored
        within 120 days following such destruction, then Landlord shall notify
        Tenant and either party may terminate this Lease by delivery of notice
        to the other within 30 days of receipt of Landlord's notice. If neither
        Landlord nor Tenant terminates this Lease as provided above, then
        Landlord shall commence to restore the Premises in compliance with then
        existing laws and shall complete such restoration with due diligence. In
        such event, this Lease shall remain in full force and effect, but there
        shall be an abatement of Base Monthly Rent and Tenant's Share of
        Expenses between the date of destruction and the date of completion of
        restoration, based on the extent to which destruction interferes with
        Tenant's use of the Premises.

18.     CONDEMNATION.

        a.      TAKING. If all of the Premises are taken by Eminent Domain, this
                Lease shall terminate as of the date Tenant is required to
                vacate the Premises and all Base and Additional Rent shall be
                paid to that date. The term "Eminent Domain" shall include the
                taking or damaging of property by, through or under any
                governmental or statutory authority, and any purchase or
                acquisition in lieu thereof, whether the damaging or taking is
                by government or any other person. If, in the reasonable
                judgment of Landlord, a taking of any part of the Premises by
                Eminent Domain renders the remainder thereof unusable for the
                business of Tenant (or the cost of restoration of the Premises
                is not commercially reasonable), the Lease may, at the option of
                either party, be terminated by written notice given to the other
                party not more than thirty (30) days after Landlord gives Tenant
                written notice of the taking, and such termination shall be
                effective as of the date when Tenant is required to vacate the
                portion of the Premises so taken. If this Lease is so
                terminated, all Base and Additional Rent shall be paid to the
                date of termination. Whenever any portion of the Premises is
                taken by Eminent Domain and this Lease is not terminated,
                Landlord shall at its expense proceed with all reasonable
                dispatch to restore, to the extent of available proceeds and to
                the extent it is reasonably prudent to do so, the remainder of
                the Premises to the condition they were in immediately prior to
                such taking,

                                      -15-
<PAGE>   16
                and Tenant shall at its expense proceed with all reasonable
                dispatch to restore its personal property and all improvements
                made by it to the Premises to the same condition they were in
                immediately prior to such taking. The Base and Additional Rent
                payable hereunder shall be reduced from the date Tenant is
                required to partially vacate the Premises in the same proportion
                that the Rentable Area taken bears to the total Rentable Area of
                the Premises prior to taking.

        b.      AWARD. Landlord reserves all right to the entire damage award or
                payment for any taking by Eminent Domain, and Tenant waives all
                claim whatsoever against Landlord for damages for termination of
                its leasehold interest in the Premises or for interference with
                its business. Tenant hereby grants and assigns to Landlord any
                right Tenant may now have or hereafter acquire to such damages
                and agrees to execute and deliver such further instruments of
                assignment as Landlord may from time to time request. Tenant
                shall, however, have the right to claim from the condemning
                authority all compensation that may be recoverable by Tenant on
                account of any loss incurred by Tenant in moving Tenant's
                merchandise, furniture, trade fixtures and equipment, provided,
                however, that Tenant may claim such damages only if they are
                awarded separately in the eminent domain proceeding and not out
                of or as part of Landlord's damages.

19.     ASSIGNMENT OR SUBLEASE. Tenant shall not assign or encumber its interest
        in this Lease or the Premises or sublease all or any part of the
        Premises or allow any other person or entity (except Tenant's authorized
        representatives, employees, invitees, or guests) to occupy or use all or
        any part of the Premises without first obtaining Landlord's consent
        which Landlord shall not unreasonably withhold for tenants meeting
        Landlord's then existing generally applied standards for
        creditworthiness and use. Any assignment, encumbrance or sublease
        without Landlord's written consent shall be voidable and at Landlord's
        election, shall constitute a default. If Tenant is a partnership, a
        withdrawal or change, voluntary, involuntary or by operation of law of
        any partner, or the dissolution of the partnership, shall be deemed a
        voluntary assignment. If Tenant consists of more than one person, a
        purported assignment, voluntary or involuntary or by operation of law
        from one person to the other shall be deemed a voluntary assignment. If
        Tenant is a corporation, any dissolution, merger, consolidation or other
        reorganization of Tenant, or sale or other transfer of a controlling
        percentage of the capital stock of Tenant, or the sale of at least 25%
        of the value of the assets of Tenant shall be deemed a voluntary
        assignment. The phrase "controlling percentage" means ownership of and
        right to vote stock possessing at least 25% of the total combined voting
        power of all classes of Tenant's capital stock issued, outstanding and
        entitled to vote for election of directors. This Section 19 shall not
        apply to corporations the stock of which is traded through an exchange
        or over the counter. All rent received by Tenant from its subtenants in
        excess of the Rent payable by Tenant to Landlord under this Lease shall
        be paid to Landlord, or any sums to be paid by an assignee to Tenant in
        consideration of the assignment of this Lease shall be paid to Landlord.
        If Tenant requests Landlord to consent to a proposed assignment or
        subletting, Tenant shall pay to Landlord, whether or not consent is
        ultimately given, $100 or Landlord's reasonable attorney's fees incurred
        in connection with such request, whichever is greater.

        Anything contained herein to the contrary notwithstanding, Landlord
        hereby consents to (provided that Tenant shall notify Landlord in
        advance of) an assignment of this Lease, or a subletting of all or part
        of the Premises, to (a) the parent of Tenant or to a wholly-owned
        subsidiary of Tenant or of such parent, (b) any corporation into which
        or with which Tenant may be merged or consolidated or (c) any entity to
        which Tenant sells all or substantially of its assets, provided that the
        assignee expressly assumes all of Tenant's obligations hereunder and
        that the

                                      -16-
<PAGE>   17
        net worth of the resulting entity is at least equal to the greater of
        (i) the net worth of Tenant on the date hereof, or (ii) the net worth of
        Tenant immediately prior to such merger, consolidation or sale of
        assets.

        No interest of Tenant in this Lease shall be assignable by involuntary
        assignment through operation of law (including without limitation the
        transfer of this Lease by testacy or intestacy). Each of the following
        acts shall be considered an involuntary assignment: (a) if Tenant is or
        becomes bankrupt or insolvent, mates an assignment for the benefit of
        creditors, or institutes proceedings under the Bankruptcy Act in which
        Tenant is the bankrupt; or if Tenant is a partnership or consists of
        more than one person or entity, if any partner of the partnership or
        other person or entity is or becomes bankrupt or insolvent, or makes an
        assignment for the benefit of creditors; or (b) if a writ of attachment
        or execution is levied on this Lease; or (c) if in any proceeding or
        action to which Tenant is a party, a receiver is appointed with
        authority to take possession of the Premises. An involuntary assignment
        shall constitute a default by Tenant and Landlord shall have the right
        to elect to terminate this Lease, in which case this Lease shall not be
        treated as an asset of Tenant.

20.     DEFAULT. The occurrence of any of the following shall constitute a
        default by Tenant: (a) a failure to pay Rent or other charge when due,
        provided that Landlord shall not exercise any of its rights under this
        Section 20(a) until Landlord has given Tenant notice of such default and
        a cure period of three (3) days from receipt of such notice, and Tenant
        has failed to pay such rent or other charge within such cure period; (b)
        abandonment and vacation of the Premises (failure to occupy and operate
        the Premises for ten consecutive days while in monetary default beyond
        the three (3) day cure period under this Lease shall be conclusively
        deemed an abandonment and vacation); or (c) failure to perform any other
        provision of this Lease, provided that Landlord shall not exercise any
        of its rights under this Section 20(c) until Landlord has given Tenant
        notice of such default and a cure period of thirty (30) days from
        receipt of such notice, and Tenant has failed to cure such default
        within such cure period, provided further that if more than thirty (30)
        days are required to complete such performance, the cure period shall
        not be deemed to have run so long as Tenant commences to cure such
        default within the thirty (30) day period and thereafter diligently
        pursues its completion. The notice required by this Section is intended
        to satisfy any and all notice requirements imposed by law on Landlord
        and is not in addition to any such requirement.

21.     LANDLORD'S REMEDIES. Landlord shall have the following remedies if
        Tenant is in default. (These remedies are not exclusive; they are
        cumulative and in addition to any remedies now or later allowed by law):
        Landlord may terminate Tenant's right to possession of the Premises at
        any time. No act by Landlord other than giving notice to Tenant shall
        terminate this Lease. Acts of maintenance, efforts to relet the
        Premises, or the appointment of a receiver on Landlord's initiative to
        protect Landlord's interest under this Lease shall not constitute a
        termination of Tenant's right to possession. Upon termination of
        Tenant's right to possession, Landlord has the right to recover from
        Tenant: (1) the worth of the unpaid Rent that had been earned at the
        time of termination of Tenant's right to possession; (2) the worth of
        the amount of the unpaid Rent that would have been earned after the date
        of termination of Tenant's right to possession; (3) any other amount,
        including but not limited to, expenses incurred to relet the Premises,
        court, attorney and collection costs, necessary to compensate Landlord
        for all detriment caused by Tenant's default. "The Worth," as used for
        Item (1) in this Paragraph 21 is to be computed by allowing interest at
        the rate of 18 percent per annum. If the interest rate specified in this
        Lease is higher than the rate permitted by law, the interest rate is
        hereby decreased to the maximum legal interest rate permitted by law.
        "The Worth" as used for Item (2) in this Paragraph

                                      -17-
<PAGE>   18
        21 is to be computed by discounting the amount at the discount rate of
        the Federal Reserve Bank of San Francisco at the time of termination of
        Tenant's right of possession.

22.     ENTRY ON PREMISES. Landlord and its authorized representatives shall
        have the right to enter the Premises at all reasonable times and after
        reasonable prior notice to Tenant except in an emergency when no notice
        is required for any of the following purposes: (a) to determine whether
        the Premises are in good condition and whether Tenant is complying with
        its obligations under this Lease; (b) to do any necessary maintenance
        and to make any restoration to the Premises or the Project that Landlord
        has the right or obligation to perform; (c) to post "for sales sign" at
        any time during the term, to post "for rent" or "for lease" signs during
        the last 90 days of the term, or during any period while Tenant is in
        default; (d) to show the Premises to prospective brokers, agents,
        buyers, tenants or persons interested in leasing or purchasing the
        Premises, at any time during the last ninety (90) days of the term; or
        (e) to repair, maintain or improve the Project and to erect scaffolding
        and protective barricades around and about the Premises but not so as to
        prevent entry to the Premises and to do any other act or thing necessary
        for the safety or preservation of the Premises or the Project. Landlord
        shall not be liable in any manner for any inconvenience, disturbance,
        loss of business, or nuisance arising out of Landlord's entry onto the
        Premises as provided in this Section 22. Tenant shall not be entitled to
        an abatement or reduction of Rent if Landlord exercises any rights
        reserved in this Section 22 provided such exercise does not materially
        interfere with Tenant's use of the Premises. Landlord shall conduct his
        activities on the Premises as provided herein in a commercially
        reasonable manner as to limit inconvenience, annoyance or disturbance to
        Tenant to the maximum extent practicable. For each of these purposes,
        Landlord shall at all times have and retain a key with which to unlock
        all the doors in, upon and about the Premises, excluding Tenant's vaults
        and safes. Tenant shall not alter any lock or install a new or
        additional lock or bolt on any door of the Premises without prior
        written consent of Landlord. If Landlord gives its consent, Tenant shall
        furnish Landlord with a key for any such lock.

23.     SUBORDINATION. Without the necessity of any additional document being
        executed by Tenant for the purpose of effecting a subordination, and at
        the election of Landlord or any mortgagee or any beneficiary of a Deed
        of Trust with a lien on the Project or any ground lessor with respect to
        the Project, this Lease shall be subject and subordinate at all times to
        (a) all ground leases or underlying leases which may now exist or
        hereafter be executed affecting the Project, and (b) the lien of any
        mortgage or deed of trust which may now exist or hereafter be executed
        in any amount for which the Project, ground leases or underlying leases,
        or Landlord's interest or estate in any of said items is specified as
        security. In the event that any ground lease or underlying lease
        terminates for any reason or any mortgage or Deed of Trust is foreclosed
        or a conveyance in lieu of foreclosure is made for any reason, Tenant
        shall, notwithstanding any subordination, attorn to and become the
        Tenant of the successor in interest to Landlord, at the option of such
        successor in interest. Tenant covenants and agrees to execute and
        deliver, upon demand by Landlord and in the form requested by Landlord
        any reasonable additional documents evidencing the priority or
        subordination of this Lease with respect to any such ground lease or
        underlying leases or the lien of any such mortgage or Deed of Trust.

        Landlord and Tenant, within ten days from notice from the other, shall
        execute and deliver to the other, in recordable form, certificates
        stating that this Lease is not in default, is unmodified and in full
        force and effect, or in full force and effect as modified, and stating
        the modifications. This certificate should also state the amount of
        current monthly Rent, the dates to which Rent has been paid in advance,
        and the amount of any security deposit and prepaid Rent. Failure to
        deliver this certificate within ten days shall be conclusive that this
        Lease is in full force and effect and has not been modified except as
        may be represented by the party requesting the certificate.

                                      -18-
<PAGE>   19
24.     NOTICE. Any notice, demand or request required hereunder shall be given
        in writing to the party's facsimile number or address set forth in
        Section 1 hereof by any of the following means: (a) personal service;
        (b) electronic communication, whether by telex, telegram or facsimile;
        (c) overnight courier; or (d) registered or certified, first class mail,
        return receipt requested. Such addresses may be changed by notice to the
        other parties given in the same manner as above provided. Any notice,
        demand or request sent pursuant to either subsection (a) or (b) hereof
        shall be deemed received upon such personal service or upon dispatch by
        electronic means with electronic confirmation of receipt. Any notice,
        demand or request sent pursuant to subsection (c) hereof shall be deemed
        received on the business day immediately following deposit with the
        overnight courier and, if sent pursuant to subsection (d), shall be
        deemed received forty-eight (48) hours following deposit in the U.S.
        mail.

25.     WAIVER. No delay or omission in the exercise of any right or remedy by
        Landlord or Tenant shall impair such right or remedy or be construed as
        a waiver. No act or conduct of Landlord, including without limitation,
        acceptance of the keys to the Premises, shall constitute an acceptance
        of the surrender of the Premises by Tenant before the expiration of the
        term. Only written notice from Landlord to Tenant shall constitute
        acceptance of the surrender of the Premises and accomplish termination
        of the Lease. Landlord's consent to or approval of any act by Tenant
        requiring Landlord's consent or approval shall not be deemed to waive or
        reader unnecessary Landlord's consent to or approval of any subsequent
        act by Tenant. Any waiver by Landlord or Tenant of any default must be
        in writing and shall not be a waiver of any other default concerning the
        same or any other provision of the Lease. TENANT SPECIFICALLY
        ACKNOWLEDGES AND AGREES THAT, WHERE TENANT HAS RECEIVED A NOTICE TO CURE
        DEFAULT (WHETHER RENT OR NON-RENT), NO ACCEPTANCE BY LANDLORD OF RENT
        SHALL BE DEEMED A WAIVER OF SUCH NOTICE, AND, INCLUDING BUT WITHOUT
        LIMITATION, NO ACCEPTANCE BY LANDLORD OF PARTIAL RENT SHALL BE DEEMED TO
        WAIVE OR CURE ANY RENT DEFAULT. LANDLORD MAY, IN ITS DISCRETION, AFTER
        RECEIPT OF PARTIAL PAYMENT OF RENT, REFUND SAME AND CONTINUE ANY PENDING
        ACTION TO COLLECT THE FULL AMOUNT DUE, OR MAY MODIFY ITS DEMAND TO THE
        UNPAID PORTION. IN EITHER EVENT THE DEFAULT SHALL BE DEEMED UNCURED
        UNTIL THE FULL AMOUNT IS PAID IN GOOD FUNDS.

26.     SURRENDER OF PREMISES; HOLDING OVER. Upon expiration of the term, Tenant
        shall surrender to Landlord the Premises and all Tenant improvements and
        alterations in good condition, except for ordinary wear and tear and
        alterations Tenant has the right or is obligated to remove under the
        provisions of Section 14 herein and damage by fire or other casualty
        that is not otherwise Tenant's responsibility under this Lease to
        repair. Tenant shall remove all personal property including, without
        limitation, all wallpaper, paneling and other decorative improvements or
        fixtures and shall perform all restoration made necessary by the removal
        of any alterations or Tenant's personal property before the expiration
        of the term, including for example, restoring all wall surfaces to their
        condition prior to the commencement of this Lease. Landlord can elect to
        retain or dispose of in any manner Tenant's personal property not
        removed from the Premises by Tenant prior to the expiration of the term.
        Tenant waives all claims against Landlord for any damage to Tenant
        resulting from Landlord's retention or disposition of Tenant's personal
        property. Tenant shall be liable to Landlord for Landlord's cost for
        storage, removal or disposal of Tenant's personal property.

        If Tenant, with Landlord's consent, remains in possession of the
        Premises after expiration or termination of the term, or after the date
        in any notice given by Landlord to Tenant terminating

                                      -19-
<PAGE>   20
        this Lease, such possession by Tenant shall be deemed to be a
        month-to-month tenancy terminable as provided under Washington law, by
        either party. All provisions of this Lease, except those pertaining to
        term and Rent, shall apply to the month- to-month tenancy. During any
        holdover term, Tenant shall pay Base Monthly Rent in an amount equal to
        125% of Base Monthly Rent for the last full calendar month during the
        regular term plus 100% of Tenant's share of Expenses pursuant to Section
        4.c.3.

27.     LIMITATION OF LIABILITY. In consideration of the benefits accruing
        hereunder, Tenant agrees that, in the event of any actual or alleged
        failure, breach or default of this Lease by Landlord, Landlord's
        liability under this Lease shall be limited to, and Tenant shall look
        only to Landlord interest in the Project and the rents and proceeds
        thereof.

28.     BUILDING PLANNING. [Intentionally omitted.]

29.     MISCELLANEOUS PROVISIONS.

        a.      TIME OF ESSENCE. Time is of the essence of each provision of
                this Lease.

        b.      SUCCESSOR. This Lease shall be binding on and inure to the
                benefit of the parties and their successors, except as provided
                in Section 19 herein.

        c.      LANDLORD'S CONSENT. Any consent required by Landlord under this
                Lease must be granted in writing and may be withheld or
                conditioned by Landlord in its sole and absolute discretion.

        d.      COMMISSIONS. Each party represents that it has not had dealings
                with any real estate broker, finder or other person with respect
                to this Lease in any manner, except for the broker identified in
                Section 1, who shall be compensated by Landlord. Landlord and
                Tenant recognize that it is possible that they may hereafter
                make additional agreements regarding further extension or
                renewal of this Lease or a new lease or leases for all or one or
                more parts of the Premises or other space in the Project for a
                term or terms commencing after the Commencement Date of this
                Lease. Landlord and Tenant recognize that it is also possible
                that they may hereafter modify this Lease to add additional
                space or to substitute space as part of the Premises. If any
                such additional agreements, new leases or modifications to this
                Lease are made, Landlord shall not have any obligation to pay
                any compensation to any real estate broker or to any other third
                person engaged by Tenant to render services to Tenant in
                connection with negotiating such matters, regardless of whether
                under the circumstances such person is or is not regarded by the
                law as an agent of Landlord.

        e.      OTHER CHARGES. If either party commences any litigation against
                the other party or files an appeal of a decision arising out of
                or in connection with the Lease, the prevailing party shall be
                entitled to recover from the other party reasonable attorney's
                fees and costs of suit. If Landlord employs a collection agency
                to recover delinquent charges, Tenant agrees to pay all
                collection agency and attorneys' fees charged to Landlord in
                addition to Rent, late charges, interest and other sums payable
                under this Lease. Tenant shall pay a charge of $75 to Landlord
                for preparation of a demand for delinquent Rent.

        f.      FORCE MAJEURE. Landlord shall not be deemed in default hereof
                nor liable for damages arising from its failure to perform its
                duties or obligations hereunder if such is due to

                                      -20-
<PAGE>   21
                causes beyond its reasonable control, including, but not limited
                to, acts of God, acts of civil or military authorities, fires,
                floods, windstorms, earthquakes, strikes or labor disturbances,
                civil commotion, delays in transportation, governmental delays
                or war.

        g.      RULES AND REGULATIONS. Tenant shall faithfully observe and
                comply with the "Rules and Regulations", a copy of which is
                attached hereto as Exhibit E, and all reasonable and
                nondiscriminatory modifications thereof and additions thereto
                from time to time put into effect by Landlord so long as such
                modifications to the Rules and Regulations do not unreasonably
                interfere with Tenant's business operations or diminish Tenant's
                express rights under this Lease. Landlord shall not be
                responsible to Tenant for the violation or non- performance by
                any other tenant or occupant of the building or Project of said
                tenant or occupant's lease or of any of said Rules and
                Regulations.

        h.      LANDLORD'S SUCCESSORS. In the event of a sale or conveyance by
                Landlord of the Project, the same shall operate to release
                Landlord from any liability arising under this Lease after the
                date of such conveyance, and in such event Landlord's successor
                in interest shall be solely responsible for all obligations of
                Landlord arising under this Lease after the date of such
                conveyance.

        i.      INTERPRETATION. This Lease shall be construed and interpreted in
                accordance with the laws of the state in which the premises are
                located. This Lease constitutes the entire agreement between the
                parties with respect to the Premises and the Project, except for
                such guarantees or modifications as may be executed in writing
                by the parties from time to time. When required by the context
                of this Lease, the singular shall include the plural, and the
                masculine shall include the feminine and/or neuter. "Party"
                shall mean Landlord or Tenant. If more than one person or entity
                constitutes Landlord or Tenant, the obligations imposed upon
                that party shall be joint and several. The enforceability,
                invalidity or illegality of any provision shall not render the
                other provisions unenforceable, invalid or illegal.

        j.      CLEAN AIR ACT. Tenant acknowledges that Landlord has not made
                any portion of the Premises or the Building accessible for
                smoking in compliance with WAC 296-62-12000. If Tenant wishes to
                make any portion of the Premises accessible for smoking, Tenant
                shall make all improvements necessary to comply with all
                applicable governmental rules and regulations. Tenant
                acknowledges that the indemnity contained in Section 15 of the
                Lease includes, but is not limited to claims based on the
                presence of tobacco smoke as a result of the activities of
                Tenant, its employees, agents, or guests.

30.     EARLY TERMINATION.

        Tenant shall have a one time right to terminate this Lease effective the
        last day of the 18th month of the Lease Term (the "Early Termination
        Date") by providing Landlord with at least six (6) months prior written
        notice of its intent and by paying, not later than the Early Termination
        Date, an early termination fee of Fourteen Thousand Nine Hundred Dollars
        ($14,900). Upon Tenant's compliance with such requirements, the Lease
        shall terminate on the Early Termination Date as by expiration of its
        term.

31.     OPTION TO RENEW. Tenant is granted the right to extend the term of this
        Lease beyond the expiration date of the initial Lease Term for one (1)
        successive period of eighteen (18) months (the "Extended Term"). Tenant
        shall exercise this right by giving Landlord written notice thereof

                                      -21-
<PAGE>   22
        not less than one hundred eighty (180) days prior to the expiration of
        the initial Lease Tenn. If Tenant has defaulted in its obligations under
        this Lease, and failed to cure such defaults within any applicable cure
        period, then Tenant's right to extend the Lease for the Extended Term
        shall automatically terminate. Tenant's right to extend the Lease for
        the Extended Term is personal to Tenant and may not be exercised by any
        subtenant or assignee of Tenant. Tenant's extension rights shall apply
        to all of the Premises under lease to Tenant at the time. From and after
        the commencement of the Extended Term, all of the terms, covenants, and
        conditions of the Lease shall continue in full force and effect as
        written, except that there shall be no further right to renew, and Base
        Rent for the Extended Term shall be adjusted based upon the increase in
        the Consumer Price Index, all Urban Consumers, for the Seattle/Tacoma
        SMSA, published by the United States Department of Labor, Bureau of
        Labor Statistics ("Index") which last published as of the Commencement
        Date ("Beginning Index"). The corresponding index ("Extension Index")
        which is last published as of the first day of the Extended Term shall
        be used as a comparison in determining the amount of the Base Rent
        Increase. Beginning with the rent due in the first month of the Extended
        Term, the Base Monthly Rent shall be increased to equal the product
        achieved by multiplying the Basic Monthly Rent due with respect to that
        first paying month of the initial term by a fraction, the numerator of
        which is the Extension Index and the denominator of which is the
        Beginning Index, provided that in no event shall the Base Monthly Rent
        for the Extended Term be less than the Base Monthly Rent for the last
        month of the initial term.

                       LANDLORD:      NORTH CREEK ASSOCIATES, a Joint Venture

                             BY:      Metropolitan Life Insurance Company, a New
                                      York Corporation, General Partner

                                      BY:     AEW Real Estate Advisors, L.P., a
                                              Massachusetts limited partnership,
                                              its duly authorized and acting
                                              asset manager

                                      BY:  /s/ [Illegible]
                                         -----------------------------------

                                      ITS: Vice President
                                          ----------------------------------

                             BY:      KOLL NORTH CREEK ASSOCIATES, a California
                                      general partnership, General Partner

                                      -22-
<PAGE>   23
                                      BY:     THE KOLL COMPANY, a California
                                              Corporation
                                              Managing Partner

                                      BY:  /s/ John J. Shephard, Jr.
                                           -------------------------------------
                                           John J. Shephard, Jr.

                                      ITS: Vice President

                         TENANT:      EDEN BIOSCIENCE CORPORATION, a Washington
                                      Corporation

                                      By:  /s/ Jerry L. Butler
                                           -------------------------------------
                                           Jerry L. Butler
                                      Its: President
                                           -------------------------------------

                                      -23-
<PAGE>   24
COMMONWEALTH OF MASSACHUSETTS       )
                                    )
COUNTY OF SUFFOLK                   )

        On April 7, 1997, before me, the undersigned, a Notary Public in and for
said Commonwealth personally appeared /s/ Robert E. Maloney, personally known to
me (or proved to me on the basis of satisfactory evidence ) to be the person who
executed the within instrument as /s/ Vice President, as his/her free act and
deed, of /s/ AEW Real Estate Advisors, Limited Partnership a Massachusetts
Limited Partnership ("AEWLP"), as duly authorized asset manager and advisor to
Metropolitan Life Insurance Company, a Massachusetts corporation, the
corporation therein named, pursuant to its bylaws or a resolution of its board
of directors, said corporation being known to me to be one of the joint ventures
of North Creek Associates, a Joint Venture, the joint venture that executed the
within instrument, and acknowledged to me that AEWLP, executed the within
instrument on behalf of Metropolitan Life Insurance Company as such joint
venturer and that such joint venture executed the same, all as their free act
and deed.

                                     WITNESS my hand and official seal

                                     /s/ Linda M. Kessler
                                     -------------------------------------------

                                     Notary Public in and for said Commonwealth
                                     My Commission Expires May 22, 2003

STATE OF Washington          )
                             )
COUNTY OF King               )

I certify that I know or have satisfactory evidence that the person appearing
before me and making this acknowledgment is the person whose true signature
appears on this document.

On this 1st day of April, 1997, before me personally appeared John J. Shepherd,
Jr. to be known to be a Vice President of The Koll Company, the Corporation that
executed the within and foregoing instrument, and acknowledged the said
instrument to be the free and voluntary act and deed of said Corporation, for
the uses and purposed therein mentioned, and on oath stated that he was
authorized to execute said instrument and that the seal affixed, if any, is the
corporate seal of said Corporation.

WITNESS my hand and seal hereto affixed the day and year first above written.

                                    /s/ Lorna M. Faxon
                                    --------------------------------------------
                                    NOTARY PUBLIC in and for the
                                    State of Washington
                                    residing at Bellevue
                                    My commission expires:  6/2/97

                                      -24-
<PAGE>   25
STATE OF Washington          )
                             )
COUNTY OF King               )

I certify that I know or have satisfactory evidence that the person appearing
before me and making this acknowledgment is the person whose true signature
appears on this document.

On this 31st day of March, 1997, before me personally appeared /s/ Jerry Butler
to be known to be the President of /s/ Eden Bioscience, the Corporation that
executed the within and foregoing instrument, and acknowledged the said
instrument to be the free and voluntary act and deed of said Corporation, for
the uses and purposed therein mentioned, and on oath stated that he/she was
authorized to execute said instrument and that the seal affixed, if any, is the
corporate seal of said Corporation.

WITNESS my hand and seal hereto affixed the day and year first above written.

                                    /s/ Lorna M. Faxon
                                    -----------------------------------------
                                    NOTARY PUBLIC in and for the
                                    State of Washington
                                    residing at Bellevue
                                    My commission expires:  6/2/97

                                      -25-
<PAGE>   26
                                   EXHIBIT A
                                OUTLINE OF FLOOR
                                PLAN OR PREMISES

                                   [DIAGRAM]

<PAGE>   27
                                   EXHIBIT B
                                  THE PROJECT

                                   [DIAGRAM]

                               LEGAL DESCRIPTION

That portion of the west half of the northwest quarter of Section 4, Township
26 North, Range 5 East, W.M., in King County, Washington described as follows:

Commencing at the northwest corner of said subdivision; thence S88 23'59"E
along the north line thereof 571.37 feet to the True Point of Beginning; thence
continuing along said north line 709.35 feet to the west line of the east 40.00
feet of said subdivision; thence S00 39'40"W along said east line 539.02 feet
to a point of curve; thence along said curve to the right, having a radius of
50.00 feet, through a central angle of 90 56'02", an arc distance of 79.35
feet; thence N88 24'18"W 668.14 feet to a point which bears S01 35'42"W from
the True Point of Beginning; thence N01 35'42"E 589.83 feet to the True Point
of Beginning.

<PAGE>   28
                                  "EXHIBIT "C"

                                  SIGN CRITERIA
                         KOLL NORTH CREEK BUSINESS PARK

        The sign criteria has been established for the purpose of maintaining
the overall appearance of Koll North Creek Business Park. It must comply with
the covenants, conditions and restrictions of Koll North Creek Business Park.
Conformation will be strictly enforced. Any sign installed without approval of
the landlord will be brought into conformity at the expense of the Tenant.

                                  REQUIREMENTS

1.      Landlord shall provide the following signage at no cost to Tenant:

        a)      Tenant's name and suite number on all exterior project
                directories and one (l) mailbox.

        b)      Tenant's suite number on front entry glass.

        c)      Tenant's name and suite number on rear transome glass where
                applicable.

Tenant shall be responsible for the construction and installation of building
mounted company signs where applicable.

All signage shall be approved and according to the Landlord's discretion.

                                 SPECIFICATIONS

1.      The Tenant sign order attached provides the sign guidelines. The signs
        will be located on or above the window closest to the front door.

2.      The style, color and size of the individual company's name shall be
        standard and in conformity to the landlord's approval. (See attached
        sign order).

3.      The placement of the sign and attachment to the building will be
        directed by the Landlord. (See attached sign order).

4.      No electrical or audible signs will be permitted.

5.      Except as provided herein, no advertising placecards, banners, pennants,
        names, insignia trademarks or other descriptive material shall be
        affixed or maintained upon the glass panes, exterior walls, landscaped
        areas, street, or parking areas.

                                    DIRECTORY

1.      Each Tenant shall be allowed a space on the building directory sign.

2.      Method of attachment, location, color and size shall be in standard
        conformity and shall be solely up to the Landlord's approval

<PAGE>   29

                                MEZZANINE TENANTS

1.      Each mezzanine Tenant shall be allowed a space on the monument sign
        located at the entrance to the mezzanine stairs.

Please contact:

                             KOLL NORTH CREEK

                             19515 North Creek Parkway
                             Suite 214
                             Bothell, WA 98011
                             (206) 343-7960

                                      -2-
<PAGE>   30
                                    EXHIBIT D
                              (PREMISES CONDITION)

        BLDG/UNIT:  5/All

                             QUANTITY AND/OR SIZE
                             HEIGHT, LENGTH, ETC.

        ITEM:

                 STANDARD IMPROVEMENTS ONLY
        ---------
           XX    STANDARD IMPROVEMENTS PLUS THOSE SHOWN BELOW
        ---------

        PARTITIONS:

        CEILINGS:

        DOORS:

        FLOOR COVERING:

        PLUMBING:

        LIGHTS:

        SWITCHES:

        WALL ELECTRICAL OUTLETS:

        TELEPHONE OUTLETS:

        AIR CONDITIONING OR VENT FAN:

        AIR CONDITIONING HOOK UP:

        WATER HEATER:

        PAINTING:

        OTHER: Tenant accepts space in "as is" condition.

                                      -3-
<PAGE>   31
                                    EXHIBIT E
                             (RULES AND REGULATIONS)

        1.      Except as specifically provided in the Lease to which these
                Rules and Regulations are attached, no sign, placard, picture,
                advertisement, name or notice shall be installed or displayed on
                any part of the outside or inside of the building or Project
                without the prior written consent of Landlord. Landlord shall
                have the right to remove, at Tenant's expense and without
                notice, any sign installed or displayed in violation of this
                rule. All approved signs or lettering on doors and walls shall
                be printed, painted, affixed or inscribed at the expense of
                Tenant by a person approved by Landlord.

        2.      If Landlord objects in writing to any curtains, blinds, shades,
                screens or hanging plants or other similar objects attached to
                or used in connection with any window or door of the Premises,
                or placed on any windowsill, which is visible from the exterior
                of the Premises, Tenant shall immediately discontinue such use.
                Tenant shall not place anything against or near glass partitions
                or doors or windows which may appear unsightly from outside the
                Premises.

        3.      Tenant shall not obstruct any sidewalks, halls, passages, exits,
                entrances, elevators, escalators or stairways of the Project.
                The halls, passages, exits, entrances, shopping malls,
                elevators, escalators and stairways are not open to the general
                public, but are open, subject to reasonable regulations, to
                Tenant's business invitees. Landlord shall in all cases retain
                the right to control and prevent access thereto of all persons
                whose presence in the judgment of Landlord would be prejudicial
                to the safety, character, reputation and interest of the Project
                and its tenants; provided that nothing herein contained shall be
                construed to prevent such access to persons with whom any tenant
                normally deals in the ordinary course of its business, unless
                such persons are engaged in illegal or unlawful activities. No
                tenant and no employee or invitee of any tenant shall go upon
                the roof(s) of the Project.

        4.      The directory of the building or Project will be provided
                exclusively for the display of the name and location of tenants
                only and Landlord reserves the right to exclude any other names
                therefrom.

        5.      Landlord will furnish Tenant, free of charge, with five keys to
                each door lock in the Premises. Landlord may make a reasonable
                charge for any additional keys. Tenant shall not make or have
                made additional keys, and Tenant shall not alter any lock or
                install a new additional lock or bolt on any door of its
                Premises. Tenant, upon the termination of its tenancy, shall
                deliver to Landlord the keys of all doors which have been
                furnished to Tenant, and in the event of loss of any keys so
                furnished, shall pay Landlord therefor.

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

        7.      Tenant shall not place a load upon any floor of the Premises
                which exceeds the load per square foot which such floor was
                designed to carry and which is allowed by law. Landlord shall
                have the right to prescribe the weight, size and position of all
                equipment, materials, furniture or other property brought into
                the building. Heavy objects shall, if

<PAGE>   32
                considered necessary by Landlord, stand on such platforms as
                determined by Landlord to be necessary to properly distribute
                the weight, which platforms shall be provided at Tenant's
                expense. Business machines and mechanical equipment belonging to
                Tenant, which cause noise or vibration that may be transmitted
                to the structure of the building or to any space therein to such
                a degree as to be objectionable to Landlord or to any tenants in
                the building, shall be placed and maintained by Tenant, at
                Tenant's expense, on vibration eliminators or other devices
                sufficient to eliminate noise or vibration. The persons employed
                to move such equipment in or out of the building must be
                acceptable to Landlord. Landlord will not be responsible for
                loss of, or damage to, any such equipment or other property from
                any cause, and all damage done to the building by maintaining or
                moving such equipment or other property shall be repaired at the
                expense of Tenant.

        8.      Tenant shall not use or keep in the Premises any kerosene,
                gasoline or inflammable or combustible fluid or material other
                than those limited quantities necessary for the operation or
                maintenance of office equipment. Tenant shall not use or permit
                to be used in the Premises any foul or noxious gas or substance,
                or permit or allow the Premises to be occupied or used in a
                manner offensive or objectionable to Landlord or other occupants
                of the building by reason of noise, odors or vibrations, nor
                shall Tenant bring into or keep in or about the Premises any
                birds or animals.

        9.      Tenant shall not use any method of heating or air conditioning
                other than that supplied by Landlord.

        10.     Tenant shall not waste electricity, water or air conditioning
                and agrees to cooperate fully with Landlord to assure the most
                effective operation of the building's heating and air
                conditioning and to comply with any governmental energy-saving
                rules, laws or regulations of which Tenant has actual notice,
                and shall refrain from attempting to adjust controls. Tenant
                shall keep corridor doors closed, and shall close window
                coverings at the end of each business day.

        11.     Landlord reserves the right, exercisable without notice and
                without liability to Tenant, to change the name and street
                address of the building.

        12.     Landlord reserves the right to exclude from the building between
                the hours of 6 p.m. and 7 a.m. the following day, or such other
                hours as may be established from time to time by landlord, and
                on Sundays and legal holidays, any person unless that person is
                known to the person or employee in charge of the building and
                has a pass or is property identified. Tenant shall be
                responsible for all persons for whom it requests passes and
                shall be liable to Landlord for all acts of such persons.
                Landlord shall not be liable for damages for any error with
                regard to the admission to or exclusion from the building of any
                person. Landlord reserves the right to prevent access to the
                building in case of invasion, mob, riot, public excitement or
                other commotion by closing the doors or by other appropriate
                action.

        13.     Tenant shall close and lock the doors of its Premises and
                entirely shut off all water faucets or other water apparatus,
                and electricity, gas or air outlets before tenant and its
                employees leave the Premises. Tenant shall be responsible for
                any damage or injuries sustained by other tenants or occupants
                of the building or by Landlord for noncompliance with this rule.

                                      -2-
<PAGE>   33
        14.     Tenant shall not obtain for use on the Premises ices, drinking
                water, food, beverage, towel or other similar services or accept
                barbering or bootblacking service upon the Premises, except at
                such hours and under such regulations as may be fixed by
                Landlord.

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

        16.     Tenant shall not sell, or permit the sale at retail of
                newspapers, magazines, periodicals, theater tickets or any other
                goods or merchandise to the general public in or on the
                Premises. Tenant shall not make any room-to-room solicitation of
                business from other tenants in the Project. Tenant shall not use
                the Premises for any business or activity other than that
                specifically provided for in Tenant's Lease.

        17.     Tenant shall not install any radio or television antenna,
                loudspeaker or other devices on the roof(s) or exterior walls of
                the building or Project. Tenant shall not interfere with radio
                or television broadcasting or reception from or in the Project
                or elsewhere.

        18.     Tenant shall not mark, drive nails, screw or drill into the
                partitions, woodwork or plaster or in any way deface the
                Premises or any part thereof, except in accordance with the
                provisions of the Lease pertaining to alterations. Landlord
                reserves the right to direct electricians as to where and how
                telephone and telegraph wires are to be introduced to the
                Premises. Tenant shall not cut or bore holes for wires. Tenant
                shall not affix any floor covering to the floor of the Premises
                in any manner except as approved by Landlord. Tenant shall
                repair any damage resulting from noncompliance with this rule.

        19.     Tenant shall not install, maintain or operate upon the Premises
                any vending machines without the written consent of Landlord.

        20.     Canvassing, soliciting and distribution of handbills or any
                other written material, and peddling in the Project are
                prohibited, and Tenant shall cooperate to prevent such
                activities.

        21.     Landlord reserves the right to exclude or expel from the Project
                any person who, in Landlord's judgment, is intoxicated or under
                the influence of liquor or drugs or who is in violation of any
                of the Rules and Regulations of the Building.

        22.     Tenant shall store all its trash and garbage within its premises
                or in other facilities provided by Landlord. Tenant shall not
                place in any trash box or receptacle any material which cannot
                be disposed of in the ordinary and customary manner of trash and
                garbage disposal. All garbage and refuse disposal shall be made
                in accordance with directions issued from time to time by
                Landlord.

        23.     The Premise shall not be used for the storage of merchandise
                held for sale to the general public, or for lodging or for
                manufacturing of any kind, nor shall the Premises be used for
                any improper, immoral or objectional purpose. No cooking shall
                be done or permitted on the Premises without landlord's consent,
                except that use by Tenant of Underwriters' Laboratory approved
                equipment for brewing coffee, tea, hot chocolate and

                                      -3-
<PAGE>   34

                similar beverages or use of microwave ovens for employees use
                shall be permitted, provided that such equipment and use is in
                accordance with all applicable, federal, state county and city
                laws, codes, ordinances, rules and regulations.

        24.     Tenant shall not use in any space or in the public halls of the
                Project any hand truck except those equipped with rubber tires
                and side guards or such other material-handling equipment as
                Landlord may approve. Tenant shall not bring any other vehicles
                of any kind into the building or Project.

        25.     Without the written consent of Landlord, Tenant shall not use
                the name of the building or Project in connection with or in
                promoting or advertising the business of Tenant except as
                Tenant's address.

        26.     Tenant shall comply with all safety, fire protection and
                evacuation procedures and regulations established by Landlord or
                any governmental agency.

        27.     Tenant assumes any and all responsibility for protecting its
                Premises from theft, robbery and pilferage, which includes
                keeping doors locked and other means of entry to the Premises
                closed.

        28.     Tenant's requirements will be attended to only upon appropriate
                application to the Project management office by an authorized
                individual. Employees of Landlord shall not perform any work or
                do anything outside of their regular duties unless under special
                instructions from Landlord, and no employee of Landlord will
                admit any person (Tenant or otherwise) to any office without
                specific instructions from Landlord.

        29.     Landlord may waive any one or more of these Rules and
                Regulations for the benefit of Tenant or any other tenant, but
                no such waiver by Landlord shall be construed as a waiver of
                such Rules and Regulations in favor of Tenant or any other
                tenant, nor prevent Landlord from thereafter enforcing any such
                Rules and Regulations against any or all of the tenants of the
                Project.

        30.     These Rules and Regulations are in addition to, and shall not be
                construed to in any way modify or amend, in whole or in part,
                the terms, covenants, agreements and conditions of the Lease.

        31.     Landlord reserves the right to make such other and reasonable
                Rules and Regulations as, in its judgment, may from time to time
                be needed for safety and security, for care and cleanliness of
                the Project and for the preservation of good order therein.
                Tenant agrees to abide by all such Rules and Regulations
                hereinabove stated and any additional Rules and regulations
                which are adopted.

        32.     Tenant shall be responsible for the observance of all of the
                foregoing rules by Tenant's employees, agents, clients,
                customers, invitees and guests.

                                      -4-<PAGE>   1
                                                                    EXHIBIT 10.3

                           EDEN BIOSCIENCE CORPORATION

           1995 COMBINED INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN

                               SECTION 1. PURPOSE

        The purpose of the 1995 Combined Incentive and Nonqualified Stock Option
Plan (the "Plan") is to enable Eden Bioscience Corporation (the "Company") to
attract and retain the services of people with training, experience and ability
and to provide additional incentive to such persons by granting them an
opportunity to participate in the ownership of the Company.

                        SECTION 2. STOCK SUBJECT TO PLAN

        The stock subject to this Plan shall be the Company's Common Stock, par
value $.0025 per share (the "Common Stock"), presently authorized but unissued
or now held or subsequently acquired by the Company as treasury shares. Subject
to adjustment as provided in Section 10, the aggregate amount of Common Stock
reserved for issuance or delivery upon exercise of all options granted under
this Plan shall not exceed 3,250,000 shares of Common Stock, as constituted on
the date of adoption of this Plan by the Board of Directors. If any option
granted under this Plan shall expire or terminate for any reason without having
been exercised in full, the unpurchased shares subject thereto shall thereupon
again be available for purposes of this Plan.

                            SECTION 3. ADMINISTRATION

        The Plan shall be administered by the Board of Directors of the Company,
in accordance with the following terms and conditions:

        3.1 General Authority. Subject to the express provisions of the Plan,
the Board of Directors shall have the authority, in its discretion, to determine
all matters relating to options to be granted under the Plan, including the
selection of individuals to be granted options, the number of shares to be
subject to each option, the exercise price, the term, whether such options shall
be immediately exercisable or shall become exercisable in increments over time,
and all other terms and conditions thereof. Grants under this Plan to persons
eligible need not be identical in any respect, even when made simultaneously.
The Board of Directors may from time to time adopt rules and regulations
relating to the administration of the Plan. The interpretation and construction
by the Board of Directors of any terms or provisions of this Plan or any option
issued hereunder, or of any rule or regulation promulgated in connection
herewith, or of any rule or regulation promulgated in

<PAGE>   2

connection herewith, shall be conclusive and binding on all interested parties.
The Board of Directors in its sole discretion, may grant incentive stock options
("Incentive Stock Options") as such term is defined in Section 422 of the
Internal Revenue Code of 1986, as amended, (the "Code") and/or nonqualified
stock options ("Nonqualified Stock Options"). A Nonqualified Stock Option is a
stock option which is not an Incentive Stock Option. The type of option granted,
whether an Incentive Stock Option or a Nonqualified Stock Option shall be
clearly identified by the Board of Directors when granted. The term option when
used in this Plan refers to Incentive Stock Options and Nonqualified Stock
Options, collectively.

        3.2 Directors. A member of the Board of Directors shall be eligible to
participate in or receive or hold options under this Plan; provided, however,
that no member of the Board of Directors shall vote with respect to the granting
of an option hereunder to himself or herself, as the case may be.

        3.3 Delegation to a Committee. Notwithstanding the foregoing, the Board
of Directors, if it so determines, may delegate to a committee of the Board of
Directors any or all authority for the administration of the Plan, and
thereafter references to the Board of Directors in this Plan shall be deemed to
be references to the committee to the extent provided in the resolution
establishing the committee.

        3.4 Persons Subject to Section 16(b). Notwithstanding anything in the
Plan to the contrary, the of Directors, in its absolute discretion, may
bifurcate the Plan so as to restrict, limit or condition the use of any
provision of the Plan to participants who are officers or directors subject to
Section 16(b) of the Securities Exchange Act of 1934, as amended, (the "1934
Act") without so restricting, limiting or conditioning the Plan with respect to
other participants.

        3.5 Full-Recourse Loans to Optionees. The Board of Directors, in its
absolute discretion, may provide that the Company loan to Optionees sufficient
funds to exercise any option granted under the Plan and/or to pay withholding
tax due upon exercise of such option. The Board of Directors shall have the
authority to make such determinations at the time of grant or exercise and shall
establish repayment terms thereof, including installments, maturity and interest
rate; provided, however, that repayment of any Company loan to the Optionee
shall be secured by delivery of a full-recourse promissory note for the loan
amount executed by the Optionee, together with any other form of security
determined by the Board of Directors. The amount of any full-recourse promissory
note delivered in connection with an Incentive Stock Option shall bear interest
at a rate specified by the Board of Directors but in no case less than the rate
required to avoid imputation of interest (taking into account any

                                      -2-
<PAGE>   3

exceptions to the imputed interest rules) for federal income tax purposes.

                             SECTION 4. ELIGIBILITY

        Options may be granted only to persons who, at the time the option is
granted, are employees or directors of, or consultants or independent
contractors to, the Company or any of its present or future parent or subsidiary
corporations (as those terms are used in Section 422(a)(2) and (d)(1) and
Section 424(e) and (f) of the Code, hereafter a "Parent" or "Subsidiary"). Any
individual to whom an option is granted under this Plan shall be referred to
hereinafter as "Optionee". Any Optionee may receive one or more grants for
options as the Board of Directors as shall from time to time determine, and such
determinations may be different as to different Optionees and may vary as to
different grants. Optionees who are not employees will only be eligible to
receive Nonqualified Stock Options.

                   SECTION 5. TERMS AND CONDITIONS OF OPTIONS

        Options granted under this Plan shall be evidenced by written agreements
which shall contain such terms, conditions, limitations and restrictions as the
Board of Directors shall deem advisable and which are not inconsistent with this
Plan. Each option granted hereunder shall clearly indicate whether it is an
Incentive Stock Option or Nonqualified Stock Option. Notwithstanding the
foregoing, all such options shall include or incorporate by reference the
following terms and conditions:

        5.1 Number of Shares; Price. The maximum number of shares that may be
purchased pursuant to the exercise of each option and the price per share at
which such option is exercisable (the "exercise price") shall be as established
by the Board of Directors, provided that the exercise price of Incentive Stock
Options shall not be less than the fair market value per share of the Common
Stock at the time the option is granted, as determined in good faith by the
Board of Directors. The exercise price of Nonqualified Stock Options may be
greater or less than the fair market value per share of the Common Stock at the
time the option is granted.

        5.2 Duration of Options. Subject to the restrictions contained in
Section 9, the term of each option shall be established by the Board of
Directors and, if not so established, shall be ten years from the date it is
granted, but in no event shall the term of any Incentive Stock Option exceed ten
years.

        5.3 Exercisability. Each option shall prescribe the installments, if
any, in which an option granted under the Plan shall become exercisable. The
Board of Directors, in its absolute discretion, may waive or accelerate any
installment requirement contained in outstanding options. In no case may an
option be exercised

                                      -3-
<PAGE>   4

as to less than 100 shares at any one time (or the remaining shares covered by
the option if less than 100) during the term of the option. Only whole shares
shall be issued pursuant to the exercise of any option.

        5.4 Incentive Stock Option. Any option which is issued as an Incentive
Stock Option under this Plan, shall, notwithstanding any other provisions of
this Plan or the option terms to the contrary, contain all of the terms,
conditions, restrictions, rights and limitations required to be an Incentive
Stock Option, and any provision to the contrary shall be disregarded.

                    SECTION 6. NONTRANSFERABILITY OF OPTIONS

        Options granted under this Plan and the rights and privileges conferred
hereby may not be transferred, assigned, pledged or hypothecated in any manner
(whether by operation of law or otherwise) other than by will or the applicable
laws of descent and distribution, and shall not be subject to execution,
attachment or similar process. Upon any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of any option under this Plan or any right or
privilege conferred hereby, contrary to the provisions hereof, or upon the sale
or levy or any attachment or similar process, such option thereupon shall
terminate and become null and void. During an Optionee's lifetime, any options
granted under this Plan are personal to him or her and are exercisable solely by
such Optionee. Notwithstanding the foregoing, and to the extent permitted by
Section 422 of the Code, the Board of Directors, in its sole discretion, may
permit such transfer, assignment and exercisability and may permit an Optionee
to designate a beneficiary who may exercise the option after the Optionee's
death; provided, however, that any option so transferred or assigned shall be
subject to all the same terms and conditions contained in the instrument
evidencing the option.

        SECTION 7. CERTAIN LIMITATIONS REGARDING INCENTIVE STOCK OPTIONS

        The grant of Incentive Stock Options shall be subject to the following
special limitations:

        7.1 Limitation on Amount of Grants. In no event shall any Optionee be
granted Incentive Stock Options that in the aggregate (together with all other
Incentive Stock Options granted by the Company or any Parents or Subsidiaries)
entitle the Optionee to purchase, in any calendar year during which such options
first become exercisable, stock of the Company, any Parent or any Subsidiary
having a fair market value (determined as of the time such options are granted)
in excess of $100,000. No limitation shall apply to Nonqualified Stock Options.

                                      -4-
<PAGE>   5

        7.2 Grants to 10% Shareholders. Incentive Stock Options may be granted
to a person owning more than 10% of the total combined voting power of all
classes of stock of the Company and any Parent or Subsidiary only if (i) the
exercise price is at least 110% of the fair market value of the stock at the
time of grant, and (ii) the option is not exercisable after the expiration of
five years from the date of grant.

                         SECTION 8. EXERCISE OF OPTIONS

        Options shall be exercised in accordance with the following terms and
conditions:

        8.1 Procedure. Options shall be exercised by delivery to the Company of
written notice of the number of shares with respect to which the option is
exercised.

        8.2 Payment. Payment of the option price shall be made in full within
three business days of the notice of exercise of the option and shall be in cash
or bank-certified or cashier's checks, or personal check if permitted by the
Board of Directors. To the extent permitted by applicable laws and regulations
(including, but not limited to, federal tax and securities laws and
regulations), an option may be exercised by (a) tendering (either actually or,
if and so long as the Common Stock is registered under Section 12(b) or 12(g) of
the Exchange Act, by attestation) shares of Common Stock already owned by the
Optionee for at least six months (or any shorter period necessary to avoid a
charge to the Company's earnings for financial reporting purposes) having a fair
market value on the day prior to the exercise date equal to the aggregate option
exercise price or (b) if and so long as the Common Stock is registered under
Section 12(b) or 12(g) of the Exchange Act, delivery of a properly executed
exercise notice, together with irrevocable instructions, to (i) a brokerage firm
designated by the Company to deliver promptly to the Company the aggregate
amount of sale or loan proceeds to pay the option exercise price and any
withholding tax obligations that may arise in connection with the exercise and
(ii) the Company to deliver the certificates for such purchased shares directly
to such brokerage firm, all in accordance with the regulations of the Federal
Reserve Board. In addition, the exercise price for shares purchased under an
option may be paid, either singly or in combination with one or more of the
alternative forms of payment authorized by this Section 8.2, by such other
consideration as the Board of Directors may permit.

        8.3 Federal Withholding Tax Requirements. Upon exercise of an option,
the Optionee shall, upon notification of the amount due and prior to or
concurrently with the delivery of the certificates representing the shares, pay
to the Company amounts necessary to satisfy any applicable federal, state and
local withholding tax requirements or shall otherwise make arrangements
satisfactory to the Company for such requirements. Such arrangements may include
payment of the appropriate

                                      -5-
<PAGE>   6

withholding tax in shares of stock of the Company having a fair market value
equal to such withholding tax, either through delivery of shares held by the
Optionee or by reduction in the number of shares to be delivered to the Optionee
upon exercise of such option.

           SECTION 9. TERMINATION OF EMPLOYMENT, DISABILITY AND DEATH

        9.1 General. If the employment of the Optionee by the Company, a Parent
or a Subsidiary shall terminate by retirement or for any reason other than
death, disability or cause as hereinafter provided, the option may be exercised
by the Optionee at any time prior to the expiration of three months after the
date of such termination of employment (unless by its terms the option sooner
terminates or expires), but only if, and to the extent the Optionee was entitled
to exercise the option at the date of such termination.

        9.2 Disability. If the employment of the Optionee by the Company, a
Parent or a Subsidiary is terminated because of the Optionee's disability (as
herein defined), the option may be exercised by the Optionee at any time prior
to the expiration of one year after the date of such termination (unless by its
terms the option sooner terminates or expires), but only if, and to the extent
the Optionee was entitled to exercise the Option at the date of such
termination. For purposes of this section, an Optionee will be considered to be
disabled if the Optionee is unable to engage in any substantial gainful activity
by reason of any medically determinable mental or physical impairment which can
be expected to result in death or which has lasted or can be expected to last a
continuous period of not less than 12 months.

        9.3 Death. In the event of the death of an Optionee while in the employ
of the Company, a Parent or a Subsidiary, the option shall be exercisable on or
prior to the expiration of one year after the date of such death (unless by its
terms the option sooner terminates and expires), but only if and to the extent
the Optionee was entitled to exercise the option at date of such death and only
by the Optionee's personal representative if then subject to administration as
part of the Optionee's estate, or by the person or persons to whom such
Optionee's rights under the option shall have passed by the Optionee's will or
by the applicable laws of descent and distribution.

        9.4 Termination for Cause. If the Optionee's employment with the
Company, a Parent or a Subsidiary is terminated for cause, any option granted
hereunder shall automatically terminate as of the first advice or discussion
thereof, and such Optionee shall thereupon have no right to purchase any shares
pursuant to such option. "Termination for Cause" shall mean dismissal for
dishonesty, conviction or confession of a crime punishable by law (except minor
violations), intoxication while at work,

                                      -6-
<PAGE>   7

fraud, misconduct or disclosure of confidential information.

        9.5 Waiver or Extension of Time Periods. The Board of Directors shall
have the authority, prior to or within the times specified in this Section 9 for
the exercise of any such option, to extend such time period or waive in its
entirety any such time period to the extent that such time period expires prior
to the expiration of the term of such option. In addition, the Board of
Directors may grant, pursuant to a specific resolution adopted at the time of
grant, modify or eliminate the time periods specified in this Section 9.
However, no Incentive Stock Option may be exercised after the expiration of ten
years from the date such option is granted. If an Optionee holding an Incentive
Stock Option exercises such option, by permission, after the expiration of the
time period specified in this Section 9, the option will no longer be treated as
an Incentive Stock Option under the Code and shall automatically be converted
into a Nonqualified Stock Option.

        9.6 Termination of Options. To the extent that the option of any
deceased Optionee or of any Optionee whose employment is terminated shall not
have been exercised within the limited periods prescribed in this Section 9, all
further rights to purchase shares pursuant to such option shall cease and
terminate at the expiration of such period. No Incentive Stock Option may be
exercised after the expiration of ten (10) years from the date such option is
granted, notwithstanding any provision to the contrary.

        9.7 Non-Employee Optionees. Options granted to optionees who are not
employees of the Company, a Parent or a Subsidiary at the time of grant shall
not be subject to the provisions of this Section 9, except as specifically
provided in the option.

                                      -7-
<PAGE>   8

                         SECTION 10. OPTION ADJUSTMENTS

        10.1 Adjustments Upon Changes in Capitalization. The aggregate number
and class of shares on which options may be granted under this Plan, the number
and class of shares covered by each outstanding option and the exercise price
per share thereof (but not the total price), and all such options, shall each be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock of the Company resulting from a split-up or consolidation
of shares or any like capital adjustment, or the payment of any stock dividend,
or any other increase or decrease in the number of shares of Common Stock of the
Company without the receipt of consideration by the Company.

        10.2 Effect of Certain Transactions. Except as provided in subsection
10.3, upon a merger, consolidation, acquisition of property or stock,
reorganization or liquidation of the Company, as a result of which the
shareholders of the Company receive cash, stock or other property in exchange
for their shares of Common Stock, any option granted hereunder shall terminate,
provided that the Optionee shall have the right immediately prior to any such
merger, consolidation, acquisition of property or stock, separation,
reorganization or liquidation to exercise his or her option in whole or in part
whether or not the vesting requirements set forth in the option agreement have
been satisfied.

        10.3 Conversion of Options on Stock for Stock Exchange. If the
shareholders of the Company receive capital stock of another corporation
("Exchange Stock") in exchange for their shares of Common Stock in any
transaction involving a merger, consolidation, acquisition of property or stock
or reorganization, all options granted hereunder shall terminate in accordance
with the provision of subsection 10.2 unless the Board of Directors and the
corporation issuing the Exchange Stock, in their sole discretion and subject to
any required action by the shareholders of the Company and such corporation,
agree that all such options granted hereunder are converted into options to
purchase shares of Exchange Stock. The amount and price of such options shall be
determined by adjusting the amount and price of the options granted hereunder in
the same proportion as used for determining the number of shares of Exchange
Stock the holders of the Common Stock receive in such merger, consolidation,
acquisition of property or stock, separation or reorganization. The vesting
schedule set forth in the option agreement shall continue to apply to the
options granted for the Exchange Stock.

        10.4 Acceleration. Except as otherwise provided in the instrument
evidencing the option, any options that are converted into options to purchase
shares of Exchange Stock shall automatically become 100% vested and exercisable
in the event that an Optionee's employment or service relationship should
terminate in contemplation of or

                                      -8-
<PAGE>   9

within three years after a transaction in which shareholders of the Company
receive Exchange Stock, unless such employment or service relationship is
terminated for Cause (as defined below) or by the Participant voluntarily
without Good Reason (as defined below).

        For purposes of the foregoing, "Cause" means, unless otherwise defined
in an employment or services agreement between the Company and an Optionee,
dishonesty, fraud, misconduct, unauthorized use or disclosure of confidential
information or trade secrets, or conviction or confession of a crime punishable
by law (except minor violations), in each case as determined by the Board of
Directors, and its determination shall be conclusive and binding.

        "Good Reason" means the occurrence of any of the following events or
conditions and the failure of another corporation to a transaction (the
"Successor Corporation") to cure such event or condition within 30 days after
receipt of written notice from the Optionee:

        (a) a change in the Optionee's status, title, position or
responsibilities (including reporting responsibilities) that, in the Optionee's
reasonable judgment, represents a substantial reduction in the status, title,
position or responsibilities as in effect immediately prior thereto; the
assignment to the Optionee of any duties or responsibilities that, in the
Optionee's reasonable judgment, are materially inconsistent with such status,
title, position or responsibilities; or any removal of the Optionee from or
failure to reappoint or reelect the Optionee to any of such positions, except in
connection with the termination of the Optionee's employment for Cause, as a
result of his or her disability or death, or by the Optionee other than for Good
Reason;

        (b) a reduction in the Optionee's annual base salary;

        (c) the Successor Corporation's requiring the Optionee (without the
Optionee's consent) to be based at any place outside a 50-mile radius of his or
her place of employment prior to a transaction, except for reasonably required
travel on the Successor Corporation's business that is not materially greater
than such travel requirements prior to the transaction;

        (d) the Successor Corporation's failure to (i) continue in effect any
material compensation or benefit plan (or the substantial equivalent thereof) in
which the Optionee was participating at the time of a transaction, including,
but not limited to, the Plan, or (ii) provide the Optionee with compensation and
benefits substantially

                                      -9-
<PAGE>   10

equivalent (in terms of benefit levels and/or reward opportunities) to those
provided for under each material employee benefit plan, program and practice as
in effect immediately prior to the transaction;

        (e) any material breach by the Successor Corporation of its obligations
to the Optionee under the Plan or any substantially equivalent plan of the
Successor Corporation; or

        (f) any purported termination of the Optionee's employment or service
relationship for Cause by the Successor Corporation that is not in accordance
with the definition of Cause under the Plan.

        10.5 Fractional Shares. In the event of any adjustment in the number of
shares covered by any option, any fractional shares resulting from such
adjustment shall be disregarded and each such option shall cover only the number
of full shares resulting from such adjustment.

        10.6 Determination of Board f Directors to be Final. All such
adjustments shall be made by the Board of Directors and its determination as to
what adjustments shall be made, and the extent thereof, shall be final, binding
and conclusive.

                       SECTION 11. SECURITIES REGULATIONS

        11.1 Compliance. Shares shall not be issued with respect to an option
granted under this Plan unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, any applicable state
securities laws, the Securities Act of 1933, as amended, the 1934 Act, the rules
and regulations promulgated thereunder, and the requirements of any stock
exchange upon which the shares may then be listed, and shall further be subject
to the approval of counsel for the company with respect to such compliance.
Inability of the Company to obtain from any regulatory body having jurisdiction,
the authority deemed by the Company's counsel to be necessary for the lawful
issuance and sale of any shares hereunder, shall relieve the Company of any
liability in respect of the nonissuance or sale of such shares as to which such
requisite authority shall not have been obtained.

        11.2 Representations by Optionee. As a condition to the exercise of an
option, the Company may require the Optionee to represent and warrant at the
time of any such exercise that the shares are being purchased only for
investment and without any present intention to sell or distribute such shares,
if, in the opinion of counsel for the Company, such representation is required
by any relevant provision of the laws referred to in Section 11.1. At the option
of the Company, a stop transfer order

                                      -10-
<PAGE>   11

against any records of the Company, and a legend indicating that the stock may
not be pledged, sold or otherwise transferred unless an opinion of counsel was
provided (concurred in by counsel for the Company) stating that such transfer is
not in violation of any applicable law or regulation, may be stamped on the
stock certificate in order to assure exemption from registration. The Board of
Directors may also require such other action or agreement by the Optionees as
may from time to time be necessary to comply with the federal and state
securities laws. This provision shall not obligate the Company to undertake
registration of options or stock hereunder.

                          SECTION 12. EMPLOYMENT RIGHTS

        Nothing in this Plan or any option or right granted pursuant hereto
shall confer upon any Optionee any right to be continued in the employment of
the Company, a Parent or any Subsidiary of the Company or to remain a director,
or to interfere in any way with the right of the Company, a Parent or any
Subsidiary, in its sole discretion, to terminate such Optionee's employment at
any time or to remove the Optionee as a director at any time.

                      SECTION 13. AMENDMENT AND TERMINATION

        13.1 Action by Shareholders. The Plan may be terminated, modified or
amended by the shareholders of the Company.

        13.2 Action by Board of Directors. The Board of Directors may also
terminate the Plan, or modify or amend the Plan in such respects as it shall
deem advisable in order to conform to any changes in law or regulation
applicable thereto, or in other respects; provided, however, that the Board of
Directors may not, without further approval by the shareholders of the Company:

               (i)       Change the number of shares in the aggregate which may
be sold pursuant to options granted under the Plan;

               (ii)      Except as provided in Section 9.5, increase the period
during which options may be granted or exercised; or

               (iii)     Change the terms of the Plan which causes the Plan to
lose its qualification as an incentive stock option plan under Section 422 of
the Code.

        No termination, suspension or amendment of the Plan may, without the
consent of each Optionee to whom any option shall theretofore have been granted,
adversely affect the rights of such Optionees under such options.

        13.3 Automatic Termination. Unless the Plan shall theretofore have been

                                      -11-
<PAGE>   12

terminated as herein provided, this Plan shall terminate ten (10) years from the
earlier of: (i) the date on which the Plan is adopted; or (ii) the date on which
this Plan is approved by the shareholders of the Company. No option may be
granted after such termination, or during any suspension of this Plan. The
amendment or termination of this Plan shall not, without the consent of the
Optionee, alter or impair any rights or obligations under any option theretofore
granted under this Plan.

                     SECTION 14. EFFECTIVE DATE OF THE PLAN

        This Plan shall become effective on the date of its adoption by the
Board of Directors of the Company and options may be granted immediately
thereafter but no option may be exercised under the Plan unless and until the
Plan shall have been approved by the shareholders within 12 months after the
date of adoption of the Plan by the Board of Directors. If such approval is not
obtained within such period the Plan and any options granted thereunder shall be
null and void.

        Approved by the Board of Directors on April 11, 1995 and approved by
shareholders on May 8, 1995. Amendment to Section 2 to increase authorized
number of shares to 1,250,000 approved by the Board on March 20, 1997 and
approved by the shareholders on December 9, 1997; amendment to Section 2 to
increase authorized shares to 1,750,000 approved by the Board on July 27, 1998
and approved by the shareholders on December 29, 1998; amendment to Section 2 to
increase authorized shares to 2,250,000 approved by the Board on October 25,
1999 and approved by the shareholders on December 16, 1999; and further amended
and restated by the Board on July 6, 2000 to increase authorized shares to
3,250,000 and to make various other technical amendments. Amendments approved by
the shareholders on __________, 2000.

                                      -12-

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