Document:

<PAGE>   1
                                                                    EXHIBIT 10.1

                            MANUFACTURING AGREEMENT
                C-MAC - Sunrise Technologies International, Inc.

THIS AGREEMENT, is made this 2 day of August 2001 ("Effective Date") by and
between Sunrise Technologies Intl', Inc., a Delaware Corporation, having
principal offices at 3400 W. Warren Ave, Fremont, California, 94538 (hereinafter
called "Sunrise") and C-MAC West Coast Operations, Inc., a California
Corporation, with its principal place of business at 2265 Junction Avenue, San
Jose, CA 95131 (hereinafter called "C-MAC"),

WHEREAS Sunrise desires to have specific services performed relative to the
production of the Sunrise Hyperion systems and other related components; and

WHEREAS C-MAC has the technical ability and desire to perform said contract
services; and

WHEREAS C-MAC and Sunrise desire to enter into an Agreement for the manufacture
of the Hyperion systems, whereby C-MAC shall manufacture said components to the
designs and specifications developed by Sunrise;

NOW THEREFORE, in consideration of the mutual promises contained herein, C-MAC
and Sunrise agree as follows:

1.      C-MAC SERVICES AND DUTIES

                                   A. SERVICES

        i.     MANUFACTURE
C-MAC shall manufacture Sunrise Hyperion systems as may be agreed between the
parties ("Products") in accordance with the prices, plans and specifications
provided by Sunrise and attached hereto in Schedules A & B. Plans and
specifications shall be supplied by Sunrise and accepted by C-MAC. The
activities performed by C-MAC shall be referred to herein as the "Services".

        ii.    STORAGE
        Should Sunrise choose to establish a Finished Goods Inventory at C-MAC,
any Product destined for the FGI shall be invoiced as it is delivered to the
FGI. Any storage charges for Product remaining in FGI over thirty (30) days will
in good faith be mutually developed and agreed to in writing at least ninety
(90) days prior to establishment of the Finished Goods Inventory. C-MAC shall
keep all Products in the FGI segregated from other products for tracking and
inventory management purposes in a separate area, clearly identified "Property
of Sunrise" or a similar marking, and shall use at least the same degree of care
in managing and protecting such Products as it uses in managing and protecting
its own inventory, but no less care than reasonable care. Prior to the
establishment of the FGI the parties will agree in good faith and set forth in
writing the specifics regarding delivery of Products in the FGI to Sunrise.

        iii.SHIPMENTS
All Products supplied to Sunrise or Sunrise's customer are FOB origin C-MAC
Fremont, California Facility. Title to all products shall pass to Sunrise upon
delivery to the common carrier specified by Sunrise. C-MAC shall assist Sunrise
in arranging any desired shipping and insurance (in amounts that Sunrise shall
determine). All costs of shipping, insurance and freight and customs, duties,
taxes, insurance premiums, and other expenses relating to such transportation
and delivery, shall be at Sunrise's expense.

<PAGE>   2

C-MAC shall deliver Products on or no earlier than three (3) days before the
mutually agreed upon Delivery Date. If circumstances arise that prevent C-MAC
from such timely delivery of Products, C-MAC shall immediately notify Sunrise of
the nature of the problem, the methods taken to overcome the problem and the
estimated time of delay.

        iv.    DROP SHIPMENT
C-MAC shall work with Sunrise to create a system for drop shipment of Products
to Sunrise's customers.

B.      DUTIES
        i.     FACILITIES
C-MAC shall cause to be constructed at its facility in Fremont, California, a
suitable area to build the Hyperion system.

        ii.    CALIBRATION AND MAINTENANCE
C-MAC shall be responsible to calibrate and maintain all equipment that is
transferred and consigned under this contract.

        iii.    ENGINEERING CHANGES
Sunrise must approve any changes that affect form, fit, or function of the
product. C-MAC may suggest changes to the manufacturing specifications of the
Products. Any such suggested changes shall be made in writing and shall clearly
set forth the nature of the change, the necessity for the change, and any
projected cost or manufacturing schedule impact. Sunrise may approve or reject
the suggested changes in its sole discretion.

C-MAC agrees to assist Sunrise in implementation of changes to the Products by
providing reasonable support including, but not limited to, quality control,
documentation, and sustaining engineering. All such changes and improvements
shall be submitted to C-MAC in writing and C-MAC shall respond to the proposed
change with cost and schedule impact within thirty (30) days after receipt, or
such other date when it might reasonably respond to Sunrise. C-MAC shall not
implement the change to the design or Specifications of any Product or
materials, equipment, manufacturing and quality assurance procedures, methods
and techniques used to produce a Product, without Sunrise's prior written
approval in the form of a Purchase Order.

        iv. SUBCONTRACTORS
Sunrise reserves the right to approve of any subcontractor selected to perform
any test, manufacture, or rework of the Products.

        v.    CERTIFICATE OF COMPLIANCE
A certificate of compliance will be created and maintained by C-MAC for the life
of any product manufactured by C-MAC. Said certificate shall be supplied with
each lot of product shipped to Sunrise and shall be maintained through the end
of the Agreement, then transferred to Sunrise or Sunrise's successor in
interest.

        vi.    RETURN MATERIAL AUTHORIZATION
C-MAC shall create and maintain a Return Material Authorization" ("RMA")
tracking system for all returned product. Said RMA system shall include
information regarding the date the returned product was received, the date
quoted for return, and the date the reworked/repaired product was shipped to
Sunrise

<PAGE>   3

or Sunrise's customer. In addition, C-MAC will supply to Sunrise the detail
cause and repair information for the return. Any Products so returned to C-MAC
shall be repaired or replaced, at C-MAC' option and expense, within ten (10)
days of receipt by C-MAC of the rejected Product; provided that (i) Sunrise
obtains a Return Material Authorization ("RMA") from C-MAC prior to returning
the Products and C-MAC shall provide Sunrise with a RMA number promptly upon of
request, (ii) the Products are returned within sixty (60) days of the date the
Product was received by Sunrise from C-MAC, and (iii) the failure analysis, or
summary thereof, conducted by Sunrise shall accompany the Product.

The parties agree to enter into good faith negotiations for the purpose of C-MAC
becoming an authorized repair facility for out of warranty repairs of Products
and components. The Parties agree to negotiate in good faith with the end goal
of having an amendment or other agreement executed as part of this Agreement if
the parties are able to reach agreement. Price for this repair shall be at
$65.00 per hour, which is subject to change by mutual agreement of the Parties
in writing. C-MAC warrants that repaired out-of-warranty Products shall be free
of workmanship defects, for a period of ninety (90) days after delivery to
Sunrise's designated location.

        vi.    ASSIGNMENT OF PURCHASE CONTRACTS
C-MAC agrees to assume the purchase agreements currently held by Sunrise with
its suppliers. Said Purchase Agreements are attached hereto as Schedule D. All
good and needed components required to build the current product will be
purchased by C-MAC from Sunrise's existing suppliers. C-MAC shall not be obliged
to continue purchasing product through current Sunrise suppliers after the
termination of the current term of the Purchase Contracts

        vii. RAW MATERIALS
C-MAC agrees to purchase raw material necessary to perform the Services from
Sunrise and other suppliers holding such material, where in the latter case,
such suppliers will not continue to supply raw material to Sunrise. C-MAC will
purchase all existing raw material inventories located at Sunrise at current
costs. Any product from the materials transfer found to be in non-compliance to
spec, not of current spec, or not relating to product ordered per this
agreement, is the responsibility of Sunrise.

Payment of this inventory will be on terms: $250,000 at agreement signing,
$1,750,000 due net 30 days, then $1,000,000 due net 90 days, net 120 days, and
net 150 days, with the balance due at net 180 days.

        viii. WARRANTY
 C-MAC represents and warrants to Sunrise that all work and service provided
pursuant to this Agreement will be provided in a timely, professional and
workmanlike manner and all Products when delivered by C-MAC to Sunrise, (i)
shall conform to the then current, manufacturing, quality, and regulatory
specifications (ii) shall be free from defects in manufacturing and workmanship
for a period of twelve (12) months from the date the Products is delivered to
Sunrise's designated location. Any Products that do not meet the foregoing
warranty shall be repaired or replaced at C-MAC' sole option and expense or
C-MAC shall refund to Sunrise or credit Sunrise's account for the purchase price
of the Product, within ten (10) business days of receipt by C-MAC of the
returned Product; provided that (i) Sunrise obtains a

<PAGE>   4

Return Material Authorization ("RMA") from C-MAC prior to returning the
Products, which C-MAC agrees to provide promptly upon request therefore, (ii)
the Products are returned within twelve (12) months of the date the Product was
delivered to Sunrise by C-MAC, and (iii) the failure analysis, or summary
thereof, conducted by Sunrise shall accompany the Product. Such warranty will
not apply if Sunrise alters, misuses, neglects, or abnormally stresses the
Products. With respect to any components acquired or supplied by C-MAC that are
incorporated into the Products, C-MAC makes no representation or warranty,
except that C-MAC agrees to pass through to Sunrise the warranty, if any,
originally provided to C-MAC by the manufacturer of such components and agrees
to cooperate in processing and seek applicable third party warranty claims and
in taking advantage of and seeking remedies, if any, available from the original
sources of the components.

        This warranty does not apply to situations where Sunrise wants their
Product ECO upgraded or repaired due to Sunrise's mishandling or misuse; such
Products are to be returned with a Purchase Order.

        C-MAC further represents and warrants that (i) it has good and clear
title to the Products, free and clear of all liens, claims and encumbrances, and
the right to grant the rights granted hereunder, (ii) C-MAC has not infringed on
any Intellectual Property of any third party in connection with its performance
under this Agreement, and (iii) C-MAC has the right and power to enter into this
Agreement. As the sole remedy and liability for any breach of the foregoing
representations and warranties in this paragraph, C-MAC agrees to indemnify
Sunrise and hold Sunrise harmless from and against any and all claims, losses,
liabilities, damages, expenses and costs (including reasonable attorney's fees
and court costs) finally awarded to Sunrise, that results from or arises out of
a breach or alleged breach of any of these representations and warranties or
incurred in the settlement or avoidance of any such claim. This indemnity shall
not apply if (i) Sunrise fails to give C-MAC prompt notice of any such claim or
threatened claim and such failure materially prejudices C-MAC, or (ii) C-MAC is
not given the opportunity to assume control of the defense or settlement, and
(iii) Sunrise does not provide reasonable assistance to C-MAC. Furthermore, if
C-MAC assumes such control, it shall only be responsible for the legal fees and
litigation expenses of the attorneys it designates to assume control of the
litigation. Nothing in this Agreement is intended to be or to serve as a grant
of authority or power in the indemnifying part to bind the indemnified party to
act or refrain from acting in any way at any time.

               C-MAC MAKES NO OTHER WARRANTIES, EXPRESSED OR IMPLIED, WITH
RESPECT TO THE COMPONENTS, PRODUCTS OR ANY SERVICES PROVIDED UNDER THIS
AGREEMENT, AND DISCLAIMS ALL OTHER WARRANTIES INCLUDING THE WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT.

        Sunrise represents and warrants to C-MAC that (i) it owns or has the
right to the use the Sunrise Components as contemplated herein, (ii) to its
knowledge, Sunrise Intellectual Property provided to C-MAC hereunder, including
without limitation, the Specifications, does not infringe the proprietary rights
of any third party, and (iii) Sunrise has the right and power to enter into this
Agreement. As the sole remedy and liability for any breach of the foregoing
representations and warranties, Sunrise agrees to indemnify C-MAC and hold C-MAC
harmless from and against any and all claims, losses, liabilities, damages,
expenses and costs (including reasonable attorney's fees and court costs)
finally awarded to C-MAC, that result from a breach or alleged breach of any of
these representations and warranties or incurred in the settlement or avoidance
of any such claim. This indemnity shall not apply (i) if C-MAC fails to give
Sunrise prompt notice of any such claim or threatened claim and such failure
materially prejudices Sunrise, or (ii) unless Sunrise is not given the
opportunity to assume control of the defense or settlement, and (iii) C-MAC does
not provide reasonable assistance to Sunrise. Furthermore, if Sunrise assumes
such control, it shall only be responsible for the legal fees and litigation
expenses of the attorneys it designates to assume control of the litigation.
Nothing in this Agreement is intended to be or to serve as

<PAGE>   5

a grant of authority or power in the indemnifying part to bind the indemnified
party ro act or refrain from acting in any way at any time.

SUNRISE MAKES NO OTHER WARRANTIES WITH RESPECT TO THE SUNRISE INTELLECTUAL
PROPERTY, SUNRISE COMPONENTS, SUNRISE PROPERTY, THE LICENSES GRANTED HEREUNDER
OR OTHER MATERIALS OR DOCUMENTATION PROVIDED BY SUNRISE HEREUNDER AND DISCLAIMS
ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT, OR
ARISING FROM A COURSE OF DEALING, USAGE OR TRADE PRACTICE.

2. SUNRISE'S  DUTIES

                        A. FORECAST OF FOR VOLUME OF FINISHED PRODUCTS

        i.     LEAD TIME,
Sunrise shall provide C-MAC with at least a ninety (90) day lead-time for
product, as defined in the forecast requirements.

        ii.    ROLLING FORECAST
Sunrise agrees to provide to C-MAC a twelve (12) month rolling forecast for
product production volume on a monthly basis. The forecasted quantity will
become the order quantity for the forecast (30) days after the issuing of the
forecast; the quantity forecasted for the next thirty (30) days can be changed
by plus or minus fifteen percent (+/-15%) from the previous forecast; and the
quantity for the subsequent thirty (30) days can be changed by plus or minus
twenty-five percent (+/- 25%) from the previous forecast. Any reasonable changes
in quantity beyond ninety (90) days will be accepted or negotiated between the
parties. Upon commencement of this agreement Sunrise will issue a purchase order
for the first 90 days.

 In the event that Sunrise desires to increase quantities ("Upside") of Products
scheduled for delivery; C-MAC will use its commercially reasonable best efforts
to accommodate the desired increases. Each of the foregoing may be subject to a
Premium Charge to be determined on a case-by-case basis, and subject to
Sunrise's prior written approval. In any event, notwithstanding the foregoing,
C-MAC agrees to meet Sunrise's Upside requests of (a) up to one hundred percent
(100%) over forecasted quantities if Sunrise provides C-MAC with at least three
(3) months notice, and (b) up to three hundred percent (300%) over forecasted
quantities if given at least six (6) months notice.

Sunrise agrees to purchase a minimum of twenty-four new Hyperion Systems
quarterly for a period of eight consecutive quarters immediately following
contract agreement approval.

B.      REGULATORY REQUIREMENTS

Sunrise shall be solely responsible for fulfilling all filings, registrations
and attendant requirements of both federal and local governments relative to the
Products. Sunrise will define and execute Quality System Audit of C-MAC
regularly on a six (6) month schedule. Audits will be a minimum of half-day
duration, and will assess compliance of operational systems of C-MAC to the FDA
cGMP requirements. Audit or Corrective Action notice reports will be supplied to
C-MAC within five (5) business days following each audit.

<PAGE>   6

3.      COST

                                     A. COST

The cost for each unit of Products manufactured shall be derived from the table
attached hereto under Schedule B. The cost per unit of Products shall
hereinafter be referred to as the "Standard Charge".

4. CONFORMITY TO ALL LAWS
A.      DUTIES OF C-MAC_
C-MAC will manufacture all products in a good and workmanship like manner and
will comply with and maintain all applicable federal, state, local, and
environmental laws, ordinances and regulations, including but not limited to
IPC-A-610 Rev C, Class 2, ISO 9002 and EN 46002 standards, as amended, and the
Food; Drug and Cosmetic Act as amended, including regulations relating thereto,
pertinent to the Services it performs relative to the manufacture of the
Products.

B.      DUTIES OF SUNRISE
Sunrise shall be solely responsible for all registrations, filings and other
regulatory requirements of both the federal, state and local laws, including but
not limited to the requirements of the Federal Food, Drug and Cosmetic Act as
amended and its attendant regulations. All responsibilities for functional
design and/or Patent Rights reside with Sunrise. C-MAC is solely responsible for
the manufacture and practices thereof, the Sunrise product.

5.      PRODUCT RECALL
All product recalls shall be the sole responsibility of Sunrise. However, C-MAC
shall bear the expense of reprocessing the recalled Products, as well as
shipping to and from the reprocessing site and reasonable associated expenses
for the coordination of the recall, if the adulteration of the Products arose
from the workmanship by C-MAC in providing the Services, or due to C-MAC's
failure to maintain Sunrise's specifications, pursuant to Schedule A hereto,
during the manufacturing process. Sunrise shall bear the expense of the recall
in all other events, including but not limited to a recall arising from a defect
or inadequacy in Sunrise's design, or if it is determined that Sunrise has
failed to provide C-MAC adequate specifications and or support.

6.      COMPENSATION
Sunrise shall compensate C-MAC as provided in Schedule B hereto. Schedule B
shall contain the amounts and terms of compensation and reference to any
applicable federal, state, local, governmental, or private tax, tariff, fee,
surcharge or other charge for the Services.

 Terms of payment shall be net Thirty (30) Days from the date of invoice or
receipt of the applicable Products, which ever is later, payable in U.S.
dollars. Invoices past due shall incur late charges at the rate of one and
one-half percent (1.5%) per month past due.

7.      DELIVERY
All Products supplied to Sunrise FOB C-MAC Fremont, California. Sunrise shall
designate a carrier and the cost of subsequent transportation shall be borne and
paid by Sunrise.

<PAGE>   7

8.      INSPECTION AND AUDIT RIGHTS

                              A. PRODUCT INSPECTION

Sunrise reserves the right to inspect and reject any product that does not meet
the specifications provided by Sunrise to C-MAC. In the event of rejected
product, Sunrise shall notify C-MAC of the rejections in writing within thirty
(30) days of receipt of the product and shall provide C-MAC with the opportunity
to rework or replace the product. In the event, the product was rejected for
design issues arising out of Sunrise's specifications, or is a result of
mishandling, tampering, or damage. Sunrise shall be responsible for all costs of
rework, replacement or scrap of the product.

B,      RECORDS AND PREMISES
C-MAC shall maintain books and records in accordance with Generally Accepted
Accounting Principles (GAAP). Sunrise, and regulators reviewing the Products,
shall have the right at Sunrise's expense, to audit C-MAC's standard costed BOM
with regard to the Services and Products related thereto. Further, Sunrise shall
have the right, during normal business hours and providing C-MAC with at least
twenty-four (24) hours notice, to enter C-MAC's facilities and inspect the
manufacturing processes of any Products.

C.      REGULATORY INSPECTIONS
C-MAC further agrees to fully cooperate with all regulatory investigations and
notify Sunrise in advance of such inspections. Sunrise reserves the right to be
present and assist with any regulatory inspections, which pertain, in any way to
the Products. C-MAC shall provide within ten (10) days of receipt a response to
any regulatory inquiries. C-MAC shall provide Sunrise copies of all form 483,
form 486, inquiries or other regulatory notifications when such notification
pertains to the Services and or the Products. Schedule " E" establishes and
defines the production item(s) and configuration(s) to be built, reference to
all FDA regulatory classifications and approvals required for each to
manufacture, and critical components that require specific testing, inspection
or requiring trace-ability by Serial Number.

9.      TRANSFER OF EMPLOYEES

Sunrise shall transfer some or all of its manufacturing employees to C-MAC and
C-MAC agrees to hire such individuals on terms at least equivalent to the salary
benefits shall be commensurate with standard C-MAC benefits.

C-MAC reserves the right to interview all employees prior to hire, and to refuse
the hire of those employees, which it deems to be unacceptable. A list of
proposed employees to be transferred is attached hereto as Schedule C.

C-MAC shall be informed, in writing, of the immigration status of all proposed
employees. C-MAC may, at its discretion, agree to provide legal assistance to
any transferred Sunrise employees with regard to immigration issues.

10.     MOVE/TRANSFER OF FACILITY
C-MAC shall incur all cost associated in the move/transfer of the current
Sunrise production equipment, tools, benches, material and associated items to
transfer the current manufacturing to contract manufactures facility.

11.     INDEMNITY

<PAGE>   8

C-MAC and Sunrise shall indemnify and hold each other harmless from and against
any and all claims, liabilities, costs and expenses (including legal fees and
disbursements) of the party seeking indemnity, arising out of the acts of the
other party, providing that the party seeking indemnity shall notify the other
party in a timely fashion, and provided the party from whom indemnity is sought
shall have control of any litigation, at its sole cost and expense, and
provided, further, that no compromise thereof shall be entered into without the
express written consent of the party from whom indemnity is Sought.

12.     INSURANCE
A.      OBLIGATION OF C-MAC
C-MAC shall at all times carry "Adequate Insurance" that shall include coverage
on all of C-MAC's activities under this Agreement, as well as any insurance
required by law. For purposes of this Agreement, "Adequate Insurance" shall
maintain liability, casualty and fire insurance of no less than Five Million
Dollars ($5,000,000) C-MAC shall provide a certificate of insurance to Sunrise
Technologies Intl', Inc. as an additional insured under such policies of
insurance. C-MAC shall also carry sufficient product liability insurance and
name Sunrise as an additional insured of its policy.

B.    SUNRISE
Sunrise shall at all times carry Adequate Insurance that shall include coverage
on all of Sunrise's activities under this Agreement, as well as any insurance
required by law. Sunrise shall provide a certificate of insurance to C-MAC
naming C-MAC Instruments as an additional insured under such policies of
insurance. Sunrise shall also carry sufficient product liability insurance and
name C-MAC as an additional insured on its policy.

13. BASELINE PROCESSES AND INCORPORATION OF ENGINEERING DOCUMENTS
Prior to the start of production, both parties shall agree to acceptable
baseline manufacturing processes. Said baseline manufacturing processes shall be
incorporated herein.

The following sets of engineering documents, collectively forming the
Specifications for the manufacture of Sunrise product, are incorporated herein:

a) Released Prints;
b) Bill of Materials; Approved vendor listing;
c) Routers;
d) Manufacturing Instructions;
e) Quality Control Instructions;
f) Labeling Instructions; and
g) Packaging Instructions.

14.     NO ASSIGNMENT
Neither party may assign any rights or obligations under this Agreement without
the express written consent of the other party. Such consent, however, shall not
be unreasonably withheld.

15.     CONFIDENTIALITY
Both parties understand that all correspondence, patents, license and conditions
pertinent to this Agreement are to be held strictly confidential, and that
breach of this confidentiality may result in

<PAGE>   9

termination of this Agreement. This contractual obligation shall survive the
termination or expiration of this Agreement for a period of not less than four
(4) years.

16.     TERM AND TERMINATION

A.      TERM AND TERMINATION

This Agreement shall begin on the Effective Date and, unless terminated earlier
pursuant to this paragraph, continue for three (3) years, at which time this
Agreement shall terminate. It is contemplated by the parties that they will
review their relationship during the ninety (90) days immediately preceding its
termination to determine whether, and on what terms, the relationship may be
continued, upon mutual agreement. Nothing in this Agreement will be construed to
require either party to agree to any such extension. Upon termination of the
Agreement, Sunrise or its successor in interest agree to purchase all inventory,
MRB, and material on-order up to ninety (90) days, and the initial term of eight
quarters each at twenty-four new Hyperion Systems minimum per quarter. The
quantity of such purchases of raw material and finished goods shall be
determined based upon the last forecast agreed by the parties.

B.      TERMINATION UPON NOTICE
The Parties agree that the entering into and the risks and costs associated with
such a venture are understood and accepted by the Parties. Therefore, either
Party may cancel this Agreement at the end of any calendar month without cause,
provided one-hundred-eighty (180) days written notice, return receipt requested,
is given. Each party shall be entitled to its verifiable costs for the venture.
These costs shall be reviewed from the perspective of those costs incurred by a
reasonably prudent business person when entering into such an Agreement. In the
event this Agreement is terminated, Sunrise shall be required to purchase the
materials per section 16A

C.      IMMEDIATE TERMINATION
This Agreement may be terminated by either party with immediate effect upon the
material breach of this Agreement by the other party if a reasonable response to
correct such breach is not provided within thirty (30) days of notice thereof;
or by C-MAC with immediate effect in the event of (i) the substantial
deterioration in Sunrise's financial position which materially impairs Sunrise
ability to perform under this agreement. (ii) Sunrise ceases to do business,
terminates its existence, dissolved or liquidates (iii) Sunrise becomes
insolvent or fails to pay its obligations (including its obligations to C-MAC)
when they become due (iv) a receiver is appointed to hold, manage or operate
Sunrise's property or business (v) there is a general assignment of Sunrise's
property or business for the benefit of its creditors or (vi) proceedings are
instituted by or against Sunrise under any bankruptcy or insolvency law. In the
event this Agreement is terminated by Sunrise breach, Sunrise shall be required
to purchase the materials per section 16A.

D.      CHANGE IN CONTROL;
In the event that a "Change in Control" occurs at Sunrise or at Sunrise's
request the surviving entity or controlling party may terminate this Agreement
upon a written 90 day notice and shall only be responsible for the cost of
materials and labor cost that are associated with Sunrise committed purchase
orders and forecast per section 16A.

Alternatively, the surviving entity or controlling party would have the right to
a modification of this Agreement in its favor.

For purposes of this Agreement, "Change in Control" shall mean, and shall be
deemed to have occurred if, on or after the date, of this Agreement:

<PAGE>   10

(i) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended), other than a trustee or other
fiduciary holding securities under an employee benefit plan of the Company
acting in such capacity or a corporation owned directly or indirectly by the
stockholders of the Company in substantially the outstanding Voting securities,

(ii) The stockholders of the Company approve a merger or consolidation of the
Company with any other corporation other than a merger or consolidation which
would result in the Voting Securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into Voting Securities of the surviving entity) at least 80% of
the total voting power represented by the Voting Securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation, or

(iii) The stockholders of the Company approve a plan of complete liquidation of
the Company or an agreement for the sale or disposition by the Company (in one
transaction or a series of related transactions) of all or substantially all of
the Company's assets.

17.     FORCE MAJEURE
If, by any reason of impediment such as war, rebellion, riot, tumult, civil
commotion, insurrection, political disturbance, embargo, strike, lock-out,
stoppage of work of any kind, fire, acts of God (i.e. earthquake, flood),
instruction of the authorities or any other cause or event of a similar nature
affecting either party over which such party has no control, such party cannot
perform its fundamental obligations hereunder, it, except for the obligation of
C-MAC to apply timely for product already ordered, manufactured and shipped,
shall have the right to postpone for the duration of such impediment the
performance of such obligation.

18.     NO AGENCY
C-MAC is an independent contractor and has, and shall have, no power nor shall
it represent that it has any power to bind Sunrise or to assume or create any
obligation or responsibility, express or implied, on behalf of Sunrise or in its
name. This Agreement shall not be construed as constituting the parties a
partnership, joint venture or any other form of association, which would impose
on any party liability for the act or failure to act of any other party.

19.     AMMENDMENT AND WAIVER
This Agreement supersedes and cancels any and all previous agreements made
between the parties and may not be changed in any way except by an agreement in
writing signed by an Executive of both parties. The failure of either party to
enforce any of the provisions herein shall not be a waiver of such provisions or
the right of such party thereafter to enforce any such provision. However, it is
the intention of the Parties that this Agreement be controlling over additional
or different terms of any quotation, purchase order, confirmation, invoice or
similar document, even if accepted in writing by both parties.

20.     NOTICES
All notices, demands and other communications required or permitted to be given
hereunder shall be in writing and shall be deemed to have been properly given if
delivered personally or sent by registered or certified mail, return receipt
requested, postage pre-paid, or by Federal Express or like courier service.

If to C-MAC:

        C-MAC West Coast Operations
        2265 Junction Avenue
        San Jose, California 95131
        Attention: Vice President & General Manager

<PAGE>   11

With a copy to:
        C-MAC West Coast Operations
        2265 Junction Avenue
        San Jose, California 95131
        Attention: CFO

If to Sunrise:
        Sunrise Technologies Intl', Inc.
        3400 W. Warren Ave
        Fremont, CA 94538
        Attention: Vice President and COO.

With a copy to:
        Sunrise Technologies Intl', Inc.
        3400 W. Warren Ave
        Fremont, CA 94538
        Attention: General Counsel.

or to such other address as the parties may designate by notice given in the
manner specified in this Paragraph 19. All such notices, demands and
communications shall be deemed effective on the date personally delivered, or
three (3) days after deposited in the United States mail as registered or
certified mail, or one (1) day after deposited with Federal Express or a like
courier service, as the ease may be.

21.     HEADINGS
The headings of this Agreement are for convenience of reference only and shall
not be used as an aid in construing any provisions of this Agreement.

22.     CHOICE OF LAW
This Agreement shall be construed under the laws of the State of California.

23.     DISPUTES
(a) Any dispute, controversy or claim (whether such claim sounds in contract,
tort or otherwise) arising out of or relating to this Agreement (or the breach,
termination or validity thereof), or arising in any way out of the relationship
of the parties shall, at the request of either party, be settled by arbitration
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association ("AAA") in effect at the time of the arbitration (the "Rules"),
except as such Rules may be modified herein. If there is any inconsistency
between the Rules and this Article, the provisions of this Article shall govern.
In the alternative, if the parties mutually agree it to, mediation may be used
to settle any disputes, controversy or claim arising here from.

(b) An award rendered in connection with arbitration, pursuant to this Article
shall be final and binding on the parties and judgment upon such an award may be
entered and enforced in any court of competent jurisdiction.

(c) All arbitration proceedings under this Article shall be held at a mutually
convenient location for both parties.

<PAGE>   12

(d) The arbitrator shall determine the rights, remedies and obligations of the
parties according to the law of the state of California (excluding conflict of
laws principles), and may not award punitive or exemplary damages to either
party.

(e) Each party shall be given not less than 15 days advance notice of the time
and place of any arbitration hearing. The arbitration hearing shall be held not
later than 120 days after the appointment of the arbitrator and the arbitrator
shall render his award not later than 30 days after the closing of the
arbitration hearing.

(f) The final award:
    (i) At the request of either party, AAA shall set forth the grounds, factual
    and legal, upon which it is based; (ii) AAA may allocate between the
    parties, in such proportion as the arbitrator deems proper, the costs of the
    proceeding, including the AAA administrative fee, arbitrator's compensation
    and the cost of stenographic transcripts and of expert witness, or may
    direct that all or part of such costs be borne directly by one party; (iii)
    AAA may award to either party all or part of the legal costs, including
    reasonable attorney fees, incurred by such party because of the other
    party's unreasonable, frivolous, bad faith, or dilatory conduct in the
    course of the arbitration; (iv) AAA may award to the party which has
    prevailed, in whole or in balance of the merits, all or part of such party's
    legal costs incurred in connection with the arbitration, including
    reasonable attorneys fees

24.     ENTIRE AGREEMENT; SEVERABILITY
THIS AGREEMENT, INCLUDING THE EXHIBITS, SETS FORTH THE ENTIRE AGREEMENT AND
UNDERSTANDING OF THE PARTIES RELATING TO THE SUBJECT MATTER HEREIN AND
SUPERSEDES ALL PRIOR DISCUSSIONS BETWEEN THEM.

The unenforceability or invalidity of any provision or provisions of this
agreement shall not render any other provision or provisions herein contained
unenforceable or invalid. In the event that any of the provisions, or portions
thereof, or interpretations by the parties or by either party of any provision,
or portions thereof, of the Agreement are held unenforceable invalid by any
court of competent jurisdiction, the parties shall negotiate an equitable
adjustment in the provisions of the Agreement with a view toward effecting the
purpose of the Agreement.

In the event that either Sunrise or C-MAC experiences exceptional circumstances
that affect its performance under this Agreement, Sunrise and C-MAC will
negotiate in good faith for the purpose of a joint resolution of the matter.

<PAGE>   13

It is acknowledged by CMAC that Silicon Valley Bank (the Bank) must give their
consent to this transaction which (the Bank) will not unreasonably withhold.
Should this consent not be forth coming this agreement will be null and void and
Sunrise will return the signing fee. The bank will complete their review and
provide notification within five (5) business days of the parties signing the
agreement.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by there duly authorized respective officer or employees as of the day and year
written below:

C-MAC West Coast Operations

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

Name:   Dennis J. Rockow
      -------------------------------------

Title:  Vice President and General Manager
       ------------------------------------

Date:
     --------------------------------------

Sunrise Technologies Intl', Inc.

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

Name:      John Hendrick
      -------------------------------------

Title:     Chief Operating Officer
      -------------------------------------

Date:
     --------------------------------------

<PAGE>   14

                            PRODUCTS, SPECIFICATIONS

SCHEDULE A

C-MAC will manufacture the Hyperion System by using Sunrise's current approved
specification. C-MAC will initially only change the name from Sunrise's to C-MAC
on these manufacturing procedures. C-MAC will not change the processes or the
procedures without prior written consent from Sunrise.

Sunrise agrees to provide soft copies of all these procedures to C-MAC upon
commencement of this contract.

"Specification sheet attached here with picture of unit"

<PAGE>   15

                                   SCHEDULE B

                         UNITS COST AND TERMS OF PAYMENT

COST
The cost for each Hyperion System, FOB C-MAC, Fremont, California, shall be
derived from the following table (hereinafter called "Standard Charge"):

<TABLE>
<CAPTION>
Units per Month       Price Per Unit
<S>                   <C>
8 - 12                $  84,848.00
</TABLE>

Applicable surcharges or credits shall be applied as specified below. Terms of
payment shall be net Thirty (30) Days from the date of invoice or receipt of the
applicable Products, which ever is later, payable in U.S. dollars.

Both parties agree to review pricing six months after first product shipments.
The pricing above assumes a $52,700 current cost material value.

RENEGOTIATION OF STANDARD CHARGE:
It is the intent of the parties that all cost savings generated by C-MAC will be
split between C-MAC and Sunrise. The parties agree to review and renegotiate the
Standard Charge after every twelve (12) month period after execution of this
Agreement. Moreover, should the volume of finished goods increase or decrease
beyond twenty-five percent (25%) of that number of finished goods anticipated by
the parties for any twelve (12) month period, the parties agree to review and
renegotiate the Standard Charge. Should the parties fail to agree on a Standard
Charge for subsequent twelve (12) month periods, either party may submit the
disagreement to arbitration or terminate this Agreement upon ninety (90) days'
notice. During arbitration or during the ninety (90) days before termination,
the Standard Charge heretofore agreed shall remain in effect.

SURCHARGES AND CREDITS:
In the event that Sunrise does not maintain a minimum build of at least 24 new
Hyperion Systems per quarter, then Sunrise agrees to pay C-MAC, $19,000.00 per
unit for each unit short of twenty-four units quarterly, upon being invoiced by
C-MAC. C-MAC may build throughout the quarter in evenly weekly build rates based
on the purchase order and forecast.

<PAGE>   16

                              TRANSFER OF EMPLOYEES
<TABLE>
<CAPTION>
SCHEDULE "C"

    NAME                 TITLE
    -----                -----
   <S>                   <C>                                   <C>
1  Ron Hast             Production Manager
2  Opal Crooks          Production Control
3  Thomas Witherspoon   Stockroom / Shipping
4  Kennie Hardmon       Stockroom / Shipping
5  Janet Vehemente      Incoming Inspection / QA
6  Chris Kinsella       Final System Laser Tech. III
7  Michael Duane        Final System Laser Tech. III
8  Josh Hanney          Final System Laser Tech. III
9  William Crone        Final System Laser Tech. III           Temporary
10 Rich Santos          Electronics  Manufacturing Tech. III
11 Elisabeth Esparza    Laser Tech / Integration
12 George Reyes         Optical Mechanical Assembler          Temporary
13 Carmen Esparza       Optical Mechanical Assembler          Temporary
</TABLE>

C-MAC agrees to employ all the above, as full time regular employees with C-MAC
standard benefits. Additionally they agree to employ all those listed above,
Sunrise regular employees, for at least one year and all current temporary
employees as regular, full time employees for no less than six (6) months,
unless this agreement is terminated or the employee is terminated for cause.
C-MAC agrees to increase all the transferring Sunrise regular employee salary by
$1,500 to offset the difference in benefits.

<PAGE>   17

                               PURCHASE AGREEMENTS

                                  SCHEDULE "D"
<TABLE>
<S>                             <C>
Bicron Corporation              PO # 10936
Computer Logistics, Inc         PO # 10345, 50391, 50405, 50406, 50407, 50412, 50430, 54041, 54054, 81887, 81922, 81971, 81978
Coorstek, Inc.                  PO # 11692
Edmund Scientific Company       PO # 11409, 54050, 50224, 50225, 50227
General Foundry                 PO # 11261
Goose Manufacturing             PO # 54036, 54037, 54038, 54039, 54040, 54055
High Speed CNC                  PO # 50432
ILC Technologies, Inc.          PO # 50252
InnerStep Corporation           PO # 50306, 50335, 50336, 50337, 50353, 50414, 54065, 54072
ISCAN, Inc                      PO # 11406, 11407, 50418
Italix Co, Inc.                 PO # 54049
J.H. Technologies, Inc.         PO # 50242
Micrometrology Laboratories     PO # 50319
Molectron Detector, Inc.        PO # 20250, 54056, 54057
Nikon Inc.                      PO # 11149, 11150, 11151, 11152
Optosigma Corporation           PO # 50230, 50231
Performex Machining Co.         PO # 11643
Polyurethane Molding Inc.       PO # 50350, 50409, 81964
Precision Technical Sewing      PO # 54045
Quality Electro-Optical Dev.    PO # 50301, 50332
Quality Plastic Industries      PO # 11202, 11204, 81748, 81961
Quality Thin Films, Inc         PO # 11704
Richard Losch, Inc.             PO # 11701
Sierra Precision Optics Inc.    PO # 11217, 11218, 11703, 11424
SeTime Incorporated             PO # 11316, 80378, 81328
Thomas Lovato Co.               PO # 11699
</TABLE>

In addition to this list there is approximately $16,000 commitment to InnerStep
for 15" display material. Quality Thin Films there will be an additional
commitment of approximately $30,000 for lens. Polyurethane Molding Inc. there
will be an additional commitment of approximately $13,000 for Microscope skins.

<PAGE>   18

                     DEFINE PRODUCTION ITEMS AND CONFIGURATION TO BE BUILT

                                  SCHEDULE "E"

<TABLE>
<CAPTION>

                                                     RECORDED ON TRAVELER
                                             ---------------------------------
  PART /                                         ASSY
 ASSEMBLY        ASSEMBLY DESCRIPTION         CREATED BY           REPORTS TO        COMMENTS
-----------    -------------------------     ------------         ------------      -----------
Lot Controlled
<S>               <C>                          <C>                  <C>             <C>
  3700001         Objective Lens               Supplier             7400029

  8000002         Yag Holmium Rod              Supplier             7400036

  8000009         Focus Cell Lenses            Supplier             7400030

  8000011         Cold Mirror                  Supplier             7400007

  8000012         Hot Reflector                Supplier             7400029

  8000013         8 Side Prism                 Supplier             7400010

  8000015         High Reflector               Supplier             7400007

  8000016         Output Coupler               Supplier             7400007

  8000019         Doublet                      Supplier             7400010

  8000020         CaF(2) Lens                  Supplier             7400010

  9100001-x       Spot Shutter Board           Sub-contract         7400000         PLD Rev Recorded

  9100003-x       Driver Board                 Sub-contract         7400000         PLD Rev Recorded

  9100019-x       Power Board                  Sub-contract         7400000         PLD Rev Recorded

  9100021-x       Motor Board                  Sub-contract         7400000         PLD Rev Recorded

  9100023-x       I/O Control Board            Sub-contract         7400000         PLD Rev Recorded

  9100025-x       Safety Shutter Board         Sub-contract         9300023         PCA Rev Only

  9300004         Spot Shutter Assy              7400012            7400014

  9300006         AutoCal Assy                   7400011            7400014

  9300022         Barrel Drive Assy              7400010            7400014

  9300025         Objective Assy                 7400029            7400014

  9300031         Laser Cavity                   7400036            7400007

  9300044         Focus Cell Assy                7400030            7400007

  9300242         Flash Lamp                     Supplier           7400036
</TABLE>

<PAGE>   19

<TABLE>
<CAPTION>

                                                     Recorded on Traveler
                                             ---------------------------------
  Part/                                         Assy
 Assembly        Assembly Description         Created by           Reports To        Comments
-----------    -------------------------     ------------         ------------      -----------
Serialized

<S>               <C>                          <C>                  <C>             <C>
2900007         Joulemeter                          7400011          7400014         Joulemeter SN

9300009         Chassis                            Supplier          7400084

9300020         Microscope Assembly                 7400014          7400084

9300023         Laser Head                          7400007          7400084

9300030         Hyperion Top Assembly               7400000          7400084

9900002         Hyperion LTK System, 110            7400084

9900005         Hyperion LTK System, 220            7400084

9900013         Hyperion LTK System, Mobile         7400084
</TABLE>

<TABLE>
<CAPTION>

CRITICAL COMPONENTS LIST

COMPONENT     MANUFACTURER    MODEL            RATINGS               APPROVALS   STANDARD
---------     ------------    -----            -------               ---------   --------
<S>           <C>             <C>              <C>                   <C>         <C>
Circuit       Carlingswitch    AJ2-B0-24-      250 VAC, 15A          UL, VDE     IEC 157-1
Breaker                        615-1C2-D
AC Inlet      Heyco            920             250 VAC, 15A, 65 C    UL, VDE     EN 60320
Transformer   PowerTronix      AA-70879        120/120 VAC,          UR, CE      UL 506,
                                               1500 VA                           C.S.A. 66, EN
                                                                                 60742, IEC
                                                                                 601-1

EMI Filter    Corcom           15EHT           250 VAC, 12 A         UL,         EN 60950
                                               120 VAC, 15 A         C.S.A.,
                                                                     VDE

Fuses         Wickmann         195 Series,     250 VAC,              % URcus,    IEC 60127-
                               19195-63 mA     mm x 20 mm,           VDE, S      2/SS3
                                               Ferrule Type
              Schurter                                                           IEC 127
Elevator      APEM             B120R2BBNN,     250 VAC, 10 A         UR,
Switch                         B series                              C.S.A.
                               Snap in
                               Rocker
                               Switch

E-STOP        EAO              61-344-0415-    250 VAC, 6 A;UR,                  EN 418
                               511LX           220 VDC, 0.5 A;
                                               CSA, 24 VDC, 6 A.
                                               IPCE, S+
                                               65, NEMA 4 & 13

</TABLE>

<PAGE>   20

<TABLE>
<CAPTION>

COMPONENT     MANUFACTURER    MODEL            RATINGS               APPROVALS   STANDARD
---------     ------------    -----            -------               ---------   --------
<S>           <C>             <C>              <C>                   <C>         <C>
Keylock       EAO              14-236-025K     250 VAC, 5 A;         UR,
Switch                                         220 VDC, 0.1 A;       CSA, CE
                                               24 VDC, 2 A. IP
                                               65, NEMA 4 & 13

Relay         Aromat           VC15-2A1B-      240 VAC,  15 A,       UR,
                               AC24V-K         1 Hp, 1               CSA,
                                                                     VDE

Power         PowerOne         PFC375-         Input: 85-264         UL, CSA,     EN 60950
Supply                         4200F           VAC, 6 A, 47-63 TUV
                                               Hz. Output: 24
                                               V @ 10 A; 5 V@ 10 A;
                                               12 v@4 A

Cooling       March            MDXT-3          115 VAC, 50/60        CSA
Pump                                           Hz, 1/25 Hp,
                                               1.55 A,

              Fabco            0135-0036       Continuous Duty, TP
                               -1000
High Voltage
Power Supply
Green Laser
Red Laser
Wiring
Enclosure                                      ABS Plastic
Flow Switch   Thomas Products  2200            50-240 VAC, 15
                                               VA. Polysulfone,
                                               burst strength
                                               1500 psi @ 70
                                               F, 20 W SPDT

Servo Motor   Oriental Motor   4RK25GN-AWMU    Thermal &             UL, CSA,    EN 60950, UL
              Use Corp                         Impedance             CE          519, 547,
                                               Protection, CAT                   1004, 508,
                                               II, Pollution                     CSA 100
                                               Degree II

Foot Switch   Line Master      88SH1           125-250 VAC,          UL, CSA,
                                               20 A, 1Hp,            VDE
                                               Heavy Pilot
                                               Duty, IP 68

Hoses, Braid  Silbradi         290-0380        3/8" ID, .665"
Reinforced                                     OD, 85 psi, 13.0
Silicone                                       lbs.cft, 85 F - 350 F

Reservoir Tank                                 Poly-propylene,
                                               1/4" thickness
</TABLE>

<PAGE>   21

<TABLE>
<CAPTION>

COMPONENT     MANUFACTURER    MODEL            RATINGS               APPROVALS   STANDARD
---------     ------------    -----            -------               ---------   --------
<S>           <C>             <C>              <C>                   <C>         <C>

Holmium
YAG Laser
Interlock     Cherry           F81A-B110       125/250               VAC, UR,
                                               10 A                  CSA,
                                                                     VDE

Transformer   Signal           14A-10R-24      115/230               VAC UR,
                                               Primary, 50/60        CSA,
                                               Hz, 12/24             VAC,  VDE
                                               10 VA. CLASS
                                               F-1

Relays        Omron            G6C-1114P-      10A, 250              VAC, UR, CSA
                               US              10A, 30               VDC.
                                               Coil 5                VDC

Fuse Holder                                    6.3 A, 250            VAC UR,
                                                                     CSA,
                                                                     VDE, S
</TABLE><PAGE>   1
                                                                    EXHIBIT 10.1

                                    SUBLEASE

        THIS SUBLEASE ("SUBLEASE") is dated as of May 22, 2001 (the "REFERENCE
DATE") for reference purposes, and is made by and between Axon Instruments,
Inc., a California corporation, as sublessor ("SUBLESSOR"), and Argonaut
Technologies, Inc., a Delaware corporation, as sublessee ("SUBLESSEE").

                                    RECITALS

        A. Sublessor, as lessee, on the one hand, and Gee Electronics, Inc.,
Glen S. Gee and Kathy Gee, as lessor, on the other hand (the "MASTER LESSOR;"
the Master Lessor is now known as Gee, LLC), entered into that certain Standard
Industrial Lease - Multi-Tenant, dated February 1989, together with an attached
addendum, and executed by Sublessor on March 24, 1989 (as referenced herein, the
"INITIAL LEASE") with respect to rental space constituting approximately 17,780
square feet in a building (the "BUILDING") commonly known as 1101 Chess Drive,
City of Foster City, County of San Mateo, State of California. Master Lessor and
Sublessor subsequently amended the Initial Lease three times, pursuant to those
certain Addendum 2 executed on March 24, 1993 ("ADDENDUM 2"), Addendum 3
executed on April 29, 1994 ("ADDENDUM 3"), and Addendum 4 executed on December
3, 1997 ("ADDENDUM 4"). The Initial Lease and all the above described addenda
thereto are hereafter collectively referred to herein as the "MASTER LEASE."
Pursuant to the Master Lease, Sublessor leases the "PREMISES" from Master
Lessor, which constitutes the entire Building as described in the Master Lease.
Addendum 4 mentioned above states that the Premises is approximately 31,620
square feet. A copy of the Master Lease is attached as Exhibit A hereto. Any
capitalized terms used in this Sublease but not defined herein shall have the
meanings attributed to them in the Master Lease.

        B. Sublessee now desires to hire the Premises from Sublessor, and
Sublessor now desires to sublease the Premises to Sublessee, on the terms and
conditions set forth hereinbelow.

        NOW, THEREFORE, in furtherance of the foregoing, and in consideration of
the mutual covenants set forth hereinbelow, the parties agree as follows:

        1. Subleased Premises. Sublessor hereby subleases to Sublessee, and
Sublessee hereby hires from Sublessor, the Premises, which sublease shall
include all of Sublessor's rights to use the Common Areas (including those
portions of the Common Areas designated by Lessor for vehicle parking) in
accordance with the terms and conditions of the Master Lease, and subject to all
of the terms and conditions set forth in this Sublease.

        2. Term.

                a. Sublease Term.

                        (i) The term ("SUBLEASE TERM") of this Sublease shall
commence on the date (the "SUBLEASE COMMENCEMENT DATE") that Sublessor delivers
possession of the Premises to Sublessee, which shall be a date not later than
fourteen (14) days after the date that all of the following have occurred: (i)
Sublessee has delivered to Sublessor the Advance Base

                                       1
<PAGE>   2

Rent Payment pursuant to Section 4 hereof; (ii) Sublessor and Sublessee have
executed this Sublease; (iii) Sublessor is in receipt of Master Lessor's Consent
pursuant to Section 17 hereof; and (iv) Sublessee has delivered to Sublessor the
security deposit pursuant to Section 5 hereof. The Sublease Term shall expire
on, and including, June 30, 2004, unless this Sublease is sooner terminated
pursuant to its terms. Sublessor shall send written confirmation to Sublessee of
the Sublease Commencement Date (provided that Sublessor's failure to so confirm
the Sublease Commencement Date shall not constitute a material breach nor a
ground for default by Sublessor hereunder). Sublessee shall have no right or
option to extend the Sublease Term.

                        (ii) If the Sublease Commencement Date is a date later
than June 15, 2001, Sublessee shall have the right, at its option and provided
that Sublessee shall not have made any Alterations to the Premises or Building,
to terminate this Sublease by concurrently notifying Sublessor and Master Lessor
thereof in writing, such notice to be delivered within two (2) business days
after such Sublease Commencement Date, and such termination to be effective on
the date of such delivery. If Sublessee terminates the Sublease pursuant to the
preceding sentence, then upon such termination, Sublessee shall promptly return
to Sublessor all keys to the Premises in Sublessee's possession (such return
obligation shall survive such termination), all amounts previously paid by
Sublessee to Sublessor shall promptly be refunded by Sublessor to Sublessee
(which refund obligation shall survive such termination), and all rights and
obligations of the parties hereto pursuant to this Sublease shall terminate
except those which are expressly provided in this Sublease to survive
termination.

                b. Early Occupancy Period. The period that begins on the
Sublease Commencement Date and ends on, and including, the day immediately
preceding the Sublease Rent Commencement Date (as defined in Section 3(a)
hereof) is referred to herein as the "EARLY OCCUPANCY PERIOD." The Early
Occupancy Period is intended to allow Sublessee to perform, at Sublessee's sole
expense, certain improvements to the interior of the Premises, subject to the
prior written approval of Master Lessor. Sublessee hereby advises Sublessor that
such intended improvements are generally described as: (i) recarpet and repaint
existing offices; (ii) removal of interior walls in shipping and receiving area
to provide efficient product flow; and (iii) construction of approximately 4,000
square feet of laboratory space at the location of the existing laboratory in
the Building (collectively, the "INITIAL Improvements"). Sublessor shall have no
obligations with respect to any improvements which Sublessee seeks to perform,
and makes no representations with respect to any such improvements, including
but not limited to whether Master Lessor will approve any or all of the
improvements that Sublessee seeks to perform, including the Initial
Improvements. Sublessee shall comply with all terms and conditions of this
Sublease during the Early Occupancy Period, including, but not limited to, (i)
Sublessee's Direct Payment/Service Obligations pursuant to Section 3(e) hereof,
and (ii) the terms and conditions of the Master Lease as incorporated herein.
During the portion of the Early Occupancy Period that is prior to the Sublease
Rent Commencement Date (as defined in Section 3(a) hereof), Sublessee shall not
be obligated to pay any Base Rent to Sublessor pursuant to Section 3(a) hereof,
nor shall Sublessee be obligated to reimburse Sublessor for Sublessor's payments
to Master Lessor pursuant to Section 3(d) hereof. Sublessor hereby consents to
the Initial Improvements and acknowledges and agrees that no further consent or
approval from Sublessor is required in connection with the Initial Improvements.
Without limitation, Sublessee shall deliver to

                                       2
<PAGE>   3

Sublessor the copies of liability insurance policies or insurance certificates
as provided in Section 8.5 of the Master Lease, within seven (7) days after the
Sublease Commencement Date.

        3. Rent.

                a. Base Rent. On the Sublease Rent Commencement Date, Sublessee
shall commence paying Base Rent to Sublessor pursuant to this Section 3. The
"SUBLEASE RENT COMMENCEMENT DATE" is the date that is the earlier of: (i) the
date that Sublessee first occupies any portion of the Premises to commence its
business operations, or (ii) August 1, 2001. For the purposes hereof, Sublessor
and Sublessee agree that the Premises consists of 31,620 square feet. The Base
Rent for the Premises to be paid by Sublessee pursuant to this Sublease shall be
paid according to the following schedule:

<TABLE>
<CAPTION>
Sublease Base Rent
------------------
<S>                 <C>           <C>                 <C>
Commencement Date   Through       June 30, 2002       $1.75 per sq. ft. per month NNN*
July 1, 2002        Through       June 30, 2003       $1.80 per sq. ft. per month NNN
July 1, 2003        Through       June 30, 2004       $1.85 per sq. ft. per month NNN
</TABLE>
*Net, Net, Net

For the purposes of this Sublease, the Base Rent to be paid by Sublessee
pursuant to the above-listed schedule during the period that begins on the
Sublease Rent Commencement Date and ends on, and including, June 30, 2002, is
referred to herein as the "COMMENCEMENT YEAR BASE RENT."

                b. Base Rent Prior to August 1, 2001. If the Sublease Rent
Commencement Date is a date earlier than August 1, 2001, then with respect to
the period of time that begins on the Sublease Rent Commencement Date and ends
on, and including, July 31, 2001, the Base Rent due from Sublessee during such
period shall be calculated as follows: (i) the Base Rent shall be fifty percent
(50%) of the Commencement Year Base Rent during the portion of such period when
Sublessee occupies not more than 15,810 square feet of the Premises; and (ii)
the Base Rent shall be one hundred percent (100%) of the Commencement Year Base
Rent during the portion of such period when Sublessee occupies more than 15,810
square feet of the Premises.

                c. Method of Paying Base Rent.

                        (i) Sublessee shall pay Sublessor the Base Rent due
pursuant to this Sublease in monthly installments payable on the first day of
each calendar month, at the address of Sublessor pursuant to Section 16 hereof.
All such Base Rent shall be paid in lawful money of the United States of
America, without deduction or offset except as may otherwise expressly be
provided in this Sublease, and without prior notice or demand.

                        (ii) It shall be Sublessor's obligation, in Sublessor's
capacity as lessee under the Master Lease, to pay Master Lessor the Base Rent
due and payable to Master Lessor pursuant to the Master Lease.

                                       3
<PAGE>   4

                d. Reimbursement of Sublessor's Payments. It shall be
Sublessor's obligation to pay Master Lessor all expenses, costs, fees, and
charges due and payable to Master Lessor (not including Base Rent due under the
Master Lease, which obligation of Sublessor is set forth in Section 3(c)(ii)
hereof) pursuant to the Master Lease in Sublessor's capacity as lessee under the
Master Lease, regarding the Premises, the Building, the Common Areas, and all
other portions of the Industrial Center, and which expenses, costs, fees, and
charges, include, but are not limited to, Operating Expenses, as such term is
defined in Section 4.2(b) of the Master Lease. Sublessee shall reimburse
Sublessor for all of such payments described in the preceding sentence that
Sublessor makes on and after the Sublease Rent Commencement Date pursuant to the
Master Lease, and such reimbursement obligation of Sublessee shall be deemed an
obligation to pay rent; provided, however, that Sublessee shall not be required
to reimburse Sublessor for any late charges, interest, or other monetary
sanctions or charges paid by Sublessor pursuant to the Master Lease which arise
from Sublessor's failure to make payments in full when due pursuant to the
Master Lease, and provided further that Sublessee's obligation to reimburse
Sublessor for Operating Expenses shall not exceed the Operating Expenses that
are due and payable pursuant to the Master Lease. Such reimbursement payments
from Sublessee to Sublessor shall be due within twenty (20) days of Sublessee's
receipt of a billing statement from Sublessor. All such reimbursement payments
to be paid by Sublessee to Sublessor shall be paid in lawful money of the United
States of America, without deduction or offset except as may be otherwise
expressly provided in this Sublease. Provided that Sublessee is not in default
under this Sublease, Sublessee shall be entitled to all credits, if any, given
by Master Lessor to Sublessor for Sublessor's and/or Sublessee's overpayment of
Operating Expenses as such relate to the Sublease Term.

                e. Sublessee's Direct Payments. Without limitation, and
notwithstanding any provisions of the Master Lease to the contrary, Sublessee
acknowledges that Master Lessor does not provide or pay for landscaping
maintenance, trash disposal service, janitorial service, maintenance or repair
of HVAC/Building Systems (as defined in Section 6 hereof) or utilities services
(including telecommunications, water, gas and electricity) with respect to the
Premises, Building, Common Areas or other portions of the Industrial Center.
Sublessee further acknowledges that during the Sublease Term, commencing on the
Sublease Commencement Date, it shall be Sublessee's sole responsibility and
obligation to obtain, provide and pay for landscaping maintenance, trash
disposal service, janitorial service, maintenance and/or repair of HVAC/Building
Systems (as defined in Section 6 hereof) and utilities services (including
telecommunications, water, gas and electricity) with respect to the Premises,
Building, Common Areas and other portions of the Industrial Center (the
foregoing are collectively referred to herein as the "SUBLESSEE'S DIRECT
PAYMENT/SERVICE OBLIGATIONS"). Sublessee further acknowledges that commencing on
the Sublease Commencement Date, Sublessor shall not provide or pay for any of
such maintenance or repair, or such services.

        4. Payment of Sublessee's Base Rent in Advance. Sublessee shall, upon
executing this Sublease and concurrently with its delivery to Sublessor of such
executed Sublease, deliver to Sublessor payment in advance of an amount equal to
the full month's Base Rent that would be due pursuant to this Sublease for the
month of August 2001; i.e., an amount equal to Fifty-Five Thousand Three Hundred
Thirty-Five Dollars ($55,335; the "ADVANCE BASE RENT PAYMENT"). The Advance Base
Rent Payment when received by Sublessor shall be credited to Sublessee's

                                       4
<PAGE>   5

Base Rent due hereunder on August 1, 2001 for the month of August 2001. In the
event that Sublessor does not receive the Master Lessor's Consent in accordance
with Section 17 hereof, such that this Lease is deemed null, void and of no
effect pursuant to such Section 17, then Sublessor shall promptly return to
Sublessee an amount of money equal to the Advance Base Rent Payment.

        5. Security Deposit.

                a. Generally. Within two (2) business days after delivery to
Sublessor of Master Lessor's Consent to this Sublease pursuant to Section 17
hereof, Sublessee shall provide Sublessor with a security deposit in an amount
equal to One Hundred Ten Thousand Six Hundred Seventy Dollars ($110,670; the
"SECURITY DEPOSIT AMOUNT"). Such sum shall serve as security for the full and
faithful performance by Sublessee of every term and condition of this Sublease.
Sublessee in its sole discretion shall have the right to elect whether to
provide the security deposit either in the form of a letter of credit or in
cash, pursuant to Sections 5(b) and 5(c) hereof, respectively. Sublessee
acknowledges and agrees that the security deposit required hereunder, whether in
the form of a Letter of Credit (and the proceeds thereof) or a Cash Security
Deposit, shall not constitute prepaid rent under this Sublease and may not be
applied by Sublessee as rent for the last month of the Sublease Term. To the
extent permitted by law, Sublessee waives the provisions of Section 1950.7 of
the California Civil Code.

                b. Letter of Credit.

                        (i) If Sublessee elects to provide the security deposit
in the form of a letter of credit, Sublessee at its expense shall deliver to
Sublessor an irrevocable and negotiable standby letter of credit in accordance
with Section 5(a) hereof and in an amount equal to the Security Deposit Amount,
in the form attached hereto as Exhibit C and made a part hereof, the terms of
which shall conform to the requirements of this Section 5(b), and which shall be
issued by a nationally recognized commercial bank acceptable to Sublessor as
security for Sublessee's full and faithful performance of every term and
condition of this Sublease (which bank shall maintain an office in the San
Francisco Bay Area to which the letter of credit may be presented by Sublessor
for purposes of immediately drawing therefrom), and which names Sublessor as the
beneficiary thereof (the "LETTER OF CREDIT"). The Letter of Credit shall have an
initial term of not less than one (1) year, and shall provide that the Letter of
Credit shall be renewed automatically unless the issuing bank delivers written
notice to Sublessor at least sixty (60) days prior to the expiration date
thereof advising Sublessor that the issuing bank has elected not to renew the
term of the Letter of Credit (the "BANK'S WRITTEN NOTICE"). The Letter of Credit
shall be renewed by Sublessee through the period ending on August 31, 2004, to
provide Sublessor with security in the event that Sublessee fails to perform all
its obligations pursuant to this Sublease prior to expiration of the Sublease
Term, subject to the Letter of Credit Return Obligation, as defined below. If
(i) the issuing bank shall give the Bank's Written Notice to Sublessor that it
will not renew the Letter of Credit for an additional twelve (12) months beyond
the then current expiry date, and (ii) if, by and including the thirtieth (30th)
day prior to the then current expiry date of the Letter of Credit, Sublessee
fails to renew the Letter of Credit or deposit with Sublessor a replacement
Letter of Credit or deposit with Sublessor a Cash Security Deposit equal to the
Security Deposit Amount, then such occurrence as described in the preceding

                                       5
<PAGE>   6

clauses "(i)" and "(ii)" shall constitute a default hereunder by Sublessee with
no right of Sublessee to cure said default and, upon such occurrence, Sublessor
may draw on the Letter of Credit in its entirety or in part, in Sublessor's
discretion.

                        (ii) In the event of any transfer by Sublessor of its
interest hereunder, upon request by Sublessor, Sublessee shall cause the issuing
bank to issue a new Letter of Credit payable to the benefit of such transferee
in lieu of the original Letter of Credit, which shall thereupon be returned to
Sublessee. Sublessee agrees that provided such transferee assumes Sublessor's
obligations hereunder, Sublessor shall, thereupon, be released from all
liability for the return of the Letter of Credit or any accounting in connection
therewith, and in such event, Sublessee agrees to look solely to the new
Sublessor for the return of the Letter of Credit.

                        (iii) If Sublessee fails to pay rent or other charges or
sums due under this Sublease, or otherwise defaults with respect to any term or
condition of this Sublease, beyond any applicable notice and cure period,
Sublessor may draw on the Letter of Credit in its entirety or in part, and use,
apply or retain all or any portion of the amount drawn for the payment of any
rent or other charges or sums in default or for the payment of any other sum
respecting which Sublessee may be obligated by reason of Sublessee's default, or
to compensate Sublessor for any loss or damage which Sublessor may suffer by
reason of Sublessee's default. If Sublessor draws upon the Letter of Credit
pursuant to this Section 5(b), proceeds therefrom which are in excess of the
amount used, applied or retained shall thereafter be treated as a Cash Security
Deposit. If Sublessor so uses, applies or retains all or any portion of such
funds, Sublessee shall within ten (10) days after delivery of written demand
deposit with Sublessor in cash an amount sufficient to replace any and all
amounts withdrawn under the Letter of Credit, so that the aggregate amount of
the security deposit then on deposit with Sublessor is equal to the Security
Deposit Amount. Any cash so deposited with Sublessor shall thereafter be treated
as a Cash Security Deposit subject to the provisions of Section 5(c) hereof.
Sublessor shall not be required to keep any funds drawn under the Letter of
Credit separate from the general accounts of Sublessor or to pay interest on
said amounts. If Sublessee performs all of Sublessee's obligations under this
Sublease, the Letter of Credit, or so much of the proceeds thereof as have not
theretofore been used, applied or retained by Lessor pursuant to this Section
5(b), shall be returned to Sublessee (or, at Sublessor's option, to the last
assignee or sub-sublessee, if any, of Sublessee's interest under this Lease)
within sixty (60) days after the date that both of the following have been
satisfied: (i) the Sublease Term has expired or the Sublease has been earlier
terminated and (ii) Sublessee has vacated the Premises and is in compliance with
the terms and conditions of this Sublease, including, but not limited to,
compliance with all applicable terms and conditions relating to restoration of
the Premises and condition of the Premises at time of surrender (the foregoing
provisions of this sentence are collectively referred to as the "LETTER OF
CREDIT RETURN OBLIGATION"). No trust relationship is created herein between
Sublessor and Sublessee with respect to the Letter of Credit.

                        (iv) If at any time after the payment by Sublessee to
Sublessor of any amounts required to be paid by Sublessee under this Sublease,
Sublessor is required to return or repay to Sublessee, or any bankruptcy
trustee, receiver, assignee for the benefit of creditors, or similar custodian,
for any reason in connection with the bankruptcy or insolvency of Sublessee, any
rent or any other charges or sums paid by Sublessee to Sublessor pursuant to
this Sublease,

                                       6
<PAGE>   7

then, at Sublessor's election, the Letter of Credit may be drawn upon by
Sublessor and the proceeds thereof applied by Sublessor to offset all or any
portion of the amounts so returned or repaid, and Sublessor's attorney's fees
and expenses in connection therewith. If while a bankruptcy or other insolvency
proceeding is pending, the Letter of Credit's expiration date is scheduled to
occur before Sublessor is required to make any such return or repayment, then no
sooner than thirty (30) days before the Letter of Credit's expiration date
Sublessor may draw on the Letter of Credit in an amount equal to one hundred and
fifty percent (150%) of the sum of all amounts received from Sublessee that
Sublessor reasonably believes may be subject to avoidance under applicable
provisions of the United States Bankruptcy Code, as security therefor and for
Sublessor's reasonable fees and expenses (including, without limitation,
reasonable attorneys' fees) in connection therewith.

                c. Cash Security Deposit. If Sublessee provides the security
deposit in the form of a cash deposit ("CASH SECURITY DEPOSIT"), Sublessee shall
deposit with Sublessor an amount equal to the Security Deposit Amount in
accordance with Section 5(a). If Sublessee fails to pay rent or other charges
due under this Sublease, or otherwise defaults with respect to any term or
condition of this Sublease, beyond any applicable notice and cure period,
Sublessor may in its discretion use, apply or retain all or any portion of such
Cash Security Deposit for the payment of any rent or other charge in default or
for the payment of any other sum respecting which Sublessee may be obligated by
reason of Sublessee's default, or to compensate Sublessor for any loss or damage
which Sublessor may suffer by reason of Sublessee's default. If Sublessor so
uses, applies or retains all or any portion of the Cash Security Deposit,
Sublessee shall within ten (10) days after delivery of written demand deposit
with Sublessor in cash an amount sufficient to replace any and all amounts so
used, applied or retained, so that the aggregate amount of the security deposit
then on deposit with Sublessor is equal to the Security Deposit Amount.
Sublessor shall not be required to keep the Cash Security Deposit separate from
the general accounts of Sublessor or to pay interest on said amounts. If
Sublessee performs all of Sublessee's obligations under this Sublease, the Cash
Security Deposit, or so much thereof as has not theretofore been used, applied
or retained by Lessor pursuant to this Section 5(c), shall be returned to
Sublessee (or, at Sublessor's option, to the last assignee or sub-sublessee, if
any, of Sublessee's interest under this Lease) within sixty (60) days after
expiration or earlier termination of the Sublease Term and after Sublessee has
vacated the Premises in compliance with the terms and conditions of this
Sublease. No trust relationship is created herein between Sublessor and
Sublessee with respect to the Cash Security Deposit.

        6. Condition of Premises. The Premises shall be delivered to Sublessee
upon the Sublease Commencement Date in clean and good working condition
(ordinary wear and tear excepted), including but not limited to, the sewer
line(s) located within the boundaries of the Industrial Center and the HVAC,
electrical, plumbing and all other Building systems serving the Premises and the
Building (such sewer line(s), and such HVAC, electrical, plumbing and all other
Building systems are referred to herein as "HVAC/BUILDING SYSTEMS"). In the
event that the Premises are not so delivered to Sublessee in the condition
described in the preceding sentence, Sublessee shall notify Sublessor in writing
of any deficiencies within thirty (30) days after the Sublease Rent Commencement
Date, and upon receipt of such notice Sublessor, at no expense to Sublessee,
shall promptly commence and pursue to completion such work as reasonably may be
needed to remedy such deficiency. Sublessor represents and warrants to

                                       7
<PAGE>   8

Sublessee that, with respect to improvements, alterations, additions and Utility
Installations (as defined in Section 7.3(a) of the Initial Lease) which were
installed or constructed by or for Sublessee with respect to the Premises, all
such improvements, alterations, additions and Utility Intallations were
installed or constructed in compliance with all laws, ordinances, regulations,
building codes, and necessary permits that were applicable at the time of any
such installation or construction. No other warranties, covenants or
representations are made by Sublessor with respect to the condition of the
Premises. Notwithstanding the foregoing provisions of this Section 6, Sublessor
and Sublessee each acknowledge that the roof of the Building needs to be
replaced, that neither Sublessor nor Sublessee shall have any obligation with
respect thereto, and that Master Lessor shall be solely responsible for
performing and paying for replacement of the roof.

        7. Use. Sublessee shall use the Premises solely for the purposes of
general office use, research and development, laboratory, storage, and
distribution of medical products and other legal uses conforming with zoning and
use requirements of the City of Foster City, and for no other purpose whatsoever
without the prior written consents of Sublessor and the Master Lessor.

        8. Incorporation of the Master Lease.

                a. Sublease Is Subject to Master Lease. This Sublease is subject
to and subordinate to the Master Lease. Sublessee shall not commit or permit to
be committed on or in the Premises, the Building, the Common Areas or any other
portions of the Industrial Center any act or omission which shall violate any of
the terms or conditions of the Master Lease as set forth in Exhibit A hereto.
Except as otherwise expressly provided herein, all the terms and conditions
contained in the Master Lease are hereby incorporated as terms and conditions of
this Sublease (with each reference in the Master Lease to "Lessor" and "Lessee"
to be deemed to refer to Sublessor and to Sublessee, respectively, hereunder,
and all references to the term "Lease" to be deemed to refer to this Sublease),
and along with all of the terms and conditions set forth herein, shall be the
complete terms and conditions of this Sublease. Except as otherwise provided in
this Sublease, Sublessee assumes and agrees to perform for the benefit of Master
Lessor and Sublessor all obligations of Sublessor, as lessee, under the Master
Lease which accrue on or after the Sublease Commencement Date. The termination
of the Master Lease shall, at Master Lessor's sole option and except as Master
Lessor shall otherwise have previously agreed in writing with Sublessee,
constitute a termination of the Sublease. Notwithstanding any other provision of
this Sublease, with respect to incorporating the Master Lease into this
Sublease, the following provisions of the Master Lease are not incorporated into
this Sublease: Article 1, Sections 3.1 and 3.3 of the Initial Lease, Sections
48, 49, 50, 56, 57, 59, 60 and 61 of the Addendum to the Initial Lease, Sections
64, 65, 66, 69 and 70 of Addendum 2, all of Addendum 3, Paragraph 3 of Addendum
4, and Exhibit B of the Initial Lease. References to "Lessor" in the following
sections of the Initial Lease and Addendum attached thereto shall mean Master
Lessor only, provided that the foregoing shall not relieve Sublessee of its
obligations under any such sections, all of which obligations have been
incorporated into this Sublease and shall be enforceable by Sublessor: 2.5, 2.6,
Article 9, 10, 11, 17, 30, 32 (except that Sublessor shall also have the right
to enter the Premises at reasonable times to make inspections of same, and such
activity of Sublessor shall be without abatement of Sublessee's rent, nor shall
Sublessor have any

                                       8
<PAGE>   9

liability to Sublessee for same, subject to the provisions of Section 9(b) of
this Sublease), 33, 34, 41, 54, and 55.

                b. Sublessor Is not Responsible for Obligations of Master
Lessor. Notwithstanding any other term or condition of this Sublease, Sublessor
shall not in any way be responsible for any representations made by Master
Lessor, or any obligations or services to be fulfilled, performed or furnished
by Master Lessor under the Master Lease, including, but not limited to, the
performance or furnishing of any insurance, maintenance, repair or replacement
matters regarding the Premises, Building, Common Areas or any other portions of
the Industrial Center, and Sublessee hereby agrees to look solely to Master
Lessor with respect to such representations, and for the fulfillment,
performance and furnishing of any and all such obligations and services. If
Master Lessor defaults on an obligation under the Master Lease, then (i) upon
receipt of Sublessee's written request, Sublessor shall promptly notify Master
Lessor of its nonperformance under the Master Lease, and (ii) Sublessee shall
have the right in the name of the Sublessor to bring an action directly against
Master Lessor, or if such an action cannot be brought, then Sublessee shall be
entitled to participate in an action brought by Sublessor at Sublessee's written
request, provided that any such notice, any such action (whether brought by
Sublessee or Sublessor), and any such participation in same by Sublessee and
Sublessor shall be at Sublessee's sole expense, and further that Sublessee shall
indemnify, defend and hold Sublessor harmless against any and all claims,
actions, liabilities, losses, judgments, orders, costs and expenses (including,
but not limited to, reasonable attorney's fees) arising from the giving of any
such notice and/or arising from any such action brought by Sublessee or
Sublessor at Sublessee's request.

                c. Special Incorporation of Section 12.4 of Initial Lease. This
Section 8(c) is set forth pursuant to requirements imposed on Sublessor by
Section 12.4 of the Initial Lease, and is in addition to the incorporation of
such Section 12.4 pursuant to Section 8(a) hereof. An excerpted copy of such
Section 12.4 is attached hereto as Exhibit B and is incorporated herein. For the
purposes of such incorporation and this Section 8(c), the term "Lessor" as set
forth in such Section 12.4 shall refer to Master Lessor, the term "Lessee" as
set forth in such Section 12.4 shall refer to Sublessor, and the term
"sublessee" as set forth in such Section 12.4 shall refer to "Sublessee."

        9. Indemnity.

                a. Sublessee's Indemnity. Except to the extent caused by the
negligence or willful misconduct of Sublessor or its employees, contractors,
agents or invitees, Sublessee shall indemnify, protect, defend with counsel
reasonably acceptable to Sublessor and hold harmless Sublessor from and against
any and all claims, liabilities, judgments, causes of action, damages, costs,
and expenses (including reasonable attorneys' and experts' fees and costs),
caused by or arising from: (i) the use, occupancy or condition of the Premises
first occurring during the Sublease Term; (ii) the negligence or willful
misconduct of Sublessee or its employees, contractors, agents or invitees; (iii)
a breach of Sublessee's obligations under this Sublease; or (iv) a breach of
Sublessee's obligations under the Master Lease, as incorporated herein. The
obligations of Sublessee under this Section 9(a) shall survive the expiration or
earlier termination of this Sublease.

                                       9
<PAGE>   10

                b. Sublessor's Indemnity. Except to the extent caused by the
negligence or willful misconduct of Sublessee or its employees, contractors,
agents or invitees, Sublessor shall indemnify, protect, defend with counsel
reasonably acceptable to Sublessee and hold harmless Sublessee from and against
any and all claims, liabilities, judgments, causes of action, damages, costs,
and expenses (including reasonable attorneys' and experts' fees and costs),
caused by or arising from: (i) the negligence or willful misconduct of Sublessor
or its employees, contractors, agents or invitees; (ii) a breach of Sublessor's
obligations under this Sublease; or (iii) a breach of Sublessor's obligations
under the Master Lease, to the extent those obligations are not the obligations
of Sublessee under the Master Lease as incorporated herein. The obligations of
Sublessor under this Section 9(b) shall survive the expiration or earlier
termination of this Sublease.

        10. Right to Cure Defaults.

                a. Sublessor's Right to Cure. If Sublessee fails to pay any sum
of money to Sublessor, or fails to perform any other act on its part to be
performed hereunder, then Sublessor may, but shall not be obligated to, make
such payment or perform such act. All such sums paid, and all costs and expenses
of performing any such act, shall be deemed additional rent payable by Sublessee
to Sublessor upon demand. In addition, Sublessee shall pay to Sublessor interest
on all amounts due and payable to Sublessor hereunder at the maximum rate then
allowed by law from the due date to and including the date of the payment by
Sublessee to Sublessor.

                b. Sublessee's Right to Cure. If Sublessor defaults in the
performance or observance of any of Sublessor's of obligations under the Master
Lease that are not obligations of Sublessee pursuant to this Sublease,
Sublessee, upon receipt of written notice from Master Lessor of the occurrence
of such default, shall have the right, but not the obligation, to cure such
default on behalf of Sublessor. If Sublessee cures any such default, then
Sublessee shall be entitled to promptly collect from Sublessor Sublessee's
reasonable expenses in so doing (including, without limitation, court costs, the
reasonable cost to effect such cure, and reasonable attorney's fees) or, at
Sublessee's option, to offset such reasonable expenses against future payments
of rent due under the Sublease.

        11. Assignment and Subletting. Sublessee may not assign this Sublease,
sub-sublet the Premises, transfer any interest of Sublessee therein, nor permit
any use of the Premises by another party ("TRANSFER"), without the prior written
consents of Sublessor and Master Lessor, with respect to those Transfers for
which "Lessor's" consent is required pursuant to the Master Lease. Without
limitation, any such Transfer shall be in accordance with Section 12 of the
Initial Lease and Section 53 of the addendum attached to the Initial Lease. With
respect to a Transfer, only Master Lessor shall be entitled to receive
"Lessor's" share of "excess monies and other consideration or value," as set
forth in Section 54 of the addendum attached to the Initial Lease. Sublessee
may, without Sublessor's prior written consent, without any right of Sublessor
to terminate this Sublease, and without payment of any amount to Sublessor,
sublet the Premises or assign the Sublease to (i) a person, corporation or other
entity pursuant to the provisions of Section 12.2 (entitled "Lessee Affiliate")
of the Initial Lease, or (ii) a person, corporation or other entity who acquires
substantially all of Sublessee's outstanding shares of stock.

                                       10
<PAGE>   11

Sublessor's and Master Lessor's written consents to one Transfer shall not be
deemed consents to any subsequent Transfer. Notwithstanding any Transfer, and
whether or not consent of Sublessor or Master Lessor is required with respect to
any such Transfer, Sublessee shall not be relieved of any of its obligations
under this Sublease.

        12. Conflict. If any terms of the Master Lease contradict the terms of
this Sublease, the terms of this Sublease shall control over the Master Lease,
as between Sublessor and Sublessee.

        13. Sublessor's Representations. Sublessor represents and warrants to
Sublessee that the Master Lease is in full force and effect, and there exists
under the Master Lease no default by Sublessor, nor has there occurred any event
which, with the giving of notice or passage of time, or both, could constitute
such a default or event of default by Sublessor. Sublessor represents and
warrants to Sublessee that, to the knowledge of Sublessor, (i) there is no
pending or threatened condemnation proceeding or similar proceeding affecting
any portion of the Premises or any part thereof, (ii) Sublessor has not received
any notice from any insurance company of any defects or inadequacies in the
Premises or any part thereof which could materially and adversely affect the
insurability of the Premises or the premiums for the insurance thereof, and
(iii) there are no pending or threatened actions, suits or proceedings before
any court or administrative agency against Sublessor, Master Lessor or the
Premises, which could, in the aggregate, adversely affect the Premises or any
part thereof or the ability of Master Lessor or Sublessor to perform their
respective obligations under the Master Lease or Sublessor to perform its
obligations under the Sublease.

        14. Parking. Sublessee shall have all parking rights in the Common Areas
with respect to the Premises that accrue to Sublessor's use as lessee under the
Master Lease. Sublessor advises Sublessee that, to Sublessor's knowledge and for
informational purposes only, as of the Reference Date, there are approximately
eighty-five (85) car parking spaces available in the Common Areas for
Sublessor's use as lessee under the Master Lease. Notwithstanding the foregoing,
Sublessee acknowledges that Sublessee has made, and is relying solely on, its
own inspection of such Common Areas and car parking spaces.

        15. Signage. Sublessee shall not install any signage without the express
written approval of Sublessor and Master Lessor.

        16. Notices:

                Any notices or other written communications required or to be
delivered pursuant to this Sublease shall be delivered pursuant to Section 23 of
the Master Lease, as incorporated

                                       11
<PAGE>   12

herein, and as follows:

                  If to Sublessor:
                  Axon Instruments, Inc.
                  3280 Whipple Road
                  Union City, CA  94587
                  Attn:  Controller
                  Facsimile:  (510) 675-6300

                  If to Sublessee:
                  Argonaut Technologies, Inc.
                  887 Industrial Road, Suite G
                  San Carlos, CA  94070
                  Attn: Elizabeth Mitchell
                  Facsimile:  (650) 598-1359

                  If to Master Lessor:
                  Gee, LLC
                  P.O. Box 8262
                  Foster City, CA  94404
                  Attn:  Glen Gee

        17. Consent of Master Lessor. This Sublease and Sublessor's and
Sublessee's obligations hereunder (except Sublessee's obligation to deliver the
Advance Base Rent Payment to Sublessor pursuant to Section 4 hereof) are
expressly conditioned upon obtaining the signed, written consent of the Master
Lessor in form and content acceptable to Sublessor and Sublessee in their
respective discretion (the "MASTER LESSOR'S CONSENT"). The parties hereto agree
that the form and content of Master Lessor's Consent shall be deemed acceptable
to each of them if Master Lessor executes the "Master Lessor's Consent" attached
as Exhibit D hereto. This Sublease shall be deemed null, void and of no effect
unless Master Lessor's Consent is received by Sublessor within fourteen (14)
days after the date that Sublessor delivers to Master Lessor an original or copy
of this Sublease that has been executed by Sublessee and Sublessor, for Master
Lessor's review and consent. Sublessor shall promptly notify Sublessee upon
Sublessor's receipt of Master Lessor's Consent.

        18. Environmental.

                (a) Sublessee's Obligations. Sublessee at its expense shall
strictly and diligently comply with all governmental directives, requirements,
rules, regulations permits, orders, laws, ordinances, and judgments
(collectively, "ENVIRONMENTAL LAWS") that apply to any toxic or hazardous
substances, wastes or materials (including petroleum) that are regulated by any
governmental entity (collectively, "HAZARDOUS SUBSTANCES") and that are
released, disposed, used, handled, stored, generated, transported, brought, or
emitted (collectively, "HANDLING" or "HANDLED") on, in or at the Premises, the
Building, the Common Areas or other portions of the Industrial Center during the
Sublease Term. Notwithstanding any other provision of this Sublease or the
Master Lease, Sublessee shall have no liability or obligations under this

                                       12
<PAGE>   13

Sublease with respect to any Handling of any Hazardous Substances on, in or at
the Premises, the Building, the Common Areas or other portions of the Industrial
Center which occurred prior to the Sublease Commencement Date. Without
limitation, Sublessee shall indemnify, defend and hold Sublessor, its officers,
directors, employees, successors and assigns harmless from and against any
claims, judgments, orders, government directives, losses, expenses, costs
(including reasonable attorneys' and experts' fees and costs) or liability
arising from the Handling of any Hazardous Substances on, in or at the Premises,
the Building, the Common Areas or other portions of the Industrial Center during
the Sublease Term, including, but not limited to, any failure of Sublessee to
comply with the terms and conditions of the immediately preceding sentence.
Without limitation, prior to expiration or earlier termination of the Sublease
Term, Sublessee at its expense shall diligently clean and remove off-site (and
shall repair any damage resulting from such removal), in compliance with
applicable Environmental Laws, (i) all Hazardous Substances-related equipment
and personal property Handled during the Sublease Term, and (ii) all Hazardous
Substances that were Handled on, in or at the Premises, the Building, the Common
Areas or other portions of the Industrial Center during the Sublease Term. This
Section 18(a) shall not apply to any non-compliance with Environmental Laws or
any Handling of Hazardous Substances, to the extent the same occurred on, in or
at the Premises, the Building, the Common Areas or other portions of the
Industrial Center prior to the Sublease Commencement Date.

                (b) Sublessor's Indemnity. Sublessor shall indemnify, defend and
hold Sublessee, its officers, directors, employees, successors and assigns
harmless from and against any claims, judgments, orders, government directives,
losses, expenses, costs (including reasonable attorneys' and experts' fees and
costs) or liability arising from the Handling by Sublessor of any Hazardous
Substances on, in or at the Premises, the Building, the Common Areas or other
portions of the Industrial Center.

                (c) Assessment Reports. Sublessor acknowledges that as of the
Reference Date, Sublessor has delivered to Sublessee copies of all environmental
assessment reports in Sublessor's possession, if any, pertaining to the
Premises.

                (d) Survival. The obligations of Sublessee under this Section 18
shall survive the expiration or earlier termination of this Sublease.

        19. Sublessor's Covenants. Sublessor (i) shall not, in its capacity as
lessee under the Master Lease, modify, amend or take any affirmative action to
waive any provisions of the Master Lease nor grant any consent or approval
thereunder without, in each instance, Sublessee's prior written consent, and
(ii) shall not take any affirmative action that could cause or constitute a
breach of the Master Lease or otherwise give rise to a right of Master Lessor to
terminate the Master Lease.

        20. Severability. If any term of this Sublease is held to be invalid or
unenforceable by any court of competent jurisdiction, then the remainder of this
Sublease shall remain in full force and effect to the fullest extent possible
under the law, and shall not be affected or impaired.

                                       13
<PAGE>   14

        21. Amendment. This Sublease may not be amended except by a written
agreement of all parties hereto.

        22. Waiver of Subrogation. Notwithstanding anything to the contrary
contained in the Sublease or the Master Lease, Sublessor and Sublessee each
release the other and their respective agents, employees, successors, assignees
and subtenants from all liability for injury to any person or damage to any
property that is caused by or results from a risk which is actually insured
against, which is required to be insured against under the Sublease or the
Master Lease, or which would normally be covered by an "all risk" property
insurance policy, without regard to the negligence or willful misconduct of the
person or entity so released.

        23. Notice of Default Received from Master Lessor. Sublessor and
Sublessee each covenant to the other to promptly deliver to each other by
facsimile if possible, or to deliver in person, copies of any notice of default
received from Master Lessor.

        24. Brokers. CB Richard Ellis is both the listing and procuring broker
for Sublessor and Sublessee, respectively. The broker shall be compensated
according to the terms and conditions of a separate agreement. Except as
referred to in the preceding provisions of this Section 24, each party
represents and warrants to the other that it has not dealt with any broker or
agent in connection with this transaction. Each party hereby indemnifies and
holds harmless the other party from all cost, loss, and expense (including
reasonable attorneys' fees) arising out of a breach of its representation set
forth in this Section 24. The terms and conditions of this Section 24 shall
survive the expiration or termination of this Sublease.

        25. Miscellaneous.

                a. Insurance. The minimum limits of insurance that Sublessee
shall be required to carry hereunder pursuant to Section 8.1 of the Master
Lease, incorporated herein, shall be One Million Dollars ($1,000,000) per
occurrence, and Two Million Dollars ($2,000,000) in the annual aggregate.
Sublessor and Master Lessor shall be named as additional insureds by endorsement
to such policy or policies, evidence of which shall be provided to Sublessor and
Master Lessor concurrently with the required certificates of insurance.
Sublessee shall further obtain and keep in force during the Sublease Term
workers' compensation insurance as required by applicable laws.

                b. Holding Over. In addition to the terms and conditions of
Section 26 of the Initial Lease, if Sublessee fails to surrender the Premises or
any part thereof after expiration or earlier termination of the Sublease Term
without the express written consent of Sublessor and Master Lessor, then
Sublessee's possession shall be deemed a tenancy at sufferance. Sublessee's
possession during the holdover shall be subject to all of the terms and
conditions of this Sublease, and during such holdover period Sublessee shall pay
Sublessor a monthly payment (on a per month basis without reduction for partial
months during the holdover) in an amount equal to one hundred fifty percent
(150%) of the amount of the monthly Base Rent installment due during the final
year of the Sublease Term. No holdover by Sublessee and no payment by Sublessee
to Sublessor during the holdover period shall be construed to extend the
Sublease Term or prevent Sublessor from pursuing and recovering any and all
remedies and damages to

                                       14
<PAGE>   15

which Sublessor is entitled under applicable law and/or this Sublease. Without
limitation, Sublessee shall be liable to Sublessor for any and all damages,
including without limitation consequential damages, that Sublessor incurs or
suffers from the holdover.

                c. Damage or Destruction; Condemnation. To the extent the Master
Lease gives Sublessor any right to terminate the Master Lease in the event of a
casualty or condemnation affecting the Premises, and provided Sublessee is not
in default under this Sublease (beyond the applicable notice and cure period, if
any), Sublessor shall not cancel or terminate the Master Lease without the prior
written consent of Sublessee, in Sublessee's sole discretion. Provided that
Sublessee is not in default under this Sublease (beyond the applicable notice
and cure period, if any), Sublessee shall have the right to terminate the
Sublease hereunder if, and to the same extent, Sublessor has the right to
terminate the Master Lease thereunder. Notwithstanding any other provisions of
this Sublease, if the Premises are condemned or damaged by any event of
casualty, then Sublessee shall have the right, at its option, to terminate the
Sublease if the Premises cannot be, or are not in fact, fully restored to their
prior condition within one hundred eighty (180) days after the condemnation or
event of casualty, such notice of termination to be delivered to Sublessor by
not later than, and including, the one hundred eighty-fifth (185th) day after
the condemnation or event of casualty.

                d. Abatement of Rent. Sublessee shall be entitled to, and
benefit from, any rental abatement granted Sublessor pursuant to the Initial
Lease for whatever reason to the extent that such abatement relates to the
Premises and the Sublease Term, provided, however, such rental abatement shall
not relieve Sublessor of any other payment obligations under this Sublease.

        IN WITNESS WHEREOF, the parties have executed this Sublease as of the
Reference Date.

SUBLESSOR:
AXON INSTRUMENTS, INC., a California corporation

By: ______________________                   By:  __________________________
Its: _____________________                   Its:   ________________________

SUBLESSEE:
ARGONAUT TECHNOLOGIES, INC., a Delaware corporation

By: ______________________
Its: _____________________

                                       15
<PAGE>   16

                                    EXHIBIT A

                                  MASTER LEASE

                                       16
<PAGE>   17

                                    EXHIBIT B

                          SECTION 12.4 OF INITIAL LEASE

                                       17
<PAGE>   18

                                    EXHIBIT C

                                LETTER OF CREDIT

TELEX: _________________________                   [BANK]
SWIFT: _________________________                   [DEPT]
FAX: ___________________________                   [ADDRESS]
                                                   [CITY, STATE, ZIP]

BENEFICIARY:                                       DATE OF ISSUE: MAY ____, 2001

AXON INSTRUMENTS, INC.
3280 WHIPPLE ROAD
UNION CITY, CA  94587
ATTN:  CONTROLLER

WE HEREBY OPEN OUR IRREVOCABLE STANDBY LETTER OF CREDIT NO. __________ IN FAVOR
OF AXON INSTRUMENTS, INC., A CALIFORNIA CORPORATION ("BENEFICIARY"), FOR ACCOUNT
OF ARGONAUT TECHNOLOGIES, INC., A DELAWARE CORPORATION, 887 INDUSTRIAL ROAD,
SUITE G, SAN CARLOS, CA 94070, FOR THE SUM OF USD$110,670.00 (ONE HUNDRED TEN
THOUSAND SIX HUNDRED SEVENTY AND 00/100'S U.S. DOLLARS) AVAILABLE IN ITS
ENTIRETY BY BENEFICIARY'S DRAFT AT SIGHT ON [BANK], WHEN ACCOMPANIED BY:

+ BENEFICIARY'S STATEMENT SIGNED BY AN OFFICER OF BENEFICIARY READING PRECISELY
AS FOLLOWS: "ARGONAUT TECHNOLOGIES, INC. IS IN DEFAULT AFTER EXPIRATION OF ALL
APPLICABLE CURE PERIODS, IF ANY, OF THE SUBLEASE (THE "SUBLEASE") DATED MAY____,
2001, BETWEEN AXON INSTRUMENTS, INC. AND ARGONAUT TECHNOLOGIES, INC., AND NOTICE
OF DEFAULT (IF REQUIRED BY THE SUBLEASE) HAS BEEN SENT IN ACCORDANCE WITH THE
TERMS OF THE SUBLEASE TO ARGONAUT TECHNOLOGIES, INC.

PARTIAL DRAWINGS ARE PERMITTED.

THIS LETTER OF CREDIT SHALL AUTOMATICALLY RENEW, WITHOUT AMENDMENT FOR
ADDITIONAL SUCCESSIVE ONE YEAR PERIODS FROM ITS CURRENT EXPIRY DATE UNLESS
[BANK] NOTIFIES THE BENEFICIARY IN WRITING BY CERTIFIED MAIL AT THE ABOVE
ADDRESS, AT LEAST SIXTY (60) DAYS PRIOR TO SUCH EXPIRATION DATE OF ITS INTENTION
NOT TO RENEW FOR SAID ADDITIONAL SUCCESSIVE ONE YEAR PERIODS. UPON NOTIFICATION
OF SUCH ELECTION, BENEFICIARY MAY DRAW ON THIS CREDIT BY PRESENTATION OF THE
SIGHT DRAFT MENTIONED ABOVE.

ANY DRAFT DRAWN UNDER THIS CREDIT MUST BE MARKED "DRAWN UNDER [BANK'S] LETTER OF
CREDIT NO. _________."

THIS LETTER OF CREDIT SHALL EXPIRE ON THE CLOSE OF OUR CUSTOMARY BUSINESS HOURS
ON AUGUST 31, 2004.

THIS LETTER OF CREDIT IS SUBJECT TO AND GOVERNED BY THE UNIFORM CUSTOMS AND
PRACTICE FOR DOCUMENTARY CREDITS OF THE INTERNATIONAL CHAMBER OF COMMERCE, 1993
REVISION, PUBLICATION 500.

THIS ORIGINAL LETTER OF CREDIT AND ALL AMENDMENTS THERETO MUST BE SUBMITTED TO
US TOGETHER WITH ANY DRAWINGS HEREUNDER FOR OUR ENDORSEMENT OF ANY PAYMENTS
EFFECTED BY US AND/OR CANCELLATION.

WE ENGAGE WITH BENEFICIARY THAT EACH DRAFT DRAWN UNDER AND IN COMPLIANCE WITH
THE TERMS OF THIS LETTER OF CREDIT WILL BE DULY HONORED ON DELIVERY OF THE
DOCUMENTS AS SPECIFIED IF

                                       18
<PAGE>   19

PRESENTED AT THIS OFFICE ON OR BEFORE ___________________ [INITIAL EXPIRATION
DATE], OR SUCH LATER EXPIRATION DATE PURSUANT TO AN AUTOMATIC EXTENSION AS
PROVIDED ABOVE.

                                       YOURS VERY TRULY,

__________________________
AUTHORIZED SIGNATURE

                                       19
<PAGE>   20

                                    EXHBIT D

                             MASTER LESSOR'S CONSENT

        The undersigned, as Master Lessor, hereby consents to that certain
Sublease dated as of May 22, 2001, between Axon Instruments, Inc., as Sublessor,
and Argonaut Technologies, Inc., as Sublessee, to which this Exhibit D is
attached, on the terms and conditions set forth therein, including, but not
limited to, Section 8(c) thereof. Except as otherwise set forth below,
capitalized terms used herein shall have the same meaning as set forth in the
Sublease.

        (a) In the event that Sublessor defaults in the performance or
observance of any of Sublessor's obligations under the Master Lease, Master
Lessor hereby agrees to deliver to Sublessee, at the same time and in the same
manner as delivered to Sublessor, a copy of any notice of default required to be
delivered to Sublessor under the Master Lease. Master Lessor further agrees that
Sublessee shall have the right, but not the obligation, on behalf of Sublessor
to cure any default stated in such notice within the time available to Sublessor
to cure any such default under the Master Lease, and Master Lessor shall accept
such cure from Sublessee.

        (b) If the Master Lease terminates prior to the expiration of the
Sublease Term for any reason other than as a result of Master Lessor's right to
terminate the Master Lease for casualty or condemnation pursuant to the Master
Lease, Master Lessor covenants and agrees that the Sublease shall continue in
full force and effect, at Sublessee's option, as a direct lease between Master
Lessor and Sublessee upon all of the terms, covenants and conditions of the
Sublease, and Master Lessor shall recognize Sublessee's right to possession of
the Premises as provided in the Sublease and shall not disturb Sublessee's right
to possession so long as Sublessee is not in default under the Sublease beyond
the applicable notice and cure period, if any.

        (c) Pursuant to Section 7.3(a) of the Initial Lease, Master Lessor
hereby consents to Sublessee's construction and installation of certain
improvements ("INITIAL IMPROVEMENTS") to the interior of the Premises, which may
include (i) recarpeting and repainting existing offices; (ii) removal of
interior walls in shipping and receiving area of the Premises; and (iii)
construction of approximately 4,000 square feet of laboratory space at the
location of the existing laboratory in the Building. Such Initial Improvements
shall be constructed by C.P. Construction, license no. _________, or another
licensed contractor approved by Master Lessor (which approval shall not be
unreasonably withheld or delayed), in a good and workmanlike manner, free from
liens, and in compliance with all applicable laws and regulations. Sublessee
shall deliver to Master Lessor a copy of Sublessee's preliminary plans for such
Initial Improvements, and Sublessee shall not construct such Initial
Improvements without Master Lessor's prior approval of such plans. Master Lessor
shall not unreasonably withhold or delay any such approval, and any failure of
Master Lessor to respond in writing within ten (10) business days of Sublessee's
delivery of such plans to Master Lessor shall be deemed to constitute Master
Lessor's approval of such plans. Any disapproval of Sublessee's plans must be
made in reasonable detail, and shall only be based upon the differences between
such plans and the general intent of Sublessee as expressed in this paragraph,
and Master Lessor shall negotiate with Sublessee in good faith to resolve any
differences regarding such plans. Notwithstanding any

                                       20
<PAGE>   21

other provisions of the Sublease or Master Lease, and without limitation, and
with respect to any DI water system, lab casework (including, but not limited
to, lab cabinetry and table tops), vacuum pumps, chemistry hoods, and fixtures
in the reception area (including but not limited to custom furniture which may
be attached to the floor in such area) that Sublessee's installs or constructs
at the Premises in accordance with the Sublease (including the Master Lease as
incorporated therein), Sublessee shall have the right to elect, at its sole
option, to (i) surrender any such improvements as part of the Premises at
expiration or earlier termination of the Sublease Term, or (ii) surrender the
Premises with any such improvements removed by Sublessee and any damage caused
by such removal repaired (such removal and repair to be at Sublessee's sole
expense) at expiration or earlier termination of the Sublease Term.

        (d) During the Sublease Term, the provisions of Section 22 (entitled
"Waiver of Subrogation") of the Sublease shall be deemed to additionally apply
as between Master Lessor and Sublessee.

        (e) Master Lessor's consent as granted hereunder does not constitute
consent to any further sublease of the Premises, and Master Lessor reserves the
right to approve or disapprove any further sublease to the extent it is entitled
to do so under the Master Lease. Nothing contained in the Sublease shall be
deemed to release Sublessor from its liability to Master Lessor under the Master
Lease. Whenever the consent or approval of Master Lessor is required with
respect to the Sublease or the Premises, such consent or approval shall not be
unreasonably withheld or delayed.

        (f) Notwithstanding anything herein or in the Sublease or Master Lease
to the contrary, the provisions of Section 11 (entitled "Assignment and
Subletting") of the Sublease shall additionally apply as between Master Lessor
and Sublessee. With respect to a Transfer (as defined in such Section 11 of the
Sublease), only Master Lessor shall be entitled to receive "Lessor's" share of
"excess monies and other consideration or value," as set forth in Section 54 of
the addendum attached to the Initial Lease, provided however, that any such
"excess monies" shall be calculated after first subtracting brokerage fees,
legal expenses, and the unamortized cost of Alterations paid for by Sublessee.

        (g) Master Lessor acknowledges that the roof of the Building needs to be
replaced, that such roof replacement work and the cost thereof is an obligation
of Master Lessor under the Initial Lease, and accordingly Master Lessor
covenants to each of Sublessor and Sublessee that Master Lessor shall cause all
such roof replacement work to be completed by no later than August 31, 2001, at
Master Lessor's sole expense.

        (h) Master Lessor hereby certifies to Sublessee that the Master Lease is
in full force and effect, and there exists under the Master Lease no default by
Master Lessor, nor has there

                                       21
<PAGE>   22

occurred any event which, with the giving of notice or passage of time, or both,
could constitute such a default or event of default by Master Lessor.

Dated:  May ___, 2001                   MASTER LESSOR:
                                        GEE, LLC, a __________ limited liability
                                        company

                                        By:_____________________________________
                                        Its:____________________________________

Agreed and accepted as aforesaid
as of the ____ day of May, 2001

Axon Instruments, Inc.,
a California Corporation

By:______________________________       By:_____________________________________
Its:_____________________________       Its:____________________________________

Argonaut Technologies, Inc.,
a Delaware corporation

By:______________________________
Its:_____________________________

                                       22

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00028-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00028-of-00352.parquet"}]]