Document:

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                                                                 EXHIBIT 10.23

                                                                  FINAL: 8/24/92

                    SINGLE TENANT INDUSTRIAL LEASE AGREEMENT

                                     between

                         SHUWA INVESTMENTS CORPORATION,

                            a California corporation

                                    "Lessor"

                                       and

                             READ-RITE CORPORATION,

                             a Delaware corporation

                                    "Lessee"

                                  dated as of

                                August 24, 1992

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                                TABLE OF CONTENTS

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                                                                                                                    PAGE
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<S>                                                                                                                 <C>
1.  Parties ......................................................................................................    1

2.  Premises .....................................................................................................    1

3.  Term .........................................................................................................    1
    3.1.  Term ...................................................................................................    1
    3.2.  [INTENTIONALLY OMITTED] ................................................................................    2
    3.3.  Condition of Premises ..................................................................................    2
    3.4.  Early Possession .......................................................................................    3
    3.5.  Conditions Precedent to Commencement of Lease Term .....................................................    3

4.  Rent .........................................................................................................    5
    4.1.  Base Rent ..............................................................................................    5
    4.2.  Operating Expenses .....................................................................................    5
    4.3.  Operating Expense Statements ...........................................................................    9
    4.4.  Lessor's Obligation to Maintain Structural Elements of Building ........................................   10
    4.5.  Lessee's Right to Contest ..............................................................................   10

5.  Security Deposit .............................................................................................   11

6.  Use ..........................................................................................................   12
    6.1.  Use ....................................................................................................   12
    6.2.  Compliance with Law ....................................................................................   12

7.  Maintenance, Repairs and Alterations..........................................................................   12
    7.1.  Lessor's Obligations ...................................................................................   12
    7.2.  Lessee's Obligations ...................................................................................   14
    7.3.  Environmental Matters ..................................................................................   15
    7.4.  Alterations and Additions ..............................................................................   22
    7.5.  Lessor Advances for Initial Improvements ...............................................................   24

8.  Insurance; Indemnity .........................................................................................   25
    8.1.  Insurance - Lessee .....................................................................................   25
    8.2.  Insurance - Lessor .....................................................................................   26
    8.3.  General Insurance Matters ..............................................................................   26
    8.4.  Waiver of Subrogation ..................................................................................   27
    8.5.  Indemnity ..............................................................................................   27
    8.6.  Exemption from Liability ...............................................................................   28

9.  Damage or Destruction ........................................................................................   29
    9.1.  Definitions ............................................................................................   29
    9.2.  Premises Partial Damage  ...............................................................................   29
    9.3.  Premises Total Destruction .............................................................................   30
    9.4.  Damage Near End of Term ................................................................................   31
    9.5.  Abatement of Rent; Lessee's Remedies ...................................................................   32
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<S>                                                                                                                   <C>
     9.6.  Termination - Advance Payments .........................................................................   32
     9.7.  Waiver .................................................................................................   32
     9.8.  Adjustment of Claims ...................................................................................   32

10.  Personal Property Taxes ......................................................................................   32

11.  Utilities ....................................................................................................   33

12.  Assignment and Subletting ....................................................................................   33
     12.1. Lessor's Consent Required ..............................................................................   33
     12.2. Terms and Conditions of Assignment......................................................................   34
     12.3. Terms and Conditions Applicable to Subletting ..........................................................   35
     12.4. Bonus Rent .............................................................................................   36
     12.5. Attorney's Fees ........................................................................................   37
     12.6. Remedy .................................................................................................   37

13.  Default; Remedies ............................................................................................   38
     13.1. Default ................................................................................................   38
     13.2. Remedies ...............................................................................................   39
     13.3. Late Charges ...........................................................................................   40

14.  Condemnation .................................................................................................   40

15.  Estoppel Certificate .........................................................................................   41

16.  Lessor's Liability ...........................................................................................   42
     16.1. Limitation on Lessor Liability .........................................................................   42
     16.2. Lessor Liability for Environmental Conditions ..........................................................   42

17.  Severability .................................................................................................   44

18.  Interest on Past-Due Obligations .............................................................................   44

19.  Time of Essence ..............................................................................................   44

20.  Additional Rent ..............................................................................................   44

21.  Incorporation of Prior Agreements; Amendments ................................................................   44

22.  Notices ......................................................................................................   45

23.  Waivers ......................................................................................................   45

24.  Recording ....................................................................................................   45

25.  Holding Over .................................................................................................   45

26.  Cumulative Remedies ..........................................................................................   46

27.  Covenants and Conditions .....................................................................................   46

28.  Binding Effect; Choice of Law ................................................................................   46
</TABLE>

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<TABLE>
<S>                                                                                                                      <C>
29.  Subordination/Mortgagee Right to Cure ...........................................................................   46
     29.1   Subordination ............................................................................................   46
     29.2.  Mortgagee Right to Cure ..................................................................................   47

30.  Attorneys' Fees .................................................................................................   47

31.  Lessor's Access .................................................................................................   47
     31.1.  General Right of Entry ...................................................................................   47
     31.2.  General Conduct of Lessor ................................................................................   47

32.  Auctions ........................................................................................................   48

33.  Signs ...........................................................................................................   48

34.  Merger ..........................................................................................................   48

35.  Consents ........................................................................................................   48

36.  Brokers .........................................................................................................   48

37.  Quiet Possession ................................................................................................   49

38.  Options to Extend ...............................................................................................   49

39.  Right of First Refusal ..........................................................................................   50
     39.1.  Lessee's Right of First Refusal ..........................................................................   50
     39.2.  Permitted Excluded Transfers .............................................................................   51
     39.3.  Bona Fide Offer/Reimbursement of Due Diligence Expenses ..................................................   52
     39.4.  Modification to Bona Fide Offer ..........................................................................   52
     39.5.  Personal to Lessee .......................................................................................   52
     39.6.  Termination of Section 16.2 ..............................................................................   52

40.  Security Measures ...............................................................................................   53

41.  Easements .......................................................................................................   53

42.  Authority .......................................................................................................   53

43.  Conflict ........................................................................................................   53

44.  Offer ...........................................................................................................   53

45.  Headings/Defined Terms ..........................................................................................   54
     45.1.    Headings ...............................................................................................   54
     45.2.    Defined Terms ..........................................................................................   54
Exhibit A - Exhibit A
Rider 1   - Fair Market Rent
Rider 2   - Arbitration Procedure For Financial Creditworthiness of Transferee
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                         SINGLE TENANT INDUSTRIAL LEASE

1.       PARTIES.

This Lease, dated for reference purposes only, August 24, 1992, is made by and
between SHUWA INVESTMENTS CORPORATION, a California corporation (herein called
"Lessor") and READ-RITE CORPORATION, a Delaware corporation (herein called
"Lessee").

2.       PREMISES.

Lessor hereby leases to Lessee and Lessee leases from Lessor for the term, at
the rental, and upon all of the conditions set forth herein, the improved real
property situated in the City of Fremont, County of Alameda, State of
California, commonly known as 44100 Osgood Road, outlined on Exhibit A attached
hereto (the "Premises"), including the existing two (2) story concrete tilt-up
building thereon (the "Building"), including rights of access and the use of the
roof of the Building.

3.       TERM.

         3.1.     TERM. This Lease shall constitute the binding agreement of
Lessor and Lessee, and the obligations of Lessor and Lessee shall be effective,
upon the execution and delivery of this Lease by both Lessor and Lessee. The
term of this Lease (the "Lease Term") shall be for a period of approximately ten
(10) years, commencing on March 1, 1993 (the "Scheduled Commencement Date"),
provided such date may be extended by "Force Majeure", as hereinafter provided,
and ending on February 28, 2003 (the "Expiration Date"), as such date may be
extended by "Force Majeure", as hereinafter provided, unless sooner terminated
pursuant to any provision hereof. Subject to Sections 9 (Damage and Restruction)
and 14 (Condemnation), Lessor shall deliver possession of the Premises to Lessee
on the later of (i) September 1, 1992, or (ii) the date Lessee unconditionally
waives or removes all of the conditions precedent to the commencement of the
Lease Term as provided in Section 3.5 hereof (the "Delivery Date").

         3.1.1    If, following the Delivery Date a Force Majeure event occurs,
and this Lease is not otherwise terminated in accordance with the terms hereof,
the Scheduled Commencement Date and the Expiration Date shall be delayed by the
number of days Lessee is prevented, despite commercially reasonable efforts
undertaken by Lessee, in completing construction of any tenant improvements to
the Premises necessary for Lessee to conduct its business operations in the
Premises. As used in this Lease, the term "Force Majeure" means delays in the
construction of the Premises caused directly by acts of war, public
insurrection, shortage of materials, acts of God, or other causes beyond the
reasonable control of Lessee, exercising commercially reasonable

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due diligence. "Force Majeure" shall specifically not include delays caused by
inclement weather of the type that may be expected in Northern California,
delays caused by the general contractor or any subcontractor, delays caused by
governmental requirements in the construction of the improvements, or delays
caused by materials requiring long lead times. As used in this Lease, the term
"Commencement Date" shall mean the date when the Lease Term commences.

         3.1.2    Notwithstanding anything to the contrary in this Lease, if the
Commencement Date shall not have occurred on or before March 1, 1994, either
party, shall have the right to terminate this Lease without liability to the
other party as a result of such termination; provided, however, any termination
of this Lease shall not affect the liability of any party to the other accruing
prior to the date of such termination.

         3.2.     [INTENTIONALLY OMITTED].

         3.3.     CONDITION OF PREMISES. Except as otherwise expressly provided
in this Lease to the contrary, Lessor shall not be responsible for the
construction or installation of any improvements or facilities in and to the
Premises and/or the Building. Subject to the terms of this Section 3.3 and
except as provided in Section 7.3 hereof, Lessee shall accept delivery of
possession of the Premises in its "AS IS" and "WITH ALL FAULTS" condition
existing as of the Delivery Date, subject to all applicable zoning, municipal,
county and state laws, ordinances and regulations governing and regulating the
use of the Premises, and any covenants or restrictions of record; provided,
however, that such acceptance by Lessee shall not release Lessor from its
obligations under this Lease, including, without limitation, Sections 3.3.1, 7.1
and 7.3 of this Lease. Except, as otherwise expressly provided in this Lease,
Lessee acknowledges that neither Lessor nor Lessor's employees or agents has
made any representation or warranty as to the present or future suitability of
the Premises for the conduct of Lessee's business and that Lessee is relying
solely on its own investigations, examinations and inspections of the Premises
and those of Lessee's representatives and is not relying in any way on any
information furnished by Lessor or any of its agents or representatives
(including, without limitation, Lessor's real estate brokers).

         3.3.1    Lessor shall deliver the Premises to Lessee on the Delivery
Date clean and free of debris, and hereby warrants to Lessee that the
electrical, plumbing, lighting and mechanical systems of the Building (referred
to in this Lease as the "Building Systems"), and the loading doors and other
improvements constructed and installed in the Building (including the roof, the
roof membrane and other structural elements) existing as of the Delivery Date
shall be in good operating condition and repair as of the Commencement Date and
in compliance with all applicable building regulations, laws, statutes,
ordinances, rules, orders and

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covenants and restrictions of record applicable to the Building in its "AS IS"
condition as of the Delivery Date. If non-compliance with said warranty exists
as of the Commencement Date, Lessor shall, except as otherwise provided in this
Lease, promptly after receipt of written notice from Lessee setting forth with
specificity the nature and extent of such non-compliance, rectify the same at
Lessor's sole cost and expense (and not charged to Lessee), and such repair and
correction shall be the sole and exclusive remedy of Lessee as against Lessor.
If Lessee does not give Lessor written notice of a non-compliance with this
warranty within one hundred eighty (180) days of the Commencement Date,
correction of that non-compliance shall, except as otherwise provided in this
Lease, be the obligation of Lessee, at Lessee's sole cost and expense.
Notwithstanding anything to the contrary in the foregoing, Lessor's obligation
to repair latent defects in the original construction or design of any Building
Systems and improvements (including the roof, roof membrane and structural
elements of the Building) shall not be subject to said one hundred and eighty
(180) day statute of limitations.

         3.4.     EARLY POSSESSION. Lessee shall have the right to accept
possession and commence occupancy of the Premises, at any time prior to the
Scheduled Commencement Date and after the satisfaction or waiver in writing by
Lessee of the conditions precedent set forth in Section 3.5 below. If Lessee
commences occupancy for other than construction purposes (including installation
of fixtures, equipment and furnishings), prior to the Scheduled Commencement
Date, the Lease Term shall commence on such date (but such occupancy shall not
advance the Expiration Date); provided, however, during any period of occupancy
of the Premises prior to the Scheduled Commencement Date, Lessee's obligation to
pay rent shall be limited to the payment of Operating Expenses, as provided in
Section 4.2 hereof, in the ratio that the portion of the Building occupied by
Lessee bears to the entire Building. If Lessee elects to accept early possession
of the Premises, Lessee shall give written notice to Lessor prior to commencing
occupancy thereof.

         3.5.     CONDITIONS PRECEDENT TO COMMENCEMENT OF LEASE TERM.
Notwithstanding anything to the contrary contained in this Lease, this Lease is
expressly conditioned upon satisfaction or waiver by Lessee of the conditions
precedent provided in this Section 3.5. Upon the failure of any of the
conditions precedent set forth below, and provided Lessee has so notified Lessor
within the time period set forth below, this Lease shall terminate and neither
party shall have any further rights or obligations with respect to this Lease or
the Premises accruing from and after the date of termination; provided, however,
upon any termination of this Lease in accordance with this Section 3.5, Lessor
shall promptly return to Lessee the prepaid rent delivered to Lessor, as
provided in Section 4.1.

         3.5.1    At Lessee's sole cost and expense, and subject to

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that certain Permit to Enter dated as of July 13, 1992 entered into by and
between Lessor and Lessee (the "Permit to Enter"), Lessee shall have satisfied
itself that any easements encumbering the Premises do not interfere with
Lessee's intended use of the Premises and that Lessee can obtain all necessary
permits and approvals from the City of Fremont and any other governmental entity
with jurisdiction over the intended use of the Premises. This condition
precedent shall be deemed waived unless Lessor has received written notice of
Lessee's unequivocal written election to terminate this Lease no later than
September 15, 1992.

         3.5.2    At Lessee's sole cost and expense, and subject to the Permit
to Enter, Lessee shall have satisfied itself concerning the environmental
condition of the Premises; provided, however, the satisfaction or waiver of this
condition shall not impair or constitute a waiver by Lessee of any of its rights
under Section 7.3 of this Lease or be deemed to be or construed as evidence that
the Premises are free of Hazardous Materials (as that term is hereinafter
defined) or that no Releases (as that term is hereinafter defined) have occurred
at the Premises. This condition precedent shall be deemed waived unless Lessor
has received written notice of Lessee's unequivocal written election to
terminate this Lease no later than September 15, 1992.

         3.5.3    At Lessee's sole cost and expense, and subject to the Permit
to Enter, Lessee shall have completed such due diligence inspections of all
Building Systems (including, without limitation, Utility Installations (as that
term is hereinafter defined)) and existing improvements of the Building. This
condition precedent shall be deemed waived unless Lessor has received written
notice of Lessee's unequivocal written election to terminate this Lease no later
than September 1, 1992. Subject to the foregoing, Lessee may, at any time, prior
to September 1, 1992, deliver to Lessor a written notice describing any Building
Systems and improvements that, in Lessee's opinion, require maintenance or
repair and, provided the total cost to Lessor (as reasonably estimated by
Lessor) of performing such repairs and maintenance actions is less than
$100,000, Lessor, at its sole cost and expense (and not charged to Lessee),
shall cause such repair and maintenance to be completed as promptly as
commercially practicable and in no event later than the Scheduled Commencement
Date.

         3.5.4    In the event Lessee determines that despite its exercise of
due diligence it is unwilling or unable to remove any of the conditions
precedent set forth in Sections 3.5.1 or 3.5.2 prior to September 15, 1992,
then, provided Lessee shall deliver to Lessor (i) a certificate signed by its
chief financial officer that Lessee has paid or incurred in excess of $50,000 in
out of pocket expenses (exclusive of attorneys' fees) in connection with its due
diligence investigation of the Premises, and (ii) a certificate signed by Mr.
James Williams, Facilities Manager for Lessee, stating with reasonable
specificity the matters of due diligence as to which Lessee has been unable to
satisfy itself (The "Facilities

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Manager's Certificate"), Lessee shall have the right to extend the expiration of
the due diligence period until November 1, 1992, solely as to the satisfaction
of the matters noted in the Facilities Manager's Certificate.

4.       RENT.

         4.1.     BASE RENT. Lessee shall pay to Lessor, as base rent for the
Premises, the following amounts (the "Base Rent"), without any offset or
deduction, in advance, on the first day of each month of the Lease Term hereof:

                  (1)      the period from the Commencement $ 68,456.02 Date
                           through the day immediately preceding the first
                           anniversary thereof:

                  (2)      the period from the first $109,446.16 anniversary of
                           the Commencement Date through the day immediately
                           preceding the fifth anniversary thereof:

                  (3)      the period from the fifth $131,193.70 anniversary of
                           the Commencement Date through the day immediately
                           preceding the seven and one-half year anniversary of
                           the Commencement Date (the "7 1/2 Year Anniversary"):

                  (4)      the period from the 7 1/2 Year $144,785.90
                           Anniversary through the Expiration Date:

Lessee shall pay Lessor upon execution hereof Base Rent for the first full
calendar month of the Lease Term. If the Commencement Date is other than the
first day of the calendar month, Lessee shall pay the Base Rent for the first
partial month of the Lease Term on the Commencement Date and the Base Rent
delivered by Lessee upon execution of this Lease shall be applied as hereinabove
provided. Rent for any period during the Lease Term which is for less than one
(1) month shall be a pro rata portion of the Base Rent. Rent shall be payable in
lawful money of the United States to Lessor at the address stated at the end of
this Lease or to such other persons or at such other places as Lessor may
designate in writing.

         4.2.     OPERATING EXPENSES. Subject to Section 4.2(c), Lessee shall
pay to Lessor during the term hereof, in addition to the Base Rent, the actual
cost of all Operating Expenses, as hereinafter defined, during each calendar
year of the Lease Term, in accordance with the following provisions:

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                  (a)      "Operating Expenses" is defined, for purposes of this
Lease, as all reasonable costs and expenses incurred by Lessor, if any, for:

                           (i)      The operation, repair and maintenance of the
following:

                                    (aa)     The Premises, including, without
                                             limitation, parking areas, loading
                                             and unloading areas, trash areas,
                                             roadways, sidewalks, walkways,
                                             parkways, driveways, landscaped
                                             areas, striping, irrigation
                                             systems, exterior lighting
                                             facilities and fences and gates;

                                    (bb)     Trash disposal services;

                                    (cc)     The cost of (i) painting the
                                             Building one (1) time each five (5)
                                             years during the term of this
                                             Lease, (ii) resaturation of the
                                             roof membrane one (1) time during
                                             the term of this Lease at a cost
                                             not to exceed $5,000; and

                                    (dd)     Any other service expressly
                                             provided in this Lease as the
                                             responsibility of Lessor, excluding
                                             any such service which this Lease
                                             provides cannot be charged back to
                                             Lessee.

                           (ii)     The deductible portion of any insured loss;
provided, however, unless otherwise approved in advance by Lessee, the
deductible under any insurance policy maintained by Lessor shall not exceed
$25,000 per occurrence.

                           (iii)    A management fee (the "Management Fee")
equal to $22,700 per year, commencing in the calendar year during which the
Commencement Date occurs; provided, however, the Management Fee shall not be
payable to Lessor from and after a transfer of title to the Premises by the
named Lessor under this Lease where the named Lessor is released from its
obligations under Section 7.3.2 of this Lease pursuant to Section 16.2 of this
Lease.

                           (iv)     The cost of the premiums for the liability
and property insurance policies to be maintained by Lessor; provided, however,
unless otherwise approved in advance by Lessee, the cost of any flood,
earthquake or pollution coverage maintained, if at all, by Lessor shall not be
an Operating Expense.

                           (v)      The amount of Real Property Taxes paid by
Lessor.

                           (vi)     The cost of water, gas and electricity to

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service the Premises.

                           (vii)    Capital improvements, expenditures and/or
replacements to all or any portion of the Premises (including any Building
Systems), except as hereinafter provided.

                  (b)      "Real Property Taxes" is defined, for purposes of
this Lease, as any form of real estate tax, assessment, levy, fee or charge,
general, special, ordinary or extraordinary, and any license fee, commercial
rental tax, improvement bond or bonds, transit charges, housing and local
employment assessments, open space charges or any other tax, assessment, levy or
fee, of any kind, unforeseen as well as foreseen, assessed, levied, charged,
confirmed or imposed on the Premises or any portion thereof by any authority
having the direct or indirect power to tax, including any city, county, state or
federal government, or any school, agricultural, sanitary, fire, street,
drainage or other improvement district thereof, as against any legal or
equitable interest of Lessor in the Premises or in any portion thereof, as
against Lessor's right to rent or other income therefrom, and as against
Lessor's business of leasing the Premises. The term "Real Property Tax" shall
also include any tax, fee, levy, assessment or charge (i) in substitution of,
partially or totally, any tax, fee, levy, assessment or charge hereinabove
included within the definition of "Real Property Tax", or (ii) assessments
imposed by any governmental agency for services provided to the Premises such as
police, fire protection, street, sidewalk and road maintenance, refuse removal
and/or for other governmental services. The term Real Property Taxes shall also
include all costs, fees and expenses of contesting by appropriate legal
proceedings the amount or validity of any Real Property Taxes, or (iii) which is
imposed as a result of a transfer, either partial or total, of Lessor's interest
in the Premises, or (iv) which is imposed by reason of this transaction, any
modifications or changes hereto, or any transfers hereof. Notwithstanding
anything to the contrary in this Section 4.2, Lessee shall not be responsible
for, and the term "Real Property Taxes" shall not include, any increases in real
property taxes that results from a change in ownership of the Premises or any
portion thereof consummated by Lessor or any of Lessor's Affiliates at any time
prior to the three year anniversary of the Commencement Date. For purposes of
the preceding sentence, the term "change in ownership" shall have the meaning
given the term in California Revenue and Taxation Code Sections 60-62, or any
successor statute or amendments to these sections.

                  (c)      Except as otherwise hereinafter provided, Operating
Expenses shall be payable by Lessee to Lessor monthly, together with the next
installment of Base Rent, based on reasonably detailed statements of actual
expenses incurred or paid by Lessor submitted to Lessee not less than twenty
(20) days in advance of the next installment of Base Rent; provided, however,
statements submitted for (i) installments of Real Property Taxes shall be
payable by Lessee not later than thirty (30) days prior to the last

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due date prior to imposition of any penalty or other charge for the late payment
thereof, (ii) insurance premiums maintained by Lessor shall be payable by Lessee
not later than thirty (30) days prior to the payment date, and (iii) the
Management Fee shall be payable by Lessee in equal monthly installments payable,
commencing on the Commencement Date, together with the payment of Base Rent.
Lessee shall have the right, upon written notice to, and upon the approval by
Lessor, which approval shall not be unreasonably withheld, to assume directly
any and all of the maintenance and repair obligations of the Premises set forth
herein, whereupon the cost and expense associated therewith shall not be
included in Operating Expenses. Notwithstanding the foregoing, Lessor may at any
time rescind its consent and authorization to Lessee to assume the
responsibility for any maintenance and repair obligation that is otherwise an
Operating Expense if Lessor determines that the quality, timeliness, and scope
of work performed by Lessee falls below that which Lessor would provide for a
building comparable to the Building and Lessee fails to correct such deficiency
or failure within thirty (30) days following notice thereof from Lessor. In the
event that Lessee pays Operating Expenses directly, Lessee shall deliver to
Lessor, if requested by Lessor, a cancelled check or other evidence that such
Operating Expense has been paid.

                  (e)      Operating Expenses shall not include (i) the cost to
maintain the structural elements of the Building, including, the roof, the roof
membrane (except as provided in Section 4.2 (a)), the foundation and the
internal load bearing walls and columns (except to the extent any of the
foregoing are damaged by Lessee or, subject to Section 4.4 hereof, substantially
altered by Lessee); (ii) any management fee paid to Lessor; (iii) interest on
debt or amortization payments on any mortgage or mortgages, and rental under any
ground or underlying lease or leases; (iv) Lessor's general corporate overhead
and general administrative expenses; (v) any other expense which under generally
accepted accounting principles and practices would not be considered an
Operating Expense; (vi) costs incurred due to violation by Lessor of the terms
and conditions of this Lease, and (vii) except as otherwise expressly provided
in this Lease, any cost or other expense incurred with respect to the
investigation, removal, remediation, containment, clean-up or other response
associated with or pertaining to the actual or alleged presence of Hazardous
Materials at, on, beneath or in the vicinity of, the Premises or to the actual
or threatened Release of Hazardous Materials at, on, beneath or in the vicinity
of, the Premises.

                  (f)      Except as otherwise herein provided to the contrary,
the cost of making capital improvements to the Premises to comply with all newly
enacted federal, state or local laws shall be deemed an Operating Expense. If
the capital improvement is triggered by Lessee's particular use of the Premises
or by Lessee's alteration to or of the Premises, Lessee shall bear the entire
cost thereof. In all other instances, Lessor shall pay the cost thereof and
Operating Expenses hereunder during the balance of the Lease Term

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(including extensions) shall be adjusted to amortize the cost of such capital
improvement over its useful life (as reasonably determined by Lessor); provided,
however, if the cost passed through to Lessee as an Operating Expense for such
capital improvements exceeds fifty percent (50%) of the Operating Expenses
payable during the preceding twelve (12) month period, Lessee shall have the
right to terminate this Lease, unless Lessor, upon receipt of such termination
notice, elects to pay such portion of the amortized cost in excess of such
amount. For purposes of this paragraph, the cost of Operating Expenses otherwise
assumed and paid for by Lessee shall be included in the calculation of Operating
Expenses paid by Lessee for the immediately preceding twelve (12) month period.
The foregoing limitation on the prospective pass through of the cost of capital
improvements is personal to the named tenant under this Lease and shall not
inure to the benefit of any assignee of the named tenant under this Lease, other
than an Affiliate of Lessee (as defined in Section 12.1 hereof).

                  (g)      Lessor shall regularly consult with Lessee to review
anticipated and incurred costs of Operating Expenses and to review proposals of
Lessee to reduce the costs thereof.

         4.3.     OPERATING EXPENSE STATEMENTS. On or before April 1 of each
calendar year during the Lease Term (or as soon thereafter as practicable),
Lessor shall deliver to Lessee a statement setting forth Lessor's Operating
Expenses for the preceding calendar year prepared by a certified public
accountant designated by Lessor. If such statement shows that the amounts
previously paid to Lessor by Lessee are less than the amount of Operating
Expenses actually paid or incurred by Lessor for the previous calendar year,
Lessee shall pay the deficiency to Lessor within thirty (30) days after the
delivery of such statement. If such statement shows that the amounts previously
paid to Lessor by Lessee are more than the amount of Operating Expenses actually
paid or incurred by Lessor for the previous calendar year, Lessor shall credit
any overpayment against the next installment(s) of Base Rent payable under this
Lease. Lessee shall have the right, exercisable within twenty-four (24) months
after the receipt of a final statement for any calendar year, to object in
writing to the accuracy of said final statement and, upon reasonable prior
written notice to Lessor, to inspect (at Lessor's office where said books and
records are maintained) the books and records of Lessor directly relevant to its
operation, maintenance and repair of the Premises and cause an audit of said
books and records to be performed by a certified public accountant ("Certified
Accountant") to determine if the foregoing final statement is accurate and
correct. The Certified Accountant shall be a certified public accounting firm
designated by Lessee and reasonably acceptable to Lessor. The Certified
Accountant shall certify the results of the audit in a manner satisfactory to
Lessor. Such audit shall in all cases be paid for by Lessee unless the audit
indicates an overpayment by Lessee of Operating Expenses by 10% or more, in
which case Lessor shall pay the cost thereof.

                                       9
<PAGE>

If the audit discloses an overpayment or underpayment of Operating Expenses by
Lessee, the amounts due, if any, by Lessee pursuant to this Section 4.3 shall be
adjusted accordingly. In making any inspection or audit, Lessee agrees, and
shall cause the Certified Accountant to agree, to keep confidential (i) any and
all information contained in such books and records and (ii) the circumstances
and details pertaining to such examination and any dispute or settlement between
Lessor and Lessee arising out of such examination; and Lessee will confirm and
cause the Certified Accountant to confirm such agreement in a separate written
agreement, if requested by Lessor. Any credit due Lessee for overpayment of
Operating Expenses shall be credited against the installments of Monthly Rent
next coming due. If Lessee does not object to the final statement for a given
year within such twenty-four (24) month period, Lessor's final statement shall
be conclusive and binding on Lessee. Objections by Lessee shall not excuse or
abate Lessee's obligation to make the payments required under Section 4.2
pending the resolution of Lessee's objection.

         4.4.     LESSOR'S OBLIGATION TO MAINTAIN STRUCTURAL ELEMENTS OF
BUILDING. Notwithstanding anything to the contrary in this Lease, if Lessee
substantially alters any of the structural elements of the Building (including
the roof and the roof membrane), such alterations are approved in advance by
Lessor and the work is performed in accordance with all building code
requirements and by contractor(s) approved by Lessor, the cost to maintain said
structural elements shall be borne by Lessor and shall not be included in
Operating Expenses, except to the extent Lessor is required to repair or correct
a defect in construction or an adverse condition attributable to any such defect
in construction by Lessee's contractor made by Lessee.

         4.5.     LESSEE'S RIGHT TO CONTEST. Upon request of Lessee, Lessor
shall promptly send to Lessee copies of all notices of changes in assessment of
the Premises or any portion thereof. Lessor, in its discretion (and without any
obligation so to do), may timely protest the amount of any assessment or the
amount of any Real Property Taxes, and Lessor shall credit to Lessee any refund
or rebate of Real Property Taxes received by Lessor (net of Lessor's expenses in
connection with the prosecution of any such protest) attributable to Real
Property Taxes previously paid by Lessee as an item of Operating Expense. If,
thirty (30) days after the written request of Lessee to do so, Lessor does not
elect to protest the amount or any assessment of Real Property Taxes, then,
provided no Event of Default shall then exist under this Lease, Lessee shall
have the right to contest such amount by legal proceedings or in such manner as
Lessee deems advisable, which proceedings or other actions taken by Lessee, if
instituted, shall be conducted diligently on behalf of Lessor or any other
entity entitled to legal standing to initiate such proceedings or other actions.
Notwithstanding any such contest by Lessee, nothing contained herein shall
relieve Lessee of its obligation to pay to Lessor Operating Expenses
attributable to Real Property Taxes in

                                       10
<PAGE>

accordance with Section 4.2 hereof during the pendency of such contest or
proceeding. Lessor shall cooperate with Lessee in any such proceedings or other
actions as may reasonably be required to enable Lessee to prosecute the same
effectively, as long as Lessor is not required to bear any cost in connection
therewith. If such proceedings or other actions result in a reduction in the
amount of Real Property Taxes so imposed, any refund or rebate of Real Property
Taxes payable to Lessor and attributable to amounts previously paid by Lessee as
an item of Operating Expense shall be paid to Lessee.

5.       SECURITY DEPOSIT.

Lessee shall deposit with Lessor the sum of One Hundred Forty Thousand Dollars
($140,000) upon Lessee's occupancy of all or any portion of the Premises for
other than construction purposes (including installation of fixtures, equipment
and furnishings), as security for Lessee's faithful performance of Lessee's
obligations hereunder (the "Security Deposit"). If Lessee fails to pay rent or
other charges due hereunder, or otherwise defaults with respect to any provision
of this Lease, Lessor may use, apply or retain all or any portion of the
Security Deposit for the payment of any rent or other charge in default or for
the payment of any other sum to which Lessor may become obligated by reason of
Lessee's default, or to compensate Lessor for any loss or damage which Lessor
may suffer thereby. If Lessor so uses or applies all or any portion of the
Security Deposit, Lessee shall within ten (10) days after written demand
therefor deposit cash with Lessor in an amount sufficient to restore the
Security Deposit to the full amount then required of Lessee. Lessor shall
deposit the Security Deposit in an interest bearing account in the name of
Lessor and with the tax identification number of Lessee, and, so long as no
Event of Default then exists hereunder, shall pay on maturity of the investment
or, if such investment has no maturity, semi-annually to Lessee any interest
earned on such account. The Security Deposit shall be deposited with any "A"
rated bank chosen by Lessor and shall be invested initially in one (1) year
certificates of deposit, or such other investments as may be mutually agreed to
by the parties. In no event shall Lessor incur any liability for the failure of
the lending institution to make any payment of interest, Lessor's only
obligation being to pay to Lessee any interest paid to Lessor. If Lessee
performs all of Lessee's obligations hereunder, the Security Deposit, or so much
thereof as has not theretofore been applied by Lessor, shall be returned, to
Lessee (or, at Lessor's option, to the last assignee, if any, of Lessee's
interest hereunder) after the expiration of the term hereof, and after Lessee
has vacated the Premises. No trust relationship is created herein between Lessor
and Lessee with respect to the Security Deposit.

                                       11
<PAGE>

6.       USE.

         6.1.     USE. The Premises shall be used and occupied for
administrative general office, and, subject to and as permitted by applicable
local, state and federal law, wafer fabrication, research and development,
assembly, production and warehousing of electronic goods and any and all
activities associated with or attendant thereto (including, without limitation,
maintenance activities and the generation, treatment, storage, disposal,
transportation, management or other handling of Hazardous Materials as permitted
by this Lease), and for no other purpose.

         6.2.     COMPLIANCE WITH LAW. (a) Subject to Lessor's obligations under
Sections 3.3 (Condition of Premises) and 7.3 (Environmental Regulation), Lessee
shall, at Lessee's sole cost and expense, promptly comply with all applicable
laws, statutes, ordinances, rules, regulations, orders, covenants and
restrictions of record, and requirements of any fire insurance underwriters or
rating bureaus, now in effect or which may hereafter come into effect, whether
or not they reflect a change in policy from that now existing, during the Lease
Term or any part of the Lease Term, relating in any manner to the Premises or
the occupation or use by Lessee (or any other person occupying any portion of
the Premises under Lessee), of the Premises including, without limitation, all
Hazardous Materials Laws (as that term is hereinafter defined) and the federal
Americans with Disabilities Act.

                  (b)      Without limiting the generality of the foregoing
provisions of this Section 6.2, if at any time as a consequence of Lessee's use
or occupancy of the Premises any governmental agency having jurisdiction over
the Premises requires, mandates or conditions the issuance or grant of any
approval, permit, license or other entitlement relating to the Premises, the
construction of additional parking on the Premises, any and all costs and
expenses associated therewith, including permitting, impact reports, grading,
paving and restripping, shall be the sole responsibility of Lessee, and such
work shall be performed in accordance with the requirements of Section 7.4
hereof (and not subject to the $100,000 exception for waiver of the requirement
of Lessor's consent). The location of any additional parking shall be limited to
the area identified on Exhibit A to this Lease as the "Additional Parking Area."

7.       MAINTENANCE, REPAIRS AND ALTERATIONS

         7.1.     LESSOR'S OBLIGATIONS.

                  7.1.1    Subject to the provisions of Sections 3.3 (Condition
of Premises), 4.2 (Operating Expenses), 4.4 (Lessor's Obligation to Maintain
Structural Elements), 6 (Use), 7.2 (Lessee's Obligations), 7.3 (Environmental
Matters), and 9 (Damage or Destruction), and except for damage caused by any
negligent or intentional act or omission of Lessee, Lessee's employees,

                                       12
<PAGE>

suppliers, shippers, customers, or invitees, Lessor, at Lessor's expense,
subject to reimbursement as an Operating Expense if and to the extent provided
pursuant to Section 4.2, shall (y) keep in good condition and repair the
foundations, internal structural columns, floor slabs, exterior walls, roof and
roof membrane of the Building, as well as the parking lots, walkways, driveways,
landscaping, fences, signs and exterior lighting facilities, and (z) replace any
Building Systems existing as of the date of this Lease resulting from
requirements of applicable law and dilapidations following the expiration of a
system's useful life. Lessor's obligations under this Section 7.1.1 shall
include, without limitation, the repair of latent defects in the construction
and design of the structural elements of the Building (including the roof and
roof membrane) and any alterations thereof approved by Lessor in accordance
with, and subject to the limitations of, Section 7.4 hereof. Lessor shall not,
however, be obligated to paint the exterior or interior surface of exterior
walls (except as provided in Section 4.2 hereof), nor shall Lessor be required
to maintain, repair or replace windows, doors or plate glass of the Building.
Upon written notice from Lessee of any repair or maintenance to be done by
Lessor as provided in this Section 7.1, Lessor shall promptly cause such work to
be commenced and diligently prosecuted to completion. Lessor shall have no
obligation to make repairs under this Section 7.1 until a reasonable time after
receipt of written notice from Lessee of the need for such repairs.

                  7.1.2    Notwithstanding anything to the contrary in this
Lease, in the event of an emergency, where immediate maintenance and repair work
is required to any portion of the Building that Lessor is obligated to maintain
and repair, if Lessor fails to commence such maintenance and repair within
twenty-four (24) hours following oral or written notice to Lessor of the
existence of such an emergency, or Lessor otherwise authorizes Lessee following
such notice, Lessee may, but shall not be obligated to (unless Lessee agrees to
perform such work following authorization to do so from Lessor), perform
maintenance and repair work otherwise required of Lessor to the extent necessary
to secure the health or safety of persons or property until Lessor is able to
respond to Lessee's request as otherwise provided in Section 7.1.1, and Lessor
shall reimburse Lessee for such cost and expense (or credit Lessee for such
amount against the next payment of Monthly Rent due under this Lease).

                  7.1.3    Except as provided to the contrary in Section 7.1.2,
Lessee expressly waives the benefits of any statute now or hereafter in effect
which would otherwise afford Lessee the right to make repairs at Lessor's
expense or to terminate this Lease because of Lessor's failure to keep the
Premises in good order, condition and repair, including without limitation Civil
Code Sections 1932(1), 1941 and 1942. Lessor shall not be liable for damages for
loss of any kind or nature by reason of Lessor's failure to furnish any services
when such failure is caused,

                                       13
<PAGE>

directly or indirectly, by accident, breakage, repairs, strikes, lockout, or
other labor disturbances or disputes of any character, or by any other cause
beyond the reasonable control of Lessor.

                  7.1.4    Lessor shall indemnify, defend and hold harmless
Lessee from and against any and all cost, claims, losses, damages and expense
(including attorneys' fees) directly arising from the negligence or willful
misconduct of Lessor, its agents, contractors or employees in the performance of
Lessor's obligations under Section 7.1.1 hereof. Notwithstanding anything to the
contrary herein, Lessor shall not be responsible for any consequential damages
(including, without limitation, lost profits or business opportunities)
resulting from the acts or omissions of Lessor, its employees, agents or
contractors.

         7.2.     LESSEE'S OBLIGATIONS.

                  (a)      Subject to the provisions of Sections 3.3 (Condition
of Premises), 7.1 (Lessor's Obligations), 7.2(c) (Surrender of Premises), 7.3
(Environmental Matters) and 9 (Damage or Destruction), Lessee, at Lessee's
expense, shall keep in good order, condition and repair the Premises and every
part thereof (whether or not the damaged portion of the Premises or the means of
repairing the same are reasonably or readily accessible to Lessee) including,
without limiting the generality of the foregoing, all plumbing, heating,
ventilating and air conditioning systems (Lessee hereby agreeing to procure and
maintain during the term hereof, at Lessee's expense, a ventilating and air
conditioning system maintenance contract reasonably satisfactory to Lessor),
electrical and lighting facilities and equipment in the Building, fixtures,
interior walls and interior surfaces of exterior walls, ceilings, windows,
doors, and plate glass, located within the Premises. Lessor reserves the right
to procure and maintain a ventilating and air conditioning system maintenance
contract, and if Lessor so elects, Lessee shall reimburse Lessor, upon demand,
for the cost thereof as an Operating Expense; provided Lessor agrees not to
require such maintenance contract so long as Lessee establishes to the
reasonable satisfaction of Lessor that Lessee is adequately maintaining such
system.

                  (b)      If Lessee fails to perform Lessee's obligations under
this Section 7.2 Lessor may, but shall not be obligated to, enter upon the
Premises after ten (10) days' prior written notice to Lessee (except in the case
of an emergency, in which no notice shall be required) to remedy such default in
the performance of any such obligation which remains uncured for such ten (10)
day period (or if such matter cannot be cured within such ten (10) day period
for reasons outside the reasonable control of Lessee, Lessee has within said ten
(10) day period commenced the cure thereof and continues to diligently prosecute
such matter to completion, and to perform such obligations on Lessee's behalf
and to put the Premises in good order, condition and repair, and the cost
thereof together with interest thereon at the Interest Rate shall be due and
payable

                                       14
<PAGE>

as additional rent to Lessor together with Lessee's next Base Rent installment.

                  (c)      On the last day of the Lease Term, or on any sooner
termination of this Lease, subject to Sections 7.3 and 7.4 hereof, Lessee shall
surrender the Premises to Lessor in substantially the same condition as
received, clean and free of debris, and excepting (i) ordinary wear and tear,
(ii) damage and destruction not resulting from the act or omission of Lessee,
any subtenant, licensee or other person occupying any portion of the Premises
under Lessee, and (iii) conditions caused, created or aggravated by persons or
entities other than Lessee or any subtenant, licensee or other person occupying
any portion of the Premises under Lessee. Any damage or deterioration of the
Premises shall not be deemed ordinary wear and tear if the same could have been
prevented by good maintenance practices. Lessee shall surrender the Premises to
Lessor with all Utility Installations in place, and in good operating condition,
excepting (i) normal wear and tear, (ii) damage and destruction not resulting
from the act or omission of Lessee any subtenant, licensee or other person
occupying any portion of the Premises under Lessee, and (iii) conditions caused,
created or aggravated by persons or entities other than Lessee or any subtenant,
licensee or other person occupying any portion of the Premises under Lessee.

         7.3.     ENVIRONMENTAL MATTERS.

                  7.3.1.   Lessor hereby represents and warrants to Lessee, to
Lessor's actual knowledge, and without investigation, as follows:

                  (a)      Lessor has duly complied and presently is in
compliance with, and the Premises has complied and presently is in compliance
with, all applicable Hazardous Materials Laws (as that term hereinafter is
defined).

                  (b)      Lessor has received no written notice of, and neither
knows of nor suspects, any fact(s) which give rise to violations of any
applicable Hazardous Materials Laws.

                  (c)      Lessor has received no written complaint, order,
directive, claim, citation, or notice by or from any governmental authority or
any person or entity with respect to (i) air emissions affecting or pertaining
to the Premises, (ii) Releases of Hazardous Materials from, into, upon, under,
above or in the vicinity of the Premises or any improvements located thereon,
(iii) noise emissions affecting or pertaining to the Premises, (iv) solid or
liquid waste disposal affecting or pertaining to the Premises, (v) the use,
generation, storage, transportation, disposal, handling or other management of
Hazardous Materials affecting or pertaining to the Premises, or (vi) other
environmental, health or safety matters affecting or pertaining to the Premises.

                                       15
<PAGE>

                  (d)      Lessor has provided Lessee with true and complete
copies of all written information in Lessor's possession or control pertaining
to the environmental history and condition of the Premises.

                  (e)      Lessor's representations and warranties shall survive
the termination of this Lease for a period coterminous with the Indemnification
Period (as that term is hereinafter defined).

                  7.3.2.   (a) Notwithstanding Section 8.5 of this Lease, upon
written claim made during the Indemnification Period, but not after such time
(except as to claims made within the Indemnification Period), Lessor agrees to
defend, indemnify, and hold harmless Lessee and its affiliates, officers,
directors, employees, agents, successors and assigns (collectively, the "Lessee
Indemnitees") from and against any and all fines, penalties, costs of
investigations, removal actions, remedial actions, cleanups, containments and
other response actions, including, without limitation, reasonable attorneys' and
consultants' fees, ("Other Environmental Liabilities") arising directly or
indirectly from, out of or by reason of (1) any breach of any representation or
warranty of Lessor set forth in Section 7.3.1 of this Lease, (2) any breach or
default in the performance of any obligation, covenant or condition on Lessor's
part to be performed under this Section 7.3, (3) any Releases of Hazardous
Materials from, into, upon, above or under the Premises that occurred prior to
the effective date of this Lease, or (4) any Releases of Hazardous Materials
that occurred at a location other than the Premises and that were or are caused,
created or aggravated by a party other than Lessee or Lessee Indemnitees,
provided that;

                       (i)  (A) The Other Environmental Liabilities are
the result of legally enforceable judicial or administrative actions,
directives, orders or judgments arising out of actions or administrative
proceedings brought or initiated by any governmental agency or any other person
not a party to this Lease, and (B) the Lessee Indemnitees have provided Lessor
with timely written notice of such actions, directives, orders or judgments and
have allowed Lessor the right, at Lessor's election, to defend against such
actions, directives, orders or judgments, or to participate in the defense of
Lessee Indemnitees; or

                       (ii) (A) The Other Environmental Liabilities are
the result of a negotiated judicial or administrative consent agreement or
decree or are incurred for remedial action necessary to prevent a legally
enforceable judicial or administrative obligation (collectively, "Other Cleanup
Actions"), and (B) before the Lessee Indemnitees incur such Other Environmental
Liabilities, Lessee Indemnitees (1) have provided Lessor with written notice of
the need for such Other Cleanup Actions, (2) have allowed Lessor the right at
Lessor's election to undertake such Other Cleanup Actions,

                                       16
<PAGE>

or, in the case of a stipulation, consent agreement or decree, allowed Lessor
the right, at Lessor's election, to attempt to negotiate or renegotiate the
terms of such stipulation, consent agreement or decree, and (3) in the case of
remedial action taken by Lessee Indemnitees, in order to prevent Other
Environmental Liabilities, obtained Lessor's prior written consent to any such
remedial action undertaken by Lessee Indemnitees, which consent shall not be
unreasonably withheld.

                  (b)      Lessor shall pay fifty percent (50%) of the first One
Hundred Thousand Dollars ($100,000) of Other Environmental Liabilities,
including, without limitation, reasonable attorneys' fees, which Lessor
otherwise (but for Sections 7.3.2(b) and 7.3.3(b)) would be obligated to pay in
its entirety pursuant to Section 7.3.2(a). Lessor shall be obligated to pay all
of the Other Environmental Liabilities that exceed the aggregate amount of One
Hundred Thousand Dollars ($100,000).

                  (c)      Lessor's obligations under this Section 7.3
(including, without limitation, the representations and warranties of Lessor set
forth in Section 7.3.1) shall not be binding upon any Lessor Mortgagee or any
purchaser of the Premises or any portion thereof following the foreclosure of
any first lien deed of trust or mortgage encumbering the Premises or any portion
thereof, or the delivery of any deed in lieu of foreclosure thereof to any
Lessor Mortgagee, and in any such instance the immediate transferee of the
Premises from any Lessor Mortgagee. For purposes of this Section 7.3.2, an
"Affiliate of Lessor" shall be any entity controlled by Lessor, controlling
Lessor, or under common control with Lessor, provided Lessee shall be given not
less than fifteen (15) days prior written notice of such assignment, together
with such information as may be necessary to establish that the assignee is an
Affiliate of Lessor. For purposes of the preceding sentence, "control" shall
mean the ownership of more than fifty percent (50%) of the voting interests in
an entity.

         7.3.3.   (a) Upon written claim made during the Indemnification Period
(as hereinafter defined), but not after such time (except as to claims made
within the Indemnification Period), Lessee agrees to defend, indemnify, and hold
harmless Lessor and its affiliates, officers, directors, employees, agents,
successors and assigns (collectively, the "Lessor Indemnitees") from and against
any and all fines, penalties, costs of investigations, removal actions, remedial
actions, cleanups, containments and other response costs, including without
limitation reasonable attorneys' and consultants' fees ("Environmental
Liabilities") arising directly or indirectly from, out of or by reason of (1)
any breach of representation or warranty of Lessee pursuant to Section 7.3.3(c)
of this Lease, (2) any breach or default in the performance of any obligation,
covenant or condition on Lessee's part to be performed under this Section 7.3,
or (3) the Release of Hazardous Materials from, into, upon, above, or under the
Premises that is caused during the term of this Lease directly by (x) use of the
Premises by Lessee (or any

                                       17
<PAGE>

subtenant, licensee or other person occupying any portion of the Premises under
Lessee), (y) the conduct of Lessee's business (or the conduct of any business
by any subtenant, licensee or other person occupying any portion of the Premises
under Lessee), or (z) any activity, work or things done or permitted by Lessee
(or by any subtenant, licensee or other person occupying any portion of the
Premises under Lessee) on or about the Premises, provided that:

                           (i)      (A) The Environmental Liabilities are the
result of legally enforceable judicial or administrative actions, directives,
orders or judgments arising out of actions or administrative proceedings brought
or initiated by any governmental agency or any other person not a party to this
Lease and (B) the Lessor Indemnitees have provided Lessee with timely written
notice of such actions, directives, orders or judgments and have allowed Lessee
the right, at Lessee's election, to defend against such actions, directives,
orders or judgments, or to participate in the defense of Lessor Indemnitees; or

                           (ii)     (A) The Environmental Liabilities are the
result of a negotiated judicial or administrative consent agreement or decree or
are incurred for remedial action necessary to prevent a legally enforceable
judicial or administrative obligation (collectively, "Cleanup Actions"), and
(B) before the Lessor Indemnitees incur such Environmental Liabilities Lessor
Indemnitees (1) have provided Lessee with written notice of the need for such
Cleanup Actions, (2) have allowed Lessee the right at Lessee's election to
undertake such Cleanup Action or, in the case of a stipulation, consent
agreement or decree, allowed Lessee the right, at its own election, to attempt
to negotiate or renegotiate the terms of such stipulation, consent agreement or
decree, and (3) in the case of remedial action taken by Lessor Indemnitees, in
order to prevent Environmental Liabilities, obtained Lessee's prior written
consent to any such remedial action undertaken by Lessor Indemnitees, which
consent shall not be unreasonably withheld.

                  (b)      Lessee shall pay fifty percent (50%) of the first One
Hundred Thousand Dollars ($100,000) of Other Environmental Liabilities,
including, without limitation, reasonable attorneys' fees, which Lessor
otherwise (but for Sections 7.3.2(b) and 7.3.3(b)) would be obligated to pay in
its entirety pursuant to Section 7.3.2(a). Lessor shall be obligated to pay all
of the Other Environmental Liabilities that exceed the aggregate amount of One
Hundred Thousand Dollars ($100,000).

                  (c)      Within ten (10) days after Lessee's vacation of the
Premises, Lessee shall deliver to Lessor a writing wherein Lessee represents and
warrants that, to the actual knowledge of Lessee's general manager at the
Premises, except as otherwise may be provided therein, Lessee has complied in
all material respects with all terms and conditions of this Lease, including,
without limitation, Lessee's obligations arising from or in connection with
Hazardous Materials and Hazardous Materials Laws. Lessee's

                                       18
<PAGE>

representation and warranty hereunder shall survive the termination of this
Lease for a period coterminous with the Indemnification Period.

                  (d)      With respect to any underground storage tanks located
at, in or on the Premises and installed by the named tenant under this Lease
("Lessee USTs"), upon the earlier of (i) vacation of the Premises by the named
tenant under this Lease, or (ii) at the end of the Lease Term, Lessee shall
comply with all laws applicable at that time to Lessee USTs, including, without
limitation, removal thereof, whether or not required by law; provided, however,
if Lessor notifies Lessee within one hundred eighty (180) days after the
occurrence of (i) or (ii) above, as applicable (the "Interim Period"), that
Lessor does not want the Lessee USTs to be removed, Lessee shall not be required
to remove the Lessee USTs; provided, however, during the Interim Period, if any,
Lessor shall assume all risks and liabilities arising from or in connection with
the Lessee USTs; provided, further, Lessee shall assume all risks and
liabilities arising from or in connection with Lessee's removal of the Lessee
USTs.

                  7.3.4.   In the event an act, omission or condition causes,
creates, or gives rise in part to Environmental Liabilities and in part to other
Environmental Liabilities, the respective indemnity obligations of the parties
toward one another under Sections 7.3.2 and 7.3.3 of this Lease shall be
equitably allocated.

                  7.3.5.   Lessee shall provide to Lessor a copy of any
hazardous materials business plans which Lessee is required to establish and
implement in accordance with Section 25503.5 of the California Health and Safety
Code (or successor statutes). Lessor acknowledges and agrees that submission of
such hazardous materials business plan(s) to the Lessor by Lessee shall
constitute compliance by Lessee with Section 25503.6 of the California Health
and Safety Code. Lessor further acknowledges and agrees that (a) it is not the
intent of this Section 7.3.5 to limit in any way the operation of Lessee's
business (or the business of any subtenant, licensee or other person occupying
any portion of the Premises under Lessee), and (b) notwithstanding the foregoing
provisions of this Section 7.3.5, Lessee (or any subtenant, licensee or other
person occupying any portion of the Premises under Lessee) may use Hazardous
Materials on or at the Premises, including, without limitation, normal
quantities of Hazardous Materials that are applicable to general retail or
consumer use, so long as the use of such Hazardous Materials by Lessee (or any
subtenant, licensee or other person occupying any portion of the Premises under
Lessee) is in compliance with all applicable Hazardous Materials Laws and
prudent business practices.

                  7.3.6.   All drains from laboratory and manufacturing areas
and any drains constructed to contain industrial (non-domestic) waste shall be
constructed of nondegradable material

                                       19
<PAGE>

from the point of waste origin to any collection, mixing or treatment system
before effluent is released into the cast iron building sanitary system located
at the Premises.

                  7.3.7.   Lessor shall provide to Lessee, and Lessee shall
provide to Lessor notice within a reasonable period of time of any Release of
Hazardous Materials that the notifying party knows or reasonably believes has
come or will come to be located on or beneath the Premises.

                  7.3.8.   On or before October 15, 1992 but no later than
November 15, 1992 Lessor shall cause the abandonment and closure of any and all
monitoring wells located at the Premises, subject to the approval of the
governmental agency authorized to issue such abandonment and closure permits
(the "Closure Permits"); provided, however, in the event Lessor is unable to
obtain the Closure Permits in sufficient time to cause a qualified contractor to
complete such abandonment and closure at the contractor's normal rates by
November 15, 1992 after diligently and actively attempting to do so, Lessor
shall cause such abandonment and closure to be completed as soon as is
reasonably practical after obtaining the Closure Permits; provided further,
Lessor shall in no event have any obligation to pay the closure contractor
overtime rates or incur any other extraordinary costs in fulfilling its
obligations under this Section 7.3.8. Lessor shall conduct the activities
specified herein in accordance with all applicable federal, state and local
laws, codes, statutes, ordinances, and regulations.

                  7.3.9.   (a) Except as provided herein, Lessor, at Lessor's
sole risk and expense, shall have the right, at the following times, to enter
the Premises and to: (a) conduct any sampling, testing, monitoring and analysis
for Hazardous Materials, including soil or water sampling, testing, monitoring,
digging and drilling, or structural analysis; (b) with the exception of
information that is protected by the attorney-client or work product privileges,
or that is proprietary in nature, review any final documents, materials,
inventory, notices or correspondence to or from governmental or regulatory
authorities in connection with the use of Hazardous Materials by Lessee; and (c)
review all storage, use, transportation, and disposal facilities owned or
operated by Lessee and associated with the use of Hazardous Materials
(collectively, "Inspection"):

                        (i)  once every six months for the first twelve
months of the term of this Lease, and once in every subsequent year beginning on
the anniversary of the effective date of this Lease, and

                        (ii) Upon receipt of written notice to Lessee in
accordance with Section 22 below and at a time mutually agreed to by Lessor and
Lessee, any time during the term of this Lease if, in the Lessor's reasonable
judgment, Lessee allegedly has breached its obligations under Section 7.3 of
this Lease or an alleged Release

                                       20
<PAGE>

of Hazardous Materials has occurred at the Premises. Lessor shall provide to
Lessee in its written notice of Inspection any and all information in Lessor's
possession or known to Lessor regarding Lessee's alleged breach of its
obligations under Section 7.3 of this Lease or the alleged Release of Hazardous
Materials.

                  (b)      Lessee shall reimburse Lessor for the cost of any
Inspection undertaken by Lessor pursuant to Section 7.3.9(a) (ii) if the results
of such Inspection document that a Release of Hazardous Materials has occurred
at the Premises for which Lessee is obliged to indemnify Lessor in accordance
with Section 7.3.3 of this Lease.

                  (c)      A representative of Lessee shall be permitted to
accompany Lessor during an Inspection. Lessor shall in the course of an
Inspection comply with any and all of Lessee's security and safety procedures.
Lessor promptly shall make available to Lessee copies of any and all reports,
data, analyses, notices, documents or other information reviewed, developed,
collected or prepared by Lessor or Lessor's employees, agents, contractors,
subcontractors, consultants, or representatives in the course of an Inspection.

                  7.3.10   Within thirty (30) days after Lessee's vacation of
the Premises, Lessor shall cause a qualified environmental consultant approved
by Lessee (whose approval shall not be unreasonably withheld, conditioned or
delayed) to perform a "Phase I" environmental assessment of the Premises
pursuant to a work plan approved by Lessee (whose approval shall not be
unreasonably withheld, conditioned or delayed) (the "Termination Inspection").
Lessor and Lessee shall bear equally the cost of the Termination Inspection;
provided, however, Lessee's obligation to pay for its share of the cost of the
Termination Inspection shall not exceed Ten Thousand Dollars ($10,000).

                  7.3.11   (a) The term "Hazardous Materials" as used in this
Lease shall include, but not be limited to, substances defined as "hazardous
substances" or "toxic substances" in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Sections 9601 et
seq., and the Resource Conservation and Recovery Act, 42 U.S.C. Sections 6901 et
seq.; those substances defined as "hazardous wastes" in Section 25117 of the
California Health and Safety Code and in the regulations adopted and promulgated
pursuant to said laws; and any other chemical, material or substance at levels
for which exposure is prohibited, limited or regulated by any governmental
agency,

                  (b)      The term "Hazardous Materials Laws" as used in this
Lease shall mean all local, state and federal laws, statutes, ordinances, rules,
regulations, orders, covenants and restrictions now or hereafter in effect
relating to the environment, Hazardous Materials (including, without limitation,
the use, handling, transportation, generation, disposal, Release or storage
thereof), or to industrial hygiene or to the environmental conditions on,

                                       21
<PAGE>

under or about the Premises, including, without limitation, soil, groundwater
and indoor and ambient air conditions.

                  (c)      The term "Indemnification Period" shall mean the
period commencing on the effective date of this Lease and expiring on the first
(1st) anniversary of the last day of the term of the Lease and any extensions
thereof, as provided for in this Lease.

                  (d)      The term "Release" or "Releases" as used in this
Lease shall mean any and all spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, or disposing into
the environment (including the abandonment or discarding of barrels, containers,
and other closed receptacles containing any Hazardous Materials), but shall not
include an emission or discharge which is in compliance with all Hazardous
Material Laws and permits issued by federal, state and local governmental
authorities.

         7.4.     ALTERATIONS AND ADDITIONS.

                  (a)      Lessee shall not, without Lessor's prior written
consent, except as herein provided, make any alterations, improvements,
additions or Utility Installations in, on or about the premises during the term
of this Lease. As used in this Lease the term "Utility Installation" shall mean
air lines, power panels, electrical distribution systems, lighting fixtures,
space heaters, heating, air conditioning and ventilation systems and plumbing.
Lessor may condition its consent to the making of any alterations or
improvements that will become permanently affixed to the Building (or which
would constitute new structures separate from or attached to the Building),
other than improvements comprising customary general office and other
non-specialized improvements, on Lessee's agreement to remove such alteration or
improvement at the expiration or sooner termination of the Lease Term.
Notwithstanding anything to the contrary in this Lease, any penetrations of the
roof membrane shall only be done with the prior consent of Lessor and only after
approval by Lessor of the manner and location of such penetration. Without
otherwise limiting the basis on which Lessor may reasonably withhold its consent
to the installation of any improvements on the roof of the Building, Lessee
agrees that it shall be reasonable for Lessor to withhold its consent thereto if
Lessor determines that the installation or operation of any such improvement
might damage the structural integrity of the roof or the Building, provided that
Lessor proposes an alternative location or manner of installation for the
proposed improvement that does not materially impair Lessee's business
operations or the utility of the proposed improvement.

                  (b)      Any alterations, improvements, additions in to or
about the Premises that Lessee shall desire to make (individually and
collectively, "Alterations") shall be presented to Lessor in written form, with
proposed detailed plans. If Lessor shall give its consent, the consent shall be
deemed conditioned upon Lessee

                                       22
<PAGE>

acquiring a permit to do so from appropriate governmental agencies, the
furnishing of a copy thereof to Lessor prior to the commencement of the work and
the compliance by Lessee of all conditions of said permit in a prompt and
expeditious manner. Notwithstanding the foregoing, Lessor's consent shall not be
required for the first $100,000 of Alterations in any twelve (12) month period
(commencing on the date of Lessee's occupancy of the Premises for other than
construction purposes (including installation of fixtures, equipment and
furnishings)), provided (i) such work does not involve any alteration or change
to any of the structural elements of the Building (including the roof and roof
membrane), any Building System, the parking facilities at the Premises or any
ingress or egress points to the Premises; (ii) such work otherwise complies with
the requirements of Section 7.4(c); and (iii) Lessee provides Lessor with final
"as-built" plans of such work annually.

                  (c)      All Alterations shall be performed by licensed
contractors approved in advance by Lessor. Lessor hereby approves Aaron
Management Company as an approved contractor for the alterations and
improvements to be constructed by Lessee with the proceeds from The Allowance.
Lessee agrees and understands that the review of any plans by Lessor is solely
to protect the interests of Lessor in the Building and the Premises, and Lessor
shall not be the guarantor of, nor responsible for, the correctness or accuracy
of any such plans or compliance of such plans with applicable laws.

                  (d)      Lessee shall pay, when due, all claims for labor or
materials furnished or alleged to have been furnished to or for Lessee at or for
use in the Premises, which claims are or may be secured by any mechanic's or
materialmen's lien against the Premises or any interest therein. Lessee shall
give Lessor not less than ten (10) days' notice prior to the commencement of any
work in the Premises for which Lessee is required to obtain the prior consent of
Lessor, and Lessor shall have the right to post notices of non-responsibility in
or on the Premises or the Building as provided by law. If Lessee shall, in good
faith, contest the validity of any such lien, claim or demand, then Lessee
shall, at its sole expense defend itself and Lessor against the same and shall
pay and satisfy and such adverse judgment that may be rendered thereon before
the enforcement thereof against the Lessor or the Premises, upon the condition
that if Lessor shall require, Lessee shall furnish to Lessor a surety bond
satisfactory to Lessor in an amount equal to such contested lien claim or demand
indemnifying Lessor against liability for the same and holding the Premises free
from the effect of such lien or claim. In addition, Lessor may require Lessee to
pay Lessor's attorneys fees and costs in participating in such action if Lessor
shall decide it is in Lessor's best interest to do so.

                  (e)      All Alterations (whether or not the same constitute
trade fixtures of Lessee), which may be made on the Premises, shall

                                       23
<PAGE>

be the property of Lessee; provided, however, upon the expiration or sooner
termination of this Lease, any and all Alterations, other than trade fixtures
and equipment that are removable without damage to any Building Systems or any
of the structural elements of the Building, shall remain in place and become the
property of Lessor. Subject to the foregoing, Lessee may remove any of its
personal property, furniture and equipment from the Building and the Premises
upon expiration or sooner termination of this Lease. In addition to the
foregoing, unless such condition is waived by Lessor in accordance with Section
7.4(a) hereof, Lessee shall remove any and all structures constructed or
installed by Lessee separate from, or as an addition or attachment to, the
Building. Lessee shall repair any damage to the Premises occasioned by the
removal of any of its fixtures, equipment and personal property at the
expiration or sooner termination of this Lease. Notwithstanding anything to the
contrary in Section 7.2 or this Section 7.4, any Alterations, equipment, trade
fixtures, furnishings or other personal property of Lessee not removed from the
Premises within sixty (60) days after the expiration or sooner termination of
this Lease shall be deemed abandoned by Lessee, to have no value, and may be
disposed of by Lessor as abandoned property in accordance with applicable law.

         7.5. LESSOR ADVANCES FOR INITIAL IMPROVEMENTS. Lessor and Lessee
acknowledge that the Base Rent provided for under this Lease includes as a
component thereof the advance by Lessor to Lessee of the sum of $2,000,000 (the
"Initial Allowance"), for the construction of Alterations approved by Lessor in
accordance with Section 7.4 hereof and commenced by Lessee prior to the
Scheduled Commencement Date (the "Initial Permitted Expenditures"). Provided no
Event of Default shall then exist under this Lease, from and after the Delivery
Date, Lessor shall make advances to Lessee of the Initial Allowance upon
presentation of invoices from Lessee or the person performing the work or
rendering the service and such reasonable supporting documentation as Lessor may
request in connection therewith, including conditional mechanics' lien releases.
In addition to the Initial Allowance, provided no Event of Default shall then
exist under this Lease, Lessor agrees to advance to Lessee, as a loan, after the
advance of the full Initial Allowance, an amount up to $1,603,962 (the
"Additional Allowance"), for the construction of Alterations approved by Lessor
in accordance with Section 7.4 hereof and commenced by Lessee prior to the first
anniversary of the Commencement Date ("Additional Permitted Expenditures").
Advances of the Additional Allowance shall be made in the same manner as
advances of the Initial Allowance. If the entire Initial Allowance is not used
for Initial Permitted Expenditures, there shall be an appropriate reduction in
Base Rent. If the entire Additional Allowance is not used for Additional
Permitted Expenditures, the balance shall be retained by Lessor. The Additional
Allowance, together with interest thereon accruing from March 1, 1994 at the
rate of seven and one-half percent (7.5%) per annum, shall be payable by Lessee
in equal monthly installments of principal and interest over the remaining

                                       24
<PAGE>

Lease Term, commencing on March 1, 1994. Each payment of principal and interest
hereunder shall be payable at the same time and in the same manner that Base
Rent is payable pursuant to Section 4 above. All payments received shall be
applied first to accrued interest and the balance shall be applied to principal.
The outstanding balance of the Additional Allowance may be prepaid in full or in
part at any time without premium or penalty. The repayment of the Additional
Allowance by Lessee to Lessor shall not constitute the payment of rent but
rather the repayment of a loan; provided, however, that any default in the
payment of any sums to be paid by Lessee pursuant to this paragraph shall
constitute a default under this Lease, and, in addition to giving rise to the
right of acceleration set forth in the next succeeding sentence, shall entitle
Lessor to exercise any and all remedies available to Lessor under this Lease, at
law or in equity, for nonpayment of rent. The unpaid principal balance and all
accrued interest thereon shall be immediately due and payable at the option of
Lessor upon any default in the payment of the Additional Allowance as and when
due hereunder or upon the occurrence of an Event of Default hereunder, or any
termination of, this Lease, together with (to the extent permitted under
applicable law) the costs and reasonable attorneys' fees incurred by Lessor in
collecting or enforcing payment thereof. Any failure of Lessor to exercise such
option to accelerate shall not constitute a waiver of the right to exercise such
option to accelerate at any future time. Notwithstanding the foregoing, Lessor
and Lessee acknowledge that Lessee shall have no obligation and is hereby
relieved of any obligation to repay the Additional Allowance in the event the
Lease is terminated as the result of any damage or destruction of the Premises,
as provided in Article 9, or condemnation of the Premises, as provided in
Article 14.

8.       INSURANCE; INDEMNITY.

         8.1.     INSURANCE - LESSEE. Lessee shall, at its sole cost and
expense, obtain and keep in full force and effect from and after the Delivery
Date a Commercial General Liability policy of insurance protecting Lessee and
Lessor (as an additional insured) against claims for bodily injury, personal
injury and property damage based upon, involving or arising out of the use,
occupancy or maintenance of the Premises and all areas appurtenant thereto. Such
insurance shall be on an occurrence basis providing single limit coverage in an
amount not less than $1,000,000 per occurrence and providing for not less than
$6,500,000 in umbrella/excess liability coverage, and contain the
"Amendment of the Pollution Exclusion" for damage caused by heat, smoke or fumes
from a hostile fire. The policy shall not contain any intra-insured exclusions
as between insured persons or organizations, but shall include coverage for
liability assumed under this Lease as an "insured contract" for the performance
of Lessee's indemnity obligations (other than the Lessee's indemnity obligations
under Section 7.3) under this Lease. The limits of said insurance required by
this Lease or as carried by Lessee shall not, however, limit the liability of
Lessee nor relieve Lessee of any obligation hereunder.

                                       25
<PAGE>

All insurance to be carried by Lessee shall be primary to and not contributory
with any similar insurance carried by Lessor, whose insurance shall be
considered excess insurance only.

         8.2.     INSURANCE - LESSOR.

                  8.2.1    From and after the Delivery Date, Lessor shall keep
the Building and all Leasehold Improvements (as defined below) insured against
all perils covered by a standard all risk insurance policy or policies as such
policies are in use as of the date of this Lease (excluding perils such as
earthquake, flood and other standard all-risk policy form exclusions), in an
amount or amounts equal to the full replacement value of the Building (excluding
the land and the footings, foundations and installations below the basement
level) and the Leasehold Improvements (provided, however, if by reason of the
unique nature of any of the Leasehold Improvements full replacement coverage is
not commercially reasonable and available, then Lessor shall only be obligated
to insure such unique Leasehold Improvements to the commercially reasonable and
available insurable value thereof), without deduction for depreciation,
including the costs of demolition and debris removal, or such other fire and
property damage insurance as Lessor shall reasonably determine to give
substantially equal or greater protection, together with endorsements for
increased cost of construction and contingent liability (commonly known as
building ordinance coverage). The replacement value of the Building and the
Leasehold Improvements shall be redetermined by Lessor no less frequently than
once every two (2) years. For purposes of this Section 8.2, "Leasehold
Improvements" shall mean the improvements and betterments made in or to the
Building existing as of the date of this Lease or later installed by Lessee,
including any Building systems, the landscaping, parking facilities, fencing and
exterior lighting facilities. Leasehold Improvements shall exclude any and all
of Lessee's trade fixtures not permanently affixed to the Premises, equipment or
moveable personal property. Lessee shall be named as a "loss payee" on Lessor's
property insurance policy, as its interest may appear.

                  8.2.2    Lessee shall have the right, upon written notice to,
and approval by Lessor (including approval of any Lessor Mortgagee), which
approval shall not be unreasonably withheld, to assume the obligations of Lessor
in Section 8.2.1, with such policy being issued in the name of Lessor, and with
loss payable to Lessor and Lessee as provided in Section 8.2.1 hereof.

         8.3.     GENERAL INSURANCE MATTERS.

                  8.3.1    The amounts of coverage called for in this Section
8.1 shall be subject to review by Lessor and Lessee each year, and shall be
adjusted as appropriate to provide that the amounts of coverages shall be not
less than the amounts of coverage carried by prudent owners, operators and
lessees of first-class industrial/office space buildings comparable to the
Building and

                                       26
<PAGE>

located in the Fremont area. For purposes of reviewing coverages to be carried
by Lessee, the amounts of coverage required will be compared with coverages
maintained by other lessees similar to Lessee with respect to the size and
nature of its business operation.

                  8.3.2    Insurance required hereunder shall be in companies
acceptable to Lessor and holding a "General Policyholders Rating" of at least
B+/VII, or such other rating as may be required by a lender having a lien on the
Premises, as set forth in the most current issue of "Best's Insurance Guide".
Lessee shall not do or permit to be done anything which shall invalidate the
insurance policies carried by Lessor. Lessee shall deliver to Lessor
certificates of insurance or certificates evidencing the existence and amounts
of the insurance required by Section 8.1 hereof prior to Lessee's occupancy of
the Premises. No such policy shall be cancelable or subject to modification
except upon thirty (30) days prior written notice to Lessor.

         8.4.     WAIVER OF SUBROGATION. Each of Lessor's and Lessee's policies
of insurance obtained for the Premises shall include a clause or endorsement
denying the insurer any right of subrogation against the other to the extent
that rights have been waived by the insured party prior to the occurrence of
injury or loss. Lessor and Lessee each waive any rights of recovery against the
other for injury or loss due to hazards covered by its own insurance, to the
extent of the injury or loss covered thereby.

         8.5.     INDEMNITY. Subject to Section 7.3 of this Lease (which shall
control in the event of any conflict with the provisions of this Section),
Lessee shall indemnify, defend and hold harmless Lessor, its employees, agents
and representatives, from and against any and all claims arising, directly or
indirectly, from Lessee's use of the Premises, or from the conduct of Lessee's
business or from any activity, work or things done, permitted or suffered by
Lessee in or about the Premises or elsewhere and shall further indemnify, defend
and hold harmless Lessor, its employees, agents and representatives, from and
against any and all claims arising, directly or indirectly, from any breach or
default in the performance of any obligation on Lessee's part to be performed
under the terms of this Lease, or arising, directly or indirectly, from any act
or omission of Lessee or any of Lessee's agents, contractors or employees,
howsoever occurring, and from and against all costs, attorneys' fees, expenses
and liabilities incurred in the defense of any such claim or any action or
proceeding brought thereon except to the extent the same results from the
negligence or willful misconduct of Lessor, its employees, agents and
representatives; and in case any action or proceeding be brought against Lessor
by reason of any such claim, Lessee upon notice from Lessor shall defend the
same at Lessee's expense by counsel reasonably satisfactory to Lessor and Lessor
shall cooperate with Lessee in such defense. Notwithstanding anything to the
contrary herein, Lessee shall not be responsible for any consequential

                                       27
<PAGE>

damages (including, without limitation, lost profits or business opportunities)
resulting from the acts or omissions of Lessee, its agents, contractors or
employees. Lessee, as a material part of the consideration to Lessor, hereby
assumes all risk of damage to property of Lessee or injury to persons, in, upon
or about the Premises arising from any cause, except as provided in Sections
7.1.4, 7.3 and 8.6.2, and, subject to the foregoing, Lessee hereby waives all
claims in respect thereof against Lessor, its employees, agents and
representatives.

         8.6.     EXEMPTION FROM LIABILITY.

                  8.6.1    Lessee hereby agrees that Lessor shall not be liable
for injury to Lessee's business or any loss of income therefrom or, subject to
Section 7.1.4 of this Lease, for damage to the goods, wares, merchandise or
other property of Lessee, Lessee's employees, invitees, customers or any other
person in or about the Premises, nor, subject to Section 7.1.4 of this Lease,
shall Lessor be liable for injury to the person of Lessee, Lessee's employees,
agents or contractors, whether such damage or injury is caused by or results
from fire, steam, electricity, gas, water or rain, or from the breakage,
leakage, obstruction or other defects of pipes, sprinklers, wires, appliances,
plumbing, air conditioning or lighting fixtures, or from any other cause,
howsoever occurring (including, without limitation, as a result of any Release
or other cause described in Section 7.3 hereof), whether said damage or injury
results from conditions arising upon the Premises or from other sources or
places and regardless of whether the cause of such damage or injury or the means
of repairing the same is inaccessible to Lessee.

                  8.6.2    Lessor hereby agrees that, subject to Section 13.2 of
this Lease and the remedies permitted Lessor thereunder, Lessee shall not be
liable for injury to Lessor's business or any loss of income therefrom or,
subject to Section 8.5 of this Lease, for damage to the goods, wares,
merchandise or other property of Lessor, or Lessor's employees, invitees, any
other person in or about the Premises, nor, subject to Section 8.5 of this
Lease, shall Lessee be liable for injury to the person of Lessor, Lessor's
employees, agents or contractors, howsoever such damage or injury occurs
(including, without limitation, as a result of any Release or other cause
described in Section 7.3 hereof), whether said damage or injury results from
conditions arising upon the Premises or from other sources or places and
regardless of whether the cause of such damage or injury or the means of
repairing the same is inaccessible to Lessor. For purposes of the preceding
sentence, to the extent Lessee is responsible to Lessor for damage or injury to
person or property based on Section 8.5 of this Lease, such liability shall, to
the extent applicable, be limited by the terms of Section 7.3 of this Lease in
all respects and Section 7.3 shall control as to the scope of Lessee's liability
to Lessor with respect to matters provided therein.

                                       28

<PAGE>

9.       DAMAGE OR DESTRUCTION.

         9.1.     DEFINITIONS.

                  (a) "Premises Partial Damage" shall mean if the Premises are
damaged or destroyed to the extent that the cost of repair is less than fifty
percent (50%) of the then replacement cost of the Premises.

                  (b) "Premises Total Destruction" shall mean if the Premises
are damaged or destroyed to the extent that the cost of repair is fifty percent
(50%) or more of the then replacement cost of the Premises.

                  (c) "Insured Loss" shall mean damage or destruction which was
covered by an event covered by the insurance required to be obtained by Lessor
under this Lease. The fact that an Insured Loss has a deductible amount shall
not make the loss an uninsured loss.

                  (d) "Replacement Cost" shall mean the amount of money
necessary to be spent in order to repair or rebuild the damaged area to the
condition that existed immediately prior to the damage occurring, including
demolition, debris removal and upgrading required by operation of applicable
building codes, ordinances, or laws, without deduction for depreciation.

         9.2.     PREMISES PARTIAL DAMAGE.

                  (a) Subject to the provisions of Sections 9.4 and 9.5, if at
any time during the term of this Lease there is damage, which is an Insured Loss
and which falls within the classification of Premises Partial Damage, then
Lessor shall, at Lessor's expense, repair such damage to the Premises, excluding
any property of Lessee that is not included within the term Leasehold
Improvements, as soon as reasonably possible after Lessor's receipt of
substantially all of the insurance proceeds therefor, and this Lease shall
continue in full force and effect. Lessor and Lessee shall cooperate to obtain
insurance proceeds as promptly as possible following the occurrence of an
Insured Loss. If, by reason of the unique nature of any of the Leasehold
Improvements, full replacement cost insurance coverage was not commercially
reasonable and available for any Leasehold Improvements, Lessor shall have no
obligation to fully restore any unique aspects of the Leasehold Improvements
unless Lessee provides Lessor with the funds to cover same, or adequate
assurance thereof, within ten (10) days following receipt of written notice of
such shortage and request therefor. If Lessor receives said funds or adequate
assurance thereof within said ten (10) days period, Lessor shall complete the
restoration of such Leasehold Improvements as soon as reasonably possible and
this Lease shall remain in full force and effect. If Lessor does not receive
such funds or assurance within said period, Lessor may nevertheless proceed to
make such restoration and repair as is commercially reasonable, taking into
account available

                                       29

<PAGE>

insurance proceeds, in which case this Lease shall remain in full force and
effect. Premises Partial Damage due to flood or earthquake shall be subject to
Section 9.3 rather than this Section 9.2, notwithstanding that there may be some
insurance coverage but the net proceeds of any such insurance shall be made
available for the repairs if made by Lessor.

                  (b) Subject to the provisions of Sections 9.4 and 9.5, if at
any time during the term of this Lease there is damage which is not an Insured
Loss and which falls within the classification of Premises Partial Damage,
unless caused by a negligent or willful act of Lessee (in which event Lessee
shall make the repairs at Lessee's expense, subject to Section 7.4 above and
other reasonable conditions imposed by Lessor, or, at Lessor's option, Lessor
shall repair the same at Lessee's expense), Lessor may, at Lessor's option
either (i) repair such damage (excluding any property of Lessee that is not
included within the term Leasehold Improvements) as soon as reasonably possible
at Lessor's expense (subject to the provisions of Section 9.2 hereof regarding
the repair of unique Leasehold Improvements for which full replacement coverage
is not available), in which event this Lease shall continue in full force and
effect, or (ii) give written notice to Lessee within sixty (60) days after the
date of the occurrence of such damage of Lessor's intention to cancel and
terminate this Lease as of the date of the occurrence of such damage.

                  (c) If at any time during the term of this Lease there is a
casualty, whether or not an Insured Loss, that falls within the classification
of Premises Partial Damage, and Lessor does not elect to terminate this Lease
pursuant to Section 9.2(b) above, Lessor shall, within sixty (60) days of such
casualty, provide Lessee with a written estimate of the time required to rebuild
and restore the Premises. Notwithstanding anything to the contrary in this
Section 9.2, if the time which would be required to rebuild and restore the
Premises is more than the first to occur of (i) six (6) months following the
issuance of all necessary building permits, or (ii) one year from the date of
such casualty, Lessee shall have the right, within thirty (30) days of Lessor's
notice, to terminate this Lease effective as of the date of such notice;
provided, if Lessee does not timely elect to terminate this Lease in accordance
with this sentence, the rights and obligations of Lessor and Lessee shall be
determined in accordance with this Section 9.2 without application of this
paragraph.

         9.3.     PREMISES TOTAL DESTRUCTION. (a) If at any time during the
Lease Term there is damage, whether or not it is an Insured Loss, and which
falls into the classification of Premises Total Destruction, Lessor may, at
Lessor's option either (i) repair such damage or destruction (excluding any
property of Lessee that is not included within the term Leasehold Improvements)
as soon as reasonably possible (after Lessor's receipt of substantially all of
the insurance proceeds therefor, if any; Lessor and Lessee agreeing to cooperate
to obtain such insurance proceeds as promptly as

                                       30
<PAGE>

possible following the occurrence of an Insured Loss) at Lessor's expense
(subject to the provisions of Section 9.2 hereof regarding the repair of unique
Leasehold Improvements for which full replacement coverage is not available),
and this Lease shall continue in full force and effect, or (ii) give written
notice to Lessee within sixty (60) days after the date of occurrence of such
damage of Lessor's intention to cancel and terminate this Lease, in which case
this Lease shall be cancelled and terminated as of the date of occurrence of
such damage.

                  (b) If at any time during the term of this Lease there is a
casualty, whether or not an Insured Loss, that falls within the classification
of Premises Total Damage, and Lessor does not elect to terminate this Lease
pursuant to Section 9.3(a) above, Lessor shall, within sixty (60) days of such
casualty, provide Lessee with a written estimate of the time required to rebuild
and restore the Premises. Notwithstanding anything to the contrary in this
Section 9.3, if the time which would be required to rebuild and restore the
Premises is more than the first to occur of (i) six (6) months following the
issuance of all necessary building permits, or (ii) one year from the date of
such casualty, Lessee shall have the right, within thirty (30) days of Lessor's
notice, to terminate this Lease effective as of the date of such notice;
provided, if Lessee does not timely elect to terminate this Lease in accordance
with this sentence, the rights and obligations of Lessor and Lessee shall be
determined in accordance with this Section 9.3 without application of this
paragraph.

                  (c) Notwithstanding anything to the contrary in Section 9.2 or
this Section 9.3, if Lessor elects, following a casualty which falls within the
classification of Premises Partial Damage or Premises Total Damage, to terminate
this Lease, Lessee shall have the right, by written notice to Lessee within ten
(10) days after the receipt of Lessor's notice terminating this Lease, to assume
the cost of reconstruction and repair of the Premises and, subject to the rights
of any Lessor's Mortgagee, receive an assignment of any property insurance
proceeds otherwise received by Lessor, and this Lease shall not terminate;
provided, however, that in such an event any abatement of rent to which Lessee
shall otherwise be entitled shall cease six (6) months after the date of the
casualty and shall be due and payable as otherwise provided in this Lease.

         9.4.     DAMAGE NEAR END OF TERM.

                  (a) Subject to Section 9.4(b), if at any time during the last
two (2) years of the Lease Term there is substantial damage, whether or not an
Insured Loss, which falls within the classification of Premises Partial Damage,
Lessor may at Lessor's option cancel and terminate this Lease as of the date of
occurrence of such damage by giving written notice to Lessee of Lessor's
election to do so within sixty (60) days after the date of occurrence of such
damage.

                                       31

<PAGE>

                  (b) Notwithstanding Section 9.4 (a), in the event that Lessee
has an option to extend this Lease, and the time within which said option may be
exercised has not yet expired, Lessee may exercise such option, if it is to be
exercised at all, no later than ten (10) days after the occurrence of an Insured
Loss falling within the classification of Premises Partial Damage during the
last two (2) years of the Lease Term. If Lessee duly exercises such option
during said 10-day period, Lessor shall, at Lessor's expense, subject to Section
9.2(a) above, repair such damage as soon as reasonably possible and this Lease
shall continue in full force and effect. If Lessee fails to exercise such option
during said 10-day period, Lessor may at Lessor's option terminate and cancel
this Lease as of the expiration of said 10-day period by giving written notice
to Lessee.

         9.5.     ABATEMENT OF RENT; LESSEE'S REMEDIES. In the event Lessor
repairs or restores the Premises pursuant to the provisions of this Section 9,
the rent payable hereunder for the period during which such damage, repair or
restoration continues shall be abated in proportion to the degree to which
Lessee's use of the Premises is impaired. Except for abatement of rent, if any,
Lessee shall have no claim against Lessor for any damage suffered by reason of
any such damage, destruction, repair or restoration.

         9.6.     TERMINATION - ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to this Section 9, an equitable adjustment shall be made concerning
advance rent and any advance payments made by Lessee to Lessor. In addition,
Lessor shall, if required, return to Lessee the Security Deposit, if any,
pursuant to Section 5 above.

         9.7.     WAIVER. Lessor and Lessee waive California Civil Code Sections
1932(2) and 1933(4) providing for the termination of a lease upon the
destruction of the thing hired.

         9.8.     ADJUSTMENT OF CLAIMS. In order to provide guidance to Lessor's
property insurance carrier as to the adjustment of any claim under Lessor's
property insurance policy following a casualty which results in a termination of
this Lease, the parties agree that Lessee's interest in the Leasehold
Improvements shall equal the depreciated value of any Leasehold Improvements
paid for by Lessee (and specifically excluding the value of any Leasehold
Improvements paid for by Lessor's disbursement of the Allowance) and that Lessee
has no insurable interest in the structural elements, Building Systems, Utility
Installations and foundation of the Building, and any parking facilities and
landscaping at the Premises.

10.      PERSONAL PROPERTY TAXES.

Lessee shall pay prior to delinquency all taxes assessed against and levied upon
trade fixtures, furnishings, equipment and all other personal property of Lessee
contained in the Premises or

                                       32

<PAGE>

elsewhere. When possible, Lessee shall cause said trade fixtures, furnishings,
equipment and all other personal property to be assessed and billed separately
from the real property of Lessor. If any of Lessee's said personal property
shall be assessed with Lessor's real property, Lessee shall pay to Lessor the
taxes attributable to Lessee within ten (10) days after receipt of a written
statement setting forth the taxes applicable to Lessee's property, and Lessee
shall have the right to protest such taxes in accordance with, and subject to
the terms of, Section 4.5 of this Lease.

11.      UTILITIES.

Lessee shall pay for all water, gas, heat, light, power, telephone and other
utilities and services supplied to the Premises, together with any taxes
thereon.

12.      ASSIGNMENT AND SUBLETTING.

         12.1.    LESSOR'S CONSENT REQUIRED. Lessee shall not voluntarily or by
operation of law, assign, transfer, mortgage, sublet or otherwise transfer or
encumber all or any part of Lessee's interest in the Lease or in the Premises,
without Lessor's prior written consent, which Lessor shall not unreasonably
withhold. For purposes of this Section 12.1, a corporate dissolution, or any
merger, consolidation or other reorganization of Lessee where Lessee is not the
surviving corporation shall constitute an assignment of this Lease; provided,
however, for so long as Lessee is a corporation the voting stock of which is
publicly traded on a national stock exchange, the consent of Lessor shall not be
required in connection with any such merger, consolidation or other
reorganization where the surviving corporation has a net worth that is at least
equal to the net worth of Lessee immediately prior to the transaction. Any of
the foregoing acts without the prior written consent of Landlord shall be void
and shall, at the option of Lessor, constitute an Event of Default under this
Lease that entitles Lessor to terminate this Lease. Lessor agrees that the
withholding of consent by Lessor shall be deemed reasonable unless all of the
following conditions are satisfied:

                  (i)      The proposed assignee or subtenant shall use the
Premises only for the Permitted Use or such other use reasonably acceptable to
Lessor.

                  (ii)     The proposed assignee or subtenant is reputable and
has a net worth and a credit rating reasonably acceptable to Lessor, and
otherwise has sufficient financial capabilities to perform all of its
obligations under this Lease or the proposed sublease, in Lessor's reasonable
judgment.

                  (iii)    Lessee is not in default and has not committed acts
or omissions which with the running of time or the giving of notice

                                       33

<PAGE>

or both would constitute a default under this Lease.

                  (iv)     All of the other terms of this Section 12 are
complied with.

The conditions described above are not exclusive and shall not limit or prevent
Lessor from considering additional factors in determining if it should
reasonably withhold its consent. Lessor shall either consent or withhold consent
to Lessee's request for consent hereunder within ten (10) business days after
Lessor's receipt of information reasonably requested by Lessor concerning such
transfer (including, without limitation, financial statements of a proposed
transferee), and any attempted assignment, transfer, mortgage, encumbrance or
subletting without such consent shall be void, and shall constitute a breach of
this Lease. The failure of Lessor to give its consent within said ten (10)
business day period shall be deemed a denial of such consent (provided, however,
that such deemed denial shall not, in and of itself, be considered an
unreasonable act of Lessor). Notwithstanding the foregoing, Lessor's consent
shall not be required for any assignment or sublease to any Affiliate of Lessee.
For purposes of this Lease, an "Affiliate of Lessee" shall be any entity
controlled by Lessee, or under common control with Lessee, provided Lessor shall
be given not less than fifteen (15) days prior written notice of such assignment
or sublease, together with such information as may be necessary to establish
that the assignee or sublessee is an Affiliate of Lessee. For purposes of this
Lease, "control" shall mean owning more than a fifty percent (50%) ownership
interest in an entity.

         12.2.    TERMS AND CONDITIONS OF ASSIGNMENT. Regardless of Lessor's
consent, no assignment to an Affiliate of Lessee shall release Lessee of
Lessee's obligations hereunder or alter the primary liability of Lessee to pay
the Base Rent and Operating Expenses, and to perform all other obligations to be
performed by Lessee hereunder. In the case of an assignment of all of the right,
title and interest of Lessee under this Lease consented to by Lessor, other than
as hereinabove provided, Lessor shall release Lessee from any liability accruing
under this Lease from and after the date of such assignment. Neither a delay in
the approval or disapproval of such assignment nor the acceptance of rent shall
constitute a waiver or estoppel of Lessor's right to exercise its remedies for
the breach of any of the terms or conditions of this Section 12 or this Lease.
Consent to one assignment shall not be deemed consent to any subsequent
assignment. In the event of a default by any assignee of Lessee or any successor
of Lessee in the performance of any of the terms hereof, Lessor may proceed
directly against Lessee without the necessity of exhausting remedies against
said assignee or successor. In the case of any assignment of this Lease where
Lessee is not released prospectively from its obligations hereunder, Lessor may
consent to subsequent assignments of this Lease or amendments or modifications
to this Lease with assignees of Lessee, without notifying Lessee, or any
successor of

                                       34

<PAGE>

Lessee, and without obtaining its or their consent thereto and such action shall
not relieve Lessee of liability under this Lease; provided, however, that Lessee
shall have no liability under this Lease as to any obligations subject to such
modification or amendment unless such modification or amendment has been
consented to by Lessor. In addition, any assignment of this Lease shall be null
unless the assignee assumes all of Lessee's obligations under this Lease and
agrees to be bound by the terms of this Lease. Lessor shall be entitled to fifty
percent (50%) of any Bonus Rent (as hereinafter defined) resulting from any
assignment.

         12.3.    TERMS AND CONDITIONS APPLICABLE TO SUBLETTING. Regardless of
Lessor's consent, the following terms and conditions shall apply to any
subletting by Lessee of all or any part of the Premises and shall be included in
subleases:

                  (a) Lessee hereby assigns and transfers to Lessor all of
Lessee's interest in all rentals and income arising from any sublease heretofore
or hereafter made by Lessee, and Lessor may collect such rent and income and
apply same toward Lessee's obligations under this Lease; provided, however, that
until a Event of Default shall occur under this Lease, Lessee may receive,
collect and enjoy the rents accruing under such sublease, except as provided
below. Lessor shall not, by reason of this or any other assignment of such
sublease to Lessor nor by reason of the collection of the rents from a
sublessee, be deemed liable to the sublessee for any failure of Lessee to
perform and comply with any of Lessee's obligations to such sublessee under such
sublease. Lessee hereby irrevocably authorizes and directs any such sublessee,
upon receipt of a written notice from Lessor stating that a default exists in
the performance of Lessee's obligations under this Lease, to pay to Lessor the
rents due and to become due under the sublease. Lessee agrees that sublessee
shall have the right to rely upon any such statement and request from Lessor,
and that such sublessee shall pay such rents to Lessor without any obligation or
right to inquire as to whether such default exists and notwithstanding any
notice from or claim from Lessee to the contrary. Lessee shall have no right or
claim against such sublessee or Lessor for any such rents so paid by said
sublessee to Lessor. All subleases shall be subject and subordinate to this
Lease, and Lessor shall be entitled to fifty percent (50%) of any Bonus Rent.

                  (b) No sublease entered into by Lessee shall be effective
unless and until it has been approved in writing by Lessor. Once approved by
Lessor, such sublease shall not be changed or modified without Lessor's prior
written consent. Any sublessee shall, by reason of entering into a sublease
under this Lease, be deemed, for the benefit of Lessor, to have assumed and
agreed to comply with each and every obligations herein to be performed by
Lessee other than such obligations as are contrary to or inconsistent with
provisions contained in a sublease to which Lessor has expressly consented in
writing.

                                       35

<PAGE>

                  (c) The consent by Lessor to any subletting shall not release
Lessee from its obligations or alter the primary liability of Lessee to pay the
rent and perform and comply with all of the obligations of Lessee to be
performed under this Lease.

                  (d) The consent by Lessor to any subletting shall not
constitute a consent to any subsequent subletting by Lessee or a consent to any
subsequent sublettings and assignments of the sublease or any amendments or
modifications thereto.

                  (e) Following any Event of any Default under this Lease,
Lessor may proceed directly against Lessee, or any one else responsible for the
performance of this Lease, including the sublessee, without first exhausting
Lessor's remedies against any other person or entity responsible therefor to
Lessor, or any security held by Lessor or Lessee.

                  (f) Following any Event of Default under this Lease, Lessor,
at its option and without any obligation to do so, may require any sublessee to
attorn to Lessor, in which event Lessor shall undertake the obligations of
Lessee under such sublease from the time of the exercise of said option to the
termination of such sublease; provided, however, Lessor shall not be liable for
any prepaid rents or security deposit paid by such sublessee to Lessee or for
any other prior defaults of Lessee under such sublease.

                  (g) Each and every consent required of Lessee under a sublease
shall also require the consent of Lessor, which consent shall not be
unreasonably withheld or delayed.

                  (h) No sublessee shall further assign or sublet all or any
part of the Premises without Lessor's prior written consent.

                  (i) Lessor's written consent to any subletting of the Premises
by Lessee shall not constitute an acknowledgment that no default by Lessee then
exists under this Lease nor shall such consent be deemed a waiver of any then
existing default. Lessor shall, if requested by Lessee, certify to any assignee
or sublessee as to the existence of any defaults of Lessee under this Lease then
known to Lessor.

         12.4.    BONUS RENT. For purposes of this Lease, "Bonus Rent" shall
mean any and all rent or other consideration, whether denominated rent or
otherwise, realized by Lessee under any assignment or sublease (pro rated to
reflect the rent allocable to the portion of the Building subject to such
assignment or sublease) in excess of (i) Base Rent, (ii) Operating Expenses,
(iii) monthly rent payment of the Allowance as provided in Section 7.5, (iv)
reasonable attorneys' fees and leasing commissions incurred by Lessee in
connection with such assignment or sublease, amortized over the term of the
assignment or sublease, and (v) the unamortized cost of capital improvements
installed in the Premises by Lessee and not removed

                                       36

<PAGE>

         12.5.    ATTORNEY'S FEES. In the event Lessee shall assign or sublet
the Premises or request the consent of Lessor to any assignment or subletting or
if Lessee shall request the consent of .Lessor for any act Lessee proposes to do
then Lessee shall pay Lessor's reasonable attorneys fees, not to exceed one
thousand dollars ($1,000) incurred in connection therewith.

         12.6.    REMEDY. Notwithstanding anything to the contrary in this
Lease, if Lessee or any proposed transferee of Lessee claims that Lessor has
unreasonably withheld its consent under this Section 12.1, their sole remedy
shall be to make a written demand on Lessor and to require Lessor to submit the
issue of whether Lessor has acted reasonably or unreasonably to arbitration in
accordance with the following procedure:

                  (i)      Within five (5) business days after Lessor's receipt
of Lessee's demand, Lessor and Lessee shall attempt in good faith to mutually
appoint a real estate attorney who shall have been active over the ten (10) year
period ending on the date of such appointment in the leasing of
commercial/industrial properties in the San Francisco/East Bay area. If the
parties are unable to agree, Lessor and Lessee shall each appoint a real estate
attorney, so qualified, by written notice to the other party within five (5)
business days after expiration of said five (5) business day period. Within ten
(10) business days after selection of the second real estate attorney, the two
real estate attorneys appointed by the parties shall mutually appoint a third
real estate attorney, with the same qualifications, who shall not have
previously acted as counsel to Lessor or Lessee. If either Lessor or Lessee
fails to appoint a real estate attorney within the time period specified, the
real estate attorney appointed by one of them shall be the arbiter of the
dispute as hereinafter provided.

                  (ii)     Within thirty (30) days after appointment of the real
estate attorney mutually appointed by the parties or selection of the third real
estate attorney (either of such attorneys hereinafter being referred to as the
"arbiter"), the arbiter shall determine whether Lessor has acted reasonably or
unreasonably. The parties shall have the right to submit (and by his or her
appointment the arbiter shall agree to consider such written material as may be
submitted) to the arbiter, and if requested by the arbiter, to make oral
arguments or presentations, as necessary; provided, however, Lessor and Lessee
agree to limit any written material submitted to the arbiter to fifteen (15)
pages (double spaced) per party and to limit oral argument to one hour per
party. The sole issue to be submitted to the arbiter for resolution is whether,
under the circumstances, Lessor has acted reasonably or unreasonably under, and
taking into account the terms of, this Article 12 in withholding its consent to
a requested assignment or subletting. The decision of the arbiter shall be final
and binding on the parties and no monetary damages or other relief shall be
ordered or determined by the arbiter. Each party shall bear its own cost in
connection with submittal of the issue

                                       37

<PAGE>

to the arbiter and the non-prevailing party shall pay the expenses and fees of
the arbiter. Except as hereinabove provided, Lessee waives all other remedies,
including, without limitation, any right to monetary damages, by reason of
Lessor's delay or withholding of any consent under Section 12.1 hereof.

13.      DEFAULT; REMEDIES.

         13.1.    DEFAULT. The occurrence of any one or more of the following
events shall constitute a material default (hereinafter an "Event of Default")
of this Lease by Lessee:

                  (a) The abandonment of the Premises.

                  (b) The failure by Lessee to make any payment of rent or any
other payment required to be made by Lessee hereunder, as and when due, where
such failure shall continue for a period of ten (10) days after written notice
thereof from Lessor to Lessee. In the event that Lessor serves Lessee with a
Notice to Pay Rent or Quit pursuant to applicable Unlawful Detainer statutes
such Notice to Pay Rent or Quit shall also constitute the notice required by
this subparagraph.

                  (c) Except as otherwise provided in this Lease, the failure by
Lessee to observe or perform any of the covenants, conditions or provisions of
this Lease to be observed or performed by Lessee, other than described in
paragraphs (b), (d), (e) and (f) herein, where such failure shall continue for a
period of thirty (30) days after written notice thereof from Lessor to Lessee;
provided, however, that if the nature of Lessee's noncompliance is such that
more than thirty (30) days are reasonably required for its cure, then Lessee
shall not be deemed to be in default if Lessee commenced such cure within said
thirty (30) day period and thereafter diligently prosecutes such cure to
completion. To the extent permitted by law, such thirty (30) day notice shall
constitute the sole and exclusive notice required to be given to Lessee under
applicable Unlawful Detainer statutes.

                  (d) (i) The making by Lessee of any general arrangement or
general assignment for the benefit of creditors; (ii) Lessee becomes a "debtor"
as defined in 11 U.S.C. Section 101 or any successor statute thereto (unless, in
the case of a petition filed against Lessee, the same is dismissed within sixty
(60) days); (iii) the appointment of a trustee or receiver to take possession of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where possession is not restored to Lessee within thirty
(30) days; or (iv) the attachment, execution or other judicial seizure of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where such seizure is not discharged within thirty (30)
days. In the event that any provision of this paragraph 13.1 (d) is contrary to
any applicable law, such provision shall be of no force or effect.

                                       38

<PAGE>

                  (e) A sale, conveyance, mortgage, pledge, assignment, sublease
or other transfer or encumbrance, or any attempt to do so, in violation of
Section 12.

                  (f) Lessee's failure to deliver the estoppel certificate
required under Section 15, or any written instrument required under Section 29.

         13.2.    REMEDIES. In the event of any such default by Lessee, Lessor
may at any time thereafter, with or without notice or demand and without
limiting Lessor in the exercise of any right or remedy which Lessor may have by
reason of such default:

                  (a) Terminate Lessee's right to possession of the Premises by
any lawful means, in which case this Lease shall terminate and Lessee shall be
entitled to its rights and remedies under Civil Code Section 1951.2 to recover
from Lessee all damages incurred by Lessor or Lessor's Affiliates by reason of
Lessee's default, including but not limited to: (i) the worth at the time of the
award of the unpaid Base Rent and additional rent which had been earned or was
payable at the time of termination; (ii) the worth at the time of the award of
the amount by which the unpaid Base Rent and additional rent which would have
been earned or payable after termination until the time of the award exceeds the
amount of such rental loss that Lessee proves could have been reasonably
avoided; (iii) the worth at the time of the award of the amount by which the
unpaid Base Rent and additional rent which would have been paid for the balance
of the term after the time of award exceeds the amount of such rental loss that
Lessee proves could have been reasonably avoided; and (iv) any other amount
necessary to compensate Lessor for all damages incurred by Lessor proximately
caused by Lessee's failure to perform its obligations under the Lease or which
in the ordinary course of things would be likely to result therefrom, including,
but not limited to, any costs or expenses incurred by Lessor in maintaining or
preserving the Premises, after such default, the cost of recovering possession
of the Premises, expenses of reletting, including necessary renovation or
alteration of the Premises, Lessor's attorneys' fees and costs incurred in
connection therewith, and any real estate commissions paid or payable. As used
in subparts (i) and (ii) above, the "worth at the time of the award" is computed
by allowing interest on unpaid amounts at the Interest Rate or such lesser
amount as may then be the maximum lawful rate. As used in subpart (iii) above,
the "worth at the time of the award" is computed by discounting such amount at
the discount rate of the Federal Reserve Bank of San Francisco at the time of
the award, plus one percent (1%). If Lessee abandons the Premises, Lessor shall
have the option of (x) taking possession of the Premises and recovering from
Lessee the amount specified in this subparagraph, or (y) proceeding under the
provisions of subparagraph (b) below.

                  (b) Maintain Lessee's right to possession, in which case this
Lease shall continue in effect whether or not Lessee shall

                                       39

<PAGE>

have abandoned the Premises. In such event Lessor may enforce all of its rights
and remedies under this Lease, including (but without limitation) the right to
recover rent as it becomes due, and Lessor, without terminating this Lease, may
exercise all of the rights and remedies of a Lessor under California Civil Code
Section 1951.4 or any successor code section. Acts of maintenance, preservation
or efforts to lease the Premises or the appointment of receiver upon application
of Lessor to protect Lessor's interest under this Lease shall not constitute an
election to terminate Lessee's right to possession.

                  (c) Pursue any other remedy now or hereafter available to
Lessor under the laws or judicial decisions of the state wherein the Premises
are located.

         13.3.    LATE CHARGES. Lessee hereby acknowledges that late payment by
Lessee to Lessor of Base Rent, Operating Expenses or other sums due hereunder
will cause Lessor to incur costs not contemplated by this Lease, the exact
amount of which will be extremely difficult to ascertain. Such costs include,
but are not limited to, processing and accounting charges, and late charges
which may be imposed on Lessor by the terms of any mortgage or trust deed
covering the Premises, or any portion thereof. Accordingly, if any installment
of Base Rent, Operating Expenses, or any other sum due from Lessee shall not be
postmarked for proper delivery to Lessor or otherwise delivered to an overnight
courier service for proper delivery to Lessor within ten (10) days following the
date such rent payment or other charge is otherwise due under this Lease, then,
without any requirement for any additional notice to Lessee, Lessee shall pay to
Lessor a late charge equal to five percent (5%) of such overdue amount.
Notwithstanding the foregoing, Tenant shall be allowed two (2) late payments
during each calendar year of the Lease Term without being assessed a late
charge, provided such payment is not overdue more than twenty (20) days in each
instance. The parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Lessor will incur by reason of late payment
Acceptance of such late charge by Lessor shall in no event constitute a waiver
of Lessee's default with respect to such overdue amount, nor prevent Lessor from
exercising any of the other rights and remedies granted hereunder.

14.      CONDEMNATION.

If the Premises or any portion thereof is taken under the power of eminent
domain, or sold under the threat of the exercise of said power (all of which are
herein called "Condemnation"), this Lease shall terminate as to the part so
taken as of the date the condemning authority takes title or possession,
whichever first occurs. If the portion of the Premises taken by condemnation
materially and detrimentally affects Lessee's use of the Premises, then either
party may, at its option, to be exercised in writing within ten (10) days after
the condemning authority shall have

                                       40

<PAGE>

taken title or possession, whichever is first, terminate this Lease as of the
date the condemning authority takes such possession or title. If neither party
terminates this Lease in accordance with the foregoing, this Lease shall remain
in full force and effect as to the portion of the Premises remaining, except
that the rent shall be reduced in the proportion that the floor area of the
Building, if any, taken bears to the total floor area of the Building. No
reduction of rent shall occur if the only area taken is that which does not have
the Building located thereon. Any award for the taking of all or any part of the
Premises under the power of eminent domain or any payment made under threat of
the exercise of such power shall be the property of Lessor, whether such award
shall be made as compensation for diminution in the value of the leasehold or
for the taking of the fee, or as severance damages; provided, however, that
Lessee shall be entitled to any award for loss of or damage to Lessee's trade
fixtures and removable personal property.

15.      ESTOPPEL CERTIFICATE.

                  (a) Lessee shall from time to time, within ten (10) business
days after written notice from Lessor, execute, acknowledge and deliver to
Lessor a statement in writing (i) certifying that this Lease is unmodified and
in full force and effect (or, if modified, stating the nature of such
modification and certifying that this Lease, as so modified, is in full force
and effect) and the date to which the rent and other charges are paid in
advance, if any, and (ii) acknowledging that there are not any uncured defaults
on the part of the Lessor, or specifying such defaults if any are claimed, and
(iii) certifying the commencement date and expiration date of the Lease Term and
that there are no agreements with Lessor to extend or renew the Lease Term or
permit any holding over (or if there are any such agreements, describes them
with particularity); and (iv) setting forth such other information concerning
this Lease or Lessee as Lessor or any other person designated by Lessor
reasonably shall request. Any such statement may be conclusively relied upon by
any prospective purchaser or encumbrancer of the Premises or the business of
Lessor.

                  (b) At Lessor's option, the failure to deliver such statement
within such time shall be a material default of this Lease by Lessee, without
any further notice to Lessee, and such failure shall be conclusive upon Lessee
that (i) this Lease is in full force and effect, without modification except as
may be represented by Lessor, (ii) there are no uncured defaults in Lessor's
performance, (iii) not more than one month's rent has been paid in advance, if
any, and (iv) the commencement date and expiration date of this Lease is as
represented by Lessor and there are no options herein except as represented by
Lessor.

                  (c) If Lessor desires to finance, refinance or sell the
Premises, or any part thereof, Lessee hereby agrees to deliver to

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<PAGE>

any lender or purchaser designated by Lessor such publicly available financial
statements and other information of Lessee as may be reasonably required by such
lender or purchaser.

16.      LESSOR'S LIABILITY.

         16.1     LIMITATION ON LESSOR LIABILITY. The term "Lessor" as used
herein shall mean only the owner or owners, at the time in question, of the fee
title or a lessee's interests in a ground lease of the Premises, and, in the
event of any transfer of such title or interest, Lessor herein named (and in
case of any subsequent transfers then the grantor), subject to Section 16.2
hereof, shall be relieved from and after the date of such transfer of all
liability as respects Lessor's obligations thereafter to be performed, provided
that the transferee agrees to assume all such liability of Lessor under this
Lease. Any funds in the hands of Lessor or the then grantor at the time of such
transfer, in which Lessee has an interest, shall be delivered to the grantee.
The obligations contained in this Lease to be performed by Lessor shall, subject
as aforesaid, be binding on Lessor's successors and assigns, only during their
respective periods of ownership.

         16.2.    LESSOR LIABILITY FOR ENVIRONMENTAL CONDITIONS.

                  16.2.1   Notwithstanding anything to the contrary in Section
16.1 of this Lease, subject to Section 16.2.2 hereof, Lessor (including, without
limitation, any successor in interest or assignee of the named Lessor under this
Lease) shall not be released from its indemnification obligations under Section
7.3.2 hereof upon any sale or transfer of its interest in the Premises unless,
in Lessee's reasonable judgment, the transferee or grantee of the Premises is
reputable, and has a net worth, credit rating and ability to maintain sufficient
financial resources to satisfy Lessor's Indemnification Costs (as that term is
hereinafter defined) for the remainder of the initial Lease Term, and is able to
demonstrate to the reasonable satisfaction of Lessee that in the course of its
business it will maintain sufficient financial resources to satisfy Lessor's
Indemnification Costs for the remainder of the initial Lease Term (provided,
however, that the foregoing demonstration shall not necessarily imply any
obligation of the transferee to post any security for the satisfaction of
Lessor's Indemnification Costs). Lessee's determination of the adequacy of the
creditworthiness and financial capability to perform of any transferee of Lessor
shall be based on a reasonable evaluation of the following: (A) potential and
existing environmental conditions in the area within a one and one-half mile
radius of the Premises (the "Immediate Vicinity"), including, without
limitation, (i) Releases or potential Releases of Hazardous Materials to soils
and/or groundwater within the Immediate Vicinity, (ii) the type and activities
of businesses operating within the Immediate Vicinity, such as (without
limitation) industrial manufacturing facilities at which Hazardous Materials are
used, stored, treated and/or generated, gasoline stations or

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<PAGE>

semiconductor manufacturing facilities, (iii) the presence and type of
groundwater monitoring wells within the Immediate Vicinity and the analytical
results of groundwater samples taken from such wells. (to the extent such
information is available), and (iv) the presence and type of Hazardous Materials
Release or potential Release sites within the area, such as (without limitation)
sites listed on the EPA CERCLIS list (hereafter "Environmental Conditions"); (B)
the estimated cost to perform Lessor's obligations set forth in Section 7.3.2
arising or potentially arising from or in connection with the Environmental
Conditions; and (C) the actual, if any, or estimated cost to Lessor to perform
Lessor's obligations set forth in Section 7.3.2 with respect to the Other
Environmental Liabilities at the time of such transfer (collectively, the
estimated and actual, if any, cost under clauses (B) and (C) above is referred
to as the "Lessor's Indemnification Costs"); provided, however, at the time of
the transfer, Lessor's Indemnification Costs shall in no event be deemed, for
the sole purpose of evaluating the creditworthiness and financial capability to
perform of any transferee of Lessor pursuant to this Section 16.2.1, to be less
than Two Million Dollars ($2,000,000). Lessee shall either approve or disapprove
of the creditworthiness and financial capability to perform of any transferee of
Lessor within thirty (30) days after Lessor's request for such approval and the
receipt by Lessee of any financial information regarding the transferee as
reasonably requested by Lessee; provided, however, Lessee shall notify Lessor of
the documentation needed by Lessee in order to consider the creditworthiness and
financial capability to perform of any transferee and of such transferee's
commitment to maintain sufficient financial resources within ten (10) business
days of Lessor's request for such approval. The failure of Lessee to give its
approval within said thirty (30) day period shall be deemed a disapproval
(provided, however, that such deemed disapproval shall not, in and of itself, be
considered an unreasonable act of Lessee). If Lessee disapproves of the
creditworthiness and financial capability to perform of any transferee of
Lessor, Lessor shall have the right, as its sole and exclusive remedy, to
require Lessee to submit the disagreement to arbitration in accordance with the
procedure provided in Rider 2 of this Lease and the decision of such arbitration
shall be final and binding on the parties.

                  16.2.2   Nothing contained in this Section 16.2 shall be
deemed to prevent or impair any sale or transfer by Lessor of its right, title
and interest in the Premises or otherwise provide Lessee with any right to
disapprove of any transferee of Lessor under this Lease. The provisions of the
Section 16.2 are intended solely as a limitation on the release of Lessor from
any indemnification obligations under Section 7.3.2 of this Lease, whether
accruing prior to or after any such sale or transfer. The provisions of this
Section 16.2 are personal to the named tenant under this Lease and shall not
inure to the benefit of any assignee, subtenant or successor in interest (other
than an Affiliate of Lessee) of the named Lessee under this Lease, it being

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<PAGE>

the intent of the parties that the provisions of this Section 16.2 shall be null
and void following any assignment (whether voluntary or involuntary) of this
Lease by the named Lessee hereunder. In addition to the foregoing, the
provisions of this Section 16.2 shall be null and void during any Option Period,
it being the intent of the parties that the provisions of this Section 16.2
shall only be binding on the parties during the initial Lease Term and that,
regardless of whether Lessor has previously sold or transferred its right, title
and interest in the Premises without being released from its obligations under
Section 7.3.2, from and after the commencement of the Option Period, subject to
Section 16.1 of this Lease, Lessor shall be released from its obligations under
Section 7.3.2 as to any claims, demands, losses or other matters made or
occurring after the expiration of the initial Lease Term.

17.      SEVERABILITY.

The invalidity of any provision of this Lease as determined by a court of
competent jurisdiction, shall in no way affect the validity of any other
provision hereof.

18.      INTEREST ON PAST-DUE OBLIGATIONS.

Except as expressly herein provided, any amount due to Lessor not paid within
thirty (30) days of the date due shall bear interest at the then existing
"reference rate" as announced by Bank of America NT&SA, or any successor
thereto, plus one percent (1%). Such rate is herein referred to as the "Interest
Rate". Payment of such interest shall not excuse or cure any default by Lessee
under this Lease; provided, however, that interest shall not be payable on late
charges incurred

19.      TIME OF ESSENCE.

Time is of the essence with respect to Lessee's obligations to be performed
under this Lease.

20.      ADDITIONAL RENT.

All monetary obligations of Lessee to Lessor under the terms of this Lease,
including, but not limited to, Operating Expenses and insurance and tax expenses
payable, shall be deemed to be rent.

21.      INCORPORATION OF PRIOR AGREEMENTS; AMENDMENTS.

This Lease contains all agreements of the parties with respect to any matter
mentioned herein. No prior or contemporaneous agreement or understanding
pertaining to any such matter shall be effective. This Lease may be modified in
writing only, signed by the parties in interest at the time of the modification.

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<PAGE>

22.      NOTICES.

Any notice, demand, consent or request required or permitted to be given
hereunder shall be in writing and shall be given by personal delivery, certified
mail, return receipt requested, or sent by overnight courier, postage prepaid,
in each case addressed to Lessee or to Lessor at the address noted below the
signature of the respective parties, as the case may be. Either party may by
notice to the other specify a different address for notice purposes except that
upon Lessee's taking possession of the Premises, the Premises shall constitute
Lessee's address for notice purposes. A copy of all notices, demands, consents
or requests required or permitted to be given to Lessor hereunder shall be
concurrently transmitted to such party or parties at such addresses as Lessor
may from time to time hereafter designate by notice to Lessee. Notices, demands,
consents or requests shall be deemed given when received or, if delivery is
refused or delivery fails because of a changed address of which no notice was
given, at the time delivery first was tendered.

23.      WAIVERS.

No waiver by Lessor or any provision hereof shall be deemed a waiver of any
other provision hereof or of any other provision. Lessor's consent to, or
approval of, any act shall not be deemed to render unnecessary the obtaining of
Lessor's consent to or approval of any subsequent act. The acceptance of rent
hereunder by Lessor shall not be a waiver of any preceding breach by Lessee of
any provision hereof other than the failure of Lessee to pay the particular rent
so accepted, regardless of Lessor's knowledge of such preceding breach at the
time of acceptance of such rent.

24.      RECORDING.

Lessee shall not record this Lease or a short form memorandum thereof.

25.      HOLDING OVER.

If Lessee, with Lessor's consent, remains in possession of the Premises or any
part thereof after the expiration of the term hereof, such occupancy shall be a
tenancy from month to month upon all the provisions of this Lease pertaining to
the obligations of Lessee, but all options, if any, granted under the terms of
this Lease shall be deemed terminated and be of no further effect during said
month to month tenancy. If Lessee holds over in possession of the Premises
without Lessor's consent, then, in addition to any other rights and remedies at
law or in equity, Lessee shall pay to Lessor during such hold over one and
one-half (1-1/2) times the Base Rent in effect immediately prior to such
holdover in addition to all other rent hereunder, and Lessee shall indemnify
Lessor, its employees, agents and representatives from and against all claims,
demands, costs and liabilities as a result of or in connection with

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<PAGE>

such holdover.

26.      CUMULATIVE REMEDIES.

No remedy or election hereunder shall be deemed exclusive but shall, wherever
possible, be cumulative with all other remedies at law or in equity.

27.      COVENANTS AND CONDITIONS.

Each provision of this Lease performable by Lessee and Lessor shall be deemed
both a covenant and a condition.

28.      BINDING EFFECT; CHOICE OF LAW.

Subject to any provisions hereof restricting assignment or subletting by Lessee
and subject to the provisions of Section 16, this Lease shall bind the parties,
successors and assigns. This Lease shall be governed by the laws of the State of
California and any litigation concerning this Lease between the parties hereto
shall be initiated in the county in which Premises is located.

29.      SUBORDINATION/MORTGAGEE RIGHT TO CURE.

         29.1     SUBORDINATION.

                  (a) Lessor represents that as of the date of this Lease, there
is no ground lease, mortgage, deed of trust, or any other hypothecation or
security interest granted by Lessor encumbering the Premises.

                  (b) In the event any ground lease, mortgage, deed of trust or
any other hypothecation or security encumbering the Premises is foreclosed or a
deed in lieu of foreclosure is given to the mortgagee or beneficiary, or in the
event any ground lease to which this Lease is subordinate is terminated, this
Lease shall not be barred, terminated, cut off or foreclosed nor shall the
rights and possession of Lessee hereunder be disturbed if Lessee shall not be in
default in the payment of rent and other sums due hereunder or otherwise be in
default under the terms of this Lease. Lessee agrees to subordinate its
leasehold estate to the lien of one or more ground leases, deeds of trusts or
mortgages hereafter encumbering the Premises at any time, provided that Lessor
obtains the agreement of any such ground Lessor, holder of any mortgage or
beneficiary under any deed of trust encumbering the Premises or any portion
thereof (any such person, whether as to any existing or future lease, mortgage
or deed of trust, as the case may be being referred to in this Lease as a
"Lessor's Mortgagee") to the provisions of this Section 29.1 by the execution of
a nondisturbance agreement in form and substance as is used by such Lessor's
Mortgagee. Lessee shall attorn to any Lessor's Mortgagee if Lessor's Mortgagee
succeeds to the interest of Lessor under this Lease, and Lessee shall recognize
such person as Lessor under this

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<PAGE>

Lease.

         29.2.    MORTGAGEE RIGHT TO CURE. No act or omission by Lessor which
would entitle Lessee under the terms of this Lease or any applicable laws to be
relieved of Lessee's obligations hereunder, or to terminate this Lease, shall
result in a release or termination of such obligations or this Lease unless: (a)
Lessee first shall have given written notice of Lessor's act or omission to
Lessor and all Lessor's Mortgagees whose names and addresses shall have been
furnished to Lessee; and (b) Lessor's Mortgagees, after receipt of such notice,
fail to correct or cure the act or omission within a reasonable time thereafter
(but in no event less than sixty (60) days). However, nothing contained in this
Section shall impose any obligation on Lessor's Mortgagees to correct or cure
any act or omission. If Lessor's Mortgagee does not elect to correct or cure any
act or omission of Lessor within the time period provided above, Lessee shall
have the right to pursue its remedies under this Lease or under applicable law.

30.      ATTORNEYS' FEES.

If either party brings an action to enforce the terms hereof or declare rights
hereunder, the prevailing party in any such action, on trial or appeal, shall be
entitled to its reasonable attorneys' fees to be paid by the losing party as
fixed by the court.

31.      LESSOR'S ACCESS.

         31.1.    GENERAL RIGHT OF ENTRY. Subject to, and except as otherwise
limited by, Section 7.3 hereof, Lessor and Lessor's agents shall have the right
to enter the Premises at any time for the purpose of inspecting the same,
showing the same to prospective purchasers, lenders, or, during the last twelve
(12) months of the Lease Term, lessees, and making such alterations, repairs,
improvements or additions to the Premises or to the Building of which they are
part as Lessor may deem necessary or desirable. Lessor may at any time place on
or about the Premises or the Building any ordinary and reasonable "For Sale"
signs. All activities of Lessor pursuant to this Section 31.1 shall be without
abatement of rent, nor shall Lessor have any liability to Lessee for the same.

         31.2.    GENERAL CONDUCT OF LESSOR. Except for entry to the Premises in
the event of an emergency, or as otherwise provided in this Section 31.2, Lessor
shall give Lessee reasonable advance notice of Lessor's intent to enter the
Premises, and shall, as a general matter, limit its entry to the Premises to
normal business hours. Lessor's employees (including, without limitation,
Lessor's agents and contractors) entering the Premises shall be prepared to
provide proper identification and non-Lessor employees shall, upon request of
Lessee, be accompanied by an employee of Lessee at all times while in the
Premises. Lessee acknowledges that Lessor's need to make repairs, improvements,
alterations or additions to the

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<PAGE>

Building may require Lessor to enter the Premises and perform work therein
outside of normal business hours. Lessor shall give Lessee reasonable advance
notice of Lessor's intent to enter the Premises for such purpose (except for
emergency repairs, where only reasonable advance notice under the circumstances
shall be required) and shall cooperate with Lessee to preserve the security and
confidentiality of Lessee's business operations.

32.      AUCTIONS.

Lessee shall not conduct, nor permit to be conducted, either voluntarily or
involuntarily, any auction upon the Premises without first having obtained
Lessor's prior written consent. Notwithstanding anything to the contrary in this
Lease, Lessor shall not be obligated to exercise any standard of reasonableness
in determining whether to grant such consent.

33.      SIGNS.

Lessee shall not place any sign upon the Premises without Lessor's prior written
consent, and then only in compliance with all applicable laws, ordinances and
covenants and restrictions of record.

34.      MERGER.

The voluntary or other surrender of this Lease by Lessee, or a mutual
cancellation thereof, or a termination by Lessor, shall not work a merger, and
shall, at the option of Lessor, terminate all or any existing subtenancies or
may, at the option of Lessor, operate as an assignment to Lessor of any or all
of such subtenancies.

35.      CONSENTS. Whenever Lessor's consent or approval is required hereunder,
Lessor shall not unreasonably withhold the granting of its consent or approval.

36.      BROKERS.

                  (a) The brokers involved in this transaction are J.R. Parrish,
Inc. as "listing broker" and Marcus & Millichap, as "cooperating broker," each
licensed real estate broker(s). A "cooperating broker" is defined as any broker
other than the listing broker entitled to a share of any commission arising
under this Lease. Upon execution of this Lease by both parties and following
expiration and waiver of the due diligence provisions set forth in Section 3.5
hereof, Lessor shall pay to said brokers a fee as set forth in a separate
agreement between Lessor and said broker(s).

                  (b) Lessee and Lessor each represent and warrant to the other
that neither has had any dealings with any person, firm, broker or finder (other
than the person(s), if any, whose names are set forth in Section 36(a), above)
in connection with the

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<PAGE>

negotiation of this Lease and/or the consummation of the transaction
contemplated hereby, and no other broker or other person, firm or entity is
entitled to any commission or finder's fee in connection with said transaction
and Lessee and Lessor do each hereby indemnify and hold the other harmless from
and against any costs, expenses, attorneys' fees or liability for compensation
or charges which may be claimed by any such unnamed broker, finder or other
similar party by reason of any dealings or actions of the indemnifying party.

37.      QUIET POSSESSION.

Upon Lessee paying the rent for the Premises and observing and performing all of
the covenants, conditions and provisions on Lessee's part to be observed and
performed hereunder, Lessee shall have quiet possession of the Premises for the
entire term hereof subject to all of the provisions of this Lease.

38.      OPTIONS TO EXTEND.

                  (a) Lessee shall have the option to extend the term of this
Lease (each an "Option") for three (3) additional periods of five (5) years each
(each an "Option Period") commencing on the Expiration Date, as may be extended
by an Option Period, upon the following terms and conditions:

                  (1)      That Lessee is not in default under any of the terms,
                  covenants, conditions or provisions of this Lease either at
                  the time Lessee exercises the Option or as of the expiration
                  date, as may be extended by an Option Period;

                  (2)      That Lessee shall not have assigned its interest
                  under this Lease nor sublet more than fifty percent (50%) of
                  the Premises; and

                  (3)      That Lessee shall have notified Lessor of Lessee's
                  election to exercise such Option in the manner provided in
                  Section 22 not more than twelve (12) months nor less than nine
                  (9) months prior to the then current Expiration Date.

Unless all of the above conditions precedent have been satisfied, Lessee's
exercise of the Option shall be of no force or effect and the Option shall
lapse. If all of the above conditions precedent are satisfied, then the Lease
Term shall automatically be extended for the Option Period and all of the terms,
conditions and provisions of this Lease shall continue in full force and effect
throughout the Option Period, except that the Base Rent to be paid by Lessee for
the Option Period shall be adjusted as provided below.

                  (b) The Base Rent for the Option Periods shall be as

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<PAGE>

follows:

                  (1)      For the first Option Period, the Base Rent shall be
                  an amount equal to ninety-five percent (95%) of the fair
                  market rental value of the Premises, but in no event (A) less
                  than seventy-six cents ($0.76) per rentable square foot, or
                  (B) greater than eighty-five and one-half cents ($0.855) per
                  rentable square foot. Such Base Rent shall be increased as of
                  the commencement of the thirty-first (31st) month of the first
                  Option Period by twelve and one-half percent (12.5%) over the
                  Base Rent payable for the immediately preceding month.

                  (2)      For the second and third Option Periods, the Base
                  Rent shall be increased by twelve and one-half percent (12.5%)
                  over the Base Rent payable for the immediately preceding
                  period, and shall be increased as of the commencement of the
                  thirty-first (31st) month of the second and third Option
                  Periods, as applicable, by twelve and one-half percent (12.5%)
                  over the Base Rent payable for the immediately preceding
                  month.

                  (c) Fair Market Value. The fair market rental value of the
Premises shall be determined as set forth in Rider 1 attached hereto, and in no
event shall the rental for any Option Period be less than the total of rent and
rental adjustments payable in the last month of the Lease Term or the then
current Option Period, as the case may be.

                  (d) Each Option granted to Lessee in this Lease is personal to
the original Lessee and may be exercised only by the original Lessee while
occupying the Premises who does so without the intent of thereafter assigning
this Lease or subletting the Premises or any portion thereof, and may not be
exercised or be assigned, voluntarily or involuntarily, by or to any person or
entity other than Lessee. The options, if any, herein granted to Lessee are not
assignable separate and apart from this Lease.

39.      RIGHT OF FIRST REFUSAL.

         39.1.    LESSEE'S RIGHT OF FIRST REFUSAL. In the event Lessor receives
a Bona Fide Offer (as that term is hereinafter defined) for the purchase of all
of Lessor's right, title and interest in the Premises, other than pursuant to a
Permitted Excluded Transfer (as that term is hereinafter defined), and provided
Lessee shall be in actual physical occupancy of not less than fifty percent
(50%) of the rentable square footage of the Premises and that no Event of
Default shall then exist under this Lease, Lessor shall, by notice to Lessee,
offer Lessee the right to purchase all of Lessor's right, title and interest in
the Premises on the same terms and conditions as contained in the Bona Fide
Offer, as amended by Section 39.4 (the "First Refusal Offer"). Lessee, by notice
to Lessor given within five (5) business days of the delivery of the

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<PAGE>

First Refusal Offer, shall have the right to accept the First Refusal Offer,
whereupon the parties shall enter into negotiations for the consummation of the
purchase and sale transaction on the terms of the First Refusal Offer. If Lessee
does not timely accept the First Refusal Offer, Lessor may proceed to negotiate
with the offeror of the Bona Fide Offer, or any other person, for the sale of
the Premises and Lessor's interest therein free of Lessee's rights under this
Section 39.1., and to consummate a sale on terms and conditions materially no
more favorable to Lessor than the terms contained in the Bona Fide Offer,
subject to the one hundred eighty (180) day closing requirement provided in the
next sentence. If Lessee timely accepts the First Refusal Offer, and following
good faith negotiations, a definitive and binding purchase and sale agreement is
not entered into between the parties within thirty (30) days after Lessee's
acceptance of the First Refusal Offer (such period being referred to as
"Lessee's Exclusivity Period"), Lessor shall have the right to terminate
negotiations with Lessee and shall be free to enter into negotiations with the
offeror of the Bona Fide Offer, or any other person, free of Lessee's rights
under this Section 39.1, and to consummate a sale of all of Lessor's right,
title and interest in the Premises on terms and conditions materially no more
favorable to Lessor than the terms contained in the Bona Fide Offer; provided
that the closing of any definitive and binding purchase and sale agreement
entered into by Lessor with such third party shall close no later than one
hundred and eighty (180) days following the expiration of Lessee's Exclusivity
Period. Should Lessor fail to close such transaction within said one hundred
eighty (180) day period, Lessor shall not sell the Premises and its interest
therein without again complying with the provisions of this Section 39.1.

         39.2.    PERMITTED EXCLUDED TRANSFERS. There shall be excepted from the
transactions subject to Section 39.1 of this Lease the following transfers,
which shall be deemed Permitted Excluded Transfers:

         (i)      Any transfer of the Premises which is a part of a statutory
reorganization of Lessor (whether by means of a sale of assets, stock, merger or
consolidation), including if the Premises is transferred to a business
enterprise controlling, controlled by, or under common control with, Lessor.

         (ii)     Any transfer of the Premises as part of a sale or transfer of
one or more other improved real property holdings of Lessor in the United
States, except if, upon being informed by Lessor of Lessee's right of first
refusal hereunder the proposed transferee advises Lessor that it is willing to
proceed with the proposed transaction with the exclusion of the Premises from
said transaction.

         (iii)    Any transfer of the Premises to a lender holding a mortgage or
deed of trust encumbering the Premises pursuant to a foreclosure or deed in lieu
of foreclosure.

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<PAGE>

         39.3.    BONA FIDE OFFER/REIMBURSEMENT OF DUE DILIGENCE EXPENSES. The
term "Bona Fide Offer" as used in this Section 39 shall mean a letter of intent
or similar written expression of interest from a third party outlining the
terms and conditions on which such person would be willing to purchase all of
the right, title and interest of Lessor in the Premises. If Lessee accepts the
First Refusal Offer in accordance with Section 39.1 of this Lease and the sale
of the Premises to Lessee is consummated in accordance therewith, Lessee shall
be obligated to reimburse the offeror of the Bona Fide Offer up to $50,000 in
due diligence costs (including attorneys' and other professionals' fees)
actually incurred by such person (as evidenced by supporting documentation
reasonably acceptable to Lessee) in connection with the presentation of the Bona
Fide Offer and the investigation of the Premises and Lessor's title thereto;
provided that, as a condition to such reimbursement, the offeror provides to
Lessee copies of any non-privileged reports and information generated by such
due diligence investigation.

         39.4.    MODIFICATION OF BONA FIDE OFFER. Notwithstanding anything to
the contrary in the Bona Fide Offer received by Lessor, the Bona Fide Offer
shall be deemed amended to provide for the following terms and conditions and
the same shall be included as part of any agreement whereby Lessor shall sell
all of its right, title and interest in the Premises to Lessee (and the same
shall be deemed incorporated into the First Refusal Offer):

         (i)      The First Refusal Offer shall provide for a due diligence
period applicable to Lessee's investigation of the Premises of not more than
thirty (30) days;

         (ii)     The First Refusal Offer shall not contain any representations
or warranties regarding this Lease or compliance with laws by Lessee; and

         (iii)    The First Refusal Offer shall not contain any representations
or warranties regarding the condition or good working order of any improvements,
Building Systems or other facilities being maintained by Lessee or that have
been substantially altered by Lessee.

         39.5.    PERSONAL TO LESSEE. The right granted to Lessee under this
Section 39 is personal to the named tenant under this Lease and shall not inure
to the benefit of any assignee, subtenant or successor in interest to Lessee
(other than an Affiliate of Lessee) under this Lease.

         39.6.    TERMINATION OF SECTION 16.2. Subject to, and without limiting
the rights of the parties to agree on, any allocation of liabilities and
obligations (including, without limitation, liabilities and obligations relating
to Hazardous Materials and Releases thereof) in any purchase and sale agreement
to be entered into between Lessor and Lessee, the consummation of the sale of
the

                                       52

<PAGE>

Premises to Lessee pursuant to the right granted Lessee under this Section 39
shall automatically be deemed a transfer under Section 16.2.1 of this Lease to a
person that satisfies the creditworthiness and financial capability to perform
requirements thereof and, notwithstanding anything to the contrary in this
Lease, Lessor shall be released from any liability under this Lease (including,
without limitation, Section 16.2).

40.      SECURITY MEASURES.

Lessee hereby acknowledges that Lessor shall have no obligation whatsoever to
provide guard service or other security measures for the benefit of the
Premises. Lessee assumes all responsibility for the protection of Lessee, its
employees, agents and invitees and the property of Lessee and of Lessee's
employees, agents and invitees from acts of third parties. In addition, Lessee
agrees, at its sole cost, to cause all security measures affecting the Premises
to be in compliance with all applicable laws.

41.      EASEMENTS.

Lessor reserves to itself the right, from time to time, to grant such easements,
rights and dedications that Lessor deems necessary or desirable, and to cause
the recordation of parcel maps and restrictions, so long as such easements,
rights, dedications, maps and restrictions do not unreasonably interfere with
the use of the Premises. Lessee shall sign any of the aforementioned documents
upon request of Lessor and failure to do so shall constitute a default of this
Lease by Lessee without the need for further notice to Lessee.

42.      AUTHORITY.

If Lessee is a corporation, trust, or general or limited partnership, each
individual executing this Lease on behalf of such entity represents and warrants
that he or she is duly authorized to execute and deliver this Lease on behalf of
said entity. If Lessee is a corporation, trust or partnership, Lessee shall,
within thirty (30) days after execution of this Lease, deliver to Lessor
evidence of such authority satisfactory to Lessor.

43.      CONFLICT.

Any conflict between the printed provisions of this Lease and the typewritten or
handwritten provisions, if any, shall be controlled by the typewritten or
handwritten provisions.

44.      OFFER.

Preparation of this Lease by Lessor or Lessor's agent and submission of same to
Lessee shall not be deemed an offer to Lease. This Lease shall become binding
upon Lessor and Lessee only when

                                       53

<PAGE>

fully executed and delivered by Lessor and Lessee.

45. HEADINGS/DEFINED TERMS.

         45.1.    HEADINGS. The subject headings of the sections of this Lease
are provided for convenience only and shall not affect the construction or
interpretation of any of the provisions thereof.

         45.2.    DEFINED TERMS. The meanings of the following terms when used
in this Lease shall be determined as follows:

<TABLE>
<S>                                                   <C>
Additional Allowance                                  Section 7.5
Additional Permitted Expenditures                     Section 7.5
Affiliate of Lessee                                   Section 12.1(iv)
Affiliate of Lessor                                   Section 7.3.2(c)
Alterations                                           Section 7.4(b)
Arbitration Notice                                    Rider 2
Base Rent                                             Section 4.1
Bona Fide Offer                                       Section 39.3
Bonus Rent                                            Section 12.4
Building Systems                                      Section 3.3.1
Certified Accountant                                  Section 4.3
Cleanup Actions                                       Section 7.3.3(a)(ii)
Closure Permits                                       Section 7.3.8
Commencement Date                                     Section 3.1.1
Condemnation                                          Section 14
Delivery Date                                         Section 3.1
Environmental Conditions                              Section 16.2.1
Environmental Liabilities                             Section 7.3.3(a)
Event of Default                                      Section 13
Expiration Date                                       Section 3.1
Facilities Manager's Certificate                      Section 3.5.4
First Refusal Offer                                   Section 39.1
Force Majeure                                         Section 3.1.1
Hazardous Materials                                   Section 7.3.11(a)
Hazardous Materials Laws                              Section 7.3.11(b)
Immediate Vicinity                                    Section 16.2.1
Indemnification Period                                Section 7.3.11(c)
Initial Allowance                                     Section 7.5
Initial Permitted Expenditures                        Section 7.5
Inspection                                            Section 7.3.9(a)
Insured Loss                                          Section 9.1(c)
Interest Rate                                         Section 18
Lease Term                                            Section 3.1
Lessee Indemnitees                                    Section 7.3.2(a)
Lessee's Exclusivity Period                           Section 39.1
Leasehold Improvements                                Section 8.2.1
Lessor Indemnitees                                    Section 7.3.3(a)
Lessor's Indemnification Costs                        Section 16.2.1
Lessor's Mortgagee                                    Section 29.1(b)
Management Fee                                        Section 4.2(a)(iii)
Market Rent                                           Rider 1
Operating Expenses                                    Section 4.2(a)
</TABLE>

                                       54

<PAGE>

<TABLE>
<S>                                                   <C>
Option                                                Section 38(a)
Option Period                                         Section 38(a)
Other Cleanup Actions                                 Section 7.3.2(a)(ii)
Other Environmental Liabilities                       Section 7.3.2(a)
Permit to Enter                                       Section 3.5.1
Permitted Excluded Transfer                           Section 39.1
Premises Partial Damage                               Section 9.1(a)
Premises Total Destruction                            Section 9.1(b)
Real Property Taxes                                   Section 4.2(b)
Release(s)                                            Section 7.3.11(d)
Replacement Cost                                      Section 9.1(d)
Scheduled Commencement Date                           Section 3
Security Deposit                                      Section 5
Termination Inspection                                Section 7.3.10
Utility Installation                                  Section 7.4(a)
</TABLE>

LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR INFORMED
AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS
LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND
EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.

LESSOR                                   LESSEE

SHUWA INVESTMENTS CORPORATION,           READ-RITE CORPORATION, a
a California corporation                  Delaware corporation

By: /s/ [ILLEGIBLE]                      By: /s/ [ILLEGIBLE]
    ---------------------------              ---------------------------
Its:  Vice Chairman                      Its: Secretary

ADDRESS FOR LESSOR NOTICES AND           LESSEE'S ADDRESS FOR NOTICE
FOR PAYMENT OF RENT:

Shuwa Investments Corporation            Read-Rite Corporation
150 Spear Street                         345 Los Coches Street
San Francisco, California 94105          Milpitas, California 95035

                                       55

<PAGE>

                                     Rider 1
                                Fair Market Value

(a)      Good Faith Negotiations. Within thirty (30) days of Lessee's exercise
of the Option, the parties shall meet at a mutually agreeable time and place to
present such evidence as either party desires in an effort to mutually and in
good faith attempt to arrive at a mutually agreeable fair market rent for the
Premises effective for the Option Term (the "Market Rent). If the parties are
unable within such thirty (30) day period to arrive at a Market Rent, Lessor
may, at any time after such impasse has been reached, deliver to Lessee a
statement ("Lessor's Statement") setting forth Lessor's determination of the
Market Rent. If Lessor does not deliver Lessor's Statement to Lessee by six (6)
months prior to the Option Period commencement, the sole right of Lessee shall
be to elect, by written notice ("Appraisal Notice") to Lessor, to have the issue
of the Market Rent determined by appraisal pursuant to the procedures set forth
in this Rider.

(b)      Lessee's Election. If a Lessor's Statement is delivered to Lessee,
Lessee shall have the right, within fifteen (15) days after receipt of Lessor's
Statement, to elect either of the following:

                  (i)      To accept in writing the Market Rent set forth in
                           Lessor's Statement; or

                  (ii)     To give an Appraisal Notice to Lessor.

If Lessee does not timely elect either of the alternatives provided above,
Lessee shall be deemed to have elected to have the issue of Market Rent
determined by appraisal pursuant to the following procedure, and the award or
decision rendered in such proceeding shall be final and binding on the parties.

(c)      Two Appraisers. In the event that Lessee elects or is deemed to have
elected the appraisal procedure, within fifteen (15) days after receipt of the
Appraisal Notice, each party, at its own cost and by giving notice to the other
party, shall appoint a real estate appraiser, with a membership in the American
Institute of Real Estate Appraisers or the Society of Real Estate Appraisers and
at least five (5) years' full-time commercial appraisal experience in the
Silicon Valley, to appraise and determine the Market Rent. If, in the time
provided, only one (1) party shall give notice of appointment of an appraiser,
the single appraiser appointed shall determine the Market Rent. If two (2)
appraisers are appointed by the parties, the two (2) appraisers shall
independently, and without consultation, prepare a written appraisal of the
Market Rent, consistent with the criteria provided in subsection (g) below,
within thirty (30) days. Each appraiser shall seal its respective appraisal
after completion. After both appraisals are completed, the resulting estimates
of the Market Rent shall be opened and compared. If the value of the appraisals
differ by no

                                       1

<PAGE>

more than ten percent (10%) of the value of the higher appraisal, then the
Market Rent shall be the average of the two (2) appraisals.

(d)      Three Appraisers. If the values of the appraisals differ by more than
ten percent (10%) of the value of the higher appraisal, the two (2) appraisers
shall designate a third appraiser meeting the qualifications set forth in
subsection (c), above. If the two (2) appraisers have not agreed on the third
appraiser after ten (10) days, either Lessor or Lessee, by giving ten (10) days
notice to the other party, may apply to the then Presiding Judge of the Superior
Court of Alameda County for the selection of a third appraiser who meets the
qualifications set forth in subsection (c) above. The third appraiser, however
selected, shall be a person who has not previously acted in any capacity for
either party. The role of the third appraiser shall be to select, within ten
(10) days after submission to him or her of the appraisals of the two other
appraisals, which of the two appraisals most closely approximates the third
appraiser's determination, consistent with the criteria of subsection (g)
hereof, of Market Rent. The third appraiser shall have no right to propose a
middle ground or any modification of either of the two other appraisals. The
determination of Market Rent chosen by the third appraiser shall be final and
binding upon the parties.

(e)      Delay. If the determination of the Market Rent is delayed beyond the
Option Period commencement, Lessee shall pay Base Rent in the amount in effect
immediately preceding the Option Period commencement until the first day of the
month following the determination of the Market Rent. On the first day of the
month following the determination of the Market Rent, there shall be an
adjustment made to the Base Rent payment then due for the difference between the
amount of Base Rent Lessee has paid to Lessor since the Option Period
commencement and the amount that Lessee would have paid if the Base Rent as
adjusted pursuant to this subsection had been in effect as of the Option Period
commencement.

(f)      Costs. Each party shall pay the fees and expenses of their own
appraiser, and fifty percent (50%) of the fees and expenses of the third
appraiser.

(g)      Criteria. The appraisers shall determine the Market Rent using the
"market comparison approach," for renewal leases (to the extent such information
is available), with the relevant market being that for similar space in the
vicinity of the Premises as of the commencement of the Option Period, taking
into consideration location, condition and improvements to the space. The
appraisers shall use their best efforts to fairly and reasonably appraise and
determine the Market Rent in accordance with the terms of the Lease and this
Rider, and shall not act as advocates for either Lessor or Lessee.

                                       2

<PAGE>

(h)      Limitation on Appraisers' Authority. The appraisers shall have no power
to modify the provisions of the Lease or this Rider, and their sole function
shall be to determine the Market Rent in accordance with this Rider.

                                       3

<PAGE>

                                     Rider 2
                           Arbitration Procedures for
                          Financial Creditworthiness of
                                   Transferee

Mindful of the high cost of litigation, not only in dollars but time and energy
as well, the parties intend to and do hereby establish a quick, final and
binding out of court dispute resolution procedure to be followed in the unlikely
event controversy should arise under Section 16.2 of the Lease. Accordingly, the
parties do hereby covenant and agree as follows:

(a)      If Lessee disapproves or is deemed to have disapproved the
creditworthiness and financial capability to perform of any transferee of Lessor
in accordance with Section 16.2.1 of the Lease, Lessor may, at any time after
such disapproval, deliver to Lessee a written notice (the "Arbitration Notice")
to have the issue determined by alternative dispute resolution in accordance
with this Rider. The issue to be submitted to arbitration shall be whether, in
the exercise of reasonable judgment, the transferee or grantee of Lessor is
reputable, and has a net worth, credit rating and ability to maintain sufficient
financial resources to satisfy Lessor's Indemnification Costs (as that term is
defined in Section 16.2.1 of the Lease) for the remainder of the initial Lease
Term, and is able to demonstrate to the reasonable satisfaction of the
arbitrator that in the course of its business it will maintain sufficient
financial resources to satisfy Lessor's Indemnification Costs for the remainder
of the initial Lease Term (provided, however, that the foregoing demonstration
shall not necessarily imply any obligation of the transferee to post any
security for the satisfaction of Lessor's Indemnification Costs), based on the
criteria set forth in Section 16.2.1 of the Lease (the "Dispute"). If the
arbitrator determines that Lessor is the prevailing party, Lessor shall be
released from any liability under the Lease in accordance with Section 16.1 of
the Lease (and without application of Section 16.2 of the Lease).

(b)      If Lessor has served Lessee with an Arbitration Notice, the Dispute
shall be settled by final and binding arbitration administered by and in
accordance with the then existing Rules of Practice and Procedure of Judicial
Arbitration and Mediation Services, Inc. (JAMS), at a location in San Francisco,
California determined by the arbitrator. The award of the arbitrator shall be
final and binding upon the parties without appeal or review. Application may be
had by any party to any court of general jurisdiction for entry and enforcement
of judgment based on said award.

(c)      The arbitrator shall determine which is the prevailing party and shall
include in the award that party's reasonable attorney fees and costs.

                                       4

<PAGE>

                            SECOND AMENDMENT TO LEASE

         THIS SECOND AMENDMENT TO LEASE ("Second Amendment") is dated for
reference purposes only as of May 28, 2002 and is entered into between OSGOOD
ROAD VEF V, LLC, a Delaware limited liability company ("Landlord"), and
READ-RITE CORPORATION, a Delaware Corporation ("Tenant).

                                    Recitals

A.       Landlord's predecessor, Shuwa Investments Corporation ("Shuwa"), a
         California corporation and Tenant entered into that Single Tenant
         Industrial Lease Agreement dated August 24, 1992, with respect to
         premises know as 44100 Osgood Road, Fremont, California (the "Lease
         Agreement"). The Lease Agreement was amended by the Supplement to
         Single Industrial Lease Agreement (the "Supplement") dated April 14,
         2000. On October 10, 2001 Landlord acquired title of the Premises from
         Shuwa and entered into the Lease Amendment dated October 10, 2001 (the
         "First Amendment"). The Lease Agreement, Supplement and First Amendment
         are collectively the "Lease". Words defined in the Lease Agreement have
         the same meanings in this Amendment.

B.       Tenant and Landlord wish to extend the term of the Lease, pursuant to
         Section 38 of the Lease Agreement, as set forth in this Amendment.

         NOW, THEREFORE, in consideration of the covenants set forth herein,
Landlord and Tenant hereby agree as follows:

1.       Term. The term of the Lease is hereby extended for a period of five
years (5) years, commencing on March 1, 2003 and ending on February 28, 2008
(the Extended Period").

2.       Monthly Rent. Effective as of March 1, 2003, the monthly Base Rent
shall be eighty-five and one-half cents ($0.855) per rentable square foot for
the first 30 months of the Extended Period and such Base Rent shall be increased
at the commencement of the 31st month of the Extended Period by 12.5.% to $0.962
per rentable square foot effective from the thirty-first (31st) month of the
Extended Period through the remainder of the Extended Period.

3.       Confirmation of Lease. Except as amended hereby, the Lease is
unmodified, and as amended hereby, the Lease remains in full force and effect.

         IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment as
of the date first above written.

                                   OSGOOD ROAD VEF V, LLC,
                                   a Delaware limited liability company

                                   By: VALUE ENHANCEMENT FUND V, L.P.,
                                   a Georgia limited partnership, Member

                                       By: LENDLEASE REAL ESTATE
                                       INVESTMENTS INC., a Delaware corporation,
                                       Manager

                                       By: /s/ [ILLEGIBLE]
                                           -------------------------------
                                       Its: PRINCIPAL

                                   READ-RITE CORPORATION, a Delaware
                                   corporation

                                       By: /s/ [ILLEGIBLE]
                                           -------------------------------
                                       Its: Sr. VP & CFOAMENDED AND RESTATED

                         INVESTMENT MANAGEMENT AGREEMENT

                                     between

                              MARINER PARTNERS INC.

                                       and

                                 NYMAGIC, INC.,

                  NEW YORK MARINE AND GENERAL INSURANCE COMPANY

                                       and

                            GOTHAM INSURANCE COMPANY

                                December 6, 2002

<PAGE>

This AMENDED AND RESTATED INVESTMENT MANAGEMENT AGREEMENT, dated the 6th day of
December, 2002, is between Mariner Partners, Inc., a corporation organized under
the laws of the State of Delaware (the "Adviser"), on the one hand, and NYMAGIC,
Inc. a New York corporation ("NYMAGIC"), New York Marine and General Insurance
Company, a New York stock insurance company ("New York Marine"), and Gotham
Insurance Company, a New York stock insurance company ("Gotham"), on the other
hand, and amends and restates the Investment Management Agreement, dated October
1, 2002, between the Adviser and the Client (the "Original Investment Management
Agreement"). Each of New York Marine and Gotham is referred to herein as a
"Company," and the Companies and NYMAGIC are collectively referred to herein as
the "Client."

WHEREAS, on October 1, 2002, the Adviser and the Client entered into the
Original Investment Management Agreement, whereby NYMAGIC, acting on behalf of
itself, New York Marine and Gotham, retained the Adviser to provide certain
discretionary investment advisory services; and

WHEREAS, the Adviser and the Client wish to amend and restate the Original
Agreement in its entirety, on the terms and subject to the conditions contained
herein.

NOW THEREFORE, in consideration of the mutual promises contained herein, and
other good and valuable consideration as set forth herein, the Adviser and the
Client agree as follows:

1.    Appointment of the Adviser.

     (a) The Client hereby appoints the Adviser to serve as investment adviser
of the Client's investment account assets listed on Schedule A (collectively,
the "Accounts"), and the Adviser hereby accepts such appointment and agrees to
perform its obligations in accordance with the terms of this Agreement (which
includes the Schedules hereto) and the Investment Policy Guidelines (as
defined in Section 2(c) below). The Adviser hereby accepts such appointment.

     (b) The assets of the Client comprising the Accounts shall be managed by
the Adviser in as many different categories as may be instructed by the Client
from time to time. Initially, the Client has allocated assets into three
different categories, (i) (cash management) the "Liquidity Portfolio", (ii)
(fixed income investing) the "Fixed Income Portfolio" and (iii) (investment in
alternative investment vehicles and common and preferred equities) the "Hedge
Fund and Equity Portfolio". The Client may designate and re-designate the
amount of assets in each category from time to time, in its sole discretion,
subject to the limitations imposed by certain funds invested in the Hedge Fund
and Equity Portfolio. The Adviser shall ensure that the assets of each Account
are maintained separately on the books of the Client's custodian and shall
manage the assets comprising each Account separately, as provided by the terms
of this Agreement. The beneficial ownership of all of the assets comprising
each of the Accounts shall at all times reside with the Client.

                                     1
<PAGE>

2.   Authorities and Duties of the Adviser.

     (a)  Subject to paragraph (c) of this Section 2, the Adviser shall provide
investment advisory services to the Accounts and shall in such capacity have
full discretion and authority, without obtaining the prior approval of the
Client or any agent of the Client (except as may be required by law or as
otherwise required by this Agreement), to:

          (i) purchase, sell, redeem, invest, reinvest or otherwise trade any
     security or other permitted investment on behalf of the Accounts;
     provided, however, that all transactions entered into on behalf of either
     of the Companies shall require the ratification, no less frequently than
     quarterly, of the Board of Directors or Finance Committee of the Board of
     Directors of the applicable Company, and that in the event any investment
     transaction fails to receive such ratification, the applicable Company
     shall direct the Adviser to dispose of such investment;

          (ii) exercise any conversion and/or subscription rights available in
     connection with any securities or other investments;

          (iii) instruct an Account's custodian to deliver for cash received,
     securities sold, exchanged, redeemed or otherwise disposed of on behalf
     of the Account, and to pay cash for securities delivered to the custodian
     and/or credited upon acquisition of same;

          (iv) determine how to vote all proxies received with respect to
     securities held by an Account and direct the custodian as to the voting
     of such proxies; provided, however, that the authority to vote proxies
     received with respect to securities held on behalf of either of the
     Companies shall require an express delegation of authority for that
     purpose from the Board of Directors of the applicable Company (which may
     be a blanket delegation with respect to all proxies received with respect
     to securities held on behalf of that Company);

          (v) select broker-dealers to purchase, sell or otherwise trade in or
     deal with any security;

          (vi) place orders with any broker-dealer so selected, to purchase,
     sell or otherwise trade in or deal with any security;

          (vii) engage personnel, whether full time or part time, in
     connection with the investment Advisory services hereunder;

          (viii) engage outside professionals, including without limitation
     investment sub-advisers, appraisers, attorneys, consultants and other
     experts, in connection with the investment advisory services hereunder;

          (ix) value the securities and other assets of an Account in
     accordance with the valuation policies and guidelines set forth in
     Section 4 hereof;

          (x) make and execute all such contracts, agreements, instruments and
     other documents as the Adviser may deem necessary or appropriate in

                                      2
<PAGE>

     connection with the performance of its investment advisory duties
     hereunder or as the Client may reasonably request from time to time; and

          (xi) take all such other actions as the Adviser may deem necessary
     or appropriate in connection with the performance of its investment
     advisory duties hereunder.

     (b) In furtherance of the foregoing and subject to paragraph (c) of this
Section 2, the Client hereby designates and appoints the Adviser as its agent
and attorney-in-fact with respect to each Account, with full power and
authority and without the need for further approval of the Client or any other
agent of the Client (except as may be required by law or as otherwise required
by this Agreement), to complete and execute all documents as may be required
to effect an investment and to take any and all actions that the Adviser, in
its discretion, shall deem advisable to carry out its duties with respect to
the assets of the Accounts.

     (c) All investment services provided to the Companies shall be based upon
the written criteria, standards and guidelines of the Companies, and the
insurance laws and regulations applicable to the Client, as delivered by the
Client to the Adviser from time to time (the "Investment Policy Guidelines");
provided, however, that the Companies shall have the ultimate and final
authority over decisions and policies, to include but not be limited to the
purchase and sale of securities; provided, further, that in the event that any
transaction is entered into by the Adviser on behalf of either of the
Companies and is in compliance with the Investment Policy Guidelines in effect
at the time, and such transaction subsequently fails to receive the
ratification specified in subparagraph (a)(i) or paragraph (d) (as applicable)
of this Section 2, the recourse of such Company in such event shall be limited
to (i) amending the Investment Policy Guidelines applicable to all future
transactions and delivering the same to the Adviser, (ii) amending this
Agreement pursuant to the provisions of Section 16(a) hereof; or (iii)
terminating this Agreement pursuant to the provisions of Section 11 hereof;
provided, further, that in any such case such Company shall direct the Adviser
to dispose of the investment that failed to receive the required ratification;
provided, finally, that the Adviser shall not effect any investment
transaction for an Account that is inconsistent with any law or regulation
applicable to the Client.

     (d) Subject to paragraph (c) of this Section 2, with respect to the
portion of an Account so designated from time to time as the "Hedge Fund and
Equity Portfolio" by the Client, the Adviser shall construct a portfolio of
hedge funds on behalf of the relevant Account, the primary purpose of which
shall be to achieve capital appreciation by investing in private investment
entities which are not registered under the U.S. Investment Company Act of
1940, as amended. The Adviser intends to achieve this objective by allocating
the assets of the account designated to the Hedge Fund and Equity Portfolio
among a group of portfolio managers, which may include affiliates of the
Adviser. The Adviser shall be responsible for fund selection, rebalancing,
reconstituting and reviewing the portfolio in accordance with the Adviser's
reasonable business judgment; provided, however, that to the extent such
investments relate to assets of either of the Companies, they shall be subject
to the review and ratification of those members of the Finance Committee of
the Board of Directors of the applicable Company who are not affiliated with
the Adviser, and that in the event any such investment fails to receive such
ratification, the applicable Company shall direct the Adviser to dispose of
such investment.

                                      3
<PAGE>

3.   Fees and Expenses.

     (a) The Client shall pay the Adviser an Advisory Fee, in arrears, within
ten (10) days following the end of each calendar month, at the rate per annum
set forth on Schedule B as applied to such relevant portion of the Account
based on the fair market value of the assets comprising such portion of the
Account as of the last day of the calendar month just ended. The parties
hereto agree to reevaluate the fee schedule on an annual basis and will adjust
the schedule of fees with the mutual consent of all parties hereto; provided,
however, that no such adjustment shall take effect unless the Companies have
notified the Superintendent of Insurance of the State of New York (the
"Superintendent") in writing of the parties' intention to make such adjustment
at least thirty (30) days prior to the effective date thereof, or such shorter
period as the Superintendent may permit, and the Superintendent has not
disapproved it within such period.

     (b) In computing the market value of any investment held by an Account,
each security listed on a national securities exchange shall be valued at the
last quoted sale price on the valuation date on the principal exchange on
which such security is traded. Any security listed on a national security
exchange that has no quoted last sale price on the valuation date and any
other security or asset, other than a security issued by a hedge fund, shall
be valued by the Adviser in reliance upon one or more quotes received from a
securities broker-dealer that has been granted the designation of primary
dealer by the Federal Reserve Bank of New York. Any security issued by a hedge
fund shall be valued at the net asset value of such security as determined by
the issuing hedge fund.

     (c) If this Agreement commences or terminates at any time other than the
beginning or end of a calendar month, respectively, the Advisory Fee shall be
prorated based on the portion of such calendar month during which this
Agreement was in force. Similar adjustments will be made in the event of an
addition or withdrawal of assets during a calendar month. The Client
understands that assets invested in hedge funds will bear additional fees and
expenses, including performance-related fees, charged by the respective fund
managers in addition to the Advisory Fee. In the event that assets of an
Account designated as part of the Hedge Fund and Equity Portfolio are invested
in alternative investment vehicles managed by the Adviser or any of its
affiliates, the Advisory Fee imposed by this Agreement on such assets shall be
waived (however, other fee(s) imposed by such alternative investment vehicle
managed by the Adviser or its affiliate will be charged).

     (d) The Adviser shall bear all expenses related to the performance of its
services under this Agreement, including without limitation travel expenses,
research, rent, utilities, and salaries. Any fees or expenses incurred by the
Client in connection with the operation or maintenance of the Accounts without
the express written consent of the Adviser shall not be the obligation of the
Adviser.

     (e) Within ten (10) Business Days after the beginning of each calendar
month, the Adviser will provide the Client with a statement setting forth the
aggregate assets of each Account as of the last day of the quarter previously
ended and the calculation of the Advisory Fee payable as of such date. For
purposes of this Agreement, the term Business Day shall mean any day, other
than a Saturday or Sunday, on which commercial banks in New York City are not
authorized or required by law to be closed.

                                      4
<PAGE>

     (f) All fees and expenses provided for in this Agreement shall be
allocated in a manner consistent with the provisions of New York Insurance
Department Regulation 30.

4.   Representations and Warranties of the Adviser.

     The Adviser represents and warrants to the Client that:

     (a) It is a corporation duly formed, validly existing and in good
standing under the laws of the State of Delaware; and

     (b) This Agreement has been duly authorized, executed and delivered by
the Adviser and constitutes a valid and binding agreement of the Adviser,
enforceable against it in accordance with its terms, except that the
enforceability thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights and (ii) general principles of equity
(regardless of whether such enforcement is considered in a proceeding in
equity or at law).

5.   Representations and Warranties of the Client.

     The Client represents and warrants to the Adviser that:

     (a) Each of NYMAGIC, New York Marine and Gotham is a corporation duly
formed, validly existing and in good standing under the laws of the State of
New York;

     (b) This Agreement has been duly authorized, executed and delivered by it
and constitutes a valid and binding agreement of the Client, enforceable in
accordance with its terms except that the enforceability thereof may be
subject to (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights and (ii)
general principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law);

     (c) The Client hereby represents and warrants that: (a) the Client
beneficially owns all of the assets comprising each of the Accounts or has
discretionary authority over such assets with authority to appoint an
investment Adviser with respect to such assets; (b) there are no restrictions
on the transfer, sale and/or public distribution of the assets comprising each
Account; (c) the Client has appointed no other investment adviser with respect
to the assets comprising the Accounts; and (d) the Client has previously
furnished to the Adviser a copy of all applicable statutes and regulations, if
any, regarding its authority to enter into this Agreement and to undertake the
investments contemplated hereunder; and

     (d) The Client shall have full responsibility for payment of all taxes
due on capital or income held or collected for the Accounts.

6.   Other Activities and Investments.

     (a) The Adviser shall not be required to devote its full time to the
affairs of the Accounts, but shall devote such of its time to the business and
affairs of the Accounts as it shall, in its discretion exercised in good

                                      5
<PAGE>

faith, determine to be necessary to conduct the affairs of each Account. The
Adviser shall use that degree of ordinary care and reasonable diligence in the
performance of services hereunder that an experienced and qualified provider
of similar services would use.

     (b) The Adviser and each of its directors, officers, affiliates,
employees or agents thereof may engage in or possess an interest in other
business ventures or commercial dealings of every kind and description,
independently or with others, including, but not limited to, management of
other accounts, investment in, or financing, acquisition and disposition of,
securities, investment and management counseling, brokerage services, serving
as directors, officers, advisers or agents of other companies, partners of any
partnership, or trustee of any trust, or entering into any other commercial
arrangements, whether or not any such activities may conflict with any
interest of the parties hereto with respect to the Account. However, in the
event the Adviser concludes, in its reasonable judgment, that any of the
activities described in the preceding sentence constitute a conflict of
interest between the person or persons engaging in the activity and either of
the Companies with respect to the Accounts, the Adviser shall provide notice
of such conflict of interest to the Board of Directors of the applicable
Company.

     (c) The Client understands that the Adviser performs investment advisory
services for clients other than the Client and that the Adviser may give
advice, make recommendations and take action with respect to other clients
that may be similar or different from that given to the Client. The Client
recognizes that other clients of the Adviser, as well as the Adviser, its
principals, employees, affiliates and their family members, may hold, and
engage in transactions in, securities purchased or sold for the Client or
about which the Adviser has given the Client recommendations or advice. The
Client also agrees that the Adviser has no obligation to purchase, sell or
make recommendations with respect to any security for the Client that the
Adviser purchases, sells or recommends to any client, or in which the Adviser,
its principals, employees, affiliates or their family members engage. The
Adviser, its principals, employees, affiliates and family members may invest
in securities or other investments that are not made available to the Client.

     (d) The Client hereby acknowledges that the Client has been informed by
the Adviser that the Adviser is not registered as an Investment Adviser under
the Investment Advisers Act of 1940, as amended, or any state or local
authority.

7.   Account and Other Information.

     (a) The Adviser shall furnish the Client with statements of the portfolio
assets of each Account and investment results relating thereto on a monthly
basis. Such reports shall indicate the assets in the Account, including their
performance, both in the aggregate and on an Account-by-Account basis (and
within the Hedge Fund and Equity Portfolio, on a fund by fund basis). The
Adviser shall also send to the Client copies of financial statements,
investment reports or letters that it receives from the managers of the
investment entities in which an Account invests.

     (b) The Adviser shall keep, in a manner and form approved by the Client,
accurate and complete books of account, records and files, in either written
or electronic form (the "Books and Records"), of all business conducted under
and pursuant to this Agreement.

     (c) All of the Books and Records established and maintained by the
Adviser by reason of its performance under this Agreement which, absent this
Agreement, would have been held by the Client, shall be the property of the

                                      6
<PAGE>

Client and shall be delivered to the Client or its designee promptly upon
termination of this Agreement; provided, however, that the Adviser shall be
entitled to retain copies of any documents forming part of the Books and
Records to the extent that such documents relate to the performance of the
Adviser's duties hereunder or the compensation payable to the Adviser pursuant
to this Agreement.

     (d) The Adviser shall make all of the Books and Records available for
examination and inspection by duly authorized representatives of the Client,
upon reasonable notice, at any time during ordinary business hours.

     (e) To the extent required by law, the Adviser shall make all of the
Books and Records available for examination and inspection by the
Superintendent or his duly authorized representatives, upon reasonable notice,
at any time during ordinary business hours.

     (f) Any document forming part of the Books and Records that is subject to
examination by the Superintendent shall be retained for six calendar years
from its creation or until after the filing of the report on examination in
which such document was subject to review, whichever is longer.

8.   Directions and Information Provided to the Adviser.

     (a) The Client may, from time to time, in the Client's discretion, issue
directions or instructions to the Adviser with respect to an Account, provided
that any such directions, instructions or amendments are in writing and
furnished to the Adviser. The Adviser shall be fully protected in, and shall
have no liability for loss resulting from, relying upon any directions,
instructions, or amendments from the Client in accordance with the previous
sentence and the Client shall indemnify and hold the Adviser harmless with
respect to such liability.

     (b) The Adviser shall be fully protected in, and shall have no liability
for loss resulting from, acting upon any instrument, certificate or paper
believed by it to be genuine and to be signed or presented on behalf of the
Client by the proper person or persons authorized by the respective Boards of
Directors of the Companies to perform such functions and designated by the
Client to the Adviser in writing from time to time, and the Adviser shall be
under no duty to make any investigation or inquiry as to any statement
contained in any such writing but may accept the same as conclusive evidence
of the truth and accuracy of the statements therein contained and the Client
shall indemnify and hold the Adviser harmless with respect to such liability.

9.   Limitation of Liability; Indemnification.

     (a) To the fullest extent permitted by law, the Adviser shall not be
liable to the Client for any expenses, losses, damages, liabilities, demands,
charges and claims of any kind or nature whatsoever (including without
limitation any reasonable legal expenses and costs and expenses relating to
investigating or defending any demands, charges and claims) (collectively, the

                                      7
<PAGE>

"Losses") by or with respect to an Account, except to the extent that such
Losses are actual investment losses which are the direct result of an act or
omission taken or omitted by the Adviser during the term of the Agreement
which constitutes gross negligence or bad faith with respect to the Adviser's
obligations under this Agreement or a material breach of this Agreement.

     (b) To the fullest extent permitted by law, the Client shall reimburse,
indemnify and hold harmless the Adviser, its affiliates and their
shareholders, partners, directors, officers, employees and any other person
controlled by or controlling the Adviser (collectively, the "Indemnified
Parties") for, from and against any and all direct Losses (i) relating to this
Agreement or the Account arising out of any misrepresentation or act or
omission or alleged act or omission on the part of the Client, its previous
advisers, or any of their agents; or (ii) relating to any demand, charge or
claim in respect of any Indemnified Party's acts, omissions, transactions,
duties, obligations or responsibilities arising in connection with this
Agreement, unless (x) a court with appropriate jurisdiction shall have
determined by a final judgment which is not subject to appeal that such
Indemnified Party is liable in respect of the demands, charges and claims
referred to in this subparagraph, (y) the loss resulted from an act or
omission of the Indemnified Party that constitutes gross negligence, bad
faith, or a material breach of this Agreement, or (z) such Indemnified Party
shall have settled such demands, charges and claims without the Client's
consent.

     (c) The indemnification provisions set forth in this Agreement shall
survive the termination of this Agreement.

10.  Independent Contractor; Sub-Advisers.

     For all purposes of this Agreement, the Adviser shall be an independent
contractor and not an employee or dependent agent of the Client or the
Account; nor shall anything herein or any action taken pursuant to this
Agreement be construed as creating a separate trust, fund, joint venture,
partnership or fiduciary relationship of any kind on the part of the Client or
an Account with respect to the Adviser, any of its affiliates or any of its
other clients. The Adviser shall be expressly permitted to retain sub-advisers
from time to time to manage part or all of the Accounts provided that (i) the
Adviser shall remain liable for the management of the assets of each Account
as if the Adviser itself was so acting and (ii) the Adviser shall pay all of
the fees and expenses of the Sub-Adviser from its compensation under this
Agreement.

11.  Term; Termination.

     This Agreement may be terminated by any party hereto, without penalty, at
any time upon 30 days' prior written notice or such shorter period as the
parties may agree. On the official date of termination, the Adviser shall
provide the Client with a final report for the Account and an invoice for any
unpaid Advisory Fee that may be due pursuant to Section 3 hereof. The Client
understands and agrees that the Adviser will take all reasonable measures to
protect and preserve the assets of the Account upon termination but any
withdrawals from underlying funds will be subject to the restrictions imposed
by such funds and, as such, the Client may be required to hold such interests
after the date of termination of this Agreement.

                                      8
<PAGE>

12.  Additions; Withdrawals; Reallocations.

     The Client may increase or decrease the assets comprising each Account,
or reallocate the amounts allocated to the various portfolios. Once part or
all of the assets comprising an Account are invested by the Adviser in a
private investment fund, any and all assets comprising the Account invested in
a fund may be withdrawn by the Client at any time, but subject to the terms
and conditions applicable to an investor in such fund. The Client further
agrees and acknowledges that any withdrawals from the underlying funds may be
restricted to the extent that the assets comprising the Account are invested
in hedge funds.

13.  Confidentiality

     The Adviser shall treat as confidential all information pertaining to the
Accounts and the Client and all aspects of the relationship established by
this Agreement, except as may be necessary to comply with applicable laws or
regulations. Notwithstanding the foregoing, the Adviser shall not be
prohibited from including the Client on Adviser's list of representative
clients.

14.  Notices.

     Except as otherwise provided herein, all notices or other communications
required or permitted hereunder shall be in writing and shall be delivered,
telecopied or telexed and confirmed to the requisite party, at its address as
follows:

                                      9
<PAGE>

         If to the Adviser:

                  Mariner Partners, Inc.
                  780 Third Avenue
                  16th Floor
                  New York, New York 10017
                  Attn:    Chip Howe, Chief Operating Officer
                           Telephone:       (212) 758-6200
                           Facsimile:       (212) 758-6680

                  With a copy to:

                  Mariner Partners, Inc.
                  780 Third Avenue
                  16th Floor
                  New York, New York 10017
                  Attn:    Peter O'Rourke, General Counsel
                           Telephone:       (212) 758-3577
                           Facsimile:       (212) 758-6680

         If to the Client:

                  NYMAGIC, INC.
                  330 Madison Avenue
                  New York, NY 10017-5001
                  Attn:    A. George Kallop, Executive Vice President
                           Telephone: (212) 551-0744
                           Facsimile: (212) 551-0717

                  With a copy to:

                  NYMAGIC, INC.
                  330 Madison Avenue
                  New York, NY 10017-5001
                  Attn:    Paul Hart, General Counsel
                           Telephone: (212) 551-0777
                           Facsimile: (212) 551-0717

Each party may change its address set forth above by giving notice to the other
parties in accordance with the provisions of this Section 14.

15.  Arbitration.

     (a) All disputes between the parties hereto relating to or in connection
with this Agreement, including but not limited to its interpretation,
performance or breach, shall be submitted to binding arbitration as described
in this Section 15.

                                      10
<PAGE>

     (b) The party initiating arbitration shall provide notice of its demand
for arbitration which shall include appointment of an arbitrator. The other
party shall have thirty (30) days from receipt of such demand for arbitration
in which to appoint its arbitrator. If the responding party fails to appoint
its arbitrator within such thirty (30) days, the initiating party shall be
entitled to choose the second arbitrator. Together the two arbitrators shall
agree upon a neutral umpire. If no such agreement is reached within thirty
(30) days of the appointment of the second arbitrator, the umpire shall be
chosen by drawing lots. The arbitrators and the umpire (collectively the
"Panel") shall be persons who are knowledgeable about financial matters and
who are not affiliated with either party or any of its controlling persons.

     (c) Each party shall submit its case to the Panel within one month from
the date of the appointment of the umpire, but this period of time may be
extended by unanimous written consent of the Panel.

     (d) The Panel shall make its decision with regard to the custom and usage
of the insurance business. The Panel shall be relieved of all judicial
formalities and the strict rules of law. The written decision of a majority of
the Panel shall be rendered within sixty (60) days following the termination
of the Panel's hearings, unless the parties consent to an extension. Such
majority decision of the Panel shall be final and binding upon the parties
both as to law and fact, and may not be appealed to any court of any
jurisdiction. Judgment may be entered upon the final decision of the Panel in
any court of proper jurisdiction.

     (e) Each party shall bear the fees and expenses of the arbitrator
selected by or on its behalf, and the costs of arbitration, including the fees
of the umpire, shall be divided equally between the two parties. The Panel
shall have the authority to award to the prevailing party its costs and
attorneys' fees.

     (f) Any arbitration pursuant to this Section 15 shall be conducted in New
York, New York unless otherwise agreed in writing by the parties, provided
however that the Panel may choose to take evidence and/or convene a hearing in
a place other than New York, New York for the convenience of the parties, the
witnesses or the Panel.

16.  Miscellaneous.

     (a) Amendment; Modification; Waiver. Except as expressly provided herein,
this Agreement shall not be amended, nor shall any provision of this Agreement
be considered modified or waived, unless evidenced by a writing signed by each
of the parties hereto; provided, however, that no such amendment, modification
or waiver shall take effect unless the Companies have notified the
Superintendent in writing of the parties' intention to make such amendment,
modification or waiver at least thirty (30) days prior to the effective date
thereof, or such shorter period as the Superintendent may permit, and the
Superintendent has not disapproved it within such period.

     (b) Binding Effect; Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors,
but the rights and obligations hereunder shall not, except as otherwise
expressly provided herein, be assignable, transferable or delegable without

                                      11
<PAGE>

the written consent of the other party hereto and any attempted assignment (as
defined in the Investment Advisers Act of 1940, as amended), transfer or
delegation thereof without such consent shall be void; provided, however, that
no such assignment, transfer or delegation shall take effect unless the
Companies have notified the Superintendent in writing of the parties'
intention to make such assignment, transfer or delegation at least thirty (30)
days prior to the effective date thereof, or such shorter period as the
Superintendent may permit, and the Superintendent has not disapproved it
within such period.

     (c) Entire Agreement. This Agreement, constitutes the entire
understanding and agreement between the parties and supercedes all prior
understandings and agreements, whether oral or written, between the parties
concerning the subject matter hereof.

     (d) Severability. Each provision of this Agreement shall be considered
separable and if for any reason any provision or provisions herein are
determined to be invalid and contrary to any existing or future law, the
balance of this Agreement shall be interpreted, to the extent practicable, so
as to give effect to the original intent of the parties hereto.

     (e) Counterparts. This Agreement may be executed in multiple counterparts
all of which counterparts together shall constitute one agreement.

     (f) Governing Law. This Agreement shall be governed by and construed both
as to validity and enforceability in accordance with the laws of the State of
New York, without regard to the conflict of laws provisions of such
jurisdiction.

                                      12
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year set forth above.

                             MARINER PARTNERS, INC.

                             By:   /s/ William J. Michaelcheck
                                   ----------------------------------
                                   Name:
                                   Title:

                             NYMAGIC, INC.

                             By:   /s/ George R. Trumbull
                                   ----------------------------------
                                   Name:
                                   Title:

                             NEW YORK MARINE AND GENERAL INSURANCE COMPANY

                             By:    /s/ George R. Trumbull
                                   ----------------------------------
                                   Name:
                                   Title:

                             GOTHAM INSURANCE COMPANY

                             By:   /s/ George R. Trumbull
                                  -----------------------------------
                                  Name:
                                  Title:

                                      13
<PAGE>

                                   Schedule A

NYMAGIC, Inc. Accounts:
-----------------------

Liquidity Portfolio

Fixed Income Portfolio

Hedge Fund and Equity Portfolio

New York Marine and General Insurance Company Accounts:
-------------------------------------------------------

Liquidity Portfolio

Fixed Income Portfolio

Hedge Fund and Equity Portfolio

Gotham Insurance Company Accounts:
----------------------------------

Liquidity Portfolio

Fixed Income Portfolio

Hedge Fund and Equity Portfolio

                                      14
<PAGE>

                                   Schedule B

Assets of the Account allocated to the various portfolios shall be assessed
the fee set forth opposite the portfolio below:

--------------------------------------------------------------------------------
                  Portfolio                                  Fee
--------------------------------------------------------------------------------
             Liquidity Portfolio                            0.20%
--------------------------------------------------------------------------------
            Fixed Income Portfolio                          0.30%
--------------------------------------------------------------------------------
       Hedge Fund and Equity Portfolio                      1.25%*
--------------------------------------------------------------------------------

*Note, this fee shall be waived at the Account level with respect to the assets
of the Account, if any, invested in hedge funds managed by the Adviser or its
affiliates.

                                      15

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