Document:

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                                 PROMISSORY NOTE

$ 99,897.50                                                     Redwood City, CA
                                                               December 14, 1999

     FOR VALUE RECEIVED, the undersigned hereby unconditionally promises to
pay to the order of IMPROVENET, INC., a Delaware corporation (the "Company"),
at [Street Address], [City and State], or at such other place as the holder
hereof may designate in writing, in lawful money of the United States of
America and in immediately available funds, the principal sum of Ninety-Nine
Thousand Eight Hundred Ninety-Seven Dollars and fifty cents ($99,897.50)
together with interest accrued from the date hereof on the unpaid principal
at the rate of 6.2% per annum, or the maximum rate permissible by law (which
under the laws of the State of California shall be deemed to be the laws
relating to permissible rates of interest on commercial loans), whichever is
less, as follows:

     PRINCIPAL REPAYMENT. The outstanding principal amount hereunder shall be
due and payable in full on December 14, 2002.

     INTEREST PAYMENTS. Interest shall be payable annually in arrears and
shall be calculated on the basis of a 365-day year for the actual number of
days elapsed;

PROVIDED, HOWEVER, that in the event that the undersigned's employment by or
association with the Company or its Affiliate is terminated for any reason
prior to payment in full of this Note, this Note shall be accelerated and all
remaining unpaid principal and interest shall become due and payable
immediately after such termination.

     If the undersigned fails to pay any of the principal and accrued
interest when due, the Company, at its sole option, shall have the right to
accelerate this Note, in which event the entire principal balance and all
accrued interest shall become immediately due and payable, and immediately
collectible by the Company pursuant to applicable law.

     This Note may be prepaid at any time without penalty. All money paid
toward the satisfaction of this Note shall be applied first to the payment of
interest as required hereunder and then to the retirement of the principal.

     The full amount of this Note is secured by a pledge of shares of Common
Stock of the Company, and is subject to all of the terms and provisions of
the Early Exercise Stock Purchase Agreement and Stock Pledge Agreement of
even date herewith between the undersigned and the Company.

     The undersigned hereby represents and agrees that the amounts due under
this Note are not consumer debt, and are not incurred primarily for personal,
family or household purposes, but are for business and commercial purposes
only.

     The undersigned hereby waives presentment, protest and notice of
protest, demand for

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payment, notice of dishonor and all other notices or demands in connection
with the delivery, acceptance, performance, default or endorsement of this
Note.

     The holder hereof shall be entitled to recover, and the undersigned
agrees to pay when incurred, all costs and expenses of collection of this
Note, including without limitation, reasonable attorneys' fees.

     This Note shall be governed by, and construed, enforced and interpreted
in accordance with, the laws of the State of California, excluding conflict
of laws principles that would cause the application of laws of any other
jurisdiction.

                                   Signed    /s/  Richard A. Roof
                                           ---------------------------------
                                                  Richard A. Roof<PAGE>

                             BASIC LEASE INFORMATION
                                 INDUSTRIAL NET

<TABLE>
<S>                                                    <C>
LEASE DATE:                                            October 22, 1999
(same as date in first paragraph of Lease)

TENANT:                                                PRI Automation, Inc., a Massachusetts corporation

TENANT'S NOTICE ADDRESS:                               PRI Automation, Inc.
                                                       805 Middlesex Turnpike
                                                       Billerica, MA 01821-3986

TENANT CONTACT: Terry Massood                          PHONE NUMBER:              (978) 670-4270
                                                       FAX NUMBER:                (978) 663-5785

LANDLORD:                                              Spieker Properties, L.P., a California Limited
                                                       partnership

LANDLORD'S NOTICE ADDRESS:                             2180 Sand Hill Road
                                                       Menlo Park, CA  94025

LANDLORD'S REMITTANCE ADDRESS:                         Spieker Properties
                                                       P.O. Box 45587
                                                       Dept. # 10793
                                                       San Francisco, CA  94145-0587

PROJECT DESCRIPTION:                                   420 North Bernardo Avenue, Mountain View, CA

BUILDING DESCRIPTION:                                  420 North Bernardo Avenue, Mountain View, CA

PREMISES:                                              31,000 square feet

PERMITTED USE:                                         Research and development, general office use, and storage that is
                                                       compliant with all applicable laws and ordinances of the city of

                                                       Mountain View, California.

PARKING DENSITY:                                       Tenant shall have the non-exclusive use of all parking on
                                                       Premises.  Parking is at 4.1 spaces per 1,000 rentable square feet
                                                       of the Premises.

SCHEDULED TERM COMMENCEMENT DATE:                      February 1, 2000

SCHEDULED LENGTH OF TERM:                              60 months

SCHEDULED TERM EXPIRATION DATE:                        January 31, 2005

RENT:

         BASE RENT:                                    $72,850.00 per month
                                                       (subject to adjustment as provided in Paragraph 38.A. hereof)

         ESTIMATED FIRST YEAR OPERATING EXPENSES:      $8,678.00 per month (amount is approximate, will have final amount
                                                       as of Nov. 1, 1999)

SECURITY DEPOSIT:                                      $82,224.00

TENANT'S PROPORTIONATE SHARE:

         OF BUILDING:                                  100%

         OF PROJECT:                                   100%
</TABLE>
<PAGE>

The foregoing Basic Lease Information is incorporated into and made a part of
this Lease. Each reference in this Lease to any of the Basic Lease Information
shall mean the respective information above and shall be construed to
incorporate all of the terms provided under the particular Lease paragraph
pertaining to such information. In the event of any conflict between the Basic
Lease Information and the Lease, the latter shall control.
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                                TABLE OF CONTENTS

                                                                            PAGE

Table of Contents will generate here
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                                      LEASE

THIS LEASE is made as of the 22nd day, of October, 1999, by and between Spieker
Properties, L.P., a California limited partnership (hereinafter called
"Landlord"), and PRI Automation, Inc, a Massachusetts corporation (hereinafter
called "Tenant").

                                   1. PREMISES

         Landlord leases to Tenant and Tenant leases from Landlord, upon the
terms and conditions hereinafter set forth, those premises (the "Premises")
outlined in red on Exhibit B and described in the Basic Lease Information. The
Premises shall be all or part of a building (the "Building") and of a project
(the "Project"), which may consist of more than one building and additional
facilities, as described in the Basic Lease Information. The Building and
Project are outlined in blue and green respectively on Exhibit B. Landlord and
Tenant acknowledge that physical changes may occur from time to time in the
Premises, Building or Project, and that the number of buildings and additional
facilities which constitute the Project may change from time to time, which may
result in an adjustment in Tenant's Proportionate Share, as defined in the Basic
Lease Information, as provided in Paragraph 7.A.

                      2. POSSESSION AND LEASE COMMENCEMENT

A. EXISTING IMPROVEMENTS. If this Lease pertains to a Premises in which the
interior improvements have already been constructed ("Existing Improvements"),
the provisions! of this Paragraph 2.A. shall apply and the term commencement
date ("Term Commencement Date") shall be the earlier of the date on which: (1)
Tenant takes possession of some or all of the Premises; or (2) Landlord notifies
Tenant that Tenant may occupy the Premises. If for any reason Landlord cannot
deliver possession of the Premises to Tenant on the scheduled Term Commencement
Date, Landlord shall not be subject to any liability therefor, nor shall
Landlord be in default hereunder nor shall such failure affect the validity of
this Lease ' and Tenant agrees to accept possession of the Premises at such time
as Landlord is able to deliver the same, which date shall then be deemed the
Term Commencement Date. Tenant shall not be liable for any Rent (defined below)
for any period prior to the Term Commencement Date. Tenant acknowledges that
Tenant has inspected and accepts the Premises in their present condition, broom
clean, "as is," and: as suitable for, the Permitted Use (as defined below), and
for Tenant's intended operations in, the Premises, Tenant agrees that the
Premises and other improvements are in good and satisfactory condition as of
when possession was taken. Tenant further acknowledges that no representations
as to the condition or repair of the Premises nor promises to alter, remodel or
improve the Premises have been made by Landlord or any agents of Landlord unless
such are expressly set forth in this Lease. Upon Landlord's request, Tenant
shall
<PAGE>

promptly execute and return to Landlord a "Start-Up Letter" in which Tenant
shall agree, among other things, to acceptance of the Premises and to the
determination of the Term Commencement Date, in accordance with the terms of
this Lease, but Tenant's failure or refusal to do so shall not negate Tenant's
acceptance of the Premises or affect determination of the Term Commencement
Date.

B. CONSTRUCTION OF IMPROVEMENTS. If this Lease pertains to a Building to be
constructed or improvements to be constructed within a Building, the provisions
of this Paragraph 2.B. shall apply in lieu of the provisions of Paragraph 2.A.
above and the term commencement date ("Term Commencement Date") shall be the
earlier of the date on which: (1) Tenant takes possession of some or all of the
Premises excluding the fifteen (15) day period prior to the Term Commencement
Date that Tenant enters the Premises solely for the purpose of preparing space
for business; or (2) the improvements to be constructed or performed in the
Premises by Landlord (if any) shall have been substantially completed in
accordance with the plans and specifications, if any, described on Exhibit C and
Tenant's taking of possession of the Premises or any part thereof shall
constitute Tenant's confirmation of substantial completion for all purposes
hereof, whether or not substantial completion of the Building or Project shall
have occurred. If for any reason Landlord cannot deliver possession of the
Premises to Tenant on the scheduled Term Commencement Date, Landlord shall not
be subject to any liability therefor, nor shall Landlord be in default hereunder
nor shall such failure affect the validity of this Lease, and Tenant agrees to
accept possession of the Premises at such time as such improvements have been
substantially completed, which date shall then be deemed the Term Commencement
Date. Tenant shall not be liable for any Rent for any period prior to the Term
Commencement Date (but without affecting any obligations of Tenant under any
improvement agreement appended to this Lease). In the event of any dispute as to
substantial completion of work performed or required to be performed by
Landlord, the certificate of Landlord's architect or general contractor shall be
conclusive. Substantial completion shall have occurred notwithstanding Tenant's
submission of a punchlist to Landlord, which Tenant shall submit, if at all,
within three (3) business days after the Term Commencement Date or otherwise in
accordance with any improvement agreement appended to this Lease. Upon
Landlord's request, Tenant shall promptly execute and return to Landlord a
"Start-Up Letter" in which Tenant shall agree, among other things, to acceptance
of the Premises and to the determination of the Term Commencement Date, in
accordance with the terms of this Lease, but Tenant's failure or refusal to do
so shall not negate Tenant's acceptance of the Premises or affect determination
of the Term Commencement Date. If Landlord is unable to deliver the Premises on
April 1. 2000. Tenant shall have the right to terminate the Lease by notice the
Landlord in writing.
<PAGE>

                                     3. TERM

         The term of this Lease (the "Term") shall commence on the Term
Commencement Date and continue in full force and effect for the number of months
specified as the Length of Term in the Basic Lease Information or until this
Lease is terminated as otherwise provided herein. If the Term Commencement Date
is a date other than the first day of the calendar month, the Term shall be the
number of months of the Length of Term in addition to the remainder of the
calendar month following the Term Commencement Date.

                                     4. USE

A. GENERAL. Tenant shall use the Premises for the permitted use specified in the
Basic Lease Information ("Permitted Use") and for no other use or purpose.
Tenant shall control Tenant's employees, agents, customers, visitors, invitees,
licensees, contractors, assignees and subtenants (collectively, "Tenant's
Parties") in such a manner that Tenant and Tenant's Parties cumulatively do not
exceed the parking density specified in the Basic Lease Information (the
"Parking Density") at any time. So long as Tenant is occupying tile Premises,
Tenant and Tenant's Parties shall have the nonexclusive right to use, in common
with other parties occupying the Building or Project, the parking areas,
driveways and other common areas of the Building and Project, subject to the
terms of this Lease and such rules and regulations as Landlord may from time to
time prescribe. Landlord reserves the right, without notice or liability to
Tenant, and without the same constituting an actual or constructive eviction, to
alter or modify the common areas from time to time, including the location and
configuration thereof, and the amenities and facilities which Landlord may
determine to provide from time to time. Tenant shall not be required to pay for
parking,

B. LIMITATIONS. Tenant shall not permit any odors, smoke, dust, gas, substances,
noise or vibrations to emanate from the Premises or from any portion of the
common areas as a result of Tenant's or any Tenant's Party's use thereof, nor
take any action which would constitute a nuisance or would disturb, obstruct or
endanger any other tenants or occupants of the Building or Project or elsewhere,
or interfere with their use of their respective premises or common areas.
Storage outside the Premises of materials, vehicles or any other items is
prohibited. Tenant shall not use or allow the Premises to be used for any
immoral, improper or unlawful purpose, nor shall Tenant cause or maintain or
permit any nuisance in, on or about the Premises, Tenant shall not commit or
suffer the commission of any waste in, on or about the Premises. Tenant shall
not allow any sale by auction upon the Premises, or place any loads upon the
floors, walls or ceilings which could endanger the structure, or place any
harmful substances in the drainage system of the Building or Project. No waste,
materials or refuse shall be dumped upon or permitted to
<PAGE>

remain outside the Premises except in trash containers placed inside exterior
enclosures designated for that purpose by Landlord. Landlord shall not be
responsible to Tenant for the non-compliance by any other tenant or occupant of
the Building or Project with any of the above-referenced rules or any other
terms or provisions of such tenant's or occupant's lease or other contract.

C. COMPLIANCE WITH REGULATIONS. By entering the Premises, Tenant accepts the
Premises in the condition existing as of the date of such entry. Tenant shall at
its sole cost and expense strictly comply with all existing or future applicable
municipal, state and federal and other governmental statutes, rules,
requirements, regulations, laws and ordinances, including zoning ordinances and
regulations, and covenants, easements and restrictions of record governing and
relating to the use, occupancy or possession of the Premises, to Tenant's use of
the common areas, or to the use, storage, generation or disposal of Hazardous
Materials (hereinafter defined) (collectively "Regulations"). Tenant shall at
its sole cost and expense obtain, any and all licenses or permits necessary for
Tenant's use of the Premises. Tenant shall at its sole cost and expense promptly
comply with the requirements of any board of fire underwriters or other similar
body now or hereafter constituted. Tenant shall not do or permit anything to be
done in, on, under or about the Project or bring or keep anything which will in
any way increase;:the rate of any insurance upon the Premises, Building or
Project or upon any contents therein or cause a cancellation of said insurance
or otherwise affect said insurance in any manner. Tenant shall indemnify, defend
(by counsel reasonably acceptable to Landlord), protect and hold Landlord
harmless from and against any loss, cost, expense, damage, attorneys' fees or
liability arising out of the failure of Tenant to comply with any Regulation.
Tenant's obligations pursuant to the foregoing indemnity shall survive the
expiration or earlier termination of this Lease.
<PAGE>

D. HAZARDOUS MATERIALS. As used in this Lease, "Hazardous Materials" shall
include, but not be limited to, hazardous, toxic and radioactive materials and
those substances defined as "hazardous substances, "hazardous materials,"
"hazardous wastes," "toxic substances," or other similar designations in any
Regulation. Tenant shall not cause, or allow any of Tenant's Parties to cause,
any Hazardous Materials to be handled, used, generated, stored, released or
disposed of in, on, under or about the Premises, the Building or the Project or
surrounding land or environment in violation of any Regulations. Tenant must
obtain Landlord's written consent prior to the introduction of any Hazardous
Materials onto the Project. Notwithstanding the foregoing, Tenant may handle,
store, use and dispose of products containing small quantities of: Hazardous
Materials for "general office purposes" (such as toner for copiers) to the
extent customary and necessary for the Permitted Use of the Premises; provided
that Tenant shall always handle, store, use, and dispose of any such Hazardous
Materials in a safe and lawful manner and never allow such Hazardous Materials
to contaminate the Premises, Building, or Project or surrounding land or
environment. Tenant shall immediately notify Landlord in writing of any
Hazardous Materials' contamination of any portion of the Project of which Tenant
becomes aware, whether or riot caused by Tenant. Landlord shall have the right
at all reasonable times to inspect the Premises and to conduct tests and.
investigations to determine whether Tenant is in compliance with the foregoing
provisions, the costs of all such inspections, tests and investigations to be
borne by Tenant. Tenant shall indemnify, defend (by counsel reasonably
acceptable to Landlord), protect and hold Landlord harmless from and against any
and all claims, liabilities, losses, costs, loss of rents, liens, damages,
injuries or expenses (including attorneys' and consultants' fees and court
costs), demands, causes of action, or judgments directly or indirectly arising
out of or related to the use, generation, storage, release, or disposal of
Hazardous Materials by Tenant or any of Tenant's Parties in, on, under or about
the Premises, the Building or the Project or surrounding land or environment,
which indemnity shall include, without limitation, damages for personal or
bodily injury, property damage, damage to the environment or natural resources
occurring on or off the Premises, losses attributable to diminution in value or
adverse effects on marketability, the cost of any investigation, monitoring,
government oversight, repair, removal, remediation, restoration, abatement, and
disposal, and the preparation of any closure or other required plans, whether
such action is required or necessary prior to or following the expiration or
earlier termination of this Lease. Neither the consent by Landlord to the use,
generation, storage, release or disposal of Hazardous Materials nor the strict
compliance by Tenant with all laws pertaining to Hazardous Materials shall
excuse Tenant from Tenant's obligation of indemnification pursuant to this
Paragraph 4.D. Tenant's obligations pursuant to the foregoing indemnity shall
survive the expiration or earlier termination of this
<PAGE>

Lease. Landlord shall disclose to Tenant any and all reports that may be
completed on the Premises relating to hazardous materials.

                            5. RULES AND REGULATIONS

         Tenant shall faithfully observe and comply with the building rules and
regulations attached hereto as Exhibit A and any other rules and regulations and
any modifications or, additions thereto which Landlord may from time to time
prescribe in writing for the purpose of maintaining the proper care,
cleanliness, safety, traffic flow and general order of the Premises or the
Building or Project. Tenant shall cause Tenant's Parties to comply with such
rules and regulations. Landlord shall not be responsible to Tenant for the
non-compliance by any other tenant or occupant of the Building or Project with
any of such rules and regulations, any other tenant's or occupant's lease or any
Regulations.

                                     6. RENT

A. BASE RENT. Tenant shall pay to Landlord and Landlord shall receive, without
notice or demand throughout the Term, Base Rent as specified in the Basic Lease
Information, payable in monthly installments in advance on or before the first
day of each calendar month, in lawful money of the United States, without
deduction or offset whatsoever, at the Remittance Address specified in the Basic
Lease Information or to such other Place as Landlord may from time to time
designate in writing. Base Rent for the first full month of the Term shall be
paid by Tenant upon Tenant's execution of this Lease. If the obligation for
payment of Base Rent commences on a day other than the first day of a month,
then Base Rent shall be prorated and the prorated installment shall be paid on
the first day of the calendar month next succeeding the Term Commencement Date.
The Base Rent payable by Tenant hereunder is subject to adjustment as provided
elsewhere in this Lease, as applicable. As used herein, the term "Base Rent"
shall mean the Base Rent specified in the Basic Lease Information as it may be
so adjusted from, time to time.

B. ADDITIONAL RENT. All monies other than Base Rent required to be paid by
Tenant hereunder, including, but not limited to, Tenant's Proportionate Share of
Operating Expenses, as specified in Paragraph 7 of this Lease, charges to be
paid by Tenant under Paragraph 15, the interest and late charge described in
Paragraphs 26.C. and D., and any monies spent by Landlord pursuant to Paragraph
30, shall be considered additional rent ("Additional Rent"). "Rent" shall mean
Base Rent and Additional Rent.

                              7. OPERATING EXPENSES

A. OPERATING EXPENSES. In addition to the Base Rent required to be paid
hereunder, Tenant shall pay as Additional Rent, Tenant's
<PAGE>

Proportionate Share of the Building and/or Project (as applicable), as defined
in the Basic Lease Information, of Operating Expenses (defined below) in the
manner set forth below. Tenant shall pay the applicable Tenant's Proportionate
Share of each such Operating Expenses. Landlord and Tenant acknowledge that if
the number of buildings which constitute the Project increases or decreases, or
if physical changes are made to the Premises, Building or Project or the
configuration of any thereof, Landlord may at its discretion reasonably adjust
Tenant's Proportionate Share of the Building or Project to reflect the change.
Landlord's determination of Tenant's Proportionate Share of the Building and of
the Project shall be conclusive so long as it is reasonably and consistently
applied. "Operating Expenses" shall mean all expenses and costs of every kind
and nature which Landlord shall pay or become obligated to pay, because of or in
connection with the ownership, management, maintenance, repair, preservation,
replacement and operation of the Building or Project and its supporting
facilities and such additional facilities now and in subsequent years as may be
determined by Landlord to be necessary or desirable to the Building and/or
Project (as determined in a reasonable manner) other than those expenses and
costs which are specifically attributable to Tenant or which are expressly made
the financial responsibility of Landlord or specific tenants of the Building or
Project pursuant to this Lease. Operating Expenses shall include, but are not
limited to, the following:

         (1) TAXES. All real property taxes and assessments, possessory interest
         taxes, sales taxes, personal property taxes, business or license taxes
         or fees, gross receipts taxes, service payments in lieu of such taxes
         or fees, annual or periodic license or use fees, excises, transit
         charges, and other impositions, general and special, ordinary and
         extraordinary, unforeseen as well as foreseen, of any kind (including
         fees "in-lieu" of any such tax or assessment) which are now or
         hereafter assessed, levied, charged, confirmed, or imposed by any
         public authority upon the Building or Project, its operations or the
         Rent (or any portion or component thereof), or any tax,: assessment or
         fee imposed in substitution, partially or totally, of any of the above.
         Operating Expenses shall also include any taxes, assessments,
         reassessments, or other fees or impositions with respect to the
         development, leasing, management, maintenance, alteration, repair, use
         or occupancy by Tenant of the Premises, Building or Project or any
         portion thereof, including, without limitation, by or for Tenant, and
         all increases therein or reassessments thereof whether the increases or
         reassessments result from increased rate and/or valuation (whether upon
         a transfer of the Building or Project or any portion thereof or any
         interest therein or for any other reason). Operating Expenses shall not
         include inheritance or estate taxes imposed upon or assessed against
         the interest of any person in the Project or taxes computed
<PAGE>

         upon the basis of the net income of any owners of any interest in the
         Project. If it shall not be lawful for Tenant to reimburse Landlord for
         all or any part of such taxes, the monthly rental payable to Landlord
         under this Lease shall be revised to net Landlord the same net rental
         after imposition of any such taxes by Landlord as would have been
         payable to Landlord prior to the payment of any such taxes.

         (2) INSURANCE. All insurance premiums and costs, including, but not
         limited to, any deductible amounts, premiums and other costs of
         insurance incurred by Landlord, including for the insurance coverage
         set forth in Paragraph 8.A. herein.

(3)      COMMON AREA MAINTENANCE.

         (a) Repairs, replacements, and general maintenance of and for the
         Building and Project and public and common areas and facilities of and
         comprising the Building and Project, including, but not limited to, the
         roof And roof membrane, elevators, mechanical rooms, alarm systems,
         pest extermination, landscaped areas, parking and service areas,
         driveways, sidewalks, truck staging areas, rail spur areas, fire
         sprinkler systems, sanitary and storm sewer lines, utility services,
         heating/ventilation/air conditioning systems, electrical, mechanical or
         other systems, telephone equipment and wiring servicing, plumbing,
         lighting, and any other items or areas which affect the operation or
         appearance of the Building or Project, which determination shall be at
         Landlord's discretion, except for: those items expressly made the
         financial responsibility of Landlord pursuant to Paragraph 10 hereof,
         those items to the extent paid for by the proceeds of insurance; and
         those items attributable solely or jointly to specific tenants of the
         Building or Project.

         (b) Repairs, replacements, and general maintenance shall include the
         cost of any capital improvements made to or capital assets acquired for
         the Project or Building that in Landlord's discretion may reduce any
         other Operating Expenses, including present or future repair work, are
         reasonably necessary for the health and safety of the occupants of the
         Building or Project, or are required to comply with any Regulation,
         such costs or allocable portions thereof to be amortized over the
         useful lives based on industry norms and Tenant shall be responsible
         for their pro rata share for the remaining Term of the Lease, together
         with interest on the unamortized balance at the publicly announced
         "prime rate" charged by Wells Fargo Bank, N.A. (San Francisco) or its
         successor at the time such improvements or capital assets are
         constructed or acquired, plus two (2) percentage points, or in the
         absence of such
<PAGE>

         prime rate, then at the U.S. Treasury six-month market note (or bond,
         if so designated) rate as published by any national financial
         publication selected by Landlord, plus four (4) percentage points, but
         in no event more than the maximum rate permitted by law, plus
         reasonable financing charges.

         (c) Payment under or for any casement, license, permit, operating
         agreement, declaration, restrictive covenant or instrument relating to
         the Building or Project.

         (d) All expenses and rental related to services and costs of supplies,
         materials and equipment used in operating, managing and maintaining the
         Premises, Building and Project, the equipment therein and the adjacent
         sidewalks, driveways, parking and service areas, including, without
         limitation, expenses related to service agreements regarding security,
         fire and other alarm systems, janitorial services to the extent not
         addressed in Paragraph II hereof, window cleaning, elevator
         maintenance, Building exterior maintenance, landscaping and expenses
         related to the administration, management and operation of the Project,
         including without limitation salaries, wages and benefits and
         management office rent.

         (e) The cost of supplying any services and utilities which benefit all
         or a portion of the Premises, Building or Project to the extent not
         addressed in Paragraph 15 hereof.

         (f) Legal expenses and the cost of audits by certified public
         accountants; provided, however, that legal expenses chargeable as
         Operating Expenses shall not include the cost of negotiating leases,
         collecting rents, evicting tenants nor shall it include costs incurred
         in legal proceedings with or against any tenant or to enforce the
         provisions of any lease.

         (g) A management and accounting cost recovery fee equal to Five percent
         (5%) of the sum of the Project's base rents and Operating Expenses
         (other than such management and accounting fee).

If the rentable area of the Building and/or Project is not fully occupied during
any fiscal year of the Term as determined by Landlord, an adjustment may be made
in Landlord's discretion in computing the Operating Expenses for such year so
that Tenant pays an equitable portion of all variable items (e.g., utilities,
janitorial services and other component expenses that are affected by variations
in occupancy levels) of Operating Expenses, as reasonably determined by
Landlord, provided, however, that in no event shall Landlord be entitled to
collect in excess of one hundred percent (100%) of the total Operating Expenses
from all of the tenants in the Building or Project, as the case may be.
<PAGE>

Operating Expenses shall not include the cost of providing tenant improvements
or other specific costs incurred for the account of, separately billed to and
paid by specific tenants of the Building or Project, the initial construction
cost of the Building, or debt service on any mortgage or deed of trust recorded
with respect to the Project other than pursuant to Paragraph TA.(3)(b) above.
Operating Expense also not include costs for any defects found in the HVAC,
roof, plumbing, electrical, or sprinkler systems not created by Tenant within
the first Ninety (90) days of the Lease term which Tenant notifies Landlord of
in writing and that Landlord should have reasonably known. Notwithstanding
anything herein to the contrary, in any instance wherein Landlord, in Landlord's
sole discretion, deems Tenant to be responsible for any amounts greater than
Tenant's Proportionate Share, Landlord shall have the right to allocate costs in
any manner Landlord deems appropriate.

The above enumeration of services and facilities shall not be deemed to impose
an obligation on Landlord to make available or provide such services or
facilities except to the extent if any that Landlord has specifically agreed
elsewhere in this Lease to make the same available or provide the same. Without
limiting the generality of the foregoing, Tenant acknowledges and agrees that it
shall be responsible for providing adequate security for its use of the
Premises, the Building and the Project and that Landlord shall have no
obligation or liability with respect thereto, except to the extent if any that
Landlord has specifically agreed elsewhere in this Lease to provide the same.

B. PAYMENT OF ESTIMATED OPERATING EXPENSES. "Estimated Operating Expenses" for
any particular year shall mean Landlord's estimate of the Operating Expenses for
such fiscal year made with respect to such fiscal year as hereinafter provided.
Landlord shall have the right from time to time to revise its fiscal year and
interim accounting periods so long as the periods as so revised are reconciled
with prior periods in a reasonable manner. During the last month of each fiscal
year during the Term, or as soon thereafter as practicable, Landlord shall give
Tenant written notice of the Estimated Operating Expenses for the ensuing fiscal
year. Tenant shall pay Tenant's Proportionate Share of the Estimated Operating
Expenses with installments of Base Rent for the fiscal year to which the
Estimated Operating Expenses applies in monthly installments on the first day of
each calendar month during such year, in advance. Such payment shall be
construed to be Additional Rent for all purposes hereunder. If at any time
during the course of the fiscal year, Landlord determines that Operating
Expenses are projected to vary from the then Estimated Operating Expenses by
more than five percent (5%), Landlord may, by written notice to Tenant, revise
the Estimated Operating Expenses for the balance of such fiscal year, and
Tenant's monthly installments for the remainder of such year shall be adjusted
so that by the end of such fiscal year Tenant
<PAGE>

has paid to Landlord Tenant's Proportionate Share of the revised Estimated
Operating Expenses for such year, such revised installment amounts to be
Additional Rent for all purposes hereunder.

C. COMPUTATION OF OPERATING EXPENSE ADJUSTMENT. "OPERATING EXPENSE ADJUSTMENT"
shall mean the difference between Estimated Operating Expenses and actual
Operating Expenses for any fiscal year determined as hereinafter provided.
Within one hundred twenty (120) days after the end of each fiscal year, or as
soon thereafter as practicable, Landlord shall deliver to Tenant a statement of
actual Operating Expenses for the fiscal year just ended, accompanied by a
computation of Operating Expense Adjustment. If Such statement shows that
Tenant's payment based upon Estimated Operating Expenses is less than Tenant's
Proportionate Share of operating Expenses, then Tenant shall pay to Landlord the
difference within thirty 30 days after receipt of such statement, such payment
to constitute Additional Rent for all purposes hereunder. If such statement
shows that Tenant's payments of Estimated Operating Expenses exceed Tenant's
Proportionate Share of Operating Expenses, then (provided that Tenant is not in
default under this Lease) Landlord shall pay to Tenant the difference within
twenty (20) days after delivery of such statement to Tenant. If this Lease has
been terminated or the Term hereof has expired prior to the date of such
statement, then the Operating Expense Adjustment shall be paid by the
appropriate party within twenty (20) days after the date of delivery of the
statement. Should this Lease commence or terminate at any time other than the
first day of the fiscal year, Tenant's Proportionate Share of the Operating
Expense Adjustment shall be prorated based on a month of 30 days and the number
of calendar months during such fiscal year that this Lease is in effect.
Notwithstanding anything to the contrary contained in Paragraph 7.A or 7.13,
Landlord's failure to provide any notices or statements within the time periods
specified in those paragraphs shall in no way excuse Tenant from its obligation
to pay Tenant's Proportionate Share of Operating Expenses.

D. NET LEASE. This shall be a triple net Lease and Base Rent shall be paid to
Landlord absolutely net of all costs and expenses, except as specifically
provided to the contrary in this Lease. The provisions for payment of Operating
Expenses and the Operating Expense Adjustment are intended to pass on to Tenant
and reimburse Landlord for all costs and expenses of the nature described in
Paragraph 7.A. incurred in connection with the ownership, management,
maintenance, repair, preservation, replacement and operation of the Building
and/or Project and its supporting facilities and such additional facilities now
and in subsequent years as may be determined by Landlord to be necessary or
desirable to the Building and/or Project.

E. TENANT AUDIT. If Tenant shall dispute the amount set forth in any Statement
provided by Landlord under Paragraph 7.13. or
<PAGE>

7.C. above, Tenant shall have the right, not later than thirty (30) days
following receipt of such statement and upon the condition that Tenant shall
first deposit with Landlord the full amount in dispute, to cause Landlord's
books and records with respect to Operating Expenses for such fiscal year to be
audited by certified public accountants selected by Tenant and subject to
Landlord's reasonable right of approval. The Operating Expense Adjustment shall
be appropriately adjusted on the basis of such audit. If such audit discloses a
liability for a refund in excess of ten percent (10%) of Tenant's Proportionate
Share of the Operating Expenses previously reported, the cost of such audit
shall be borne by Landlord; otherwise the cost of such audit shall be paid by
Tenant. If Tenant shall not request an audit in accordance with the provisions
of this Paragraph 7.E. within twenty (20) days after receipt of Landlord's
statement provided pursuant to Paragraph 7.B. or 7.C., such statement shall be
final and binding for all purposes hereof.

                        8. INSURANCE AND INDEMNIFICATION

A. LANDLORD'S INSURANCE. All insurance maintained by Landlord shall be for the
sole benefit of Landlord and under Landlord's sole control.

         (1) PROPERTY INSURANCE. Landlord agrees to maintain property insurance
         insuring the Building against damage or destruction due to risk
         including fire, vandalism, and malicious mischief in an amount not less
         than the replacement cost thereof, in the form and with deductibles and
         endorsements as selected by Landlord. At its election, Landlord may
         instead (but shall have no obligation to) obtain"All Risk" coverage,
         and may also obtain earthquake, pollution, and/or flood insurance in
         amounts selected by Landlord.

         (2) OPTIONAL INSURANCE. Landlord, at Landlord's option, may also (but
         shall have no obligation to) carry insurance against loss of rent, in
         an amount equal to the amount of Base Rent and Additional Rent that
         Landlord could be required to abate to all Building tenants in the
         event of condemnation or casualty damage for a period of twelve (12)
         months. Landlord may also (but shall have no obligation to) carry such
         other insurance as Landlord may deem prudent or advisable, including,
         without limitation, liability insurance in such amounts and on such
         terms as Landlord shall determine. Landlord shall not be obligated to
         insure, and shall have no responsibility whatsoever for any damage to,
         any furniture, machinery, goods, inventory or supplies, or other
         personal property or fixtures which Tenant may keep or maintain in the
         Premises, or any leasehold improvements, additions or alterations
         within the Premises.
<PAGE>

B.       TENANT'S INSURANCE.

         (1) PROPERTY INSURANCE. Tenant shall procure at Tenant's sole cost and
         expense and keep in effect from the date of this Lease and at all times
         until the end of the Term, insurance on all personal property and
         fixtures of Tenant and all improvements, additions or alterations made
         by or for Tenant to the Premises on an "All Risk" basis, insuring such
         property for the full replacement value of such property.

         (2) LIABILITY INSURANCE. Tenant shall procure at Tenant's sole cost and
         expense and keep in effect from the date of this Lease and at all times
         until the end of the Term Commercial General Liability insurance
         covering bodily injury and property damage liability occurring in or
         about the Premises or arising out of the use and occupancy of the
         Premises and the Project, and any part of either, and any areas
         adjacent thereto, and the business operated by Tenant or by any other
         occupant of the Premises. Such insurance shall include contractual
         liability coverage insuring all of Tenant's indemnity obligations under
         this Lease. Such coverage shall have a minimum combined single limit of
         liability of at least Two Million Dollars ($2,000,000.00), and a
         minimum general aggregate limit of Three Million Dollars
         ($3,000,000.00), with an "Additional Insured - Managers or Lessors of
         Premises Endorsement" and the "Amendment of the Pollution Exclusion
         Endorsement." All such policies shall be written to apply to all bodily
         injury (including death), property damage or loss, personal and
         advertising injury and other covered loss, however occasioned,
         occurring during the policy term, shall be endorsed to add Landlord and
         any party holding an interest to which this Lease may be subordinated
         as an additional insured, and shall provide that such coverage shall be
         "primary" and non-contributing with any insurance maintained by
         Landlord, which shall be excess insurance only. Such coverage shall
         also contain endorsements including employees as additional insureds if
         not covered by Tenant's Commercial General Liability Insurance. All
         such insurance shall provide for the severability of interests of
         insureds; and shall be written on an "occurrence" basis, which shall
         afford coverage for all claims based on acts, omissions, injury and
         damage, which occurred or arose (or the onset of which occurred or
         arose) in whole or in part during the policy period.

         (3) WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY INSURANCE. Tenant
         shall carry Workers' Compensation Insurance as required by any
         Regulation, throughout the Term at Tenant's sole cost and expense.
         Tenant shall also carry Employers' Liability Insurance in amounts not
         less than One Million Dollars ($1,000,000) each accident for bodily
         injury by accident; One Million Dollars ($1,000,000) policy limit
<PAGE>

         for bodily injury by disease; and One Million Dollars ($1,000,000) each
         employee for bodily injury by disease, throughout the Term at Tenant's
         sole cost and expense.

         (4) COMMERCIAL AUTO LIABILITY INSURANCE. Tenant shall procure at
         Tenant's sole cost and expense and keep in effect from the date of this
         Lease and at all times until the end of the Term commercial auto
         liability insurance with a combined limit of not less than One Million
         Dollars ($1,000,000) for bodily injury and property damage for each
         accident. Such insurance shall cover liability relating to any auto
         (including owned, hired and non-owned autos).

         (5) GENERAL INSURANCE REQUIREMENTS. All coverages described in this
         Paragraph 8.B. shall be endorsed to (ij provide Landlord with thirty
         (30) days' notice of cancellation or change in terms; and (ii) waive
         all rights of subrogation by the insurance carrier against Landlord. If
         at any time during the Term the amount or coverage of insurance which
         Tenant is required to carry under this Paragraph S.B. is, in Landlord's
         reasonable judgment, materially less than the amount or type of
         insurance coverage typically carried by owners or tenants of properties
         located in the general area in which the Premises are located which are
         similar to and operated for similar purposes as the Premises or if
         Tenant's use of the Premises should change with or without Landlord's
         consent, Landlord shall have the right to require Tenant to increase
         the amount or change the types of insurance coverage required under
         this Paragraph 8.B. All insurance policies required to be carried by
         Tenant under this Lease shall be written by companies rated A X or
         better in "Best's Insurance Guide" and authorized to do business in the
         State of California. In any event deductible amounts under all
         insurance policies required to be carried by Tenant under this Lease
         shall not exceed Five Thousand Dollars ($5,000.00) per occurrence.
         Tenant shall deliver to Landlord on or before the Term Commencement
         Date, and thereafter at least thirty (30) days before the expiration
         dates of the expired policies, certified copies of Tenant's insurance
         policies, or a certificate evidencing the same issued by the insurer
         thereunder; and, if Tenant shall fail to procure such insurance, or to
         deliver such policies or certificates, Landlord may, at Landlord's
         option and in addition to Landlord's other remedies in the event of a
         default by Tenant hereunder, procure the same for the account of
         Tenant, and the cost thereof shall be paid to Landlord as Additional
         Rent.

C. INDEMNIFICATION. Tenant shall indemnify, defend by counsel reasonably
acceptable to Landlord, protect and hold Landlord harmless from and against any
and all claims, liabilities, losses, costs, loss of rents, liens, damages,
injuries or
<PAGE>

expenses, including reasonable attorneys' and consultants' fees and court costs,
demands, causes of action, or judgments, directly or indirectly arising out of
or related to: (1) claims of injury to or death of persons or damage to property
occurring or resulting directly or indirectly from the use or occupancy of the
Premises, Building or Project by Tenant or Tenant's Parties, or from activities
or failures to act of Tenant or Tenant's Parties; (2) claims arising from work
or labor performed, or for materials or supplies furnished to or at the request
of Tenant in connection with performance of any work done for the account of
Tenant within the Premises or Project; (3) claims arising from any breach or
default on the part of Tenant in the performance of any covenant contained in
this Lease, and (4) claims arising from the negligence or intentional acts or
omissions of Tenant or Tenant's Parties. The foregoing indemnity by Tenant shall
not be applicable to claims to the extent arising from the gross negligence or
willful misconduct of Landlord. Landlord shall not be liable to Tenant and
Tenant hereby waives all claims against Landlord for any injury or damage to any
person or property in or about the Premises, Building or Project by or from any
cause whatsoever (other than Landlord's gross negligence or willful misconduct)
and, without limiting the generality of the foregoing, whether caused by water
leakage of any character from the roof, walls, basement or other portion of the
Premises, Building or Project, or caused by gas, fire, oil or electricity in, on
or about the Premises, Building or Project. The provisions of this Paragraph
shall survive the expiration or earlier termination of this Lease.

                            9. WAIVER OF SUBROGATION

         To the extent permitted by law and without affecting the coverage
provided by insurance to be maintained hereunder or any other rights or
remedies, Landlord and Tenant each waive any right to recover against the other
for: (a) damages for injury to or death of persons; (b) damages to property,
including personal property; (c) damages to the Premises or any part thereof,
and (d) claims arising by reason of the foregoing due to hazards covered by
insurance maintained or required to be maintained pursuant to this Lease to the
extent of proceeds recovered therefrom, or proceeds which would have been
recoverable therefrom in the case of the failure or any party to maintain any
insurance coverage required to be maintained by such party pursuant to this
Lease. This provision is intended to waive fully, any rights and/or claims
arising by reason of the foregoing, but only to the extent that any of the
foregoing damages and/or claims referred to above are covered or would be
covered, and only to the extent of such coverage, by insurance actually carried
or required to be maintained pursuant to this Lease by either Landlord or
Tenant. This provision is also intended to waive fully, and for the benefit of
each party, any rights and/or claims which might give rise to a right of
subrogation on any insurance carrier. Subject to all
<PAGE>

qualifications of this Paragraph 9, Landlord waives its rights as specified in
this Paragraph 9 with respect to any subtenant that it has approved pursuant to
Paragraph 21 but only in exchange for the written waiver of such rights to be
given by such subtenant to Landlord upon such subtenant taking possession of the
Premises or a portion thereof. Each party shall cause each insurance policy
obtained by it to provide that the insurance company waives all right of
recovery by way of subrogation against either party in connection with any
damage covered by any policy.

                     10. LANDLORD'S REPAIRS AND MAINTENANCE

         Landlord shall at Landlord's expense maintain in good repair,
reasonable wear and tear excepted, the structural soundness of the roof,
foundations, and exterior walls of the Building. The term "exterior walls" as
used herein shall not include windows, glass or plate glass, doors, dock bumpers
or dock plates, special store fronts or office entries. Any damage caused by or
repairs necessitated by any negligence or act of Tenant or Tenant's Parties may
be repaired by Landlord. at Landlord's option and Tenant's expense. Tenant shall
immediately give Landlord written notice of any defect or need of repairs in
such components of the Building for which Landlord is responsible, after which
Landlord shall have a reasonable opportunity and the right to enter the Premises
at all reasonable times to repair same. Landlord's liability with respect to any
defects, repairs, or maintenance for which Landlord is responsible under any of
the provisions of this Lease shall be limited to the cost of such repairs or
maintenance, and there shall be no abatement of rent and no liability of
Landlord by reason of any injury to or interference with Tenant's business,
except in the instance of Landlord's gross negligence or wilful misconduct,
arising from the making of repairs, alterations or improvements in or to any
portion of the Premises, the Building or the Project or to fixtures,
appurtenances or equipment in the Building, except as provided in Paragraph 24.
By taking possession of the Premises, Tenant accepts them "as is," as being in
good order, condition and repair and the condition in which Landlord is
obligated to deliver them and suitable for the Permitted Use and Tenant's
intended operations in the Premises, whether or not any notice of acceptance is
given. Tenant shall have period of Ninety (90) days from the Term Commencement
with which to report to Landlord, in writing, any defects with the FIVAQ. roof,
plumbing, electrical or sprinkler systems notice ated by 'Tenant that Landlord
should reasonably have known and Landlord shall repair such defects at
Landlord's sole cost,

                      11. TENANT'S REPAIRS AND MAINTENANCE

         Tenant shall at all times during the Term at Tenant's expense maintain
all parts of the Premises and such portions of the Building as are within the
exclusive control of Tenant in a
<PAGE>

good, clean and secure condition and promptly make all necessary repairs and
replacements, as determined by Landlord, including but not limited to, all
windows, glass, doors, walls, including demising walls, and wall finishes,
floors and floor covering, heating, ventilating and air conditioning systems,
ceiling insulation, truck doors, hardware, dock bumpers, dock plates and
levelers, plumbing work and fixtures, downspouts, entries, skylights, smoke
hatches, roof vents, electrical and lighting systems, and fire sprinklers, with
materials and workmanship of the same character, kind and quality as the
original. Tenant shall at Tenant's expense also perform regular removal of trash
and debris. If Tenant uses rail and if required by the railroad company, Tenant
agrees to sign a joint maintenance agreement governing the use of the rail spur,
if any. Tenant shall, at Tenant's own expense, enter into a regularly scheduled
preventative maintenance/service contract with a maintenance contractor for
servicing all hot water, heating and air conditioning systems and equipment
within or serving the Premises. The maintenance contractor and the contract must
be approved-by Landlord. The service contract must include all services
suggested by the equipment manufacturer within the operation/maintenance manual
and must become effective and a copy thereof delivered to Landlord within thirty
(30) days after the Term Commencement Date. Landlord may, upon notice to Tenant,
enter into such a service contract on behalf of Tenant or perform the work and
in either case charge Tenant the cost thereof along with a reasonable amount for
Landlord's overhead if Tenant fails to enter into such a service contract.
Notwithstanding anything to the contrary contained herein, Tenant shall, at its
expense, promptly repair any damage to the Premises or the Building or Project
resulting from or caused by any negligence or act of Tenant or Tenant's Parties.
Nothing herein shall expressly or by implication render Tenant Landlord's agent
or contractor to effect any repairs or maintenance required of Tenant under this
Paragraph 11, as to all of which Tenant shall be solely responsible.

                                 12. ALTERATIONS

A. Tenant shall not make, or allow to be made, any alterations, physical
additions, improvements or partitions, including without limitation the
attachment of any fixtures or equipment, in, about or to the Premises
("Alterations") without obtaining the prior written consent of Landlord, which
consent shall not be unreasonably withheld with respect to proposed Alterations
which: (a) comply with all applicable Regulations; (b) are, in Landlord's
opinion, compatible with the Building or the Project and its mechanical,
plumbing, electrical, heating/ventilation/air conditioning systems, and will not
cause the Building or Project or such systems to be required to be modified to
comply with any Regulations (including, without limitation, the Americans With
Disabilities Act); and (c) will not interfere with the use and occupancy of any
other portion of the Building or Project by any
<PAGE>

other tenant or its invitees. Notwithstanding the above, Tenant shall have the
right to make minor non-structural alterations up to $5,000 per item or $15.000
per year without Landlord's prior consent. Specifically, but without limiting
the generality of the foregoing, Landlord shall have the right of written
consent for all plans and specifications for the proposed Alterations,
construction means and methods, all appropriate permits and licenses, any
contractor or subcontractor to be employed on the work of Alterations, and the
time for performance of such work, and may impose rules and regulations for
contractors and subcontractors performing such work. Tenant shall also supply to
Landlord any documents and information reasonably requested by Landlord in
connection with Landlord's consideration of a request for approval hereunder.
Tenant shall cause all Alterations to be accomplished in a first-class, good and
workmanlike manner, and to comply with all applicable Regulations and Paragraph
27 hereof. Tenant shall at Tenant's sole expense, perform any additional work
required under applicable Regulations due to the Alterations hereunder. No
review or consent by Landlord of or to any proposed Alteration or additional
work shall constitute a waiver of Tenant's obligations under this Paragraph 12.
Tenant shall reimburse Landlord for all costs which Landlord may incur in
connection with granting approval to Tenant for any such Alterations, including
any costs or expenses which Landlord may incur in electing to have outside
architects and engineers review said plans and specifications, and shall pay
Landlord an administration fee of fifteen percent (15%) of the cost of the
Alterations as Additional Rent hereunder. All such Alterations shall remain the
property of Tenant until the expiration or earlier termination of this Lease, at
which time they shall be and become the property of Landlord; provided, however,
that Landlord may, at Landlord's option, require that Tenant, at Tenant's
expense, remove any or all Alterations made by Tenant and restore the Premises
by the expiration or earlier termination of this Lease, to their condition
existing prior to the construction of any such Alterations. All such removals
and restoration shall be accomplished in a first-class and good and workmanlike
manner so as not to cause any damage to the Premises or Project whatsoever. If
Tenant fails to remove such Alterations or Tenant's trade fixtures or furniture
or other personal property, Landlord may keep and use them or remove any of them
and cause them to be stored or sold in accordance with applicable law, at
Tenant's sole expense. In addition to and wholly apart from Tenant's obligation
to pay Tenant's Proportionate Share of Operating Expenses, Tenant shall be
responsible for and shall pay prior to delinquency any taxes or governmental
service fees, possessory interest taxes, fees or charges in lieu of any such
taxes, capital levies, or other charges imposed upon, levied with respect to or
assessed against its fixtures or personal property, on the value of Alterations
within the Premises, and on Tenant's interest pursuant to this Lease, or any
increase in any of the foregoing based on such Alterations. To the extent that
any such taxes are not separately assessed or billed to Tenant, Tenant shall pay
the amount thereof as invoiced to Tenant by Landlord.
<PAGE>

Notwithstanding the foregoing, at Landlord's option (but without obligation),
all or any portion of the Alterations shall be performed by Landlord for
Tenant's account and Tenant shall. pay Landlord's estimate of the cost thereof
(including a reasonable charge for Landlord's overhead and profit) prior to
commencement of the work. In addition, at Landlord's election and
notwithstanding the foregoing, however, Tenant shall pay to Landlord the cost of
removing any such Alterations and restoring the Premises to their original
condition such cost to include a reasonable charge for Landlord's overhead and
profit as provided above, and such amount may be deducted from the Security
Deposit or any other sums or amounts held by Landlord under this Lease. Landlord
will require, at the outset, the removal of the following per Weske & Associates
Space Plan 1; OEM offices 1-6, P storage and office, ILQ offices 4-17 and
attached P office 5 and storage room upon the end of said lease term. All
located at the rear of the building.

B. In compliance with Paragraph 27 hereof, at least ten (10) business days
before beginning construction of any Alteration, Tenant shall give Landlord
written notice of the expected commencement date of that construction to permit
Landlord to post and record a notice of non-responsibility. Upon substantial
completion of construction, if the law so provides, Tenant shall cause a timely
notice of completion to be recorded in the office of the recorder of the county
in which the Building is located.

                                    13. SIGNS

Tenant shall not place, install, affix, paint or maintain any signs, notices,
graphics or banners whatsoever or any window decor which is visible in or from
public view or corridors, the common areas or the exterior of the Premises or
the Building, in or on any exterior window or window fronting upon any common
areas or service area or upon any truck doors or man doors without Landlord's
prior written approval which Landlord shall have the right to withhold in its
absolute and sole discretion; provided that Tenant's name shall be included in
any Building-standard door and directory signage, if any, in accordance with
Landlord's Building signage program, including without limitation, payment by
Tenant of any fee charged by Landlord for maintaining such signage, which fee
shall constitute Additional Rent hereunder. Any installation of signs, notices,
graphics or banners on or about the Premises or Project approved by Landlord
shall be subject to any Regulations and to any other requirements imposed by
Landlord. Tenant shall remove, all such signs or graphics by the expiration or
any earlier termination of this Lease. Such installations and removals shall be
made in such manner as to avoid injury to or defacement of the Premises,
Building or Project and any other improvements contained therein, and Tenant
shall repair any injury or defacement including without limitation discoloration
caused by such installation or
<PAGE>

removal. Landlord shall erect a new monument sign in front of the Premises on
North Bernardo Avenue at Landlord's sole cost that meets the approval or
Landlord, Tenant and the City of Mountain View.

                         14. INSPECTION/POSTING NOTICES

After reasonable notice, except in emergencies where no such notice shall be
required, Landlord and Landlord's agents and representatives, shall have the
right to enter the Premises to inspect the same, to clean, to perform such work
as may be permitted or required hereunder, to make repairs, improvements or
alterations to the Premises, Building or Project or to other tenant spaces
therein, to deal with emergencies, to post such notices as may be permitted or
required by law to prevent the perfection of liens against Landlord's interest
in the Project or to exhibit the Promises to prospective tenants, purchasers,
encumbrancers or to others, or for any other purpose as Landlord may deem
necessary or desirable, provided, however, that Landlord shall use reasonable
efforts not to unreasonably interfere with Tenant's business operations and that
Tenant in the event of an emergency shall have the right to request that
visitors identify themselves by name. company and purpose of visit and may be
subject to a Tenant escort. Tenant shall not be entitled to any abatement of
Rent by reason of the exercise of any such right of entry. Tenant waives any
claim for damages for any injury or inconvenience to or interference with
Tenant's business, any loss of occupancy or quiet enjoyment of the Premises, and
any other loss occasioned thereby. Landlord shall at all times have and retain a
key with which to unlock all of the doors in, upon and about the Premises,
excluding Tenant's vaults and safes or special security areas (designated in
advance), and Landlord shall have the right to use any and all means which
Landlord may deem necessary or proper to open said doors in an emergency, in
order to obtain entry to any portion of the Premises, and any entry to the
Premises or portions thereof obtained by Landlord by any of said means, or
otherwise, shall not be construed to be a forcible or unlawful entry into, or a
detainer of, the Premises, or an eviction, actual or constructive, of Tenant
from the Premises or any portions thereof. At anytime within six (6) months
prior to the expiration of the Term or following any earlier termination of this
Lease or agreement to terminate this Lease, Landlord shall have the right to
erect on the Premises, Building and/or Project a suitable sign indicating that
the Premises are available for lease.

                           15. SERVICES AND UTILITIES

A. Tenant shall pay directly for all water, gas, heat, air conditioning, light,
power, telephone, sewer, sprinkler charges and other utilities and services used
on or from the Premises, together with any taxes, penalties, surcharges or the
like pertaining thereto, and maintenance charges for utilities and
<PAGE>

shall furnish all electric light bulbs, ballasts and tubes. If any such services
are not separately billed or metered to Tenant, Tenant shall pay a proportion,
as determined by Landlord, of all charges jointly serving other premises. All
sums payable under this Paragraph 15 shall constitute Additional Rent hereunder.

B. Tenant acknowledges that Tenant has inspected and accepts the water,
electricity, heat and air conditioning and other utilities and services being
supplied or furnished to the Premises as of the date Tenant takes possession of
the Premises, if any, as being sufficient in their present condition, "as is,"
for the Permitted Use, and for Tenant's intended operations in the Premises.
Landlord shall have no obligation to provide additional or after-hours
electricity, heating or air conditioning, but if Landlord elects to provide such
services at Tenant's request, Tenant shall pay to Landlord a reasonable charge
for such services as determined by Landlord. Tenant agrees to keep and cause to
be kept closed all window covering when necessary because of the sun's position,
and Tenant also agrees at all times to cooperate fully with Landlord and to
abide by all of the regulations and requirements which Landlord may prescribe
for the proper functioning and protection of electrical, heating, ventilating
and air conditioning systems. Wherever heat-generating machines, excess lighting
or equipment are used in the Premises which affect the temperature otherwise
maintained by the air conditioning system, Landlord reserves the right to
install supplementary air conditioning units in the Premises and the cost
thereof, including the cost of installation and the cost of operation and
maintenance thereof, shall be paid by Tenant to Landlord upon demand by
Landlord.

C. Tenant shall not without written consent of Landlord use any apparatus,
equipment or device in the Premises, including without limitation, computers,
electronic data processing machines, copying machines, and other machines, using
excess lighting or using electric current, water, or any other resource in
excess of or which will in any way increase the amount of electricity, water, or
any other resource being furnished or supplied for the use of the Premises for
reasonable and normal office use, in each case as of the date Tenant takes
possession of the Premises as determined by Landlord, or which will require
additions or alterations to or interfere with the Building power distribution
systems; nor connect with electric current, except through existing electrical
outlets in the Premises or water pipes, any apparatus, equipment or device for
the purpose of using electrical current, water, or any other resource. If Tenant
shall require water or electric current or any other resource in excess of that
being furnished or supplied for the use of the Premises as of the date Tenant
takes possession of the Premises, if any, as determined by Landlord, Tenant
shall first procure the written consent of Landlord which Landlord may refuse,
to the use thereof, and Landlord may cause a special meter to be installed in
the Premises so as to measure the amount of water, electric
<PAGE>

current or other resource consumed for any such other use. Tenant shall pay
directly to Landlord as an addition to and separate from payment of Operating
Expenses the cost of all such additional resources, energy, utility service and
meters (and of installation, maintenance and repair thereof and of any
additional circuits or other equipment necessary to furnish such additional
resources, energy, utility or service). Landlord may add to the separate or
metered charge a recovery of additional expense incurred in keeping account of
the excess water, electric current or other resource so consumed. Landlord shall
not be liable for any damages directly or indirectly resulting from nor shall
the Rent or any monies owed Landlord under this Lease herein reserved be abated
by reason of: (a) the installation, use or interruption of use of any equipment
used in connection with the furnishing of any such utilities or services, or any
change in the character or means of supplying or providing any such utilities or
services or any supplier thereof; (b) the failure to furnish or delay in
furnishing any such utilities or services when such failure or delay is caused
by acts of God or the elements, labor disturbances of any character, or any
other accidents or other conditions beyond the reasonable control of Landlord or
because of an interruption of service due to Tenant's use of water, electric
current or other resource in excess of that being supplied or furnished for the
use of the Premises as of the date Tenant takes possession of the Premises; or
(c) the inadequacy, limitation, curtailment, rationing or restriction on use of
water, electricity, gas or any other form of energy or any other service or
utility whatsoever serving the Premises or Project otherwise; or (d) the partial
or total unavailability of any such utilities or services to the Premises or the
Building, whether by Regulation or otherwise; nor shall any such occurrence
constitute an actual or constructive eviction of Tenant. Landlord shall further
have no obligation to protect or preserve any apparatus, equipment or device
installed by Tenant in the Premises, including without limitation by providing
additional or after-hours heating or air conditioning. Landlord shall be
entitled to cooperate voluntarily and in a reasonable manner with the efforts of
national, state or local governmental agencies or utility suppliers in reducing
energy or other resource consumption. The obligation to make services available
hereunder shall be subject to the limitations of any such voluntary, reasonable
program. In addition, Landlord reserves the right to change the supplier or
provider of any such utility or service from time to time. Landlord may, but
shall not be obligated to, upon notice to Tenant, contract with or otherwise
obtain any electrical or other such service for or with respect to the Premises
or Tenant's operations therein from any supplier or provider of any such
service. Tenant shall cooperate with Landlord and any supplier or provider of
such services designated by Landlord from time to time to facilitate the
delivery of such services to Tenant at the Premises and to the Building and
Project, including without limitation allowing Landlord and Landlord's suppliers
or providers, and their respective agents
<PAGE>

and contractors, reasonable access to the Premises for the purpose of
installing, maintaining, repairing, replacing or upgrading such service or any
equipment or machinery associated therewith.

                                16. SUBORDINATION

Without the necessity of any additional document being executed by Tenant for
the purpose of effecting a subordination, this Lease shall be and is hereby
declared to be subject and subordinate at all times to: (a) all ground leases or
underlying leases which may now exist or hereafter be executed affecting the
Premises and/or the land upon which the Premises and Project are situated, or
both; and (b) any mortgage or deed of trust which may now exist or be placed
upon the Building, the Project and/or the land upon which the Premises or the
Project are situated, or said ground leases or underlying leases, or Landlord's
interest or estate in any of said items which is specified as security.
Notwithstanding the foregoing, Landlord shall have the right to subordinate or
cause to be subordinated any such ground leases or underlying leases or any such
liens to this Lease. If any ground lease or underlying lease terminates for any
reason or any mortgage or deed of trust is foreclosed or a conveyance in lieu of
foreclosure is made for any reason, Tenant shall, notwithstanding any
subordination, attorn to and become the Tenant of the successor in interest to
Landlord provided that Tenant shall not be disturbed in its possession under
this Lease by such successor in interest so long as Tenant is not in default
under this Lease. Within twenty (20) days after request by Landlord, Tenant
shall execute and deliver any additional documents evidencing Tenant's
attornment or the subordination of this Lease with respect to any such ground
leases or underlying leases or any such mortgage or deed of trust, in the form
requested by Landlord or by any ground landlord, mortgagee, or beneficiary under
a deed of trust, subject to such nondisturbance requirement. If requested in
writing by Tenant, Landlord shall use commercially reasonable efforts to obtain
a subordination, nondisturbance and attornment agreement for the benefit of
Tenant reflecting the foregoing from any ground landlord, mortgagee or
beneficiary, at Tenant's expense, subject to such other terms and conditions as
the ground landlord, mortgagee or beneficiary may require.

                            17. FINANCIAL STATEMENTS

At the request of Landlord from time to time, Tenant shall provide to Landlord,
any information allowable under applicable laws. Tenant's and any guarantor's
current financial statements or other information discussing financial worth of
Tenant and any guarantor, which Landlord shall use solely for purposes of this
Lease and in connection with the ownership, management, financing and
disposition of the Project.
<PAGE>

                            18. ESTOPPEL CERTIFICATE

Tenant agrees from time to time, within twenty (20) days after request of
Landlord, to deliver to Landlord, or Landlord's designee, an estoppel
certificate stating that this Lease is in full force and effect, that this Lease
has not been modified (or stating all modifications, written or oral, to this
Lease), the date to which Rent has been paid, the unexpired portion of this
Lease, that there are no current defaults by Landlord or Tenant under this Lease
(or specifying any such defaults), that the leasehold estate granted by this
Lease is the sole interest of Tenant in the Premises and/or the land at which
the Premises are situated, and such other matters pertaining to this Lease as
may be reasonably requested by Landlord or any mortgagee, beneficiary, purchaser
or prospective purchaser of the Building or Project or any interest therein.
Failure by Tenant to execute and deliver such certificate shall constitute an
acceptance of the Premises and acknowledgment by Tenant that the statements
included are true and correct without exception. Tenant agrees that if Tenant
fails to execute and deliver such certificate within such twenty (20) day
period, Landlord may execute and deliver such certificate on Tenant's behalf and
that such certificate shall be binding on Tenant. Landlord and Tenant intend
that any statement delivered pursuant to this Paragraph may be relied upon by
any mortgagee, beneficiary, purchaser or prospective purchaser of the Building
or Project or any interest therein. The parties agree that Tenant's obligation
to furnish such estoppel certificates in a timely fashion is a material
inducement for Landlord's execution of this Lease, and shall be an event of
default (without any cure period that might be provided under Paragraph 26.A(3)
of this Lease) if Tenant fails to fully comply or makes any material
misstatement in any such certificate.

                              19. SECURITY DEPOSIT

Tenant agrees to deposit with Landlord upon execution of this Lease, a security
deposit as stated in the Basic Lease Information (the "Security Deposit"), which
sum shall be held and owned by Landlord, without obligation to pay interest, as
security for the performance of Tenant's covenants and obligations under this
Lease. The Security Deposit is riot an advance rental deposit or a measure of
damages incurred by Landlord in case of Tenant's default. Upon the occurrence of
any event of default by Tenant, Landlord may from time to time, without
prejudice to any other remedy provided herein or by law, use such fund as a
credit to the extent necessary to credit against any arrears of Rent or other
payments due to Landlord hereunder, and any other damage, injury, expense or
liability caused by such event of default, and Tenant shall pay to Landlord, on
demand, the amount so applied in order to restore the Security Deposit to its
original amount. Although the Security Deposit shall be deemed the property of
Landlord, any remaining balance of such deposit shall be returned by Landlord
<PAGE>

to Tenant at such time after termination of this Lease that, all of Tenant's
obligations under this Lease have been fulfilled, reduced by such amounts as may
be required by Landlord to remedy defaults on the part of Tenant in the payment
of Rent or other obligations of Tenant under this Lease, to repair damage to the
Premises, Building or Project caused by Tenant or any Tenant's Parties and to
clean the Premises. Landlord may use and commingle the Security Deposit with
other funds of Landlord.

                       20. LIMITATION OF TENANT'S REMEDIES

The obligations and liability of Landlord to Tenant for any default by Landlord
under the terms of this Lease are not personal obligations of Landlord or of the
individual or other partners of Landlord or its or their partners, directors,
officers, or shareholders, and Tenant agrees to look solely to Landlord's
interest in the Project for the recovery of any amount from Landlord, and shall
not look to other assets of Landlord nor seek recourse against the assets of the
individual or other partners of Landlord or its or their partners, directors,
officers or shareholders. Any lien obtained to enforce any such judgment and any
levy of execution thereon shall be subject and subordinate to any lien, mortgage
or deed of trust on the Project. Under no circumstances shall Tenant have the
right to offset against or recoup Rent or other payments due and to become due
to Landlord hereunder except as expressly provided in Paragraph 23.13. below,
which Rent and other payments shall be absolutely due and payable hereunder in
accordance with the terms hereof.

                          21. ASSIGNMENT AND SUBLETTING

A. (1) GENERAL. This Lease has been negotiated to be and is granted as an
accommodation to Tenant. Accordingly, this Lease is personal. to Tenant, and
Tenant's rights granted hereunder do not include the right to assign this Lease
or sublease tile Premises, or to receive any excess, either in installments or
lump sum, over the Rent which is expressly reserved by Landlord as hereinafter
provided, except as otherwise expressly hereinafter provided. Tenant shall not
assign or pledge this Lease or sublet the Premises or any part thereof, whether
voluntarily or by operation of law, or permit the use or occupancy of the
Premises or any part thereof by anyone other than Tenant, or suffer or permit
any such assignment, pledge, subleasing or occupancy, without Landlord's prior
written consent except as provided herein. If Tenant desires to assign this
Lease or sublet any or all of the Premises, Tenant shall give Landlord written
notice (the "Transfer Notice") at least sixty (60) days prior to the anticipated
effective date of the proposed assignment or sublease, which shall contain all
of the information reasonably requested by Landlord to address Landlord's
decision criteria specified hereinafter. Landlord shall then have a period of
thirty (30) days following receipt of the Transfer Notice to
<PAGE>

notify Tenant in writing that Landlord elects either; (i) to terminate this
Lease as to the space so affected as of the date so requested by Tenant; or (ii)
to consent to the proposed assignment or sublease, subject, however, to
Landlord's prior written consent of the proposed assignee or subtenant and of
any related documents or agreements associated with the assignment or sublease.
If Landlord should fail to notify Tenant in writing of such election within said
period, Landlord shall be deemed to have waived option (i) above, but written
consent by Landlord of the proposed assignee or subtenant shall still be
required. If Landlord does not exercise option (i) above, Landlord's consent to
a proposed assignment or sublease shall not be unreasonably withheld. Consent to
any assignment or subletting shall not constitute consent to any subsequent
transaction to which this Paragraph 21 applies.

(2) CONDITIONS OF LANDLORD'S CONSENT. Without limiting the other instances in
which it may be reasonable for Landlord to withhold Landlord's consent to an
assignment or subletting, Landlord and Tenant acknowledge that it shall be
reasonable for Landlord to withhold Landlord's consent in the following
instances: if the proposed assignee does not agree to be bound by and assume the
obligations of Tenant under this Lease in form and substance satisfactory to
Landlord; the use of the Premises by such proposed assignee or subtenant would
not be a Permitted Use or would violate any exclusivity or other arrangement
which Landlord has with any other tenant or occupant or any Regulation or would
increase the Occupancy Density or Parking Density of the Building or Project, or
would otherwise result in an undesirable tenant mix for the Project as
determined by Landlord; the proposed assignee or subtenant is not of sound
financial condition as determined by Landlord in Landlord's sole discretion; the
proposed assignee or subtenant is a governmental agency; the proposed assignee
or subtenant does not have a good reputation as a tenant OF property or a good
business reputation; the proposed assignee or subtenant is a person with whom
Landlord is negotiating to lease space in the Project or is a present tenant of
the Project; the assignment or subletting would entail any Alterations which
would lessen the value of the leasehold improvements in the Premises or use of
any Hazardous Materials or other noxious use or use which may disturb other
tenants of the Project; or Tenant is in default of any obligation of Tenant
under this Lease, or Tenant has defaulted under this Lease on three (3) or more
occasions during any twelve (12) months preceding the date that Tenant shall
request consent. Failure by or refusal of Landlord to consent to a proposed
assignee or subtenant shall not cause a termination of this Lease. Upon a
termination under Paragraph 2 I.A.(I)(i), Landlord may lease the Premises to any
party, including parties with whom Tenant has negotiated an assignment or
sublease, without incurring any liability to Tenant, At the option of Landlord,
a surrender and termination of this Lease shall operate as an assignment to
Landlord of some or all subleases or subtenancies. Landlord shall
<PAGE>

exercise this option by giving notice of that assignment to such subtenants on
or before the effective date of the surrender and termination. In connection
with each request for assignment or subletting, Tenant shall pay to Landlord
Landlord's standard fee for approving such requests, as well as all costs
incurred by Landlord or any mortgagee or ground lessor in approving each such
request and effecting any such transfer, including, without limitation,
reasonable attorneys' fees.

(3) PERMITTED TRANSFERS. An "Affiliate" means any entity that (i) controls. is
controlled by. or is tinder common control with Tenant. (ii) results from the
transfer of all or substantially of Tenant's assets or stock, or (iii) results
from the merger or consolidation of Tenant with another entity. "Control" means
the direct or indirect ownership of more than fifty percent (50%) of the voting
securities of an entity or possession of the right to vote more than Fifty
percent (50%) of the voting interest in the ordinary direction of that entity's
affairs. Notwithstanding anything to the contrary contained in this Lease,
Landlord's consent is not required for tiny assignment of this Lease or sublease
of all or a portion of the Premises to an Affiliate so long as the following
conditions are met: (a) at least ten (10) business days before any such
assignment or sublease. Landlord receives written notice or such assignment of
sublease (as well as any documents or information reasonably requested by
Landlord regarding the proposed intended transfer and the transferee) (b) Tenant
is not then and has not been in default under this Lease; (c) if the transfer is
an assignment or any other transfer to an Affiliate other than a sublease, the
intended assignee assumes in writing all of Tenant's obligations under this
Lease relating to the Premises in form satisfactory to Landlord or, if the
transfer is a sublease, the intended sublessee accepts the sublease in form
satisfactory to Landlord; (d) the intended transferee has tangible net worth, as
evidenced by financial statements delivered to Landlord and certified by an
independent certified public accountant in accordance with generally accented
accounting principles that are consistently applied, at least equal to
$10,000,000.00; (e) the Premises shall continue to be operated solely for the
use specified in the Basic Lease Information; and (f) Tenant shall pay to
Landlord all costs reasonably incurred by Landlord or any mortgagee or ground
lessor for such assignment or subletting, including, without limitation,
reasonable attorneys' fees. No transfer to an Affiliate in accordance with this
subparagraph shall relieve Tenant named herein of any obligation under the Lease
or alter the primary liability of Tenant named herein for the payment of Rent or
for the performance of any other obligation to be performed by Tenant, including
the obligations contained in Paragraph 25 with respect to any Affiliate.
Notwithstanding anything to the contrary in this Lease, the transfer of
outstanding capital stock or other listed equity interests, or the purchase of
outstanding capital stock or other listed equity interests, or the purchase of
equity interests issued in an initial public offering of stock
<PAGE>

by persons or parties other than "insiders" within the meaning of the Securities
Exchange Act or 1934, as amended, through the "over-the-counter" market or any
recognized national or international securities exchange shall not be included
in determining whether control has been transferred.

B. BONUS RENT. Any Rent or other consideration realized by Tenant under an),
such sublease or assignment in excess of the Rent payable hereunder, after
amortization of a reasonable brokerage commission incurred by Tenant, shall be
divided and paid, ten percent (50%) to Tenant, ninety percent (50%) to Landlord.
In any subletting or assignment undertaken by Tenant, Tenant shall diligently
seek to obtain the maximum rental amount available in the marketplace for
comparable space available for primary leasing.

C. CORPORATION. If Tenant is a corporation, a transfer of corporate shares by
sale, assignment, bequest, inheritance, operation of law or other disposition
(including such a transfer to or by a receiver or trustee in federal or state
bankruptcy, insolvency or other proceedings) resulting in a change in the
present control of such corporation or any of its parent corporations by the
person or persons owning a majority of said corporate shares, shall constitute
an assignment for purposes of this Lease.

D. UNINCORPORATED ENTITY. If Tenant is a partnership, joint venture,
unincorporated limited liability company or other unincorporated business form,
a transfer of the interest of persons, firms or entities responsible for
managerial control of Tenant by sale, assignment, bequest, inheritance,
operation of law or other disposition, so as to result in a change in the
present control of said entity and/or of the underlying beneficial interests of
said entity and/or a change in the identity of the persons responsible for the
general credit obligations of said entity shall constitute an assignment for all
purposes of this Lease.

E. LIABILITY. No assignment or subletting by Tenant, permitted or otherwise,
shall relieve Tenant of any obligation under this Lease or alter the primary
liability of the Tenant named herein for the payment of Rent or for the
performance of any other obligations to be performed by Tenant, including
obligations contained in Paragraph 25 with respect to any assignee or subtenant.
Landlord may collect rent or other amounts or any portion thereof from any
assignee, subtenant, or other occupant of the Premises, permitted or otherwise,
and apply the net rent collected to the Rent payable hereunder, but no such
collection shall be deemed to be a waiver of this Paragraph 21, or the
acceptance of the assignee, subtenant or occupant as tenant, or a release of
Tenant from the further performance by Tenant of the obligations of Tenant under
this Lease. Any assignment or subletting which conflicts with the provisions
hereof shall be void.
<PAGE>

                                  22. AUTHORITY

Landlord represents and warrants that it has full right and authority to enter
into this Lease and to perform all of Landlord's obligations hereunder and that
all persons signing this Lease on its behalf are authorized to do. Tenant and
the person or persons, if any, signing on behalf of Tenant, jointly and
severally represent and warrant that Tenant has full right and authority to
enter into this Lease, and to perform all of Tenant's obligations hereunder, and
that all persons signing this Lease on its behalf are authorized to do so.

                                23. CONDEMNATION

A. CONDEMNATION RESULTING IN TERMINATION. If the whole or any substantial part
of the Premises should be taken or condemned for any public use under any
Regulation, or by right of eminent domain, or by private purchase in lieu
thereof, and the taking would prevent or materially interfere with the Permitted
Use of the Premises, either party shall have the right to terminate this Lease
at its option. If any material portion of the Building or Project is taken or
condemned for any public use under any Regulation, or by right of eminent
domain, or by private purchase in lieu thereof, Landlord may terminate this
Lease at its option. In either of such events, the Rent shall be abated during
the unexpired portion of this Lease, effective when the physical taking of said
Premises shall have occurred.

B. CONDEMNATION NOT RESULTING IN TERMINATION. If a portion of the Project of
which the Premises are a part should be taken or condemned for any public use
under any Regulation, or by right of eminent domain, or by private purchase in
lieu thereof, and the taking prevents or materially interferes with the
Permitted Use of the Premises, and this Lease is not terminated as provided in
Paragraph 23.A. above, the Rent payable hereunder during the unexpired portion
of this Lease shall be reduced, beginning on the date when the physical taking
shall have occurred, to such amount as may be fair and reasonable under all of
the circumstances, but only after giving Landlord credit for all sums received
or to be received by Tenant by the condemning authority. Notwithstanding
anything to the contrary contained in this Paragraph, if the temporary use or
occupancy of any part of the Premises shall be taken or appropriated under power
of eminent domain during the Term, this Lease shall be and remain unaffected by
such taking or appropriation and Tenant shall continue to pay in full all Rent
payable hereunder by Tenant during the Term; in the event of any such temporary
appropriation or taking, Tenant shall be entitled to receive that portion of any
award which represents compensation for the use of or occupancy of the Premises
during the Term, and Landlord shall be entitled to receive that portion of any
award which represents the cost of
<PAGE>

restoration of the Premises and the use and occupancy of the Premises.

C. AWARD. Landlord shall be entitled to (and Tenant shall assign to Landlord)
any and all payment, income, rent, award or any interest therein whatsoever
which may be paid or made in connection with such taking or conveyance and
Tenant shall have no claim against Landlord or otherwise for any sums paid by
virtue of such proceedings, whether or not attributable to the value of any
unexpired portion of this Lease, except as expressly provided in this Lease.
Notwithstanding the foregoing, any compensation specifically and separately
awarded Tenant for Tenant's personal property and moving costs, shall be and
remain the property of Tenant.

D. WAIVER OF CCP Section 1265.130. Each party waives the provisions of
California Civil Code Procedure Section 1265.130 allowing either party to
petition the superior court to terminate this Lease as a result of a partial
taking.

                               24. CASUALTY DAMAGE

A. GENERAL. If the Premises or Building should be damaged or destroyed by fire,
tornado, or other casualty (collectively, "Casualty"), Tenant shall give
immediate written notice thereof to Landlord. Within thirty (30) days after
Landlord's receipt of such notice, Landlord shall notify Tenant whether in
Landlord's estimation material restoration of the Premises can reasonably be
made within one hundred eighty (180) days from the date of such notice and
receipt of required permits for such restoration. Landlord's determination shall
be binding on Tenant.

B. WITHIN 180 DAYS. If the Premises or Building should be damaged by Casualty to
such extent that material restoration can in Landlord's estimation be reasonably
completed within one hundred eighty ( 180) days after the date of such notice
and receipt of required permits for such restoration, this Lease shall not
terminate. Provided that insurance proceeds are received by Landlord to fully
repair the damage, Landlord shall proceed to rebuild and repair the Premises in
the manner determined by Landlord, except that Landlord shall not be required to
rebuild, repair or replace any part of the Alterations which may have been
placed on or about the Premises by Tenant. If the Premises are untenantable in
whole or in part following such damage, the Rent payable hereunder during the
period in which they are untenantable shall be abated proportionately, but only
to the extent of rental abatement insurance proceeds received by Landlord during
the time and to the extent the Premises are unfit for occupancy.

C. GREATER THAN 180 DAYS. If the Premises or Building should be damaged by
Casualty to such extent that rebuilding or repairs
<PAGE>

cannot in Landlord's estimation be reasonably completed within one hundred
eighty (180) days after the date of such notice and receipt of required permits
for such rebuilding or repair, then Landlord shall have the option of either:
(1) terminating this Lease effective upon the date of the occurrence of such
damage, in which event the Rent shall be abated during the unexpired portion of
this Lease; or (2) electing to rebuild or repair the Premises diligently and in
the manner determined by Landlord. Landlord shall notify Tenant OF its election
within thirty (30) days after Landlord's receipt of notice OF the damage or
destruction. Notwithstanding the above, Landlord shall not be required to
rebuild, repair or replace any part of any Alterations which may have been
placed, on or about the Premises by Tenant. If the Premises are untenantable in
whole or in part following such damage, the Rent payable hereunder during the
period in which they are untenantable shall be abated proportionately, but only
to the extent of rental abatement insurance proceeds received by Landlord during
the time and to the extent the Premises are unfit for occupancy.

D. GREATER THAN 270 DAYS. If the Premises or Building should be damaged by
Casualty to such extent that rebuilding or repairs in Landlord's estimation be
reasonably completed within two hundred seventy (170) days after receipt of
require permits for rebuilding or repair, and such damage materially and
adversely interferes with the conduct of Tenant's business in the Premises, then
either party shall have the right to cancel this Lease by giving the other party
written notice within ten (10) days from the date of Landlord's notice that
material restoration of the Premises cannot be made within such two hundred
severity (270) day period or notice that Landlord has elected not to rebuild or
repair the Premises. Said cancellation shall be effective thirty (30) days from
the first day that either party gives its notice to cancel. If neither party
elects to so cancel this Lease, Landlord shall proceed to rebuild and repair the
Premises diligently and in the manner determined by Landlord, except that
Landlord shall not be required to rebuild, repair or replace any part of any
Alterations which may have been placed on or about the Premises by the Tenant.
If the Premises are untenantable in whole or in part following such damage, the
Rent payable hereunder during the period in which they are untenantable shall be
abated proportionately, but only to the extent of rental abatement proceeds
received by Landlord during the time and to the extent the Premises are unfit
for occupancy.

E. TENANT'S FAULT. Notwithstanding anything herein to the contrary, if the
Premises or any other portion of the Building are damaged by Casualty resulting
from the fault, negligence, or breach of this Lease by Tenant or any of Tenant's
Parties, Base Rent and Additional Rent shall not be diminished during the repair
of such damage and Tenant shall be liable to Landlord for the cost and expense
of the repair and restoration of the Building caused thereby to the extent such
cost and expense is not covered by insurance proceeds.
<PAGE>

F. INSURANCE PROCEEDS. Notwithstanding anything herein to the contrary, if the
Premises or Building are damaged or destroyed and are not fully covered by the
insurance proceeds received by Landlord or if the holder of any indebtedness
secured by a mortgage or deed of trust covering the Premises requires that the
insurance proceeds be applied to such indebtedness, then in either case Landlord
shall have the right to terminate this Lease by delivering written notice of
termination to Tenant within thirty (30) days after the date of notice to
Landlord that said damage or destruction is not fully covered by insurance or
such requirement is made by any such holder, as the case may be, whereupon this
Lease shall terminate.

G. WAIVER. This Paragraph 24 shall be: Tenant's sole and exclusive remedy in the
event of damage or destruction to the Premises or the Building. As a material
inducement to Landlord entering into this Lease, Tenant hereby waives any rights
it may have under Sections 1932, 1933(4), 1941 or 1942 of the Civil Code of
California with respect to any destruction of the Premises, Landlord's
obligation for tenantability of the Premises and Tenant's right to make repairs
and deduct the expenses of such repairs, or under any similar law, statute or
ordinance now or hereafter in effect.

H. TENANT'S PERSONAL PROPERTY. In the event of any damage or destruction of the
Premises or the Building, under no circumstances shall Landlord be required to
repair any injury or damage to, or make any repairs to or replacements of,
Tenant's personal property.

                                25. HOLDING OVER

Unless Landlord expressly consents in writing to Tenant's holding over, Tenant
shall be unlawfully and illegally in possession of the Premises, whether or not
Landlord accepts any rent from Tenant or any other person while Tenant remains
in possession of the Premises without Landlord's written consent. If Tenant
shall retain possession of the Premises or any portion thereof without
Landlord's consent following the expiration of this Lease or sooner termination
for any reason, then Tenant shall pay to Landlord for each day of such retention
150% of the amount of daily rental as of the last month prior to the date of
expiration or earlier termination. Tenant shall also indemnify, defend, protect
and hold Landlord harmless from any loss, liability or cost, including
consequential and incidental damages and reasonable attorneys' fees, incurred by
Landlord resulting from delay by Tenant in surrendering the Premises, including,
without limitation, any claims made by the succeeding tenant founded on such
delay. Acceptance of Rent by Landlord following expiration or earlier
termination of this Lease, or following demand by Landlord for possession of the
Premises, shall not constitute a
<PAGE>

renewal of this Lease, and nothing contained in this Paragraph 25 shall waive
Landlord's right of reentry or any other right. Additionally, if upon expiration
or earlier termination of this Lease, or following demand by Landlord for
possession of the Premises, Tenant has not fulfilled its obligation with respect
to repairs and cleanup of the Premises or any other Tenant obligations as set
forth in this Lease, then Landlord shall have the right to perform any such
obligations as it deems necessary at Tenant's sole cost and expense, and any
time required by Landlord to complete such obligations shall be considered a
period of holding over and the terms of this Paragraph 25 shall apply. The
provisions of this Paragraph 25 shall survive any expiration or earlier
termination of this Lease.

                                   26. DEFAULT

A. EVENTS OF DEFAULT. The occurrence of any of the following shall constitute an
event of default on the part of Tenant:

         (1) ABANDONMENT. Abandonment of the Premises for a continuous period in
         excess of five (5) days. Tenant waives any right to notice Tenant may
         have under Section 1951.3 of the Civil Code of the State of California,
         the terms of this Paragraph 26.A. being deemed such notice to Tenant as
         required by said Section 195 1.3.

         (2) NONPAYMENT OF RENT. Failure to pay any installment of Rent or any
         other amount due and payable hereunder upon the date when said payment
         is due, as to which time is of the essence.

         (3) OTHER OBLIGATIONS. Failure to perform any obligation, agreement or
         covenant under this Lease other than those matters specified in
         subparagraphs (1) and (2) of this Paragraph 26.A., such failure
         continuing for thirty (30) days after written notice of such failure,
         as to which time is of the essence.

         (4) GENERAL ASSIGNMENT. A general assignment by Tenant for the benefit
         of creditors.

         (5) BANKRUPTCY. The filing of any voluntary petition in bankruptcy by
         Tenant, or the filing of an involuntary petition by Tenant's creditors,
         which involuntary petition remains undischarged for a period of thirty
         (30) days. If under applicable law, the trustee in bankruptcy or Tenant
         has the right to affirm this Lease and continue to perform the
         obligations of Tenant hereunder, such trustee or Tenant shall, in such
         time period as may be permitted by the bankruptcy court having
         jurisdiction, cure all defaults of Tenant hereunder outstanding as of
         the date of the affirmance of this Lease and provide to Landlord such
<PAGE>

         adequate assurances as may be necessary to ensure Landlord of the
         continued performance of Tenant's obligations under this Lease.

         (6) RECEIVERSHIP. The employment of a receiver to take possession of
         substantially all of Tenant's assets or the Premises, if such
         appointment remains undismissed or undischarged for a period of fifteen
         (15) days after the order therefor.

         (7) ATTACHMENT. The attachment, execution or other judicial seizure of
         all or substantially all of Tenant's assets or Tenant's leasehold of
         the Premises, if such attachment or other seizure remains undismissed
         or undischarged for a period of fifteen (15) days after the levy
         thereof.

         (8) INSOLVENCY. The admission by Tenant in writing of its inability to
         pay its debts as they become due.

B.       REMEDIES UPON DEFAULT.

         (1) TERMINATION. In the event of the occurrence of any event of
         default, Landlord shall have the rig ht to give a written termination
         notice to Tenant, and on the date specified in such notice, Tenant's
         right to possession shall terminate, and this Lease shall terminate
         unless on or before such date all Rent in arrears and all costs and
         expenses incurred by or on behalf of Landlord -hereunder shall have
         been paid by Tenant and all other events of default of this Lease by
         Tenant at the time existing shall have been fully remedied to the
         satisfaction of Landlord. At any time after such termination, Landlord
         may recover possession of the Premises or any part thereof and expel
         and remove therefrom Tenant and any other person occupying the same,
         including any subtenant or subtenants notwithstanding Landlord's
         consent to any sublease, by any lawful means, and again repossess and
         enjoy the Premises without prejudice to any of the remedies that
         Landlord may have under this Lease, or at law or equity by any reason
         of Tenant's default or of such termination. Landlord hereby reserves
         the right, but shall not have the obligation, to recognize the
         continued possession of any subtenant. The delivery or surrender to
         Landlord by or on behalf of Tenant of keys, entry codes, or other means
         to bypass security at the Premises shall not terminate this Lease.

         (2) CONTINUATION AFTER DEFAULT. Even though an event of default may
         have occurred, this Lease shall continue in effect for so long as
         Landlord does not terminate Tenant's right to possession under
         Paragraph 26.B.(I) hereof, and Landlord may enforce all of Landlord's
         rights and remedies
<PAGE>

         under this Lease and at law or in equity, including without limitation,
         the right to recover Rent as it becomes due, and Landlord, without
         terminating this Lease, may exercise all of the rights and remedies of
         a landlord under Section 1951.4 of the Civil Code of the State of
         California or any successor code section. Acts of maintenance,
         preservation or efforts to lease the Premises or the appointment of a
         receiver under application of Landlord to protect Landlord's interest
         under this Lease or other entry by Landlord upon the Premises shall not
         constitute an election to terminate Tenant's right to possession.

         (3) INCREASED SECURITY DEPOSIT. If Tenant is in default under Paragraph
         26.A.(2) hereof and such default remains uncured for thirty (30) days
         after such occurrence or such default occurs more than three times in
         any twelve (12) month period, Landlord may require that Tenant increase
         the Security Deposit to the amount of three times the current month's
         Rent at the time of the most recent default.

C. DAMAGES AFTER DEFAULT. Should Landlord terminate this Lease pursuant to the
provisions of Paragraph 26.B.(I) hereof, Landlord shall have the rights and
remedies of a Landlord provided by Section 1951.2 of the Civil Code of the State
of California, or any successor code sections. Upon such termination, in
addition to any other rights and remedies to which Landlord may be entitled
under applicable law or at equity, Landlord shall be entitled to recover from
Tenant: (1) the worth at the time of award of the unpaid Rent and other amounts
which had been earned at the time of termination, (2) the worth at the time of
award of the amount by which the unpaid Rent and other amounts that would have
been earned after the date of termination until the time of award exceeds the
amount of such Rent loss that Tenant proves could have been reasonably avoided;
(3) the worth at the time of award of the amount by which the unpaid Rent and
other amounts for the balance of the Term after the time of award exceeds the
amount of such Rent loss that the Tenant proves could be reasonably avoided; and
(4) any other amount and court costs necessary to compensate Landlord for all
detriment proximately caused by Tenant's failure to perform Tenant's obligations
under this Lease or which, in the ordinary course of things, would be likely to
result therefrom. The "worth at the time of award" as used in (1) and (2) above
shall be computed at the Applicable Interest Rate (defined below). The "worth at
the time of award" as used in (3) above shall be computed by discounting such
amount at the Federal Discount Rate of the Federal Reserve Bank of San Francisco
at the time of award plus one percent (1%). If this Lease provides for any
periods during the Term during which Tenant is not required to pay Base Rent or
if Tenant otherwise receives a Rent concession, then upon the occurrence of an
event of default, Tenant shall owe to Landlord the full amount of such Base Rent
or value of such Rent concession, plus interest at the Applicable Interest Rate,
<PAGE>

calculated from the date that such Base Rent or Rent concession would have been
payable.

D. LATE CHARGE. In addition to its other remedies, Landlord shall have the right
without notice or demand to add to the amount of any payment required to be made
by Tenant hereunder, and which is not paid and received by Landlord on or before
the first day of each calendar month, an amount equal to ten percent (10%) of
the delinquency for each month or portion thereof that the delinquency remains
outstanding to compensate Landlord for the loss of the use of the amount not
paid and the administrative costs caused by the delinquency, the parties
agreeing that Landlord's damage by virtue of such delinquencies would be
extremely difficult and impracticable to compute and the amount stated herein
represents a reasonable estimate thereof. Any waiver by Landlord of any late
charges or failure to claim the same shall not constitute a waiver of other late
charges or any other remedies available to Landlord. Landlord shall waive late
fee one time per year.

E. INTEREST. Interest shall accrue on all sums not paid when due hereunder at
the lesser of eighteen percent (18%) per annum or the maximum interest rate
allowed by law ("Applicable Interest Rate") from the due date until paid.

F. REMEDIES CUMULATIVE. All rights, privileges and elections or remedies of the
parties are cumulative and not alternative, to the extent permitted by law and
except as otherwise provided herein.

                                    27. LIENS

Tenant shall at all times keep the Premises and the Project free from liens
arising out of or related to work or services performed, materials or supplies
furnished or obligations incurred by or on behalf of Tenant or in connection
with work made, suffered or done by or on behalf of Tenant in or on the Premises
or Project. If Tenant shall not, within ten (10) days following the imposition
of any such lien, cause the same to be released of record by payment or posting
of a proper bond, Landlord shall have, in addition to all other remedies
provided herein and by law, the right, but not the obligation, to cause the same
to be released by such means as Landlord shall deem proper, including payment of
the claim giving rise to such lien. All sums paid by Landlord on behalf of
Tenant and all expenses incurred by Landlord in connection therefor shall be
payable to Landlord by Tenant on demand with interest at the Applicable Interest
Rate as Additional Rent. Landlord shall have the right at all times to post and
keep posted on the Premises any notices permitted or required by law, or which
Landlord shall deem proper, for the protection of Landlord, the Premises, the
Project and any other party having an interest therein, from mechanics' and
materialmen's liens, and Tenant shall give Landlord not less
<PAGE>

than ten (10) business days prior written notice of the commencement of any work
in the Premises or Project which could lawfully give rise to a claim for
mechanics' or materiaimen's liens to permit Landlord to post and record a timely
notice of non-responsibility, as Landlord may elect to proceed or as the law may
from time to time provide, for which purpose, if Landlord shall so determine,
Landlord may enter the Premises. Tenant shall not remove any such notice posted
by Landlord without Landlord's consent, and in any event not before completion
of the work which could lawfully give rise to a claim for mechanics' or
materialmen's liens.

                            29. TRANSFERS BY LANDLORD

In the event of a sale or conveyance by Landlord of the Building or a
foreclosure by any creditor of Landlord, the same shall operate to release
Landlord from any liability upon any of the covenants or conditions, express or
implied, herein contained in favor of Tenant, to the extent required to be
performed after the passing of title to Landlord's successor-in-interest. In
such event, Tenant agrees to look solely to the responsibility of the
successor-in-interest of Landlord under this Lease with respect to the
performance of the covenants and duties of "Landlord" to be performed after the
passing of title to Landlord's successor-in-interest. This Lease shall not be
affected by any such sale and Tenant agrees to attorn to the purchaser or
assignee. Landlord's successor(s)-in-interest shall not have liability to Tenant
with respect to the failure to perform any of the obligations of"Landlord," to
the extent required to be performed prior to the date such
successor(s)-in-interest became the owner of the Building.

               30. RIGHT OF LANDLORD TO PERFORM TENANT'S COVENANTS

All covenants and agreements to be performed by Tenant under any of the terms of
this Lease shall be performed by Tenant at Tenant's sole cost and expense and
without any abatement of Rent. If Tenant shall fail to pay any sum of money,
other than Base Rent, required to be paid by Tenant hereunder or shall fail to
perform any other act on Tenant's part to be performed hereunder, including
Tenant's obligations under Paragraph 11 hereof, and such failure shall continue
for fifteen (15) days after notice thereof by Landlord, in addition to the other
rights and remedies of Landlord, Landlord may make any such payment and perform
any such act on Tenant's part. In the case of an emergency, no prior
notification by Landlord shall, be required. Landlord may take such actions
without any obligation and without releasing Tenant from any of Tenant's
obligations. All sums so paid by Landlord and all incidental costs incurred by
Landlord and interest thereon at the Applicable Interest Rate, from the date of
payment by Landlord, shall be paid to Landlord on demand as Additional Rent.
<PAGE>

                                   31. WAIVER

If either Landlord or Tenant waives the performance of any term, covenant or
condition contained in this Lease, such waiver shall not be deemed to be a
waiver of any subsequent breach of the same or any other term, covenant or
condition contained herein, or constitute a course of dealing contrary to the
expressed terms of this Lease. The acceptance of Rent by Landlord shall not
constitute a waiver of any preceding breach by Tenant of any term, covenant or
condition of this Lease, regardless of Landlord's knowledge of such preceding
breach at the time Landlord accepted such Rent. Failure by Landlord to enforce
any of the terms, covenants or conditions of this Lease for any length of time
shall not be deemed to waive or decrease the right of Landlord to insist
thereafter upon strict performance by Tenant. Waiver by Landlord of any term,
covenant or condition contained in this Lease may only be made by a written
document signed by Landlord, based upon full knowledge of the circumstances.

                                   32. NOTICES

Each provision of this Lease or of any applicable governmental laws, ordinances,
regulations and other requirements with reference to sending, mailing, or
delivery of any notice or the making of any payment by Landlord or Tenant to the
other shall be deemed to be complied with when and if the following steps are
taken:

A. RENT. All Rent and other payments required to be made by Tenant to Landlord
hereunder shall be payable to Landlord at Landlord's Remittance Address set
forth in the Basic Lease Information, or at such other address as Landlord may
specify from time to time by written notice delivered in accordance herewith.
Tenant's obligation to pay Rent and any other amounts to Landlord under the
terms of this Lease shall not be deemed satisfied until such Rent and other
amounts have been actually received by Landlord.

B. OTHER. All notices, demands, consents and approvals which may or are required
to be given by either party to the other hereunder shall be in writing and
either personally delivered, sent by commercial overnight courier, mailed,
certified or registered, postage prepaid or sent by facsimile with confirmed
receipt (and with an original sent by commercial overnight courier), and in each
case addressed to the party to be notified at the Notice Address for such party
as specified in the Basic Lease Information or to such other place as the party
to be notified may from time to time designate by at least fifteen (15) days
notice to the notifying party. Notices shall be deemed served upon receipt or
refusal to accept delivery. Tenant appoints as its agent to receive the service
of all default notices and notice of commencement of unlawful detainer
<PAGE>

proceedings the person in charge of or apparently in charge of occupying the
Premises at the time, and, if there is no such person, then such service may be
made by attaching the same on the main entrance of the Premises.

C. REQUIRED NOTICES. Tenant shall immediately notify Landlord in writing of any
notice of a violation or a potential or alleged violation of any Regulation that
relates to the Premises or the Project, or of any inquiry, investigation,
enforcement or other action that is instituted or threatened by any governmental
or regulatory agency against Tenant or any other occupant of the Premises, or
any claim that is instituted or threatened by any third party that relates to
the Premises or the Project.

                               33. ATTORNEYS' FEES

If Landlord places the enforcement of this Lease, or any part thereof, OR the
collection of any Rent due, or to become due hereunder, or recovery of
possession of the Premises in the hands of an attorney, Tenant shall pay to
Landlord, upon demand, Landlord's reasonable attorneys' fees and court costs,
whether incurred at trial, appeal or review. In any action which Landlord or
Tenant brings to enforce its respective rights hereunder, the unsuccessful party
shall pay all costs incurred by the prevailing party including reasonable
attorneys' fees, to be fixed by the court, and said costs and attorneys' fees
shall be a part of the judgment in said action.

                           34. SUCCESSORS AND ASSIGNS

This Lease shall be binding upon and inure to the benefit of Landlord, its
successors and assigns, and shall be binding upon and inure to the benefit of
Tenant, its successors, and to the extent assignment is approved by Landlord as
provided hereunder, Tenant's assigns.

                                35. FORCE MAJEURE

If performance by a party of any portion of this Lease is made impossible by any
prevention, delay, or stoppage caused by strikes, lockouts, labor disputes, acts
of God, inability to obtain services, labor, or materials or reasonable
substitutes for those items, government actions, civil commotions, fire or other
casualty, or other causes beyond the reasonable control of the party obligated
to perform, performance by that party for a period equal to the period of that
prevention, delay, or stoppage is excused. Tenant's obligation to pay Rent,
however, is not excused by this Paragraph 35.
<PAGE>

                            36. SURRENDER OF PREMISES

Tenant shall, upon expiration or sooner termination of this Lease, surrender the
Premises to Landlord in the same condition as existed on the date Tenant
originally took possession thereof, including, but not limited to, all interior
walls cleaned, all holes in walls repaired, all carpets shampooed and cleaned,
all HVAC equipment in operating order and in good repair, and all floors
cleaned, waxed, and free of any Tenant-introduced marking or painting, all to
the reasonable satisfaction of Landlord. Tenant shall remove all of its debris
from the Project. At or before the time of surrender, Tenant shall comply with
the terms of Paragraph 12.A. hereof with respect to Alterations to the Premises
and all other matters addressed in such Paragraph. If the Premises are not so
surrendered at the expiration or sooner termination of this Lease, the
provisions of Paragraph 25 hereof shall apply. Al I keys to the Premises or any
part thereof shall be surrendered to Landlord upon expiration or sooner
termination of the Term. Tenant shall give written notice to Landlord at least
thirty (30) days prior to vacating the Premises and shall meet with Landlord for
a joint inspection of the Premises at the time of vacating, but nothing
contained herein shall be construed as an extension of the Term or as a consent
by Landlord ,to any holding over by Tenant. In the event of Tenant's failure to
give such notice or participate in such joint inspection, Landlord's inspection
at or after Tenant's vacating the Premises shall conclusively be deemed correct
for purposes, of determining Tenant's responsibility for repairs and
restoration. Any delay caused by Tenant's failure to carry out its obligations
under this Paragraph 36 beyond the term hereof, shall constitute unlawful and
illegal possession of Premises under Paragraph 25 hereof.

                                37. MISCELLANEOUS

A. GENERAL. The term "Tenant" or any pronoun used in place thereof shall
indicate and include the masculine or feminine, the singular or plural number,
individuals, firms or corporations, and their respective successors, executors,
administrators and permitted assigns, according to the context hereof.

B. TIME. Time is of the essence regarding this Lease and all of its provisions.

C. CHOICE OF LAW. This Lease shall in all respects be governed by the laws of
the State of California.

D. ENTIRE AGREEMENT. This Lease, together with its Exhibits, addenda and
attachments and the Basic Lease Information, contains all the agreements of the
parties hereto and supersedes any previous negotiations. There have been no
representations made by the Landlord or understandings made between the parties
other than those set forth in this Lease and its Exhibits, addenda and
attachments and the Basic Lease Information.
<PAGE>

E. MODIFICATION. This Lease may not be modified except by a written instrument
signed by the parties hereto. Tenant accepts the area of the Premises as
specified in the Basic Lease Information as the approximate area of the Premises
for all purposes under this Lease, and acknowledges and agrees that no other
definition of the area (rentable, usable or otherwise) of the Premises shall
apply. Tenant shall in no event be entitled to a recalculation of the square
footage of the Premises, rentable, usable or otherwise, and no recalculation, if
made, irrespective of its purpose, shall reduce Tenant's obligations under this
Lease in any manner, including without limitation the amount of Base Rent
payable by Tenant or Tenant's Proportionate Share of the Building and of the
Project.

F. SEVERABILITY. If, for any reason whatsoever, any of the provisions hereof
shall be unenforceable or ineffective, all of the other provisions shall be and
remain in full force and effect,

G. RECORDATION. Tenant shall not record this Lease or a short form memorandum
hereof.

H. EXAMINATION of Lease. Submission of this Lease to Tenant does not constitute
an option or offer to lease and this Lease is not effective otherwise until
execution and delivery by both Landlord and Tenant.

I. ACCORD AND SATISFACTION. No payment by Tenant of a lesser amount than the
total Rent due nor any endorsement on any check or letter accompanying any check
or payment of Rent shall be deemed an accord and satisfaction of full payment of
Rent, and Landlord may accept such payment without prejudice to Landlord's right
to recover the balance of such Rent or to pursue other remedies. All offers by
or on behalf of Tenant of accord and satisfaction are hereby rejected in
advance.

J. EASEMENTS. Landlord may grant casements on the Project and dedicate for
public use portions of the Project without Tenant's consent; provided that no
such grant of dedication shall materially interfere with Tenant's Permitted Use
of the Premises. Upon Landlord's request, Tenant shall execute, acknowledge and
deliver to Landlord documents, instruments, maps and plats necessary to
effectuate Tenant's covenants hereunder.

K. DRAFTING AND DETERMINATION PRESUMPTION. The parties acknowledge that this
Lease has been agreed to by both the parties, that both Landlord and Tenant have
consulted with attorneys with respect to the terms of this Lease and that no
presumption shall be created against Landlord because Landlord drafted this
Lease. Except as otherwise specifically set forth in this Lease, with respect to
any consent, determination or estimation of Landlord required or allowed in this
Lease or
<PAGE>

requested of Landlord, Landlord's consent, determination or estimation shall be
given or made solely by Landlord in Landlord's good faith opinion, whether or
not objectively reasonable. If Landlord fails to respond to any request for its
consent within the time period, if any, specified in this Lease, Landlord shall
be deemed to have disapproved such request.

L. EXHIBITS. The Basic Lease Information, and the Exhibits, addenda and
attachments attached hereto are hereby incorporated herein by this reference and
made a part of this Lease as though fully set forth herein.

M. NO LIGHT, AIR OR VIEW EASEMENT. Any diminution or shutting off of light, air
or view by any structure which may be erected on lands adjacent to or in the
vicinity of the Building shall in no way affect this Lease or impose any
liability on Landlord.

N. NO THIRD PARTY BENEFIT. This Lease is a contract between Landlord and Tenant
and nothing herein is intended to create any third party benefit.

0. QUIET ENJOYMENT. Upon payment by Tenant of the Rent, and upon the observance
and performance of all of the other covenants, terms and conditions on Tenant's
part to he observed anti performed, Tenant shall peaceably and quietly hold and
enjoy the Premises for the term hereby demised without hindrance or interruption
by Landlord or any other person or persons lawfully or equitably claiming by,
through or under Landlord, subject, nevertheless, to all of the other terms and
conditions of this Lease. Landlord shall not be liable for any hindrance,
interruption, interference or disturbance by other tenants or third persons, nor
shall Tenant be released from any obligations under this Lease because of such
hindrance, interruption, interference or disturbance.

P. COUNTERPARTS. This Lease may be executed in any number ofcounterparts, each
of which shall be deemed an original.

Q. MULTIPLE PARTIES. If more than one person or entity is named herein as
Tenant, such multiple parties shall have joint and several responsibility to
comply with the terms of this Lease.

R. PRORATIONS. Any Rent or other amounts payable to Landlord by Tenant hereunder
for any fractional month shall be prorated based on a month of 30 days. As used
herein, the term "fiscal year" shall mean the calendar year or such other fiscal
year as Landlord may deem appropriate.

                            38. ADDITIONAL PROVISIONS

A. ADDENDUM 1: PARAGRAPH 6. BASE RENT . Base Rent, net of Estimated Operating
Expenses per Paragraph 7 of this Lease, for
<PAGE>

the Premises at 420 North Bernardo Avenue in Mountain View, California shall be
as follows:

         MONTHS 1-12: Base Rent shall be $72,850,00 per month. In addition to
         Base Rent, Tenant shall also pay Tenant's proportionate share of
         Estimated Operating Expenses as set forth in Paragraph 7 of the Lease
         Agreement. Operating Expenses are initially estimated to be $8,678.00
         per month. (These are estimations, final values will be available Nov.
         1, 1999) Operating Expenses are estimated a year in advance and
         collected on a monthly basis. Any adjustments (up or down) will be made
         at the end of the calendar year.

         MONTHS 13-24: Base Rent shall be $75,764.00 per month. In addition to
         Base Rent, Tenant shall also pay Tenant's proportionate share of
         Estimated Operating Expenses as set forth in Paragraph 7 of the Lease
         Agreement.

         MONTHS 25-36: Base Rent shall be $78,795.00 per month. In addition to
         Base Rent, Tenant shall also pay Tenant's proportionate share of
         Estimated Operating Expenses as set forth in Paragraph 7 of the Lease
         Agreement.

         MONTHS 37-48: Base Rent shall be $81,946.00 per month. In addition to
         Base Rent, Tenant shall also pay Tenant's proportionate share of
         Estimated Operating Expenses as set forth in Paragraph 7 of the Lease
         Agreement.

         MONTHS 49-60: Base Rent shall be $85,224.00 per month. In addition to
         Base Rent, Tenant shall also pay Tenant's proportionate share of
         Estimated Operating Expenses as set forth in Paragraph 7 of the Lease
         Agreement.

B.       ADDENDUM 2; OPTION TO RENEW.

         OPTION TO RENEW. Tenant shall, provided this Lease is in full force and
         effect and Tenant is not and has not been in default under any of the
         terms and conditions ofthis Lease, have one (1) successive option(s) to
         renew this Lease for a term of five (5) year(s) each, for the Premises
         in "as in" condition and on the same terms and conditions set forth in
         this Lease, except as modified by the terms, covenants and conditions
         set forth below:

         (1) If Tenant elects to exercise such option, then Tenant shall provide
         Landlord with written notice no later than the date which is 270 days
         prior to the expiration of the then current term of this Lease. If
         Tenant fails to provide such notice,Tenant shall have no further or
         additional right to extend or renew the term of this Lease.
<PAGE>

         (2) The Base Rent in effect at the expiration of the then current term
         of this Lease shall be increased to reflect the current fair market
         rental for comparable space in the Building or Project and in other
         similar buildings in the Mountain View rental market as of the date the
         renewal term is to commence, taking into account the specific
         provisions of this Lease which will remain constant, and the Building
         amenities, location, identity, quality, age, conditions, term of lease,
         tenant improvements, services provided, and other pertinent items.

         (3) Landlord shall advise Tenant of the new Base Rent for the Premises
         for the applicable renewal term which will be based on Landlord's
         determination of fair market rental value, as well as additional terms
         and conditions for the renewal term, no later than fifteen ( 15) days
         after receipt of notice of Tenant's exercise of its option to renew.
         Tenant shall have forty-five (45) days after receipt of such
         notification from Landlord to accept the new Base Rent, terms and
         conditions. If Tenant does not accept Landlord's determination of the
         new Base Rent, terms and conditions within such forty-five (45) day
         period, this option shall be null and void, and Landlord shall have no
         further obligation to Tenant and may enter into a lease for the
         Premises with a third party on such terms and conditions as Landlord
         may determine in its sole discretion.

         (4) Notwithstanding anything to the contrary contained in this
         Paragraph, in no event shall the Base Rent for any renewal term be less
         than the Base Rent in effect at the expiration of the previous term. In
         addition, Landlord shall have no obligation to provide or pay for any
         tenant improvements or brokerage commissions during any renewal term.

         (5) Tenant's right to exercise any option(s) to renew under this
         Paragraph shall be conditioned upon Tenant occupying the entire
         Premises and the same not being occupied by any assignee, subtenant or
         licensee other than Tenant or its affiliate at the time of exercise of
         any option and commencement of the renewal term. Tenant's exercise of
         any option to renew shall constitute a representation by Tenant to
         Landlord that as of the date of exercise of the option and the
         commencement of the applicable renewal term, Tenant does not intend to
         seek to assign this Lease in whole or in part, or sublet all or any
         portion of the Premises.

         (6) Any exercise by Tenant of any option to renew under this Paragraph
         shall be irrevocable. If requested by Landlord, Tenant agrees to
         execute a lease amendment or, at Landlord's option, a new lease
         agreement on Landlord's then standard lease form for the Building,
         reflecting the foregoing terms and conditions, prior to the
         commencement of the renewal term. The option(s) to renew granted tinder
         this
<PAGE>

         Paragraph is/are not transferable; the parties hereto acknowledge and
         agree that they intend that each option to renew this Lease under this
         Paragraph shall be "personal" to the specific Tenant named in this
         Lease and that in no event will any assignee or sublessee have any
         rights to exercise such option(s) to renew.

                              39. JURY TRIAL WAIVER

EACH PARTY HERETO (WHICH INCLUDES ANY ASSIGNEE, SUCCESSOR HEIR OR PERSONAL
REPRESENTATIVE OF A PARTY) SHALL NOT SEEK A JURY TRIAL, HEREBY WAIVES TRIAL BY
JURY, AND HEREBY FURTHER WAIVES ANY OBJECTION TO VENUE IN THE COUNTY IN WHICH
THE BUILDING IS LOCATED, AND AGREES AND CONSENTS TO PERSONAL JURISDICTION OF THE
COURTS OF THE STATE IN WHICH THE PROPERTY IS LOCATED, IN ANY ACTION OR
PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY HERETO AGAINST THE OTHER ON ANY
MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS LEASE, THE
RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S USE OR OCCUPANCY OF THE PREMISES,
OR ANY CLAIM OF INJURY OR DAMAGE, OR THE ENFORCEMENT OF ANY REMEDY UNDER ANY
STATUTE, EMERGENCY OR OTHERWISE, WHETHER ANY OF THE FOREGOING IS BASED ON THIS
LEASE OR ON TORT LAW, EACH PARTY REPRESENTS THAT IT HAS HAD THE OPPORTUNITY TO
CONSULT WITH LEGAL COUNSEL CONCERNING THE EFFECT OF THIS PARAGRAPH 39. THE
PROVISIONS OF THIS PARAGRAPH 39 SHALL SURVIVE THE EXPIRATION OR EARLIER
TERMINATION OF THIS LEASE.
<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the day
and the year first above written.

                                    LANDLORD

                                    Spieker Properties, L.P.,
                                     a California limited partnership

                                    By:     Spieker Properties, Inc.,
                                            a Maryland corporation,
                                            its general partner

                                    By: /s/ John Petersen
                                       -----------------------------------
                                       John Petersen
                                       Its: Vice President

                                    Date: October 30, 1999

                                    TENANT

                                    PRI Automation,
                                    A Massachusetts corporation

                                    By: /s/ Stephen D. Allison
                                       ------------------------------------
                                       Its: CFO

                                    Date: October 22, 1999
<PAGE>

                                    EXHIBIT A

                                INDUSTRIAL LEASE
                              RULES AND REGULATIONS

         1. Driveways, sidewalks, halls, passages, exits, entrances, elevators,
escalators and stairways shall riot be obstructed by tenants or used by tenants
for any purpose other than for ingress to and egress from their respective
premises. The driveways, sidewalks, halls, passages, exits, entrances, elevators
and stairways are not for the use of the general public and Landlord shall in
all cases retain the right to control and prevent access thereto by all persons
whose presence, in the judgment of Landlord, shall be prejudicial to the safety,
character, reputation and interests of the Building, the Project and its
tenants~ provided that nothing herein contained shall be construed to prevent
such access to persons with whom any tenant normally deals in the ordinary
course of such tenant's business unless such persons are engaged in illegal
activities. No tenant, and no employees or invitees of any tenant, shall go upon
the roof of any Building, except as authorized by Landlord.

         2. No sign, placard, banner, picture, name, advertisement or notice,
visible from the exterior of the Premises or the Building or the common areas of
the Building shall be inscribed, painted, affixed, installed or otherwise
displayed by Tenant either on its Premises or any part of the Building or
Project without the prior written consent of Landlord in Landlord's sole and
absolute discretion. Landlord shall have the right to remove any such sign,
placard, banner, picture, name, advertisement, or notice without notice to and
at the expense of Tenant, which were installed or displayed in violation of this
rule. If Landlord shall have given such consent to Tenant at any time, whether
before or after the execution of Tenant's Lease, such consent shall in no way
operate as a waiver or release of any of the provisions hereof or of the Lease,
and shall be deemed to relate only to the particular sign, placard, banner,
picture, name, advertisement or notice so consented to by Landlord and shall not
be construed as dispensing with the necessity of obtaining the specific written
consent of Landlord with respect to any other such sign, placard, banner,
picture, name, advertisement or notice.

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

         3. The directory of the Building or Project will be provided
exclusively for the display of the name and location of tenants only and
Landlord reserves the right to charge for the use thereof and to exclude any
other names therefrom.
<PAGE>

         4. All electrical ceiling fixtures hung in offices or spaces along the
perimeter of the Building must be fluorescent or of a quality, type, design, and
bulb color approved by Landlord. No articles shall be placed or kept on the
window sills so as to be visible from the exterior of the Building. No articles
shall be placed against glass partitions or doors which Landlord considers
unsightly from outside Tenant's Premises.

         5. Each tenant shall be responsible for all persons for whom it allows
to enter the Building or the Project and shall be liable to Landlord for all
acts of such persons.

         Landlord and its agents shall not be liable for damages for any error
concerning the admission to, or exclusion from, the Building or the Project of
any person.

         During the continuance of any invasion, mob, riot, public excitement or
other circumstance rendering such action advisable in Landlord's opinion,
Landlord reserves the right (but shall not be obligated) to prevent access to
the Building and the Project during the continuance of that event by any means
it considers appropriate for the safety of tenants and protection of the
Building, property in the Building and the Project.

         6. Tenant shall not alter any lock or access device or install a new or
additional lock or access device or bolt on any door of its Premises, without
the prior written consent of Landlord. If Landlord shall give its consent,
Tenant shall in each case furnish Landlord with a key for any such lock. Tenant,
upon the termination of its tenancy, shall deliver to Landlord the keys for all
doors which have been furnished to Tenant, and in the event of loss of any keys
so furnished, shall pay Landlord therefor.

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

         8. Tenant shall not use or keep in or on the Premises, the Building or
the Project any kerosene, gasoline, or inflammable or combustible fluid or
material except in strict accordance with the terms of the Lease.

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

         10. Except with the prior written consent of Landlord, Tenant shall not
sell, or permit the sale, at retail, of newspapers, magazines, periodicals,
theater tickets or any other goods or merchandise in or on the Premises, nor
shall Tenant carry on, or permit or allow any employee or other person to carry
on, the business of stenography, typewriting or any similar business in or from
the Premises for the service or accommodation of occupants of any other portion
of the Building, or the business of a public barber shop, beauty parlor, nor
shall the Premises be used for any illegal, improper, immoral or objectionable
purpose, or any business or activity other than that specifically provided for
in such Tenant's Lease. Tenant shall not accept hairstyling, barbering,
shoeshine, nail, massage or similar services in the Premises or common areas
except as authorized by Landlord.

         11. If Tenant requires telegraphic, telephonic, telecommunications,
data processing, burglar alarm or similar services, it shall first obtain, and
comply with, Landlord's reasonable instructions in their installation. The cost
of purchasing, installation and maintenance of such services shall be home
solely by Tenant.

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

         13. Tenant shall not install any radio or television antenna, satellite
dish, loudspeaker or any other device on the exterior walls or the roof of the
Building, without Landlord's consent. Tenant shall not interfere with radio or
television broadcasting or reception from or in the Building, the Project or
elsewhere.

         14. Tenant shall not mark the partitions, woodwork or drywall or in any
way deface the Premises or any part thereof. Tenant shall not lay linoleum,
tile, carpet or any other floor covering so that the same shall be affixed to
the floor of its Premises in any manner except as approved in writing by
Landlord. The expense of repairing any damage resulting from a violation of this
rule or the removal of any floor covering shall be borne by the tenant by whom,
or by whose contractors, employees or invitees, the damage shall have been
caused.

         15. Tenant shall not place a load upon any floor of its Premises which
exceeds the load per square foot which such floor was designed to carry or which
is allowed by law.
<PAGE>

         Business machines and mechanical equipment belonging to Tenant which
cause noise or vibration that may be transmitted to the structure of the
Building or to any space therein to such a degree as to be objectionable to
Landlord or to any tenants in the Building shall be placed and maintained by
Tenant, at Tenant's expense, on vibration eliminators or other devices
sufficient to eliminate noise or vibration. The persons employed to move such
equipment in or out of the Building must be acceptable to Landlord.

         16. Each tenant shall store all its trash and garbage within the
interior of the Premises or as otherwise directed by Landlord from time to time.
Tenant shall not place in the trash boxes or receptacles any personal trash or
any material that may not or cannot be disposed of in the ordinary and customary
manner of removing and disposing of trash and garbage in the city, without
violation of any law or ordinance governing such disposal.

         17. Canvassing, soliciting, distribution of handbills or any other
written material and peddling in the Building and the Project are prohibited and
each tenant shall cooperate to prevent the same. No tenant shall make
room-to-room solicitation of business from other tenants in the Building or the
Project, without the written consent of Landlord.

         18. Landlord shall have the right, exercisable without notice and
without liability to any tenant, to change the name and address of the Building
and the Project.

         19. Landlord reserves the right to exclude or expel from the Project
any person who, in Landlord's judgment, is under the influence of alcohol or
drugs or who commits any act in violation of any of these Rules and Regulations.

         20. Without the prior written consent of Landlord, Tenant shall not use
the name of the Building or the Project or any photograph or other likeness of
the Building or the Project in connection with, or in promoting or advertising,
Tenant's business except that Tenant may include the Building's or Project's
name in Tenant's address.

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

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

         23. Landlord reserves the right to designate the use of the parking
spaces on the Project. Tenant or Tenant's guests shall park between designated
parking lines only, and shall not
<PAGE>

occupy two parking spaces with one car, NO trucks, truck tractors, trailers or
fifth wheel are allowed to be parked anywhere at any time within the Project
other than in Tenant's own truck dock well. Vehicles in violation of the above
shall be subject to tow-away, at vehicle owner's expense. Vehicles parked on the
Project for more than a week including nights without prior written consent of
the Landlord shall be deemed abandoned and shall be subject to tow-away at
vehicle owner's expense. The parking areas shall not be used to provide car
wash, oil changes, detailing, automotive repair or other services unless
otherwise approved or furnished by Landlord.

         24. No Tenant is allowed to unload, unpack, pack or in any way
manipulate any products, materials or goods in the common areas of the Project
including the parking and driveway areas of the Project. All products, goods and
materials must be manipulated, handled, kept, and stored within the Tenant's
Premises and not in any exterior areas, including, but not limited to, exterior
dock platforms, against the exterior of the Building, parking areas and driveway
areas of the Project. Tenant also agrees to keep the exterior of the Premises
clean and free of nails, wood, pallets, packing materials, barrels and any other
debris produced from their operation. All products, materials and goods are to
enter and exit the Premises by being loaded or unloaded through dock high doors
into trucks and or trailers, over dock high loading platforms into trucks and or
trailers or loaded or unloaded into trucks and or trailers within the Premises
through grade level door access.

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

         26. These Rules and Regulations are in addition to, and shall not be
construed to in any way modify, alter or amend, in whole or in part, the terms,
covenants, agreements and conditions of any lease of any premises in the
Project.

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

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

                                    EXHIBIT C

                           LEASE IMPROVEMENT AGREEMENT

         This Lease Improvement Agreement ("Improvement Agreement") sets forth
the terms and conditions relating to construction of the initial tenant
improvements described in the Plans to be prepared and approved as provided
below, excluding Paragraph 1 to be completed by Landlord at Landlord's sole cost
and expense (the "Tenant Improvements") in the Premises. Capitalized terms used
but not otherwise defined herein shall have the meanings set forth in the Lease
(the "Lease") to which this Improvement Agreement is attached and forms a part.

1.       Base Building Work. The "Base Building Work" described on Schedule 1 to
this Exhibit C, if any, has been or will be performed by Landlord at Landlord's
sole cost and expense.

2.       Plans and Specifications.

         2.1 Tenant shall retain the services of Weske and Associates (the
"Space Planner") to prepare a detailed space plan (the "Space Plan") mutually
satisfactory to Landlord and Tenant for the construction of the Tenant
Improvements in the Premises. Tenant shall submit the Space Plan and any
proposed revisions thereto to Landlord for Landlord's approval.

         2.2 Based on the approved Space Plan, Tenant shall cause the Space
Planner to prepare detailed plans, specifications and working drawings mutually
satisfactory to Landlord and Tenant for the construction of the Tenant
Improvements (the "Plans"). Landlord and Tenant shall diligently pursue the
preparation of the Plans. Tenant shall submit the Plans and any proposed
revisions thereto, including the estimated cost of the Tenant Improvements. All
necessary revisions to the Space Plan and the Plans shall be made within ten
(10) business days after Landlord's response thereto. This procedure shall be
repeated until Landlord ultimately approves the Space Plan and Plans.

         2.3 Tenant shall be responsible for ensuring that the Plans are
compatible with the design, construction and equipment of the Building, comply
with applicable Regulations and the Standards (defined below), and contain ail
such information as may be required to show locations, types and requirements
for all heat loads, people loads, floor loads, power and plumbing, regular and
special HVAC needs, telephone communications, telephone and electrical outlets,
lighting, light fixtures and related power, and electrical and telephone
switches, B.T.U. calculations, electrical requirements and special receptacle
requirements. The Plans shall also include mechanical, electrical, plumbing,
structural and engineering drawings mutually satisfactory to Landlord and Tenant
which shall be prepared by Weske and Associates. Notwithstanding Landlord's
<PAGE>

preparation, review and approval of the Space Plan and the Plans and any
revisions thereto, Landlord shall have no responsibility or liability whatsoever
for any errors or omissions contained in the Space Plan or Plans or any
revisions thereto, or to verify dimensions or conditions, or for the quality,
design or compliance with applicable Regulations of any improvements described
therein or constructed in accordance therewith. Tenant hereby waives all claims
against Landlord relating to, or arising out of the design or construction of,
the Tenant Improvements.

         2.4 Landlord's criteria for approvals shall be based on reasonable
criteria established from time to time by Landlord, but Landlord will be deemed
to have acted reasonably if Landlord's disapproval is predicated upon (i) effect
on the structural integrity of the Building, (ii) possible damage to the
Building's mechanical, electrical, plumbing and HVAC systems, (iii)
noncompliance with applicable laws, codes and regulations, (iv) incompatibility
with the base building plans, (v) failure to use materials required by Schedule
2 pertaining to Standards, and (vi) effect on the exterior of the Building or
any of the Building's common areas. Landlord shall not be deemed to have
approved the Space Plan, the Plans, or any proposed revisions thereto, unless
approved by Landlord in writing. Landlord shall approve or disapprove any Space
Plan, Plans or proposed revisions thereto submitted to Landlord for Landlord's
approval within three (3) business days after Landlord's receipt thereof. If
Landlord has not approved in writing any Space Plan, Plans, or proposed
revisions thereto submitted to Landlord within five (5) business days after
Landlord's receipt thereof, Landlord shall be deemed to have disapproved the
same.

3.       Specifications for Standard Tenant Improvement .

         3.1 Specifications and quantities of standard building components which
will comprise and be used in the construction of the Tenant Improvements
("Standards") are set forth in Schedule 2 to this Exhibit C. As used herein,
"Standards" or "Building Standards" shall mean the standards for a particular
item selected from time to time by Landlord for the Building, including those
set forth on Schedule 2 of this Exhibit C, or such other standards of equal or
better quality as may be mutually agreed between Landlord and Tenant in writing.

         3.2      No deviations from the Standards are permitted.

4.       Tenant Improvement Cost

         4.1 The cost of the Tenant Improvements shall be paid for by Tenant,
including, without limitation, the cost of: Standards; space plans and studies;
architectural and engineering fees; permits; approvals and other governmental
fees; labor, material, equipment and supplies; construction fees and other
amounts payable to contractors or subcontractors; taxes; off-site improvements;
remediation and preparation of the Premises for
<PAGE>

construction of the Tenant Improvements; taxes; filing and recording fees;
premiums for insurance and bonds; attorneys' fees; financing costs; and all
other costs expended or to be expended in tile construction ofthe Tenant
Improvements.

         4.2 Provided Tenant is not in default under the Lease, including this
Improvement Agreement, Landlord shall contribute a one-time tenant improvement
allowance not to exceed $31,000.00 ("Tenant Improvement Allowance") toward the
cost of the initial Tenant Improvements. Provided Tenant is not then in default
under the Lease, including this Improvement Agreement, Landlord shall disburse
the Tenant Improvement Allowance to Tenant upon completion of construction of
the Tenant Improvements and expiration of the time for filing of any mechanics'
liens claimed or which might be filed on account of any work- ordered by Tenant
or its contractor or any subcontractor, and upon receipt by Landlord of a
certificate of completion executed by the Space Planner and Tenant's contractor,
and unconditional mechanics' lien releases (which mechanics' lien releases shall
be executed by tile subcontractors, labor suppliers and materialmen in addition
to Tenant's contractor), in each case in form and substance satisfactory to
Landlord, and all appropriate bills and supporting documentation for the work
ordered by Tenant or its contractor or any subcontractor.

         4.3 In the event the estimated cost of the design and construction or
tile Tenant Improvements exceeds the Tenant Improvement Allowance, Tenant shall
pay such excess cost to Tenant's contractor. No credit shall be given to Tenant
if the cost of the Tenant Improvements is less than the Tenant Improvement
Allowance.

         4.4 If the cost of the Tenant Improvements increases after the Tenant's
approval of the Plans due to the requirements of any governmental agency or
applicable Regulation or for any other reason, Tenant shall pay the amount of
such increase.

         4.5 If Tenant requests any change(s) in the Plans after approval of the
estimate of the cost of the Tenant Improvements and any such requested changes
are approved by Landlord in writing in Landlord's sole discretion, Tenant shall
pay the amount of such increase.

5.       Construction of Tenant Improvement .

         5.1 Within fifteen (15) business days after Tenant's and Landlord's
approval of the Plans including the estimate of the cost of the Tenant
Improvements and Landlord's receipt of payment of any such estimated cost
exceeding the amount of the Tenant Improvement Allowance, Tenant shall cause the
contractor to proceed to secure a building permit and commence construction of
the Tenant Improvements provided that the Building has in Landlord's discretion
reached the stage of construction where it is appropriate to commence
construction of the Tenant Improvements in the Premises.
<PAGE>

         5.2 Tenant shall be responsible for obtaining all governmental
approvals to the full extent necessary for the construction and installation of
the Tenant Improvements and for Tenant's occupancy of the Premises, in
compliance with all applicable Regulations. Tenant shall employ Hallmark
Construction as the contractor or such other contractor or contractors as shall
be approved by Landlord in writing to construct the Tenant Improvements in
conformance with the approved Space Plan and Plans. The construction contracts
between Tenant and the approved contractor shall be subject TO Landlord's prior
reasonable approval and shall provide for progress payments. The contractor(s)
shall be duly licensed and Landlord's approval of the contractor(s) shall be
conditioned, among other things, upon the contractor's reputation for quality of
work, timeliness of performance, integrity and Landlord's prior experience with
such contractor.

         5.3 Landlord shall not be liable for any direct or indirect damages
suffered by Tenant as a result of delays in construction beyond Landlord's
reasonable control, including, but not limited to, delays due to strikes or
unavailability of materials or labor, or delays caused by Tenant (including
delays by the Space Planner, the contractor or anyone else performing services
on behalf of Landlord or Tenant).

         5.4 All work to be performed on the Premises by Tenant or Tenant's
contractor or agents shall be subject TO the following conditions:

             (a) Such work shall proceed upon Landlord's written approval of
Tenant's contractor, and public liability and property damage insurance carried
by Tenant's contractor, and shall further be subject to the provisions of
Paragraphs 12 and 27 of the Lease.

             (b) All work shall be done in conformity with a valid building
permit when required, a copy of which shall be furnished to Landlord before such
work is commenced, and in any case, all such work, shall be performed in a good
and workmanlike and first-class manner, and in accordance with all applicable
Regulations and the requirements and standards of any insurance underwriting
board, inspection bureau or insurance carrier insuring the Premises pursuant to
the Lease. Notwithstanding any failure by Landlord to object to any such work,
Landlord shall have no responsibility for Tenant's failure to comply with all
applicable Regulations. Tenant shall be responsible for ensuring that
construction and installation of the Tenant Improvements will not affect the
structural integrity of the Building.

             (c) If required by Landlord or any lender of Landlord, all work by
Tenant or Tenant's contractor shall be done with union labor in accordance with
all union labor agreements applicable to the trades being employed.
<PAGE>

             (d) Landlord or Landlord's agents shall have the right to inspect
the construction of the Tenant Improvements BY Tenant during the progress
thereof. If Landlord shall give notice of faulty construction or any other
deviation from the approved Space Plan or Plans, Tenant shall cause its
contractor to Make corrections promptly. However, neither the privilege herein
granted to Landlord to make such inspections, nor the making of such inspections
by Landlord, shall operate as a waiver of any right of Landlord to require good
and workmanlike construction and improvements erected in accordance with the
approved Space Plan or Plans.

             (e) Tenant shall cause its contractor to complete the Tenant
Improvements as soon as reasonably possible but in any event on or before the
Scheduled Term Commencement Date. Failure to complete the Tenant Improvements by
the Scheduled Term Commencement Date will not amount to a default under the
Lease.

             (f) Tenant's construction of the Tenant Improvements shall comply
with the following: (i) the Tenant Improvements shall be constructed in strict
accordance with the approved Space Plan or Plans; (ii) Tenant's and its
contractor shall submit schedules of all work relating to the Tenant
Improvements to Landlord for Landlord's approval within ten (10) business days
following the selection of the contractor and the approval of the Plans.
Landlord shall within five (5) business days after receipt thereof inform Tenant
of any changes which are necessary and Tenant's contractor shall adhere to such
corrected schedule; and (iii) Tenant shall abide by all rules made by Landlord
with respect to the use of freight, loading dock, and service elevators, storage
of materials, coordination of work with the contractors of other tenants, and
any other matter in connection with this Improvement Agreement, including,
without limitation, the construction of the Tenant Improvements.

             (g) Tenant or Tenant's contractor or agents shall arrange for
necessary utility, hoisting and elevator service with Landlord's contractor and
shall pay such reasonable charges for such services as may be charged by
Tenant's or Landlord's contractor.

             (h) Tenant's entry to the Premises for any purpose, including,
without limitation, inspection or performance of Tenant construction by Tenant's
agents, prior to the date Tenant's obligation to pay rent commences shall be
subject to all the terms and conditions of the Lease except the payment of Rent.
Tenant's entry shall mean entry by Tenant, its officers, contractors, licensees,
agents, servants, employees, guests, invitees, or visitors.
<PAGE>

             (i) Tenant shall promptly reimburse Landlord upon demand for any
reasonable expense actually incurred by the Landlord by reason of faulty work
done by Tenant or its contractors or by reason of any delays caused by such
work, or by reason of inadequate clean-up.

             (j) Tenant hereby indemnifies and holds Landlord harmless with
respect to any and all costs, losses, damages, injuries and liabilities relating
in any way to any act or omission of Tenant or Tenant's contractor or agents, or
anyone directly or indirectly employed by any of them, in connection with the
Tenant Improvements and any breach of Tenant's obligations under this
Improvement Agreement, or in connection with Tenant's non-payment of any amount
arising out of the Tenant Improvements. Such indemnity by Tenant, as set forth
above, shall also apply with respect to any and all costs, losses, damages,
injuries, and liabilities related in any way to Landlord's performance or any
ministerial acts reasonably necessary (i) to permit Tenant to complete the
Tenant Improvements, and (ii) to enable Tenant to obtain any building permit or
certificate of occupancy for the Premises.

             (k) Tenant's contractor and the subcontractors utilized by Tenant's
contractor shall guarantee to Tenant and for the benefit of Landlord that the
portion of the Tenant Improvements for which it is responsible shall be free
from any defects in workmanship and materials for a period of not less than one
(1) year from the date of completion thereof. Each of Tenant's contractor and
the subcontractors utilized by Tenant's contractor shall be responsible for the
replacement or repair, without additional charge, of all work done or furnished
in accordance with its contract that shall become defective within one (1) year
after the later to occur of(i) completion of the work performed by such
contractor of subcontractors and (ii) the Term Commencement Date. The correction
of such work shall include, without additional charge, all additional expenses
and damages incurred in connection with such removal or replacement of all or
any part of the Tenant Improvements, and/or the Building and/or common areas
that may be damaged or disturbed thereby. All such warranties or guarantees as
to materials or workmanship of or with respect to the Tenant Improvements shall
be contained in the construction contract or subcontract and shall be written
such that such guarantees or warranties shall inure to the benefit of both
Landlord and Tenant, as their respective interests may appear, and can be
directly enforced by either. Tenant covenants to give to Landlord any assignment
or other assurances which may be necessary to effect such rights of direct
enforcement.

             (1) Commencing upon the execution of the Lease, Tenant shall hold
weekly meetings at a reasonable time with the Space Planner and the contractor
regarding the progress of the preparation of the Plans and the construction of
the Tenant Improvements, which meetings shall be held at a location designated
by Tenant, and Landlord and/or its agents shall
<PAGE>

receive prior notice of, and shall have the right to attend, all such meetings,
and upon Landlord's request, certain of Tenant's contractors shall attend such
meetings. One such meeting each month shall include the review of contractor's
current request for payment.

6.       Insurance Requirements.

         6.1 All of Tenant's contractors shall carry worker's compensation
insurance covering all of their respective employees, and shall also carry
public liability insurance, including property damage, all with limits, in form
and with companies as are required to be carried by Tenant as set forth in
Exhibit D to the Lease.

         6.2 Tenant shall carry "Builder's All Risk" insurance in an amount
approved by Landlord covering the construction of the Tenant Improvements, and
such other insurance as Landlord may require, it being understood and agreed
that the Tenant Improvements shall be insured by Tenant pursuant to Exhibit D to
the Lease immediately upon completion thereof. Such insurance shall be in
amounts and shall include such extended coverage endorsements as may be
reasonably required by Landlord including, but not limited to, the requirement
that all of Tenant's contractors shall carry excess liability and Products and
Completed Operation coverage insurance, each in amounts not less than, $500,000
per incident, $1,000,000 in aggregate, and in form and with companies as are
required to be carried by Tenant as set forth in Exhibit D to the Lease.

         6.3 Certificates for all insurance carried pursuant to this Improvement
Agreement must comply with the requirements of Exhibit D to the Lease and shall
be delivered to Landlord before the commencement of construction of the Tenant
Improvements and before the contractor's equipment is moved onto the site. In
the event the Tenant Improvements are damaged by any cause during the course of
the construction thereof, Tenant shall immediately repair the same at Tenant's
sole cost and expense. Tenant's contractors shall maintain all of the foregoing
insurance coverage in force until the Tenant Improvements are fully completed
and accepted by Landlord, except for any Product and Completed Operation
Coverage insurance required by Landlord, which is to be maintained for ten (10)
years following completion of the work and acceptance by Landlord and Tenant.
All policies carried under this Paragraph 6 shall insure Landlord and Tenant, as
their interests may appear, as well as the contractors. All insurance maintained
by Tenant's contractors shall preclude subrogation claims by the insurer against
anyone insured thereunder. Such insurance shall provide that it is primary
insurance as respects the owner and that any other insurance maintained by owner
is excess and noncontributing with the insurance required hereunder. Landlord
may, in its discretion, require Tenant to obtain a lien and completion bond or
some
<PAGE>

alternate form of security satisfactory to Landlord in an amount sufficient to
ensure the lien-free completion of the Tenant Improvements and naming Landlord
as a co-obligee.

7.       Completion and Rental Commencement Date

         7.1 Tenant's obligation to pay Rent under the Lease shall commence on
the Scheduled Term Commencement Date and the Scheduled Term Commencement Date
shall be the Tenn Commencement Date notwithstanding anything to the contrary
contained in, Paragraph 3 of the Lease. However, Landlord Delays (as defined
below) shall extend the Term Commencement Date, but only in the event that
substantial completion of the Tenant Improvements is delayed despite Tenant's
reasonable efforts to adapt and compensate for such delays. In addition, no
Landlord Delays shall be deemed to have occurred unless Tenant has provided
notice, in compliance with the Lease, to Landlord specifying that a delay shall
be deemed to have occurred because of actions, inactions or circumstances
specified in the notice in reasonable detail. If such actions, inactions or
circumstances are not cured by Landlord within one (1) business day after
receipt of such notice ("Count Date"), and if such actions, inaction or
circumstances otherwise qualify as a Landlord Delay, then a Landlord Delay shall
be deemed to have occurred commencing as of the Count Date. The Term
Commencement Date shall be extended by one day for each day from the Count Date
that a Landlord Delay has occurred, as calculated as provided above. The term
"Landlord Delays," as such term may be used in this Improvement Agreement, shall
mean any delays in the completion of the Tenant Improvements which are due to
any act or omission of Landlord, its agents or contractors. Landlord Delays
shall include, but shall not be limited to: (i) delays in the giving of
authorizations or approvals by Landlord, (ii) delays due to the acts or failures
to act, of Landlord, its agents or contractors, where such acts or failures to
act delay the completion of the Tenant Improvements, provided that Tenant acts
in a commercially reasonable manner to mitigate any such delay, (iii) delays due
to the interference of Landlord, its agents or contractors with the completion
of the Tenant Improvements or the failure or refusal of any party to permit
Tenant, its agents and contractors, access to and use of the Building or any
Building facilities or services, including elevators and loading docks, which
access and use are necessary to complete the Tenant Improvements, and (iv)
delays due to Landlord's failure to allow Tenant sufficient access to the
Building and/or the Premises during Tenant's move into the Premises.

         7.2 Within ten (10) days after completion of construction of the Tenant
Improvements, Tenant shall cause a Notice of Completion to be recorded in the
office of the Recorder of the county in which the Building is located in
accordance with Section 3093 of the Civil Code of the State of California or
any successor statute, and shall furnish a copy thereof to Landlord
<PAGE>

upon such recordation. If Tenant fails to do so, Landlord may execute and file
the same on behalf of Tenant as Tenant's agent for such purpose, at Tenant's
sole cost and expense. At the conclusion of construction, (i) Tenant shall cause
the Space Planner and the contractor (i) to update the approved working drawings
as necessary to reflect all changes made to the approved working drawings during
the course of construction, (ii) to certify to the best of their knowledge that
the "record-set" of as-built drawings are true and correct, which certification
shall survive the expiration or termination of' the Lease, and (c) to deliver to
Landlord two (2) sets of copies of such record set of drawings within ninety
(90) days following issuance of certificate of occupancy for the Premises, and
(iii) Tenant shall deliver to Landlord a copy of all warranties, guarantees, and
operating manuals and information relating to the improvements, equipment, and
systems in the Premises.

         7.3 A default under this Improvement Agreement shall constitute a
default under the Lease, and the parties shall be entitled to all rights and
remedies under the Lease in the event of a default hereunder by the other party
(notwithstanding that the Term thereof has not commenced).
<PAGE>

         7.4 Without limiting the "as-is" provisions of the Lease, except for
the Tenant Improvements, if any, to be constructed by Landlord pursuant to this
Improvement Agreement, Tenant accepts the Premises in its "as-is" condition and
acknowledges that it has had an opportunity to inspect the Premises prior to
signing the Lease.

         7.5 Tenant's contractor shall be permitted to enter the premises for
the purpose of performing the Tenant Improvement work before the Scheduled
Commencement Date, so long as such entry does not interfere with the Landlord's
construction.
<PAGE>

                                   SCHEDULE 1
                                  TO EXHIBIT C

                               BASE BUILDING WORK

Landlord shall provide at Landlord's sole expense:

1.   Demolition of current improvements at the premises.

2.   The initial Tenant space plan session with architect and one revision of
     space plan.

3.   A new 2 x 4 non-directional ceiling grid suspended at 10 feet.

4.   A new 4-ply built up mineral cap sheet roof membrane (rosin sheet, base
     sheet, 4-ply tack sheet and a cap sheet).

5.   73 torts of new HVAC equipment using 10 gas/electric packaged units and 2
     exhaust systems.

6.   A conference room per Landlord's general plan (see Exhibit B).

7.   A refurbished lobby, includes; paint and new tile to be determined with
     Tenant's input.

8.   Upgraded restroom cores to include new fixtures and tile.

9.   An employee lunchroom equipped with sink and cabinets per Landlord's
     general plan and new VCT (see Exhibit 13), material to be agreed upon with
     Tenant.

10.  A coffee bar with sink.

11.  Paint and a 28oz level loop or cut-pile carpet, colors to be determined
     with input of Tenant.

12.  Lighting - 2x4 standard prismatic lens fixtures with 40 feet of candle of
     illumination.
<PAGE>

                                   SCHEDULE 2
                                  TO EXHIBIT C

                               BUILDING STANDARDS

         The following constitutes the Building Standard tenant improvements
("Standards") in the quantities specified: The following constitutes the
Building Standard tenant improvements ("Standards") in the quantities specified:
all construction will be performed in a good workmanlike manner. All completed
work and finishes shall attain the same or higher degree of quality as the
existing interiors.
<PAGE>

                                 FIRST AMENDMENT

         This First Amendment to Lease is made effective this Twenty-eighth day
of October, 1999, by and between Spieker Properties, L.P., a California limited
partnership, ("Landlord"), and PRI Automation Inc., a Massachusetts corporation,
("Tenant") for that approximately 31,000 square at 420 North Bernardo Avenue,
Mountain View, California.

                                    RECITALS

         A. Landlord and Tenant have entered into that certain Lease dated
October 22, 1999, for the Premises located at 420 North Bernardo Avenue,
Mountain View, California, and made subject to the terms and conditions of that
Lease. Unless expressly defined herein, all capitalized terms and conditions
used in this First Amendment to Lease shall have the same meaning ascribed to
them in the Lease.

         B. Tenant wishes to alter the Site Plan (Exhibit B) to change the
location of the main restroom core to approximately the center of the 420 North
Bernardo Avenue Premises, (completed plan to be attached) this is subject to the
terms and conditions indicated below.

         C. Landlord wishes to consent to Tenant's changing of the main restroom
core location in the 420 North Bernardo Avenue Premises, which is subject to the
terms and conditions indicated below.

                                    AGREEMENT

         NOW THEREFORE, Landlord and Tenant hereby agree as follows:

SCHEDULED TERM
COMMENCEMENT:     The commencement of this Lease shall remain February 1, 2000.

POSSESSION:       Paragraph 2B, as it relates to the construction of
                  improvements by Landlord, shall be altered to read, if
                  Landlord is unable to deliver the Premises by May 1, 2000, not
                  including improvements to be constructed by Tenant, Tenant
                  shall have the right to terminate the Lease by noticing
                  Landlord in writing. The date which Landlord shall have to
                  deliver the Premise shall be extended beyond May 1, 2000
                  should there be any construction delays caused by Tenant.

All other terms and conditions of the Lease Agreement shall remain in full force
and effect.
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have entered into this First
Amendment to Lease as evidenced by their signature below.

SPIEKER PROPERTIES, L.P.,                   PRI AUTOMATION, INC.
a California limited partnership            a Massachusetts corporation

By:      Spieker Properties
         a Maryland corporation
         Its: General Partner

By:                                         By:      /s/ Stephen D. Allison
         ------------------------------              -------------------------
         Joseph D. Russell, Jr.

Its:     President, Silicon Valley          Its:     CFO

         Date:                              Date:    11/3/99
              -------------------------              -------------------------

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