Document:

<PAGE>

                                                                   Exhibit 10.47

                              SUBLEASE AGREEMENT
                              ------------------

                               SUMMARY OF TERMS

Sublease Date:                      March 25, 1999

Sublandlord:                        Trimble Navigation Limited,
                                    a California corporation

Sublandlord's Address:              645 N. Mary Ave.
                                    Sunnyvale, CA 94086

Subtenant:                          Scios, Inc.,
                                    a Delaware corporation

Subtenant's Address:                2450 Bayshore Parkway
                                    Mountain View, CA 94042

Premises Address:                   749 North Mary Ave., Sunnyvale, CA

Premises Square Footage:            33,600+/-

Initial Term:                       Thirty-three (33) months, commencing on
                                    May 1, 1999 ("Commencement Date") and
                                    Terminating on January 31, 2002,
                                    ("Termination Date")

Optional Extended Term:             One (1) period of eleven (11) consecutive
                                    months.

Monthly Base Rent:                  Months  Sq. Ft.  Monthly Rate   Monthly Rent
                                    ------  -------  ------------   ------------
                                    1-20    33,600 x  $1.65/sf    =  $55,400

                                    20-33   33,600 x  $1.85/sf    =  $62,160

Security Deposit:                   One Hundred Twenty-four Thousand, Three
                                    Hundred Twenty Dollars ($124,320.00)

Permitted Use:                      Research and development, sales, marketing,
                                    administration, and offices

Broker:                             Cornish and Carey Commercial -- representing
                                    Sublanlord
                                    CRESA Partners, LLC -- representing tenant

Exhibits/Attachments:               Exhibit A     -- Floor Plan Premises
                                    Attachment 1  -- Master Lease

[NOTE: In the event of any differences appearing between the information
contained in this Summary of Terms and the Sublease Agreement, the Sublease
Agreement shall be controlling.]

<PAGE>

                              SUBLEASE AGREEMENT
                              ------------------

Sublandlord:                Trimble Navigation Limited

Subject Property:           749 North Mary Ave., Sunnyvale, CA

Subtenant:                  Scios, Inc.

Date:                       March 24, 1999

1.   Parties and Consideration. This Sublease is made and entered into as of
     March 24, 1999, by and between Trimble Navigation Limited ("Sublandlord"),
     and Scios, Inc. ("Subtenant").

     In consideration for the rents and all other charges and payments payable
     by Subtenant, and for the agreements, terms and conditions to be performed
     by Subtenant in this Sublease, Sublandlord does hereby sublease to
     Subtenant, and Subtenant does hereby hire and take from Sublandlord, the
     subleased premises referred to in Section 3. (the "Premises"), upon the
     agreements, terms and conditions of this Sublease for the Term hereinafter
     stated.

2.   Master Lease.

     2.1  Sublandlord is the Tenant of the Premises by virtue of an Industrial
          Lease Agreement dated June 4, 1994, as amended by that certain First
          Amendment to Lease dated June 12, 1995, (for the period April 1, 1995
          through December 31, 2000), hereinafter sometimes referred to as
          "Master Lease A"; and by virtue of an Industrial Lease Agreement dated
          March 24, 1999 (for the period January 1, 2001 through December 31,
          2005), hereinafter sometimes referred to as "Master Lease B";
          hereinafter sometimes referred to collectively as the "Master Lease,"
          wherein The Irvine Corporation, by Assignment from AETNA Life
          Insurance Co., is the "Landlord", hereinafter referred to as the
          "Master Landlord." A copy of the Master Lease (comprised of Master
          Lease A as amended, and Master Lease B) is attached hereto as
          Attachment I and incorporated herein by this reference. A copy of the
          aforesaid Assignment is attached hereto as Attachment II and
          incorporated herein by this reference.

     2.2  This Sublease is and shall be at all times subject and subordinate to
          all of the terms and conditions of the Master Lease. All references
          herein to the "Master Lease" for the period from the Sublease
          Commencement Date through December 31, 2000 shall be deemed references
          to Master Lease A; and all references herein to the "Master Lease" for
          the period from January 1, 2001 through the Sublease Termination Date
          shall be deemed references to Master Lease B.

     2.3  For purposes of this Sublease, except as otherwise provided herein,
          wherever in the Master Lease the word "Landlord" is used it shall be
          deemed to mean the Sublandlord herein and wherever in the Master Lease
          the word "Tenant" is used it shall be deemed to mean the Subtenant
          herein. Subtenant hereby assumes and agrees to perform all of the
          obligations of "Tenant" under the Master Lease to the extent said
          obligations apply to the

2
<PAGE>

          Subleased Premises and Subtenant's use of the common areas and all
          areas appurtenant thereto (which obligations shall not include those
          arising out of or in connection with Sublandlord's use of the Premises
          prior to the commencement date of this); except that Subtenant shall
          not be required to pay the Rent or Security Deposit required under the
          Master Lease, and shall not be required to perform those obligations
          of "Tenant" under the Master Lease which are directly contradicted by
          this Sublease, in which event the terms of this Sublease document
          shall control over the Master Lease.

     2.4  Sublandlord hereby agrees to use all reasonable efforts to cause
          Landlord under the Master Lease to perform all of the obligations of
          Landlord thereunder to the extent said obligations apply to the
          Subleased Premises and Subtenant's use of the common areas. Subtenant
          shall not commit or permit to be committed on the Subleased Premises,
          common areas or areas appurtenant thereto any act or omission, which
          violates any, term or condition of the Master Lease. Except to the
          extent waived or consented to in writing by the other party or parties
          hereto who are affected thereby, neither of the parties hereto will,
          by renegotiation of the Master Lease, assignment, subletting, default
          or any other voluntary action, avoid or seek to avoid the observance
          or performance of the terms to be observed or performed hereunder by
          such party, but will at all times in good faith assist in carrying out
          all of the terms of this Sublease and in taking all such on as may be
          necessary or appropriate to protect the rights of the other party or
          parties hereto who are affected thereby against impairment. Nothing
          contained in this Section 2 or elsewhere in this Sublease shall
          prevent or prohibit Sublandlord (a) from exercising its right to
          terminate the Master Lease pursuant to the terms thereof or (b) from
          assigning its interest in this Sublease or subletting the Premises to
          any other third party.

     2.5  Sublandlord represents to Subtenant that the Master Lease is in full
          force and effect and that no default exists on the part of any Party
          to the Master Lease.

3.   Premises. Sublandlord hereby subleases to Subtenant and Subtenant hereby
     subleases from Sublandlord that certain real property, including all
     improvements therein, and commonly known by the street address of 749 North
     Mary Avenue, Sunnyvale, California, located in the County of Santa Clara,
     State of California (the "Premises").

     The Premises consist of approximately 33,600 square feet +/-, as identified
     in the Floor Plan attached hereto as Exhibit A of this Sublease Agreement.
     Any statement of size set forth in this Sublease Agreement, or that may
     have been used in calculating rental, is an approximation which the parties
     agree is reasonable and the rental based thereon is not subject to revision
     whether or not the actual size is more or less.

4.  Rent.

3
<PAGE>

     4.1  Base Rent. Subtenant shall pay to Sublandlord, in advance on the first
          day of each month, without further notice or demand and without offset
          for deduction, the monthly installments of Base Rent specified below:
<TABLE>
<CAPTION>

     Base Rent:    Months         Monthly Rate           Base Rent
                   ------         ------------           ---------
<S>                <C>            <C>                    <C>
                   0-20           $ 1.65/sq ft NNN       $ 55,400
                   21-33          $ 1.85/sq ft NNN       $ 62,160
</TABLE>

     4.2  Additional Rent. In addition to the Base Rent, Subtenant shall pay to
          Sublandlord, all of the following items related to the premises, as
          defined at Paragraph 4b ("Additional Rent") of Master Lease A, and as
          further defined as "Building Costs" at Section 4.2(f) of Master
          Lease B:

                    (1) Taxes and Assessments
                    (2) Insurance
                    (3) Outside Area expenses
                    (4) Parking charges
                    (5) Maintenance and Repair of Building
                    (6) Management and Administration

          Additional Rent costs are currently estimated at $.19/square
          foot/month or Six Thousand Three Hundred Eighty-four Dollars
          ($6,384.00) per month. Subtenant shall pay such estimated Additional
          Rent to Sublandlord on a monthly basis concurrently with the payment
          of the Base Rent. By April 1st of each calendar year or as soon
          thereafter as Sublandlord is able to do so, Sublandlord will provide
          to Subtenant a copy of the statement from the Master Landlord showing
          the actual Additional Rental due for the prior calendar year, prorated
          from the Commencement Date during the first year. If the total of the
          monthly payments of Additional Rent that Subtenant has made for the
          prior calendar year (or portion thereof during which this Sublease was
          in effect) is less than the actual Additional Rent chargeable to
          Subtenant for such prior calendar year, then Subtenant shall pay the
          difference in a lump sum within ten (10) days after receipt of such
          statement from Sublandlord. Any overpayment by Subtenant of Additional
          Rent for the prior calendar year shall be credited towards the
          Additional Rent next due, or paid to Subtenant if no Additional Rent
          remains unpaid or shall be due. Sublandlord agrees to exercise any
          right it may have to request clarification, or seek correction of
          Master Landlord's statement, upon request of Subtenant.

     4.3  If the Sublease Commencement Date or the Termination Date of the
          Sublease occurs on a date other than the first day or the last day,
          respectively, of a calendar month, then the Rent for such partial
          month shall be prorated and the prorated Rent shall be payable on the
          Sublease Commencement Date or on the first day of the calendar month
          in which the Sublease Termination Date occurs, respectively.

4
<PAGE>

     4.4  The term "Rent" as used in this Sublease Agreement shall mean both
          Base and Additional Rent collectively. All monetary obligations of
          Subtenant to Sublandlord under the terms of this Sublease Agreement
          shall be payable in lawful money of the United States to Sublandlord
          at the address stated herein or to such other persons or as such other
          places as Sublandlord may designate in writing.

5.   Security Deposit.

     5.1  In addition to the Rent specified above, Subtenant shall pay to
          Sublandlord an amount equal to the last two (2) months' Base Rent, or
          One Hundred Twenty-four Thousand Three Hundred Twenty Dollars
          ($124,320.00) as a Security Deposit. Effective on the commencement
          date, Sublandlord shall hold said security deposit, as the Security
          Deposit required under this Sublease. The Security Deposit shall be
          held by Sublandlord as security for the full and faithful performance
          of each and every term, covenant and condition of this Sublease.
          Sublandlord may use, apply or retain the whole or any part of the
          Security Deposit as may be reasonably necessary (a) to remedy
          Subtenant's default in the payment of any Rent beyond any applicable
          cure period provided for herein, (b) to repair damage to the Premises
          caused by Subtenant during its occupancy of the Premises under this
          Sublease, (c) to clean the Premises upon termination of this Sublease,
          (d) to reimburse Sublandlord for the payment of any amount which
          Sublandlord may reasonably spend or be required to spend by reason of
          Subtenant's default under this Sublease beyond any applicable cure
          period provided for herein, or (e) to compensate Sublandlord for any
          other loss or damage which Sublandlord may suffer by reason of
          Subtenant's default under this Sublease beyond any applicable cure
          period provided for herein.

     5.2  Should Subtenant faithfully and fully comply with all of the terms,
          covenants and conditions of this Sublease, Sublandlord shall, within
          thirty (30) days following expiration of the Term, return the
          remaining Security Deposit or any balance thereof to Subtenant or, at
          the option of Sublandlord, to the last assignee of Subtenant's
          interest in the Sublease. Sublandlord shall not be required to keep
          the Security Deposit separate from its general funds and Subtenant
          shall not be entitled to any interest on such deposit.

     5.3  If Sublandlord so uses or applies all or any portion of said deposit,
          within ten (10) days after written demand therefor Subtenant shall
          deposit cash with Sublandlord in an amount sufficient to restore the
          Security Deposit to the full extent of the above amount, and
          Subtenant's failure to do so shall be a default under this Sublease.
          In the event Sublandlord transfers its interest in this Sublease,
          Sublandlord shall transfer the then remaining amount of the Security
          Deposit to Sublandlord's successor in interest, and thereafter
          Sublandlord shall have no further liability to Subtenant with respect
          to such Security Deposit

6.   First Month's Rent and Security Deposit. Upon execution of this Sublease,
     Subtenant shall pay to Sublandlord the sum of Sixty-one Thousand Seven
     Hundred Eighty-four Dollars ($61,784.00), representing payment in advance
     of the first month's Base and Additional Rent, plus the sum of One Hundred
     Twenty-four Thousand Three Hundred Twenty Dollars

5
<PAGE>

     ($124,320.00), representing Subtenant's Security Deposit, which is in an
     amount equal to the last two (2) months' Base Rent.

7.   Sublease Term.

     7.1  Initial Sublease Term: The Initial Term of this Sublease shall be for
          a period of Thirty-three (33) months, commencing on May 1, 1999
          ("Commencement Date"), and expiring on January 31, 2002, ("Termination
          Date"). In no event shall the Sublease term extend beyond the term of
          the Master Lease.

     7.2  Option to Extend Term: Provided that Subtenant is not in Default
          beyond any applicable cure period under the Sublease at the time of
          exercise of the Option provided for herein, Subtenant shall have the
          Option ("Option") to extend the Term of this Sublease for one period
          of Eleven (11) months on the same terms, covenants and Conditions
          provided for in this Sublease Agreement, except that the Base Rent due
          hereunder during the Option period shall be as follows:

          Base Rent:    Months      Monthly Rate       Monthly Base Rent
                        ------      ------------       -----------------
                        34-44       $ 1.95/sq ft NNN   $ 65,520.00

          Subtenant shall exercise the Option by giving Sublandlord written
          notice thereof at least One hundred and twenty (120) days prior to the
          expiration of the Initial Sublease Term.

     7.3  Early Possession. If Subtenant, with Sublandlord's consent, totally or
          partially occupies the Premises prior to the Commencement Date, the
          obligation to pay Rent shall be abated for the period of such early
          possession. All other terms of this Sublease Agreement, however, shall
          be in full force and effect during such period. Any such early
          possession shall not alter the Termination Date.

     7.4  Delay in Possession. In the event Sublandlord is unable to deliver
          possession of the Subleased Premises at the commencement of the term,
          Sublandlord shall not be liable for any damage caused thereby, nor
          shall this Sublease be void or voidable but Subtenant shall not be
          liable for Rent until such time as Sublandlord offers to deliver
          possession of the Subleased Premises to Subtenant, but the term hereof
          shall not be extended by such delay. In the event Sublandlord has been
          unable to deliver possession of the Subleased Premises within thirty
          (30) days from the Commencement Date, Subtenant, at Subtenant's
          option, may terminate this Sublease by giving Sublandlord written
          notice thereof.

     7.5  Subtenant Compliance. Sublandlord shall not be required to tender
          possession of the Premises to Subtenant until Subtenant complies with
          its obligation to provide evidence of insurance (Paragraph 14.2).
          Pending delivery of such evidence, Subtenant shall be required to
          perform all of its obligations under this Sublease from and after the
          Commencement Date, including the payment of Rent, notwithstanding
          Sublandlord's election to withhold possession pending receipt of such
          evidence of insurance.

6
<PAGE>

8.   Agreed Use.

     8.1  Use. Subtenant shall occupy and use the Premises only for research and
          development, sales, marketing, administration, general office and
          storage uses, and such other purposes permitted in the Master Lease
          and for no other purpose, unless Sublandlord and Master Landlord
          consent in writing to other uses prior to the commencement thereof.

     8.2  Hazardous Materials. Subtenant agrees that it shall not bring onto the
          Premises any "Hazardous Materials" as that term is defined in Master
          Lease at Section 32 "Environmental Covenants" of Master Lease A and at
          Section 5.3 "Hazardous Materials" of Master Lease B, except to the
          extent permitted under the terms of the Master Lease. Prior to the
          execution of this Sublease, Subtenant shall complete, execute and
          deliver to Sublandlord an Environmental Questionnaire and Disclosure
          Statement (the "Environmental Questionnaire") in the form of Exhibit
          "B" attached to Master Lease B.

9.   Condition - Quiet Enjoyment. Sublandlord will deliver the Premises to
     Subtenant in clean condition on the Commencement Date or earlier possession
     date (Paragraph 7.3), whichever occurs first. At commencement of the
     Sublease all existing electrical, plumbing, fire sprinkler, lighting,
     heating, ventilating and air conditioning systems ("HVAC"), and all other
     such elements in the Premises, other than those constructed by Subtenant
     shall be in good operating condition.

     Sublandlord represents that, to the best of its knowledge, the improvements
     on the Premises comply with all applicable laws, statutes, building and
     occupancy codes, regulations, ordinances, and covenants or restrictions of
     record, (collectively, "Applicable Laws") in effect on the Commencement
     Date. To the best of Sublandlord's knowledge, the Premises are currently in
     compliance with the requirements imposed by the Americans With Disabilities
     Act of 1990 (ADA). Said representations do not apply to the use to which
     Subtenant will put the Premises or to any alterations or utility
     installations made or to be made by Subtenant. Sublandlord further
     represents that, to the best of its knowledge, Sublandlord's use of the
     Premises was strictly in accordance with all Applicable Laws including,
     without limitation, any Applicable Laws requiring Sublandlord to obtain
     closure permits or similar approvals.

10.  Acceptance of Premises. Subtenant acknowledges and agrees that:

     a.   Subtenant is responsible for determining whether or not the condition
          of the Premises (including but not limited to the electrical, HVAC and
          fire sprinkler systems, security, environmental aspects, and
          compliance with current zoning and other Applicable Laws) is
          appropriate for Subtenant's intended use;

     b.   Subtenant has made such investigation as it deems necessary with
          reference to such matters and assumes all responsibility therefore as
          the same relate to its occupancy of the Premises;
<PAGE>

     c.   neither Sublandlord, nor Sublandlord's agents nor broker (if any) has
          made any oral or written representations or warranties with respect to
          said matters other than as set forth in this Sublease Agreement; and
          that

     d.   by entry under the terms of this Sublease Agreement, Subtenant accepts
          the Premises AS IS, as being suitable for Subtenant's intended use,
          and as being in good and sanitary operating order, condition and
          repair (except as to any latent defects in the Building not
          ascertainable by a diligent inspection by Subtenant, and except for
          any breach of Sublandlord's representations set forth in Section 9,
          above).

11.  Subtenant Alterations and Additions.

     11.1 Consent. Subtenant shall not make, or permit to be made, any
          alteration, additions or improvements to the Premises, or any part
          thereof, without the prior written consent of Sublandlord, which shall
          not be unreasonably withheld. Any alterations or additions made to the
          Premises shall be: (i) at Subtenant's sole cost and expense; (ii) in
          compliance with all Applicable Laws (as defined above) and all
          reasonable requirements of Sublandlord; and (iii) in accordance with
          plans and specifications submitted to, and approved in writing by
          Sublandlord prior to commencement of the work. "All reasonable
          requirements" of Sublandlord shall include, without limitation, the
          requirements of any insurer providing coverage for the Premises or the
          real property parcel on which the Premises are located or any part
          thereof. The above requirements shall be deemed supplemental to and
          not in place of provisions governing Alterations and Additions set
          forth in the Master Lease.

     11.2 Compliance With American With Disabilities Act. Subtenant shall be
          responsible for the installation and cost of any and all alterations,
          additions or other work required on or to the Subleased Premises or to
          any other portion of the property of which the Subleased Premises are
          a part, as may be required or made reasonably necessary by the
          Americans With Disabilities Act of 1990 because of: (1) Subtenant's
          use of the Subleased Premises or any portion thereof; (2) any
          alterations, additions, or improvements made by Subtenant to the
          Premises; and/or (3) the use by a transferee of subtenant by reason of
          assignment or sublease. Any alterations or additions made by Subtenant
          to the Premises shall be made in compliance with and conform to the
          requirements of said Act. Compliance with the provisions of this
          Section shall be a condition of Sublandlord granting its consent to
          any assignment or Sublease of all or a portion of this Sublease and
          the Subleased Premises described in this Sublease.

12.  Surrender and Restoration of the Premises. Upon the Termination Date or
     earlier termination of this Sublease, Subtenant shall surrender the
     Premises to Sublandlord in accordance with the same terms and conditions as
     set forth in Section 15.3 of Master Lease B. Additionally, upon the
     Termination Date or earlier termination of this Sublease, Subtenant shall
     remove at its sole cost and expense all Subtenant's alterations and
     additions as to which Sublandlord notified Subtenant at the time consent to
     alterations was given that removal thereof would or might be required,
     unless Sublandlord agrees in writing that
<PAGE>

     Subtenant shall not be required to do so. Subtenant shall repair all damage
     caused by such removal as required under the terms of Section 15.3 of
     Master Lease B.

13.  Maintenance and Utilities.

     13.1 HVAC Maintenance. Subtenant shall, at its sole expense, employ the
          services of a contractor specializing and experienced in the
          maintenance of HVAC equipment to service and maintain the HVAC system
          on the Premises on a regularly scheduled basis and in accordance with
          Sublandlords standards. Any modifications or additions made to the
          HVAC system shall be at Subtenant's sole cost and expense, and may be
          made only with the prior written consent of Sublandlord.

     13.2 Structural. Sublandlord, at Sublandlord's or Landlord's sole cost and
          expense, shall be responsible for any structural repairs to the
          building in which the Premises are located, including repairs to the
          roof, roof screen, floor, slab, footings, foundation, load bearing
          walls and exterior walls.

     13.3 Utilities. Subtenant shall be responsible for and shall pay promptly,
          directly to the appropriate supplier, all charges for water, gas,
          electricity, sewer, heat, light, power, telephone, refuse pickup,
          janitorial service, interior landscape maintenance and all other
          utilities, materials and services furnished directly to Subtenant or
          the Premises or used by Subtenant in, on or about the Premises during
          the Term, together with any taxes thereon. Subtenant's obligation to
          pay utility charges will begin at the Commencement Date.

     13.4 Sublandlord Access. Subtenant shall, upon receipt of reasonable notice
          from Sublandlord, permit Sublandlord to access the Subleased premises
          to do inspections or to provide Sublandlord required maintenance of
          the Subleased Premises.

14.  Subtenant Insurance.

     14.1 Insurance Coverage. Subtenant shall procure and at all times keep in
          full force and effect, insurance coverage as required of "Tenant"
          under the terms of Section 14 of Master Lease A (for the period from
          the Commencement Date through December 31, 2000) and Sections 10.1 and
          Exhibit D of Master Lease B (for the period from January 1, 2001
          through the Termination Date), and further naming Sublandlord and
          Master Landlord as additional insureds on such policies. The limit of
          any insurance shall not limit the liability of Subtenant hereunder.

     14.2 Copy of Insurance Policy. Upon commencement of the Sublease Term and
          thereafter whenever Sublandlord shall reasonably request, Subtenant
          shall furnish Sublandlord with copies of Subtenant's said insurance
          policies or with certificates evidencing, to Sublandlord's reasonable
          satisfaction, that such insurance is in effect.

15.  Indemnification. The respective indemnification obligations of Subtenant
     and Sublandlord herein shall be the same as those of "Tenant" and
     "Landlord" set forth in Section 15 of

9
<PAGE>

     Master Lease A (for the period from the Commencement Date through
     December 31, 2000), and in Sections 10.3, 10.4 and 10.5 of Master Lease B
     (for the period from January 1, 2001 through the Termination Date). For
     purposes of Section 15(a) of Master Lease A and Section 10.3 of Master
     Lease B, however, wherever the word "Landlord" is used it shall be deemed
     to mean "Sublandlord and Master Landlord".

16.  Right To Sublease. Subtenant shall have the right to sublease or assign its
     Sublease only with prior written approval from Sublandlord and Master
     Landlord. Such approval shall not unreasonably withheld.

17.  Notices. All notices, demands, consents and approvals which may be or are
     required to be given by either party to the other hereunder shall be given
     in the manner provided in the Master Lease, at the addresses shown on the
     signature page hereof. Sublandlord shall notify Subtenant of any Event of
     Default under the Master Lease, or of any other event of which Sublandlord
     has actual knowledge which will impair Subtenant's ability to conduct its
     normal business at the Subleased Premises, as soon as reasonably
     practicable following Sublandlord's receipt of notice from the Landlord of
     an Event of Default or actual knowledge of such impairment. If Sublandlord
     elects to terminate the Master Lease, Sublandlord shall so notify Subtenant
     by giving at least 30 days notice prior to the effective date of such
     termination.

18.  Broker Fee. Sublandlord and Subtenant each represent and warrant to the
     other that neither it nor its officers or agents nor anyone acting on its
     behalf has dealt with any real estate broker in the negotiating or making
     of this Amendment except Cornish and Carey Commercial, which has
     represented Sublandlord, and CRESA Partners, LLC, which has represented
     Subtenant; and each party agrees to indemnify and hold harmless the other
     from any claim or claims, and costs and expenses, including attorneys'
     fees, incurred by the indemnifying party in conjunction with any such claim
     or claims of any broker or brokers. Sublandlord is responsible for payment
     of leasing obligations only to Cornish and Carey Commercial.

19.  Sublandlord Right to Cure Defaults. If Subtenant fails to pay any sum of
     money due to Sublandlord or fails to perform any other act on its part to
     be performed hereunder beyond any applicable cure period following any
     required notice provided for herein, then Sublandlord may, but will not be
     obligated to, make such payment or perform such act. In such event,
     Sublandlord may only make payment on behalf of Subtenant under this
     Sublease five (5) days or more following Sublandlord's written notice to
     Subtenant of any such breach; and Sublandlord may only perform an act on
     behalf of Subtenant under this Sublease fifteen (15) days or more following
     Sublandlord's written notice to Subtenant of any such breach. All such sums
     paid, and all costs and expenses of performing any such act, will be deemed
     additional Rent payable by Subtenant to Sublandlord upon demand, together
     with interest thereon as hereinafter provided, until repaid.

20.  Late Charge. Notwithstanding any other provisions of this Sublease,
     Subtenant hereby acknowledges that late payment to Sublandlord of Rent, or
     other amounts due hereunder will cause Sublandlord to incur costs not
     contemplated by this Sublease, the exact amount of

10
<PAGE>

     which will be extremely difficult to ascertain. If any Rent or other sums
     due from Subtenant are not received by Sublandlord or by Sublandlord's
     designated agent within ten (10) days after their due date, then Subtenant
     shall pay to Sublandlord, for each month or partial month during which each
     overdue amount remains unpaid, a late charge equal to ten percent (10%) of
     such overdue amount if Sublandlord has given Subtenant written notice that
     Sublandlord has not received such amounts, or five percent (5%) of such
     overdue amount if Sublandlord has not given Subtenant such written notice,
     plus any attorneys' fees incurred by Sublandlord in connection with
     Subtenant's failure to pay Rent and/or other charge when due hereunder.
     Sublandlord and Subtenant hereby agree that such late charge represents a
     fair and reasonable estimate of the cost that Sublandlord will incur by
     reason of Subtenant's late payment. Sublandlord's acceptance of such late
     charge shall not constitute a waiver of Subtenant's default with respect to
     such overdue amount or stop Sublandlord from exercising any of the other
     rights and remedies granted under this Sublease.

       Initials:       Sublandlord                   Subtenant /s/ DWG
                                  ----------------            ---------------

21.  Interest. Any installment of Rent and any other sum due from Subtenant
     under this Sublease which is not received by Sublandlord within ten (10)
     days from when the same is due shall bear interest from such tenth (10th)
     day until paid at an annual rate of ten percent (10%) per annum. Payment of
     such interest shall not excuse or cure any Default by Subtenant. In
     addition, Subtenant shall pay all costs and attorney's fees incurred by
     Sublandlord in collection of such amounts.

22.  Entire Agreement. This Sublease, including any Exhibits or Attachments
     attached hereto, which are hereby incorporated herein by this reference,
     contain the entire agreement of the parties hereto, and no representations,
     inducements, promises or agreements, oral or otherwise, between the
     parties, not embodied herein shall be of any force and effect.

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

24.  Binding Effect; Governing Law. This Sublease Agreement shall be binding
     upon the parties, their personal representatives, successors and assigns
     and shall be governed by the laws of the State of California. Any
     litigation between the Parties hereto concerning this Sublease shall be
     initiated in Santa Clara County.

25.  Construction of Agreement. In construing this Sublease Agreement, all
     headings and titles are for the convenience of the parties only and shall
     not be considered a part of this Lease. Whenever required by the context,
     the singular shall include the plural and vice versa. This Sublease shall
     not be construed as if prepared by one of the parties, but rather according
     to its fair meaning as a whole, as if both parties had prepared it.

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

11
<PAGE>

27.  Attorneys Fees. In the event any legal action or proceeding, including
     arbitration and declaratory relief, is commenced for the purpose of
     enforcing any rights or remedies pursuant to this Sublease, the prevailing
     party shall be entitled to recover from the non-prevailing party reasonable
     attorneys' fees, as well as costs of suit, in said action or proceeding,
     whether or not such action is prosecuted to judgment.

28.  Master Landlord Consent. Subtenant acknowledges and agrees that
     Sublandlord's ability to Sublease the Premises to Subtenant and to enter
     into this Sublease Agreement is subject to the prior consent of Master
     Landlord as provided in the Master Lease. Should Master Landlord refuse its
     consent to the Sublease of the Premises to Subtenant hereunder, either
     party shall have the absolute right to cancel this Sublease Agreement, by
     giving written notice to the other party. In the event of such cancellation
     following Subtenant's entry into possession, Subtenant shall immediately
     surrender the Premises to Sublandlord in accordance with the terms of
     paragraph 12 herein, at which time Sublandlord shall, within fifteen (15)
     days thereafter, return to Subtenant the Rent and the Security Deposit paid
     by Subtenant to Sublandlord. In such event, Sublandlord shall not be
     responsible to Subtenant for any expenses Subtenant may have incurred by
     reason of its entering into this Sublease Agreement.

     WITH INTENT TO BE BOUND, Sublandlord and Subtenant have signed this
Sublease Agreement on the date set forth below.

Sublandlord: Trimble Navigation Limited

By:  /s/ Mary Ellen Genovese                 Date:  3/26/99
   ------------------------------                 -------------------------
   AUTHORIZED SIGNATURE
                                                  Address for Notice:
   Mary Ellen Genovese                            -------------------
   Vice President, Finance
                                                  Trimble Navigation Limited
                                                  Real Estate Dept.
                                                  P.O. Box 3642
                                                  Sunnyvale, CA 94088-3642

Subtenant:  Scios, Inc.

By:  /s/ David W. Gryska                     Date:  3/29/99
   ------------------------------                 -------------------------
   AUTHORIZED SIGNATURE

   David W. Gryska                                Address for Notice:
   ------------------------------
   PRINT NAME
                                                  810 W. Maude
                                                  -------------------------
   CFO
   ------------------------------                 Sunnyvale, CA 94086
                                                  -------------------------

                                                  -------------------------

Exhibit A -    Floor Plan
Attachment I - Master Lease [Consisting of Industrial Lease Agreement, dated
               April 1, 1995, and First Amendment to Lease, dated June 12, 1995
               (for the period April 1, 1995 through December 31, 2000, "Master
               Lease A"; and Industrial Lease dated March 24, 1999 (for the
               period January 1, 2001 through December 31, 2005, "Master Lease
               B".]

12

<PAGE>

MASTER LANDLORD CONSENT

The undersigned, Landlord under the Master Lease attached as Attachment I, (1)
represents and warrants that the Master Lease is full force and effect and there
are no defaults thereunder by either party nor any event which, with the giving
of notice or passing of time, would constitute a default: and (2) hereby
consents to the subletting of the Subleased Premises described herein on the
terms and conditions contained in this Sublease. This Consent shall apply only
to this Sublease and shall not be deemed to be a consent to any other Sublease.
The undersigned agrees to give a copy of any notices sent to Sublandlord to
Subtenant concurrently.

Master Landlord:   AETNA LIFE INSURANCE

By: ______________________               Date:_____________________
    SIGN NAME

    ______________________
    PRINT NAME

ATTORNMENT AGREEMENT

Subtenant shall attorn to Master Landlord ("Landlord") and perform all of
Subtenant's obligations under the Sublease directly to Master Landlord as if
Master Landlord were the Landlord under the Sublease. If Subtenant is not, at
the time of the notice, in default, Master Landlord shall continue to recognize
the estate of Subtenant created under the Sublease. If Subtenant is not in
default, the Sublease shall continue with the same force and effect as if Master
Landlord and Sublandlord had entered into a lease on the same provisions as
those contained in the Sublease, including, without limitation, Subtenant's
right to extend the term of the Lease.

Subtenant: Scios, Inc.

By: /s/ DAVID W. GRYSKA              Date:   3/29/99
    -----------------------               ---------------------
    SIGN NAME

    DAVID W. GRYSKA
    -----------------------
    PRINT NAME

13

<PAGE>

                                   EXHIBIT A

The attached plan identified as A-1 shows Subtenant's intended alterations and
improvements, which Sublandlord has approved. Sublandlord's approval is
conditioned upon Subtenant restoring the outlined portions of the new
alterations and improvements as shown on A-2.

<PAGE>

                                 [FLOOR PLAN]
<PAGE>

                                 [FLOOR PLAN]

<PAGE>

                           INDUSTRIAL LEASE AGREEMENT
                           --------------------------

                             BASIC LEASE INFORMATION

<TABLE>
<CAPTION>

<S>                                 <C>
Lease Date:                         June 6, 1994

Landlord:                           AETNA LIFE INSURANCE COMPANY,
                                    a Connecticut corporation

Landlord's Address:                 c/o Koll Management Services, Inc.
                                    1450 Koll Circle, Suite 104
                                    San Jose, California 95112

Tenant:                             TRIMBLE NAVIGATION LIMITED
                                    a California corporation

Tenant's Address:                   645 N. Mary Avenue
                                    Sunnyvale, California 94086

Premises Address:                   749 N. Mary Avenue
                                    Sunnyvale, California 94086

Building Square
Footage:                            Approximately thirty-three thousand six hundred (33,600)
                                    rentable square feet

Term:                               Forty-five (45) months commencing on April 1, 1995
                                    ("Commencement Date") and expiring on December 31,
                                    1998 ("Expiration Date")

Monthly Base Rent:                  Period                Sq. Ft.       Monthly Rate         Monthly Rent
                                    ------                -------       ------------         ------------

                                    April 1, 1995          33,600   x     $0.72          =     $24,192
                                    through
                                    December 31, 1998

Prepaid Rent:                       Twenty-Four Thousand One Hundred Ninety-Two Dollars
                                    ($24,192)

Period To Which                     Last one-half (1/2) of the third month of the Term and the first
Prepaid Rent Applied:               one-half (1/2) of the fourth month of the Term

Security Deposit:                   Twenty-Four Thousand One Hundred Ninety-Two Dollars
                                    ($24,192)

Permitted Use:                      Light manufacturing, research and development, sales,
                                    marketing, administration, and offices

Tenant Improvements                 One Hundred Fifty-One Thousand Two Hundred Dollars
Allowance:                          ($151,200)

Architect:                          James Dumas & Associates

Exhibits:                           Exhibit A   - Legal Description of the Premises
                                    Exhibit B   - Tenant Improvements
                                    Exhibit B-1 - Final Plans and Specifications for Tenant
                                                  Improvements
                                    Exhibit C   - Most Recent Environmental Report
</TABLE>

Single Tenant With Tenant Improvements
VILOO2-K.b (B) c3 gcn 10/13/94                     1
<PAGE>

                                TABLE OF CONTENTS
                                -----------------

SECTION                                                                    Page
-------                                                                    ----

 1.    DEMISE..............................................................   4
 2.    PREMISES............................................................   4
 3.    TERM................................................................   4
 4.    RENT................................................................   4
 5.    LATE CHARGE.........................................................   6
 6.    SECURITY DEPOSIT....................................................   7
 7.    POSSESSION..........................................................   7
 8.    USE OF PREMISES.....................................................   7
 9.    ACCEPTANCE OF PREMISES..............................................   7
10.    SURRENDER...........................................................   8
11.    ALTERATIONS AND ADDITIONS..........................................    8
12.    MAINTENANCE OF PREMISES.............................................   8
13.    LANDLORD'S INSURANCE................................................   9
14.    TENANT'S INSURANCE..................................................  10
15.    INDEMNIFICATION.....................................................  10
16.    SUBROGATION.........................................................  11
17.    ABANDONMENT.........................................................  11
18.    FREE FROM LIENS.....................................................  11
19.    ADVERTISEMENTS AND SIGNS............................................  11
20.    UTILITIES...........................................................  11
21.    ENTRY BY LANDLORD...................................................  11
22.    DESTRUCTION AND DAMAGE..............................................  11
23.    CONDEMNATION........................................................  13
24.    ASSIGNMENT AND SUBLETTING...........................................  13
25.    TENANT'S DEFAULT....................................................  14
26.    LANDLORD'S REMEDIES.................................................  15
27.    ATTORNEY'S FEES.....................................................  16
28.    TAXES...............................................................  16
29.    EFFECT OF CONVEYANCE................................................  16
30.    TENANTS ESTOPPEL CERTIFICATE........................................  17
31.    SUBORDINATION.......................................................  17

                                        2
<PAGE>

                                TABLE OF CONTENTS
                                -----------------
                                   (Continued)

SECTION                                                                    Page
-------                                                                    ----

32.    ENVIRONMENTAL COVENANTS.............................................  17
33.    NOTICES.............................................................  19
34.    WAIVER..............................................................  19
35.    HOLDING OVER........................................................  19
36.    SUCCESSORS AND ASSIGNS..............................................  19
37.    TIME................................................................  19
38.    BROKERS.............................................................  19
39.    LIMITATION OF LIABILITY.............................................  20
40.    FINANCIAL STATEMENTS................................................  20
41.    RULES AND REGULATIONS...............................................  20
42.    MORTGAGEE PROTECTION................................................  20
43.    ENTIRE AGREEMENT....................................................  20
44.    INTEREST............................................................  21
45.    CONSTRUCTION........................................................  21
46.    REPRESENTATIONS AND WARRANTIES OF TENANT............................  21
47.    REPRESENTATIONS AND WARRANTIES OF LANDLORD..........................  21
48.    MEMORANDUM OF LEASE.................................................  21
49.    QUIET ENJOYMENT.....................................................  21

EXHIBIT A: LEGAL DESCRIPTION OF THE PREMISES

EXHIBIT B: TENANT IMPROVEMENTS

EXHIBIT B-1: FINAL PLANS AND SPECIFICATIONS FOR TENANT
             IMPROVEMENTS

EXHIBIT C: MOST RECENT ENVIRONMENTAL REPORT

                                        3
<PAGE>

                                 LEASE AGREEMENT
                                 ---------------

     This Lease Agreement is made and entered into by and between Landlord and
Tenant on the Lease Date. The terms used in this Lease which are set forth in
the Basic Lease Information set forth on page 1 of this Lease Agreement ("Basic
Lease Information") shall have the meanings given them in the Basic Lease
Information. The Basic Lease Information, the exhibit(s), the addendum or
addenda described in the Basic Lease Information, and this Lease Agreement are
and shall be construed as a single instrument and are referred to herein as the
"Lease".

     1.   DEMISE: In consideration for the rents and all other charges and
payments payable by Tenant, and for the agreements, terms and conditions to be
performed by Tenant in this Lease, LANDLORD DOES HEREBY LEASE TO TENANT, AND
TENANT DOES HEREBY HIRE AND TAKE FROM LANDLORD, the premises described in
Paragraph 2 below (the "Premises"), upon the agreements, terms and conditions of
this Lease for the Term hereinafter stated.

     2.   PREMISES: The Premises demised by this Lease are the land, Building
(hereafter defined) and related improvements comprising the real property
located in Sunnyvale, Santa Clara County, California, more particularly
described in Exhibit A, which is attached hereto and incorporated herein by this
             ---------
reference, and having the address specified in the Basic Lease Information. The
building ("Building") which is a portion of the Premises contains the amount of
rentable square footage specified in the Basic Lease Information. Tenant shall
have the exclusive right to use the parking and other common areas on the
Premises. No easement for light or air is incorporated in the Premises.

     The Premises demised by this Lease shall also include the Tenant
Improvements (as that term is defined in Exhibit B, attached hereto and
                                         ---------
incorporated herein by this reference) to be constructed by Landlord within the
interior of the Building. Landlord shall construct the Tenant Improvements on
the terms and conditions set forth in Exhibit B. Landlord and Tenant agree to
                                      ---------
and shall be bound by the terms and conditions of Exhibit B.
                                                  ---------

     3.   TERM: The term of this Lease ("Term") shall be for the period of
months specified in the Basic Lease Information, commencing on the Commencement
Date specified in the Basic Lease Information and expiring on the Expiration
Date specified in the Basic Lease Information.

     Tenant hereby acknowledges that the Premises are currently occupied by
MasPar Computer Corporation, a California corporation, under a lease whose term
does not expire until March 31, 1995.

     4.   RENT:

          (a)  Base Rent. Tenant shall pay to Landlord, in advance on the first
               ---------
day of each month of the Term, without further notice or demand and without
offset or deduction, the monthly installments of rent specified in the Basic
Lease Information (the "Base Rent").

     Provided Tenant is not in Default at the time of abatement and further
provided that Tenant shall have never been in Default at any time prior to the
time of such abatement, Landlord hereby agrees to abate Tenant's obligation to
pay Base Rent for the first two and one-half (2-1/2) months of the Lease Term.
During such abatement period, Tenant shall still be responsible for the payment
of all of its other monetary obligations under the Lease, including without
Limitation, Additional Rent (hereafter defined in Paragraph 4(b)) and any
expenses relative to Tenant's use and occupancy of the Premises. In the event of
a Default by Tenant under the terms of this Lease, then in addition to other
sums which Landlord is permitted to recover, Landlord shall be entitled to
recover the Base Rent which was abated pursuant to the provisions of this
paragraph. The abated Base Rent shall become due and payable by Tenant to
Landlord as "Rent" under the Lease within three (3) days after written demand
therefor by Landlord.

     Upon execution of this Lease, Tenant shall pay to Landlord the Prepaid Rent
specified in the Basic Lease Information to be applied toward Base Rent for the
period of the Term specified in the Basic Lease Information.

                                        4
<PAGE>

     (b)  Additional Rent. In addition to the Base Rent, Tenant shall pay to
          ---------------
Landlord, in accordance with this Paragraph 4, all of the following items
related to the Premises (the "Additional Rent"):

          (1)  Taxes and Assessments. All real estate taxes and assessments
               ---------------------
levied, assessed or imposed against the Premises. Real estate taxes and
assessments shall include any form of assessment, license, fee, levy, penalty
(if a result of Tenant's delinquency), or tax (other than income, estate,
succession, inheritance, transfer or franchise taxes), levied assessed or
imposed against the Premises by any authority having the direct or indirect
power to tax, or by any city, county, state or federal government or any
improvement or other district or division thereof, whether such tax is (i)
determined by the area of the Premises, or any part thereof, or the Rent and
other sums payable hereunder by Tenant or by other tenants, including, but not
limited to, any gross income or excise tax levied by any of the foregoing
authorities with respect to receipt of Rent or other sums due under this Lease;
(ii) upon any legal or equitable interest of Landlord in the Premises, or any
part thereof; (iii) upon this transaction or any document to which Tenant is a
party creating or transferring any interest in the Premises; (iv) levied or
assessed in lieu of, in substitution for, or in addition to, existing or
additional real estate taxes against the Premises, whether or not now customary
or within the contemplation of the parties; or (v) surcharged against the
parking area. Tenant and Landlord acknowledge that Proposition 13 was adopted by
the voters of the State of California in the June, 1978 election and that
assessments, taxes, fees, levies and charges may be imposed by governmental
agencies for such purposes as fire protection, street, sidewalk, road, utility
construction and maintenance, refuse removal and for other governmental services
which may formerly have been provided without charge to property owners or
occupants. It is the intention of the parties that all new and increased
assessments, taxes, fees, levies and charges due to Proposition l3 or any other
cause are to be included within the definition of real property taxes and
assessments for purposes of this Lease. If the Commencement Date occurs on a
date other than the first day of a calendar year or the Expiration Date or the
date of an earlier termination of the Term of this Lease occurs on a date other
than the last day of a calendar year, then real estate taxes and assessments
shall be prorated and apportioned to coincide with the Commencement Date,
Expiration Date or earlier termination date of the Term of this Lease.

          (2)  Insurance. All insurance premiums, including premiums for fire,
               ---------
extended coverage, and "all risk" (including earthquake endorsements) insurance
for the Building, public liability insurance, other insurance as Landlord deems
necessary provided such insurance is customarily carried by landlords of
comparable projects in the community, and any deductibles paid under policies of
such insurance. Notwithstanding the foregoing to the contrary, Additional Rent
shall not include and Tenant shall not be responsible for the following: (a) any
deductible amount in excess of Twenty Five Thousand Dollars ($25,000) per
occurrence for insured flood coverage; (b) any deductible amount for insured
earthquake coverage; and (c) any deductible amount in excess of Ten Thousand
Dollars ($10,000) per occurrence for any perils insured against under fire,
extended coverage, and "all risk" insurance policy or policies [except those
perils referred to in items (a) and (b) above, the deductibles for which are
limited as provided for in said items (a) and (b)]. In addition, notwithstanding
the foregoing to the contrary, Additional Rent shall not include and Tenant
shall not be responsible for any increased cost of earthquake endorsement(s)
which exceeds One Thousand One Hundred Sixty-Nine Dollars ($1,169.00), the
annual cost of such endorsement(s) as of the Lease Date specified in the Basic
Lease Information for or allocable to the Building, plus fifteen percent (15%)
thereof per year, not compounded.

          (3)  Outside Areas Expenses. All costs incurred by Landlord to
               ----------------------
maintain, repair, replace, supervise, insure (including provision of public
liability insurance) and administer the outside areas of the Premises ("Outside
Areas"), including parking areas, landscaping (including maintenance contracts),
sprinkler systems, sidewalks, driveways, curbs, lighting systems, and utilities
for the Outside Areas.

          (4)  Parking Charges. Any parking charges or other costs levied
               ---------------
assessed or imposed by, or at the direction of, or resulting from statutes or
regulations, or interpretations thereof, promulgated by any governmental
authority or insurer in connection with the use or occupancy of the Premises.

          (5)  Maintenance and Repair of Building. All costs to maintain and
               ----------------------------------
repair the structural portions of the roof, the roof coverings, the foundation,
the floor slab, the load bearing walls, and the exterior walls (including the
painting thereof) of the Building, and all costs to maintain and repair all
utility and plumbing systems, fixtures and equipment serving the Building but
which are located in the Outside Areas. Notwithstanding the foregoing if the
roof covering is replaced, the cost of such replacement shall, in accordance
with generally accepted accounting principles consistently applied, be

                                        5
<PAGE>

amortized on a monthly basis over the useful life of the replacement, together
with interest thereon at the rate of ten percent (10%) per annum, and Tenant
shall pay to Landlord as Additional Rent such amortized amount for each month
after such replacement is completed until the earlier of (i) the expiration of
the Term of (ii) the end of the amortization period.

              (6)  Management and Administration. An amount equal to eight
                   -----------------------------
percent (8%) of the total sum of the items described in paragraphs 4(b)(1)
through 4(b)(5) above, representing Landlord's costs for management and
administration of the Premises, including a property management fee, accounting,
auditing, billing, postage, employee benefits, payroll taxes, etc.

              (c)  Payment of Additional Rent.
                   --------------------------

              (1)  Upon commencement of this Lease, Landlord shall submit to
Tenant an estimate of monthly Additional Rent for the period between the
Commencement Date and the following December 31 and Tenant shall pay such
estimated Additional Rent on a monthly basis concurrently with the payment of
the Base Rent. Tenant shall continue to make said monthly payments until
notified by Landlord of a change therein. By March 1 of each calendar year or as
soon thereafter as Landlord is able to do so, Landlord shall provide to Tenant a
statement showing the actual Additional Rent due to Landlord for the prior
calendar year, prorated from the Commencement Date during the first year. If the
total of the monthly payments of Additional Rent that Tenant has made for the
prior calendar year (or portion thereof during which this Lease was in effect)
is less than the actual Additional Rent chargeable to Tenant for such prior
calendar year, then Tenant shall pay the difference in a lump sum within ten
(10) days after receipt of such statement from Landlord. Any overpayment by
Tenant of Additional Rent for the prior calendar year shall be credited towards
the Additional Rent next due.

              (2)  The actual Additional Rent for the prior calendar year shall
be used for purposes of calculating Tenant's monthly payment of estimated
Additional Rent for the current year, subject to adjustment as provided above,
except that in any year in which resurfacing of the parking area or material
roof repairs are planned, Landlord may include the estimated cost of such work
in the estimated monthly Additional Rent. Landlord shall make the final
determination of Additional Rent for the year in which this Lease terminates as
soon as possible after termination of such year. Tenant shall remain liable for
payment of any amount due to Landlord in excess of the estimated Additional Rent
previously paid by Tenant, and, conversely, Landlord shall promptly return to
Tenant any overpayment, even though the Term has expired and Tenant has vacated
the Premises. Failure of Landlord to submit statements as called for herein
shall not be deemed a waiver of Tenant's obligation to pay Additional Rent as
herein provided.

              (d)  General Payment Terms. The Base Rent, Additional Rent and all
                   ---------------------
other sums payable by Tenant to Landlord hereunder are referred to as the
"Rent". All Rent shall be paid without deduction, offset or abatement in lawful
money of the United States of America. Checks are to be made payable to Aetna
Life insurance Company and shall be mailed to: Department 66169, El Monte,
California 91735, or to such other person or place as Landlord may, from time to
time, designate to Tenant in writing. If the Commencement Date is on a date
other than the first day of the calendar month or the Expiration Date or the
date of an earlier termination of the Lease occurs on a date other than the last
day of a calendar month, then Rent shall be prorated for the portion of said
calendar month on the basis of a thirty (30) day month.

         5.   LATE CHARGE: Notwithstanding any other provision of this Lease,
Tenant hereby acknowledges that late payment to Landlord of Rent, or other
amounts due hereunder will cause Landlord to incur costs not contemplated by
this Lease, the exact amount of which will be extremely difficult to ascertain.
If any Rent or other sums due from Tenant are not received by Landlord or by
Landlord's designated agent within ten (10) days after their due date, then
Tenant shall pay to Landlord a late charge equal to ten percent (10%) of such
overdue amount if Landlord has given Tenant written notice that Landlord has not
received such amounts or five percent (5%) of such overdue amount if Landlord
has not given Tenant such written notice, plus any attorneys' fees by Landlord
by reason of Tenant's failure to pay Rent and/or other charge when due
hereunder. Landlord and Tenant hereby agree that such late charge represent a
fair and reasonable estimate of the cost that Landlord will incur by reason of
Tenant's late payment. Landlord's acceptance of such late charge shall not
constitute a waiver of Tenant's default with respect to such overdue amount or
estop Landlord from exercising any of the other rights and remedies granted
under this Lease.

                                       6
<PAGE>

              Initials:

              Landlord /s/                      Tenant /s/

         6.   SECURITY DEPOSIT: Concurrently with Tenant's execution of the
Lease, Tenant shall deposit with Landlord the Security Deposit specified in the
Basic Lease Information as security for the full and faithful performance of
each and every term, covenant and condition of this Lease. Landlord may use,
apply or retain the whole or any part of the Security Deposit as may be
reasonably necessary (a) to remedy Tenant's default in the payment of any Rent,
(b) to repair damage to the Premises caused by Tenant, (c) to clean the Premises
upon termination of this Lease, (d) to reimburse Landlord for the payment of any
amount which Landlord may reasonably spend or be required to spend by reason of
Tenant's default, or (e) to compensate Landlord for any other loss or damage
which Landlord may suffer by reason of Tenant's default. Should Tenant
faithfully and fully comply with all of the terms, covenants and conditions of
this Lease, within thirty (30) days following the expiration of the Term, the
Security Deposit or any balance thereof shall be returned to Tenant or, at the
option of Landlord, to the last assignee of Tenant's interest in this Lease.
Landlord shall not be required to keep the Security Deposit separate from its
general funds and Tenant shall not be entitled to any interest on such deposit.
If Landlord so uses or applies all or any portion of said deposit, within ten
(10) days after written demand therefor Tenant shall deposit cash with Landlord
in an amount sufficient to restore the Security Deposit to the full extent of
the above amount, and Tenant's failure to do so shall be a default under this
Lease. In the event Landlord transfers its interest in this Lease, Landlord
shall transfer the then remaining amount of the Security Deposit to Landlord's
successor in interest, and thereafter Landlord shall have no further liability
to Tenant with respect to such Security Deposit.

         7.   POSSESSION: Tenant shall be entitled to possession of the Premises
upon substantial completion of the Tenant Improvements.

         8.   USE OF PREMISES:

         (a)  Permitted Uses. The Building shall be used for the Permitted Uses
              --------------
specified in the Basic Lease Information and no other. The remainder of the
Premises shall be used only for ingress, egress and parking in designated areas,
provided, however, Tenant may use areas adjoining the Building for temporary
outside testing of Tenant's products as long as such use is in full compliance
with all city and other governmental ordinances, rules and regulations. The
Premises shall not be used to create any nuisance or trespass, for any illegal
purpose, for any purpose not permitted by applicable laws and regulations, or
for any purpose that would vitiate the insurance or increase the premiums for
insurance on the Premises. Tenant agrees not to overload the floor(s) of the
Building.

         (b)  Compliance with Governmental Regulations. Tenant shall, at
              ----------------------------------------
Tenant's expense, faithfully observe and comply with all Municipal, State and
Federal statutes, rules, regulations, ordinances, requirements, and orders, now
in force or which may hereafter be in force pertaining to the Premises or
Tenant's use thereof, including without limitation, any statutes, rules,
regulations, ordinances, requirements, or orders requiring installation of fire
sprinkler systems, seismic reinforcement and related alterations, and removal of
asbestos, whether substantial in cost or otherwise, and all recorded covenants,
conditions and restrictions affecting the Premises ("Private Restrictions") now
in force or which may hereafter be in force; provided, however, that Tenant
shall not be required to make structural changes or other capital improvements
to the Premises or Building not related to Tenant's specific use of the Premises
unless the requirement for such changes is imposed as a result of any
improvements or additions made or proposed to be made at Tenant's request. The
judgment of any court of competent jurisdiction, or the admission of Tenant in
any action or proceeding against Tenant, whether Landlord be a party thereto or
not, that Tenant has violated any such rule, regulation, ordinance, statute or
Private Restrictions, shall be conclusive of that fact as between Landlord and
Tenant.

     9.  ACCEPTANCE OF PREMISES: By entry hereunder, Tenant accepts the
Premises as suitable for Tenant's intended use and as being in good and sanitary
operating order, condition and repair (except as to latent defects in the
Building not ascertainable by a diligent inspection by Tenant), AS IS, and
without representation or warranty by Landlord as to the condition, use or
occupancy which may be made thereof. Any exceptions to the foregoing must be by
written agreement executed by Landlord and Tenant.

                                        7
<PAGE>

         10.  SURRENDER: Tenant agrees that on the last day of the Term, or on
the sooner termination of this Lease, Tenant shall surrender the Premises to
Landlord (a) in good condition and repair (damage by acts of God, fire, and
normal wear and tear excepted), but with all interior walls of the Building
painted or cleaned so they appear painted, any carpets within the Building
cleaned, and with all floors of the Building cleaned and waxed, together with
all alterations, additions and improvements which may have been made in or on
the Premises; except that Tenant at its expense shall remove (i) trade fixtures
put in at the expense of Tenant, and (ii) except as otherwise provided in
Paragraph 11(c), any alterations, additions, or improvements as to which
Landlord has, prior to the date of surrender, consented to or requested to be
removed; and (b) otherwise in accordance with Paragraph 32(f). Tenant shall
repair all damage caused by such removal and otherwise restore the Premises in
accordance with the preceding sentence at Tenant's sole cost and expense. On or
before the expiration or sooner termination of this Lease, Tenant shall remove
all of Tenant's personal property from the Premises. All property of Tenant not
so removed, unless such non-removal is consented to by Landlord, shall be deemed
abandoned by Tenant, provided that in such event Tenant shall remain liable to
                     -------- ----
Landlord for all costs incurred in storing and disposing of such abandoned
property of Tenant. If the Premises are not surrendered at the end of the Term
or sooner termination of this Lease, and in accordance with the provisions of
this Paragraph 10 and of Paragraph 32(f), Tenant hereby indemnifies Landlord
against loss or liability resulting from delay by Tenant in so surrendering the
Premises including, without limitation, any claims made by any succeeding tenant
founded on such delay.

         11.  ALTERATIONS AND ADDITIONS:

              (a)  Tenant shall not make, or permit to be made, any alteration
or addition to the Premises, or any part thereof, without the prior written
consent of Landlord, such consent not to be unreasonably withheld.

              (b)  Any alteration or addition to the Premises shall be at
Tenant's sole cost and expense, in compliance with all applicable laws and all
reasonable requirements of Landlord, and in accordance with plans and
specifications approved in writing by Landlord.

              (c)  In the event Landlord consents to a proposed alteration or
addition, such consent shall include Landlord's advice whether or not Landlord
requires that such proposed alteration or addition be removed at the expiration
or termination of this Lease. If Landlord fails so to advise Tenant in writing
at the time Landlord consents to the proposed alteration or addition that such
alteration or addition must be removed by Tenant at the expiration or
termination of this Lease, then Tenant shall not be required to do so, and
Tenant shall surrender the alteration or addition to Landlord with the Premises,
without compensation to Tenant, at the expiration or termination of this Lease.
In the event that Tenant makes any alterations or additions to the Premises, or
any part thereof, without the prior written consent of Landlord as required
hereunder, then Tenant at its sole expense shall remove any such alteration or
addition at the expiration or termination of this Lease if Landlord requests
that such alteration or addition be removed. All additions, alterations or
improvements made to the Premises, including, but not limited to, heating,
lighting, electrical, air conditioning, fixed partitioning, drapery, wall
covering and paneling, built-in cabinet work and carpeting installations made by
Tenant, together with all property that has become an integral part of the
Premises, shall at once be and become the property of Landlord, and shall not be
deemed trade fixtures.

         (d)  Tenant agrees not to proceed to make such alterations or
additions, notwithstanding consent from Landlord to do so, until five (5) days
after Tenant's receipt of such consent, in order that Landlord may post
appropriate notices to avoid any liability to contractors or material suppliers
for payment for Tenant's improvements. Tenant will at all times permit such
notices to be posted and to remain posted until the completion of work.

     12. MAINTENANCE OF PREMISES:

         (a)  Maintenance by Landlord. Subject to the provisions of Paragraphs
              -----------------------
12(b), 22 and 23, and further subject to Tenant's obligation under Paragraph 4
to reimburse Landlord, in the form of Additional Rent, for the cost and expense
of the following items, Landlord agrees to keep and maintain in good order and
condition, repair, and replace the following items: the structural portions of
the roof and the roof coverings (provided that Tenant installs no additional air
conditioning or other equipment on the roof that damages structural portions of
the roof or the roof coverings), the foundation, the floor slab, the load
bearing walls, and the exterior walls (excluding any glass therein but including
the painting thereof) of the Building; the utility and plumbing systems,
fixtures, and equipment located outside the Building; and the parking areas,
landscaping, sprinkler systems, sidewalks, driveways, curbs, and lighting
systems in the Outside Areas. Landlord

                                        8
<PAGE>

shall not be required to repair or maintain conditions created due to any act,
negligence or omission of Tenant or its agents, contractors, employees or
invitees occurring during the Term of this Lease. Landlord's obligation
hereunder to repair and maintain is subject to the condition precedent that
Landlord shall have received written notice of the need for such repairs and
maintenance. Tenant shall promptly report in writing to Landlord any defective
condition known to it which Landlord is required to repair.

         (b)  Maintenance by Tenant. Tenant shall, at its sole expense, (1)
              ---------------------
keep and maintain in good order and condition, repair, and replace the Building,
and every part thereof, including glass, windows, window frames, skylights,
interior and exterior doors and door frames of the Building, and the interior of
the Building, (excepting only those portions of the Building to be maintained,
repaired or replaced by Landlord as provided in Paragraph 12(a) above), (2) keep
and maintain in good order and condition, repair, and replace all utility and
plumbing systems, fixtures and equipment, including without limitation,
electricity, gas, water, and sewer, located in or on the Building, and furnish
all expendables, including light bulbs, paper goods and soaps, used in the
Building, (3) repair all damage to the Building or the Outside Areas occurring
during the term of this Lease or the term of the Previous Lease caused by the
negligence or willful misconduct of Tenant or its agents, employees, contractors
or invitees. Tenant shall not do anything to cause any damage, deterioration or
unsightliness to the Building or the Outside Areas.

         Landlord agrees prior to the Commencement Date to have the heating,
ventilation and air conditioning system and equipment serving the Building
("HVAC") serviced by a licensed mechanical contractor and brought up to good
working order. Thereafter, Tenant, at its sole cost, shall keep and maintain in
good order and condition and repair the HVAC; provided, however, Landlord at its
sole cost and expense for a period of ninety (90) days after the Commencement
Date shall maintain and make any repairs required to the HVAC during said ninety
(90) day period. Tenant at its sole cost and expense, shall contract with a
licensed mechanical contractor reasonably acceptable to Landlord to provide a
program of preventative maintenance for the HVAC and shall provide Landlord with
evidence of such program. If at any time during the Term of this Lease it is
determined by a licensed mechanical contractor approved by Landlord that the
HVAC or a portion thereof is no longer operational and must be replaced, and the
cost of such replacement does not exceed Twelve Hundred Dollars ($1,200.00),
then Tenant shall pay the cost of such replacement. If at any time during the
Term of this Lease it is determined by a licensed mechanical contractor approved
by Landlord that the HVAC or a portion thereof is no longer operational and must
be replaced, and the cost of such replacement is in excess of Twelve Hundred
Dollars ($1,200.00) then Landlord shall pay the cost of such replacement and
Tenant shall reimburse Landlord for such costs as follows: the cost of such
replacement shall in accordance with generally accepted accounting principles
consistently applied be amortized on a monthly basis over the useful life of the
replacement together with interest thereon at the rate on ten percent (10%) per
annum and Tenant shall pay to Landlord as Additional Rent hereunder such
amortized amount for each month after such replacement is completed until the
earlier of (i) the expiration of the Term or (ii) the end of the amortization
period.

         (c)  Landlord's Right to Maintain and Repair at Tenant's Expense.
              -----------------------------------------------------------
Notwithstanding the foregoing, if Tenant fails to perform any maintenance or
repairs which Tenant is obligated to perform for ten (10) days or more after the
receipt by Tenant of written notice from Landlord specifying the need for such
maintenance and repairs, Landlord shall have the right, but not the obligation,
at Tenant's expense, to enter the Building and perform Tenant's maintenance,
repair and replacement work; provided, however in the case of an emergency
Landlord may immediately and without any notice to Tenant enter the Building and
perform Tenant's maintenance, repair, and replacement work. Within ten (10)
days after invoice therefor from Landlord, Tenant shall pay all reasonable costs
and expenses incurred by Landlord in connection with such maintenance, repair
and replacement work.

         (d)  Tenant's Waiver of Rights. Tenant hereby expressly waives all
              -------------------------
rights to make repairs at the expense of Landlord or to terminate this Lease, as
provided for in California Civil Code Sections 1941 and 1942, and 1932(1),
respectively, and any similar or successor statute or law in effect or any
amendment thereof during the Term.

    13.  LANDLORD'S INSURANCE: Landlord shall purchase and keep in force fire,
extended coverage and "all risk" insurance covering the Building with coverage
not less than eighty percent (80%) of the full replacement cost of the Building.
Tenant shall, at its sole cost and expense, comply with any and all reasonable
requirements pertaining to the Premises of any insurer necessary for the
maintenance of reasonable fire and public liability insurance, covering the
Premises and appurtenances. Landlord, at Tenant's cost, may maintain "Loss of
Rents" insurance, insuring that the Rent will be paid in a timely

                                        9
<PAGE>

manner to Landlord for a period of at least twelve (12) months if the Premises
are destroyed or rendered unusable or inaccessible by any cause insured against
under this Lease.

    14.  TENANT'S INSURANCE:

         (a)  Public Liability Insurance. Tenant shall, at Tenant's expense,
              --------------------------
secure and keep in force a "broad form" public liability insurance and property
damage policy covering the Premises, insuring Tenant, and naming Landlord and
its lenders as additional insureds, against any liability arising out of the
ownership, use, occupancy or maintenance of the Premises. The minimum limit of
coverage of such policy shall be in the amount of not less than Three Million
Dollars ($3,000,000.00) for injury or death of one person in any one accident or
occurrence and in the amount of not less than Three Million Dollars
($3,000,000.00) for injury or death of more than one person in any one accident
or occurrence, shall include an extended liability endorsement providing
contractual liability coverage (which shall include coverage for Tenant's
indemnification obligations in this Lease), and shall contain a severability of
interest clause or a cross liability endorsement. Such insurance shall further
insure Landlord and Tenant against liability for property damage of at least One
Million Dollars ($1,000,000.00). The limit of any insurance shall not limit the
liability of Tenant hereunder. No policy shall be cancellable or subject to
reduction of coverage, and loss payable clauses shall be subject to Landlord's
approval. Such policies of insurance shall be issued as primary policies and not
contributing with or in excess of coverage that Landlord may carry, by an
insurance company authorized to do business in the State of California for the
issuance of such type of insurance coverage and rated A:XIII or better in Best's
                                                                          ------
Key Rating Guide. A copy of said policy or a certificate evidencing to
----------------
Landlord's reasonable satisfaction that such insurance is in effect shall be
delivered to Landlord upon commencement of the Term, and thereafter whenever
Landlord shall reasonably request. Tenant shall be entitled to fulfill its
insurance obligations under this Paragraph 14(a) by maintaining a so-called
"blanket" policy or policies of insurance in such form as to provide by specific
endorsement coverage not less than that which is required under this Paragraph
14(a) for the Premises.

         (b)  Personal Property Insurance. Tenant shall maintain in full force
              ---------------------------
and effect on all of its fixtures and equipment on the Premises, a policy or
policies of fire and extended coverage insurance with standard coverage
endorsement to the extent of the full replacement cost thereof. During the term
of this Lease the proceeds from any such policy or policies of insurance shall
be used for the repair or replacement of the fixtures and equipment so insured.
Landlord shall have no interest in the insurance upon Tenant's equipment and
fixtures and will sign all documents reasonably necessary in connection with
the settlement of any claim or loss by Tenant. Landlord will not carry insurance
on Tenant's possessions. Tenant shall furnish Landlord with a certificate
evidencing to Landlord's reasonable satisfaction that such insurance is in
effect, and whenever required, shall satisfy Landlord that such policy is in
full force and effect.

    15.  INDEMNIFICATION:

         (a)  Of Landlord. Tenant shall indemnify and hold harmless Landlord
              -----------
and agents, employees, partners, shareholders, directors, invitees, and
independent contractors (collectively "Agents") of Landlord against and from any
and all claims, liabilities, judgments, costs, demands, causes of action and
expenses (including, without limitation, reasonable attorneys' fees) arising
from (1) Tenant's use of the Premises or from any activity done, permitted or
suffered by Tenant in, on, or about the Premises, and (2) any act, neglect,
fault, willful misconduct or omission of Tenant, or Tenant's Agents or from any
breach or default in the terms of this Lease by Tenant, and (3) any action or
proceeding brought on account of any matter in items (1) or (2). If any action
or proceeding is brought against Landlord by reason of any such claim, upon
notice from Landlord, Tenant shall defend the same at Tenant's expense by
counsel reasonably satisfactory to Landlord. As a material part of the
consideration to Landlord, Tenant hereby assumes all risk of damage to property
or injury to persons in, on, or about the Premises from any cause whatsoever
(except to the extent caused by the active negligence or willful misconduct by
Landlord or its Agents or by the failure of Landlord to observe any of the terms
and conditions of this Lease, if such failure has persisted for an unreasonable
period of time after written notice of such failure), and Tenant hereby waives
all claims in respect thereof against Landlord. The obligations of Tenant under
this Paragraph 15 shall survive any termination of this Lease.

         (b)  Of Tenant. Landlord shall indemnify and hold harmless Tenant and
              ---------
Tenant's Agents against and from any and all claims, liabilities, judgments,
costs, demands, causes of action and expenses (including, without limitation,
reasonable attorneys' fees) arising from the gross negligence or willful
misconduct of Landlord or its Agents.

                                      10
<PAGE>

              (c) No Impairment of Insurance. The foregoing indemnity shall not
relieve any insurance carrier of its obligations under any policies required to
be carried by either party pursuant to this Lease, to the extent that such
policies cover the peril or occurrence that results in the claim that is subject
to the foregoing indemnity.

          16. SUBROGATION: Landlord and Tenant hereby mutually waive any claim
against the other during the Term for any injury to person or loss or damage to
any of their property located on or about the Premises that is caused by or
results from perils covered by insurance carried by the respective parties, to
the extent of the proceeds of such insurance actually received with respect to
such injury, loss or damage, whether or not due to the negligence of the other
party or its agents. Because the foregoing waivers will preclude the assignment
of any claim by way of subrogation to an insurance company or any other person,
each party now agrees to immediately give to its insurer written notice of the
terms of these mutual waivers and shall have their insurance policies endorsed
to prevent the invalidation of the insurance coverage because of these waivers.
Nothing in this Paragraph 16 shall relieve a party of liability to the other
party for failure to carry insurance required by this Lease.

          17. ABANDONMENT: Tenant shall not abandon the Premises at any time
during the Term. In the event of abandonment, the rights and remedies of Tenant
and Landlord shall be determined in accordance with the applicable California
statutes in effect at the time of abandonment. The discontinuance by Tenant of
business activities on the Premises shall not constitute abandonment of the
Premises provided that Tenant continues to pay Rent and perform Tenant's other
obligations under this Lease.

          18. FREE FROM LIENS: Tenant shall keep the Premises free from any
liens arising out of any work performed, materials furnished, or obligations
incurred by or for Tenant.

          19. ADVERTISEMENTS AND SIGNS: Tenant shall not place or permit to be
placed in, upon, or about the Premises any signs, advertisements or notices
without obtaining Landlord's prior written consent or without complying with
applicable law, and will not conduct, or permit to be conducted, any sale by
auction on the Premises. Tenant shall remove any sign; advertisement or notice
placed on the Premises by Tenant upon the expiration of the Term or sooner
termination of this Lease, and Tenant shall repair any damage or injury to the
Premises or the Property caused thereby, all at Tenant's expense. If any signs
are not removed, or necessary repairs not made, Landlord shall have the right to
remove the signs and repair any damage or injury to the Premises at Tenant's
sole cost and expense.

          20. UTILITIES: Tenant shall pay for all water, gas, heat, light,
power, telephone service and all other materials and services supplied to the
Premises. If Tenant fails to pay for any of the foregoing within ten (10) days
after the date due, Landlord may, after giving written notice to Tenant of such
failure, pay the same and add such amount to the Rent.

          21. ENTRY BY LANDLORD: Tenant shall permit Landlord and its Agents to
enter into and upon the Premises at all reasonable times during normal business
hours and upon reasonable notice (except in the case of an emergency, for which
entry shall be allowed at any time and for which no notice shall be required),
and subject to Tenant's reasonable security arrangements, for the purpose of
inspecting the same or showing the Premises to prospective purchasers, lenders
or tenants or to alter, improve, maintain and repair the Premises as required or
permitted of Landlord under the terms hereof, without any rebate of Rent and
without any liability to Tenant for any loss of occupation or quiet enjoyment of
the Premises thereby occasioned (except for actual damages resulting from the
negligence or willful misconduct of Landlord or its agents); and Tenant shall
permit Landlord to post notices of non-responsibility and ordinary "for sale" or
"for lease" signs, provided that Landlord may post such "for lease" signs and
exhibit the Premises to prospective tenants only during the six (6) months prior
to expiration of the Term of this Lease. No such entry shall be construed to be
a forcible or unlawful entry into, or a detainer of, the Premises, or an
eviction of Tenant from the Premises.

          22. DESTRUCTION AND DAMAGE:

              (a) If the Building is damaged by fire or other perils covered
by the insurance required by Paragraph 13, the following shall apply:

                  (1)   In the event of total destruction (which shall mean
destruction or damage in excess of fifty percent (50%) of the full insurable
value thereof) of the

                                       11
<PAGE>

Building, Tenant may elect to terminate the Lease by giving Landlord written
notice of termination within thirty (30) days after the occurrence of such
destruction. If Tenant does not elect to terminate the Lease, Landlord may elect
either to commence promptly to repair and restore the Building and prosecute the
same diligently to completion, in which event this Lease shall remain in full
force and effect; or not to repair or restore the Building, in which event this
Lease shall terminate. Landlord shall give Tenant written notice of its
intention within sixty (60) days after the occurrence of such destruction. If
Landlord elects not to restore the Building, this Lease shall be deemed to have
terminated as of the date of such total destruction.

                   (2)   In the event of a partial destruction (which shall mean
destruction or damage to an extent not exceeding fifty percent (50%) of the
full insurable value thereof) of the Building for which Landlord will receive
insurance proceeds sufficient to cover the cost to repair and restore such
partial destruction and, if the damage thereto is such that the Building may be
substantially repaired or restored to its condition existing immediately prior
to such damage or destruction within one hundred eighty (180) days from the date
of such destruction, Landlord shall commence and proceed diligently with the
work of repair and restoration, in which event the Lease shall continue in full
force and effect. If such repair and restoration is reasonably estimated to
require more than one hundred eighty (180) days, Tenant may within thirty (30)
days of receipt from Landlord of notice of the time required for repair
terminate this Lease by giving Landlord written notice. If such repair and
restoration requires longer than one hundred eighty (180) days and Tenant has
not elected to terminate this Lease or if the insurance proceeds therefor (plus
any amounts Tenant may elect or is obligated to contribute) are not sufficient
to cover the cost of such repair and restoration, Landlord may elect either to
so repair and restore, in which event the Lease shall continue in full force and
effect, or not to repair or restore, in which event the Lease shall terminate.
In either case, Landlord shall give written notice to Tenant of its intention
and of the estimated time required for repair within sixty (60) days after the
destruction occurs. If Landlord elects not to restore the Building, this Lease
shall be deemed to have terminated as of the date of such partial destruction.

                   (3)   Nothwithstanding anything to the contrary contained in
this Paragraph 22, in the event of damage to the Building occurring during the
last twelve (12) months of the Term, Landlord may elect to terminate this Lease
by written notice of such election given to Tenant within thirty (30) days after
the damage occurs. If Landlord does not terminate this Lease as provided in the
immediately preceding sentence, and if the repair and restoration of such damage
is reasonably estimated to require more than ninety (90) days, Tenant may elect
to terminate this Lease by written notice of such election given to Landlord
within ten (10) days of receipt from Landlord of notice of the time required for
repair and restoration.

                         (b)   If the Building is damaged by any peril not
covered by the insurance required by Paragraph 13, and the cost to repair such
damage exceeds any amount Tenant may voluntarily agree to contribute, Landlord
may elect to commence promptly to repair and restore the Building and prosecute
the same diligently to completion if such repairs and restoration can be
completed within two hundred and ten (210) days after the date such damage
occurs, in which event this Lease shall remain in full force and effect. If such
repairs and restoration cannot be completed within two hundred and ten (210)
days after the date of the casualty or if Landlord elects not to repair or
restore the Building, this Lease shall terminate. Landlord shall give Tenant
written notice of its intention within sixty (60) days after the occurrence of
such damage. If Landlord elects not to restore the Building, then this Lease
shall be deemed to have terminated as of the date such damage occured.

                         (c)   In the event of repair and restoration as herein
provided, the monthly installments of Base Rent shall be abated proportionately
in the ratio which Tenant's use of the Building is impaired during the period of
such repair or restoration. Tenant shall not be entitled to any compensation or
damages from Landlord for loss of use of the whole or any part of the Building
and/or any inconvenience or annoyance occasioned by such damage, repair or
restoration.

                         (d)   If Landlord is obligated to or elects to repair
or restore as herein provided, Landlord shall repair or restore only those
portions of the Building which were originally provided at Landlord's expense
substantially to their condition existing immediately prior to the occurrence of
the damage or destruction; and Tenant shall promptly repair and restore, at
Tenant's expense, Tenant's fixtures, improvements, alterations and additions in
and to the Building which were not provided at Landlord's expense.

                                       12
<PAGE>

              (e) Tenant hereby waives the provisions of California Civil Code
Section 1932(2) and Section 1933(4) which permit termination of a lease upon
destruction of the leased premises, and the provisions of any similar law now or
hereinafter in effect, and the provisions of this Paragraph 22 shall govern
exclusively in case of such destruction.

         23.  CONDEMNATION: If twenty-five percent (25%) or more of the Building
or the parking area located on the Premises is taken for any public or
quasi-public purpose by any lawful governmental power or authority, by exercise
of the right of appropriation, inverse condemnation, condemnation or eminent
domain, or sold to prevent such taking (each such event being referred to as a
"Condemnation"), Landlord may, at its option, terminate this Lease as of the
date title vests in the condemning party. If the Building after any Condemnation
and any repairs by Landlord would be untenantable for the conduct of Tenant's
business operations, Tenant shall have the right to terminate this Lease as of
the date title vests in the condemning party. If either party elects to
terminate this Lease as provided herein, such election shall be made by written
notice to the other party given within thirty (30) days after the nature and
extent of such Condemnation have been finally determined. Tenant shall not
because of such taking assert any claim against Landlord. Landlord shall be
entitled to receive the proceeds of all Condemnation awards except for the
portion, if any, of the award specifically granted to compensate Tenant for
Tenant's fixtures, equipment, personal property and relocation expenses, and
except for such portion Tenant hereby assigns to Landlord all of its interest in
such awards. If less than twenty-five percent (25%) of the Building or the
parking area located on the Premises is taken, Landlord at its option may
terminate this Lease. If neither Landlord nor Tenant elects to terminate this
Lease to the extent permitted above, Landlord shall promptly proceed to restore
the Building, to the extent of any Condemnation award received by Landlord, to
substantially their same condition as existed prior to such Condemnation,
allowing for the reasonable effects of such Condemnation, and a proportionate
abatement shall be made to the Base Rent corresponding to the time during which,
and to the portion of the floor area of the Building (adjusted for any increase
thereto resulting from any reconstruction) of which, Tenant is deprived on
account of such Condemnation and restoration. The provisions of California Code
of Civil Procedure Section 1265.130, which allows either party to petition the
Superior Court to terminate the Lease in the event of a partial taking of leased
premises, and any other applicable law now or hereafter enacted, are hereby
waived by Landlord and Tenant.

         24.  ASSIGNMENT AND SUBLETTING

              (a) Tenant shall not voluntarily or by operation of law, (1)
mortgage, pledge, hypothecate or encumber this Lease or any interest herein, (2)
assign or transfer this Lease or any interest herein, sublet the Premises or any
part thereof, or any right or privilege appurtenant thereto, or allow any other
person (the employees, agents and invitees of Tenant excepted) to occupy or use
the Premises, or any portion thereof, without first obtaining the written
consent of Landlord, which consent shall not be withheld unreasonably. When
Tenant requests Landlord's consent to such assignment or subletting, it shall
notify Landlord in writing of the name and address of the proposed assignee or
subtenant and the nature and character of the business of the proposed assignee
or subtenant and shall provide current financial statements for the proposed
assignee or subtenant prepared in accordance with generally accepted accounting
principles. Tenant shall also provide Landlord with a copy of the proposed
sublet or assignment agreement, including all material terms and conditions
thereof. Landlord shall have the option, to be exercised within thirty (30) days
of receipt of the foregoing, (1) to acquire from Tenant the interest, or any
portion thereof, in this Lease and/or the Premises that Tenant proposes to
assign or sublease, on the same terms and conditions as stated in the proposed
sublet or assignment agreement, (2) to consent to the proposed assignment or
sublease, or (3) to refuse its consent to the proposed assignment or sublease,
providing that such consent shall not be unreasonably withheld.

              (b) Without otherwise limiting the criteria upon which
Landlord may withhold its consent, Landlord may take into account the business,
reputation and credit worthiness of the proposed assignee or subtenant, the
character of the business proposed to be conducted on the Premises or portion
thereof sought to be subleased, and the potential impact of the proposed
assignment or sublease on the economic value of the Premises. In any event,
Landlord may withhold its consent to any assignment or sublease, if (1) the
actual use proposed to be conducted on the Premises or portion thereof conflicts
with the provisions of Paragraph 8(a) or (b) above, or (2) the proposed
assignment or sublease requires alterations, improvements or additions to the
Premises or portions thereof.

              (c) If Landlord approves an assignment or subletting as herein
provided, Tenant shall pay to Landlord, as Additional Rent, twenty-five percent
(25%) of the excess of (1) rent, any additional rent or any assignment
consideration payable by the assignee or sublessee to Tenant, after deducting
all reasonable costs incurred by Tenant in connection

                                      13
<PAGE>

with any such assignment or sublease, including, but not limited to,
advertising, leasing commissions, and costs of retrofitting the Premises for the
assignee or sublessee, over (2) the Base Rent plus Additional Rent allocable to
that part of the Premises affected by such assignment or sublease pursuant to
the provisions of this Lease. The assignment or sublease agreement, as the case
may be, after approval by Landlord, shall not be amended without Landlord's
prior written consent, and shall contain a provision directing the assignee or
subtenant to pay the rent and other sums due thereunder directly to Landlord
upon receiving written notice from Landlord that Tenant is in default under this
Lease with respect to the payment of Rent. Landlord's collection of such rent
and other sums shall not constitute an acceptance by Landlord of attornment by
such assignee or subtenant. A consent to one assignment, subletting, occupation
or use shall not be deemed to be a consent to any other or subsequent
assignment, subletting, occupation or use, and consent to any assignment or
subletting shall in no way relieve Tenant of any liability under this Lease. Any
assignment or subletting without Landlord's consent shall be void, and shall, at
the option of Landlord, constitute a Default under this Lease.

              (d) Tenant shall pay Landlord's reasonable fees, not to exceed One
Thousand Dollars ($1,000.00) per transaction, incurred in connection with
Landlord's review and processing of documents regarding any proposed assignment
or sublease.

              (e) Tenant acknowledges and agrees that the restrictions,
conditions and limitations imposed by this Paragraph 24 on Tenant's ability to
assign or transfer this Lease or any interest herein, to sublet the Premises or
any part thereof, to transfer or assign any right or privilege appurtenant to
the Premises, or to allow any other person to occupy or use the Premises or any
portion thereof, are, for the purposes of California Civil Code Section 1951.4,
as amended from time to time, and for all other purposes, reasonable at the time
that the Lease was entered into, and shall be deemed to be reasonable at the
time that Tenant seeks to assign or transfer this Lease or any interest herein,
to sublet the Premises or any part thereof, to transfer or assign any right or
privilege appurtenant to the Premises, or to allow any other person to occupy or
use the Premises or any portion thereof.

          25. TENANT'S DEFAULT: The occurrence of any one of the following
events shall constitute an event of default on the part of Tenant ("Default"):

              (a)  The abandonment of the Premises by Tenant;

              (b)  Failure to pay any installment of Rent or any other monies
due and payable hereunder, said failure continuing for a period of five (5) days
after the same is due;

              (c)  A general assignment by Tenant for the benefit of creditors;

              (d)  The filing of a voluntary petition in bankruptcy by Tenant,
the filing of a voluntary petition for an arrangement, the filing of a petition,
voluntary or involuntary, for reorganization, or the filing of an involuntary
petition by Tenant's creditors, said involuntary petition remaining undischarged
for a period of sixty (60) days;

              (e)  Receivership, attachment, or other judicial seizure of
substantially all of Tenant's assets on the Premises, such attachment or other
seizure remaining undismissed or undischarged for a period of sixty (60) days
after the levy thereof;

              (f)  Failure of Tenant to execute and deliver to Landlord any
estoppel certificate, subordination agreement, or lease amendment within the
time periods and in the manner required by Paragraph 30 or 31 or 42;

              (g)  An assignment or sublease, or attempted assignment or
sublease, of this Lease or the Premises by Tenant contrary to the provision of
Paragraph 24, unless such assignment or sublease is expressly conditioned upon
Tenant having received Landlord's consent thereto;

              (h)  Failure of Tenant to restore the Security Deposit to the
amount and within the time period provided in Paragraph 6 above;

              (i)  Failure in the performance of any of Tenant's covenants,
agreements or obligations hereunder (except those failures specified as events
of Default in other subparagraphs of this Paragraph 25, which shall be governed
by such other subparagraphs), which failure continues for twenty (20) days after
written notice thereof from Landlord to Tenant, provided that, if Tenant has
                                                -------------
exercised reasonable diligence to cure such failure and such failure cannot be
cured within such twenty (20) day period despite reasonable diligence,

                                      14
<PAGE>

Tenant shall not be in Default under this subparagraph unless Tenant fails
thereafter diligently and continuously to prosecute the cure to completion; and

              (j)  Chronic delinquency by Tenant in the payment of Rent, or
any other periodic payments required to be paid by Tenant under this Lease.
"Chronic delinquency" shall mean failure by Tenant to pay Rent, or any other
payments required to be paid by Tenant under this Lease within five (5) days
after the same is due for any three (3) months (consecutive or nonconsecutive)
during any twelve (12) month period. In the event of a Chronic Delinquency, in
addition to Landlord's other remedies for Default provided in this Lease, at
Landlord's option, Landlord shall have the right to require that Rent be paid by
Tenant quarterly, in advance.

              Tenant agrees that any notice given by Landlord pursuant to
subparagraph 25(i) above shall satisfy the requirements for notice under
California Code of Civil Procedure Section 1161, and Landlord shall not be
required to give any additional notice in order to be entitled to commence an
unlawful detainer proceeding.

          26. LANDLORD'S REMEDIES:

              (a) Termination. In the event of any Default by Tenant, then
                  -----------
in addition to any other remedies available to Landlord at law or in equity and
under this Lease, Landlord shall have the immediate option to terminate this
Lease and all rights of Tenant hereunder by giving written notice of such
intention to terminate. In the event that Landlord shall elect to so terminate
this Lease then Landlord may recover from Tenant:

              (1)  the worth at the time of award of any unpaid Rent which had
been earned at the time of such termination; plus

              (2)  the worth at the time of award of the amount by which the
unpaid Rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss Tenant proves could have been
reasonably avoided; plus

              (3)  the worth at the time of award of the amount by which the
unpaid Rent for the balance of the term of this Lease after the time of award
exceeds the amount of such rental loss that Tenant proves could be reasonably
avoided; plus

              (4)  any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform its obligations
under this Lease or which in the ordinary course would be likely to result
therefrom, including, without limitation, any costs or expenses incurred by
Landlord (i) in retaking possession of the Premises; (ii) in maintaining,
repairing, preserving, restoring, replacing, cleaning, altering or
rehabilitating the Premises or any portion thereof, including such acts for
reletting to a new tenant or tenants; (iii) for leasing commissions; or (iv) for
any other costs necessary or appropriate to relet the Premises; plus

              (5)  such reasonable attorneys' fees incurred by Landlord as a
result of a Default, and costs in the event suit is filed by Landlord to enforce
such remedy; and plus

              (6)  at Landlord's election, such other amounts in addition to or
in lieu of the foregoing as may be permitted from time to time by applicable
law.

As used in subparagraphs (1) and (2) above, the "worth at the time of award" is
computed by allowing interest at an annual rate equal to twelve percent (12%)
per annum or the maximum rate permitted by law, whichever is less. As used in
subparagraph (3) above, the "worth at the time of award" is computed by
discounting such amount at the discount rate of the Federal Reserve Bank of San
Francisco at the time of award, plus one percent (1%). Tenant waives redemption
or relief from forfeiture under California Code of Civil Procedure Sections 1174
and 1179, or under any other present or future law, in the event Tenant is
evicted or Landlord takes possession of the Premises by reason of any Default of
Tenant hereunder.

              (b)  Continuation of Lease. In the event of any Default by Tenant,
                   ---------------------
then in addition to any other remedies available to Landlord at law or in equity
and under this Lease, Landlord shall have the remedy described in California
Civil-Code Section 1951.4 or any successor statute or law thereto (Landlord may
continue this Lease in effect after Tenant's Default and abandonment and recover
Rent as it becomes due, provided Tenant has the right to sublet or assign,
subject only to reasonable limitations).

                                      15
<PAGE>

          (c)  Re-entry. In the event of any Default by Tenant, Landlord shall
               --------
also have the right, with or without terminating this Lease, in compliance with
applicable law, to re-enter the Premises and remove all persons and property
from the Premises; such property may be removed and stored in a public warehouse
or elsewhere at the cost of and for the account of Tenant.

          (d)  Reletting. In the event of the abandonment of the Premises by
               ---------
Tenant or in the event that Landlord shall elect to re-enter as provided in
Paragraph 26(c) or shall take possession of the Premises pursuant to legal
proceeding or pursuant to any notice provided by law, then if Landlord does not
elect to terminate this Lease as provided in Paragraph 26(a), Landlord may from
time to time, without terminating this Lease, relet the Premises or any part
thereof for such term or terms and at such rental or rentals and upon such other
terms and conditions as Landlord in its sole discretion may deem advisable with
the right to make alterations and repairs to the Premises. In the event that
Landlord shall elect to so relet, then rentals received by Landlord from such
reletting shall be applied in the following order: (1) to reasonable attorneys'
fees incurred by Landlord as a result of a Default and costs in the event suit
is filed by Landlord to enforce such remedies; (2) to the payment of any
indebtedness other than Rent due hereunder from Tenant to Landlord; (3) to the
payment of any costs of such reletting; (4) to the payment of the costs of any
alterations and repairs to the Premises; (5) to the payment of Rent due and
unpaid hereunder, and (6) the residue, if any, shall be held by Landlord and
applied in payment of future Rent and other sums payable by Tenant hereunder as
the same may become due and payable hereunder. Should that portion of such
rentals received from such reletting during any month, which is applied to the
payment of Rent hereunder, be less than the Rent payable during the month by
Tenant hereunder, then Tenant shall pay such deficiency to Landlord. Such
deficiency shall be calculated and paid monthly. Tenant shall also pay to
Landlord, as soon as ascertained, any costs and expenses incurred by Landlord in
such reletting or in making such alterations and repairs not covered by the
rentals received from such reletting.

          (e)  Termination. No re-entry or taking of possession of the Premises
               -----------
by Landlord pursuant to this Paragraph 26 shall be construed as an election to
terminate this Lease unless a written notice of such intention is given to
Tenant or unless the termination thereof is decreed by a court of competent
jurisdiction. Notwithstanding any reletting without termination by Landlord
because of any Default by Tenant, Landlord may at any time after such reletting
elect to terminate this Lease for any such Default.

          (f)  Cumulative Remedies. The remedies herein provided are not
               -------------------
exclusive and Landlord shall have any and all other remedies provided herein or
by law or in equity.

          (g)  No Surrender. No act or conduct of Landlord, whether consisting
               ------------
of the acceptance of the keys to the Building, or otherwise, shall be deemed to
be or constitute an acceptance of the surrender of the Premises by Tenant prior
to the expiration of the Term, and such acceptance by Landlord of surrender by
Tenant shall only flow from and must be evidenced by a written acknowledgment of
acceptance of surrender signed by Landlord. The surrender of this Lease by
Tenant, voluntarily or otherwise, shall not work a merger unless Landlord elects
in writing that such merger take place, but shall operate as an assignment to
Landlord of any and all existing subleases, or Landlord may, at its option,
elect in writing to treat such surrender as a merger terminating Tenant's estate
under this Lease, and thereupon Landlord may terminate any or all such subleases
by notifying the sublessee of its election so to do within five (5) days after
such surrender.

     27.  ATTORNEY'S FEES: In the event any legal action or proceeding,
including arbitration and declaratory relief, is commenced for the purpose of
enforcing any rights or remedies pursuant to this Lease, the prevailing party
shall be entitled to recover from the non-prevailing party reasonable attorneys'
fees, as well as costs of suit, in said action or proceeding, whether or not
such action is prosecuted to judgment.

     28.  TAXES: Tenant shall be liable for and shall pay, prior to delinquency,
all taxes levied against personal property and trade or business fixtures of
Tenant. If any alteration, addition or improvement installed by Tenant pursuant
to Paragraph 11, or any personal property, trade fixture or other property of
Tenant, is assessed and taxed with the Premises, Tenant shall pay such taxes to
Landlord within ten (10) days after delivery to Tenant of a statement therefor.

     29.  EFFECT OF CONVEYANCE: The term "Landlord" as used in this Lease, means
only the owner for the time being of the Premises, so that, in the event of any
sale of the Premises, Landlord shall be and hereby is entirely freed and
relieved of all covenants and obligations of Landlord hereunder accruing from
and after the transfer, and it

                                       16
<PAGE>

shall be deemed and construed, without further agreement between the parties and
the purchaser at any such sale, that the purchaser of the Premises has assumed
and agreed to carry out any and all covenants and obligations of Landlord
hereunder.

     30.  TENANT'S ESTOPPEL CERTIFICATE: From time to time, upon written request
of Landlord, Tenant shall execute, acknowledge and deliver to Landlord or its
designee, a written certificate stating (a) the date this Lease was executed,
the Commencement Date of the Term and the date the Term expires; (b) the date
Tenant entered into occupancy of the Premises; (c) the amount of Rent and the
date to which such Rent has been paid; (d) that this Lease is in full force and
effect and has not been assigned, modified, supplemented or amended in any way
(or, if assigned, modified, supplemented or amended, specifying the date and
terms of any agreement so affecting this Lease); (e) that this Lease represents
the entire agreement between the parties with respect to Tenant's right to use
and occupy the Premises (or specifying such other agreements, if any); (f) that
all obligations under this Lease to be performed by Landlord as of the date of
such certificate have been satisfied (or specifying those as to which Tenant
claims that Landlord has yet to perform); (g) that all required contributions by
Landlord to Tenant on account of Tenant's improvements have been received (or
stating exceptions thereto); (h) that on such date there exist no defenses or
offsets that Tenant has against the enforcement of this Lease by Landlord (or
stating exceptions thereto); (i) that no Rent or other sum payable by Tenant
hereunder has been paid more than one (1) month in advance (or stating
exceptions thereto); (j) that security has been deposited with Landlord, stating
the amount thereof; and (k) any other matters evidencing the status of this
Lease that may be required either by a lender making a loan to Landlord to be
secured by a deed of trust covering the Premises or by a purchaser of the
Premises. Any such certificate delivered pursuant to this Paragraph 30 may be
relied upon by a prospective purchaser of Landlord's interest or a mortgagee of
Landlord's interest or assignee of any mortgage upon Landlord's interest in the
Premises. If Tenant shall fail to provide such certificate within ten (10)
business days after receipt by Tenant of the form of such certificate and a
written request by Landlord that Tenant complete and deliver such certificate as
herein provided, such failure shall, at Landlord's election, constitute a
Default under this Lease, and Tenant shall be deemed to have given such
certificate as above provided without modification and shall be deemed to have
admitted the accuracy of any information supplied by Landlord to a prospective
purchaser or mortgagee.

     31.  SUBORDINATION: Landlord shall have the right to cause this Lease to be
and remain subject and subordinate to any and all mortgages, deeds of trust and
ground leases, if any ("Encumbrances") that are now or may hereafter be executed
covering the Premises, or any renewals, modifications, consolidations,
replacements or extensions thereof, for the full amount of all advances made or
to be made thereunder and without regard to the time or character of such
advances, together with interest thereon and subject to all the terms and
provisions thereof; provided only, that concurrently with and conditional upon
                    -------------
the execution and delivery by Tenant of the requested documents, Landlord shall
cause to be delivered to Tenant a document in form reasonably acceptable to
Tenant and the holder of any such Encumbrance ("Holder") signed by the Holder
and Tenant providing that in the event of termination of any such ground lease
or upon the foreclosure of any such mortgage or deed of trust, so long as Tenant
is not in Default, the Holder thereof shall agree to recognize Tenant's rights
under this Lease as long as Tenant shall pay the Rent and observe and perform
all the provisions of this Lease to be observed and performed by Tenant. Within
ten (10) business days after Landlord's written request, Tenant shall execute,
acknowledge and deliver any and all reasonable documents required by Landlord or
the Holder to effectuate such subordination. If Tenant fails to do so, such
failure shall constitute a Default by Tenant under this Lease. Notwithstanding
anything to the contrary set forth in this Paragraph 31, Tenant hereby attorns
and agrees to attorn to any person or entity purchasing or otherwise acquiring
the Premises at any sale or other proceeding or pursuant to the exercise of any
other rights, powers or remedies under such Encumbrance.

     32.  ENVIRONMENTAL COVENANTS:

          (a)  As used herein, the term "Hazardous Material" shall mean any
substance or material which has been determined by any state, federal or local
governmental authority to be capable of posing a risk of injury to health,
safety or property, including all of those materials and substances designated
as hazardous or toxic by the city in which the Premises are located, the U.S.
Environmental Protection Agency, the Consumer Product Safety Commission, the
Food and Drug Administration, the California Water Resources Control Board, the
Regional Water Quality Control Board, San Francisco Bay Region, the California
Air Resources Board, CAL/OSHA Standards Board, Division of Occupational Safety
and Health, the California Department of Food and Agriculture, the California
Department of Health Services, and any federal agencies that have overlapping
jurisdiction with such California agencies, or any other governmental agency now
or hereafter authorized

                                       17
<PAGE>

to regulate materials and substances in the environment. Without limiting the
generality of the foregoing, the term "Hazardous Material" shall include all of
those materials and substances defined as "hazardous materials" or "hazardous
waste" in Sections 66680 through 66685 of Title 22 of the California
Administrative Code, Division 4, Chapter 30, as the same shall be amended from
time to time, petroleum, petroleum-related substances and the by-products,
fractions, constituents and sub-constituents of petroleum or petroleum-related
substances, asbestos, and any other materials requiring remediation now or in
the future under federal, state or local statutes, ordinances, regulations or
policies.

          (b)  Tenant represents, warrants and covenants (i) that it will use
and store in, on or about the Premises, only those Hazardous Materials that are
necessary for Tenant to conduct its business activities on the Premises, (ii)
that, with respect to any such Hazardous Materials, Tenant shall comply with all
applicable federal, state and local laws, rules, regulations, policies and
authorities relating to the storage, use, disposal or cleanup of Hazardous
Materials, including, but not limited to, the obtaining of proper permits, and
(iii) that it will not dispose of any Hazardous Materials in, on or about the
Premises under any circumstances.

          (c)  Tenant shall immediately notify Landlord and Landlord shall
immediately notify Tenant of any inquiry, test, investigation or enforcement
proceeding occurring during the Term of this Lease by or against Tenant,
Landlord or the Premises concerning a Hazardous Material. Tenant acknowledges
that Landlord, as the owner of the Premises, shall have the right, at its
election, in its own name or as Tenant's agent, to negotiate, defend, approve
and appeal, at Tenant's expense, any action taken or order issued during the
Term of this Lease with regard to a Hazardous Material by an applicable
governmental authority, unless Tenant can prove, the burden of proof being on
Tenant, that Tenant did not introduce the Hazardous Material to the Premises.
Until such time as Tenant proves Tenant did not introduce the Hazardous Material
to the Premises, Tenant shall proceed with any remediation action required by
Landlord or any governmental authorities or as otherwise required by this Lease.

          (d)  If Tenant's storage, use or disposal of any Hazardous Material
in, on or adjacent to the Premises results in any contamination of the Premises,
the soil or surface or groundwater (1) requiring remediation under federal,
state or local statutes, ordinances, regulations, or policies, or (2) at levels
which are unacceptable to Landlord, in Landlord's reasonable judgment, Tenant
agrees to clean up said contamination. Tenant further agrees to indemnify,
defend and hold Landlord harmless from and against any claims, liabilities,
suits, causes of action, costs, expenses or fees, including attorneys' fees and
costs, arising out of or in connection with any remediation, cleanup work,
inquiry or enforcement proceeding in connection therewith, and any Hazardous
Materials currently or hereafter used, stored or disposed of by Tenant or its
agents, employees, contractors or invitees in, on or adjacent to the Premises.

          (e)  Notwithstanding any other right of entry granted to Landlord
under this Lease, Landlord shall have the right to enter the Premises or to have
consultants enter the Premises throughout the term of this Lease for the purpose
of (1) determining whether the Premises are in conformity with federal, state
and local statutes, regulations, ordinances, and policies including those
pertaining to the environmental condition of the Premises, (2) conducting an
environmental audit or investigation of the Premises for purposes of sale,
transfer, conveyance or financing, (3) determining whether Tenant has complied
with this Paragraph 32, and (4) determining the corrective measures, if any,
required of Tenant to ensure the safe use, storage and disposal of Hazardous
Materials, or to remove Hazardous Materials (except to the extent used, stored
or disposed of by Tenant or its agents, employees, contractors or invitees in
compliance with applicable law). Tenant agrees to provide access and reasonable
assistance for such inspections. Such inspections may include, but are not
limited to, entering the Premises or adjacent property with drill rigs or other
machinery for the purpose of obtaining laboratory samples. Landlord shall not be
limited in the number of such inspections during the term of this Lease. To the
extent such inspections disclose the presence of Hazardous Materials used,
stored or disposed of by Tenant or its agents, employees, contractors or
invitees in violation of the provisions of this Lease, Tenant shall reimburse
Landlord for the cost of such inspections within ten (10) days of receipt of a
written statement thereof. If such consultants determine that the Premises are
contaminated with Hazardous Materials used, stored or disposed of by Tenant or
its agents, employees contractors or invitees, Tenant shall, in a timely manner,
at its expense, remove such Hazardous Materials or otherwise comply with the
recommendations of such consultants to the reasonable satisfaction of Landlord
and any applicable governmental agencies. The right granted to Landlord herein
to inspect the Premises shall not create a duty on Landlord's part to inspect
the Premises, or liability of Landlord for Tenant's use, storage or disposal of

                                       18
<PAGE>

Hazardous Materials, it being understood that Tenant shall be solely responsible
for all liability in connection therewith.

          (f)  Tenant shall surrender the Premises to Landlord upon the
expiration or earlier termination of this Lease free of debris, waste and
Hazardous Materials used, stored or disposed of by Tenant or its agents,
employees, contractors or invitees, and in a condition which complies with all
governmental statutes, ordinances, regulations and policies, recommendations of
consultants hired by Landlord, and such other reasonable requirements as may be
imposed by Landlord.

          (g)  Tenant's obligations under this Paragraph 32 shall survive
termination of this Lease.

          (h)  Landlord hereby discloses to Tenant that the Premises are or may
be in an area in which contamination of soils or groundwater by Hazardous
Materials may exist. The most recent environmental report concerning the
Premises in Landlord's possession, if any, is listed in Exhibit D which is
                                                        ---------
attached hereto and incorporated herein by this reference. If Tenant desires
more definite and additional information regarding the existence or possible
existence of contamination by Hazardous Materials of soils or groundwater of or
beneath the Premises or other real property in the general area of the Premises,
then Tenant shall investigate such matters.

     33.  NOTICES: All notices and demands which may or are to be required or
permitted to be given to either party by the other hereunder shall be in writing
and shall be sent by United States mail, postage prepaid, certified, or by
personal delivery or overnight courier, addressed to the addressee at the
address for such addressee as specified in the Basic Lease Information, or to
such other place as such party may from time to time designate in a notice to
the other party given as provided herein, or by telex or telecopy at the number
therefor designated by the addressee in a written notice given as provided
herein. Notice shall be deemed given upon the earlier of actual receipt or the
third day following deposit in the United States mail in the manner described
above.

     34.  WAIVER: The waiver of any breach of any term, covenant or condition of
this Lease shall not be deemed to be a waiver of such term, covenant or
condition or any subsequent breach of the same or any other term, covenant or
condition herein contained. The subsequent acceptance of Rent by Landlord shall
not be deemed to be a waiver of any preceding breach by Tenant, other than the
failure of Tenant to pay the particular rental so accepted, regardless of
Landlord's knowledge of such preceding breach at the time of acceptance of such
Rent. No delay or omission in the exercise of any right or remedy of Landlord on
any Default by Tenant shall impair such a right or remedy or be construed as a
waiver. Any waiver by Landlord of any Default must be in writing and shall not
be a waiver of any other Default concerning the same or any other provisions of
this Lease.

     35.  HOLDING OVER: Any holding over after the expiration of the Term,
without the express written consent of Landlord, shall constitute a Default and,
without limiting Landlord's remedies provided in this Lease, such holding over
shall be construed to be a tenancy at sufferance, at a rental rate of one
hundred twenty-five percent (125%) of the Base Rent last due in this Lease, plus
Additional Rent, and shall otherwise be on the terms and conditions herein
specified, so far as applicable.

     36.  SUCCESSORS AND ASSIGNS: The terms, covenants and conditions of this
Lease shall, subject to the provisions as to assignment, apply to and bind the
heirs, successors, executors, administrators and assigns of all of the parties
hereto. If Tenant shall consist of more than one entity or person, the
obligations of Tenant under this Lease shall be Joint and several.

     37.  TIME: Time is of the essence of this Lease and each and every term,
condition and provision herein.

     38.  BROKERS: Landlord and Tenant each represents and warrants to the other
that neither it nor its officers or agents nor anyone acting on its behalf has
dealt with any real estate broker in the negotiating or making of this Lease,
and each party agrees to indemnify and hold harmless the other from any claim or
claims, and costs and expenses, including attorneys' fees, incurred by the
indemnified party in conjunction with any such claim or claims of any broker or
brokers to a commission connection with this Lease as a result of the actions of
the indemnifying party.

                                       19
<PAGE>

     39.  LIMITATION OF LIABILITY: Tenant agrees that, in the event of any
default or breach by Landlord with respect to any of the terms of the Lease to
be observed and performed by Landlord (a) Tenant shall look solely to the estate
and property of Landlord in the Premises or any successor in interest to the
Premises, for the satisfaction of Tenant's remedies for the collection of a
judgment (or other judicial process) requiring the payment of money by Landlord;
(b) no other property or assets of Landlord, its partners, shareholder,
officers, directors or any successor in interest shall be subject to levy,
execution or other enforcement procedure for the satisfaction of Tenant's
remedies; (c) no personal liability shall at any time be asserted or enforceable
against Landlord's partners or successors in interest (except to the extent
permitted in (a) above), or against Landlord's shareholders, officers or
directors, or their respective partners, shareholders, officers, directors or
successors in interest; and (d) no judgment will be taken against any partner,
shareholder, officer or director of Landlord. The provisions of this paragraph
shall apply only to the Landlord and the parties herein described, and shall not
be for the benefit of any insurer nor any other third party.

     40.  FINANCIAL STATEMENTS: Within thirty (30) days after Landlord's
request, Tenant shall deliver to Landlord the then current financial statements
of Tenant (including interim periods following the end of the last fiscal year
for which annual statements are available), prepared or compiled by a certified
public accountant, including a balance sheet and profit and loss statement for
the most recent prior year, in the form distributed by Tenant to its
shareholders for so long as Tenant is a publicly held company, or prepared in
accordance with generally accepted accounting principles consistently applied if
Tenant becomes a privately held company. As long as Tenant is a publicly held
company Tenant shall not be required to deliver to Landlord any financial
information which Tenant has not released to the public.

     41.  RULES AND REGULATIONS: Tenant agrees to comply with such reasonable
rules and regulations as Landlord may adopt from time to time for the orderly
and proper operation of the Premises. Such rules may include but shall not be
limited to the following: regulation of the removal, storage and disposal of
Tenant's refuse and other rubbish at the sole cost and expense of Tenant. The
rules and regulations shall be binding upon Tenant upon delivery of a copy of
them to Tenant. Landlord shall not be responsible to Tenant for the failure of
any other person to observe and abide by any of said rules and regulations.

     42.  MORTGAGEE PROTECTION:

          (a)  Modifications for Lender. If, in connection with obtaining
               ------------------------
financing for the Premises or any portion thereof, Landlord's lender shall
request reasonable modifications to this Lease as a condition to such financing,
Tenant shall not unreasonably withhold, delay or defer its consent to such
modifications, provided such modifications do not materially adversely affect
Tenant's rights or increase Tenant's obligations under this Lease.

          (b)  Right to Cure. Tenant agrees to give to any trust deed or
               -------------
mortgage holder ("Holder"), by registered mail, at the same time as it is given
to Landlord, a copy of any notice of default given by Tenant to Landlord under
the Lease, provided that prior to such notice Tenant has been notified, in
           -------------
writing, (by way of notice of assignment of rents and leases, or otherwise) of
the address of such Holder. Tenant further agrees that if Landlord shall have
failed to cure such default within the time provided for in this Lease, then the
Holder shall have an additional twenty (20) days after expiration of such
period, or after receipt of such notice from Tenant (if such notice to the
Holder is required by this Paragraph 42(b)), whichever shall last occur, within
which to cure such default or if such default cannot be cured within that time,
then such additional time as may be necessary if within such twenty (20) days,
any Holder has commenced and is diligently pursuing the remedies necessary to
cure such default (including but not limited to commencement of foreclosure
proceedings, if necessary to effect such cure), in which event this Lease shall
not be terminated; provided, however, that this Paragraph 42(b) shall not extend
the time period for Landlord to repair or to restore the Building as may be
required by Paragraphs 22 or 23 hereof.

     43.  ENTIRE AGREEMENT: This Lease, including the Exhibits and any Addendum
or Addenda attached hereto, which are hereby incorporated herein by this
reference, and that certain Expansion Agreement of even date herewith by and
between Landlord and Tenant, contains the entire agreement of the parties
hereto, and no representations, inducements, promises or agreements, oral or
otherwise, between the parties, not embodied herein or therein, shall be of any
force and effect.

                                       20
<PAGE>

     44.  INTEREST: Any installment of Rent and any other sum due from Tenant
under this Lease which is not received by Landlord within ten (10) days from
when the same is due shall bear interest from such tenth (10th) day until paid
at an annual rate equal to the maximum rate of interest permitted by law.
Payment of such interest shall not excuse or cure any Default by Tenant. In
addition, Tenant shall pay all costs and attorneys' fees incurred by Landlord in
collection of such amounts.

     45.  CONSTRUCTION: This Lease shall be construed and interpreted in
accordance with the laws of the State of California. The parties acknowledge and
agree that no rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall be employed in the interpretation of
this Lease, including the Exhibits and any Addenda attached hereto. All captions
in this Lease are for reference only and shall not be used in the interpretation
of this Lease. Whenever required by the context of this Lease, the singular
shall include the plural, the masculine shall include the feminine, and vice
versa. If any provision of this Lease shall be determined to be illegal or
unenforceable, such determination shall not affect any other provision of this
Lease and all such other provisions shall remain in full force and effect.

     46.  REPRESENTATIONS AND WARRANTIES OF TENANT: Tenant hereby makes the
following representations and warranties, each of which is material and being
relied upon by Landlord, is true in all respects as of the date of this Lease,
and shall survive the expiration or termination of the Lease:

          (a)  If Tenant is an entity, Tenant is duly organized, validly
existing and in good standing under the laws of the state of its organization
and the persons executing this Lease on behalf of Tenant have the full right and
authority to execute this Lease on behalf of Tenant and to bind Tenant without
the consent or approval of any other person or entity. Tenant has full power,
capacity, authority and legal right to execute and deliver this Lease and to
perform all of its obligations hereunder. This Lease is a legal, valid and
binding obligation of Tenant, enforceable in accordance with its terms.

          (b)  Tenant has not (1) made a general assignment for the benefit of
creditors, (2) filed any voluntary petition in bankruptcy or suffered the filing
of an involuntary petition by any creditors, (3) suffered the appointment of a
receiver to take possession of all or substantially all of its assets, (4)
suffered the attachment or other judicial seizure of all or substantially all of
its assets, (5) admitted in writing its inability to pay its debts as they come
due, or (6) made an offer of settlement, extension or composition to its
creditors generally.

     47.  REPRESENTATIONS AND WARRANTIES OF LANDLORD: Landlord hereby makes the
following representations and warranties, each of which is material and being
relied upon by Tenant, is true in all respects as of the date of this Lease, and
shall survive the expiration or termination of the Lease:

          (a)  Landlord is duly organized, validly existing and in good standing
under the laws of the state of its organization and the persons executing this
Lease on behalf of Landlord have the full right and authority to execute this
Lease on behalf of Landlord and to bind Landlord without the consent or approval
of any other person or entity. Landlord has full power, capacity, authority and
legal right to execute and deliver this Lease and to perform all of its
obligations hereunder. This Lease is a legal, valid and binding obligation of
Landlord, enforceable in accordance with its terms.

     48.  MEMORANDUM OF LEASE: If Tenant obtains a policy of title insurance
insuring Tenant's leasehold interest in this Lease, Landlord agrees in
connection therewith to execute and deliver to Tenant with signature
acknowledged a memorandum of this Lease for recordation with the Recorder of
Santa Clara County.

     49.  QUIET ENJOYMENT: Landlord covenants that Tenant, upon performing the
terms, conditions and covenants of this Lease, shall have the quiet and peaceful
possession of the Premises as against any person claiming the same by, through
or under Landlord.

                                       21
<PAGE>

Landlord and Tenant have executed and delivered this Lease as of the Lease Date
specified in the Basic Lease Information.

                                    LANDLORD:

                                    AETNA LIFE INSURANCE COMPANY,
                                    a Connecticut corporation

                                    By:   Koll Management Services, Inc.,
                                          a Delaware corporation,
                                          As Manager and Agent for Aetna
                                          Life Insurance Company

                                          By: /s/ William M. Harris
                                              ----------------------------
                                              William M. Harris
                                              Regional President

                                     TENANT:

                                     TRIMBLE NAVIGATION LIMITED,
                                     a California corporation

                                     By: /s/ Robert A. Trimble
                                         ----------------------------------

                                     Printed Name: Robert A. Trimble

                                     Title: Treasurer

                                       22
<PAGE>

                          COMMENCEMENT DATE MEMORANDUM
                          ----------------------------

LANDLORD:          AETNA LIFE INSURANCE COMPANY

TENANT:            TRIMBLE NAVIGATION LIMITED

LEASE DATE:        June 6, 1994

PREMISES:          749 North Mary Avenue
                   Sunnyvale, California

     The "Commencement Date" of the above referenced Lease is hereby established
as June 12, 1995.

                                     TENANT:

                                     Trimble Navigation Limited,
                                     a California corporation

                                     By: /s/ Robert A. Trimble
                                         ----------------------------------

                                     Printed
                                     Name:     Robert A. Trimble

                                     Its:      Treasurer

                                    Approved and agreed:

                                    Koll Management Services, Inc., as
                                    agent and managers for:
                                    AETNA LIFE INSURANCE COMPANY,
                                    a Connecticut corporation

                                    By: /s/ William M. Harris
                                       -----------------------------------
                                    Printed Name: William M. Harris
                                    Its: Regional President
<PAGE>

                                FIRST AMENDMENT
                                      TO
                                LEASE AGREEMENT

     This First Amendment to Lease Agreement ("Amendment") is entered into as of
June 12, 1995, by and between AETNA LIFE INSURANCE COMPANY, a Connecticut
corporation ("Landlord"), and TRIMBLE NAVIGATION LIMITED, a California
corporation ("Tenant"), with reference to the following facts:

                                   Recitals
                                   --------

     A.   Landlord and Tenant entered into that certain lease agreement dated
June 6, 1994 ("Lease") with respect to those certain premises consisting of
approximately 33,600 square feet commonly known as 749 N. Mary Avenue,
Sunnyvale, California, as said premises are more particularly described in the
Lease.

     B.   Tenant wishes Landlord to increase the Tenant Improvement Allowance
under the Lease. Landlord is willing to increase the Tenant Improvement
Allowance under the Lease as more particularly set forth in this Amendment
provided the Lease is amended as set forth in this Amendment.

     NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in this Amendment, the receipt and sufficiency of which are hereby
acknowledged, Landlord and Tenant agree as follows:

                           Amendments and Agreements
                           -------------------------

     1.   Recitals.  All of the above recitals are true and correct.
          --------

     2.   Definitions.  Unless otherwise defined in this Amendment, all
          -----------
capitalized terms used in this Amendment which are not defined in this Amendment
shall have the same meaning and definition given them in the Lease.

     3.   Expiration Date of Term.  The Expiration Date of the Term of the Lease
          -----------------------
is extended from December 31, 1998 to December 31, 2000. All references in the
Lease to the Expiration Date shall be deemed to be amended to provide that the
Expiration Date of the Term shall be December 31, 2000.

     4.   Base Rent.  The monthly Base Rent for the Term of the Lease shall be
          ---------
as set forth in the following schedule:

<TABLE>
<CAPTION>
                                                                             Monthly
     Period                                  Sq. Ft.        Monthly Rate     Base Rent
     ------                                  -------        -----------     ---------
<S>                                          <C>            <C>             <C>
June 12, 1995 through July 11, 1997           33,600           $0.72        $24,192
July 12, 1997 through Feb. 11, 1999           33,600           $0.74        $24,864
February 12, 1999 through Dec. 31, 2000       33,600           $0.82        $27,552
</TABLE>

     5.   Tenant Improvement Allowance.  The Tenant Improvement Allowance is
          ----------------------------
increased from One Hundred Fifty-One Thousand Two Hundred Dollars ($151,200) to
Two Hundred Ninety-One Thousand Dollars ($291,000). All references in the Lease
to the Tenant Improvement Allowance being One Hundred Fifty-One Thousand Two
Hundred Dollars

                                      -1-

<PAGE>

($151,200) shall be deemed to be amended to provide that the Tenant Improvement
Allowance shall be Two Hundred Ninety-One Thousand Dollars ($291,000).

        6.    Brokers. Each party hereto represents and warrants to the other
              -------
party that neither it nor its officers or agents nor anyone acting on behalf of
it has dealt with any real estate broker in the negotiating or making of this
Amendment. Each party hereto agrees to indemnify and hold the other party
harmless from any claim or claims, costs, or expenses, including attorneys'
fees, incurred by the indemnified party in conjunction with any claim or claims
of any broker or brokers to a commission in connection with this Amendment as a
result of the acts or omissions of the indemnifying party.

        7.    Inconsistency. In the event of any inconsistency or conflict
              -------------
between the terms of this Amendment and the terms of the Lease with respect to
the matters which are a subject of this Amendment, the terms of this Amendment
shall control.

        8.    Ratification. Except as amended by this Amendment, the terms and
              ------------
provisions of the Lease are hereby ratified, confirmed, and shall remain in full
force and effect.

        IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment as
of the day and year first hereinabove written.

                                  LANDLORD:
                                  --------

                                  AETNA LIFE INSURANCE COMPANY,
                                  a Connecticut corporation

                                  By:   Koll Management Services, Inc.
                                        a Delaware corporation
                                        As Manager and Agent for Aetna Life
                                        Insurance Company

                                        By:    /s/ William M. Harris
                                               ---------------------
                                               William M. Harris
                                        Its:   Regional President

                                  TENANT:
                                  ------

                                  TRIMBLE NAVIGATION LIMITED,
                                  a California corporation

                                  By:  /s/ Robert A. Trimble
                                       -------------------------------
                                  Printed Name  Robert A. Trimble
                                                ----------------------
                                  Its:  Treasurer
                                        ------------------------------

                                  By:
                                       -------------------------------
                                  Printed Name
                                                ----------------------
                                  Its:
                                        ------------------------------

                                      -2-<PAGE>

                                                                    EXHIBIT 4.14

                SENIOR COLLATERAL PLEDGE AND SECURITY AGREEMENT

                           Dated as of June 15, 2001

                                    Between
                                    -------

                            EARTHWATCH INCORPORATED

                                  as grantor
                                  -- -------

                                      and

                             THE BANK OF NEW YORK

                              as collateral agent
                              -- ---------- -----
<PAGE>

                SENIOR COLLATERAL PLEDGE AND SECURITY AGREEMENT

          SENIOR COLLATERAL PLEDGE AND SECURITY AGREEMENT, dated as of June 15,
2001 (this "Agreement"), made by EarthWatch Incorporated (the "Company"), a
Delaware corporation having its principal office at 1900 Pike Road, Longmont
Colorado 80501, in favor of The Bank of New York, a New York banking
corporation, having its principal corporate trust office at 101 Barclay Street,
Floor 21 West, New York, New York 10286 in its capacity as collateral agent
(referred to herein as the "Collateral Agent") for itself and for the ratable
benefit of the 13% Noteholders referred to below and the holders from time to
time of the Vendor Financing.

                                  BACKGROUND

          A.   The Company has entered into the Recapitalization Agreement dated
as of April 2, 2001 (as amended, amended and restated, supplemented or otherwise
modified from time to time, the "Recapitalization Agreement") among the Company,
Morgan Stanley & Co., Incorporated, and the other parties thereto.

          B.   Pursuant to Section 5.4 of the Recapitalization Agreement, the
Company is required to cause the QuickBird 2 Insurance to be assigned, pledged
and transferred to the Collateral Agent as sole loss payee, as security for the
13% Notes Obligations and the Vendor Financing Obligations, in the case of the
Vendor Financing Obligations, in an amount up to the Vendor Financing Cap.

          C.   It is the intent of the parties that any distributions in respect
of the Collateral, including any distributions in respect of payments to the
Collateral Agent under the QuickBird 2 Insurance shall be distributed in
accordance with Section 8(d) hereof.

          NOW THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by the Company, the Company hereby covenants and agrees with, and
(in Section 4 below) represents and warrants to the Collateral Agent for the
benefit of the Secured Parties as follows:

          Section 1. Defined Terms. Capitalized terms that are used herein and
                     -------------
not otherwise defined herein shall have the meanings ascribed to such terms in
the 13% Notes Indenture and the Recapitalization Agreement; provided, however,
                                                            --------  -------
that if such a term is defined in both such documents, the definition contained
in the Recapitalization Agreement shall govern. In addition to the terms defined
in the introductory and background paragraphs of this Agreement, the following
terms shall have the meanings indicated below:

          "Collateral" means all of the following, whether now owned or
hereafter acquired:

          (i)   the QuickBird 2 Insurance;

          (ii)  all accounts, contract rights, instruments, investment property
     and general intangibles in respect of the QuickBird 2 Insurance, including
     without limitation any premiums, unearned premiums and premium refunds; and
<PAGE>

          (iii)   to the extent not otherwise included, all Proceeds of each of
     the foregoing and all accessions to, substitutions and replacements for,
     and proceeds, issues, returns, rents, profits and products of, each of the
     foregoing.

          "Collateral Agent Expenses" means the costs and expenses incurred by
the Collateral Agent in connection with the sale or other disposition of the
Collateral and any and all other fees, expenses or other amounts payable to the
Collateral Agent and its agents pursuant to this Agreement, including, without
limitation, expenses of the Collateral Agent and its agents, including the fees
and expenses of its outside counsel and internal counsel, and all expenses,
liabilities and advances made or incurred by the Collateral Agent in connection
therewith or pursuant to Section 7 hereof and amounts payable pursuant to
Section 17 hereof.

          "Event of Default" means an "Event of Default" under and as defined in
the 13% Notes Indenture, an event of default (howsoever described) under the
Vendor Financing Agreement or a default by the Company of any obligation under
this Agreement.

          "Excess Proceeds Distributions" shall have the meaning ascribed to
such term in Section 8(d) hereof.

          "Filing Offices" means (i) the Secretary of State of Delaware and (ii)
the Secretary of State of Colorado.

          "Officer" means, with respect to the Company, (i) the Chairman of the
Board, the Chief Executive Officer, the President or any other Director of the
Company or (ii) the Chief Financial Officer, the Treasurer or any Assistant
Treasurer, the Company Secretary or any Company Assistant Secretary.

          "Officers' Certificate" means a certificate signed by one Officer
listed in clause (i) of the definition thereof and one Officer listed in clause
(ii) of the definition thereof; provided, however, that any such certificate may
                                --------  -------
be signed by any two of the Officers listed in clause (i) of the definition
thereof in lieu of being signed by one Officer listed in clause (i) of the
definition thereof and one Officer listed in clause (ii) of the definition
thereof.

          "Opinions of Counsel" means written opinions substantially in the
forms set forth in Exhibits I-1 and I-2 to the Recapitalization Agreement.

          "Permitted Insurance Modification" means the following particular
specified amendments and modifications to the QuickBird 2 Insurance:

          (a)  amendments and modifications to cure any ambiguity, defect or
     inconsistency in the QuickBird 2 Insurance or to increase the rights and
     benefits in favor of the Collateral Agent in respect of the QuickBird 2
     Insurance; provided that such amendments or modifications shall not,
     directly or indirectly, adversely affect the interests of the Collateral
     Agent or any other Secured Party in any material respect:

          (b)  amendments and modifications to the launch schedule set forth in
     the declarations section of the QuickBird 2 Insurance; and

                                       2
<PAGE>

          (c)  amendments and modifications in the "Definitions" section of the
     QuickBird 2 Insurance which only amend or modify the definitions of the
     specific defined terms set forth on Schedule II attached hereto or
     substantially equivalent defined terms in the QuickBird 2 Insurance.

          "Permitted Lien" means the Liens created under or evidenced by the
Second Priority Pledge Agreement.

          "Proceeds" means "proceeds," as such term is defined in Section 9-
306(1) of the UCC, and, in any event, shall include, without limitation, (i) any
and all proceeds of any insurance, indemnity, warranty or guaranty payable to
the Company or the Collateral Agent from time to time with respect to any of the
Collateral, (ii) any and all payments (in any form whatsoever) made or due and
payable to the Company from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Collateral by any governmental authority (or any Person acting under color of
governmental authority), and (iii) any and all other amounts from time to time
paid or payable in respect of any of the Collateral.

          "Proceeds Distributions" shall have the meaning ascribed to such term
in Section 8(d) hereof.

          "QuickBird 2 Insurance" means the insurance policy or policies and any
placement slips relating to the Company's "QuickBird 2" satellite, in
substantially the form or forms attached as Exhibit A hereto, as such policy or
policies or placement slips may from time to time be amended, modified,
supplemented or replaced.

          "Returned Insurance Premiums" shall have the meaning ascribed to such
term in Section 8(g) hereof.

          "Second Priority Pledge Agreement" means the Collateral Pledge and
Security Agreement dated as of the date hereof made by the Company in favor of
The Bank of New York, as collateral agent for the holders of the Series A
Preferred Stock and the Series B Preferred Stock in the form attached hereto as
Exhibit B hereto.

          "Secured Obligations" means, collectively, the 13% Notes Obligations
and the Vendor Financing Obligations.

          "Secured Parties" means the Collateral Agent, the 13% Notes Trustee,
the 13% Noteholders and any holder from time to time of the Vendor Financing.

          "Termination Date" means the latest scheduled date of termination of
any insurance policy with respect to the QuickBird 2 Insurance; provided that
                                                                -------- ----
there has been no event of loss under the QuickBird 2 Insurance or other event
causing payment under the QuickBird 2 Insurance.

          "13% Noteholders" means the holders from time to time of the 13%
Notes.

                                       3
<PAGE>

          "13% Notes Indenture" means the Indenture, dated as of July 12, 1999,
between the Company and The Bank of New York, as trustee for the 13%
Noteholders, as supplemented by the Supplemental Indenture and as further
amended, amended and restated, supplemented or otherwise modified from time to
time.

          "13% Notes Obligations" means the 13% Notes and all other obligations
under and in respect of the 13% Notes Indenture, whether for principal, premium,
interest, fees or otherwise.

          "UCC" means the Uniform Commercial Code as the same may, from time to
time, be in effect in the State of New York; provided, however, in the event
                                             --------  -------
that, by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of the Collateral Agent's security interest in any
Collateral is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than the State of New York, the term "UCC" means the Uniform
Commercial Code as in effect in such other jurisdiction for purposes of the
provisions hereof relating to such attachment, perfection or priority and for
purposes of definitions related to such provisions.

          "Vendor Financing Agreement" means any agreement governing the terms
of the Vendor Financing, as such agreement may be amended, amended and restated,
supplemented or otherwise modified from time to time.

          "Vendor Financing Cap" means $9,000,000 in principal, and accrued
interest thereon.

          "Vendor Financing Obligations" means all obligations under and in
respect of the Vendor Financing Agreement, whether for principal, premium,
interest, fees or otherwise, in an aggregate amount not exceeding the Vendor
Financing Cap.

          "Vendor Financing Representative" means any representative for the
holders of the Vendor Financing, as notified in writing from time to time to the
Collateral Agent and the Company.

          Section 2. Assignment and Grant of Security Interest. As collateral
                     -----------------------------------------
security for the full and prompt payment when due (whether at stated maturity,
by acceleration or otherwise) of, and the performance of, all of the Secured
Obligations, the Company hereby assigns, conveys, mortgages, pledges,
hypothecates and transfers to the Collateral Agent, and hereby grants to the
Collateral Agent, for itself and the ratable benefit of the Secured Parties, a
continuing security interest in all of the Company's right, title and interest
in, to and under the Collateral. This Agreement secures the prompt and complete
payment and performance when due (whether at stated maturity, by acceleration or
otherwise) of all the Secured Obligations ratably.

          Section 3. Rights of the Collateral Agent; Limitations on the
                     --------------------------------------------------
Collateral Agent's Secured Obligations. (a) It is expressly agreed by the
--------------------------------------
Company that, anything herein to the contrary notwithstanding, the Company shall
remain liable under each of its contracts to observe and perform all the
conditions and obligations to be observed and performed by it thereunder and the
Company shall perform all of its duties and obligations thereunder, all in
accordance with

                                       4
<PAGE>

and pursuant to the terms and provisions of each such contract. Neither the
Collateral Agent nor any other Secured Party shall have any obligation or
liability under any contract by reason of or arising out of this Agreement or
the granting of a security interest in any contract (including the QuickBird 2
Insurance) to the Collateral Agent or the receipt by the Collateral Agent or any
other Secured Party of any payment relating to any such contract pursuant
hereto, nor shall the Collateral Agent nor any other Secured Party be required
or obligated in any manner to perform or fulfill any of the obligations of the
Company under or pursuant to any contract, or to make any payment, or to make
any inquiry as to the nature or the sufficiency of any payment received by it or
the sufficiency of any performance by any party under any contract, or to
present or file any claim, or to take any action to collect or enforce any
performance or the payment of any amounts which may have been assigned to it or
to which it may be entitled at any time or times.

          (b)  The Company hereby authorizes the Collateral Agent to collect
directly from any Person any proceeds in respect of the Collateral, including,
without limitation, any payments under or in respect of the QuickBird 2
Insurance. In the event that the Company receives any amount or other proceeds
in respect of the QuickBird 2 Insurance or other Collateral from the relevant
insurance company or any other Person other than the Collateral Agent in
accordance with this Agreement, the Company shall cause such amounts to be held
in trust for the benefit of the Collateral Agent and immediately turned over to
the Collateral Agent in the same form received with appropriate endorsements.

          Section 4. Representations and Warranties. The Company hereby
                     ------------------------------
represents and warrants to the Collateral Agent, as of the date hereof, as
follows:

          (a)  The execution and delivery by the Company of, and the performance
by the Company of its obligations under, this Agreement will not contravene any
provision of applicable law or statute or the organizational documents of the
Company or any material agreement or other material instrument binding upon the
Company or any of its subsidiaries or any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the Company or any
of its subsidiaries, or result in the creation or imposition of any Lien on any
assets of the Company, except for the security interests granted under this
Agreement; no consent, approval, authorization or order of, or qualification
with, or other action by, any governmental or regulatory body or agency or any
third party is required (i) for the execution, delivery or performance by the
Company of this Agreement, (ii) for the grant by the Company of the security
interest granted hereby, for the assignment and pledge by the Company of the
Collateral pursuant to this Agreement, (iii) for the perfection and maintenance
of the assignment, pledge and security interest created hereby (including the
first-priority nature of such assignment, pledge and security interest), or (iv)
except for any such consents, approvals, authorizations or orders required to be
obtained by the Collateral Agent (or the Secured Parties) for reasons other than
the consummation of the transactions contemplated by the Recapitalization
Agreement, for the exercise by the Collateral Agent of the rights provided for
in this Agreement or the remedies in respect of the Collateral pursuant to this
Agreement.

          (b)  This Agreement has been duly authorized, validly executed and
delivered by the Company and assuming the due authorization, execution and
delivery thereof by the Collateral Agent, constitutes a valid and binding
agreement of the Company, enforceable against the Company in accordance with its
terms, except as (i) the enforceability hereof may be limited

                                       5
<PAGE>

by bankruptcy, insolvency, fraudulent conveyance, preference, reorganization,
moratorium or similar laws now or hereafter in effect relating to or affecting
creditors' rights or remedies generally, (ii) the availability of equitable
remedies may be limited by equitable principles of general applicability, (iii)
the exculpation provisions and rights to indemnification hereunder may be
limited by public policy considerations and (iv) the waiver of rights and
defenses contained in Section 8(c) or Section 11 may be limited by applicable
law.

          (c)  There are no legal or governmental proceedings pending or, to the
best of the Company's knowledge, threatened to which the Company or any of its
subsidiaries is a party or to which any of the properties of the Company or any
such subsidiary is subject that would materially adversely affect the power or
ability of the Company to perform its obligations under this Agreement or to
consummate the transactions contemplated hereby.

          (d)  The Company is the sole owner of each item of the Collateral in
which it purports to grant a security interest hereunder, having good title
thereto, free and clear of any and all Liens (other than the Permitted Lien),
except for the assignment, security interest and other rights granted pursuant
to this Agreement.

          (e)  To the Company's knowledge, no effective security agreement,
financing statement, equivalent security or lien instrument or continuation
statement covering all or any part of the Collateral is on file or of record in
any public office, except such as may have been filed by the Company in favor of
the Collateral Agent pursuant to this Agreement or pursuant to the collateral
agent under the Second Priority Pledge Agreement.

          (f)  The Company's place of business (or the chief executive office if
it has more than one place of business), the places where its records concerning
the Collateral are kept is set forth on Schedule I attached hereto.

          (g)  True and correct copies of the policies relating to the QuickBird
2 Insurance are attached as Exhibit A hereto, which policies include the
Collateral Agent as sole loss payee thereon and are in full force and effect.

          (h)  Upon the occurrence of (i) the execution and delivery of this
Agreement by the Collateral Agent and the Company, (ii) the procurement of the
QuickBird 2 Insurance in accordance with this Agreement, (iii) the filing of a
copy of this Agreement with the Filing Offices, (iv) the filing of a UCC
financing statement describing the Collateral with the Filing Offices, (v) the
delivery to the Collateral Agent of the original insurance policy in respect of
the QuickBird 2 Insurance, (vi) the notation of the Collateral Agent as sole
loss payee under the insurance policy in respect of the QuickBird 2 Insurance
and (vii) receipt by the Collateral Agent of a consent and acknowledgement by
each insurance company issuing the QuickBird 2 Insurance to the security
interest created hereby, such acknowledgement to be contained in the relevant
insurance policy or to be in the form of Exhibit C hereto (with such
modifications as the Collateral Agent agrees), the Collateral Agent shall have a
first priority, perfected security interest in the Collateral, free and clear of
any and all Liens.

                                       6
<PAGE>

          Section 5. Covenants. The Company covenants and agrees with the
                     ---------
Collateral Agent that from and after the date hereof and until the Secured
Obligations are fully and indefeasibly satisfied in cash or the Termination Date
otherwise occurs:

          (a)  Further Documentation; Pledge of Instruments. At any time and
               --------------------------------------------
from time to time, at the sole expense of the Company, the Company will promptly
and duly execute and deliver any and all such further instruments and documents
and take such further action as may be necessary and desirable to obtain the
full benefits of this Agreement and of the rights and powers herein granted,
including, without limitation, securing all consents and approvals necessary or
appropriate for the assignment of, or grant of a security interest in, the
QuickBird 2 Insurance (or any other contract constituting Collateral held by the
Company or in which the Company has any rights not heretofore assigned) to the
Collateral Agent, the execution and filing of any financing or continuation
statements under the UCC or any other required filings with respect to the
Liens, assignments and security interests granted hereby and the delivery to the
Collateral Agent of any Collateral constituting instruments or investment
securities under the UCC. Without limiting the foregoing, the Company will
perform all acts as may be necessary or desirable to create and maintain in
favor of the Collateral Agent a first priority perfected security interest in
the Collateral. To the extent permitted by applicable law, the Company
authorizes the Collateral Agent to sign any financing or continuation statement
instead of the Company.

          (b)  Limitation on Liens on Collateral. The Company will not create,
               ---------------------------------
permit or suffer to exist, and will defend the Collateral against and take such
other action as is necessary to remove, any Lien on the Collateral (other than
the Permitted Lien and the Lien in favor of the Collateral Agent created
hereby), and will defend the right, title and interest of the Collateral Agent
in and to any of the Company's rights in the Collateral and in and to the
Proceeds thereof constituting Collateral against the claims and demands of all
Persons whomsoever.

          (c)  Maintenance of Insurance. The Company shall comply in all
               ------------------------
respects with the insurance requirements set forth in Section 4.10 of the 13%
Notes Indenture. Without limiting the generality of the foregoing, the Company
shall take all actions necessary to continue the QuickBird 2 Insurance in full
force and effect (including payment of all premiums) and to cause the Collateral
Agent to be the sole loss payee on the QuickBird 2 Insurance.

          (d)  Limitations on Disposition. The Company will not sell, assign,
               --------------------------
lease, transfer or otherwise dispose of any of the Collateral or any interest
therein to any Person other than the Collateral Agent.

          (e)  Notices. The Company will advise the Collateral Agent promptly in
               -------
writing, in reasonable detail, (i) of any material Lien (other than the
Permitted Lien) or claim made or asserted against any of the Collateral, (ii) of
any material change in the composition of the Collateral, (iii) of any claim
under the QuickBird 2 Insurance or any event causing the payment of any sums
(including return of premium) in respect of the QuickBird 2 Insurance and (iv)
of the occurrence of any other event which could reasonably be expected to have
a material adverse effect on the aggregate value of the Collateral or in the
security interests created hereunder. The Company will promptly provide the
Collateral Agent with copies of any and all notices received from or provided to
any insurance company or agent in respect of the QuickBird 2 Insurance. Without
limiting the generality of the foregoing, the Company will promptly provide the

                                       7
<PAGE>

Collateral Agent, the 13% Notes Trustee and the Vendor Financing Representative
with any information regarding the QuickBird 2 Insurance as such Person shall
reasonably request.

          (f)  Quickbird 2 Insurance. The Company shall not permit any
               ---------------------
amendment, modification or termination of the QuickBird 2 Insurance, or any
settlement in respect of any claim thereunder, without the written consent of
the Collateral Agent. The Company shall comply with all terms and conditions of
the QuickBird 2 Insurance and will act promptly and diligently in the
enforcement of all rights, the protection of all benefits and the prosecution of
any claims under the QuickBird 2 Insurance. In respect of the QuickBird 2
Insurance, the Company shall not permit there to be (i) any loss payee, other
than the Collateral Agent or (ii) any insured party or additional insured party,
other than the Company. The Company shall not permit there to be any original
policy in respect of the QuickBird 2 Insurance other than any such original
which is delivered to the Collateral Agent.

          (g)  Continuous Perfection. The Company will not change its name,
               ---------------------
identity or corporate structure in any manner which might make any financing or
continuation statement filed in connection herewith misleading within the
meaning of Section 9-402(7) of the UCC (or any other then applicable provision
of the UCC) unless the Company shall have given the Collateral Agent at least 60
days' prior written notice thereof and shall have taken all action (or made
arrangements to take such action substantially simultaneously with such change
if it is impossible to take such action in advance) necessary or reasonably
requested by the Collateral Agent to amend such financing statement or
continuation statement so that it is not misleading. The Company will not change
its place of incorporation, place of business or its chief executive office (if
it has more than one place of business) or remove its records from any location,
unless it gives the Collateral Agent at least 60 days' prior written notice
thereof and has taken such action as is necessary to cause the security interest
of the Collateral Agent in the Collateral to continue to be perfected.

          (h)  Second Priority Pledge Agreement. The Company shall not agree to
               --------------------------------
any material amendment, supplement or other modification to the terms of the
Second Priority Pledge Agreement (it being agreed that any amendment, supplement
or other modification to Section 2(b), Section 2(c) or Section 16 of the Second
Priority Pledge Agreement shall be a material amendment, supplement or
modification) without the prior written consent of the Collateral Agent.

          Section 6. The Collateral Agent's Appointment as Attorney-in-Fact. (a)
                     ------------------------------------------------------
The Company hereby irrevocably constitutes and appoints the Collateral Agent and
any officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in- fact with full irrevocable power and authority in the place
and stead of the Company and in the name of the Company or in its own name, from
time to time in the Collateral Agent's discretion, for the purpose of carrying
out the terms of this Agreement, to take any and all appropriate action and to
execute and deliver any and all documents and instruments which the Collateral
Agent may deem necessary or desirable to accomplish the purposes of this
Agreement and, without limiting the generality of the foregoing, hereby gives
the Collateral Agent the power and right, but not the duty, on behalf of the
Company, without notice to or assent by the Company to do the following:

                                       8
<PAGE>

               (i)   to ask, demand, collect, receive and give acquittances and
     receipts for any and all moneys due and to become due under any Collateral
     and, in the name of the Company or in its own name or otherwise, to take
     possession of and endorse and collect any checks, drafts, notes,
     acceptances or other instruments for the payment of moneys due under any
     Collateral and to file any claim or to take any other action or proceeding
     in any court of law or equity or otherwise deemed appropriate by the
     Collateral Agent for the purpose of collecting any and all such moneys due
     under any Collateral whenever payable and to file any claim or to take any
     other action or proceeding in any court of law or equity or otherwise
     deemed appropriate by the Collateral Agent for the purpose of collecting
     any and all such moneys due under any Collateral whenever payable;

               (ii)  to pay or discharge taxes, Liens, security interests or
     other encumbrances levied or placed on or threatened against the Collateral
     and to pay any required insurance premiums and related costs and expenses;
     and

               (iii) (A) to direct any party liable for any payment under any of
     the Collateral to make payment of any and all moneys due, and to become due
     thereunder, directly to the Collateral Agent or as the Collateral Agent
     shall direct; (B) to receive payment of and receipt for any and all moneys,
     claims and other amounts due, and to become due at any time, in respect of
     or arising out of any Collateral; (C) to sign and indorse any invoices,
     freight or express bills, bills of lading, storage or warehouse receipts,
     drafts against debtors, assignments, verifications and notices in
     connection with accounts, general intangibles, instruments and other items
     constituting or relating to the Collateral; (D) to commence and prosecute
     any suits, actions or proceedings at law or in equity in any court of
     competent jurisdiction to collect the Collateral or any part thereof and to
     enforce any other right in respect of any Collateral; (E) to defend any
     suit, action or proceeding brought against the Company with respect to any
     Collateral; (F) to settle, compromise or adjust any suit, action or
     proceeding described above and, in connection therewith, to give such
     discharges or releases as the Collateral Agent may deem appropriate; and
     (G) generally to sell, transfer, pledge, make any agreement with respect to
     or otherwise deal with any of the Collateral as fully and completely as
     though the Collateral Agent were the absolute owner thereof for all
     purposes, and to do, at the Collateral Agent's option and the Company's
     expense, at any time, or from time to time, all acts and things which the
     Collateral Agent reasonably deems necessary to protect, preserve or realize
     upon the Collateral and the Collateral Agent's Lien therein, in order to
     effect the intent of this Agreement, all as fully and effectively as the
     Company might do.

               (b)   The Collateral Agent agrees that, except upon the
occurrence and during the continuance of any Event of Default or default
hereunder, it will forbear from exercising the power of attorney or any rights
granted to the Collateral Agent pursuant to this Section 6; provided that the
                                                            --------
Collateral Agent may, at the direction of the 13% Notes Trustee or the Vendor
Financing Representative, exercise any such power of attorney or other rights
notwithstanding the absence of an Event of Default or default hereunder if such
exercise is necessary or desirable for the grant to, or maintenance in favor of,
the Collateral Agent of the first priority security interest in the Collateral
intended by this Agreement. The Company hereby ratifies, to the extent permitted
by law, all that any said attorney shall lawfully do or cause to be done by
virtue hereof.

                                       9
<PAGE>

The power of attorney granted pursuant to this Section 6, being coupled with an
interest, shall be irrevocable until the Secured Obligations are indefeasibly
paid in full in cash.

               (c)  The powers conferred on the Collateral Agent hereunder are
solely to protect the Collateral Agent's interests in the Collateral and shall
not impose any duty or obligation upon it to exercise any such powers. The
Collateral Agent shall be accountable only for amounts that it actually receives
as a result of the exercise of such powers and neither it nor any of its
officers, directors, employees or agents shall be responsible to the Company for
any act or failure to act, except for its own gross negligence or willful
misconduct as finally determined by a court of competent jurisdiction. The
Collateral Agent shall not be required to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured it.

               (d)  The Company also authorizes the Collateral Agent, at any
time and from time to time, including, but not limited to, upon the occurrence
and during the continuance of an Event of Default, (i) to communicate in its own
name with any party to any contract constituting Collateral with regard to the
assignment of the right, title and interest of the Company in and under the
Contracts constituting Collateral hereunder and other matters relating thereto
and (ii) to execute, in connection with the sale or other realization provided
for in Section 8 hereof, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral. Nothing in this agreement
shall be construed to limit the power of the Collateral Agent at anytime and
from time to time to communicate with any insurance company or any agent in
respect of the QuickBird 2 Insurance or otherwise exercise any rights or powers
granted to it under the QuickBird 2 Insurance.

               Section 7. Performance by the Collateral Agent of the Company's
                          ----------------------------------------------------
Obligations. If the Company fails to perform or comply with any of its
-----------
agreements contained herein, and the Collateral Agent shall itself perform or
comply, or otherwise cause performance or compliance, with such agreement, the
expenses of the Collateral Agent incurred in connection with such performance or
compliance, together with interest thereon at the highest rate then in effect in
respect of the Secured Obligations, shall be payable by the Company to the
Collateral Agent on demand and shall constitute Secured Obligations secured
hereby.

               Section 8. Remedies; Rights Upon an Event of Default; Allocation
                          -----------------------------------------------------
and Payment of Proceeds Distributions; Special Provisions Regarding Return of
-----------------------------------------------------------------------------
Premiums Under QuickBird 2 Insurance. (a) If an Event of Default shall occur and
------------------------------------
be continuing, the Collateral Agent may exercise, in addition to all other
rights and remedies granted to it in this Agreement and in any other instrument
or agreement securing, evidencing or relating to the Secured Obligations, all
rights and remedies of a secured party under the UCC and other applicable law.
Without limiting the generality of the foregoing, the Company expressly agrees
that in any such event the Collateral Agent, without demand of performance or
other demand, advertisement or notice of any kind (except the notice specified
below of time and place of public or private sale) to or upon the Company or any
other Person (all and each of which demands, advertisements and/or notices are
hereby expressly waived to the maximum extent permitted by the UCC and other
applicable law), may forthwith collect, receive, appropriate and realize upon
the Collateral, or any part

                                       10
<PAGE>

thereof, and/or may forthwith sell, lease, assign, give an option or options to
purchase, or sell or otherwise dispose of and deliver said Collateral (or
contract to do so), or any part thereof, in one or more parcels at public or
private sale or sales, at any exchange or broker's board or any of the
Collateral Agent's offices or elsewhere at such prices as it may deem best, for
cash or on credit or for future delivery without assumption of any credit risk.
The Collateral Agent shall have the right upon any such public sale or sales,
and, to the extent permitted by law, upon any such private sale or sales, to
purchase the whole or any part of said Collateral so sold, free of any right or
equity of redemption, which equity of redemption the Company hereby releases
(subject as aforesaid). The Company further agrees, at the Collateral Agent's
request, to assemble the Collateral and make it available to the Collateral
Agent at places which the Collateral Agent shall reasonably select, whether at
the Company's premises or elsewhere. The Collateral Agent shall apply or hold
the net proceeds of any such collection, recovery receipt, appropriation,
realization or sale, as provided in Section 8(d) hereof, the Company remaining
liable for any deficiency remaining unpaid after such application, and only
after so paying over such net proceeds to the holders of Secured Obligations to
the extent provided in Section 8(d) and after the payment by the Collateral
Agent of any other amount required by any provision of law, including Section
9-504(1)(c) of the UCC, need the Collateral Agent account for the surplus, if
any, to the Company. To the maximum extent permitted by applicable law, the
Company waives all claims, damages, and demands against the Collateral Agent
arising out of any repossession, retention or sale of the Collateral. The
Company agrees that the Collateral Agent need not give more than ten days'
notice (which notification shall be deemed given when delivered on an overnight
basis, postage prepaid, addressed to the Company at its address referred to in
Section 12) of the time and place of any public sale or of the time after which
a private sale may take place and that such notice is reasonable notification of
such matters. The Company shall remain liable for any deficiency if the proceeds
of any sale or disposition of the Collateral are insufficient to pay all amounts
to which the Collateral Agent is entitled, the Company also being liable for the
fees and disbursements of any attorneys employed by the Collateral Agent to
collect such deficiency.

          (b) The Company also agrees to pay all costs of the Collateral Agent,
including, without limitation, fees and disbursements of Collateral Agent's
attorneys, incurred in connection with the enforcement of any of its rights and
remedies under this Agreement.

          (c) The Company hereby waives presentment, demand, protest or any
notice (to the maximum extent permitted by applicable law) of any kind in
connection with this Agreement or any Collateral.

          (d) Subject to clause (g) below, any cash held or received by the
Collateral Agent as Collateral and all cash proceeds received by the Collateral
Agent in respect of any sale of, collection from, or other realization upon all
or any part of the Collateral (including, without limitation, any payment in
respect of the QuickBird 2 Insurance) (collectively, "Proceeds Distributions"),
shall be applied, distributed or held by the Collateral Agent, whether or not
there then exists any Default or Event of Default, as follows:

          First, Proceeds Distributions shall be applied to the payment of and
          -----
     reserve for Collateral Agent Expenses;

                                       11
<PAGE>

          Second, Proceeds Distributions Shall be Applied equally and ratably to
          ------
     those 13% Noteholders that accept an Offer to Purchase the 13% Notes in
     accordance with Section 4.12 of the 13% Notes Indenture (as amended by the
     Supplemental Indenture) and to the Vendor Financing Obligations in
     accordance with the equivalent provision of the Vendor Financing Agreement;
     provided however, that the aggregate amount of Proceeds Distributions
     -------- -------
     applied to the Vendor Financing Obligations shall not exceed the Vendor
     Financing Cap;

          Finally, after payment of the amounts set forth in First and Second
          -------                                            -----     ------
     above then, if the Permitted Lien shall then be in existence, the
     Collateral Agent shall hold any remaining Proceeds Distributions ("Excess
     Proceeds Distributions") as collateral agent under the Second Priority
     Pledge Agreement for the benefit of the holders of the Series A Preferred
     Stock and the Series B Preferred Stock for application in accordance with
     the provisions of the Second Priority Pledge Agreement, and, if the
     Permitted Lien shall not then be in existence, the Collateral Agent shall
     distribute any Excess Proceeds Distributions to the Company, or its
     successors or assigns, or to whomsoever may be lawfully entitled to receive
     the same as a court of competent jurisdiction may direct.

          (e) [Reserved].

          (f) Any distribution and payment to the Secured Parties in respect of
the 13% Notes Obligations and the Vendor Financing Obligations pursuant to
paragraph "Second" of clause (d) of this Section 8 shall be treated as a
           ------
prepayment, without premium, of the accreted value of, and accrued and unpaid
interest, if any, on, the 13% Notes Obligations and a prepayment of the
principal of, and accrued and unpaid interest, if any, on, the Vendor Financing
Obligations, as the case may be, to the extent of such distribution and payment
in respect thereof.

          (g) Subject to the following sentence, in the event that the
Collateral Agent receives any Proceeds Distribut ions that constitute the return
of insurance premiums ("Returned Insurance Premiums") under the QuickBird 2
Insurance in accordance with the terms thereof, the Collateral Agent shall hold
all Returned Insurance Premiums for a period of 180 days following receipt
before distributing such amounts in accordance with clause (d) of this Section
8. In the event that the Company delivers an Officers' Certificate to the
Collateral Agent prior to the expiration of such 180 day period which (i) states
that such Returned Insurance Premiums shall be used directly for the payment of
premiums for QuickBird 2 Insurance complying in all respects with the provisions
of Section 4.10(b) of the 13% Notes Indenture and (ii) provides instructions for
the payment of such premiums directly to the insurer(s) or their agents, the
Collateral Agent shall promptly pay such Returned Insurance Premiums in
accordance with such payment instructions.

          Section 9. Limitation On the Collateral Agent's Duty In Respect of
                     -------------------------------------------------------
Collateral. The Collateral Agent shall not have any duty as to any Collateral in
----------
its possession or control or in the possession or control of any agent or
nominee of it or any income thereon or as to the preservation of rights against
prior parties or any other rights pertaining thereto, except that the Collateral
Agent shall use reasonable care with respect to the Collateral in its possession
or under its control. In accordance with Section 9-207 of the UCC, the
Collateral Agent shall be deemed to have used reasonable care if it observes
substantially the same standard of care with respect to

                                       12
<PAGE>

the custody or preservation of the Collateral as it observes with respect to
similar assets owned by the Collateral Agent. Without limiting the generality of
the foregoing, the Collateral Agent shall not be under any obligation to take
any steps to preserve rights in the Collateral against any other parties, to
sell the same if it threatens to decline in value, or to exercise any rights
represented thereby (including rights with respect to calls, conversions,
exchanges, maturities, or tenders); provided, however, that the Collateral Agent
                                    --------  -------
may, at its option, do so, and any and all reasonable expenses incurred in
connection therewith shall be for the account of the Company. Upon written
request of the Company, the Collateral Agent shall account for any moneys
received by it in respect of any foreclosure on or disposition of the Collateral
owned by the Company.

          Section 10. Security Interest Absolute. All rights of the Collateral
                      --------------------------
Agent and security interests hereunder, and all obligations of the Company
hereunder, shall be absolute and unconditional irrespective of:

          (i)       any lack of validity or enforceability of any provision of
     this Agreement, the 13% Notes, the Vendor Financing Agreement or any
     other agreement or instrument relating thereto;

          (ii)      any change in the time, manner or place of payment of, or in
     any other term of, or any increase in the amount of, all or any of the
     Secured Obligations, or any other amendment, waiver or modification of any
     term of, or any consent to any departure from any requirement of, this
     Agreement, the 13% Notes, the Vendor Financing Agreement or any other
     agreement or instrument relating thereto;

          (iii)     any exchange, release or non-perfection of any security
     interest or lien on any other collateral, or any release or amendment or
     waiver of any term of any guaranty of, or security for, or consent to
     departure from any requirement of any guaranty or other credit support of
     or for, all or any of the Secured Obligations; or

          (iv)      all suretyship defenses and any other circumstance which
     might otherwise constitute a defense available to, or a discharge of, a
     borrower, a pledgor or a surety.

          Section 11. Choice of Law and Venue; Jury Trial Waiver. THE VALIDITY
                      ------------------------------------------
OF THIS AGREEMENT, ITS CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT, AND THE
RIGHTS OF THE PARTIES HERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR
RELATED HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. WHEREVER POSSIBLE, EACH
PROVISION OF THIS AGREEMENT SHALL BE INTERPRETED IN SUCH MANNER AS TO BE
EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION OF THIS AGREEMENT
SHALL BE PROHIBITED BY OR INVALID UNDER APPLICABLE LAW, SUCH PROVISION SHALL BE
INEFFECTIVE ONLY TO THE EXTENT OF SUCH PROHIBITION OR INVALIDITY AND WITHOUT
INVALIDATING THE REMAINING PROVISIONS OF THIS AGREEMENT; THE PARTIES AGREE THAT
ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT SHALL BE
TRIED AND LITIGATED

                                       13
<PAGE>

ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF
NEW YORK OR, AT THE SOLE OPTION OF THE COLLATERAL AGENT, IN ANY OTHER COURT IN
WHICH COLLATERAL AGENT SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH
HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. THE COMPANY AND
THE COLLATERAL AGENT WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY
RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT
TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION
11. TO THE EXTENT PERMITTED BY LAW, THE COMPANY AND COLLATERAL AGENT EACH HEREBY
WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF ANY OF THE DOCUMENTS OR ANY OF THE TRANSACTIONS
CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. THE COMPANY AND COLLATERAL
AGENT EACH REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.

          Section 12. Notices. All notices or demands by any party hereto to the
                      -------
other party and relating to this Agreement shall be sent by telecopy, promptly
confirmed in writing, or nationwide overnight delivery service (with charges
prepaid) and (i) if to the Collateral Agent, addressed to such address set forth
under the signature block for the Collateral Agent as set forth in this
Agreement, or at such other address as the Collateral Agent shall have specified
to the Company in writing and (ii) if to the Company, addressed to it at 1900
Pike Road, Longmont, Colorado, 80501, Telecopier No: 303-682-3848, or at such
other address as the Company shall have specified to the Collateral Agent in
writing; provided, however, that any such communication to the Company may also,
at the option of the Secured Party making the communication, be delivered by any
other means either to the Company at its address specified above or to the
Chairman of the Board, Chief Executive Officer, Chief Operating Officer,
President, Chief Financial Officer or Secretary of the Company.

          Section 13. Amendments and Waivers in Writing.
                      ---------------------------------

          (a) No amendment or waiver of any provision of this Agreement nor
consent to any departure by the Company therefrom shall in any event be
effective unless the same shall be in writing, and signed by the Collateral
Agent and the Company, and then any such waiver or consent shall only be
effective in the specific instance and for the specific purpose for which given.

          (b) As provided in Section 5(f) of this Agreement, the Company shall
not permit any amendment, modification or termination of the QuickBird 2
Insurance without the written consent of the Collateral Agent. The Collateral
Agent shall consent to any proposed amendment or modification to the QuickBird 2
Insurance that constitutes a Permitted Insurance Modification

                                       14
<PAGE>

no later than ten days after delivery to the Collateral Agent of an Officers'
Certificate (i) stating that such amendment or modification constitutes a
Permitted Insurance Modification and (ii) stating that such amendment or
modification will not, directly or indirectly, have a material adverse effect on
the value of the Collateral, the rights and benefits of the Company or the
Collateral Agent under the QuickBird 2 Insurance, the Lien of the Collateral
Agent on the Collateral or the rights and benefits of the Collateral Agent
hereunder. The Company will concurrently deliver a copy of such Officers'
Certificate to the 13% Notes Trustee and the Vendor Financing Representative.

          Section 14. No Waiver; Remedies.
                      -------------------

          (a) No failure on the part of the Collateral Agent or any Secured
Party to exercise, and no delay in exercising any right hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any right
hereunder preclude any other or further exercise thereof or the exercise of any
other right. The remedies herein provided are cumulative, may be exercised
singly or concurrently, and are not exclusive of any remedies provided by law or
any other agreement.

          (b) Failure by the Collateral Agent or any other Secured Party at any
time or times hereafter to require strict performance by the Company or any
other Person of any of the provisions, warranties, terms or conditions contained
in this Agreement, the 13% Notes Indenture, the Vendor Financing Agreement or
any other agreements now or at any time or times hereafter executed by the
Company or any such other Person and delivered to the Collateral Agent or any
other Secured Party shall not waive, affect or diminish any right of the
Collateral Agent or any other Secured Party at any time or times hereafter to
demand strict performance thereof, and such right shall not be deemed to have
been modified or waived by any course of conduct or knowledge of the Collateral
Agent or any other Secured Party, or any agent, officer or employee of such
Secured Party.

          Section 15. Counterparts; Facsimile Execution. This Agreement may be
                      ---------------------------------
executed in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall constitute but one and
the same Agreement. Delivery of an executed counterpart of this Agreement by
facsimile shall be equally as effective as delivery of a manually executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by facsimile also shall deliver a manually executed counterpart
of this Agreement but the failure to deliver a manually executed counterpart
shall not affect the validity, enforceability, and binding effect of this
Agreement.

          Section 16. Successors and Assigns. This Agreement and all obligations
                      ----------------------
of the Company hereunder shall be binding upon the legal representatives,
successors and assigns of the Company, and shall, together with the rights and
remedies of the Collateral Agent hereunder, inure to the benefit of the
Collateral Agent for the benefit of the Secured Parties, and their respective
successors and assigns, including any subsequent holder of any Secured
Obligations; provided, however, that the Company may not assign this Agreement
             --------  -------
or any rights or duties hereunder without the Collateral Agent's prior written
consent.

                                       15
<PAGE>

          Section 17. Compensation; Indemnification. The Company shall pay to
                      -----------------------------
the Collateral Agent the following compensation: (i) $3,500, as an acceptance
fee, payable upon execution hereof and (ii) $5,000 as an annual fee, first
payable upon execution of this Agreement, then on each anniversary thereof. The
reasonable compensation of the Collateral Agent shall not be limited by any law
on compensation of a trustee of an express trust. The Company shall reimburse
the Collateral Agent upon request for all reasonable out-of-pocket expenses and
advances incurred or made by the Collateral Agent. Without limiting the
generality of the foregoing, the Company shall pay, indemnify, hold harmless and
defend the Collateral Agent, the 13% Noteholders, the 13% Notes Trustee, the
holders of the Vendor Financing, the Vendor Financing Representative and their
respective directors, officers, agents and employees for, from and against any
and all claims, actions, costs, damages, obligations, liabilities and expenses,
including reasonable fees and disbursements of counsel and other advisors and
consultants (including any insurance advisors retained to review the QuickBird 2
Insurance, whether prior or subsequent to an Event of Default) retained by them,
arising from this Agreement, the 13% Notes Indenture, the Vendor Financing
Agreement and the Collateral Agent's acceptance of, or performance under, this
Agreement.

          Section 18. Effectiveness. Except as provided in the following
                      -------------
sentence, this Agreement shall be binding and deemed effective when executed by
the Company and the Collateral Agent. The provisions of Section 4(g) shall
become effective upon the delivery to the Collateral Agent of the policy in
respect of the QuickBird 2 Insurance.

          Section 19. Severability of Provisions. Each provision of this
                      --------------------------
Agreement shall be severable from every other provision of this Agreement for
the purpose of determining the legal enforceability of any specific provision.

          Section 20. Integration. This Agreement reflects the entire
                      -----------
understanding of the parties with respect to the subject matter of the security
interest contemplated hereby for the benefit of the Secured Parties and this
Agreement shall not be contradicted or qualified by any other agreement, oral or
written, before the date hereof.

          Section 21. Construction. Unless the context of this Agreement clearly
                      ------------
requires otherwise, references to the plural include the singular, references to
the singular include the plural, and the term "including" is not limiting. The
words "hereof," "herein," "hereby," "hereunder," and other similar terms refer
to this Agreement as a whole and not to any particular provision of this
Agreement.

          Section 22. Section Titles. The Section titles contained in this
                      --------------
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of this Agreement.

          Section 23. Exculpation. No Person in or connected to the Secured
                      -----------
Parties shall have any obligation or liability whatsoever under any governing
agreement relating to any of the Collateral, or for the obligations of the
Company, by reason of or arising out of this Agreement, nor shall any Person in
or connected to the Secured Parties be required or obligated in any manner to
perform or fulfill any of the obligations of the Company in connection with the
Collateral.

                                       16
<PAGE>

               Section 24. Termination. This Agreement insofar as it relates to
                           -----------
the Company and the security interest created and continued hereby by the
Company shall terminate on the earlier to occur of (x) the date of payment in
full of the purchase price for all of the Notes tendered pursuant to all Offers
to Purchase made pursuant to Section 4.12 of the 13% Notes Indenture (as amended
by the Supplemental Indenture) following payment of all of the proceeds of the
QuickBird 2 Insurance to the Collateral Agent and termination of all of the
insurance policies relating to the QuickBird 2 Insurance and (y) the Termination
Date, at which time, at the Company's request and at the Company's cost and
expense, to be paid in advance on or prior to such date or such Termination
Date, the Collateral Agent shall execute and deliver to the Company all UCC
termination statements and similar documents and take such further action that
the Company shall reasonably request to evidence or more fully effect such
termination; provided, however, that the provisions of Section 17 and any other
             --------  -------
requirement for reimbursement of expenses and indemnification with respect to
events occurring on or before the Termination Date shall continue in full force
and effect following such Termination Date and the occurrence of the Termination
Date shall not discharge or novate any rights accruing to the Collateral Agent
or any other Secured Party prior thereto.

                 [Remainder of page intentionally left blank]

                                      17
<PAGE>

               IN WITNESS WHEREOF, the Company and the Collateral Agent have
duly executed and delivered this Agreement on the date first above written.

                                            EARTHWATCH INCORPORATED,
                                             a Delaware corporation

                                                /s/ Henry E. Dubois
                                            By _________________________________
                                               Name:  Henry E. Dubois
                                               Title: Chief Operating Officer
                                                  and Chief Financial Officer

                                            THE BANK OF NEW YORK, as
                                            Collateral Agent

                                                /s/ Van K. Brown
                                            By _________________________________
                                               Name:  Van K. Brown
                                               Title: Vice President

                                            Address for notice:
                                            101 Barclay Street, Floor 21 West
                                            New York, New York 10286
                                            Telecopier No: (212) 815-5915
                                            Attention: Corporate Trust Trustee
                                            Administration
<PAGE>

                                  SCHEDULE I

                  LOCATION OF RECORDS AND CERTAIN COLLATERAL

Tax Identification Number: 31-1420852

Place of
Business* and
Location of Records

EarthWatch Incorporated
1900 Pike Road
Longmont, CO 80501

     The records in respect of the Collateral will be maintained in the safe
within the Accounting Department at the above location.

________________________
* Indicates chief executive officer if there is more than one place of business.

                                      19
<PAGE>

                                  SCHEDULE II

Amendments or modifications to the following definitions in the "Definitions"
section of the QuickBird 2 Insurance shall be Permitted Insurance Modifications.

Defined Term
------------

Intentional Ignition
Launch Services Agreement
Launch Services Contractor
Launch Vehicle
Satellite
Satellite Performance Specifications
Terminated Ignition
Underwriting Information
Partial Loss
Partial Loss Amount
Partial Loss Fraction
Projected Commercial Value
Achieved Commercial Value
Design Commercial Value
Design Lifetime
Remaining Lifetime
Bus Throughput
Instrument Output
Normalized Size

                                      20
<PAGE>

                                   EXHIBIT C

                                ACKNOWLEDGEMENT

[Name and address of insurance company(ies)]

Attention: [_______________]

                            EarthWatch Incorporated

               Reference is made to the "EarthWatch, Incorporated - QuickBird
Launch and In-Orbit Operations Insurance Policy" (Policy No. ____________) in
respect of the QuickBird 2 Satellite (the "QuickBird 2 Insurance") issued by you
in favor of EarthWatch Incorporated (the "Company").

               We hereby give you notice that all of the Company's right, title
and interest in and to the QuickBird 2 Insurance, and all proceeds relating
thereto, have been assigned and pledged (such assignment and pledge, the "Senior
Collateral Pledge and Security") in favor of The Bank of New York, as collateral
agent (the "Senior Collateral Agent") for the holders of the Company's 13%
Senior Discount Notes due 2007 and any holders of the Vendor Financing (as
defined therein).

               The Senior Collateral Agent is recorded as sole loss payee of the
QuickBird 2 Insurance.

               Unless and until you have received written notification from the
Senior Collateral Agent instructing you that the Senior Collateral Pledge and
Security has terminated, you agree that you shall pay all amounts payable by you
under or in respect of the QuickBird 2 Insurance to the Senior Collateral Agent,
by deposit to such account as the Senior Collateral Account notifies you in
writing.

               Please indicate your acknowledgement and agreement to the above
by signing where indicated below and returning this signed letter to
[___________].

Very Truly Yours,                                   Very Truly Yours,
THE BANK OF NEW YORK                                EARTHWATCH INCORPORATED
as Senior Collateral Agent

_________________________                            _____________________
Name:                                                Name:
Title:                                               Title:

                                      21
<PAGE>

ACKNOWLEDGEMENT

We hereby acknowledge and agree to the above:

[Insurance company(ies)]

___________________________
Name:
Title:

                                      22

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00026-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00026-of-00352.parquet"}]]