Document:

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                                                                    EXHIBIT 10.4

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

     THIS SUBLEASE AGREEMENT (the "Sublease" or "Sublease Agreement") is entered
into on this 21 day of February, 1990, by and between Micro-Comp Industries, a
California corporation ("Sublessor"), and Artest Inc., a California corporation
("Sublessee").

     WHEREAS, Sublessor entered into a Lease Agreement dated as February 10,
1997 (the "Master Lease"), a copy of which is attached hereto as Exhibit A,
                                                                 ---------
under which it leases from The Irvine Company as Lessor, certain space in the
building with a street address of 680 Almanor Avenue, Sunnyvale, California
94086 as provided in the Master Lease, together with certain appurtenant rights,
the provisions of which Master Lease are incorporated herein by reference;

     NOW, THEREFORE, in consideration of the mutual promises herein provided,
the parties agree as follows:

     1.   Premises and Term. Sublessor hereby subleases to Sublessee and
          ------------------
Sublessee hereby subleases from Sublessor premises known as 678 Almanor Avenue,
Sunnyvale, California and consisting of approximately 7,899 square feet, subject
to covenants, agreements, terms and conditions herein provided, for term
commencing on April 1, 1997 and terminating on February 28, 1999. The term of
this Sublease shall in no event extend beyond the expiration or earlier
termination of the Master Lease.

     1.1  Option to Extend. Sublessor grants to Sublessee an option to extend
          -----------------
the term of this Lease of the herein demised Premises for a period of three
years beginning on the first day of March 1, 1999 and ending February 29, 2002
subject to all of the other terms, covenants and conditions herein contained;
provided (1) Tenant is not in default in the performance of any of the terms and
conditions of this Lease upon the commencement of said extended term, and (2)
Sublessee has given Sublessor, One Hundred Twenty (120) days' prior to the
expiration of this Lease term, written notice of his intention to exercise said
option. In the event that Tenant shall exercise this option, then the amount of
rental to be paid during said extended three (3) year term shall be determined
as follows:

          (a)  The rental rate for the option period shall be the same per
square foot rent charged by the Master Lessor. The Irvine Company under the
Master Lease which is attached as Exhibit A. The rental increase paragraph is
evidenced on page 1, item 6, Basic Rent, under Article I - Basic Lease
provisions.

     1.2  Delay in Possession. Notwithstanding said commencement date, if for
          --------------------
any reason Sublessor cannot deliver possession of the premises to Sublessee on
said date, Sublessor shall not be subject to any liability therefore, nor shall
such failure affect the validity of this sublease or the obligations of
Sublessee hereunder or extend the sublease term hereof, but in such case,
Sublessee shall not be obligated to pay rent or perform any other obligation of
sublease under the terms of this sublease, except as may be otherwise provided
in this sublease until possession of the premises is tendered to Sublessee.

     2.   Rent. Sublessee covenants and agrees to pay rent to Sublessor for the
          ----
Premises as follows: Monthly rental of $12,573.39 NNN per month from April 1,
1997 - February 29, 1998 the rental rate from March 1, 1998 to February 28, 1999
shall be $12,573.39 NNN plus the

                                                                     Page 1 of 6
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applicable CPI increase based on $1.50 NNN per square foot due under the Master
Lease provisions. The rent is due and payable in advance on the 1st day of each
month without notice or offset. Upon execution of this Sublease, Sublessee shall
pay to Sublessor the sum of $12,573.39 NNN to be applied toward the first
month's rent due under this Sublease. In addition to the base monthly rental,
the sublessee shall pay its prorata share of all operating expenses as set forth
on page 3, section 4.2 "Operating Expenses of the Master Lease". - See "Option
to Extend 1.1" for rent due under the option period.

     All payments shall be made to:

               Micro-Comp Industries
               1267 Oakmead Parkway
               Sunnyvale, California 94086

     3.   Improvements. The sublessee shall be provided with an amount of
          -------------
$3.00 per square foot leased and said monies are to be used toward the
construction of the tenant improvements. All improvements need to be approved by
the Master Lessor prior to construction and shall meet all applicable codes and
constructed in a workman like manner, by a licensed, bonded contractor. All
improvement costs above $3.00 per foot will be paid by the Sublessee.

     4.   Use. The Premises shall be used for office, sales, semiconductor
          ----
testing functions and other related legal uses.

     5.   Incorporation of Master Lease. All of the covenants, agreements,
          ------------------------------
terms and conditions of the Master Lease relating to or applicable to the
Premises are incorporated herein and made a part hereof with the same force and
effect as if set forth at length herein, except to the extent the same are
modified or amended by this Sublease, it being understood and agreed that said
provisions shall fix the rights and obligations of the Sublessee with the same
effect as if the Sublessee were the lessee named in the Master Lease. Except as
otherwise provided herein, Sublessee agrees that Sublessor shall have all of the
rights and remedies of the Lessor under the Master Lease relating to the
Premises with respect to Sublessee as if such rights and remedies were fully set
forth herein.

     6.   Condition of Premises. Sublessee represents that it has inspected the
          ----------------------
Premises and agrees to accept possession of the Premises in their present
condition without any obligation on the part of the Sublessor to make any
alterations, decorations, installations or improvements. Sublessee acknowledges
that the Master Lessor, Sublessor nor its broker have made any representation or
warranties as to the suitability of the previous for the Lesser's intended use.

     7.   Adherence to Master Lease. Sublessee covenants and agrees (a) to
          --------------------------
perform and observe all of the agreements, covenants, terms and conditions of
the Master Lease with respect to the Premises and to the extent that the same
are not modified or amended by this Sublease, and (b) that it shall not do or
suffer or permit anything to be done which would constitute a default under the
Master Lease with respect to the premises, and (c) that any act or omission
which constitutes a default under the Master Lease with respect to the Premises
also constitutes a default hereunder. Sublessee agrees to name Sublessor as an
additional insured on its

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comprehensive liability insurance policy, and to provide Sublessor with a
Certificate of Insurance certifying said coverage.

     8.   Default. If any default by Sublessee continues, in the case of
          --------
payment of rent or any other sum owned by Sublessee, for more than seven (7)
days, or in the case of any of Sublessee's other covenants, agreements or
obligations under this Sublease or the Master Lease for more than seven (7) days
after notice by Sublessor, Sublessor may immediately or at any time thereafter
and without further notice terminate this Sublease and take any and all actions
permitted to be taken by the lessor under the Master Lease in respect of a
termination. However, in the event of a non-monetary default said seven (7) day
period shall be extended for up to a total of twenty (20) days, if such default
is not susceptible and is within seven (7) days, Sublessee commences to correct
the default with the seven (7) days, and Sublessee thereafter diligently pursues
correction of the default.

     9.   Indemnity. Sublessee shall indemnify and hold harmless Sublessor from
          ----------
and against any and all cost, expense or liability (including reasonable
attorney's fees) incurred in account of Sublessee's actions or the action of its
employees, agents, licensees or contractors on or about the Premises or on
account of any breach or violation by Sublessee of this Sublease, or the Master
Lease, unless the same is due solely to the negligence of Sublessor's employees,
agents, licensees, or contractors. Sublessee hereby releases and waives any
right or claim against Sublessor for loss of business, loss of profits,
inconvenience, or for any other incidental or consequential damages.

     10.  Assignment. Sublessee shall not assign this Sublease nor further
          -----------
sublet the Premises in whole or in part, and shall not permit Sublessee's
interest in this Sublease Agreement to be vested in any third party by operation
of law or otherwise.

     11.  Authority. Sublessee represents and warrants that it has read and is
          ---------
familiar with the terms of the Master Lease and further represents and warrants
that it has all requisite corporate power and authority to enter into this
Sublease.

     12.  Late Charges. Other remedies for non-payment of rent notwithstanding,
          -------------
any rental payment not received within seven (7) days of the date it was due
shall automatically be subject to a late payment fee in the amount of five
percent (5%) of such overdue payment, which fee is a service charge intended to
compensate Sublessor for the additional administrative and other costs and
expenses it incurs by reason of such late payment.

     13.  Brokers. Divided Agency Sublessee and Sublessor acknowledge that BT
          -------  --------------
Commercial is solely the broker for the Sublessee and that Grubb & Ellis Company
is solely the broker for the Sublessor, and that neither represents the client
of the other. Sublessor agrees to pay broker a commission per the standard Grubb
& Ellis agreement.

     14.  Insurance. During the term of this Sublease Agreement, Sublessee shall
          ----------
maintain public liability and property damage insurance in accordance with the
provisions of the Master Lease. Sublessee shall maintain fire and extended
coverage insurance on its fixtures, equipment and leasehold improvements in
amounts equal to the full insurable value thereof. Sublessor and

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Sublessee each release the other from any liability for loss or damage sustained
by it to the extent the same would be or is covered by insurance as herein
provided.

     15.  Services and Repairs. It is understood that all work, services,
          ---------------------
repairs, restorations, equipment and access which are required to be provided
and made by Sublessor hereunder or by lessor under the Master Lease, will, in
fact, be provided by the lessor under the Master Lease, and Sublessor shall have
no obligation during the term of this Sublease Agreement to do any such work, to
provide any such services, equipment or access, or to make any such repairs or
restorations or otherwise perform any obligations or observe any conditions
required to be observed or performed by lessor under the Master Lease for the
performance and observance of the same. Sublessor shall in no event be liable to
Sublessee nor shall Sublessee's obligations hereunder be impaired or the
performance thereof excused because of any failure or delay on the part of the
lessor under the Master Lease in performing or observing the obligations of the
lessor under the Master Lease, provided, however, that if a failure by the
lessor under the Master Lease materially interferes with Sublessee's use and
occupancy of the Premise, and Sublessee so notifies Sublessor in writing,
Sublessor shall use its reasonable efforts to cause the lessor under the Master
Lease to promptly correct the failure.

     16.  Surrender of Premises. Sublessee agrees that time shall be of the
          ----------------------
essence with respect to Sublessee's obligation to surrender possession of the
Premises to Sublessor upon the termination of the term of this Sublease, and
further agrees that in the event that Sublessee does not promptly surrender
possession of the Premises to Sublessor upon such termination, Sublessor, in
addition to any other rights and remedies Sublessor may have against Sublessee
for such holding over, shall be entitled to bring summary proceedings against
Sublessee, and Sublessee agrees to reimburse Sublessor for all Sublessor's
damages sustained by reason of such holding over, including without limitation,
Sublessor's reasonable attorneys' fees and disbursements incurred in connection
with the exercise by Sublessor of its remedies against Sublessee.

     17.  Notices. Any notice, approval, consent or election made pursuant to
          --------
this Sublease or the Master Lease shall be in writing and shall be deemed duly
delivered upon receipt if delivered personally or if mailed by registered or
certified mail, return receipt requested, addressed

          if to Sublessor:    Micro Comp Industries
                              1267 Oakmead Parkway
                              Sunnyvale, CA 94086

          if to Sublessee:    Artest Inc.
                              680 Almanor Avenue
                              Sunnyvale, CA 94086
          Either party may, by notice as aforesaid, direct that future notices
be sent to a different address.

     18.  Security Deposit. Sublessee has deposited with Sublessor the sum of
          -----------------
$12,573.39 as security for the faithful performance and observance by Sublessee
of the terms, provisions and conditions of this Sublease; it is agreed that in
the event Sublessee defaults in respect of any of

                                                                     Page 4 of 6
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the terms, provisions and conditions of this Sublease, including, but not
limited to, the payment of rent, Sublessor may use, apply or retain the whole or
any part of the Security so deposited to the extend required for the payment of
any rent and additional rent or any other sum as to which Sublessee is in
default or for any sum which Sublessor may expend or may be required to expend
by reason of Sublessee's default in respect of any of the terms, covenants and
conditions of this lease.

     19.  Entire Agreement. All prior understandings and agreements between the
          -----------------
parties with respect to the subject matter hereof are merged within this
Sublease. The covenants and agreements herein contained shall bind and inure to
the benefit of Sublessor, Sublessee, and their respective successors and
permitted assigns.

     20.  Effectiveness. This Sublease shall be effective only when executed by
          -------------
Sublessor and Sublessee and approved by the lessor under the Master Lease.

                                                                     Page 5 of 6
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AGREED AND ACCEPTED:

SUBLESSOR:                                   SUBLESSEE:
Micro-Comp Industries,                       Artest Inc.,
A California Corporation                     A California Corporation

By: _____________________________            By:  /s/ Jen Kao
                                                  ------------------------------

Its: ____________________________            Its: President
                                                  ------------------------------

Date: ___________________________            Date: 03-05-97
                                                   -----------------------------

               CONSENT TO SUBLEASE DATED _____________________________________
               BETWEEN ____________________________________________________ AS
               SUBLESSOR, AND __________________________ AS SUBLESSEE, FOR THE
               PREMISES COMMONLY KNOWN AS ___________________________________.

The undersigned in consideration of the above Sublease, consents to the above
Sublease, but this consent is given only on condition that it shall not be
construed to release, alter, or modify in any way the obligation of the above
original Lessee in the Master Lease or of any guarantor or surety.

MASTER LESSOR:
THE IRVINE COMPANY

By: _____________________________

Its: ____________________________

Date: ___________________________

                                                                     Page 6 of 6
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                             CONSENT TO SUBLETTING

     I.   PARTIES AND DATES.

     This Consent to Subletting ("Consent") dated February 21, 1997, is by and
                                                  -----------
between THE IRVINE COMPANY, a Michigan corporation ("Landlord"), Micro-Comp
                                                                 ----------
Industries ("Tenant"), and Artest, Inc., A California Corporation ("Subtenant").
----------                 --------------------------------------

     II.  RECITALS.

     On February 10, 1997, Landlord and Tenant entered into a lease ("Lease")
        -----------
for space in a building owned by Landlord and located at 680 Almanor Avenue,
                                                         -------------------
Sunnyvale, CA 94086, Irvine, California ("Premises").
-------------------

     The Lease contains provisions which require, among other things, Tenant to
obtain Landlord's consent to any subletting of the Premises. Tenant has
requested Landlord to consent to a subletting of the Premises to Subtenant.

     III. CONSENT TO SUBLETTING.

     For valuable consideration including Tenant's and Subtenant's agreement to
the provisions of this Consent, Landlord consents to a subletting to Subtenant
of approximately 7899 rentable square feet of the Premises.  Tenant and
                 ----
Subtenant agree that this Consent is conditioned upon their agreement that:

          A.   The sublease agreement ("Sublease") between Tenant and Subtenant
is expressly subject to the provisions of the Lease, a copy of which Subtenant
acknowledges it has received.

          B.   Tenant will deliver a copy of the Sublease to Landlord within
five (5) business days of Landlords request, provided that if the Sublease is
not in writing, Tenant may deliver a reasonably detailed summary of the Sublease
including information respecting the length of the term and the amount of rent
and other charges payable under the Sublease, which summary shall be approved by
Subtenant.

          C.   Tenants obligations under the Lease shall not be affected by this
Consent.

          D.   Landlord shall be entitled to receive profits derived by Tenant
from this subletting in accordance with the provisions of the Lease.

          E.   The provisions of the Lease respecting assignment and subletting
are not waived with respect to future assignments and sublettings.

          F.   Subtenant is not claiming any interest in a right belonging
solely to Tenant pursuant to the Lease.

          G.   The Lease is in full force and effect and that Landlord is not in
breach of any provision of the Lease.

                                       1
<PAGE>

          H.   That it the Sublease terminates by reason of a termination of the
Lease, Landlord may, at its option, by delivering written notice to Subtenant,
assume the obligation of Tenant under the Sublease in which event Subtenant
shall recognize Landlord as if it were Sublandlord under the Sublease.

     IV.  SUBTENANTS PRINCIPAL PLACE OF BUSINESS.

     The address of Subtenant's principal place of business is:

          678 Almanor Avenue
          ------------------

          Sunnyvale, CA 94086
          -------------------

     V.   GENERAL.

          A.   EFFECT OF SUBLETTING. The Lease and Tenant's obligations to
Landlord shall not be deemed to have been modified by this Consent.

          B.   ENTIRE AGREEMENT. This Consent embodies the entire understanding
between Landlord, Tenant and Subtenant with respect to the subletting and can be
changed only by an instrument in writing signed by the party against whom
enforcement is sought.

          C.   COUNTERPARTS. If this Consent is executed in counterparts, each
is hereby declared to be an original; all, however, shall constitute but one in
the some Consent. In any action or proceeding, any photographic, photostatic, or
other copy of this Consent may be introduced into evidence without foundation.

          D.   DEFINED TERMS. All words commencing with initial capital letters
in this Consent and defined in the Lease shall have the same meaning in this
Consent as in the Lease.

          E.   CORPORATE AND PARTNERSHIP AUTHORITY. If Tenant is a corporation
or partnership, or is comprised of either or both of them, each individual
executing this Consent for the corporation or partnership represents that he or
she is duly authorized to execute and deliver this Consent on behalf of the
corporation or partnership, and that this Consent is binding upon the
corporation or partnership in accordance with its terms.

          F.   ATTORNEYS, FEES. The provisions of the Lease respecting payment
of attorneys' fees shall also apply to this Consent to Subletting.
<PAGE>

     VI.  EXECUTION.

     Landlord, Tenant and Subtenant have entered into this Consent as of the
date set forth in "I.  PARTIES AND DATE" above.

TENANT:                                 SUBTENANT:

Micro-Comp Industries, A                Artest, Inc., A California
------------------------                --------------------------

California Corporation                  Corporation
----------------------                  -----------

By ___________________________          By  /s/ Jen Kao
                                            ----------------------------------

Title ________________________          Title  President
                                               -------------------------------

LANDLORD:

THE IRVINE COMPANY,
a Michigan corporation

By _______________________________
   Clarence W. Barker, President,
   Irvine Industrial Company, a division
   of The Irvine Company

By _______________________________
   John C. Tsu,
   Assistant Secretary
<PAGE>

                                  Exhibit "B"
                                  -----------

Sublessee shall remove the following equipment (Sublessee trade fixtures) on or
before Sublessee vacate the premises and shall restore the premises back to
original condition at their sole cost and expense.

          1.   All water chillers installed on the roof.
          2.   All Artest Inc. specifically installed air conditioning equipment
               for their testers.
          3.   All Air/Vac equipment installed on the pad behind the building.

READ AND APPROVED

/s/ Jen Kao                             03-05-97
-------------------------------         --------------------------
Sublessee                               Date

_______________________________         __________________________
Sublessor                               Date

_______________________________         __________________________
Lessor                                  Date

<PAGE>

                           [FLOOR PLAN APPEARS HERE]

                                      5.
<PAGE>

                                   EXHIBIT C

            STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE-GROSS
                  AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION

1.   Basic Provisions ("Basic Provisions").

     1.1    Parties: This Lease ("Lease"), dated for reference purposes only,
May 01, 2000 is made by and between Micro Linear Corporation, a Delaware
corporation, ("Lessor") and Artest Corporation, a California corporation
("Lessee"), (collectively the "Parties," or individually a "Party").

     1.2    (a) Premises: That certain portion of the Building, including all
improvements therein or to be provided by Lessor under the terms of this Lease,
commonly known by the street address of 2050 and 2092 Concourse Drive, located
in the City of San Jose, County of Santa Clara, State of California, with zip
code 95131, as outlined on Exhibit A attached hereto ("Premises"). The
"Building" is that certain building containing the Premises and generally
described as (describe briefly the nature of the Building): Two, one-story
buildings located next door to one another, each consisting of approximately
47,000 square feet.

In addition to Lessee's rights to use and occupy the Premises as hereinafter
specified, Lessee shall have non-exclusive rights to the Common Areas (as
defined in Paragraph 2.7 below) as hereinafter specified, but shall not have any
rights to the roof, exterior walls or utility raceways of the Building or to any
other buildings in the Industrial Center.  The Premises, the Building, the
Common Areas, the land upon which they are located, along with all other
buildings and improvements thereon, are herein collectively referred to as the
"Industrial Center." (Also see Paragraph 2.)

     1.2    (b)  Parking: 18.23% of the unreserved vehicle parking spaces
("Unreserved Parking Spaces") located in the Industrial Center.  (Also see
Paragraph 2.6.)

     1.3    Term: 3 years and 0 months ("Original Term") commencing See Addendum
("Commencement Date") and ending on the day before the 3rd Anniversary of the
Commencement Date ("Expiration Date").  (Also see Paragraph-3).

     1.4    Early Possession: N/A ("Early Possession Date"). (Also see
Paragraphs 3.2 and 3.3.)

     1.5    Base Rent: $ 25,024 per month ("Base Rent"), payable on the 1st day
of each month commencing on the Commencement Date (Also see Paragraph 4.)

[    ]  If this box is checked, this Lease provides for the Base Rent to be
adjusted per Addendum ___, attached hereto.

     1.6    (a) Base Rent Paid Upon Execution: $ N/A as Base Rent for the period
N/A.

     1.6    (b) Lessee's Share of Common Area Operating Expenses: N/A percent
(   .%) ("Lessee's Share") as determined by [ ] prorata square footage of the
Promises as compared to the total square footage of the Building or [ ] other
criteria as described in Addendum _____.

     1.7    Security Deposit: $ N/A ("Security Deposit"). (Also see Paragraph
5.)

     1.8    Permitted Use: Semiconductor testing and manufacturing in the same
manner and using the same equipment as Lessor immediately prior to the
Commencement Date ("Permitted Use") (Also see Paragraph 6.)

     1.9    Insuring Party: Lessor is the "Insuring Party." (Also see Paragraph
8.)

     1.10   Addenda and Exhibits: Attached hereto is an Addendum or Addenda
consisting of Paragraphs 1 through 7 and Exhibits A, all of which constitute a
part of this Lease.

2.   Premises, Parking and Common Areas.

     2.1    Letting. Lessor hereby leases to Lessee, and Lessee hereby leases
from Lessor, the Premises, for the term, at the rental, and upon all of the
terms, covenants and conditions set forth in this Lease. Unless otherwise
provided herein, any statement of square footage set forth in this Lease, or
that may have been used in calculating rental and/or Common Area Operating
Expenses, is an approximation which Lessor and Lessee agree is reasonable and
the rental and Lessee's Share (as defined in Paragraph 1.6(b)) based thereon is
not subject to revision whether or not the actual square footage is more or
less.

     2.2    [deleted]

     2.3    [deleted]

     2.4    Acceptance of Premises. Lessee hereby acknowledges: (a) that it has
been advised by Lessor to satisfy itself with respect to the condition of the
Premises (including but not limited to the electrical and fire sprinkler
systems, security, environmental aspects, seismic and earthquake requirements,
and compliance with the Americans with Disabilities Act and applicable zoning,
municipal, county, state and federal laws, ordinances and regulations and any
covenants or restrictions of record (collectively, "Applicable Laws") and the
present and future suitability of the Premises for Lessee's intended use; (b)
that Lessee has made such investigation as it deems necessary with reference to
such matters, is satisfied with reference thereto, and assumes all
responsibility therefore as the same relate to Lessee's occupancy of the
Promises and/or the terms of this Lease; and (c) that neither Lessor, nor any of
Lessor's agents, has made any oral or written representations or warranties with
respect to said matters other than as set forth in this Lease.

                                                               Initials:________
                                                                        ________
<PAGE>

     2.5   Lessee as Prior Owner/Occupant. The warranties made by Lessor in this
Paragraph 2 shall be of no force or effect if immediately prior to the date set
forth in Paragraph 1.1 Lessee was the owner or occupant of the Premises. In such
event, Lessee shall, at Lessee's sole cost and expense, correct any non-
compliance of the Premises with said warranties.

     2.6   Vehicle Parking. Lessee shall be entitled to use the number of
Unreserved Parking Spaces and Reserved Parking Spaces specified in Paragraph
1.2(b) on those portions of the Common Areas designated from time to time by
Lessor for parking. Lessee shall not use more parking spaces than said number.
Said parking spaces shall be used for parking by vehicles no larger than full-
size passenger automobiles or pick-up trucks, herein called "Permitted Size
Vehicles." Vehicles other than Permitted Size Vehicles shall be parked and
loaded or unloaded as directed by Lessor in the Rules and Regulations (as
defined in Paragraph 40) issued by Lessor. (Also see Paragraph 2.9.)

           (a)  Lessee shall not permit or allow any vehicles that belong to or
are controlled by Lessee or Lessee's employees, suppliers, shippers, customers,
contractors or invitees to be loaded, unloaded, or parked in areas other than
those designated by Lessor for such activities.

           (b)  If Lessee permits or allows any of the prohibited activities
described in this Paragraph 2.6, then Lessor shall have the right, without
notice, in addition to such other rights and remedies that it may have, to
remove or tow away the vehicle involved and charge the cost to Lessee, which
cost shall be immediately payable upon demand by Lessor.

           (c)  Lessor shall at the Commencement Date of this Lease provide the
parking facilities required by Applicable Law.

     2.7   Common Areas-Definition. The term "Common Areas" is defined as all
areas and facilities outside the Premises and within the exterior boundary line
of the Industrial Center and interior utility raceways within the Premises that
are provided and designated by the Lessor from time to time for the general now
exclusive use of Lessor, Lessee and other lessees of the Industrial Center and
their respective employees, suppliers, shippers, customers, contractors and
invitees, including parking areas, loading and unloading areas, trash areas,
roadways, sidewalks, walkways, parkways, driveways and landscaped areas.

     2.8   Common Areas-Lessee's Rights. Lessor hereby grants to Lessee, for the
benefit of Lessee and its employees, suppliers, shippers, contractors, customers
and invitees, during the term of this Lease, the non-exclusive right to use, in
common with others entitled to such use, the Common Areas as they exist from
time to time, subject to any rights, powers, and privileges reserved by Lessor
under the terms hereof or under the terms of any rules and regulations or
restrictions governing the use of the Industrial Center. Under no circumstances
shall the right herein granted to use the Common Areas be deemed to include the
right to store any property, temporarily or permanently, in the Common Areas.
Any such storage shall be permitted only by the prior written consent of Lessor
or Lessor's designated agent, which consent may be revoked at any time. In the
event that any unauthorized storage shall occur then Lessor shall have the
right, without notice, in addition to such other rights and remedies that it may
have, to remove the property and charge the cost to Lessee, which cost shall be
immediately payable upon demand by Lessor.

     2.9   Common Areas-Rules and Regulations. Lessor or such other person(s) as
Lessor may appoint shall have the exclusive control and management of the Common
Areas and shall have the right, from time to time, to establish, modify, amend
and enforce reasonable Rules and Regulations with respect thereto in accordance
with Paragraph 40. Lessee agrees to abide by and conform to all such Rules and
Regulations, and to cause its employees suppliers, shippers, customers,
contractors and invitees to so abide and conform. Lessor shall not be
responsible to Lessee for the non-compliance with said rules and regulations by
other lessees of the Industrial Center.

     2.10  Common Areas-Changes. Lessor shall have the right, in Lessor's sole
discretion, from time to time:

           (a)    To make changes to the Common Areas, including, without
limitation, changes in the location, size, shape and number of driveways,
entrances, parking spaces, parking areas, loading and unloading areas, ingress,
egress, direction of traffic, landscaped areas, walkways and utility raceways;

           (b)    To close temporarily any of the Common Areas for maintenance
purposes so long as reasonable access to the Premises remains available;

           (c)    To designate other land outside the boundaries of the
Industrial Center to be a part of the Common Areas;

           (d)    To add additional buildings and improvements to the Common
Areas;

           (e)    To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Industrial Center, or any portion
thereof; and

           (f)    To do and perform such other acts and make such other changes
in, to or with respect to the Common Areas and Industrial Center as Lessor may,
in the exercise of sound business judgment, deem to be appropriate.

3.  Term.

     3.1  Term. The Commencement Date, Expiration Date and Original Term of this
Lease are as specified in Paragraph 1.3.

                                                               Initials:_______
                                                                        _______

                                      -2-
<PAGE>

     3.2   Early Possession. If an Early Possession Date is specified in
Paragraph 1.4 and if Lessee totally or partially occupies the Premises after the
Early Possession Date but prior to the Commencement Date, the obligation to pay
Base Rent shall be abated for the period of such early occupancy. All other
terms of this Lease, however, (including but not limited to the obligations to
pay Lessee's Share of Common Area Operating Expenses and to carry the insurance
required by Paragraph 8) shall be in effect during such period. Any such early
possession shall not affect nor advance the Expiration Date of the Original
Term.

     3.3   Delay In Possession. If for any reason Lessor cannot deliver
possession of the Premises to Lessee by the Early Possession Date, if one is
specified in Paragraph 1.4, or if no Early Possession Date is specified, by the
Commencement Date, Lessor shall not be subject to any liability therefor, nor
shall such failure affect the validity of this Lease, or the obligations of
Lessee hereunder, or extend the term hereof, but in such case, Lessee shall not,
except as otherwise provided herein, be obligated to pay rent or perform any
other obligation of Lessee under the terms of this Lease until Lessor delivers
possession of the Premises to Lessee. If possession of the Premises is not
delivered to Lessee within sixty (60) days after the Commencement Date, Lessee
may, at its option, by notice in writing to Lessor within ten (10) days after
the end of said sixty (60) day period, cancel this Lease, in which event the
parties shall be discharged from all obligations hereunder; provided further,
however, that if such written notice of Lessee is not received by Lessor within
said ten (10) day period, Lessee's right to cancel this Lease hereunder shall
terminate and be of no further force or effect. Except as may be otherwise
provided, and regardless of when the Original Term actually commences, if
possession is not tendered to Lessee when required by this Lease and Lessee does
not terminate this Lease, as aforesaid, the period free of the obligation to pay
Base Rent, if any, that Lessee would otherwise have enjoyed shall run from the
date of delivery of possession and continue for a period equal to the period
during which the Lessee would have otherwise enjoyed under the terms hereof, but
minus any days of delay caused by the acts, changes or omissions of Lessee.

4.   Rent.

     4.1   Base Rent. Lessee shall pay Base Rent and other rent or charges, as
the same may be adjusted from time to time, to Lessor in lawful money of the
United States, without offset or deduction, on or before the day on which it is
due under the terms of this Lease. Base Rent and ail other rent and charges for
any period during the term hereof which is for less than one full month shall be
prorated based upon the actual number of days of the month involved. Payment of
Base Rent and other charges shall be made to Lessor at its address stated herein
or to such other persons or at such other addresses as Lessor may from time to
time designate in writing to Lessee.

     4.2   [deleted]

5.   Security Deposit. Lessee shall deposit with Lessor upon Lessee's execution
hereof the Security Deposit set forth in Paragraph 1.7 as security for Lessee's
faithful performance of Lessee's obligations under this Lease. If Lessee fails
to pay Base Rent or other rent or charges due hereunder, or otherwise Defaults
under this Lease (as defined in Paragraph 13.1), Lessor may use, apply or retain
all or any portion of said Security Deposit for the payment of any amount due
Lessor or to reimburse or compensate Lessor for any liability, cost, expense,
loss or damage (including attorneys' fees) which Lessor may suffer or incur by
reason thereof. It Lessor uses or applies all or any portion of said Security
Deposit, Lessee shall within ten (10) days after written request therefore
deposit monies with Lessor sufficient to restore said Security Deposit to the
tuft amount required by this Lease. Any time the Base Rent increases during the
term of this Lease, Lessee shall, upon written request from Lessor, deposit
additional monies with Lessor as an addition to the Security Deposit so that the
total amount of the Security Deposit shall at all times bear the same proportion
to the then current Base Rent as the initial Security Deposit bears to the
initial Base Rent set forth in Paragraph 1.5. Lessor shall not be required to
keep all or any part of the Security Deposit separate from its general accounts.
Lessor shall, at the expiration or earlier termination of the term hereof and
after Lessee has vacated the Premises, return to Lessee (or, at Lessor's option,
to the last assignee, it any, of Lessee's interest herein), that portion of the
Security Deposit not used or applied by Lessor. Unless otherwise expressly
agreed in writing by Lessor, no part of the Security Deposit shall be considered
to be held in trust, to bear interest or other increment for its use, or to be
prepayment for any monies to be paid by Lessee under this Lease.

6.   Use.

     6.1   Permitted Use.

           (a)   Lessee shall use and occupy the Premises only for the Permitted
Use set forth in Paragraph 1.8, and for no other purpose. Lessee shall not use
or permit the use of the Promises in a manner that is unlawful, creates waste or
a nuisance, or that disturbs owners and/or occupants of, or causes damage to the
Premises or neighboring premises or properties.

           (b)   [deleted]

     6.2   Hazardous Substances.

           (a) Reportable Uses Require Consent. The term "Hazardous Substance"
as used in this Lease shall mean any product, substance, chemical, material or
waste whose presence, nature, quantity and/or intensity of existence, use,
manufacture, disposal, transportation, spill, release or effect, either by
itself or in combination with other materials expected to be on the Premises, is
either: (i) potentially injurious to the public health, safety or welfare, the
environment, or the Promises; (ii) regulated or monitored by any governmental
authority; or (iii) a basis for potential liability of Lessor to any
governmental agency or third party under any applicable statute or common law
theory. Hazardous Substance shall include, but not be limited to, hydrocarbons,
petroleum, gasoline, crude oil or any products or by-products thereof. Lessee
shall not engage in any activity in or about the Premises which constitutes a
Reportable Use (as hereinafter defined) of Hazardous Substances without the
express prior written consent of Lessor and compliance in a

                                                            Initials:________
                                                                     ________
                                      -3-
<PAGE>

timely manner (at Lessee's sole cost and expense) with all Applicable
Requirements (as defined in Paragraph 6.3). "Reportable Use" shall mean (i) the
installation or use of any above or below ground storage tank, (ii) the
generation, possession, storage, use, transportation, or disposal of a Hazardous
Substance that requires a permit from, or with respect to which a report,
notice, registration or business plan is required to be tiled with, any
governmental authority, and (iii) the presence in, on or about the Premises of a
Hazardous Substance with respect to which any Applicable Laws require that a
notice be given to persons entering or occupying the Premises or neighboring
properties. Notwithstanding the foregoing, Lessee may, without Lessor's prior
consent, but upon notice to Lessor and in compliance with all Applicable
Requirements, use any ordinary and customary materials reasonably required to be
used by Lessee in the normal course of the Permitted Use, so long as such use is
not a Reportable Use and does not expose the Premises or neighboring properties
to any meaningful risk of contamination or damage or expose Lessor to any
liability therefor. In addition, Lessor may (but without any obligation to do
so) condition its consent to any Reportable Use of any Hazardous Substance by
Lessee upon Lessee's giving Lessor such additional assurances as Lessor, in its
reasonable discretion, deems necessary to protect itself, the public, the
Premises and the environment against damage, contamination or injury and/or
liability therefor, including but not limited to the installation (and, at
Lessor's option, removal on or before Lease expiration or earlier termination)
of reasonably necessary protective modifications to the Premises (such as
concrete encasements) and/or the deposit of an additional Security Deposit under
Paragraph 5 hereof.

           (b)   Duty to Inform Lessor. If Lessee knows, or has reasonable cause
to believe, that a Hazardous Substance has come to be located in, on, under or
about the Premises or the Building, other than as previously consented to by
Lessor, Lessee shall immediately give Lessor written notice thereof, together
with a copy of any statement, report, notice, registration, application, permit,
business plan, license, claim, action, or proceeding given to, or received from,
any govern-mental authority or private party concerning the presence, spill,
release, discharge of, or exposure to, such Hazardous Substance, including but
not limited to all such documents as may be involved in any Reportable Use
involving the Premises. Lessee shall not cause or permit any Hazardous Substance
to be spilled or released in, on, under or about the Premises (including,
without limitation, through the plumbing or sanitary sewer system).

           (c)   Indemnification. Lessee shall indemnify, protect, defend and
hold Lessor, its agents, employees, lenders and ground lessor, if any, and the
Premises, harmless from and against any and all damages, liabilities, judgments,
costs, claims, liens, expenses, penalties, loss of permits and attorneys' and
consultants' fees arising out of or involving any Hazardous Substance brought
onto the Premises by or for Lessee or by anyone under Lessee's control. Lessee's
obligations under this Paragraph 6.2(c) shall include, but not be limited to,
the effects of any contamination or injury to person, property or the
environment created or suffered by Lessee, and the cost of investigation
(including consultants' and attorneys' fees and testing), removal, remediation,
restoration and/or abatement thereof, or of any contamination therein involved,
and shall survive the expiration or earlier termination of this Lease. No
termination, cancellation or release agreement entered into by Lessor and Lessee
shall release Lessee from its obligations under this Lease with respect to
Hazardous Substances, unless specifically so agreed by Lessor in writing at the
time of such agreement.

     6.3   Lessee's Compliance with Requirements. Lessee shall, at Lessee's sole
cost and expense, fully, diligently and in a timely manner, comply with all
"Applicable Requirements," which term is used in this Lease to mean all laws,
rules, regulations, ordinances, directives, covenants, easements and
restrictions of record, permits, the requirements of any applicable fire
insurance underwriter or rating bureau, and the recommendations of Lessor's
engineers and/or consultants, relating in any manner to the Premises (including
but not limited to matters pertaining to (i) industrial hygiene, (ii)
environmental conditions on, in, under or about the Premises, including soil and
groundwater conditions, and (iii) the use, generation, manufacture, production,
installation, maintenance, removal, transportation, storage, spill, or release
of any Hazardous Substance), now in effect or which may hereafter come into
effect. Lessee shall, within five (5) days after receipt of Lessor's written
request, provide Lessor with copies of all documents and information, including
but not limited to permits, registrations, manifests, applications, reports and
certificates, evidencing Lessee's compliance with any Applicable Requirements
specified by Lessor, and shall immediately upon receipt, notify Lessor in
writing (with copies of any documents involved) of any threatened or actual
claim, notice, citation, warning, complaint or report pertaining to or involving
failure by Lessee or the Promises to comply with any Applicable Requirements.

     6.4   Inspection; Compliance with Law. Lessor, Lessor's agents, employees,
and designated representatives, and the holders of any mortgages, deeds of trust
or ground leases on the Premises ("Lenders") shall have the right to enter the
Premises at any time in the case of an emergency, and otherwise at reasonable
times, for the purpose of inspecting the condition of the Premises and for
verifying compliance by Lessee with this Lease and all Applicable Requirements
(as defined in Paragraph 6.3), and Lessor shall be entitled to employ experts
and/or consultants in connection therewith to advise Lessor with respect to
Lessee's activities, including but not limited to Lessee's installation,
operation, use, monitoring, maintenance, or removal of any Hazardous Substance
on or from the Premises. The costs and expenses of any such inspections shall be
paid by the party requesting same, unless a Default or Breach of this Lease by
Lessee or a violation of Applicable Requirements or a contamination, caused or
materially contributed to by Lessee, is found to exist or to be imminent, or
unless the Inspection is requested or ordered by a governmental authority as the
result of any such existing or imminent violation or contamination. In such
case, Lessee shall upon request reimburse Lessor or Lessor's Lender, as the case
may be, for the costs and expenses of such inspections.

7.   Maintenance, Repairs, Utility Installations, Trade Fixtures and
     Alterations.

     7.1 Lessee's Obligations.

           (a)  Subject to the provisions of Paragraphs 2.2 (Condition), 2.3
(Compliance with Covenants, Restrictions and Building Code), 7.2 (Lessor's
Obligations), 9 (Damage or Destruction), and 14 (Condemnation), Lessee shall, at
Lessee's sole cost and expense and at all times, keep the Premises and every
part thereof in good order, condition and repair (whether or not such portion of
the Premises requiring repair, or the means of repairing the same, are
reasonably or readily accessible to Lessee, and whether or not the need for such
repairs occurs as a result of Lessee's

                                                            Initials:_______
                                                                     _______
                                      -4-
<PAGE>

use, any prior use, the elements or the age of such portion of the Premises),
including, without limiting the generality of the foregoing, all equipment or
facilities specifically serving the Premises, such as plumbing, heating, air
conditioning, ventilating, electrical, lighting facilities, boilers, fired or
unfired pressure vessels, fire hose connections if within the Premises,
fixtures, interior walls, interior surfaces of exterior walls, ceilings, floors,
windows, doors, plate glass, and skylights, but excluding any items which are
the responsibility of Lessor pursuant to Paragraph 7.2 below. Lessee, in keeping
the Promises in good order, condition and repair, shall exercise and perform
good maintenance practices, Lessee's obligations shall include restorations,
replacements or renewals when necessary to keep the Promises and all
improvements thereon or a part thereof in good order, condition and state of
repair.

           (b)   [deleted]

           (c)   If Lessee fails to perform Lessee's obligations under this
Paragraph 7.1, Lessor may enter upon the Premises after ten (10) days' prior
written notice to Lessee (except in the case of an emergency, in which case no
notice shall be required), perform such obligations on Lessee's behalf, and put
the Premises in good order, condition and repair, in accordance with Paragraph
13.2 below.

     7.2   Lessor's Obligations. Subject to the provisions of Paragraphs 2.2
(Condition), 2.3 (Compliance with Covenants, Restrictions and Building Code),
4.2 (Common Area Operating Expenses), 6 (Use), 7.1 (Lessee's Obligations), 9
(Damage or Destruction) and 14 (Condemnation), Lessor, subject to reimbursement
pursuant to Paragraph 4.2, shall keep in good order, condition and repair the
foundations, exterior walls, structural condition of interior bearing walls,
exterior roof, fire sprinkler and/or standpipe and hose (it located in the
Common Areas) or other automatic fire extinguishing system including fire alarm
and/or smoke detection systems and equipment, fire hydrants, parking lots,
walkways, parkways, driveways, landscaping, fences, signs and utility systems
serving the Common Areas and all pans thereof, as well as providing the services
for which there is a Common Area Operating Expense pursuant to Paragraph 4.2.
Lessor shall not be obligated to paint the exterior or interior surfaces of
exterior walls nor shall Lessor be obligated to maintain, repair or replace
windows, doors or plate glass of the Premises. Lessee expressly waives the
benefit of any statute now or hereafter in effect which would otherwise afford
Lessee the right to make repairs at Lessor's expense or to terminate this Lease
because of Lessor's failure to keep the Building, Industrial Center or Common
Areas in good order, condition and repair.

     7.3   Utility Installations, Trade Fixtures, Alterations.

           (a)  Definitions; Consent Required. The term "Utility Installations"
is used in this Lease to refer to all air lines, power panels, electrical
distribution, security, fire protection systems, communications systems,
lighting fixtures, heating, ventilating and air conditioning equipment,
plumbing, and fencing in, on or about the Premises. The term "Trade Fixtures"
shall mean Lessee's machinery and equipment which can be removed without doing
material damage to the Premises. The term "Alterations" shall mean any
modification of the improvements on the Premises which are provided by Lessor
under the terms of this Lease other than Utility installations or Trade
Fixtures. "Lessee-Owned Alterations and/or Utility Installations" are defined as
Alterations and/or Utility Installations made by Lessee that are not yet owned
by Lessor pursuant to Paragraph 7.4(a). Lessee shall not make nor cause to be
made any Alterations and/or Utility Installations in, on, under or about the
Premises without Lessor's prior written consent. Lessee may, however, make non-
structural Utility Installations to the interior of the Premises (excluding the
roof) without Lessor's consent but upon notice to Lessor, so long as they are
not visible from the outside of the Premises, do not involve puncturing,
relocating or removing the root or any existing walls, or changing or
interfering with the fire sprinkler or fire detection systems and the cumulative
cost thereof during the term of this Lease as extended does not exceed
$2,500.00.

           (b)  Consent. Any Alterations or Utility Installations that Lessee
shall desire to make and which require the consent of the Lessor shall be
presented to Lessor in written form with detailed plans. All consents given by
Lessor, whether by virtue of Paragraph 7.3(a) or by subsequent specific consent,
shall he deemed conditioned upon: (i) Lessee's acquiring all applicable permits
required by governmental authorities; (ii) the furnishing of copies of such
permits together with a copy of the plans and specifications for the Alteration
or Utility Installation to Lessor prior to commencement of the work thereon: and
(iii) the compliance by Lessee with all conditions of said permits in a prompt
and expeditious manner. Any Alterations or Utility Installations by Lessee
during the term of this Lease shall be done in a good and workmanlike manner,
with good and sufficient materials, and be in compliance with all Applicable
Requirements. Lessee shall promptly upon completion thereof furnish Lessor with
as-built plans and specifications therefor. Lessor may, (but without obligation
to do so) condition its consent to any requested Alteration or Utility
Installation that costs $2,500.00 or more upon Lessee's providing Lessor with a
lien and completion bond in an amount equal to one and one-half times the
estimated cost of such Alteration or Utility Installation.

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

     7.4  Ownership, Removal, Surrender, and Restoration.

                                                              Initials:________
                                                                       ________
                                     -5-
<PAGE>

           (a)  Ownership. Subject to Lessor's right to require their removal
and to cause Lessee to become the owner thereof as hereinafter provided in this
Paragraph 7.4, all Alterations and Utility Installations made to the Premises by
Lessee shall be the properly of and owned by Lessee, but considered a part of
the Premises. Lessor may, at any time and at its option, elect in writing to
Lessee to be the owner of all or any specified part of the Lessee-Owned
Alterations and Utility Installations. Unless otherwise instructed per
Subparagraph 7.4(b) hereof, all Lessee-Owned Alterations and Utility
Installations shall, at the expiration or earlier termination of this Lease.
become the property of Lessor and remain upon the Premises and be surrendered
with the Premises by Lessee.

           (b)  Removal. Unless otherwise agreed in writing, Lessor may require
that any or all Lessee-Owned Alterations or Utility installations be removed by
(he expiration or earlier termination of this Lease, notwithstanding that their
installation may have been consented to by Lessor. Lessor may require the
removal at any time of all or any part of any Alterations or Utility
Installations made without the required consent of Lessor.

           (c)  Surrender/Restoration. Lessee shall surrender the Premises by
the end of the last day of the Lease term or any earlier termination date, clean
and free of debris and in good operating order, condition and state of repair,
ordinary wear and fear excepted. Ordinary wear and tear shall not include any
damage or deterioration that would have been prevented by good maintenance
practice or by Lessee performing all of its obligations under this Lease. Except
as otherwise agreed or specified herein, the Premises, as surrendered, shall
include the Alterations and Utility Installations. The obligation of Lessee
shall include the repair of any damage occasioned by the installation,
maintenance or removal of Lessee's Trade Fixtures, furnishings, equipment, and
Lessee-Owned Alterations and Utility Installations, as well as the removal of
any storage tank installed by or for Lessee, and the removal, replacement, or
remediation of any soil, material or ground water contaminated by Lessee, all as
may then be required by Applicable Requirements and/or good practice. Lessee's
Trade Fixtures shall remain the property of Lessee and shall be removed by
Lessee subject to its obligation to repair and restore the Premises per this
Lease.

8.   Insurance; Indemnity.

     8.1   [deleted]

     8.2   Liability Insurance.

           (a)  Carried by Lessee. Lessee shall obtain and keep in force during
the term of this Lease a Commercial General Liability policy of insurance
protecting Lessee, Lessor and any Lender(s) whose names have been provided to
Lessee in writing (as additional insureds) against claims for bodily injury,
personal injury and properly damage based upon, involving or arising out of the
ownership, use, occupancy or maintenance of the Premises arid all areas
appurtenant thereto. Such insurance shall be on an occurrence basis providing
single limit coverage in an amount not less than $1,000,000 per occurrence with
an "Additional Insured-Managers or Lessors of Premises" endorsement and contain
the "Amendment of the Pollution Exclusion" endorsement for damage caused by
heat, smoke or fumes from a hostile fire. The policy shall not contain any
intra-insured exclusions as between insured persons or organizations, bill shall
include coverage for liability assumed under this Lease as an "Insured contract"
for the performance of Lessee's indemnity obligations under this Lease. The
limits of said insurance required by this Lease or as carried by Lessee shall
not, however, limit the liability of Lessee nor relieve Lessee of any obligation
hereunder. All insurance to be carried by Lessee shall be primary to and not
contributory with any similar insurance carried by Lessor, whose insurance shall
be considered excess insurance only.

           (b)  Carried by Lessor. Lessor shall also maintain liability
insurance described in Paragraph 8.2(a) above, in addition to and not in lieu
of, the insurance required to be maintained by Lessee. Lessee shall not be named
as an additional insured therein.

     8.3   Properly Insurance-Building, Improvements and Rental Value.

           (a) Building and Improvements. Lessor shall obtain and keep in force
during the term of this Lease a policy or policies, in the name of Lessor, with
loss payable to Lessor and to any Lender(s), insuring against loss or damage to
the Premises. Such insurance shall be for full replacement cost, as the same
shall exist from time to time, or the amount required by any Lender(s), but in
no event more than the commercially reasonable and available insurable value
thereof it, by reason of the unique nature or age of the improvements involved,
such latter amount is less than full replacement cost. Lessee-Owned Alterations
and Utility Installations, Trade Fixtures and Lessee's personal property shall
be insured by Lessee pursuant to Paragraph 8 4. If the coverage is available
arid commercially appropriate, Lessor's policy or policies shall insure against
all risks of direct physical loss or damage (except the perils of flood and/or
earthquake unless required by a Lender or included in the Base Premium),
including coverage for any additional costs resulting from debris removal and
reasonable amounts of cove-rage for the enforcement of any ordinance or law
regulating the reconstruction or replacement of any undamaged sections of the
Building required to be demolished or removed by reason of the enforcement of
any building, zoning, safety or land use laws as the result of a covered loss,
but not including plate glass insurance. Said policy or policies shall also
contain an agreed valuation provision in lieu of any co-insurance clause, waiver
of subrogation, arid inflation guard protection causing an increase in the
annual property insurance coverage amount by a factor of not less than the
adjusted U.S. Department of Labor Consumer Price index for Ali Urban Consumers
for the city nearest to where the Premises are located.

           (b) Rental Value. Lessor shall also obtain and keep in force during
the term of this Lease a policy or policies in the name of Lessor, with loss
payable to Lessor and any Lender(s), insuring the loss of the full rental and
other charges payable by all lessees of the Building to Lessor for one year
(including all Real Property Taxes, insurance costs, all Common Area Operating
Expenses and any scheduled rental increases). Said insurance may provide that in
the event the Lease is terminated by reason of an insured loss, the period of
indemnity for such coverage shall be extended beyond the date of the completion
of repairs or replacement of the Premises, to provide for one full year's loss
of rental revenues

                                                             Initials:_______
                                                                      _______
                                      -6-
<PAGE>

from the date of any such loss. Said insurance shall contain an agreed valuation
provision in lieu of any co-insurance clause, and the amount of coverage shall
be adjusted annually to reflect the projected rental income. Real Property
Taxes, insurance premium costs and other expenses, if any, otherwise payable,
for the next 12-month period. Common Area Operating Expenses shall include any
deductible amount in the event of such loss.

           (c)  Adjacent Premises. Lessee shall pay for any increase in the
premiums for the properly insurance of the Building and for the Common Areas or
other buildings in the Industrial Center if said increase is caused by Lessee's
acts, omissions, use or occupancy of the Premises.

           (d)  Lessee's Improvements. Since Lessor is the Insuring Party,
Lessor shall not be required to insure Lessee-Owned Alterations and Utility
Installations unless the item in question has become the property of Lessor
under the terms of this Lease.

     8.4   Lessee's Property Insurance. Subject to the requirements of Paragraph
8.5, Lessee at its cost shall either by separate policy or, at Lessor's option,
by endorsement to a policy already carried, maintain insurance coverage on all
of Lessee's personal property, Trade Fixtures and Lessee-Owned Alterations and
Utility Installations in, on, or about the Premises similar in coverage to that
carried by Lessor as the Insuring Party under Paragraph 8.3(a). Such insurance
shall be full replacement cost coverage with a deductible not to exceed $1,000
per occurrence. The proceeds from any such insurance shall be used by Lessee for
the replacement of personal property and the restoration of Trade Fixtures and
Lessee-Owned Alterations and Utility Installations. Upon request from Lessor,
Lessee shall provide Lessor with written evidence that such insurance is in
force.

     8.5   Insurance Policies. Insurance required hereunder shall be In
companies duly licensed to transact business in the state where the Promises are
located, and maintaining during the policy term a "General Policyholders Rating"
of at least A-, VIII or such other rating as may be required by a Lender, as set
forth in the most current issue of "Best's Insurance Guide." Lessee shall not do
or permit to be done anything which shall invalidate the insurance policies
referred to in this Paragraph 8. Lessee shall cause to be delivered to Lessor,
within seven (7) days after the earlier of the Early Possession Date or the
Commencement Date, certified copies of, or certificates evidencing the existence
and amounts of, the insurance required under Paragraph 8.2(a) and 8.4. No such
policy shall be cancelable or subject to modification except after thirty (30)
days' prior written notice to Lessor. Lessee shall at least thirty (30) days
prior to the expiration of such policies, furnish Lessor with evidence of
renewals or "insurance binders" evidencing renewal thereof, or Lessor may order
such insurance and charge the cost thereof to Lessee, which amount shall be
payable by Lessee to Lessor upon demand.

     8.6   Waiver of Subrogation. Without affecting any other rights or
remedies, Lessee and Lessor each hereby release and relieve the other, and waive
their entire right to recover damages (whether in contract or in tort) against
the other, for loss or damage to their property arising out of or incident to
the perils required to be insured against under Paragraph 8. The effect of such
releases and waivers of the right to recover damages shall not be limited by the
amount of insurance carried or required, or by any deductibles applicable
thereto. Lessor and Lessee agree to have their respective insurance companies
issuing property damage insurance waive any right to subrogation that such
companies may have against Lessor or Lessee, as the case may be, so long as the
insurance is not invalidated thereby,

     8.7   Indemnity. Except for Lessor's negligence and/or breach of express
warranties, Lessee shall indemnify, protect, defend and hold harmless the
Premises, Lessor and its agents, Lessor's master or ground lessor, partners and
Lenders, from and against any and all claims, loss of rents and/or damages,
costs, liens, judgments, penalties, loss of permits, attorneys' and consultants'
fees, expenses and/or liabilities arising out of, involving, or in connection
with, the occupancy of the Premises by Lessee, the conduct of Lessee's business,
any act, omission or neglect of Lessee, its agents, contractors, employees or
invitees, and out of any Default or Breach by Lessee in the performance in a
timely manner of any obligation on Lessee's part to be performed under this
Lease. The fore-going shall include, but not be limited to, the defense or
pursuit of any claim or any action or proceeding involved therein, and whether
or not (in the case of claims made against Lessor) litigated and/or reduced to
judgment. In case any action or proceeding be brought against Lessor by reason
of any of the foregoing matters, Lessee upon notice from Lessor shall defend the
same at Lessee's expense by counsel reasonably satisfactory to Lessor and Lessor
shall cooperate with Lessee in such defense. Lessor need not have first paid any
such claim in order to be so indemnified.

     8.8   Exemption of Lessor from Liability. Lessor shall not be liable for
injury or damage to the person or goods, wares, merchandise or other property of
Lessee, Lessee's employees, contractors, invitees, customers, or any other
person in or about the Premises, whether such damage or injury is caused by or
results from fire, steam, electricity, gas, water or rain, or from the breakage,
leakage, obstruction or other defects of pipes, tire sprinklers, wires,
appliances, plumb-ing, air conditioning or lighting fixtures, or from any other
cause, whether said injury or damage results from conditions arising upon the
Premises or upon other portions of the Building of which the Premises are a
part, from other sources or places, and regardless of whether the cause of such
damage or injury or the means of repairing the same is accessible or not. Lessor
shall not be liable for any damages arising from any act or neglect of any other
lessee of Lessor nor from the failure by Lessor to enforce the provisions of any
other lease in the Industrial Center. Notwithstanding Lessor's negligence or
breach of this Lease, Lessor shall under no circumstances be liable for injury
to Lessee's business or for any loss of income or profit therefrom.

9.   Damage or Destruction.

     9.1   Definitions.

           (a) "Premises Partial Damage" shall mean damage or destruction to the
Premises, other than Lessee-Owned Alterations and Utility Installations. the
repair cost of which damage or destruction is less than fifty percent

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(50%) of the then Replacement Cost (as defined in Paragraph 9.1 (d)) of the
Promises (excluding Lessee-Owned Alterations and Utility Installations and Trade
Fixtures) immediately prior to such damage or destruction.

           (b) "Premises Total Destruction" shall mean damage or destruction to
the Premises, other than Lessee-Owned Alterations and Utility Installations, the
repair cost of which damage or destruction is fifty percent (50%) or more of the
then Replacement Cost of the Premises (excluding Lessee-Owned Alterations and
Utility Installations and Trade Fixtures) immediately prior to such damage or
destruction. In addition, damage or destruction to the Building, other than
Lessee-Owned Alterations and Utility Installations and Trade Fixtures of any
lessees of the Building, the cost of which damage or destruction is fifty
percent (50%) or more of the then Replacement Cost (excluding Lessee-Owned
Alterations and Utility Installations and Trade Fixtures of any lessees of the
Building) of the Building shall, at the option of Lessor, be deemed to be
Premises Total Destruction.

           (c) "Insured Loss" shall mean damage or destruction to the Premises,
other than Lessee-Owned Alterations and Utility Installations and Trade
Fixtures, which was caused by an event required to be covered by the insurance
described in Paragraph 8.3(a) irrespective of any deductible amounts or coverage
limits involved.

           (d) "Replacement Cost" shall mean the cost to repair or rebuild the
improvements owned by Lessor at the time of the occurrence to their condition
existing immediately prior thereto, including demolition, debris removal and
upgrading required by the operation of applicable building codes, ordinances or
laws, and without deduction for depreciation.

           (e) "Hazardous Substance Condition" shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination by, a
Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the
Promises.

     9.2   Premises Partial Damage--Insured Loss. If Premises Partial Damage
that is an Insured Loss occurs, then Lessor shall, at Lessor's expense, repair
such damage (but not Lessee's Trade Fixtures or Lessee-Owned Alterations and
Utility Installations) as soon as reasonably possible and this Lease shall
continue in full force and effect. In the event, however, that there is a
shortage of insurance proceeds and such shortage is due to the fact that, by
reason of the unique nature of the improvements in the Premises, full
replacement cost insurance coverage was not commercially reasonable and
available. Lessor shall have no obligation to pay for the shortage in insurance
proceeds or to fully restore the unique aspects of the Promises unless Lessee
provides Lessor with the funds to cover same, or adequate assurance thereof,
within ten (10) days following receipt of written notice of such shortage and
request therefor. If Lessor receives said funds or adequate assurance thereof
within said ten (10) day period, Lessor shall complete them as soon as
reasonably possible and this Lease shall remain in full force and effect. If
Lessor does not receive such funds or assurance within said period, Lessor may
nevertheless elect by written notice to Lessee within ten (10) days thereafter
to make such restoration and repair as is commercially reasonable with Lessor
paying any shortage in proceeds, in which case this Lease shall remain in full
force and effect. If Lessor does not receive such funds or assurance within such
ten (10) day period, and it Lessor does not so elect to restore and repair, then
this Lease shall terminate sixty (60) days following the occurrence of the
damage or destruction. Unless otherwise agreed. Lessee shall in no event have
any right to reimbursement from Lessor for any funds contributed by Lessee to
repair any such damage or destruction. Promises Partial Damage due to flood or
earthquake shall be subject to Paragraph 9.3 rather than Paragraph 9.2,
notwithstanding that there may be some insurance coverage, but the net proceeds
of any such insurance shall be made available for the repairs it made by either
Party.

     9.3   Partial Damage--Uninsured Loss. If Premises Partial Damage that is
not an Insured Loss occurs, unless caused by a negligent or willful act of
Lessee (in which event Lessee shall make the repairs at Lessee's expense and
this Lease shall continue in full force and effect), Lessor may at Lessor's
option, either (i) repair such damage as soon as reasonably possible at Lessor's
expense, in which event this Lease shall continue in full force and effect, or
(ii) give written notice to Lessee within thirty (30) days after receipt by
Lessor of knowledge of the occurrence of such damage of Lessor's desire to
terminate this Lease as of the date sixty (60) days following the date of such
notice. In the event Lessor elects to give such notice of Lessor's intention to
terminate this Lease. Lessee shall have the right within ten (10) days after the
receipt of such notice to give written notice to Lessor of Lessee's commitment
to pay for the repair of such damage totally at Lessee's expense and without
reimbursement from Lessor. Lessee shall provide Lessor with the required funds
or satisfactory assurance thereof within thirty (30) days following such
commitment from Lessee. In such event this Lease shall continue in full force
and effect, and Lessor shall proceed to make such repairs as soon as reasonably
possible after the required funds are available. If Lessee does not give such
notice and provide the funds or assurance thereof within the times specified
above, this Lease shall terminate as of the date specified in Lessor's notice of
termination.

     9.4   Total Destruction. Notwithstanding any other provision hereof, if
Premises Total Destruction occurs (including any destruction required by any
authorized public authority), this Lease shall terminate sixty (60) days
following the date of such Premises Total Destruction, whether or not the damage
or destruction is an Insured Loss or was caused by a negligent or willful act of
Lessee. In the event, however, that the damage or destruction was caused by
Lessee, Lessor shall have the right to recover Lessor's damages from Lessee
except as released and waived in Paragraph 9.7.

     9.5   Damage Near End of Term. If at any time during the last six (6)
months of the term of this Lease there is damage for which the cost to repair
exceeds one month's Base Rent, whether or not an Insured Loss, Lessor may, at
Lessor's option, terminate this Lease effective sixty (60) days following the
date of occurrence of such damage by giving written notice to Lessee of Lessor's
election to do so within thirty (30) days after the date of occurrence of such
damage. Provided, however, if Lessee at that time has an exercisable option to
extend this Lease or to purchase the Premises, then Lessee may preserve this
Lease by (a) exercising such option, and (b) providing Lessor with any shortage
in insurance proceeds (or adequate assurance thereof) needed to make the repairs
on or before the earlier of (i) the date which is ten (10) days after Lessee's
receipt of Lessor's written notice purporting to terminate this Lease, or (ii)
the day

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prior to the date upon which such option expires. If Lessee duly exercises such
option during such period and provides Lessor with funds (or adequate assurance
thereof) to cover any shortage in insurance proceeds, Lessor shall, at Lessor's
expense repair such damage as soon as reasonably possible and this Lease shall
continue in full force and effect. If Lessee fails to exercise such option and
provide such funds or assurance during such period, then this Lease shall
terminate as of the date set forth in the first sentence of this Paragraph 9.5.

     9.6   Abatement of Rent; Lessee's Remedies.

           (a) In the event of (i) Premises Partial Damage or (ii) Hazardous
Substance Condition for which Lessee is not legally responsible, the Base Rent.
Common Area Operating Expenses and other charges, if any, payable by Lessee
hereunder for the period during which such damage or condition, its repair,
remediation or restoration continues, shall be abated in proportion to the
degree to which Lessee's use of the Premises is impaired, but not in excess of
proceeds from insurance required to be carried under Paragraph 8.3(b). Except
for abatement of Base Rent, Common Area Operating Expenses and other charges. if
any, as aforesaid, all other obligations of Lessee hereunder shall be performed
by Lessee, and Lessee shall have no claim against Lessor for any damage suffered
by reason of any such damage, destruction, repair, remediation or restoration.

           (b) If Lessor shall be obligated to repair or restore the Premises
under the provisions of this Paragraph 9 and shall not commence, in a
substantial and meaningful way, the repair or restoration of the Premises within
ninety (90) days after such obligation shall accrue. Lessee may, at any time
prior to the commencement of such repair or restoration, give written notice to
Lessor and to any Lenders of which Lessee has actual notice of Lessee's election
to terminate this Lease on a (late not less than sixty (60) days following the
giving of such notice. If Lessee gives such notice to Lessor and such Lenders
and such repair or restoration is not commenced within thirty (30) days after
receipt of such notice, this Lease shall terminate as of the date specified in
said notice. If Lessor or a Lender commences the repair or restoration of the
Premises within thirty (30) days after the receipt of such notice, this Lease
shall continue in full force and effect. "Commence" as used in this Paragraph
9.6 shall mean either the unconditional authorization of the preparation of the
required plans, or the beginning of the actual work on the Premises, whichever
occurs first.

     9.7   Hazardous Substance Conditions. It a Hazardous Substance Condition
occurs. unless Lessee is legally responsible therefor (in which case Lessee
shall make the investigation and remediation thereof required by Applicable
Requirements and this Lease shall continue in full force and effect, but subject
to Lessor's rights under Paragraph 6.2(c) and Paragraph 13), Lessor may at
Lessor's option either (i) investigate and remediate such Hazardous Substances
Condition. If required, as soon as reasonably possible at Lessor's expense, in
which event this Lease shall continue in full force and effect, or (ii) it file
estimated cost to investigate and remediate such condition exceeds twelve (12)
limes the then monthly Base Rent or $100,000 whichever is greater, give written
notice to Lessee within thirty (30) days after receipt by Lessor of knowledge of
the occurrence of such Hazardous Substance Condition of Lessor s desire to
terminate this Lease as of the date sixty (60), days following the date of such
notice. In the event Lessor elects to give such notice of Lessor s intention to
terminate this Lease. Lessee shall have the right within ten (10) days after the
receipt of such notice to give written notice to Lessor of Lessee's commitment
to Day for the excess costs of (a) investigation and remediation of such
Hazardous Substance Condition to the extent required by Applicable Requirements,
over (b) an amount equal to, waive (12) times the then monthly Base Rent or
$100.000, whichever is greater. Lessee shall provide Lessor with the funds
required of Lessee or satisfactory assurance thereof within thirty (30) days
following said commitment by Lessee, if, such event this Lease shall continue in
full force and effect. and Lessor shall proceed to make such investigation and
remediation as soon as reasonably possible after the required funds are
available. If Lessee does not give such notice and provide the required funds or
assurance thereof within the time period specified above, this Lease shall
terminate as of the date specified in Lessor's notice, of termination.

     9.8   Term I nation-Advance Payments. Upon termination of this Lease
pursuant to this Paragraph 9, Lessor shall return to Lessee any advance payment
made by Lessee to Lessor and so much of Lessee's Security Deposit as has not
been, or is not then required to be, used by Lessor under the terms of this
Lease

     9.9   Waiver of Statutes. Lessor and Lessee agree that the terms of this
Lease shall govern the effect of any damage to or destruction of the Premises
and the Building with respect to the termination of this Lease and hereby waive
the provisions of any present or future statute to the extent it is inconsistent
herewith.

10.  Real Property Taxes.

     10.1  Payment of Taxes. Lessor shall pay the Real Property Taxes, as
defined in Paragraph 10 2.1a), applicable to the Industrial Center.

     10.2 Real Property Tax Definitions.

           (a)  As used herein, the term "Real Property Taxes" shall include any
form of real estate tax or assessment, general, special, ordinary or
extraordinary, and any license fee, commercial rental tax, improvement bond or
bonds, levy or tax (other than inheritance, personal income or estate taxes)
imposed upon the Industrial Center by any authority having the direct or
indirect power to tax, including any city, state or federal government, or any
school, agricultural, sanitary, fire, street, drainage, or other improvement
district thereof, levied against any legal or equitable interest of Lessor in
the Industrial Center or any portion thereof. Lessor's right to rent or other
income therefrom, and/or Lessor's business of leasing the Premises. The term
"Real Property Taxes" stall also include any tax, fee, levy, assessment or
charge, or any increase therein, imposed by reason of events occurring, or
changes in Applicable Law taking effect, during the term of this Lease,
including but not limited to a change in the ownership of the Industrial Center
or in the improvements thereon, the execution of this Lease, or any
modification, amendment or transfer thereof, and whether or not contemplated by
the Parties.

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<PAGE>

           (b)  As used herein, the term "Base Real Property Taxes" shall be the
amount of Real Property Taxes, which are assessed against the Premises. Building
or Common Areas in the calendar year during which the Lease is executed. In
calculating Real Property Taxes for any calendar year, the Real Property Taxes
for any real estate tax year shall be included in the calculation of Real
Property Taxes for such calendar year based upon the number of days which such
calendar year and tax year have in common.

     10.3  Additional Improvements. Common Area Operating Expenses shall not
include Real Property Taxes specified in the tax assessor's records and work
sheets as being caused by additional improvements placed upon the Industrial
Center by other lessees of by Lessor for the exclusive enjoyment of such other
lessees. Notwithstanding Paragraph 10.1 hereof, Lessee shall, however, pay to
Lessor at the time Common Area Operating Expenses are payable under Paragraph
4.2, the entirety of any increase in Real Property Taxes if assessed solely by
reason of Alterations, Trade Fixtures or Utility Installations placed upon the
Premises by Lessee or at Lessee's request.

     10.4  Joint Assessment. If the Building is not separately assessed. Real
Property Taxes allocated to the Building shall be an equitable proportion of the
Real Property Taxes for all of the land and improvements included within the tax
parcel assessed, such proportion to be determined by Lessor from the respective
valuations assigned in the assessor's work sheets or such other information as
may be reasonably available. Lessor's reasonable determination thereof, in good
faith, shall be conclusive.

     10.5  Lessee's Property Taxes. Lessee shall pay prior to delinquency all
taxes assessed against and levied upon Lessee-Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee contained in the Premises or stored within the Industrial Center. When
possible, Lessee shall cause its Lessee-Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all other personal
property to be assessed and billed separately from life real property of Lessor.
If any of Lessee's said property shall be assessed with Lessor's real property,
Lessee shall pay Lessor the taxes attributable to Lessee's property within ten
(10) days after receipt of a written statement setting forth the taxes
applicable to Lessee's property.

11.  [deleted]

12.  Assignment and Subletting.

     12.1  Lessor's Consent Required.

           (a) Lessee shall not voluntarily or by operation of law assign,
transfer, mortgage or otherwise transfer or encumber (collectively, "assign") or
sublet all or any part of Lessee's interest in this Lease or in the Premises
without Lessor's prior written consent which may be withheld in Lessor's sole
and absolute discretion.

           (b) A change in the control of Lessee shall constitute an assignment
requiring Lessor's consent. The transfer, on a cumulative basis, of twenty-five
per-cent (25%) or more of the voting control of Lessee shall constitute a change
in control for this purpose.

           (c)  The involvement of Lessee or its assets in any transaction, or
series of transactions (by way of merger, sale, acquisition, financing,
refinancing, transfer, leveraged buy-out or otherwise), whether or not a formal
assignment or hypothecation of this Lease or Lessee's assets occurs, which
results or will result in a reduction of the Net Worth of Lessee, as hereinafter
defined, by an amount equal to or greater than twenty-five percent (25%) of such
Net Worth of Lessee as it was represented to Lessor at the time of full
execution and delivery of this Lease or at the time of the most recent
assignment to which Lessor has consented, or as it exists immediately prior to
said transaction or transactions constituting such reduction, at whichever time
said Net Worth of Lessee was or is greater, shall be considered an assignment of
this Lease by Lessee to which Lessor may withhold its consent in its sole
discretion "Net Worth of Lessee" for purposes of this Lease shall be the net
worth of Lessee (excluding any Guarantors) established under generally accepted
accounting principles consistently applied.

           (d)  An assignment or subletting of Lessee's interest in this Lease
without Lessor's specific prior written consent shall, at Lessor's option, be a
Default curable after notice per Paragraph 13.1, or a non-curable Breach without
the necessity of any notice and grace period. If lessor elects to treat such
unconsented to assignment or subletting as a non-curable Broach, Lessor shall
have the right to either: (i) terminate this Lease, or (ii) upon thirty (30)
days' written notice ("Lessor's Notice"), increase the monthly Base Rent for the
Premises to the greater of the then fair market rental value of the Premises, as
reasonably determined by Lessor, or one hundred ten percent (110%) of the Base
Rent then in effect. Pending determination of the new fair market rental value,
if disputed by Lessee, Lessee shall pay the amount set forth in Lessor's Notice,
with any overpayment credited against the next installment(s) of base Rent
coming due, and any underpayment for the period retroactively to the effective
date of the adjustment being due and payable immediately upon the determination
thereof. Further, in the event of such Breach and rental adjustment, (i) the
purchase price of any option to purchase the Premises held by Lessee shall be
subject to similar adjustment to the then fair market value as reasonably
determined by Lessor (without the Lease being considered an encumbrance or any
deduction for depreciation or obsolescence, and considering the Premises at its
highest and best use and in good condition) or one hundred ten percent (110%) of
the price previously in effect, (ii) any index-oriented rental or price
adjustment formulas contained in this Lease shall be adjusted to require that
the base index be determined with reference to the index applicable to the time
of such adjustment, and (iii) any fixed rental adjustments scheduled during the
remainder of the Lease term shall he increased in the same ratio as the new
rental bears to the Base Rent in effect immediately prior to the adjustment
specified in Lessor's Notice.

               (e) Lessee's remedy for any breach of this Paragraph 12.1 by
Lessor shall be limited to compensatory damages and/or injunctive relief.

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     12.2  Terms and Conditions Applicable to Assignment and Subletting.

           (a)  Regardless of Lessor's consent, any assignment or subletting
shall not (i) be effective without the express written assumption by such
assignee or sublessee of the obligations of Lessee under this Lease, (ii)
release Lessee of any obligations hereunder, nor (iii) alter the primary
liability of Lessee for the payment of Base Pont and other sums due Lessor
hereunder or for the performance of any other obligations to be performed by
Lessee under this Lease.

           (b)  Lessor may accept any rent or performance of Lessee's
obligations from any person other than Lessee pending approval or disapproval of
an assignment. Neither a delay in the approval or disapproval of such assignment
nor the acceptance of any rent for performance shall constitute a waiver or
estoppel of Lessor's right to exercise its remedies for the Default or Breach by
Lessee of any of the terms, covenants or conditions of this Lease.

           (c)  The consent of Lessor to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting by Lessee or to
any subsequent or successive assignment or subletting by the assignee or
sublessee. However, Lessor may consent to subsequent sublettings and assignments
of the sublease or any amendments or modifications thereto without notifying
Lessee or anyone else liable under this Lease or the sublease and without
obtaining their consent, and such action shall not relieve such persons from
liability under this Lease or the sublease.

           (d)  In the event of any Default or Breach of Lessee's obligation
under this Lease, Lessor may proceed directly against Lessee, any Guarantors or
any-one else responsible for the performance of the Lessee's obligations under
this Lease, including any sublessee, without first exhausting Lessor's remedies
against any other person or entity responsible therefor to Lessor, or any
security hold by Lessor.

           (e)  Each request for consent to an assignment or subletting shall be
in writing, accompanied by information relevant to Lessor's determination as to
the financial and operational responsibility and appropriateness of the proposed
assignee or sublessee, including but not limited to the intended use and/or
required modification of the Premises, if any, together with a non-refundable
deposit of $1,000 or ten percent (10%) of the monthly Base Rent applicable to
the portion of the Premises which is the subject of the proposed assignment or
sublease, whichever is greater, as reasonable consideration for Lessor's
considering and processing the request for consent. Lessee agrees to provide
Lessor with such other or additional information and/or documentation as may be
reasonably requested by Lessor.

           (f)  Any assignee of, or sublessee under, this Lease shall, by reason
of accepting such assignment or entering into such sublease, be deemed, for the
benefit of Lessor, to have assumed and agreed to conform and comply with each
and every term, covenant, condition and obligation herein to be observed or
performed by Lessee during the term of said assignment or sublease, other than
such obligations as are contrary to or inconsistent with provisions of an
assignment or sublease to which Lessor has specifically consented in writing.

          (g)   The occurrence of a transaction described in Paragraph 12.2(c)
shall give Lessor the right (but not the obligation) to require that the
Security Deposit be increased by an amount equal to six (6) times the then
monthly Base Rent, and Lessor may make the actual receipt by Lessor of the
Security Deposit Increase a condition to Lessor's consent to such transaction.

          (h)   Lessor, as a condition to giving its consent to any assignment
or subletting, may require that the amount and adjustment schedule of the rent
payable under this Lease be adjusted to what is then the market value and/or
adjustment schedule for property similar to the Premises as then constituted, as
determined by Lessor.

     12.3  Additional Terms and Conditions Applicable to Subletting. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:

           (a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all rentals and income arising from any sublease of all or a portion
of the Premises heretofore or hereafter made by Lessee, and Lessor may collect
such rent and income and apply same toward Lessee's obligations under this
Lease; provided, however, that until a Breach (as defined in Paragraph 13.1)
shall occur in the performance of Lessee's obligations under this Lease, Lessee
may, except as otherwise provided in this Lease, receive, collect and enjoy the
rents accruing under such sublease. Lessor shall not, by reason of the foregoing
provision or any other assignment of such sublease to Lessor, nor by reason of
the collection of the rents from a sublessee, be deemed liable to the sublessee
for any failure of Lessee to perform and comply with any of Lessee's obligations
to such sublessee under such Sublease. Lessee hereby irrevocably authorizes and
directs any such sublessee, upon receipt of a written notice from Lessor stating
that a Breach exists In the performance of Lessee's obligations under this
Lease, to pay to Lessor the rents and other charges due and to become due under
the sublease. Sublessee shall rely upon any such statement and request from
Lessor and shall pay such rents and other charges to Lessor without any
obligation or right to inquire as to whether such Breach exists and
notwithstanding any notice from or claim from Lessee to the contrary. Lessee
shall have no right or claim against such sublessee, or, until the Breach has
been cured, against Lessor, for any such rents and other charges so paid by said
sublessee to Lessor.

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

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           (c)  Any matter or thing requiring the consent of the sublessor under
a sublease shall also require the consent of Lessor herein.

           (d)  No sublessee under a sublease approved by Lessor shall further
assign or sublet all or any part of the Premises without Lessors prior written
consent which may be withheld in Lessor's sole discretion.

           (e)  Lessor shall deliver a copy of any notice of Default or Breach
by Lessee to the sublessee, who shall have the right to cure the Default of
Lessee within the grace period, if any, specified in such notice. The sublessee
shall have a right of reimbursement and offset from and against Lessee for any
such Defaults cured by the sublessee.

13.  Default; Breach; Remedies.

     13.1  Default; Breach. Lessor and Lessee agree that if an attorney is
consulted by Lessor in connection with a Lessee Default or Breach (as
hereinafter defined), $350.00 is a reasonable minimum sum per such occurrence
for legal services and costs in the preparation and service of a notice of
Default, and that Lessor may include the cost of such services and costs in said
notice as rent due and payable to cure said default. A "Default" by Lessee is
defined as a failure by Lessee to observe, comply with or perform any of the
terms, covenants, conditions or rules applicable to Lessee under this Lease. A
"Breach" by Lessee is defined as the occurrence of any one or more of the
following Defaults, and, where a grace period for cure after notice is specified
herein, the failure by Lessee to cure such Default prior to the expiration of
the applicable grace period, and shall entitle Lessor to pursue the remedies set
forth in Paragraphs 13.2 and/or 13.3:

           (a)  The vacating of the Premises without the intention to reoccupy
same, or the abandonment of the Premises.

           (b)  Except as expressly otherwise provided in this Lease, the
failure by Lessee to make any payment of Base Rent, Lessee's Share of Common
Area Operating Expenses, or any other monetary payment required to be made by
Lessee hereunder as and when due, the failure by Lessee to provide Lessor with
reasonable evidence of insurance or surety bond required under this Lease, or
the failure of Lessee to fulfill any obligation under this Lease which endangers
or threatens life or property, where such failure continues for a period of
three (3) days following written notice thereof by or on behalf of Lessor to
Lessee.

           (c)  Except as expressly otherwise provided in this Lease, the
failure by Lessee to provide Lessor with reasonable written evidence (in duly
executed original form, if applicable) of (i) compliance with Applicable
Requirements per Paragraph 6.3, (ii) the inspection, maintenance and service
contracts required under Paragraph 7.1(b), (iii) the rescission of an
unauthorized assignment or subletting per Paragraph 12.1, (iv) a Tenancy
Statement per Paragraphs 16 or 37, (v) the subordination or non-subordination of
this Lease per Paragraph 30, (vi) the guaranty of the performance of Lessee's
obligations under this Lease if required under Paragraphs 1.11 and 37, (vii) the
execution of any document requested under Paragraph 42 (easements), or (viii)
any other documentation or information which Lessor may reasonably require of
Lessee under the terms of this lease, where any such failure continues for a
period of ten (10) days following written notice by or on behalf of Lessor to
Lessee.

           (d)  A Default by Lessee as to the terms, covenants, conditions or
provisions of this Lease, or of the rules adopted under Paragraph 40 hereof that
are to be observed, complied with or performed by Lessee, other than those
described in Subparagraphs 13.1(a), (b) or (c), above, where such Default
continues for a period of thirty (30) days after written notice thereof by or on
behalf of Lessor to Lessee; provided, however, that it the nature of Lessee's
Default is such that more than thirty (30) days are reasonably required for its
cure, then it shall not be deemed to be a Breach of this Lease by Lessee if
Lessee commences such cure with-in said thirty (30) day period and thereafter
diligently prosecutes such cure to completion.

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

           (f)  The discovery by Lessor that any financial statement of Lessee
or of any Guarantor, given to Lessor by Lessee or any Guarantor, was materially
false.

           (g)  If the performance of Lessee's obligations under this Lease is
guaranteed: (i) the death of a Guarantor, (ii) the termination of a Guarantor's
liability with respect to this Lease other than in accordance with the terms of
such guaranty, (iii) a Guarantor's becoming insolvent or the subject of a
bankruptcy filing, (iv) a Guarantor's refusal to honor the guaranty, or (v) a
Guarantor's breach of its guaranty obligation on an anticipatory breach basis,
and Lessee's failure, within sixty (60) days following written notice by or on
behalf of Lessor to Lessee of any such event, to provide Lessor with written
alternative assurances of security, which, when coupled with the then existing
resources of Lessee, equals or exceeds the combined financial resources of
Lessee and the Guarantors that existed at the time of execution of this Lease.

     13.2  Remedies. It Lessee fails to perform any affirmative duly or
obligation of Lessee under this Lease, within ten (10) days after written notice
to Lessee (or in case of an emergency, without notice). Lessor may at its option
(but

                                                               Initials:________
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                                     -12-
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without obligation to do so), perform such duty or obligation on Lessee's
behalf, including but not limited to the obtaining of reasonably required bonds,
insurance policies, or governmental licenses, permits or approvals. The costs
and expenses of any such performance by Lessor shall be due and payable by
Lessee to Lessor upon invoice therefor. It any check given to Lessor by Lessee
shall not be honored by the bank upon which it is drawn, Lessor, at its own
option, may require all future payments to be made under this Lease by Lessee to
be made only by cashier's check. In the event of a Breach of this Lease by
Lessee (as defined in Paragraph 13.1), with or without further notice or demand.
and without limiting Lessor in the exercise of any right or remedy which Lessor
may have by reason of such Breach, Lessor may:

           (a)  Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease and the term hereof shall terminate and
Lessee shall immediately surrender possession of the Premises to Lessor. In such
event Lessor shall be entitled to recover from Lessee: (i) the worth at the time
of the award of the unpaid rent which had been earned at the time of
termination; (ii) 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 that the Lessee proves could have
been reasonably avoided; (iii) the worth at the time of award of the amount by
which the unpaid rent for the balance of the term after the time of award
exceeds the amount of such rental loss that the Lessee proves could be
reasonably avoided; and (iv) any other amount necessary to compensate Lessor for
all the detriment proximately caused by the Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, including but not limited to the cost of recovering
possession of the Premises, expenses of reletting, including necessary
renovation and alteration of the Premises, reasonable attorneys' fees, and that
portion of any leasing commission paid by Lessor in connection with this Lease
applicable to the unexpired term of this Lease. The worth at the time of award
of the amount referred to in provision (iii) of the immediately preceding
sentence shall be computed by discounting such amount at the discount rate of
the Federal Reserve Bank of San Francisco or the Federal Reserve Bank District
in which the Premises are located at the time of award plus one percent (1%).
Efforts by Lessor to mitigate damages caused by Lessee's Default or Breach of
this Lease shall not waive Lessor's right to recover damages under this
Paragraph 13.2. If termination of this Lease is obtained through the provisional
remedy of unlawful detainer, Lessor shall have the right to recover in such
proceeding the unpaid rent and damages as are recoverable therein, or Lesser may
reserve the right to recover all or any part thereof in a separate suit to for
such rent and/or damages. If a notice and grace period required under
Subparagraph 13.1(b), (c) or (d) was not previously given, a notice to pay rent
or quit, or to perform or quit, as the case may be, given to Lessee under any
statute authorizing the forfeiture of !leases for unlawful detainer shall also
constitute, the applicable notice for grace period purposes required by
Subparagraph 13.1(b), (c) or (d). In such case, the applicable grace period
under the unlawful detainer statute shall run concurrently after the one such
statutory notice, and the failure of Lessee to cure the Default within the
greater of the two (2) such grace periods shall constitute both in unlawful
detainer and a Breach of this Lease entitling Lessor to the remedies provided
for in this Lease and/or by said statute.

           (b)  Continue the Lease and Lessee's right to possession in effect
(in California under California Civil Code Section 1951.4) after Lessee's Breach
and recover the rent as it becomes due, provided Lessee has the right to sublet
or assign, subject only to reasonable limitation. Lessor and Lessee agree that
the limitations on assignment and subletting in this Lease are reasonable. Acts
of maintenance or preservation, efforts to relet the Premises, or the
appointment or a receiver to protect the Lessor's interest under this Lease,
shall not constitute a termination of the Lessee's right to possession.

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

           (d)  The expiration or termination of this Lease and/or the
termination of Lessee's right to possession shall not relieve Lessee from
liability under any indemnity provisions of this Lease as to matters occurring
or accruing during the term hereof or by reason of Lessee's occupancy of the,
Promises.

     13.3  Inducement Recapture In Event of Breach. Any agreement by Lessor for
free or abated rent or other charges applicable to the Premises, or for the
giving or paying by Lessor to or for Lessee of any cash or other bonus,
inducement or consideration for Lessee's entering into this Lease, all of which
concessions are hereinafter referred to as "Inducement Provisions" shall be
doomed conditioned upon Lessee's hill and faithful performance of all of the
terms, covenants and conditions of this Lease to be performed or observed by
Lessee during the term hereof as the same may be extended. Upon the occurrence
of a Breach (as defined in Paragraph 13.1) of this Lease by Lessee, any such
Inducement Provision shall automatically be deemed deleted from this Lease and
of no, further force or effect, and any rent, other charge, bonus, inducement or
consideration theretofore abated, given or paid by Lessor under such an
Inducement Provision shall be immediately due and payable by Lessee to Lessor,
and recoverable by Lessor, as additional rent due under this Lease,
notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by
Lessor of rent or the cure of the Breach which initiated the operation of this
Paragraph 13.3 shall not be deemed a waiver by Lessor of the provisions of this
Paragraph 13.3 unless specifically so stated in writing by Lessor at the time of
such acceptance.

     13.4  Late Charges. Lessee hereby acknowledges that late payment by Lessee
to Lessor of rent and other sums due hereunder will cause Lessor 10 111CM costs
not contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited to, processing
and accounting charges, and late charges which may be imposed upon Lessor by the
terms of any ground lease, mortgage or deed of trust covering the premises.
Accordingly, if any installment of rent or other sum due from Lessee shall not
be received by Lessor or Lessor's designee within ten (10) days after such
amount shall be due, then, without any requirement for notice to Lessee, Lessee
shall pay to Lessor a late charge equal to six percent (6%) M Such overdue
amount. The parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Lessor will incur by reason of late payment by
Lessee. Acceptance of such late charge by Lessor shall in no event constitute a
waiver of Lessee's Default or Breach with respect to such overdue amount, nor
prevent Lessor from exercising any of the other rights and remedies granted
hereunder. In the event that a late charge is payable hereunder, whether or not
collected, for three (3) consecutive

                                                              Initials:________
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                                     -13-
<PAGE>

installments of Base Rent, then notwithstanding Paragraph 4.1 or any other
provision of this Lease to the contrary, Base Rent shall. at Lessor's option,
become due and payable quarterly in advance.

     13.5  Breach by Lessor.  Lessor shall not be deemed in breach of this Lease
unless Lessor fails within a reasonable time to perform an obligation required
to be performed by Lessor. For purposes of this Paragraph 13.5, a reasonable
time shall in no event be less than thirty (30) days after receipt by Lessor,
and by any Lender(s) whose name and address shall have been furnished to Lessee
in writing for such purpose, of written notice specifying wherein such
obligation of Lessor has not been performed; provided, however, that if the
nature of Lessor's obligation is such that more than thirty (30) days after such
notice are reasonably required for its performance, then Lessor shall not be in
breach of this Lease it performance is commenced within such thirty (30) day
period and thereafter diligently pursued to completion.

14.  Condemnation.  If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of the exercise of said power
(all of which are herein called "condemnation"), this Lease shall terminate as
to the part so taken as of the date the condemning authority takes title or
possession, whichever first occurs. It more than ten percent (10%) of the floor
area of the Premises, or more than twenty-five percent (25%) of the portion of
the Common Areas designated for Lessee's parking, is taken by condemnation,
Lessee may, at Lessee's option, to be exercised in writing within ten (10) days
after Lessor shall have given Lessee written notice of such taking (or in the
absence of such notice, within ten (10) days after the condemning authority
shall have taken possession) terminate this Lease as of the date the condemning
authority takes such possession. If Lessee does not terminate this Lease in
accordance with the foregoing, this Lease shall remain in full force and effect
as to the portion of the Premises remaining, except that the Base Rent shall be
reduced in the same proportion as the rentable floor area of the Premises taken
bears to the total rentable floor area of the Premises. No reduction of Base
Rent shall occur if the condemnation does not apply to any portion of the
Premises. Any award for the taking of all or any part of the Premises under the
power of eminent domain or any payment made under threat of the exercise of such
power shall be the property of Lessor. whether such award shall be made as
compensation for diminution of value of the leasehold or for the taking of the
fee, or as severance damages; provided, however, that Lessee shall be entitled
to any compensation, separately awarded to Lessee for Lessee's relocation
expenses and/or loss of Lessee's Trade Fixtures. In the event that this Lease is
not terminated by reason of such condemnation, Lessor shall to the extent of its
net severance damages received, over and above Lessee's Share of the legal and
other expenses incurred by Lessor in the condemnation, matter, repair any damage
to the Premises caused by such condemnation authority. Lessee shall be
responsible for the payment of any amount in excess of such not severance
damages required to complete such repair.

15.  [deleted]

16.  Tenancy and Financial Statements.

     16.1  Tenancy Statement.  Each Party (as "Responding Party") shall within
ten (10) days after written notice from the other Party (the "Requesting Party")
execute, acknowledge and deliver to the Requesting Party a statement in writing
in a form similar to the then most current "Tenancy Statement" form published by
the American Industrial Real Estate Association, plus such additional
information, confirmation and/or statements as may be reasonably requested by
the Requesting Party.

     16.2  Financial Statement.  If Lessor desires to finance, refinance, or
sell the Premises or the Building, or any part thereof, Lessee and all
Guarantors shall deliver to any potential lender or purchaser designated by
Lessor such financial statements of Lessee and such Guarantors as may be
reasonably required by such lender or purchaser, including but not limited to
Lessee's financial statements for the past three (3) years. All such financial
statements shall be received by Lessor and such lender or purchaser in
confidence and shall be used only for the purposes herein set forth.

17.  Lessor's Liability.  The term "Lessor" as used herein shall mean the owner
or owners at the time in question of the fee title to the Premises. In the event
of a transfer of Lessor's title or interest in the Premises or in this Lease,
Lessor shall deliver to the transferee or assignee (in cash or by credit) any
unused Security Deposit held by Lessor at the time of such transfer or
assignment. Except as provided in Paragraph 15.3, upon such transfer or
assignment and delivery of the Security Deposit, as aforesaid. the prior Lessor
shall be relieved of all liability with respect to the obligations and/or
covenants under this Lease thereafter to be performed by the Lessor. Subject to
the foregoing, the obligations and/or covenants in this Lease to be performed by
the Lessor shall be binding only upon the Lessor as hereinabove defined.

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

19.  Interest on Past-Due Obligations.  Any monetary payment due Lessor
hereunder, other than late charges. not received by Lessor within ten (10) days
follow-ing the date on which it was due, shall bear interest from the date due
at the prime rate charged by [he largest state chartered bank in the state in
which the Premises are located plus four percent (4%) per annum, but not
exceeding the maximum rate allowed by law, in addition to the potential late
charge provided for in Paragraph 13.4.

20.  Time of Essence.  Time is of the essence with respect to the performance of
all obligations to be performed or observed by the Parties under this Lease.

21.  Rent Defined.  All monetary obligations of Lessee to Lessor under the terms
of this Lease are deemed to be rent.

22.  No Prior or other Agreements.  This Lease contains all agreements between
the Parties with respect to any matter mentioned herein, and no other prior or
contemporaneous agreement or understanding shall be effective.

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                                     -14-
<PAGE>

23.  Notices.

     23.1  Notice Requirements.  All notices required or permitted by this Lease
shall be in writing and may be delivered in person (by hand or by messenger or
courier service) or may be sent by regular, certified or registered mail or U.S.
Postal Service Express Mail, with postage prepaid, and shall be deemed
sufficiently given if served in a manner specified in this Paragraph 23. The
addresses noted adjacent to a Party's signature on this Lease shall be that
Party's address for delivery or mailing of notice purposes. Either Party may by
written notice to the other specify a different address for notice purposes,
except that upon Lessee's taking possession of the Premises, the Premises shall
constitute Lessee's address for the purpose of mail-ing or delivering notices to
Lessee. A copy of all notices required or permitted to be given to Lessor
hereunder shall be concurrently transmitted to such party or parties at such
addresses as Lessor may from time to time hereafter designate by written notice
to Lessee.

     23.2  Date of Notice.  Any notice sent by registered or certified mail,
return receipt requested, shall be deemed given on the date of delivery shown on
the receipt card, or it no delivery date is shown, the postmark thereon. If sent
by regular mail. the notice shall be deemed given forty-eight (48) hours after
the same is addressed as required herein and mailed with postage prepaid.
Notices delivered by United States Express Mail or overnight courier that
guarantees next day delivery shall be deemed given twenty-four (24) hours after
delivery of the same to the United States Postal Service or courier. If notice
is received on a Saturday or a Sunday or a legal holiday, it shall be deemed
received on the next business day.

24.  Waivers.  No waiver by Lessor of the Default or Breach of any term.
covenant or condition hereof by Lessee, shall be deemed a waiver of any other
term, covenant or condition hereof, or of any subsequent Default or Breach by
Lessee of the same or any other term, covenant or condition hereof. Lessor's
consent to, or approval of, any such act shall not be deemed to render
unnecessary the obtaining of Lessor's consent to. or approval of, any subsequent
or similar act by Lessee, or be construed as the basis of an estoppel to enforce
the provision or provisions of this Lease requiring such consent. Regardless of
Lessor's knowledge of a Default or Breach at the time of accepting rent, the
acceptance of rent by Lessor shall not be a waiver of any Default or Breach by
Lessee of any provision hereof. Any payment given Lessor by Lessee may be
accepted by Lessor on account of moneys or damages due Lessor, notwithstanding
any qualifying statements or conditions made by Lessee in connection therewith,
which such statements and/or conditions shall be of no force or effect
whatsoever unless specifically agreed to in writing by Lessor at or before the
time of deposit of such payment.

25.  Recording.  Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording. purposes. The Party requesting recordation shall be
responsible for payment of any fees or taxes applicable thereto.

26.  No Right To Holdover.  Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or earlier termination of
this Lease. In the event that Lessee holds over in violation of this Paragraph
26 then the Base Rent payable from and after the time of the expiration or
earlier termination of this Lease shall be increased to two hundred percent
(200%) of the Base Rent applicable during the month immediately preceding such
expiration or earlier termination. Nothing contained herein shall be construed
as a consent by Lessor to any holding over by Lessee.

27.  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.

28.  Covenants and Conditions.  All provisions of this Lease to be observed or
performed by Lessee are both covenants and conditions.

29.  Binding Effect; Choice of Law.  This Lease shall be binding upon the
Parties, their personal representatives, successors and assigns and be governed
by the laws of the State in which the Premises are located. Any litigation
between the Parties hereto concerning this Lease shall be initiated in the
county in which the Premises are located.

30.  Subordination; Attornment; Non-Disturbance.

     30.1  Subordination.  This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, "Security Device"), now or
hereafter placed by Lessor upon the real property of which the Premises are a
part, to any and all advances made on the security thereof, and to all renewals,
modifications, consolidations, replacements and extensions thereof. Lessee
agrees that the Lenders holding any such Security Device shall have no duty,
liability or obligation to perform any of the obligations of Lessor under this
Lease, but that in the event of Lessor's default with respect to any such
obligation, Lessee will give any Lender whose name and address have been
furnished Lessee in writing for such purpose notice of Lessor's default pursuant
to Paragraph 13.5. If any Lender shall elect to have this Lease and/or any
Option granted hereby superior to the lien of its Security Device and shall give
written notice thereof to Lessee, this Lease and such Options shall be deemed
prior to such Security Device, notwithstanding the relative dates of the
documentation or recordation thereof.

     30.2  Attornment.  Subject to the non-disturbance provisions of Paragraph
30.3, Lessee agrees to attorn to a Lender or any other party who acquires owner-
ship of the Promises by reason of a foreclosure of a Security Device, and that
in the event of such foreclosure, such new owner shall not: (i) be liable for
any act or omission of any prior lessor or with respect to events occurring
prior to acquisition of ownership, (it) be subject to any offsets or defenses
which Lessee might have against any prior lessor, or (iii) be bound by
prepayment of more than one month's rent.

     30.3  Non-Disturbance.  With respect to Security Devices entered into by
Lessor after the execution of this lease, Lessee's subordination of this Lease
shall be subject to receiving assurance (a "non-disturbance agreement") from

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<PAGE>

the Lender that Lessee's possession and this Lease, including any options to
extend the term hereof, will not be disturbed so long as Lessee is not in Breach
hereof and attorns to the record owner of the Premises.

     30.4  Self-Executing.  The agreements contained in this Paragraph 30 shall
be effective without the execution of any further documents; provided, however,
that upon written request from Lessor or a Lender in connection with a sale,
financing or refinancing of Premises, Lessee and Lessor shall execute such
further writings as may be reasonably required to separately document any such
subordination or non-subordination, attornment and/or non-disturbance agreement
as is provided for herein.

31.  Attorneys' Fees.  If any Party brings an action or proceeding to enforce
the terms hereof or declare rights hereunder. the Prevailing Party (as here-
after defined) in any such proceeding, action, or appeal thereon, shall be
entitled to reasonable attorneys' fees. Such fees may be awarded in the same
suit or recovered in a separate suit, whether or not such action or proceeding
is pursued to decision or judgment. The term "Prevailing Party" shall include,
without limitation, a Party who substantially obtains or defeats the relief
sought, as the case may be, whether by compromise, settlement, judgment, or the
abandonment by the other Party of its claim or defense. The attorneys' fee award
shall not be computed in accordance with any court fee schedule, but shall be
such as to fully reimburse all attorneys' fees reasonably incurred. Lessor shall
be entitled to attorneys' fees, costs and expenses incurred in preparation and
service of notices of Default and consultations in connection therewith, whether
or not a legal action is subsequently commenced in connection with such Default
or resulting Breach.

32.  Lessor's Access; Showing Premises; Repairs.  Lessor and Lessor's agents
shall have the right to enter the Premises at any time, in the case of an
emergency, and otherwise at reasonable times for the purpose of showing the same
to prospective purchasers, lenders, or lessees, and making such alterations,
repairs, improvements or additions to the Premises or to the Building, as Lessor
may reasonably deem necessary. Lessor may at any time place on or about the
Premises or Building any ordinary "For Sale" signs and Lessor may at any time
during the last one hundred eighty (180) days of the term hereof place on or
about the Promises any ordinary "For Lease" signs. All such activities of Lessor
shall be without abatement of rent or liability to Lessee.

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

34.  Signs.  Lessee shall not place any sign upon the exterior of the Premises
or the Building, except that Lessee may, with Lessor's prior written consent,
install (but not on the roof) such signs as are reasonably required to advertise
Lessee's own business so long as such signs are in a location designated by
Lessor and comply with Applicable Requirements and the signage criteria
established for the Industrial Center by Lessor. The installation of any sign on
the Premises by or for Lessee shall be subject to the provisions of Paragraph 7
(Maintenance, Repairs, Utility Installations, Trade Fixtures and Alterations).
Unless otherwise expressly agreed herein, Lessor reserves all rights to the use
of the roof of the Building, and the right to install advertising signs on the
Building, including the roof. which do not unreasonably interfere with the
conduct of Lessee's business; Lessor shall be entitled to all revenues from such
advertising signs.

35.  Termination; Merger.  Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided. however, Lessor shall, in the event of any such surrender,
termination or cancellation, have the option to continue any one or all of any
existing subtenancies. Lessor's failure within ten (10) days following any such
event to make a written election to the contrary by written notice to the holder
of any such lesser interest, shall constitute Lessor's election to have such
event constitute the termination of such interest.

36.  Consents.

           (a)  Except for Paragraph 33 hereof (Auctions) or as otherwise
provided herein, wherever in this Lease the consent of a Party is required to an
act by or for the other Party, such consent shall not be unreasonably withheld
or delayed. Lessor's actual reasonable costs and expenses (including but not
limited to architects', attorneys', engineers' and other consultants' fees)
incurred in the consideration of. or response to. a request by Lessee for any
Lessor consent pertaining to this Lease or the Premises, including but not
limited to consents to an assignment a subletting or the presence or use of a
Hazardous Substance. shall be paid by Lessee to Lessor upon receipt of an
invoice and supporting documentation therefor. In addition to the deposit
described in Paragraph 12.2(e), Lessor may. as a condition to considering any
such request by Lessee, require that Lessee deposit with Lessor an amount of
money (in addition to the Security Deposit held under Paragraph 5) reasonably
calculated by Lessor to represent the cost Lessor will incur in considering and
responding to Lessee's request. Any unused portion of said deposit shall be
refunded to Lessee without interest. Lessor's consent to any act. assignment of
this Lease or subletting of the Premises by Lessee shall not constitute an
acknowledgment that no Default or Breach by Lessee of this Lease exists. nor
shall such consent be doomed a waiver of any then existing Default of Breach,
except as may be otherwise specifically stated in writing by Lessor at the time
of such consent.

           (b)  All conditions to Lessor's consent authorized by this Lease are
acknowledged by Lessee as being reasonable. The failure to specify herein any
particular condition to Lessor's consent shall not preclude the impositions by
Lessor at the time of consent of such further or other conditions as are then
reason-able with reference to the particular matter for which consent is being
given.

                                                                 Initials: ____

                                                                           ____

                                     -16-
<PAGE>

37.  Guarantor.

     37.1  Form of Guaranty.  It there are to be any Guarantors of this Lease
per Paragraph 1.11, the form of the guaranty to be executed by each such
Guarantor shall be in the form most recently published by the American
Industrial Real Estate Association. and each such Guarantor shall have the same
obligations as Lessee under this lease, including but not limited to the
obligation to provide the Tenancy Statement and information required in
Paragraph 16.

     37.2  Additional Obligations of Guarantor.  It shall constitute a Default
of the Lessee under this Lease if any such Guarantor fails or refuses. upon
reason-able request by Lessor to give: (a) evidence of the due execution of the
guaranty called for by this Lease. including the authority of the Guarantor (and
of the party signing on Guarantor's behalf) to obligate such Guarantor on said
guaranty, and resolution of its board of directors authorizing the making of
such guaranty, together with a certificate of incumbency showing the signatures
of the persons authorized to sign on its behalf. (b) current financial
statements of Guarantor as may from time to time be requested by Lessor. (c) a
Tenancy Statement. or (d) written confirmation that the guaranty is still in
effect.

38.  Quiet Possession.  Upon payment by Lessee of the rent for the Promises and
the performance of all of the covenants, conditions and provisions on Lessee's
part to be observed and performed under this Lease. Lessee shall have quiet
possession of the Premises for the entire term hereof subject to all of the
provisions of this Lease.

39.  Options.

     39.1  Definition.  As used in this Lease. the word "Option" has the
following meaning: (a) the right to extend the term of this Lease or to renew
this Lease or to extend or renew any lease that Lessee has on other property of
Lessor: (b) the right of first refusal to lease the Premises or the right of
first offer to lease the Premises or the right of first refusal to lease other
property of Lessor or the right of first offer to lease other property of
Lessor: (c) the right to purchase the Premises, or the right of first refusal to
purchase the Premises. or the right of first offer to purchase the Promises. or
the right to purchase other property of Lessor, or the right of first refusal to
purchase other property of Lessor. or the right of first offer to purchase other
property of Lessor.

     39.2  Options Personal to Original Lessee.  Each Option granted to Lessee
in this Lease is personal to the original Lessee named in Paragraph 1.1 hereof,
and cannot be voluntarily or involuntarily assigned or exercised by any person
or entity other than said original Lessee while the original Lessee is in full
and actual possession of the Promises and without the intention of thereafter
assigning or subletting. The Options, if any, herein granted to Lessee am not
assignable, either as a pan of an assignment of this Lease or separately or
apart therefrom, and no Option may be separated from this Lease in any manner by
reservation or otherwise.

     39.3  Multiple Options.  In the event that Lessee has any multiple Options
to extend or renew this Lease, a later option cannot be exercised unless the
prior Options to extend or renew this Lease have been validly exercised.

     39.4  Effect of Default on Options.

           (a)  Lessee shall have no right to exercise an Option,
notwithstanding any provision in the grant of Option to the contrary: (i) during
the period commencing with the giving of any notice of Default under Paragraph
13.1 and continuing until the noticed Default is cured, or (ii) during the
period of time any monetary obligation due Lessor from Lessee is unpaid (without
regard to whether notice thereof is given Lessee), or (iii) during the time
Lessee is in Breach of this Lease, or (iv) in the event that Lessor has given to
Lessee three (3) or more notices of separate Defaults under Paragraph 13.1
during the twelve (12) month period immediately preceding the exercise of the
Option, whether or not the Defaults are cured.

           (b)  The period of time within which an Option may be exercised shall
not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of Paragraph 39.4(a).

           (c)  All rights of Lessee under the provisions of an Option shall
terminate and be of no further force or effect, notwithstanding Lessee's due and
timely exercise of the Option, if, after such exercise and during the term of
this Lease, (i) Lessee fails to pay to Lessor a monetary obligation of Lessee
for a period of thirty (30) days after such obligation becomes due (without any
necessity of Lessor to give notice thereof to Lessee), or (ii) Lessor gives to
Lessee three (3) or more notices of separate Defaults under Paragraph 13.1
during any twelve (12) month period, whether of not the Defaults are cured, or
(iii) if Lessee commits a Breach of this Lease.

40.  Rules and Regulations.  Lessee agrees that it will abide by, and keep and
observe all reasonable rules and regulations ("Rules and Regulations") which
Lessor may make from time to time for the management, safety, care, and
cleanliness of the grounds, the parking and unloading of vehicles and the
preservation of good order, as well as for the convenience of other occupants or
tenants of the Building and the Industrial Center and their invitees.

41.  [deleted]Reservations.  Lessor reserves the right, from time to time, to
grant, without the consent or joinder of Lessee, such easements, rights of way,
utility raceways, and dedications that Lessor deems necessary, and to cause the
recordation of parcel maps and restrictions, so long as such easements, rights
of way, utility race-ways, dedications, maps and restrictions do not reasonably
interfere with the use of the Premises by Lessee. Lessee agrees to sign any
documents reasonably requested by Lessor to effectuate any such easement rights,
dedication, map or restrictions.

43.  Performance Under Protest.  It at any time a dispute shall arise as to any
amount or sum of money to be paid by one Party to the other under the provisions
hereof, the Party against whom the obligation to pay the money is asserted shall
have the right to make payment "under protest" and such payment shall not be
regarded as a voluntary payment and there shall survive the right on the part of
said Party to institute suit for recovery of such sum. If it shall be adjudged
that

                                                                 Initials: ____

                                                                           ____

                                     -17-
<PAGE>

there was no legal obligation on the pan of said Party to pay such sum or any
part thereof, said Party shall be entitled to recover such sum or so much
thereof as it was not legally required to pay under the provisions of this
Lease.

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

45.  Conflict.  Any conflict between the printed provisions of this Lease and
the typewritten or handwritten provisions shall be controlled by the typewritten
or hand written provisions.

46.  Offer.  Preparation of this Lease by either Lessor or Lessee or Lessor's
agent or Lessee's agent and submission of same to Lessee or Lessor shall not be
deemed an offer to lease. This Lease is not intended to be binding until
executed and delivered by all Parties hereto.

47.  Amendments.  This Lease may be modified only in writing, signed by the
parties in interest at the time of the modification. The Parties shall amend
this Lease from time to time to reflect any adjustments that are made to the
Base Rent or other rent payable under this Lease. As long as they do not
materially change Lessee's obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by an institutional Insurance company or pension plan Lender In
connection with the obtaining of normal financing or refinancing of the property
of which the Promises are a part.

48.  Multiple Parties.  Except as otherwise expressly provided herein, if more
than one person or entity Is named herein as either Lessor or Lessee, the
obligations of such multiple parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee,

                                                                 Initials: ____

                                                                           ____

                                     -18-
<PAGE>

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

          IF THIS LEASE HAS BEEN FILLED IN IT HAS BEEN PREPARED FOR
          YOUR ATTORNEYS REVIEW AND APPROVAL. FURTHER, EXPERTS SHOULD
          BE CONSULTED TO EVALUATE THE CONDITION OF THE PROPERTY FOR
          THE POSSIBLE PRESENCE OF ASBESTOS, UNDERGROUND STORAGE TANKS
          OR HAZARDOUS SUBSTANCES. NO REPRESENTATION OR RECOMMENDATION
          IS MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
          OR BY THE REAL ESTATE BROKERS OR THEIR CONTRACTORS, AGENTS
          OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT. OR
          TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH
          IT RELATES; THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF
          THEIR OWN COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF
          THIS LEASE. IF THE SUBJECT PROPERTY IS IN A STATE OTHER THAN
          CALIFORNIA, AN ATTORNEY FROM THE STATE WHERE THE PROPERTY IS
          LOCATED SHOULD BE CONSULTED.

The parties hereto have executed this Lease at the place and on the dates
specified above their respective signatures.

<TABLE>
<S>                                                                      <C>
Executed at: ______________________________________________________      Executed at: ______________________________________________

on: _______________________________________________________________      on: _______________________________________________________

By LESSOR:                                                               By LESSEE:

MICRO LINEAR CORPORATION                                                 ARTEST CORPORATION,

a Delaware corporation                                                   a California corporation

Name Printed: _____________________________________________________      Name Printed: _____________________________________________

Title: ____________________________________________________________      Title: ____________________________________________________

By: _______________________________________________________________      By: _______________________________________________________

Name Printed: _____________________________________________________      Name Printed: _____________________________________________

Title: ____________________________________________________________      Title: ____________________________________________________

Address: __________________________________________________________      Address: __________________________________________________

___________________________________________________________________      ___________________________________________________________

Telephone: (      ) _______________________________________________      Telephone: (      ) _______________________________________
</TABLE>

NOTE: These forms are often modified to meet changing requirements of law and
      needs of the industry. Always write or call to make sure you are utilizing
      the most current form: AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION, 700
      South Flower Street, Suite 600, Los Angeles, CA 90017. (213) 687-8777.

                                                                 Initials: ____

                                                                           ____

                                     -19-
<PAGE>

                    FIRST ADDENDUM TO STANDARD INDUSTRIAL/
                     COMMERCIAL MULTI-TENANT LEASE - GROSS

     THIS FIRST ADDENDUM TO STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE
(this "Addendum") is made by and between Micro Linear Corporation, a Delaware
corporation ("Lessor") and Artest Corporation, a California corporation
("Lessee"), to be a part of that certain lease (the "Lease") of even date
herewith between Lessor and Lessee concerning premises located at 2050 and 2092
Concourse Drive, San Jose, California (the "Premises"). Lessor and Lessee agree
that, notwithstanding anything to the contrary in the Lease, the Lease is hereby
modified and supplemented as set forth below.

     1.   Term. The Lease shall commence (the "Commencement Date") on the date
          ----
of the "Closing" of that certain Agreement for Purchase and Sale of Assets by
and between Lessor and Lessee dated as of the date hereof.

     2.   Common Areas. The Common Areas shall be limited to the lobby,
          ------------
restrooms, lunch rooms and hallways leading directly between the foregoing and
the Premises in each Building, as well as the parking areas and exterior
sidewalks of the Industrial Center.

     3.   Hazardous Materials.  Lessee shall not use, store or bring onto the
          -------------------
Premises or the Industrial Center any Hazardous Materials other than those of a
type and in quantities used in the Premises by Lessor immediately before the
Commencement Date.

     4.   Utilities.  Lessor shall provide to the Premises electricity, water,
          ---------
heating, ventilating and air conditioning and garbage disposal services at the
levels provided to the Premises immediately prior to the Commencement Date. In
addition, Lessor shall provide, at Lessee's cost, telephone service to the
Premises at the level provided to the Premises immediately prior to the
Commencement Date. Lessee shall pay any invoices for such telephone services
within ten (10) days of receipt thereof. If such telephone service is not
separately metered or billed to the Premises, Lessee shall pay to Lessor a
reasonable portion to be determined by Lessor of any jointly metered or billed
within ten (10) days of Lessee's receipt of an invoice therefor from Lessor. If,
in Lessor's reasonable determination, Lessee uses any utilities or services
(other than telephone services) in excess of levels used immediately before the
Commencement Date, Lessor shall have the right to charge Lessee with the cost of
any excess usage as reasonably calculated by Lessor, and Lessee shall pay such
charges within ten (10) days of receipt of an invoice therefor. Lessor shall not
be liable for the interruption of any such services or utilities for causes
beyond Lessor's reasonable control.

     5.   Annual Negotiations.  On or about each anniversary of the Commencement
          -------------------
Date, the parties shall meet upon the request of either party to discuss the
possibility of increasing or decreasing the size of the Premises. In the event
that the parties agree to change the size of the Premises, the Base Rent,
Lessee's Share and Lessee's percentage of parking spaces shall be equitably
adjusted based on any adjustment to the size of the Premises.

     6.   Lessor's Termination Right. In the event that (a) the agreement
          --------------------------
between Lessor or Lessee with respect to Lessee's performance of production,
test and shipping functions for Lessor terminates for any reason, or (b) Lessee
for any reason ceases carrying out such functions in the Premises, Lessor shall
have the right at any time thereafter to terminate this Lease by delivering at
least thirty (30) days prior written notice hereof to Lessee.

     7.   Effect of Addendum. All terms with initial capital letters used herein
          ------------------
as defined terms shall have the meanings ascribed to them in the Lease unless
specifically defined herein. In the event of any inconsistency between this
Addendum and the Lease, the terms of this Addendum shall prevail.

LESSOR:                                     LESSEE:

MICRO LINEAR CORPORATION,                   ARTEST CORPORATION,
a Delaware corporation                      a California corporation

By: /s/ David L. Gellatly                   By: /s/ Jen Kao
    --------------------------------            ------------------------------

Name: David L. Gellatly                     Name: Jen Kao
      ------------------------------              ----------------------------

Its: President and CEO                      Its: President and CEO
     -------------------------------             -----------------------------

                                                                 Initials: ____

                                                                           ____

<PAGE>

                                                         EXHIBIT A1 - Floor plan

                                 [FLOOR PLAN]

<PAGE>

                                                         EXHIBIT A2 - Floor plan

                                 [FLOOR PLAN]

<PAGE>

                            Addendum to Sub-lease:

     At the termination of the sub-lease Artest will remove all of Artest's
assets and return that portion of the building which Artest has occupied to MLIN
in an "As is" condition.
<PAGE>

                               INDUSTRIAL LEASE

                       (Single Tenant; Net; Stand-Alone)

ARTICLE I. BASIC LEASE PROVISIONS

ARTICLE II. PREMISES
  SECTION 2.1.   LEASED PREMISES
  SECTION 2.2.   ACCEPTANCE OF PREMISES
  SECTION 2.3.   BUILDING NAME AND ADDRESS

ARTICLE III. TERM
  SECTION 3.1.   GENERAL
  SECTION 3.2.   DELAY IN POSSESSION

ARTICLE IV. RENT AND OPERATING EXPENSES
  SECTION 4.1.   BASIC RENT
  SECTION 4.2.   OPERATING EXPENSES
  SECTION 4.3.   SECURITY DEPOSIT

ARTICLE V. USES
  SECTION 5.1.   USE
  SECTION 5.2.   SIGNS
  SECTION 5.3.   HAZARDOUS MATERIALS

ARTICLE VI. SERVICES
  SECTION 6.1.   UTILITIES AND SERVICES
  SECTION 6.2.   PARKING

ARTICLE VII. MAINTAINING THE PREMISES
  SECTION 7.1.   TENANT'S MAINTENANCE AND REPAIR
  SECTION 7.2.   LANDLORD'S MAINTENANCE AND REPAIR
  SECTION 7.3.   ALTERATIONS
  SECTION 7.4.   MECHANIC'S LIENS
  SECTION 7.5.   ENTRY AND INSPECTION

ARTICLE VIII. TAXES AND ASSESSMENTS ON TENANT'S PROPERTY

ARTICLE IX. ASSIGNMENT AND SUBLETTING
  SECTION 9.1.   RIGHTS OF PARTIES
  SECTION 9.2.   EFFECT OF TRANSFER
  SECTION 9.3.   SUBLEASE REQUIREMENTS
  SECTION 9.4.   CERTAIN TRANSFERS

ARTICLE X. INSURANCE AND INDEMNITY
  SECTION 10.1.  TENANT'S INSURANCE
  SECTION 10.2.  LANDLORD'S INSURANCE
  SECTION 10.3.  TENANT'S INDEMNITY
  SECTION 10.4.  LANDLORD'S NONLIABILITY
  SECTION 10.5.  WAIVER OF SUBROGATION

ARTICLE XI. DAMAGE Or DESTRUCTION
  SECTION 11.1.  RESTORATION
  SECTION 11.2.  LEASE GOVERNS

                                       i
<PAGE>

ARTICLE XII. EMINENT DOMAIN
  SECTION 12.1.   TOTAL OR PARTIAL TAKING
  SECTION 12.2.   TEMPORARY TAKING
  SECTION 12.3.   TAKING OF PARKING AREA

ARTICLE XIII. SUBORDINATION; ESTOPPEL CERTIFICATE; FINANCIALS
  SECTION 13.1.   SUBORDINATION
  SECTION 13.2.   ESTOPPEL CERTIFICATE
  SECTION 13.3.   FINANCIALS

ARTICLE XIV. DEFAULTS AND REMEDIES
  SECTION 14.1.   TENANT'S DEFAULTS
  SECTION 14.2.   LANDLORD'S REMEDIES
  SECTION 14.3.   LATE PAYMENTS
  SECTION 14.4.   RIGHT OF LANDLORD TO PERFORM
  SECTION 14.5.   DEFAULT BY LANDLORD
  SECTION 14.6.   EXPENSES AND LEGAL FEES
  SECTION 14.7.   WAIVER OF JURY TRIAL
  SECTION 14.8.   SATISFACTION OF JUDGMENT
  SECTION 14.9.   LIMITATION OF ACTIONS AGAINST LANDLORD

ARTICLE XV. END OF TERM
  SECTION 15.1.   HOLDING OVER
  SECTION 15.2.   MERGER ON TERMINATION
  SECTION 15.3.   SURRENDER OF PREMISES; REMOVAL OF PROPERTY

ARTICLE XVI. PAYMENTS AND NOTICES

ARTICLE XVII. RULES AND REGULATIONS

ARTICLE XVIII. BROKER'S COMMISSION

ARTICLE XIX. TRANSFER OF LANDLORD'S INTEREST

ARTICLE XX. INTERPRETATION
  SECTION 20.1.   GENDER AND NUMBER
  SECTION 20.2.   HEADINGS
  SECTION 20.3.   JOINT AND SEVERAL LIABILITY
  SECTION 20.4.   SUCCESSORS
  SECTION 20.5.   TIME OF ESSENCE
  SECTION 20.6.   CONTROLLING LAW
  SECTION 20.7.   SEVERABILITY
  SECTION 20.8.   WAIVER AND CUMULATIVE REMEDIES
  SECTION 20.9.   INABILITY TO PERFORM
  SECTION 20.10.  ENTIRE AGREEMENT
  SECTION 20.11.  QUIET ENJOYMENT
  SECTION 20.12.  SURVIVAL

ARTICLE XXI. EXECUTION AND RECORDING
  SECTION 21.1.   COUNTERPARTS
  SECTION 21.2.   CORPORATE AND PARTNERSHIP AUTHORITY
  SECTION 21.3.   EXECUTION OF LEASE; NO OPTION OR OFFER
  SECTION 21.4.   RECORDING
  SECTION 21.5.   AMENDMENTS
  SECTION 21.6.   EXECUTED COPY

                                      ii
<PAGE>

  SECTION 21.7.  ATTACHMENTS

ARTICLE XXII. MISCELLANEOUS
  SECTION 22.1.  NONDISCLOSURE OF LEASE TERMS
  SECTION 22.2.  GUARANTY
  SECTION 22.3.  CHANGES REQUESTED BY LENDER
  SECTION 22.4.  MORTGAGEE PROTECTION
  SECTION 22.5.  COVENANTS AND CONDITIONS
  SECTION 22.6.  SECURITY MEASURES
  SECTION 22.7.  CONTINGENCY

EXHIBITS

EXHIBIT A    DESCRIPTION OF PREMISES
EXHIBIT A-1  DESCRIPTION OF THE SITE
EXHIBIT B    ENVIRONMENTAL QUESTIONNAIRE
EXHIBIT C    LANDLORD'S DISCLOSURES
EXHIBIT D    INSURANCE REQUIREMENTS
EXHIBIT E    RULES AND REGULATIONS
EXHIBIT X    WORK LETTER

                                      iii
<PAGE>

                               INDUSTRIAL LEASE
                       (Single Tenant; Net; Stand-Alone)

          THIS LEASE is made as of the 10th day of February, 1997, by and
between THE IRVINE COMPANY, a Michigan corporation, hereafter called "Landlord,"
and MICRO-COMP INDUSTRIES, a California corporation, hereinafter called
"Tenant."

                      ARTICLE I.   BASIC LEASE PROVISIONS

          Each reference in this Lease to the "Basic Lease Provisions" shall
mean and refer to the following collective terms, the application of which shall
be governed by the provisions in the remaining Articles of this Lease.

1.   Premises:  The Premises are more particularly described in Section 2.1.

2.   Address of Building:  680 Almanor Avenue, Sunnyvale, CA 94086

3.   Use of Premises:  Office, administration and related legal uses.

4.   Commencement Date:  March 1, 1997

5.   Lease Term: Sixty (60) months, plus such additional days as may be required
     to cause this Lease to terminate on the final day of the calendar month.

6.   Basic Rent:  Twenty-Five Thousand Eight Hundred Sixty Dollars ($25,860.00)
     per month, based on $1.50 per rentable square foot.

     Basic Rent is subject to adjustment is follows:

     The Basic Rent shall be increased, as of the commencement of the thirteenth
     (13th) month of the Lease Term and every twelve (12) months thereafter (the
     "Rental Adjustment Date(s)"), by the percentage increase, if any, in the
     United States Department of Labor, Bureau of Labor Statistics, Consumer
     Price Index for all Urban Consumers, San Francisco-Oakland Area Average,
     all items (1982-84=100) (the "Index").  The adjustment shall be calculated
     by comparing the Index published for the third month preceding the
     applicable Rental Adjustment Date with the Index published for the third
     month preceding the last prior Rental Adjustment Date (or the third month
     preceding the Commencement Date in the case of the first rental
     adjustment), and the Basic Rent then in effect shall be increased by the
     amount of the percentage increase, if any, between those published Index
     amounts.  In no event shall the Basic Rent be reduced by reason of such
     computation.  If at any Rental Adjustment Date the Index shall not exist,
     Landlord may substitute another reasonable index published by any
     governmental agency.  Landlord shall use diligent efforts to calculate and
     give Tenant notice of any such increase in the Basic Rent on or near each
     Rental Adjustment Date, and Tenant shall commence to pay the increased
     Basic Rent effective on the applicable Rental Adjustment Date.  In the
     event Landlord is unable to deliver to Tenant the notice of the increased
     Basic Rent at least five (5) days prior to any Rental Adjustment Date,
     Tenant shall commence to pay the increased Basic Rent on the first day of
     the month following the delivery of such notice (the "Payment Date"),
     provided Landlord's notice has been given at least five (5) days in
     advance.  Tenant shall also pay, together with the first payment of the
     increased Basic Rent, an amount determined by multiplying the amount of the
     increase in Basic Rent times the number of months that have elapsed between
     the Rental Adjustment Date and the Payment Date.

     Notwithstanding the foregoing, the parties agree that as of any Rental
     Adjustment Date, the revised Basic Rent due to all cumulative increases
     pursuant to this paragraph shall neither (i) exceed the amount obtained by
     increasing the initial Basic Rent from the Commencement Date to said Rental
     Adjustment at the rate of seven percent (7%) per annum, compounded
     annually, nor (ii) be less than the amount obtained by

                                       1
<PAGE>

     increasing the initial Basic Rent from the Commencement Date to said Rental
     Adjustment Date at the rate of three percent (3%) per annum, compounded
     annually.

7.   Guarantor(s):  N/A

8.   Floor Area of Premises:  approximately 17,240 rentable square feet

9.   Security Deposit: $25,860.00

10.  Broker(s):  Grubb & Ellis

11.  Additional Insureds:  Insignia Commercial Group, Inc.

12.  Address for Payments and Notices:

LANDLORD                                     TENANT

INSIGNIA COMMERCIAL GROUP, INC.              MICRO-COMP INDUSTRIES
160 West Santa Clara Street, Suite 1350      680 Almanor Avenue
San Jose, CA 95113                           Sunnyvale, CA 94086

with a copy of notices to:

IRVINE INDUSTRIAL COMPANY
P.O.  Box 6370
Newport Beach, CA 92658-6370
Attn:  Vice President, Industrial Operations

13.  Tenant's Liability Insurance Requirement: $2,000,000.00

Exhibits:

A    Description of Premises
A-1  Description of the Site
B    Environmental Questionnaire
C    Landlord's Disclosures
D    Insurance Requirements
E    Rules and Regulations
X    Work Letter

                                       2
<PAGE>

                             ARTICLE II. PREMISES

     SECTION 2.1.  LEASED PREMISES.  Landlord leases to Tenant and Tenant leases
from Landlord the premises shown in EXHIBIT A (the "Premises"), including the
                                    ---------
building identified in Item 2 of the Basic Lease Provisions (which together with
the underlying real property, is called the "Building"), and containing
approximately the floor area set forth in Item 8 of the Basic Lease Provisions.
The Building is located on the site (the "Site") shown on EXHIBIT A-1 attached
                                                          -----------
hereto.

     SECTION 2.2.  ACCEPTANCE OF PREMISES.  Tenant acknowledges that neither
Landlord nor any representative of Landlord has made any representation or
warranty with respect to the Premises or the Building or the suitability or
fitness of either for any purpose, including without limitation any
representations or warranties regarding zoning or other land use matters. Tenant
further acknowledges that neither Landlord nor any representative of Landlord
has agreed to undertake any alterations or additions or construct any
improvements to the Premises except as expressly provided in this Lease. The
taking of possession or use of the Premises by Tenant for any purpose other than
construction shall conclusively establish that the Premises and the Building
were in satisfactory condition and in conformity with the provisions of this
Lease in all respects, except for those matters which Tenant shall have brought
to Landlord's attention on a written punch list. The list shall be limited to
any items required to be accomplished by Landlord under the Work Letter attached
as Exhibit X, and shall be delivered to Landlord within sixty (60) days after
   ---------
the term ("Term") of this Lease commences as provided in Article III below. If
no items are required of Landlord under the Work Letter, by taking possession of
the Premises Tenant accepts the improvements in their existing condition, and
waives any right or claim against Landlord arising out of the condition of the
Premises. Nothing contained in this Section shall affect the commencement of the
Term or the obligation to Tenant to pay rent. Landlord shall diligently complete
all punch list items of which it is notified as provided above.

     SECTION 2.3.  BUILDING NAME AND ADDRESS.  Tenant shall not utilize any name
selected by Landlord from time to time for the Building as any part of Tenant's
corporate or trade name. Landlord shall have the right to change the name,
address, number of designation of the Building without liability to Tenant.

                              ARTICLE III. TERM

     SECTION 3.1.  GENERAL.  The Term shall be for the period shown in Item 5 of
the Basic Lease Provisions. Subject to the provisions of Section 3.2 and Section
22.7 below, the Term shall commence on the date set forth in Item 4 of the Basic
Lease Provisions ("Commencement Date"). Within ten (10) days after possession of
the Premises is tendered to Tenant, the parties shall memorialize on a form
provided by Landlord the actual Commencement Date and the expiration date
("Expiration Date") of this Lease. Tenant's failure to execute that form shall
not affect the validity of Landlord's determination of those dates.

     SECTION 3.2.  DELAY IN POSSESSION.  If Landlord, for any reason whatsoever,
cannot deliver possession of the Premises to Tenant on or before the
Commencement Date, this Lease shall not be void or voidable nor shall Landlord
be liable to Tenant for any resulting loss or damage. However, Tenant shall not
be liable for any rent and the Commencement Date shall not occur until Landlord
delivers possession of the Premises and the Premises are in fact available for
Tenant's occupancy with any Tenant Improvements that have been approved as per
Section 3.1(a) above, except that if Landlord's failure to so deliver possession
on the Commencement Date is attributable to any action or inaction by Tenant,
then the Commencement Date shall not be advanced to the date on which possession
of the Premises is tendered to Tenant, and Landlord shall be entitled to full
performance by Tenant (including the payment of rent) from the date Landlord
would have been able to deliver the Premises to Tenant but for Tenant's
delay(s).

                    ARTICLE IV. RENT AND OPERATING EXPENSES

     SECTION 4.1.  BASIC RENT.  From and after the Commencement Date, Tenant
shall pay to Landlord without deduction or offset, Basic Rent for the Premises
in the total amount shown (including subsequent adjustments, if any) in Item 6
of the Basic Lease Provisions. Any rental adjustment shown in Item 6 shall be
deemed to occur on the specified monthly anniversary of the Commencement Date,
whether or not the date occurs at the end of a calendar month. The rent shall be
due and payable in advance commencing on the Commencement Date (as prorated for
any partial month) and continuing thereafter on the first day of each successive
calendar month

                                       3
<PAGE>

of the Term. No demand, notice or invoice shall be required for the payment of
Basic Rent. An installment of rent in the amount of one (1) full month's Basic
Rent at the initial rate specified in Item 6 of the Basic Lease Provisions shall
be delivered to Landlord concurrently with Tenant's execution of this Lease and
shall be applied against the Basic Rent first due hereunder.

     SECTION 4.2.  OPERATING EXPENSES.

          (a)  Tenant shall pay to Landlord, as additional rent, "Building
Costs" and "Property Taxes," as those terms are defined below, incurred by
Landlord in the operation of the Building. For convenience of reference,
Property Taxes and Building Costs shall be referred to collectively as
"Operating Expenses".

          (b)  Commencing prior to the start of the first full "Expense Recovery
Period" (as defined below) of the Lease, and prior to the start or each full or
partial Expense Recovery Period thereafter, Landlord shall give Tenant a written
estimate of the amount of Operating Expenses for the Expense Recovery Period.
Tenant shall pay the estimated amounts to Landlord in equal monthly
installments, in advance, with Basic Rent. If Landlord has not furnished its
written estimate for any Expense Recovery Period by the time set forth above,
Tenant shall continue to pay cost reimbursements at the rates established for
the prior Expense Recovery Period, if any; provided that when the new estimate
is delivered to Tenant, Tenant shall, at the next monthly payment date, pay any
accrued cost reimbursements based upon the new estimate. For purposes hereof,
"Expense Recovery Period" shall mean every twelve-month period during the Term
(or portion thereof for the first and last lease years) commencing July 1 and
ending June 30.

          (c)  Within one hundred twenty (120) days after the end of each
Expense Recovery Period, Landlord shall furnish to Tenant a statement showing in
reasonable detail the actual or prorated Operating Expenses incurred by Landlord
during the period, and the parties shall within thirty (30) days thereafter make
any payment or allowance necessary to adjust Tenant's estimated payments, if
any, to Tenant's actual owed amounts as shown by the annual statement. Any delay
or failure by Landlord in delivering any statement hereunder shall not
constitute a waiver of Landlord's right to require Tenant to pay Operating
Expenses pursuant hereto. Any amount due Tenant shall be credited against
installments next coming due under this Section 4.2, and any deficiency shall be
paid by Tenant together with the next installment. If Tenant has not made
estimated payments during the Expense Recovery Period, any amount owing by
Tenant pursuant to subsection (a) above shall be paid to Landlord in accordance
with Article XVI. Should Tenant fail to object in writing to Landlord's
determination of actual Operating Expenses within sixty (60) days following
delivery of Landlord's expense statement, Landlord's determination of actual
Operating Expenses for the applicable Expense Recovery Period shall be
conclusive and binding on the parties and any future claims to the contrary
shall be barred.

          (d)  Even though the Lease has terminated and the Tenant has vacated
the Premises, when the final determination is made of Operating Expenses for the
Expense Recovery Period in which the Lease terminates, Tenant shall upon notice
pay the entire increase due over the estimated expenses paid. Conversely, any
overpayment made in the event expenses decrease shall be rebated by Landlord to
Tenant.

          (e)  If, at any time during any Expense Recovery Period, any one or
more of the Operating Expenses are increased to a rate(s) or amount(s) in excess
of the rate(s) or amount(s) used in calculating the estimated expenses for the
year, then the estimate of Operating Expenses shall be increased for the month
in which such rate(s) or amount(s) becomes effective and for all succeeding
months by an amount equal to the increase. Landlord shall give Tenant written
notice of the amount or estimated amount of the increase, the month in which the
increase will become effective, and the month for which the payments are due.
Tenant shall pay the increase to Landlord as a part of Tenant's monthly payments
of estimated expenses is provided in paragraph (b) above, commencing with the
month in which effective.

          (f)  The term "Building Costs" shall include all expenses of operation
and maintenance of the Building and all landscaping, walkways, parking areas and
lighting of the Site to the extent such expenses are not billed to and paid
directly by Tenant, and shall include the following charges by way of
illustration but not limitation: water and sewer charges; insurance premiums or
reasonable premium equivalents should Landlord elect to self-insure any risk
that Landlord is authorized to insure hereunder; license, permit, and inspection
fees; heat; light; power; air conditioning; supplies; materials; equipment;
tools; the cost of any insurance, tax or other

                                       4
<PAGE>

consultant utilized by Landlord in connection with the Building; costs incurred
in connection with compliance of any laws or changes in laws applicable to the
Building; the cost of any capital investments (other than tenant improvements
for specific tenants) to the extent of the amortized amount thereof over the
useful life of such capital investments calculated at a market cost of funds,
all as determined by Landlord, for each such year of useful life during the
Term; labor; reasonably allocated wages and salaries, fringe benefits, and
payroll taxes for administrative and other personnel directly applicable to the
Building, including both Landlord's personnel and outside personnel; any expense
incurred pursuant to Sections 6.1, 6.2, 7.2, and 10.2; and a reasonable
overhead/management fee for the professional operation of the Building.
Notwithstanding anything to the contrary contained herein, the amount of such
overhead/management fee to be charged to Tenant shall be determined by
multiplying the actual fee charged (which from time to time may be with respect
to the Building only or the Building together with other properties owned by
Landlord and/or its affiliates) by a fraction, the numerator of which is the
floor area of the Premises (as set forth in Item No. 8 of the Basic Lease
Provisions) and the denominator of which is the total square footage of space
charged with such fee actually leased to tenants (including Tenant). It is
understood that Building Costs shall include competitive charges for direct
services provided by any subsidiary or division of Landlord, and may include the
Building's or the Site's proportionate share of the cost of maintenance or
repair contracts which cover the Building and/or the Site and other buildings
and/or projects in Landlord's portfolio, as reasonably allocated by Landlord.

          (g)  The term "Property Taxes" as used herein shall include the
following: (i) all real estate taxes or personal property taxes, as such
property taxes may be reassessed from time to time; and (ii) other taxes,
charges and assessments which are levied with respect to this Lease, to the
Building or to the Site, and any improvements, fixtures and equipment and other
property of Landlord located in the Building or on the Site, except that general
net income and franchise taxes imposed against Landlord shall be excluded; and
(iii) all assessments and fees for public improvements, services, and facilities
and impacts thereon, including without limitation arising out of any Community
Facilities Districts, "Mello Roos" districts, similar assessment districts and
any traffic impact mitigation assessments or fees; and (iv) any tax, surcharge
or assessment which shall be levied in addition to or in lieu of real estate or
personal property taxes, other than taxes covered by Article VIII; and (v) costs
and expenses incurred in contesting the amount or validity of any Property Tax
by appropriate proceedings.

     SECTION 4.3.  SECURITY DEPOSIT.  Concurrently with Tenant's delivery of
this Lease, Tenant shall deposit with Landlord the sum, if any, stated in Item 9
of the Basic Lease Provisions, to be held by Landlord as security for the full
and faithful performance of Tenant's obligations under this Lease (the "Security
Deposit"). Subject to the last sentence of this Section, the Security Deposit
shall be understood and agreed to be the property of Landlord upon Landlord's
receipt thereof, and may be utilized by Landlord in its discretion towards the
payment of all prepaid expenses by Landlord for which Tenant would be required
to reimburse Landlord under this Lease, including without limitation brokerage
commissions and Tenant Improvement costs. Upon any default by Tenant, including
specifically Tenant's failure to pay rent or to abide by its obligations under
Section 7.1 and 15.3 below, whether or not Landlord is informed of or has
knowledge of the default, the Security Deposit shall be deemed to be
automatically and immediately applied, without waiver of any rights Landlord may
have under this Lease or at law or in equity as a result of the default, as a
setoff for full or partial compensation for that default. If any portion of the
Security Deposit is applied after a default by Tenant, Tenant shall within five
(5) days after written demand by Landlord deposit cash with Landlord in an
amount sufficient to restore the Security Deposit to its original amount.
Landlord shall not be required to keep this Security Deposit separate from its
general funds, and Tenant shall not be entitled to interest on the Security
Deposit. If Tenant fully performs its obligations under this Lease, the Security
Deposit or any balance thereof shall be returned to Tenant (or, at Landlord's
option, to the last assignee of Tenant's interest in this Lease) after the
expiration of the Term, provided that Landlord may retain the Security Deposit
to the extent and until such time as all amounts due from Tenant in accordance
with this Lease have been determined and paid in full.

                               ARTICLE V. USES

     SECTION 5.1.  USE.  Tenant shall use the Premises only for the purposes
stated in Item 3 of the Basic Lease Provisions, all in accordance with
applicable laws and restrictions and pursuant to approvals to be obtained by
Tenant from all relevant and required governmental agencies and authorities. The
parties agree that any contrary use shall be deemed to cause material and
irreparable harm to Landlord and shall entitle Landlord to injunctive relief in
addition to any other available remedy. Tenant, it its expense, shall procure,
maintain and make

                                       5
<PAGE>

available for Landlord's inspection throughout the Term, all governmental
approvals, licenses and permits required for the proper and lawful conduct of
Tenant's permitted use of the Premises. Tenant shall not use or allow the
Premises to be used for any unlawful purpose, nor shall Tenant permit any
nuisance or commit any waste in the Premises. Tenant shall not do or permit to
be done anything which will invalidate or increase the cost of any insurance
policy(ies) covering the Building or its contents, and shall comply with all
applicable insurance underwriters rules and the requirements of the Pacific Fire
Rating Bureau or any other organization performing a similar function. Tenant
shall comply at its expense with all present and future laws, ordinances,
restrictions, regulations, orders, rules and requirements of all governmental
authorities that pertain to Tenant or its use of the Premises, including without
limitation all federal and state occupational health and safety requirements,
whether or not Tenant's compliance will necessitate expenditures or interfere
with its use and enjoyment of the Premises. Tenant shall comply at its expense
with all present and future covenants, conditions, easements or restrictions now
or hereafter affecting or encumbering the Building, and any amendments or
modifications thereto, including without limitation the payment by Tenant of any
periodic or special dues or assessments charged against the Premises or Tenant
which may be allocated to the Premises or Tenant in accordance with the
provisions thereof. Tenant shall promptly upon demand reimburse Landlord for any
additional insurance premium charged by reason of Tenant's failure to comply
with the provisions of this Section, and shall indemnify Landlord from any
liability and/or expense resulting from Tenant's noncompliance.

     SECTION 5.2. SIGNS.  Except as approved in writing by Landlord, in its sole
discretion, Tenant shall have no right to maintain identification signs in any
location in, on or about the Premises or the Building and shall not place or
erect any signs, displays or other advertising materials that are visible from
the exterior of the Building. The size, design, graphics, material, style, color
and other physical aspects of any permitted sign shall be subject to Landlord's
written approval prior to installation (which approval may be withheld in
Landlord's discretion), any covenants, conditions or restrictions encumbering
the Premises, Landlord's signage program, if any, as in effect form time to time
("Signage Criteria"), and any applicable municipal or other governmental permits
and approvals. Tenant acknowledges having received and reviewed a copy of the
current Signage Criteria, if applicable. Tenant shall be responsible for the
cost of any permitted sign, including the fabrication, installation, maintenance
and removal thereof. If Tenant fails to maintain its sign, or if Tenant fails to
remove same upon termination of this Lease and repair any damage caused by such
removal, Landlord may do so at Tenant's expense.

     SECTION 5.3. HAZARDOUS MATERIALS.

          (a)  For purposes of this Lease, the term "Hazardous Materials"
includes (i) any "hazardous materials" as defined in Section 25501(n) of the
California Health and Safety Code, (ii) any other substance or matter which
results in liability to any person or entity from exposure to such substance or
matter under any statutory or common law theory, and (iii) any substance or
matter which is in excess of permitted levels set forth in any federal,
California or local law or regulation pertaining to any hazardous or toxic
substance, material or waste.

          (b)  Tenant shall not cause or permit any Hazardous Materials to be
brought upon, stored, used, generated, released or disposed of on, under, from
or about the Premises or the Site (including without limitation the soil and
groundwater thereunder) without the prior written consent of Landlord.
Notwithstanding the foregoing, Tenant shall have the right, without obtaining
prior written consent of Landlord, to utilize within the Premises standard
office products that may contain Hazardous Materials (such as photocopy toner,
"White Out", and the like), provided however, that (i) Tenant shall maintain
                            ----------------
such products in their original retail packaging, shall follow all instructions
on such packaging with respect to the storage, use and disposal of such
products, and shall otherwise comply with all applicable laws with respect to
such products, and (ii) all of the other terms and provisions of this Section
5.3 shall apply with respect to Tenant's storage, use and disposal of all such
products. Landlord only, in its sole discretion, place such conditions as
Landlord deems appropriate with respect to any such Hazardous Materials, and may
further require that Tenant demonstrate that any such Hazardous Materials are
necessary or useful to Tenant's business and will be generated, stored, used and
disposed of in a manner that complies with all applicable laws and regulations
pertaining thereto and with good business practices. Tenant understands that
Landlord may utilize an environmental consultant to assist in determining
conditions of approval in connection with the storage, generation, release,
disposal or use of Hazardous Materials by Tenant on or about the Premises,
and/or to conduct periodic inspections of the storage, generation, use, release
and/or disposal of such Hazardous Materials by Tenant on and from the Premises,
and Tenant agrees that any costs incurred by Landlord in connection therewith
shall be reimbursed by Tenant to Landlord as additional rent hereunder upon
demand.

                                       6
<PAGE>

          (c)  Prior to the execution of this Lease, Tenant shall complete,
execute and deliver to Landlord an Environmental Questionnaire and Disclosure
Statement (the "Environmental Questionnaire") in the form of Exhibit B attached
                                                             ---------
hereto. The completed Environmental Questionnaire shall be deemed incorporated
into this Lease for all purposes, and Landlord shall be entitled to rely fully
on the information contained therein. On each anniversary of the Commencement
Date until the expiration or sooner termination of this Lease, Tenant shall
disclose to Landlord in writing the names and amounts of all Hazardous Materials
which were stored, generated, used, released and/or disposed of on, under or
about the Premises for the twelve-month period prior thereto, and which Tenant
desires to store, generate, use, release and/or dispose of on, under or about
the Premises for the succeeding twelve-month period. In addition, to the extent
Tenant is permitted to utilize Hazardous Materials upon the Premises, Tenant
shall promptly provide Landlord with complete and legible copies of all the
following environmental documents relating thereto: reports filed pursuant to
any self-reporting requirements; permit applications, permits, monitoring
reports, workplace exposure and community exposure warnings or notices and all
other reports, disclosures, plans or documents (even those which may be
characterized as confidential) relating to water discharges, air pollution,
waste generation or disposal, and underground storage tanks for Hazardous
Materials; orders, reports, notices, listings and correspondence (even those
which may be considered confidential) of or concerning the release,
investigation of, compliance, cleanup, remedial and corrective actions, and
abatement of Hazardous Materials; and all complaints, pleadings and other legal
documents filed by or against Tenant related to Tenant's use, handling, storage,
release and/or disposal of Hazardous Materials.

          (d)  Landlord and its agents shall have the right, but not the
obligation, to inspect, sample and/or monitor the Premises, the Site and/or the
soil groundwater thereunder at any time to determine whether Tenant is complying
with the terms of this Section 5.3, and in connection therewith, Tenant shall
provide Landlord with full access to all relevant facilities, records and
personnel. If Tenant is not in compliance with any of the provisions of this
Section 5.3, or in the event of a release of any Hazardous Material on, under or
about the Premises and/or the Site caused or permitted by Tenant, its agents,
employees, contractors, licensees or invitees, Landlord and its agents shall
have the right, but not the obligation, without limitation upon any of
Landlord's other rights and remedies under this Lease, to immediately enter upon
the Premises and/or the Site without notice and to discharge Tenant's
obligations under this Section 5.3 at Tenants expense, including without
limitation the taking of emergency or long-term remedial action. Landlord and
its agents shall endeavor to minimize interference with Tenant's business in
connection therewith, but shall not be liable for any such interference. In
addition, Landlord, at Tenant's expense, shall have the right, but not the
obligation, to join and participate in any legal proceedings or actions
initiated in connection with any claims arising out of the storage, generation,
use, release and/or disposal by Tenant or its agents, employees, contractors,
licensees or invitees of Hazardous Materials on, under, from or about the
Premises and/or the Site.

          (e)  If the presence of any Hazardous Materials on, under, from or
about the Premises and/or the Site caused or permitted by Tenant or its agents,
employees, contractors, licensees or invitees results in (i) injury to any
person, (ii) injury to or any contamination of Premises and/or the Site, or
(iii) injury to or contamination or any real or personal property wherever
situated, Tenant, at its expense, shall promptly take all actions necessary to
return the Premises, the Site and any other affected real or personal property
owned by Landlord to the condition existing prior to the introduction of such
Hazardous Materials and to remedy or repair any such injury or contamination,
including without limitation, any cleanup, remediation, removal, disposal,
neutralization or other treatment of any such Hazardous Materials.
Notwithstanding the foregoing, Tenant shall not, without Landlord's prior
written consent, take any remedial action in response to the presence or any
Hazardous Materials on, under or about the Premises, the Site or any other
affected real or personal property owned by Landlord or enter into any similar
agreement, consent, decree or other compromise with any governmental agency with
respect to any Hazardous Materials claims; provided however, Landlord's prior
written consent shall not be necessary in the event that the presence of
Hazardous Materials on, under or about the Premises, the Site or any other
affected real or personal property owned by Landlord (i) imposes all immediate
threat to the health, safety or welfare of any individual or (ii) is of such a
nature that an immediate remedial response is necessary and it is not possible
to obtain Landlord's consent before taking such action. To the fullest extent
permitted by law, Tenant shall indemnify, hold harmless, protect and defend
(with attorneys acceptable to Landlord) Landlord and any successors to all or
any portion or Landlord's interest in the Premises, the Site and any other real
or personal property owned by Landlord from and against any and all liabilities,
losses, damages, diminution in value, judgments, fines, demands, claims,
recoveries, deficiencies, costs and expenses (including without limitation
attorneys' fees, court costs and other professional expenses), whether
foreseeable or unforeseeable, arising directly or indirectly out of the use,

                                       7
<PAGE>

generation, storage, treatment, release, on- or off-site disposal or
transportation of Hazardous Materials on, into, from, under or about the
Premises, the Site and any other real or personal property owned by Landlord
caused or permitted by Tenant its agents, employees, contractors, licensees or
invitees, specifically including without limitation the cost of any required or
necessary repair, restoration, cleanup or detoxification of the Premises, the
Site and any other real or personal property owned by Landlord, and the
preparation of any closure or other required plans, whether or not such actions
is required or necessary during the Term or after the expiration of this Lease.
If Landlord at any time discovers that Tenant or its agents, employees,
contractors, licensees or invitees may have caused or permitted the release of a
Hazardous Material on under, from or about the Premises, the Site or any other
real or personal property owned by Landlord, Tenant shall, at Landlord's
request, immediately prepare and submit to Landlord a comprehensive plan,
subject to Landlord's approval, specifying the actions to be taken by Tenant to
return the Premises, the Site or any other real or personal property owned by
Landlord to the condition existing prior to the introduction of such Hazardous
Materials. Upon Landlord's approval of such cleanup plan, Tenant shall, at its
expense, and without limitation of any rights and remedies of Landlord under
this Lease or at law or in equity, immediately implement such plan and proceed
to cleanup such Hazardous Materials in accordance with all applicable laws and
as required by such plan and this Lease. The provisions of this subsection (e)
shall expressly survive the expiration or sooner termination of this Lease.

          (f)  Landlord hereby discloses to Tenant, and Tenant hereby
acknowledges, certain facts relating to Hazardous Materials at the Premises
and/or the Site known by Landlord to exist is of the date of this Lease, as more
particularly described in Exhibit C attached hereto. Tenant shall have no
                          ---------
liability or responsibility with respect to the Hazardous Materials facts
described in Exhibit C, nor with respect to any Hazardous Materials which
             ---------
Tenant proves were not caused or permitted by Tenant, its agents, employees,
contractors, licensees or invitees. Notwithstanding the preceding two sentences,
Tenant agrees to notify its agents, employees, contractors, licensees, and
invitees of any exposure or potential exposure to Hazardous Materials at the
Premises and/or the Site that Landlord brings to Tenant's attention.

                             ARTICLE VI. SERVICES

     SECTION 6.1.  UTILITIES AND SERVICES.  Tenant 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 Tenant or the Premises or used by
Tenant in, on or about the Premises during the Term, together with any taxes
thereon. Landlord shall not be liable for damages or otherwise for any failure
or interruption of any utility or other service furnished to the Premises, and
no such failure or interruption shall be deemed an eviction or entitle Tenant to
terminate this Lease or withhold or abate any rent due hereunder, Landlord shall
at all reasonable times have free access to all electrical and mechanical
installations of Landlord.

     SECTION 6.2.  PARKING.  Tenant shall be entitled to unreserved and
unassigned vehicle parking spaces on those portions of the Site designated by
Landlord for parking. Tenant shall not use more parking spaces than such number.
Tenant shall not permit or allow any vehicles that belong to or are controlled
by Tenant or Tenant's employees, suppliers, shippers, customers or invitees to
be loaded, unloaded or parked in areas other than those designated by Landlord
for such activities. If Tenant permits or allows any of the prohibited
activities described above, then Landlord shall have the right, without notice,
in addition to such other rights and remedies that Landlord may have, to remove
or tow away the vehicle involved and charge the costs to Tenant. Parking shall
be limited to striped parking stalls, and no parking shall be permitted in any
driveways, access ways or in any similar area. Nothing contained in this Lease
shall he deemed to create liability upon Landlord for any damage to motor
vehicles of visitors or employees, for any loss of property from within those
motor vehicles, or for any injury to Tenant, its visitors or employees, unless
ultimately determined to be caused by the sole active negligence or willful
misconduct of Landlord, its agents, servants and employees. Landlord shall have
the right to establish, and from time to time amend, and to enforce against all
users all reasonable rules and regulations (including the designation of areas
for employee parking) that Landlord may deem necessary and advisable for the
proper and efficient operation and maintenance of parking. Landlord shall have
the right to construct, maintain and operate lighting facilities within the
parking areas; to change the area, level, location and arrangement of the
parking areas and improvements therein; and to do and perform such other acts in
and to the parking areas and improvements therein as, in the use of good
business judgment, Landlord shall determine to be advisable. Parking areas shall
be used only for parking vehicles. Washing, waxing, cleaning or servicing of
vehicles, or the storage of vehicles for 24-hour periods, is

                                       8
<PAGE>

prohibited unless otherwise authorized by Landlord. Tenant shall be liable for
any damage to the parking areas caused by Tenant or Tenant's employees,
suppliers, shippers, customers or invitees, including without limitation damage
from excess oil leakage. Tenant shall have no right to install any fixtures,
equipment or personal property in the parking areas.

                     ARTICLE VII. MAINTAINING THE PREMISES

     SECTION 7.1.  TENANT'S MAINTENANCE AND REPAIR.  Tenant at its sole expense
shall comply with all applicable laws and governmental regulations governing the
Premises and make all repairs necessary to keep the Premises in the condition as
existed on the Commencement Date (or on any later date that the improvements may
have been installed), excepting ordinary wear and tear, including without
limitation the electrical and mechanical systems, any air conditioning,
ventilating or healing equipment which serves the Premises, all walls, glass,
windows, doors, door closures, hardware, fixtures, electrical, plumbing, fire
extinguisher equipment and other equipment. Any damage or deterioration of the
Premises shall not be deemed ordinary wear and tear if the same could have been
prevented by good maintenance practices by Tenant. As part of its maintenance
obligations hereunder, Tenant shall, at Landlord's request, provide Landlord
with copies of all maintenance schedules, reports and notices prepared by, for
or on behalf of Tenant. Tenant shall obtain preventive maintenance contracts
from a licensed heating and air conditioning contractor to provide for regular
inspection and maintenance of the heating, ventilating and air conditioning
systems servicing the Premises, all subject to Landlord's approval. All repairs
shall be at least equal in quality to the original work, shall be made only by a
licensed contractor approved in writing in advance by Landlord and shall be made
only at the time or times approved by Landlord. Any contractor utilized by
Tenant shall be subject to Landlord's standard requirements for contractors, as
modified from time to time. Landlord shall have the right at all times to
inspect Tenant's maintenance of all equipment (including without limitation air
conditioning, ventilating and heating equipment), and may impose reasonable
restrictions and requirements with respect to repairs, as provided in Section
7.3, and the provisions of Section 7.4 shall apply to all repairs.
Alternatively, Landlord may elect to make any repair or maintenance required
hereunder on behalf of Tenant and at Tenant's expense, and Tenant shall promptly
reimburse Landlord for all costs incurred upon submission of an invoice.

     SECTION 7.2.  LANDLORD'S MAINTENANCE AND REPAIR.  Subject to Section 7.1
and Article XI, Landlord shall provide service, maintenance and repair with
respect to the roof, foundations, and footings of the Building, all landscaping,
walkways, parking areas, exterior lighting of the Site, and the exterior
surfaces of the exterior walls of the Building, except that Tenant at its
expense shall make all repairs which Landlord deems reasonably necessary as a
result of the act or negligence of Tenant, its agents, employees, invitees,
subtenants or contractors. Landlord shall have the right to employ or designate
any reputable person or firm, including any employee or agent of Landlord or any
of Landlord's affiliates or divisions, to perform any service, repair or
maintenance function. Landlord need not make any other improvements or repairs
except as specifically required under this Lease, and nothing contained in this
Section shall limit Landlord's right to reimbursement from Tenant for
maintenance, repair costs and replacement costs as provided elsewhere in this
Lease. Tenant understands that it shall not make repairs at Landlord's expense
or by rental offset. Tenant further understands that Landlord shall not be
required to make any repairs to the roof, foundations or footings unless and
until Tenant has notified Landlord in writing of the need for such repair and
Landlord shall have a reasonable period of time thereafter to commence and
complete said repair, if warranted. All costs of any maintenance and repairs on
the part of Landlord provided hereunder shall be considered part of Building
Costs; except that the costs of any repairs or replacements to the foundations,
footings, and structural components of the walls and roof of the Building shall
be Landlord's responsibility, at its sole cost and expense and shall not be
considered as part of the Building Costs, for the initial Term of the Lease.

     SECTION 7.3.  ALTERATIONS.  Tenant shall make no alterations, additions or
improvements to the Premises without the prior written consent of Landlord,
which consent shall not be unreasonably withheld, provided that in no event
shall such alterations, additions or improvements: (i) affect the exterior of
the Building or outside areas (or be visible from adjoining sites), or (ii)
affect or penetrate any of the structural portions of the Building, including
but not limited to the roof, or (iii) require any change to the basic floor plan
of the Premises, any change to any structural or mechanical systems of the
Premises, or any governmental permit as a prerequisite to the construction
thereof, or (iv) interfere in any manner with the proper functioning of or
Landlord's access to any mechanical, electrical, plumbing or HVAC systems,
facilities or equipment located in or serving the Building, or

                                       9
<PAGE>

(v) diminish the value of the Premises. Landlord may impose, as a condition to
its consent, any requirements that Landlord in its discretion may deem
reasonable or desirable, including but not limited to a requirement that all
work be covered by a lien and completion bond satisfactory to Landlord and
requirements as to the manner, time, and contractor for performance of the work.
Tenant shall obtain all required permits for the work and shall perform the work
in compliance with all applicable laws, regulations and ordinances, all
covenants, conditions and restrictions affecting the Premises, and the Rules and
Regulations (hereafter defined). Tenant understands and agrees that, to the
extent Landlord elects to supervise the work, Landlord shall be entitled to a
supervision fee in the amount of five percent (5%) of the cost of the work. If
any governmental entity requires, as a condition to any proposed alterations,
additions or improvements to the Premises by Tenant that improvements be made to
the outside areas, and if Landlord consents to such improvements to the outside
areas, then Tenant shall, at Tenant's sole expense, make such required
improvements to the outside areas in such manner, utilizing such materials, and
with such contractors (including, if required by Landlord, Landlord's
contractors) as Landlord may require in its sole discretion. Under to
circumstances shall Tenant make any improvement which incorporates any Hazardous
Materials, including without limitation asbestos-containing construction
materials into the Premises. Any request for Landlord's consent shall be made in
writing and shall contain architectural plans describing the work in detail
reasonably satisfactory to Landlord. Unless Landlord otherwise agrees in
writing, all alterations, additions or improvements affixed to the Premises
(excluding moveable trade fixtures and furniture) shall become the property of
Landlord and shall be surrendered with the Premises at the end of the Term,
except that Landlord may, by notice to Tenant given at the time of Landlord's
consent to the applicable alteration, require Tenant to remove by the Expiration
Date, or sooner termination date of this Lease, all or any alterations,
decorations, fixtures, additions, improvements and the like installed either by
Tenant or by Landlord at Tenant's request and to repair any damage to the
Premises arising from that removal. Except as otherwise provided in this Lease
or in any Exhibit to this Lease, should Landlord make any alteration or
improvement to the Premises for Tenant, Landlord shall be entitled to prompt
reimbursement from Tenant for all costs incurred.

     SECTION 7.4.  MECHANIC'S 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. Upon request by Landlord, Tenant shall promptly cause
any such lien to be released by posting a bond in accordance with California
Civil Code Section 3143 or any successor statute. In the event that Tenant shall
not, within thirty (30) days following the imposition of any lien, cause the
lien to be released of record by payment or posting of a proper bond, Landlord
shall have, in addition to all other available remedies, the right to cause the
lien to be released by any means it deems proper, including payment of or
defense against the claim giving rise to the lien. All expenses so incurred by
Landlord, including Landlord's attorneys' fees, and any consequential or other
damages incurred by Landlord arising out of such lien, shall be reimbursed by
Tenant promptly following Landlord's demand, together with interest from the
date of payment by Landlord at the maximum rate permitted by law until paid.
Tenant shall give Landlord no less than twenty (20) days' prior notice in
writing before commencing construction of any kind on the Premises so that
Landlord may post and maintain notices of nonresponsibility on the Premises.

     SECTION 7.5.  ENTRY AND INSPECTION.  Landlord shall at all reasonable
times, upon written or oral notice (except in emergencies, when no notice shall
be required) have the right to enter the Premises to inspect them, to supply
services in accordance with this Lease, to protect the interests of Landlord in
the Premises, and to submit the Premises to prospective or actual purchasers or
encumbrance holders (or, during the last one hundred and eighty (180) days of
the Term or when an uncured Tenant default exists, to prospective tenants), all
without being deemed to have caused an eviction of Tenant and without abatement
of rent except as provided elsewhere in this Lease. Landlord shall have the
right, if desired, to retain a key which unlocks all of the doors in the
Premises, excluding Tenant's vaults and safes, and Landlord shall have the right
to use any and all means which Landlord may deem proper to open the doors in an
emergency in order to obtain entry to the Premises, and any entry to the
Premises obtained by Landlord shall not under any circumstances be deemed to be
a forcible or unlawful entry into, or a detainer of, the Premises, or any
eviction of Tenant from the Premises.

           ARTICLE VIII. TAXES AND ASSESSMENTS ON TENANT'S PROPERTY

          Tenant shall be liable for and shall pay, at least ten (10) days
before delinquency, all taxes and assessments levied against all personal
property of Tenant located in the Premises, and against any alterations,
additions or like improvements made to the Premises by or on behalf of Tenant.
When possible Tenant shall cause its personal property and alterations to be
assessed and billed separately from the real property of which the

                                      10
<PAGE>

Premises form a part. If any taxes on Tenant's personal property and/or
alterations are levied against Landlord or Landlord's property and if Landlord
pays the same, or if the assessed value of Landlord's property is increased by
the inclusion of a value placed upon the personal property and/or alterations of
Tenant and if Landlord pays the taxes based upon the increased assessment,
Tenant shall pay to Landlord the taxes so levied against Landlord or the
proportion of the taxes resulting from the increase in the assessment. In
calculating what portion of any tax bill which is assessed against Landlord
separately, or Landlord and Tenant jointly, is attributable to Tenant's
alterations and personal property, Landlord's reasonable determination shall be
conclusive.

                     ARTICLE IX. ASSIGNMENT AND SUBLETTING

     SECTION 9.1.  RIGHTS OF PARTIES.

          (a)  Notwithstanding any provision of this Lease to the contrary,
Tenant will not, either voluntarily or by operation of law, assign, sublet,
encumber, or otherwise transfer all or any part of Tenant's interest in this
lease, or permit the Premises to be occupied by anyone other than Tenant,
without Landlord's prior written consent, which consent shall not unreasonably
be withheld in accordance with the provisions of Section 9.1(b). No assignment
(whether voluntary, involuntary or by operation of law) and no subletting shall
be valid or effective without Landlord's prior written consent and, at
Landlord's election, any such assignment or subletting or attempted assignment
or subletting shall constitute a material default of this Lease. Landlord shall
not be deemed to have given its consent to any assignment or subletting by any
other course of action, including its acceptance of any name for listing in the
Building directory. To the extent not prohibited by provisions of the Bankruptcy
Code, 11 U.S.C. Section 101 et seq. (the "Bankruptcy Code"), including Section
365(f)(1), Tenant on behalf of itself and its creditors, administrators and
assigns waives the applicability of Section 365(c) of the Bankruptcy Code unless
the proposed assignee of the Trustee for the estate of the bankrupt meets
Landlord's standard for consent as set forth in Section 9.1(b) of this Lease. If
this Lease is assigned to any person or entity pursuant to the provisions of the
Bankruptcy Code, any and all monies or other considerations to be delivered in
connection with the assignment shall be delivered to Landlord, shall be and
remain the exclusive property of Landlord and shall not constitute property of
Tenant or of the estate of Tenant within the meaning of the Bankruptcy Code. Any
person or entity to which this Lease is assigned pursuant to the provisions of
the Bankruptcy Code shall be deemed to have assumed all of the obligations
arising under this Lease on and after the date of the assignment, and shall upon
demand execute and deliver to Landlord an instrument confirming that assumption.

          (b)  If Tenant desires to transfer an interest in this Lease, it shall
first notify Landlord of its desire and shall submit in writing to Landlord: (i)
the name and address of the proposed transferee; (ii) the nature of any proposed
subtenant's or assignee's business to be carried on in the Premises; (iii) the
terms and provisions of any proposed sublease or assignment, including a copy of
the proposed assignment or sublease form; (iv) evidence of insurance of the
proposed assignee or subtenant complying with the requirements of Exhibit D
                                                                  ---------
hereto; (v) a completed Environmental Questionnaire from the proposed assignee
or subtenant; and (vi) any other information requested by Landlord and
reasonably related to the transfer. Except as provided in Subsection (e) of this
Section, Landlord shall not unreasonably withhold its consent, provided: (1) the
use of the Premises will be consistent with the provisions of this Lease; (2)
the proposed assignee or subtenant has not been required by any prior landlord,
lender or governmental authority to take remedial action in connection with
Hazardous Materials contaminating a property arising out of the proposed
assignee's or subtenants' actions or use of the property in question and is not
subject to any enforcement order issued by any governmental authority in
connection with the use, disposal or storage of a Hazardous Material; (3) at
Landlord's election, insurance requirements shall be brought into conformity
with Landlord's then current leasing practice; (4) any proposed subtenant or
assignee demonstrates that it is financially responsible by submission to
Landlord of all reasonable information as Landlord may request concerning the
proposed subtenant or assignee, including, but not limited to, a balance sheet
of the proposed subtenant or assignee as of a date within ninety (90) days of
the request for Landlord's consent and statements of income or profit and loss
of the proposed subtenant or assignee for the two-year period preceding the
request for Landlord's consent, and/or a certification signed by the proposed
subtenant or assignee that it has not been evicted or been in arrears in rent at
any other leased premises for the 3-year period preceding the request for
Landlord's consent; and (5) any proposed subtenant or assignee demonstrates to
Landlord's reasonable satisfaction a record of successful experience in
business. If Tenant has any exterior sign rights under this Lease, such rights
are personal to Tenant and may not be assigned or transferred to any assignee of
this Lease or subtenant of the Premises without Landlord's prior written
consent, which may be withheld in Landlord's reasonable discretion.

                                      11
<PAGE>

          If Landlord consents to the proposed transfer, Tenant may within
ninety (90) days after the date of the consent effect the transfer upon the
terms described in the information furnished to Landlord; provided that any
material change in the terms shall be subject to Landlord's consent as set forth
in this Section.  Landlord shall approve or disapprove any requested transfer
within fifteen (15) days following receipt of Tenant's written request, the
information set forth above, and the fee set forth below.

          (c)  Notwithstanding the provisions of Subsection (b) above, in lieu
of consenting to a proposed assignment or subletting, Landlord may elect to (i)
sublease the Premises (or the portion proposed to be subleased), or take an
assignment of Tenant's interest in this Lease, upon the same term as offered to
the proposed subtenant or assignee (excluding terms relating to the purchase of
personal property, the use of Tenant's name or the continuation of Tenant's
business), or (ii) terminate this Lease as to the portion of the Premises
proposed to be subleased or assigned with a proportionate abatement in the rent
payable under this Lease, effective on the dale that the proposed sublease or
assignment would have become effective. Landlord may thereafter, at its option,
assign or re-let any space so recaptured to any third party, including without
limitation the proposed transferee of Tenant.

          (d)  Tenant agrees that fifty percent (50%) of any amounts paid by the
assignee or subtenant, however described, in excess of (i) the Basic Rent
payable by Tenant hereunder, or in the case of a sublease of a portion of the
Premises, in excess of the Basic Rent reasonably allocable to such portion, plus
(ii) Tenant's direct out-of-pocket costs which Tenant certifies to Landlord have
been paid to provide occupancy related services to such assignee or subtenant of
a nature commonly provided by landlords of similar space, shall be the property
of Landlord and such mounts shall be payable directly to Landlord by the
assignee or subtenant or, at Landlord's option, by Tenant. At Landlord's
request, a written agreement shall be entered into by and among Tenant, Landlord
and the proposed assignee or subtenant confirming the requirements of this
subsection.

          (e)  Tenant shall pay to Landlord a fee of Five Hundred Dollars
($500.00) if and when any transfer hereunder is requested by Tenant. Such fee is
hereby acknowledged as a reasonable amount to reimburse Landlord for its costs
of review and evaluation of a proposed assignee/sublessee, and Landlord shall
not be obligated to commence such review and evaluation unless and until such
fee is paid.

     SECTION 9.2.  EFFECT OF TRANSFER.  No subletting or assignment, even with
the consent of Landlord, shall relieve Tenant of its obligation to pay rent and
to perform all its other obligations under this Lease. Moreover, Tenant shall
indemnify and hold Landlord harmless, as provided in Section 10.3, for any act
or omission by an assignee or subtenant. Each assignee, other than Landlord,
shall be deemed to assume all obligations of Tenant under this Lease and shall
be liable jointly and severally with Tenant for the payment of all rent, and for
the due performance of all of Tenant's obligations, under this Lease. No
transfer shall be binding on Landlord unless any document memorializing the
transfer is delivered to Landlord and both the assignee/sublessee and Tenant
deliver to Landlord an executed consent to transfer instrument prepared by
Landlord and consistent with the requirements of this Article. The acceptance by
Landlord of any payment due under this Lease from any other person shall not be
deemed to be a waiver by Landlord of any provision of this Lease or to be a
consent to any transfer. Consent by Landlord to one or more transfers shall not
operate as a waiver or estoppel to the future enforcement by Landlord of its
rights under this Lease.

     SECTION 9.3.  SUBLEASE REQUIREMENTS. The following terms and conditions
shall apply to any subletting by Tenant of all or any part of the Premises and
shall be deemed included in each sublease:

          (a)  Each and every provision contained in this Lease (other than with
respect to the payment of rent hereunder) is incorporated by reference into and
made a part of such sublease, with "Landlord" hereunder meaning the sublandlord
therein and "Tenant" hereunder meaning the subtenant therein.

          (b)  Tenant hereby irrevocably assigns to Landlord all of Tenant's
interest in all rentals and income arising from any sublease of the Premises,
and Landlord may collect such rent and income and apply same toward Tenant's
obligations under this Lease; provided, however, that until a default occurs in
the performance of Tenant's obligations under this Lease, Tenant shall have the
right to receive and collect the sublease rentals. Landlord shall not, by reason
of this assignment or the collection of sublease rentals, be deemed liable to
the subtenant for the performance of any of Tenant's obligations under the
sublease. Tenant hereby irrevocably authorizes and directs any subtenant, upon
receipt of a written notice from Landlord staling that an uncured default

                                      12
<PAGE>

exists in the performance of Tenant's obligations under this Lease, to pay to
Landlord all sums then and thereafter due under the sublease. Tenant agrees that
the subtenant may rely on that notice without any duty of further inquiry and
notwithstanding any notice or claim by Tenant to the contrary. Tenant shall have
no right or claim against the subtenant or Landlord for any rentals so paid to
Landlord.

          (c)  In the event of the termination of this Lease, Landlord may, at
its sole option, take over Tenant's entire interest in any sublease and, upon
notice from Landlord, the subtenant shall attorn to Landlord. In no event,
however, shall Landlord be liable for any previous act or omission by Tenant
under the sublease or for the return of any advance rental payments or deposits
under the sublease that have not been actually delivered to Landlord, nor shall
Landlord be bound by any sublease modification executed without Landlord's
consent or for any advance rental payment by the subtenant in excess of one
month's rent. The general provisions of this Lease, including without limitation
those pertaining to insurance and indemnification, shall be deemed incorporated
by reference into the sublease despite the termination of this Lease.

     SECTION 9.4.  CERTAIN TRANSFERS.  The sale of all or substantially all of
Tenant's assets (other than bulk sales in the ordinary course of business) or,
if Tenant is a corporation, an unincorporated association, or a partnership, the
transfer assignment or hypothecation of any stock or interest in such
corporation, association, or partnership in the aggregate of twenty-five percent
(25%) (except for publicly traded shares of stock constituting a transfer of
twenty-five percent (25%) or more in the aggregate, so long as no change in the
controlling interest of Tenant occurs as a result thereof) shall be deemed an
assignment within the meaning and provisions of this Article. Notwithstanding
the foregoing, Landlord's consent shall not be required for the assignment of
this Lease as a result of a merger by Tenant with or into another entity, so
long as (i) the net worth of the successor entity after such merger is at least
equal to the greater of the net worth of Tenant as of the execution of this
Lease by Landlord or the net worth of Tenant immediately prior to the date of
such merger, evidence of which, satisfactory to Landlord, shall be presented to
Landlord prior to such merger, (ii) Tenant shall provide to Landlord, prior to
such merger, written notice of such merger and such assignment documentation and
other information as Landlord may request in connection herewith, and (iii) all
of the other terms and requirements of this Article shall apply with respect to
such assignment.

                      ARTICLE X. INSURANCE AND INDEMNITY

     SECTION 10.1. TENANT'S INSURANCE.  Tenant, at its sole cost and expense,
shall provide and maintain in effect the insurance described in Exhibit D.
                                                                ---------
Evidence of that insurance must be delivered to Landlord prior to the
Commencement Date.

     SECTION 10.2. LANDLORD'S INSURANCE.  Landlord may, at its election, provide
any or all of the following types of insurance, with or without deductible and
in amounts and coverages as may be determined by Landlord in its discretion:
"all risk" property insurance, subject to standard exclusions, covering the
Building, and such other risks as Landlord or its mortgagees may from time to
lime deem appropriate, including leasehold improvements made by Landlord, and
commercial general liability coverage. Landlord shall not be required to carry
insurance of any kind on Tenant's property, including leasehold improvements,
trade fixtures, furnishings, equipment, plate glass, signs and all other items
of personal property, and shall not be obligated to repair or replace that
property should damage occur. All proceeds of insurance maintained by Landlord
upon the Building shall be the property of Landlord, whether or not Landlord is
obligated to or elects to make any repairs. At Landlord's option, Landlord may
self-insure all or any portion of the risks for which Landlord elects to provide
insurance hereunder.

     SECTION 10.3. TENANT'S INDEMNITY.  To the fullest extent permitted by law,
Tenant shall defend, indemnify, protect, save and hold harmless Landlord, its
agents, and any and all affiliates of Landlord, including, without limitation,
any corporations or other entities controlling, controlled by or under common
control with Landlord, from and against any and all claims, liabilities, costs
or expenses arising either before or after the Commencement Date from Tenant's
use or occupancy of the Premises or the Building, or from the conduct of its
business, or from any activity, work, or thing done, permitted or suffered by
Tenant or its agents, employees, invitees or licensees in or about the Premises
or the Building, or from any default in the performance of any obligation on
Tenant's part to be performed under this Lease, or from any act or negligence of
Tenant or its agents, employees, visitors, patrons, guests, invitees or
licensees. Landlord may, at its option, require Tenant to assume

                                      13
<PAGE>

Landlord's defense in any action covered by this Section through counsel
satisfactory to Landlord. The provisions of this Section shall expressly survive
the expiration or sooner termination of this Lease.

     SECTION 10.4.  LANDLORD'S NONLIABILITY.  Landlord shall not be liable to
Tenant, its employees, agents and invitees, and Tenant hereby waives all claims
against Landlord for loss of or damage to any property, or any injury to any
person, or loss or interruption of business or income, or any other loss, cost,
damage, injury or liability whatsoever (including without limitation any
consequential damages and lost profit or opportunity costs) resulting from, but
not limited to, Acts of God, acts of civil disobedience or insurrection, fire,
explosion, falling plaster, steam, gas, electricity, water or rain which may
leak or flow from or into any part of the Building or from the breakage,
leakage, obstruction or other defects of the pipes, sprinklers, wires,
appliances, plumbing, air conditioning, electrical works or other fixtures in
the Building. It is understood that any such condition may require the temporary
evacuation or closure of all or a portion of the Building. Except as provided in
Sections 11.1 and 12.1 below, there shall be no abatement of rent and no
liability of Landlord by reason of any injury to or interference with Tenant's
business (including without limitation consequential damages and lost profit or
opportunity costs) arising from the making of any repairs, alterations or
improvements to any portion of the Building, including repairs to the Premises,
nor shall any related activity by Landlord constitute an actual or constructive
eviction; provided, however, that in making repairs, alterations or
improvements, Landlord shall interfere as little as reasonably practicable with
the conduct of Tenant's business in the Premises. Neither Landlord nor its
agents shall be liable for interference with light or other similar intangible
interests. Tenant shall immediately notify Landlord in case of fire or accident
in the Premises or the Building and of defects in any improvements or equipment.

     SECTION 10.5.  WAIVER OF SUBROGATION.  Landlord and Tenant each hereby
waives all rights of recovery against the other and the other's agents on
account of loss and damage occasioned to the property of such waiving party to
the extent only that such loss or damage is required to be insured against under
any "all risk" property insurance policies required by this Article X; provided
however, that (i) the foregoing waiver shall not apply to the extent of Tenant's
obligations to pay deductibles under any such policies and this Lease, and (ii)
if any loss is due to the act, omission or negligence or willful misconduct of
Tenant or its agents, employees, contractors, guests or invitees, Tenant's
liability insurance shall be primary and shall cover all losses and damages
prior to any other insurance hereunder. By this waiver it is the intent of the
parties that neither Landlord nor Tenant shall be liable to any insurance
company (by way of subrogation or otherwise) insuring the other party for any
loss or damage insured against under any "all-risk" property insurance policies
required by this Article, even though such loss or damage might be occasioned by
the negligence of such party, its agents, employees, contractors, guests or
invitees. The provisions of this Section shall not limit the indemnification
provisions elsewhere contained in this Lease.

                       ARTICLE XI. DAMAGE OR DESTRUCTION

     SECTION 11.1.  RESTORATION.

          (a)  If the Building is damaged, Landlord shall repair that damage as
soon as reasonably possible, at its expense, unless: (i) Landlord reasonably
determines that the cost of repair is not covered by Landlord's fire and
extended coverage insurance plus such additional amounts Tenant elects, at its
option, to contribute, excluding however the deductible (for which Tenant shall
be responsible for Tenant's proportionate share); (ii) Landlord reasonably
determines that the Premises cannot, with reasonable diligence, be fully
repaired by Landlord (or cannot be safely repaired because of the presence of
hazardous factors, including without limitation Hazardous Materials, earthquake
faults, and other similar dangers) within two hundred seventy (270) days after
the date of the damage; (iii) an event of default by Tenant has occurred and is
continuing at the time of such damage; or (iv) the damage occurs during the
final twelve (12) months of the Term. Should Landlord elect not to repair the
damage for one of the preceding reasons, Landlord shall so notify Tenant in
writing within sixty (60) days after the damage occurs and this Lease shall
terminate as of the date of that notice.

          (b)  Unless Landlord elects to terminate this Lease in accordance with
subsection (a) above, this Lease shall continue in effect for the remainder of
the Term; provided that so long as Tenant is not in default under this Lease, if
the damage is so extensive that Landlord reasonably determines that the Premises
cannot, with reasonable diligence, be repaired by Landlord (or cannot be safely
repaired because of the presence of hazardous factors, earthquake faults, and
other similar dangers) so as to allow Tenant's substantial use and enjoyment of
the

                                      14
<PAGE>

Premises within two hundred seventy (270) days after the date of damage, then
Tenant may elect to terminate this Lease by written notice to Landlord within
the sixty (60) day period stated in subsection (a).

          (c)  Commencing on the date of any damage to the Building, and ending
on the sooner of the date the damage is repaired or the date this Lease is
terminated, the rental to be paid under this Lease shall be abated in the same
proportion that the floor area of the Building that is rendered unusable by the
damage from time to time bears to the total floor area of the Building, but only
to the extent that any business interruption insurance proceeds are received by
Landlord therefor from Tenant's insurance described in Exhibit D.
                                                       ---------

          (d)  Notwithstanding the provisions of subsections (a), (b) and (c) of
this Section, and subject to the provisions of Section 10.5 above and to the
extent not covered by applicable insurance coverage, the cost of any repairs
shall be borne by Tenant, and Tenant shall not be entitled to rental abatement
or termination rights, if the damage is due to the fault or neglect of Tenant or
its employees, subtenants, invitees or representatives. In addition, the
provisions of this Section shall not be deemed to require Landlord to repair any
improvements or fixtures that Tenant is obligated to repair or insure pursuant
to any other provision of this Lease.

          (e)  Tenant shall fully cooperate with Landlord in removing Tenant's
personal property and any debris from the Premises to facilitate all inspections
of the Premises and the making of any repairs. Notwithstanding anything to the
contrary contained in this Lease, if Landlord in good faith believes there is a
risk of injury to persons or damage to property from entry into the Building or
Premises following any damage or destruction thereto, Landlord may restrict
entry into the Building or the Premises by Tenant, its employees, agents and
contractors in a non-discriminatory manner, without being deemed to have
violated Tenant's rights of quiet enjoyment to, or made an unlawful detainer of,
or evicted Tenant from, the Premises. Upon request, Landlord shall consult with
Tenant to determine if there are safe methods of entry into the Building or the
Premises solely in order to allow Tenant to retrieve files, data in computers,
and necessary inventory, subject however to all indemnities and waivers of
liability from Tenant to Landlord contained in this Lease and any additional
indemnities and waivers of liability which Landlord may require.

     SECTION 11.2.  LEASE GOVERNS.  Tenant agrees that the provisions of this
Lease, including without limitation Section 11.1, shall govern any damage or
destruction and shall accordingly supersede any contrary statute or rule of law.

                          ARTICLE XII. EMINENT DOMAIN

     SECTION 12.1.  TOTAL OR PARTIAL TAKING.  If all or a material portion of
the Premises is taken by any lawful authority by exercise of the right of
eminent domain, or sold to prevent a taking, either Tenant or Landlord may
terminate this Lease effective as of the date possession is required to be
surrendered to the authority. In the event title to a portion of the Premises is
taken or sold in lieu of taking, and if Landlord elects to restore the Premises
in such a way as to alter the Premises materially, either party may terminate
this Lease, by written notice to the other party, effective on the date of
vesting of title. In the event neither patty has elected to terminate this Lease
as provided above, then Landlord shall promptly, after receipt of a sufficient
condemnation award, proceed to restore the Premises to substantially their
condition prior to the taking, and a proportionate allowance shall be made to
Tenant for the rent corresponding to the time during which, and to the part of
the Premises of which, Tenant is deprived on account of the taking and
restoration. In the event of a taking, Landlord shall be entitled to the entire
amount of the condemnation award without deduction for any estate or interest of
Tenant; provided that nothing in this Section shall be deemed to give Landlord
any interest in, or prevent Tenant from seeking any award against the taking
authority for, the taking of personal property and fixtures belonging to Tenant
or for relocation or business interruption expenses recoverable from the taking
authority.

     SECTION 12.2.  TEMPORARY TAKING.  No temporary taking of the Premises shall
terminate this Lease or give Tenant any right to abatement of rent, and any
award specifically attributable to a temporary taking of the Premises shall
belong entirely to Tenant. A temporary taking shall be deemed to be a taking of
the use or occupancy of the Premises for a period of not to exceed one hundred
eighty (180) days.

     SECTION 12.3.  TAKING OF PARKING AREA.  In the event there shall be a
taking of the parking area such that Landlord can no longer provide sufficient
parking to comply with this Lease, Landlord may substitute

                                      15
<PAGE>

reasonably equivalent parking in a location reasonably close to the Building;
provided that if Landlord fails to make that substitution within one hundred
eighty (180) days following the taking and if the taking materially impairs
Tenant's use and enjoyment of the Premises, Tenant may, at its option, terminate
this Lease by written notice to Landlord. If this Lease is not so terminated by
Tenant, there shall be no abatement of rent and this Lease shall continue in
effect.

         ARTICLE XIII. SUBORDINATION; ESTOPPEL CERTIFICATE; FINANCIALS

     SECTION 13.1.  SUBORDINATION.  At the option of Landlord, this Lease shall
be either superior or subordinate to all ground or underlying leases, mortgages
and deeds of trust, if any, which may hereafter affect the Premises, and to all
renewals, modifications, consolidations, replacements and extensions thereof;
provided, that so long as Tenant is not in default under this Lease, this Lease
shall not be terminated or Tenant's quiet enjoyment of the Premises disturbed in
the event of termination of any such ground or underlying lease, or the
foreclosure of any such mortgage or deed of trust, to which Tenant has
subordinated this Lease pursuant to this Section. In the event of a termination
or foreclosure, Tenant shall become a tenant of and attorn to the successor-in-
interest to Landlord upon the same terms and conditions as are contained in this
Lease, and shall execute any instrument reasonably required by Landlord's
successor for that purpose. Tenant shall also, upon written request of Landlord,
execute and deliver all instruments as may be required from time to time to
subordinate the rights of Tenant under this Lease to any ground or underlying
lease or to the lien of any mortgage or deed of trust (provided that such
instruments include the nondisturbance and attornment provisions set forth
above), or, if requested by Landlord, to subordinate, in whole or in part, any
ground or underlying lease or the lien of any mortgage or deed of trust to this
Lease.

     SECTION 13.2.  ESTOPPEL CERTIFICATE.

          (a)  Tenant shall, at any time upon not less than ten (10) days prior
written notice from Landlord, execute, acknowledge and deliver to Landlord, in
any form that Landlord may reasonably require, a statement in writing (i)
certifying that this Lease is unmodified and in full force and effect (or, if
modified, stating the nature of the modification and certifying that this Lease,
as modified, is in full force and effect) and the dates to which the rental,
additional rent and other charges have been paid in advance, if any, and (ii)
acknowledging that, to Tenant's knowledge, there are no uncured defaults on the
part of Landlord, or specifying each default if any are claimed, and (iii)
setting forth all further information that Landlord may reasonably require.
Tenant's statement may be relied upon by any prospective purchaser or
encumbrancer of the Premises.

          (b)  Notwithstanding any other rights and remedies of Landlord,
Tenant's failure to deliver any estoppel statement within the provided time
shall be conclusive upon Tenant that (i) this Lease is in full force and effect,
without modification except as may be represented by Landlord, (ii) there are no
uncured defaults in Landlord's performance, and (iii) not more than one month's
rental has been paid in advance.

     SECTION 13.3.  FINANCIALS.

          (a)  Tenant shall deliver to Landlord, prior to the execution of this
Lease and thereafter at any time upon Landlord's request, Tenant's current tax
returns and financial statements, certified true, accurate and complete by the
chief financial officer of Tenant, including a balance sheet and profit and loss
statement for the most recent prior year (collectively, the "Statements"), which
Statements shall accurately and completely reflect the financial condition of
Tenant. Landlord agrees that it will keep the Statements confidential, except
that Landlord shall have the right to deliver the same to any proposed purchaser
or encumbrancer of the Premises.

          (b)  Tenant acknowledges that Landlord is relying on the Statements in
its determination to enter into this Lease, and Tenant represents to Landlord,
which representation shall be deemed made on the date of this Lease and again on
the Commencement Date, that no material change in the financial condition of
Tenant, as reflected in the Statements, has occurred since the date Tenant
delivered the Statements to Landlord. The Statements are represented and
warranted by Tenant to be correct and to accurately and fully reflect Tenant's
true financial condition as of the date of submission by any Statements to
Landlord.

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                      ARTICLE XIV. DEFAULTS AND REMEDIES

     SECTION 14.1.  TENANT'S DEFAULTS. In addition to any other event of default
set forth in this Lease, the occurrence of any one or more of the following
events shall constitute a default by Tenant:

          (a)  The failure by Tenant to make any payment of rent or additional
rent required to be made by Tenant, as and when due, where the failure continues
for a period of three (3) days after written notice from Landlord to Tenant;
provided, however, that any such notice shall be in lieu of, and not in addition
to, any notice required under California Code of Civil Procedure Section 1161
and 1161(a) as amended. For purposes of these default and remedies provisions,
the term "additional rent" shall be deemed to include all amounts of any type
whatsoever other than Basic Rent to be paid by Tenant pursuant to the terms of
this Lease.

          (b)  Assignment, sublease, encumbrance or other transfer of the Lease
by Tenant, either voluntarily or by operation of law, whether by judgment,
execution, transfer by intestacy or testacy, or other means, without the prior
written consent of Landlord.

          (c)  The discovery by Landlord that any financial statement provided
by Tenant, or by any affiliate, successor or guarantor of Tenant, was materially
false.

          (d)  The failure of Tenant to timely and fully provide any
subordination agreement, estoppel certificate or financial statements in
accordance with the requirements of Article XIII.

          (e)  The failure or inability by Tenant to observe or perform any of
the express or implied covenants or provisions of this Lease to be observed or
performed by Tenant, other than as specified in any other subsection of this
Section, where the failure continues for a period of thirty (30) days after
written notice from Landlord to Tenant or such shorter period as is specified in
any other provision of this Lease; provided, however, that any such notice shall
be in lieu of, and not in addition to, any notice required under California Code
of Civil Procedure Section 1161 and 1161(a) as amended. However, if the nature
of the failure is such that more than thirty (30) days are reasonably required
for its cure, then Tenant shall not be deemed to be in default if Tenant
commences the cure within thirty (30) days, and thereafter diligently pursues
the cure to completion.

          (f)  (i) The making by Tenant of any general assignment for the
benefit of creditors; (ii) the filing by or against Tenant of a petition to have
Tenant adjudged a Chapter 7 debtor under the Bankruptcy Code or to have debts
discharged or a petition for reorganization or arrangement under any law
relating to bankruptcy (unless, in the case of a petition filed against Tenant,
the same is dismissed within thirty (30) days; (iii) the appointment of a
trustee or receiver to take possession of substantially all of Tenant's assets
located at the Premises or of Tenant's interest in this Lease, if possession is
not restored to Tenant within thirty (30) days; (iv) the attachment, execution
or other judicial seizure of substantially all of Tenant's assets located at the
Premises or of Tenant's interest in this Lease, where the seizure is not
discharged within thirty (30) days; or (v) Tenant's convening of a meeting of
its creditors for the purpose of effecting a moratorium upon or composition of
its debts. Landlord shall not be deemed to have knowledge of any event described
in this subsection unless notification in writing is received by Landlord, nor
shall there be any presumption attributable to Landlord of Tenant's insolvency.
In the event that any provision of this subsection is contrary to applicable
law, the provision shall be of no force or effect.

     SECTION 14.2.  LANDLORD'S REMEDIES.

          (a)  In the event of any default by Tenant, or in the event of the
abandonment of the Premises by Tenant, then in addition to any other remedies
available to Landlord, Landlord may exercise the following remedies:

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<PAGE>

               (i)  Landlord may terminate Tenant's right to possession of the
Premises by any lawful means, in which case this Lease shall terminate and
Tenant shall immediately surrender possession of the Premises to Landlord. Such
termination shall not affect any accrued obligations of Tenant under this Lease.
Upon termination, Landlord shall have the right to reenter the Premises and
remove all persons and property. Landlord shall also be entitled to recover from
Tenant:

                    (1)  The worth at the time of the award of the unpaid rent
and additional rent which had been earned at the time of termination;

                    (2)  The worth at the time of award of the amount by which
the unpaid rent and additional rent which would have been earned after
termination until the time of award exceeds the amount of such loss that Tenant
proves could have been reasonably avoided;

                    (3)  The worth at the time of award of the amount by which
the unpaid rent and additional rent for the balance of the Term after the time
of award exceeds the amount of such loss that Tenant proves could be reasonably
avoided;

                    (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 of things would be
likely to result from Tenant's default, including, but not limited to, the cost
of recovering possession of the Premises, refurbishment of the Premises,
marketing costs, commissions and other expenses of reletting, including
necessary repair, the unamortized portion of any tenant improvements and
brokerage commissions funded by Landlord in connection with this Lease,
reasonable attorneys' fees, and any other reasonable costs; and

                    (5)  At Landlord's election, all other amounts in addition
to or in lieu of the foregoing as may be permitted by law. The term "rent" as
used in this Lease shall be deemed to mean the Basic Rent and all other sums
required to be paid by Tenant to Landlord pursuant to the terms of this Lease.
Any sum, other than Basic Rent, shall be computed on the basis of the average
monthly amount accruing during the twenty-four (24) month period immediately
prior to default, except that if it becomes necessary to compute such rental
before the twenty-four (24) month period has occurred, then the computation
shall be on the basis of the average monthly amount during the shorter period.
As used in subparagraphs (1) and (2) above, the "worth at the time of award"
shall be computed by allowing interest at the rate of ten percent (10%) per
annum. As used in subparagraph (3) above, the "worth at the time of award" shall
be computed by discounting the amount at the discount rate of the Federal
Reserve Bank of San Francisco at the time of award plus one percent (1%).

               (ii) Landlord may elect not to terminate Tenant's right to
possession of the Premises, in which event Landlord may continue to enforce all
of its rights and remedies under this Lease, including the right to collect all
rent as it becomes due. Efforts by the Landlord to maintain, preserve or relet
the Premises, or the appointment of a receiver to protect the Landlord's
interests under this Lease, shall not constitute a termination f the Tenant's
right to possession of the Premises. In the event that Landlord elects to avail
itself of the remedy provided by this subsection (ii), Landlord shall not
unreasonably withhold its consent to an assignment or subletting of the Premises
subject to the reasonable standards for Landlord's consent as are contained in
this Lease.

          (b)  Landlord shall be under no obligation to observe or perform any
covenant of this Lease on its part to be observed or performed which accrues
after the date of any default by Tenant unless and until the default is cured by
Tenant, it being understood and agreed that the performance by Landlord of its
obligations under this Lease are expressly conditioned upon Tenant's full and
timely performance of its obligations under this Lease. The various rights and
remedies reserved to Landlord in this Lease or otherwise shall be cumulative
and, except as otherwise provided by California law, Landlord may pursue any or
all of its rights and remedies at the same time.

          (c)  No delay or omission of Landlord to exercise any right or remedy
shall be construed as a waiver of the right or remedy or of any default by
Tenant. The acceptance by Landlord of rent shall not be a (i) waiver of any
preceding breach or default by Tenant of any provision of this Lease, other than
the failure of Tenant to pay the particular rent accepted, regardless of
Landlord's knowledge of the preceding breach or default at the time of
acceptance of rent, or (ii) a waiver of Landlord's right to exercise any remedy
available to Landlord by

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<PAGE>

virtue of the breach or default. The acceptance of any payment from a debtor in
possession, a trustee, a receiver or any other person acting on behalf of Tenant
or Tenant's estate shall not waive or cure a default under Section 14.1. No
payment by Tenant or receipt by Landlord of a lessor amount than the rent
required by this Lease shall be deemed to be other than a partial payment on
account of the earliest due stipulated rent, nor shall any endorsement or
statement on any check or letter be deemed an accord and satisfaction and
Landlord shall accept the check or payment without prejudice to Landlord's right
to recover the balance of the rent or pursue any other remedy available to it.
No act or thing done by Landlord or Landlord's agents during the Term shall be
deemed an acceptance of a surrender of the Premises, and no agreement to accept
a surrender shall be valid unless in writing and signed by Landlord. No employee
of Landlord or of Landlord's agents shall have any power to accept the keys to
the Premises prior to the termination of this Lease, and the delivery of the
keys to any employee shall not operate as a termination of the Lease or a
surrender of the Premises.

     SECTION 14.3.  LATE PAYMENTS

          (a)  Any rent due under this Lease that is not received by Landlord
within five (5) business days of the date when due shall bear interest at the
maximum rate permitted by law from the date due until fully paid. The payment of
interest shall not cure any default by Tenant under this Lease. In addition,
Tenant acknowledges that the late payment by Tenant to Landlord of rent will
cause Landlord to incur costs not contemplated by this Lease, the exact amount
of which will be extremely difficult and impracticable to ascertain. Those costs
may include, but are not limited to administrative, processing and accounting
charges, and late charges which may be imposed on Landlord by the terms of any
ground lease, mortgage or trust deed covering the Premises. Accordingly, if any
rent due from Tenant shall not be received by Landlord or Landlord's designee
within five (5) business days after the date due, then Tenant shall pay to
Landlord, in addition to the interest provided above, a late charge in a sum
equal to the greater of five percent (5%) of the amount overdue or Two Hundred
Fifty Dollars ($250.00) for each delinquent payment. Acceptance of a late charge
by Landlord shall not constitute a waiver of Tenant's default with respect to
the overdue amount, nor shall it prevent Landlord from exercising any of its
other rights and remedies.

          (b)  Following each second consecutive installment of rent that is not
paid within five (5) business days following notice of nonpayment from Landlord,
Landlord shall have the option (i) to require that beginning with the first
payment of rent next due, rent shall no longer be paid in monthly installments
but shall be payable in quarterly three (3) months in advance and/or (ii) to
require that Tenant increase the amount, if any, of the Security Deposit by one
hundred percent (100%). Should Tenant deliver to Landlord, at any time during
the Term, two (2) or more insufficient checks, the Landlord may require that all
monies then and thereafter due from Tenant be paid to Landlord by cashier's
check.

     SECTION 14.4.  RIGHT OF LANDLORD TO PERFORM.  All covenants and agreements
to be performed by Tenant under this Lease shall be performed at Tenant's sole
cost and expense and without any abatement of rent or right of set-off. If
Tenant fails to pay any sum of money, other than rent, or fails to perform any
other act on its part to be performed under this Lease, and the failure
continues beyond any applicable grace period set forth in Section 14.1, then in
addition to any other available remedies, Landlord may, at its election make the
payment or perform the other act on Tenant's part. Landlord's election to make
the payment or perform the act on Tenant's part shall not give rise to any
responsibility of Landlord to continue making the same or similar payments or
performing the same or similar acts. Tenant shall, promptly upon demand by
Landlord, reimburse Landlord for all sums paid by Landlord and all necessary
incidental costs, together with interest at the maximum rate permitted by law
from the date of the payment by Landlord. Landlord shall have the same rights
and remedies if Tenant fails to pay those amounts as Landlord would have in the
event of a default by Tenant in the payment of rent.

     SECTION 14.5.  DEFAULT BY LANDLORD.  Landlord shall not be deemed to be in
default in the performance of any obligation under this Lease unless and until
it has failed to perform the obligation within thirty (30) days after written
notice by Tenant to Landlord specifying in reasonable detail the nature and
extent of the failure; provided, however, that if the nature of Landlord's
obligation is such that more than thirty (30) days are required for its
performance, then Landlord shall not be deemed to be in default if it commences
performance within the thirty (30) day period and thereafter diligently pursues
the cure to completion.

                                      19
<PAGE>

     SECTION 14.6.  EXPENSES AND LEGAL FEES.  All sums reasonably incurred by
Landlord in connection with any event of default by Tenant under this Lease or
holding over of possession by Tenant after the expiration or earlier termination
of this Lease including without limitation all costs, expenses and actual
accountants, appraisers, attorneys and other professional fees, and any
collection agency or other collection charges, shall be due and payable by
Tenant to Landlord on demand, and shall bear interest at the rate of ten percent
(10%) per annum. Should either Landlord or Tenant bring any action in connection
with this Lease, the prevailing party shall be entitled to recover as a part of
the action its reasonable attorneys' fees, and all other costs. The prevailing
party for the purpose of this paragraph shall be determined by the trier of the
facts.

     SECTION 14.7.  WAIVER OF JURY TRIAL.  LANDLORD AND TENANT EACH ACKNOWLEDGES
THAT IT IS AWARE OF AND HAS HAD THE ADVICE OF COUNSEL OF ITS CHOICE WITH RESPECT
TO ITS RIGHTS TO TRIAL BY JURY, AND EACH PARTY DOES HEREBY EXPRESSLY AND
KNOWINGLY WAIVE AND RELEASE ALL SUCH RIGHTS TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER PARTY HERETO AGAINST THE OTHER
(AND/OR AGAINST ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, OR SUBSIDIARY OR
AFFILIATED ENTITIES) ON ANY MATTERS WHATSOEVER ARISING OUT OF OR IN ANY WAY
CONNECTED WITH THIS LEASE, TENANT'S USE OR OCCUPANCY OF THE PREMISES, AND/OR ANY
CLAIM OF INJURY OR DAMAGE.

     SECTION 14.8.  SATISFACTION OF JUDGMENT.  The obligations of Landlord do
not constitute the personal obligations of the individual partners, trustees,
directors, officers or shareholders of Landlord or its constituent partners.
Should Tenant recover a money judgment against Landlord, such judgment shall be
satisfied only out of the proceeds of sale received upon execution of such
judgment and levied thereon against the right, title and interest of Landlord in
the Building and out of the rent or other income from such property receivable
by Landlord or out of consideration received by Landlord from the sale or other
disposition of all or any part of Landlord's right, title or interest in the
Building, and no action for any deficiency may be sought or obtained by Tenant.

     SECTION 14.9.  LIMITATION OF ACTIONS AGAINST LANDLORD.  Any claim, demand
or right of any kind by Tenant which is based upon or arises in connection with
this Lease shall be barred unless Tenant commences in action thereon within six
(6) months after the date that the act, omission, event or default upon which
the claim, demand or right arises, has occurred.

                            ARTICLE XV. END OF TERM

     SECTION 15.1.  HOLDING OVER.  This Lease shall terminate without further
notice upon the expiration of the Term, and any holding over by Tenant after the
expiration shall not constitute a renewal or extension of this Lease, or give
Tenant any rights under this Lease, except when in writing signed by both
parties. If Tenant holds over for any period after the expiration (or earlier
termination) of the Term without the prior written consent of Landlord, such
possession shall constitute a tenancy at sufferance only; such holding over with
the prior written consent of Landlord shall constitute a month-to-month tenancy
commencing on the first (1st) day following the termination of this Lease. In
either of such events, possession shall be subject to all of the terms of this
Lease, except that the monthly Basic Rent shall be the greater of (a) one
hundred seventy-five percent (175%) of the Basic Rent for the month immediately
preceding the date of termination or (b) the then currently scheduled Basic Rent
for comparable space in the Building. If Tenant fails to surrender the Premises
upon the expiration of this Lease despite demand to do so by Landlord, Tenant
shall indemnify and hold Landlord harmless from all loss or liability, including
without limitation, any claims made by any succeeding tenant relating to such
failure to surrender. Acceptance by Landlord of rent after the termination shall
not constitute a consent to a holdover or result in a renewal of this Lease. The
foregoing provisions of this Section are in addition to and do not affect
Landlord's right of re-entry or any other rights of Landlord under this Lease or
at law.

     SECTION 15.2.  MERGER ON TERMINATION.  The voluntary or other surrender of
this Lease by Tenant, or a mutual termination of this Lease, shall terminate any
or all existing subleases unless Landlord, at its option, elects in writing to
treat the surrender or termination as an assignment to it of any or all
subleases affecting the Premises.

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<PAGE>

     SECTION 15.3.  SURRENDER OF PREMISES; REMOVAL OF PROPERTY.  Upon the
Expiration Date or upon any earlier termination of this Lease, Tenant shall quit
and surrender possession of the Premises to Landlord in as good order, condition
and repair as when received or as hereafter may be improved by Landlord or
Tenant, reasonable wear and tear and repairs which are Landlord's obligation
excepted, and shall, without expense to Landlord, remove or cause to be removed
from the Premises all personal property and debris, except for any items that
Landlord may by written authorization allow to remain. Tenant shall repair all
damage to the Premises resulting from the removal, which repair shall include
the patching and filling of holes and repair of structural damage, provided that
Landlord may instead elect to repair any structural damage at Tenant's expense.
If Tenant shall fail to comply with the provisions of this Section, Landlord may
effect the removal and/or make any repairs, and the cost to Landlord shall be
additional rent payable by Tenant upon demand. If Tenant fails to remove
Tenant's personal property from the Premises upon the expiration of the Term,
Landlord may remove, store, dispose of and/or retain such personal property, at
Landlord's option, in accordance with the then applicable laws, all at the
expense of Tenant. If requested by Landlord, Tenant shall execute, acknowledge
and deliver to Landlord an instrument in writing releasing and quit claiming to
Landlord all right, title and interest of Tenant in the Premises.

                       ARTICLE XVI. PAYMENTS AND NOTICES

          All sums payable by Tenant to Landlord shall be paid, without
deduction or offset, in lawful money of the United States to Landlord at its
address set forth in Item 12 of the Basic Lease Provisions, or at any other
place as Landlord may designate in writing.  Unless this Lease expressly
provides otherwise, as for example in the payment of rent pursuant to Section
4.1, all payments shall be due and payable within five (5) days after demand.
All payments requiring proration shall be prorated on the basis of a thirty (30)
day month and a three hundred sixty (360) day year.  Any notice, election,
demand, consent, approval or other communication to be given or other document
to be delivered by either party to the other may be delivered in person or by
courier or overnight delivery service to the other party, or may be deposited in
the United States mail, duly registered or certified, postage prepaid, return
receipt requested, and addressed to the other party at the address set forth in
Item 12 of the Basic Lease Provisions, or if to Tenant, at that address or, from
and after the Commencement Date, at the Premises (whether or not Tenant has
departed from, abandoned or vacated the Premises), or may be delivered by
telegram, telex or telecopy, provided that receipt thereof is telephonically
confirmed.  Either party may, by written notice to the other, served in the
manner provided in this Article, designate a different address.  If any notice
or other document is sent by mail, it shall be deemed served or delivered
twenty-four (24) hours after mailing.  If more than one person or entity is
named as Tenant under this Lease, service of any notice upon any one of them
shall be deemed as service upon all of them.

                      ARTICLE XVII. RULES AND REGULATIONS

          Tenant agrees to observe faithfully and comply strictly with the Rules
and Regulations, attached as Exhibit E, and any reasonable and nondiscriminatory
                             ---------
amendments, modifications and/or additions as may be adopted and published by
written notice to tenants by Landlord for the safety, care, security, good
order, or cleanliness of the Premises.  Landlord shall not be liable to Tenant
for any violation of the Rules and Regulations or the breach of any covenant or
condition in any lease by any other tenant or such tenant's agents, employees,
contractors, guests or invitees.  One or more waivers by Landlord of any breach
of the Rules an Regulations by Tenant or by any other tenant(s) shall not be a
waiver of any subsequent breach of that rule or any other.  Tenant's failure to
keep and observe the Rules and Regulations shall constitute a default under this
Lease.  In the case of any conflict between the Rules and Regulations and this
Lease, this Lease shall be controlling.

                      ARTICLE XVIII. BROKER'S COMMISSION

          The parties recognize as the broker(s) who negotiated this Lease the
firm(s), if any, whose name(s) is (are) stated in Item 10 of the Basic Rent
Provisions, and agree that Landlord shall be responsible for the payment of
brokerage commissions to those broker(s) unless otherwise provided in this
Lease.  Tenant warrants that it has had no dealings with any other real estate
broker or agent in connection with the negotiation of this Lease, and Tenant
agrees to indemnify and hold Landlord harmless from any cost, expense or
liability (including reasonable attorneys' fees) for any compensation,
commissions or charges claimed by any other real estate broker or agent employed
or claiming to represent or to have been employed by Tenant in connection with
the negotiation of this Lease.  The foregoing agreement shall survive the
termination of this Lease.  If Tenant fails to take possession of the

                                      21
<PAGE>

Premises or if this Lease otherwise terminates prior to the Expiration Date as
the result of failure of performance by Tenant, Landlord shall be entitled to
recover from Tenant the unamortized portion of any brokerage commission funded
by Landlord in addition to any other damages to which Landlord may be entitled.

                 ARTICLE XIX. TRANSFER OF LANDLORD'S INTEREST

          In the event of any transfer of Landlord's interest in the Premises,
the transferor shall be automatically relieved of all obligations on the part of
Landlord accruing under this Lease from and after the date of the transfer,
provided that any funds held by the transferor in which Tenant has an interest
shall be turned over, subject to that interest, to the transferee and Tenant is
notified of the transfer as required by law.  No holder of a mortgage and/or
deed of trust to which this Lease is or may be subordinate, and no landlord
under a so-called sale-leaseback, shall be responsible in connection with the
Security Deposit, unless the mortgagee or holder of the deed of trust or the
landlord actually receives the Security Deposit.  It is intended that the
covenants and obligations contained in this Lease on the part of Landlord shall,
subject to the foregoing, be binding on Landlord, its successors and assigns,
only during and in respect to their respective successive periods of ownership.

                          ARTICLE XX. INTERPRETATION

     SECTION 20.1.  GENDER AND NUMBER.  Whenever the context of this Lease
requires, the words "Landlord" and "Tenant" shall include the plural as well as
the singular, and words used in neuter, masculine or feminine genders shall
include the others.

     SECTION 20.2.  HEADINGS.  The captions and headings of the articles and
sections of this Lease are for convenience only, are not a part of this Lease
and shall have no effect upon its construction or interpretation.

     SECTION 20.3.  JOINT AND SEVERAL LIABILITY.  If more than one person or
entity is named as Tenant, the obligations imposed upon each shall be joint and
several and the act of or notice from, or notice or refund to, or the signature
of, any one or more of them shall be binding on all of them with respect to the
tenancy of this Lease, including, but not limited to, any renewal, extension,
termination or modification of this Lease.

     SECTION 20.4.  SUCCESSORS.  Subject to Articles IX and XIX, all rights and
liabilities given to or imposed upon Landlord and Tenant shall extend to and
bind their respective heirs, executors, administrators, successors and assigns.
Nothing contained in this Section is intended, or shall be construed, to grant
to any person other than Landlord and Tenant and their successors and assigns
any rights or remedies under this Lease.

     SECTION 20.5.  TIME OF ESSENCE.  Time is of the essence with respect to the
performance of every provision of this Lease.

     SECTION 20.6.  CONTROLLING LAW.  This Lease shall be governed by and
interpreted in accordance with the laws of the Stale of California.

     SECTION 20.7.  SEVERABILITY.  If any term or provision of this Lease, the
deletion of which would not adversely affect the receipt of any material benefit
by either party or the deletion of which is consented to by the party adversely
affected, shall be held invalid or unenforceable to any extent, the remainder of
this Lease shall not be affected and each term and provision of this Lease shall
be valid and enforceable to the fullest extent permitted by law.

     SECTION 20.8.  WAIVER AND CUMULATIVE REMEDIES.  One or more waivers by
Landlord or Tenant of any breach of any term, covenant or condition contained in
this Lease shall not be a waiver of any subsequent breach of the same or any
other term, covenant or condition. Consent to any act by one of the parties
shall not be deemed to render unnecessary the obtaining of that party's consent
to any subsequent act. No breach by Tenant of this Lease shall be deemed to have
been waived by Landlord unless the waiver is in a writing signed by Landlord.
The rights and remedies of Landlord under this Lease shall be cumulative and in
addition to any and all other rights and remedies which Landlord may have.

                                      22
<PAGE>

     SECTION 20.9.   INABILITY TO PERFORM.  In the event that either party shall
be delayed or hindered in or prevented from the performance of any work or in
performing any act required under this Lease by reason of any cause beyond the
reasonable control of that party, then the performance of the work or the doing
of the act shall be excused for the period of the delay and the time for
performance shall be extended for a period equivalent to the period of the
delay. The provisions of this Section shall not operate to excuse Tenant from
the prompt payment of rent or from the timely performance of any other
obligation under this Lease within Tenant's reasonable control.

     SECTION 20.10.  ENTIRE AGREEMENT.  This Lease and its exhibits and other
attachments cover in full each and every agreement of every kind between the
parties concerning the Premises and the Building. and all preliminary
negotiations, oral agreements, understandings and/or practices, except those
contained in this Lease, are superseded and of no further effect. Tenant waives
its rights to rely on any representations or promises made by Landlord or others
which are not contained in this Lease. No verbal agreement or implied covenant
shall be held to modify the provisions of this Lease, any statute, law, or
custom to the contrary notwithstanding.

     SECTION 20.11.  QUIET ENJOYMENT.  Upon the observance and performance of
all the covenants, terms and conditions on Tenant's part to be observed and
performed, and subject to the other provisions of this Lease, Tenant shall
peaceably and quietly hold and enjoy the Premises for the Term without hindrance
or interruption by Landlord or any other person claiming by or through Landlord.

     SECTION 20.12.  SURVIVAL.  All covenants of Landlord or Tenant which
reasonably would be intended to survive the expiration or sooner termination of
this Lease, including without limitation any warranty or indemnity hereunder,
shall so survive and continue to be binding upon and inure to the benefit of the
respective parties and their successors and assigns.

                     ARTICLE XXI. EXECUTION AND RECORDING

     SECTION 21.1.  COUNTERPARTS.  This Lease may be executed in one or more
counterparts, each of which shall constitute an original and all of which shall
be one and the same agreement.

     SECTION 21.2.  CORPORATE AND PARTNERSHIP AUTHORITY.  If Tenant is a
corporation or partnership, each individual executing this Lease on behalf of
the corporation or partnership represents and warrants that he is duly
authorized to execute and deliver this Lease on behalf of the corporation or
partnership, and that this Lease is binding upon the corporation or partnership
in accordance with its terms. Tenant shall, at Landlord's request, deliver a
certified copy of its board of directors' resolution or partnership agreement or
certificate authorizing or evidencing the execution of this Lease.

     SECTION 21.3.  EXECUTION OF LEASE; NO OPTION OR OFFER.  The submission of
this Lease to Tenant shall be for examination purposes only, and shall not
constitute an offer to or option for Tenant to lease the Premises. Execution of
this Lease by Tenant and its return to Landlord shall not be binding upon
Landlord, notwithstanding any time interval, until Landlord has in fact executed
and delivered this Lease to Tenant, it being intended that this Lease shall only
become effective upon execution by Landlord and delivery of a fully executed
counterpart to Tenant.

     SECTION 21.4.  RECORDING.  Tenant shall not record this Lease without the
prior written consent of Landlord. Tenant, upon the request of Landlord, shall
execute and acknowledge a "short form" memorandum of this Lease for recording
purposes.

     SECTION 21.5.  AMENDMENTS.  No amendment or termination of this Lease shall
be effective unless in writing signed by authorized signatories of Tenant and
Landlord, or by their respective successors in interest. No actions, policies,
oral or informal arrangements, business dealings or other course of conduct by
or between the parties shall be deemed to modify this Lease in any respect.

     SECTION 21.6.  EXECUTED COPY.  Any fully executed photocopy or similar
reproduction of this Lease shall be deemed an original for all purposes.

                                      23
<PAGE>

     SECTION 21.7.  ATTACHMENTS.  All exhibits, amendments, riders and addenda
attached to this Lease are hereby incorporated into and made a part of this
Lease.

                          ARTICLE XXII. MISCELLANEOUS

     SECTION 22.1.  NONDISCLOSURE OF LEASE TERMS.  Tenant acknowledges and
agrees that the terms of this Lease are confidential and constitute proprietary
information of Landlord. Disclosure of the terms could adversely affect the
ability of Landlord to negotiate other leases and impair Landlord's relationship
with other tenants. Accordingly, Tenant agrees that it, and its partners,
officers, directors, employees and attorneys, shall not intentionally and
voluntarily disclose the terms and conditions of this Lease to any other tenant
or apparent prospective tenant of the Landlord, either directly or indirectly,
without the prior written consent of Landlord, provided, however, that Tenant
may disclose the terms to prospective subtenants or assignees under this Lease.

     SECTION 22.2.  GUARANTY.  As a condition to the execution of this Lease by
Landlord, the obligations, covenants and performance of the Tenant as herein
provided shall be guaranteed in writing by the Guarantor(s) listed in Item 7 of
the Basic Lease Provisions, if any, on a form of guaranty provided by Landlord.

     SECTION 22.3.  CHANGES REQUESTED BY LENDER.  If, in connection with
obtaining financing for the Building, the lender shall request reasonable
modifications in this Lease as a condition of the financing, Tenant will not
unreasonably withhold or delay its consent, provided that the modifications do
not materially increase the obligations of Tenant or materially and adversely
affect the leasehold interest created by this Lease.

     SECTION 22.4.  MORTGAGEE PROTECTION.  No act or failure to act on the part
of Landlord which would otherwise entitle Tenant to be relieved of its
obligations hereunder or to terminate this Lease shall result in such a release
or termination unless (a) Tenant has given notice by registered or certified
mail to any beneficiary of a deed of trust or mortgage covering the Premises
whose address has been furnished to Tenant and (b) such beneficiary is afforded
a reasonable opportunity to cure the default by Landlord (which in no event
shall be less than sixty (60) days), including, if necessary to effect the cure,
time to obtain possession of the Premises by power of sale or judicial
foreclosure provided that such foreclosure remedy is diligently pursued. Tenant
agrees that each beneficiary of a deed of trust or mortgage covering the
Premises is am express third party beneficiary hereof, Tenant shall have no
right or claim for the collection of any deposit from such beneficiary or from
any purchaser at a foreclosure sale unless such beneficiary or purchaser shall
have actually received and not refunded the deposit, and Tenant shall comply
with any written directions by any beneficiary to pay rent due hereunder
directly to such beneficiary without determining whether an event of default
exists under such beneficiary's deed of trust.

     SECTION 22.5.  COVENANTS AND CONDITIONS.  All or the provisions of this
Lease shall be construed to be conditions as well as covenants as though the
words specifically expressing or imparting covenants and conditions were used in
each separate provision.

     SECTION 22.6.  SECURITY MEASURES.  Tenant hereby acknowledges that Landlord
shall have no obligation whatsoever to provide guard service or other security
measures for the benefit of the Premises. Tenant assumes all responsibility for
the protection of Tenant, its agents, invitees and property from acts of third
parties. Nothing herein contained shall prevent Landlord, at its sole option,
from providing security protection for the Premises or any part thereof, in
which event the cost thereof shall be included within the definition of Building
Costs.

     SECTION 22.7.  CONTINGENCY.  Tenant understands and agrees that the
effectiveness of this Lease is contingent upon the mutual execution and delivery
or a lease surrender and termination agreement between Landlord and Integrated
Silicon Solutions, Inc., the current tenant in possession of the Premises.

                        [Signatures on following page.]

                                      24
<PAGE>

LANDLORD:                                    TENANT:

THE IRVINE COMPANY,                          MICRO-COMP INDUSTRIES,
a Michigan corporation                       a California corporation

By  /s/ Clarence W. Baker                    By  /s/
    ----------------------------------           -------------------------------
Clarence W. Baker,                               Title   President
President, Irvine Industrial Company,
a division of The Irvine Company

By  /s/ David A. Patty                       By  /s/
    ----------------------------------           -------------------------------
David A. Patty,                                  Title   Vice President
Senior Vice President - Finance,
Investment Property Group

                                      25
<PAGE>

                                   EXHIBIT A

                            Description of Premises

                                   [DIAGRAM]
<PAGE>

                                  EXHIBIT A-1

                            Description of the Site

                                   [DIAGRAM]
<PAGE>

                             [DIAGRAM OF PALOMAR]
<PAGE>

                                   EXHIBIT B

                           IRVINE INDUSTRIAL COMPANY
                           -------------------------
                        HAZARDOUS MATERIALS SURVEY FORM
                        -------------------------------

          The purpose of this form is to obtain information regarding the use of
hazardous substances on Irvine Industrial Company property.  Prospective tenants
and contractors should answer the questions in light of their proposed
operations on the premises.  Existing tenants and contractors should answer the
questions as they relate to ongoing operations on the premises and should update
any information previously submitted.

          If additional space is needed to answer the questions, you may attach
separate sheets of paper to this form.  When completed, the form should be sent
to the following address:

                      ___________________________________

                      ___________________________________

                      ___________________________________

                      ___________________________________
                          (insert address of Property
                              Management Company)

          Your cooperation in this matter is appreciated.  If you have any
questions, please do not hesitate to call [insert name of Property Manager] at
[insert phone number] for assistance.

1.  GENERAL INFORMATION
    -------------------

<TABLE>
       Name of Responding Company:
       <S>                    <C>         <C>             <C>              <C>
       Check all that apply:  Tenant ( )  Contractor ( )  Prospective ( )  Existing ( )

       Mailing Address: ______________________________________________________________

       Contact Person & Title: _______________________________________________________

       Telephone Number: _____________________________________________________________

       Address of Leased Premises: ___________________________________________________

       Length of Lease or Contract Term: _____________________________________________
</TABLE>

       Describe the proposed operations to take place on the property, including
       principal products manufactured or services to be conducted. Existing
       tenants and contractors should describe any proposed changes to ongoing
       operations.
_______________________________________________________________________________

_______________________________________________________________________________

                                       1
<PAGE>

2. STORAGE OF HAZARDOUS MATERIALS
   ------------------------------

     2.1.   Will any hazardous materials be used or stored on-site?

            Wastes                           Yes (  )                 No (  )
            Chemical Products                Yes (  )                 No (  )
            Biological Hazards               Yes (  )                 No (  )
            Infectious Wastes                Yes (  )                 No (  )
            Radioactive Materials            Yes (  )                 No (  )

     2.2.  List any hazardous materials to be used or stored, the quantities
           that will be on-site at any given time, and the location and method
           of storage (e.g., bottles in storage closet on the premises).

                                   Location and Method
                                   -------------------

               Waste/Products           of Storage          Quantity
               --------------           ----------          --------

            ______________________ ___________________ _________________
            ______________________ ___________________ _________________
            ______________________ ___________________ _________________
            ______________________ ___________________ _________________
            ______________________ ___________________ _________________
     2.3.   Is any underground storage of hazardous substances proposed or
            currently conducted on the premises? Yes ( )     No ( )

            If yes, describe the materials to be stored, and the size and
            construction of the tank. Attach copies of any permits obtained for
            the underground storage of such substances.

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

3.  SPILLS
    ------

     3.1.   During the past year, have any spills occurred on the premises?
            Yes ( ) No ( )
            If so, please describe the spill and attach the results of any
            testing conducted to determine the extent of such spills.

     3.2.   Were any agencies notified in connection with such spills?
            Yes ( ) No ( )
            If so, attach copies of any spill reports or other correspondence
            with regulatory agencies.

     3.3.   Were any clean-up actions undertaken in connection with the spills?
            Yes ( ) No ( )
            If so, briefly describe the actions taken. Attach copies of any
            clearance letters obtained from any regulatory agencies involved and
            the results of any final soil or groundwater sampling done upon
            completion of the clean-up work.

                                       2
<PAGE>

4.  WASTE MANAGEMENT
    ----------------

     4.1.   List the waste, if any, generated or to be generated at the
            premises, whether it is as hazardous waste, biological or
            radioactive hazard, its hazard class and the quantity generated on a
            monthly basis.

                  Waste            Hazard Class        Quantity/Month
                  -----            ------------        --------------

            ___________________ ____________________ ____________________
            ___________________ ____________________ ____________________
            ___________________ ____________________ ____________________
            ___________________ ____________________ ____________________
            ___________________ ____________________ ____________________

     4.2.   Describe the method(s) of disposal for each waste. Indicate where
            and how often disposal will take place.

            ____________________________________________________________________
            ____________________________________________________________________

     4.3.   Is any treatment or processing of hazardous, infectious or
            radioactive wastes currently conducted or oposed to be conducted at
            the premises? Yes ( ) No ( )

            If yes, please describe any existing or proposed treatment methods.

            ____________________________________________________________________
            ____________________________________________________________________

     4.4.   Attach copies of any hazardous waste permits or licenses issued to
            your company with respect to its operations on the Premises.

5. WASTEWATER TREATMENT/DISCHARGE
   ------------------------------

     5.1.   Do you discharge industrial wastewater to:

            ___ storm drain?         ___ sewer?
            ___ surface water?       ___ no industrial discharge

     5.2.   Is your industrial wastewater treated before discharge? Yes ( )
            No ( )

            If yes, describe the type of treatment conducted.

     5.3.   Attach copies of any wastewater discharge permits issued to your
            company with respect to its operations on the premises.

6.   AIR DISCHARGES
     --------------

     6.1.   Do you have any air filtration systems or stacks that discharge into
            the air? Yes ( )     No ( )

                                       3
<PAGE>

     6.2.   Do you operate any equipment that require air emissions permits? Yes
            ( )     No ( )

     6.3.   Attach copies of any air discharge permits pertaining to these
            operations.

7. HAZARDOUS MATERIALS DISCLOSURES
   -------------------------------

     7.1.   Does your company handle an aggregate of at least 500 pounds, 55
            gallons or 200 cubic feet of hazardous materials at any given time?
            If so, state law requires that you prepare a hazardous materials
            management plan. Yes ( )     No ( )

     7.2.   Has your company prepared a hazardous materials management plan
            (`business plan') pursuant to state and Orange County Fire
            Department requirements? Yes ( )     No ( )
            If so, attach a copy of the business plan.

     7.3.   Are any of the chemicals used in your operations regulated under
            Proposition 65? Yes ( )     No ( )
            If so, describe the actions taken, or proposed actions to be taken,
            to comply with Proposition 65 requirements.

     7.4.   Is your company subject to OSHA Hazard Communication Standard
            Requirements? Yes ( )     No ( )
            If so, describe the procedures followed to comply with these
            requirements.

8. ENFORCEMENT ACTIONS, COMPLAINTS
   -------------------------------

     8.1.   Has your company ever been subject to any agency enforcement
            actions, administrative orders, or consent decrees? Yes ( )
            No ( )
            If so, describe the actions and any continuing compliance
            obligations imposed as a result of these actions.

     8.2.   Has your company ever received requests for information, notice or
            demand letters, or any other inquiries regarding its operations?
            Yes ( )     No ( )

     8.3.   Have there ever been, or are there now pending, any lawsuits against
            your company regarding any environmental or health and safety
            concerns? Yes ( )     No ( )

     8.4.   Has an environmental audit ever been conducted at your company's
            current facility? Yes ( )    No ( )
            If so, discuss the results of the audit.

     8.5.   Have there been any problems or complaints from neighbors at your
            company's current facility? Yes ( )     No ( )

                                                       ________________________

                                                       ________________________

                                                       By: ____________________

                                                           Name: ______________
                                                           Title: _____________
                                                           Date: ______________

                                       4
<PAGE>

                                                                January 14, 1997

                                Sunnyvale Leases

                                   EXHIBIT C

                         HAZARDOUS MATERIALS DISCLOSURE

Tenant acknowledges the following disclosures by Landlord with respect to
Hazardous Materials at the Premises.  Tenant agrees to comply with the
precautionary requirements and other provisions, set forth below, that are
associated with these Hazardous Materials.

     (1)  Portions of the structures on the Premises may contain asbestos-
          containing materials. Accordingly, Tenant agrees that it will not make
          any repairs or alterations to the structures on the Premises: (a)
          without inquiring from Landlord whether Tenant's planned repairs or
          alterations are likely to disturb asbestos-containing materials in the
          structures, and (b) if, in Landlord's judgment, the planned repairs or
          alterations will disturb the asbestos-containing materials, without
          securing Landlord's prior consent to the repairs or alterations.

     (2)  Portions of the groundwater in the City of Sunnyvale contain volatile
          organic compounds and/or solvents. These substances may be present in
          the groundwater.

          Landlord is unaware of any practical impediment to the use or
          occupancy of the Premises as a result of the presence of these
          substances in the groundwater.

     (3)  Tenant agrees that its exemption in Section 5.3(f) of the Lease from
          liability or responsibility with respect to the Hazardous Materials
          described in this Exhibit C shall not extend to any such Hazardous
                            ---------
          Materials whose presence was caused or permitted by Tenant, its
          agents, employees, contractors, licensees, or invitees.
<PAGE>

                                   EXHIBIT D
                                   ---------

                              TENANT'S INSURANCE

            The following standards for Tenant's insurance shall be in effect at
the Premises.  Landlord reserves the right to adopt reasonable nondiscriminatory
modifications and additions to those standards.  Tenant agrees to obtain and
present evidence to Landlord that it has fully complied with the insurance
requirements.

     1.  Tenant shall, at its sole cost and expense, commencing on the date
Tenant is given access to the Premises for any purpose and during the entire
Term, procure, pay for and keep in full force and effect: (i) commercial general
liability insurance with respect to the Premises and the operations of or on
behalf of Tenant in, on or about the Premises, including but not limited to
personal injury, owned and nonowned automobile, blanket contractual, independent
contractors, broad form property damage (with an exception to any pollution
exclusion with respect to damage arising out of heat, smoke or fumes from a
hostile fire), fire and water legal liability, products liability (if a product
is sold from the Premises), liquor law liability (if alcoholic beverages are
sold, served or consumed within the Premises), and severability of interest ,
which policy(ies) shall be written on an "occurrence" basis and for not less
than the amount set forth in Item 13 of the Basic Lease Provisions, with a
combined single limit (with a $50,000 minimum limit on fire legal liability) per
occurrence for bodily injury, death, and property damage liability, or the
current limit of liability carried by Tenant, whichever is greater, and subject
to such increases in amounts as Landlord may determine from time to time; (ii)
workers' compensation insurance coverage as required by law, together with
employers' liability insurance; (iii) with respect to improvements, alterations,
and the like required or permitted to be made by Tenant under this Lease,
builder's all-risk insurance, in an amount equal to the replacement cost of the
work; (iv) insurance against fire, vandalism, malicious mischief and such other
additional perils as may be included in a standard "all risk" form in general
use in Orange County, California, insuring Tenant's leasehold improvements,
trade fixtures, furnishings, equipment and items of personal property of Tenant
located in the Premises, in an amount equal to not less than ninety percent
(90%) of their actual replacement cost (with replacement cost endorsement); and
(v) business interruption insurance in amounts satisfactory to cover one (1)
year of loss. In no event shall the limits of any policy be considered as
limiting the liability of Tenant under this Lease.

     2.  In the event Landlord consents to Tenant's use, generation or storage
of Hazardous Materials on, under or about the Premises pursuant to Section 5.3
of this Lease, Landlord shall have the continuing right to require Tenant, at
Tenant's sole cost and expense (provided the same is available for purchase upon
commercially reasonable terms), to purchase insurance specified and approved by
Landlord, with coverage not less than Five Million Dollars ($5,000,000.00),
insuring (i) any Hazardous Materials shall be removed from the Premises; (ii)
the Premises shall be restored to a clean, healthy, safe and sanitary condition,
and (iii) any liability of Tenant, Landlord and Landlord's officers, directors,
shareholders, agents, employees and representatives, arising from such Hazardous
Materials.

     3.  All policies of insurance required to be carried by Tenant pursuant to
this Exhibit D containing a deductible exceeding Ten Thousand Dollars
     ---------
($10,000.00) per occurrence must be approved in writing by Landlord prior to the
issuance of such policy. Tenant shall be solely responsible for the payment of
all deductibles.

     4.  All policies of insurance required to be carried by Tenant pursuant to
this Exhibit D shall be written by responsible insurance companies authorized to
     ---------
do business in the State of California and with a Best's rating of not less than
"A" subject to final acceptance and approval by Landlord. Any insurance required
of Tenant may be furnished by Tenant under any blanket policy carried by it or
under a separate policy, so long as (i) the Premises are specifically covered
(by rider, endorsement or otherwise), (ii) the limits of the policy are
applicable on a "per location" basis to the Premises and provide for restoration
of the aggregate limits, and (iii) the policy otherwise complies with the
provisions of this Exhibit D. A true and exact copy of each paid up policy
                   ---------
evidencing the insurance (appropriately authenticated by the insurer) or a
certificate of insurance, certifying that the policy has been issued, provides
the coverage required by this Exhibit D and contains the required provisions,
                              ---------
shall be delivered to Landlord prior to the date Tenant is given the right of
possession of the Premises. Proper evidence of the renewal of any insurance
coverage shall also be delivered to Landlord not less than thirty (30) days
prior to the expiration of the coverage. Landlord may at any time, and from time
to time, inspect and/or copy any and all insurance policies required by this
Lease.

                                  Page 1 of 2
<PAGE>

     5.  Each policy evidencing insurance required to be carried by Tenant
pursuant to this Exhibit D shall contain the following provisions and/or clauses
                 ---------
satisfactory to Landlord: (i) a provision that the policy and the coverage
provided shall be primary and that any coverage carried by Landlord shall be
noncontributory with respect to any policies carried by Tenant except as to
workers' compensation insurance; (ii) a provision including Landlord, the
Additional Insureds identified in Item 11 of the Basic Lease Provisions, and any
other parties in interest designated by Landlord as an additional insured,
except as to workers' compensation insurance; (iii) a waiver by the insurer of
any right to subrogation against Landlord, its agents, employees, contractors
and representatives which arises or might arise by reason of any payment under
the policy or by reason of any act or omission of Landlord, its agents,
employees, contractors or representatives; and (iv) a provision that the insurer
will not cancel or change the coverage provided by the policy without first
giving Landlord thirty (30) days prior written notice.

     6.  In the event that Tenant fails to procure, maintain and/or pay for, at
the times and for the durations specified in Exhibit D, any insurance required
                                             ---------
by this Exhibit D, or fails to carry insurance required by any governmental
        ---------
authority, Landlord may at its election procure that insurance and pay the
premiums, in which event Tenant shall repay Landlord all sums paid by Landlord,
together with interest at the maximum rate permitted by law and any related
costs or expenses incurred by Landlord, within ten (10) days following
Landlord's written demand to Tenant.

                                  Page 2 of 2
<PAGE>

                                   EXHIBIT E
                                   ---------

                             RULES AND REGULATIONS

            This Exhibit sets forth the rules and regulations governing Tenant's
use of the Premises leased to Tenant pursuant to the terms, covenants and
conditions of the Lease to which this Exhibit is attached and therein made part
thereof.  In the event of any conflict or inconsistency between this Exhibit and
the Lease, the Lease shall control.

     1.  Tenant shall not place anything or allow anything to be placed near the
glass of any window, door, partition or wall which may appear unsightly from
outside the Premises.

     2.  The walls, walkways, sidewalks, entrance passages, courts and
vestibules shall not be obstructed or used for any purpose other than ingress
and egress of pedestrian travel to and from the Premises, and shall not be used
for loitering or gathering, or to display, store or place any merchandise,
equipment or devices, or for any other purpose. The walkways, entrance
passageways, courts, vestibules and roof are not for the use of the general
public and Landlord shall in all cases retain the right to control and prevent
access thereto by all persons whose presence in the judgment of the Landlord
shall be prejudicial to the safety, character, reputation and interests of the
Building and its tenants, provided that nothing herein contained shall be
construed to prevent such access to persons with whom Tenant normally deals in
the ordinary course of Tenant's business unless such persons are engaged in
illegal activities. No tenant or employee or invitee of any tenant shall be
permitted upon the roof of the Building.

     3.  No awnings or other projection shall be attached to the outside walls
of the Building. No security bars or gates, curtains, blinds, shades or screens
shall be attached to or hung in, or used in connection with, any window or door
of the Premises without the prior written consent of Landlord. Neither the
interior nor exterior of any windows shall be coated or otherwise sunscreened
without the express written consent of Landlord.

     4.  Tenant shall not mark, nail, paint, drill into, or in any way deface
any part of the Premises or the Building. Tenant shall not lay linoleum, tile,
carpet or other similar floor covering so that the same shall be affixed to the
floor of the Premises in any manner except as approved by Landlord in writing.
The expense of repairing any damage resulting from a violation of this rule or
removal of any floor covering shall be borne by Tenant.

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

     6.  Landlord shall direct electricians as to the manner and location of any
future telephone wiring.  No boring or cutting for wires will be allowed without
the prior consent of Landlord.  The locations of the telephones, call boxes and
other office equipment affixed to the Premises shall be subject to the prior
written approval of Landlord.

     7.  The Premises shall not be used for manufacturing or for the storage of
merchandise except as such storage may be incidental to the permitted use of the
Premises.  No exterior storage shall be allowed at any time without the prior
written approval of Landlord.  The Premises shall not be used for cooking or
washing clothes without the prior written consent of Landlord, or for lodging or
sleeping or for any immoral or illegal purposes.

     8.  Tenant shall not make, or permit to be made, any unseemly or disturbing
noises or disturb or interfere with occupants of this or neighboring buildings
or premises or those having business with them, whether by the use of any
musical instrument, radio, phonograph, noise, or otherwise.  Tenant shall not
use, keep or permit to be used, or kept, any foul or obnoxious gas or substance
in the Premises or permit or suffer the Premises to be used or occupied in any
manner offensive or objectionable to Landlord or other occupants of this or
neighboring buildings or premises by reason of any odors, fumes or gases.

     9.  No animals shall be permitted at any time within the Premises.

                                       1
<PAGE>

     10.  Tenant shall not use the name of the Building or the Project in
connection with or in promoting or advertising the business of Tenant, except as
Tenant's address, without the written consent of Landlord. Landlord shall have
the right to prohibit any advertising by any Tenant which, in Landlord's
reasonable opinion, tends to impair the reputation of the Project or its
desirability for its intended uses, and upon written notice from Landlord any
Tenant shall refrain from or discontinue such advertising.

     11.  Canvassing, soliciting, peddling, parading, picketing, demonstrating
or otherwise engaging in any conduct that unreasonably impairs the value or use
of the Premises or the Project are prohibited and each Tenant shall cooperate to
prevent the same.

     12.  No equipment of any type shall be placed on the Premises which in
Landlord's opinion exceeds the load limits of the floor or otherwise threatens
the soundness of the structure or improvements of the Building.

     13.  No air conditioning unit or other similar apparatus shall be installed
or used by any Tenant without the prior written consent of Landlord.

     14.  No aerial antenna shall be erected on the roof or exterior walls of
the Premises, or on the grounds, without in each instance, the prior written
consent of Landlord. Any aerial or antenna so installed without such written
consent shall be subject to removal by Landlord at any time without prior notice
at the expense of the Tenant, and Tenant shall upon Landlord's demand pay a
removal fee to Landlord of not less than $200.00.

     15.  The entire Premises, including vestibules, entrances, doors, fixtures,
windows and plate glass, shall at all times be maintained in a safe, neat and
clean condition by Tenant.  All trash, refuse and waste materials shall be
regularly removed from the Premises by Tenant and placed in the containers at
the locations designated by Landlord for refuse collection.  All cardboard boxes
must be "broken down" prior to being placed in the trash container.  All
styrofoam chips must be bagged or otherwise contained prior to placement in the
trash container, so as not to constitute a nuisance.  Pallets may not be
disposed of in the trash container or enclosures.  The burning of trash, refuse
or waste materials is prohibited.

     16.  Tenant shall use at Tenant's cost such pest extermination contractor
as Landlord may direct and at such intervals as Landlord may require.

     17.  All keys for the Premises shall be provided to Tenant by Landlord and
Tenant shall return to Landlord any of such keys so provided upon termination of
the Lease.  Tenant shall not change locks or install other locks on doors of the
Premises, without the prior written consent of Landlord.  In the event of loss
of any keys furnished by Landlord for Tenant, Tenant shall pay to Landlord the
costs thereof.

     18.  No person shall enter or remain within the Project while intoxicated
or under the influence of liquor or drugs. Landlord shall have the right to
exclude or expel from the Project any person who, in the absolute discretion of
Landlord, is under the influence of liquor or drugs.

            Landlord reserves the right to amend or supplement the foregoing
Rules and Regulations and to adopt and promulgate additional rules and
regulations applicable to the Premises. Notice of such rules and regulations and
amendments and supplements thereto, if any, shall be given to Tenant.

                                       2
<PAGE>

                                   EXHIBIT X

                                  WORK LETTER
                                  -----------

TENANT IMPROVEMENTS
-------------------

          The tenant improvement work by Landlord shall consist of repainting
the Premises, installing new carpet in the Premises, and demolishing select
areas of the Premises ("Tenant Improvements").  All materials and finishes
utilized in completing the Tenant Improvements shall be Landlord's building
standard.  Landlord's total contribution for the Tenant Improvements shall not
exceed Fifty-One Thousand Seven Hundred Twenty Dollars ($51,720.00).  Landlord's
contribution shall include a construction management fee of five percent (5%) of
the cost of the work, unless the work consists only of repainting and/or
recarpeting in which event no management fee shall be included.  Any excess cost
shall be borne solely by Tenant and shall be paid to Landlord within ten (10)
days following Landlord's billing for such excess cost.
<PAGE>

                             CONSENT TO SUBLETTING

     21.  PARTIES AND DATES.

     This Consent to Subletting ("Consent") dated July ___, 1999, is by and
between THE IRVINE COMPANY, a Delaware corporation ("Landlord"), MICRO-COMP
INDUSTRIES, a California corporation ("Tenant"), and ARTES, INC., a California
corporation ("Subtenant").

     22.  RECITALS.

     On February 10, 1997, Landlord and Tenant entered into a lease ("Lease")
for space in a building owned by Landlord and located at 680 Almanor Avenue,
Sunnyvale, California ("Premises").

     The Lease contains provisions which require, among other things, Tenant to
obtain Landlord's consent to any subletting of the Premises.  Tenant has
requested Landlord to consent to a subletting of the Premises to Subtenant.

     23.  CONSENT TO SUBLETTING.

     For valuable consideration including Tenant's and Subtenant's agreement to
the provisions of this Consent, Landlord consents to a subletting to Subtenant
of approximately 17,240 rentable square feet of the Premises.  Tenant and
Subtenant agree that this Consent is conditioned upon their agreement that:

     23.1  The sublease agreement ("Sublease") between Tenant and Subtenant is
expressly subject to the provisions of the Lease, a copy of which Subtenant
acknowledges it has received.

     23.2  Tenant will deliver a copy of the Sublease to Landlord within five
(5) business days of Landlord's request, provided that if the Sublease is not in
writing, Tenant may deliver a reasonably detailed summary of the Sublease
including information respecting the length of the term and the amount of rent
and other charges payable under the Sublease, which summary shall be approved by
Subtenant.

     23.3  Tenant's obligations under the Lease shall not be affected by this
Consent.

     23.4  Landlord shall be entitled to receive profits derived by Tenant from
this subletting in accordance with the provisions of the Lease.

     23.5  The provisions of the Lease respecting assignment and subletting are
not waived with respect to future assignments and sublettings.

     23.6  Subtenant is not claiming any interest in a right belonging solely to
Tenant pursuant to the Lease.

                                       8
<PAGE>

     23.7  The Lease is in full force and effect and that Landlord is not in
breach of any provision of the Lease.

     23.8  That if the Sublease terminates by reason of a termination of the
Lease, Landlord may, at its option, by delivering written notice to Subtenant,
assume the obligation of Tenant under the Sublease in which event Subtenant
shall recognize Landlord as if it were Sublandlord under the Sublease.

     24.  SUBTENANT'S PRINCIPAL PLACE OF BUSINESS.

     The address of Subtenant's principal place of business is:

               678 Almanor Avenue
               ------------------

               Sunnyvale, CA 94086
               -------------------
     25.  GENERAL.

     25.1  EFFECT OF SUBLETTING. The Lease and Tenant's obligations to Landlord
shall not be deemed to have been modified by this Consent.

     25.2  ENTIRE AGREEMENT. This Consent embodies the entire understanding
between Landlord, Tenant and Subtenant with respect to the subletting and can be
changed only by an instrument in writing signed by the party against whom
enforcement is sought.

     25.3  COUNTERPARTS. If this Consent is executed in counterparts, each is
hereby declared to be an original; all, however, shall constitute but one in the
same Consent. In any action or proceeding, any photographic, photostatic, or
other copy of this Consent may be introduced into evidence without foundation.

     25.4  DEFINED TERMS, All words commencing with initial capital letters in
this Consent and defined in the Lease shall have the same meaning in this
Consent as in the Lease.

     25.5  CORPORATE AND PARTNERSHIP AUTHORITY. If Tenant is a corporation or
partnership, or is comprised of either or both of them, each individual
executing this Consent for the corporation or partnership represents that he or
she is duly authorized to execute and deliver this Consent on behalf of the
corporation or partnership and that this Consent is binding upon the corporation
or partnership in accordance with its terms.

     25.6  ATTORNEYS' FEES. The provisions of the Lease respecting payment of
attorneys' fees shall also apply to this Consent to Subletting.

     26.  EXECUTION.

     Landlord, Tenant and Subtenant have entered into this Consent as of the
date set forth in "I. PARTIES AND DATE" above.

                                       9
<PAGE>

TENANT:                                            SUBTENANT:

MICRO-COMP INDUSTRIES                              ARTEST, INC.
A California Corporation                           A California Corporation

By  /s/ Micro Comp Industries                      By  /s/ David Ganapol 7-30-99

Title                                              Title  VP Engineering

By                                                  By

Title                                               Title

LANDLORD:

THE IRVINE COMPANY,
a Delaware Corporation

By
Robert E. Williams, Jr., President,
Irvine Industrial Company, a division
of The Irvine Company

                                      10
<PAGE>

By
Nancy E. Trujillo
Assistant Secretary

                                      11
<PAGE>

                     FIRST ADDENDUM TO SUBLEASE AGREEMENT

     THIS ADDENDUM IS HEREBY ATTACHED AND SHALL BECOME PART OF THAT CERTAIN
SUBLEASE AGREEMENT BY AND BETWEEN MICROCOMP INDUSTRIES, A CALIFORNIA CORPORATION
AS THE SUBLESSOR AND ARTEST INC., A CALIFORNIA CORPORATION AS THE SUBLESSEE FOR
THAT CERTAIN PREMISES OF APPROXIMATELY 7,899 SQUARE FEET COMMONLY KNOWN 680
ALMANOR AVENUE, SUNNYVALE, CALIFORNIA

ALL OF THE TERMS AND CONDITIONS OF THE SUBLEASE SHALL REMAIN IN FULL FORCE AND
EFFECT WITH THE EXCEPTION OF THE FOLLOWING:

21. Option to Extend:  The Sublessee has previously exercised its Option to
    ----------------
Extend the sublease for the current 7,899 square foot premises for the period
March 1, 1999 to February, 28, 2002. 22.

22. Expansion of Premises: Upon the vacating of the balance of the premises or
    ---------------------
approximately 9,341 square feet by the Sublessor, the Sublessee will occupy and
sublease the entire facility.  The entire premises are approximately 17,240
square feet, as per the attached Exhibit A.

23. Sublease Term:  The sublease term for the entire premises will be from the
    -------------
substantial vacating of the property by the Sublessor until February 28, 2002.

24. Rental Rate:  The rental rate for the sublease term shall be as follows:
    -----------

Occupancy to February 29, 2000:     $27,762.70 NNN per month

Thereafter the rental rate shall increase on March 1, 2000 and March 1, 2001 as
set forth in Article 1. Basic Lease Provisions, Item #6 of the Master Lease.

25. Security Deposit:  As per paragraph 18 of the original sublease agreement,
    ----------------
the Sublessee has deposited with the Sublessor, a security deposit in the amount
of $12,573.39. The security deposit will be increased to a total of $27,756.64
upon mutual execution of this sublease addendum.

26. Condition, Furniture, and Fixtures:  The Sublessee shall, upon mutual
    ----------------------------------
execution of this agreement, give to the Sublessor an amount of Four Hundred
Thousand ($400,000.00) Dollars as payment for the furniture and fixtures as
shown on the attached Exhibit B. However, the Sublessee shall be credited an
amount of Four Hundred Thirty ($430.00) per day from July 11, 1999 until the
date the Sublessee vacates the space as a penalty for non-delivery of the
premises. If necessary, a Bill of Sale will be executed between the parties. The
Lessee will take possession of the premises in an "as-is" condition.

27. Contingency:  This Addendum is contingent upon the approval of the Master
    -----------
Lessor, The Irvine Company to the terms and conditions contained herein.

                                      12
<PAGE>

AGREED AND ACCEPTED:

SUBLESSOR:
MICRO-COMP IND.
A CALIFORNIA CORP.

BY: ____________________________________

ITS: ____________________________________

DATE: __________________________________

SUBLESSEE:
ARTEST INC.,
A CALIFORNIA CORPORATION

BY:_____________________________________

ITS: _____________________________________

DATE:___________________________________

                                      13
<PAGE>

     The undersigned, in consideration of the above Addendum, consents to the
above Addendum, but this consent is given only on the condition that it shall
not be construed to release, alter, or modify in any way the obligation of the
original Lessee in the Master Lease or of any guarantor or surety.

MASTER LESSOR:
THE IRVINE COMPANY

BY:_______________________________________

ITS: _______________________________________

DATE:_____________________________________

                                      14
<PAGE>

EXHIBIT A
(DIAGRAM)

                           [FLOOR PLAN APPEARS HERE]

<PAGE>

                            [UMC LOGO APPEARS HERE]
                             UMC-USA OFFICE LAYOUT
                                 [FLOOR PLAN]
<PAGE>

<TABLE>
<S>                      <C>
Exhibit B for the UMC    All items have been received for "Exhibit B" on 7/30/99
Sub-lease                Artest Corp /s/ [ILLEGIBLE]^^
                                     -----------------
UMC Building
                         Sherry                                                 DB office
                         Desk Chair                                             M/T
                         Small chair

                                                                                Ron Hsu
                         Ken                                                    White Board
Chris                    Desk chair                                             Computer Table
Tall bookcase                                                                   Desk
Desk                     Li-Kuo                                                 Office chair
Drawers                  Desk chair
Desk Chair               Small chair                                            Simon
Computer table                                                                  Desk chair (2)
White board              YI-NAN                                                 Computer Table
                         Desk chair                                             Desk
Web                      Small chair                                            Small chair
Tall bookcase                                                                   Whiteboard
Desk                     D.K.
Chair desk               M/T                                                    Ambrose
Computer table                                                                  Whiteboard
Small drawers            Jolle                                                  Small chair
Small chair              Desk Chair                                             Cube desk
                                                                                Furn

Fax/copier                                                                      Storage
Metal desk                                                                      Desk
                                                                                Desk chair
Jim K                    Wen                      AA office                     Computer table

M.T.                     Computer table           Small Chair                   WS Lin
Desk                     Desk Chair                                             Cube Furn
                         Bookcase                                               Desk Chair
                         Desk chair                                             WhiteBoard
                         Small chair

                                                                                Wesley
                         Bellis                   Jean                          Cube Furn
                         Desk chair               Computer table                Desk Chair
                         Small chair              Desk                          Small chair
                         Desk                     Tall bookcase                 Whiteboard
                         White board              2 small chairs
                                                  Desk Chair/White board        George Yeh
                         Tony                     Sammy                         Cube Furn.
                         Tall bookcase            Desk                          Desk Chair
                         White board              Desk Chair
                         Desk                     Computer Chair                Conf Rm.
                         Desk chair               Small Chair                   Small chair
                         Computer table           Tall bookcase
                                                  Small cabinet/White board
                         Computer rm              Arthur
                         M/T                      Computer table
                                                  2 small chairs
                         Computer rm              Desk
                         M/T                      Office Chair
</TABLE>
<PAGE>

Exhibit B for the UMC building

Vickie
Desk chair
Small Chair

Iris
Desk Chair

Jessica Lin                   Jessie Lee
Chair                         Desk chair
                              Small chair

Judy
Small chair                   Justin
                              Desk Chair

Helen
Desk chair                    Fenny
Small Chair                   Desk Chair

Jade                          Eunice
Desk chair                    Desk chair
                              Small chair

Mei-Chu
Desk Chair                    Jenny Lee
                              Desk Chair
                              Small Chair

Cafe'
Round Table
Seven Chairs                  Henry Lin
                              Desk chair
                              Small Chair
<PAGE>

  Exhibit B for the
  UMC Sub-lease
  Arques Building

-------------------------
  Computer Desk
  Metal desk
  Half wood bookcase
  Office Chair
  Small chair
  Whiteboard
  Tall White bookcase
-------------------------

-------------------------
  Half Wood bookcase
  Metal desk
  Office Chair
  Small Chair
  Large bookcase
  Whiteboard
-------------------------

-------------------------
  Bookcase tall
-------------------------

-------------------------
  Half Bookcase
  Wood Desk
  Wood computer Table
  Whiteboard
  Office Chair
  Tall bookcase
-------------------------

  Ray's office

-------------------------
  Tall bookcase
  Half bookcase
  Wood Desk
  Computer table
  Desk chair
  Whiteboard
-------------------------

  Bellone

-------------------------
  Desk chair
  Desk
  Small chair
  Tall bookcase
  Half drawer
-------------------------
<PAGE>

  Aileen

-------------------------
  Wood computer
  table
  Desk
  Desk chair
  Small chair
  Wood computer
  table
  Desk
  Desk chair
  Small chair
  Printer chair
-------------------------

  Ron's office

-------------------------
  Wood computer
  table
  Desk chair
  Desk
  Half drawers
  Tall wood bookcase
  Green Chair
  Whiteboard
-------------------------

  Five cubes
  3 small chairs
  Cafe'
  Round table
  3 small chairs
  2 tables

  Computer room
  Credenza

  Front Desk
  Desk chair
  2 chairs and table<PAGE>

                                                                    EXHIBIT 10.9
Confidential

                     Master Services and Supply Agreement

          This Master Services and Supply Agreement ("Agreement") is made this
4/th/ day of April, 2000 ("Effective Date") by and between PeoplePC, Inc., a
Delaware corporation, having its principal place of business at 100 Pine Street,
Suite 1100, San Francisco, California 94111 ("PeoplePC") and Ford Motor Company,
a Delaware Corporation, having its principal place of business at The American
Road, Dearborn, Michigan 48121 ("Ford") (each, a "Party"; collectively, the
"Parties").

                                    Recitals

          WHEREAS, PeoplePC makes it possible for people to get connected to the
Internet by offering certain packages of hardware, software and internet access
at affordable prices;

          WHEREAS, Ford wishes to help its employees worldwide get connected to
the Internet from their homes by offering them the PeoplePC solution;

          WHEREAS, PeoplePC and Ford have entered into that certain non-binding
Memorandum of Understanding dated January 31, 2000 outlining in a general manner
their desire to work together to realize their respective goals; and

          WHEREAS, concurrent with the signing of this Agreement, PeoplePC and
Ford are entering into that certain Stock Purchase Agreement of even date
herewith and the related agreements referenced herein (collectively, the "Equity
Investment Agreements") under which, among other things, Ford has agreed to
purchase certain shares of PeoplePC's Series C Preferred Stock;

          NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, and other good and valuable consideration the
sufficiency of which is hereby acknowledged, the Parties hereby AGREE as
follows:

                                   ARTICLE 1.
                                  DEFINITIONS

          Capitalized terms have the meaning ascribed to them elsewhere in this
Agreement and as more fully set forth in Schedule 1 (Definitions).

                                   ARTICLE 2.
                           JOINT OVERSIGHT COMMITTEE

Section 2.1.  Joint Oversight Committee.

     PeoplePC and Ford shall establish a joint oversight committee to develop,
oversee and coordinate the implementation and roll-out of the Ford Employee
Connectivity Program ("Joint Oversight Committee" or "JOC").  From time to time,
the JOC may establish subcommittees or project teams to oversee particular
projects or activities, and such subcommittees or project teams

Confidential treatment has been requested with respect to the omitted portions
of this exhibit. The copy filed herewith omits the information subject to the
confidentiality request. Omissions are designated as [*]. A complete version of
this exhibit has been filed separately with the Securities and Exchange
Commission.
<PAGE>

will be constituted as the JOC agrees including a joint subcommittee on privacy
to oversee the use of data as set forth in Section 8 below.

Section 2.2.  Membership.

     The JOC will be comprised of representatives from each of PeoplePC and
Ford, selected by such Party.  The representatives will have expertise in the
areas designated by the JOC including marketing, billing, distribution,
services, product management and human resources. Each Party shall designate one
of its representatives as its project coordinator to serve as the liaison with
the other Party ("Project Coordinator").  The Project Coordinators for Ford and
PeoplePC shall communicate regularly as to the status of the Scope of Work and
the Ford Employee Connectivity Program to ensure that each Party is kept
informed as to the success of each.  Subject to the foregoing provisions of this
Section 2.2, PeoplePC and Ford may replace its respective JOC representatives,
including its Project Coordinator, at any time with prior written notice to the
other Party.

Section 2.3.  JOC Meetings.

     During the Term, the JOC shall meet at least once per month, or as
otherwise agreed by the Parties, at such locations as the Parties agree;
provided, however, that to the extent possible, the Parties shall attempt to
meet at the location of the other Party on an alternating basis.  At its
meetings, the JOC will consistent with the terms of this Agreement: (i)
formulate and review the  Scope of Work objectives; (ii) monitor the progress of
the  Scope of Work towards those objectives; (iii) review the Ford Employee
Connectivity Program generally; and (iv) undertake and/or approve such matters
as provided for the JOC under this Agreement.  With the consent of the other
Party, other representatives of a Party may attend JOC or subcommittee meetings
as non-participating observers.  The JOC may also convene or be polled or
consulted from time to time by means of telecommunications, video conferences or
correspondence, as deemed necessary or appropriate.  Each Party shall bear its
own personnel and travel costs and expenses relating to the JOC meetings.

Section 2.4.  Decisions.

     Decisions of the JOC will be made by mutual agreement on a course of action
by both PeoplePC and Ford.  If  the PeoplePC and Ford are not able to reach
mutual agreement on an issue, then the issue will be referred to for resolution
through good faith negotiations between the Chief Executive Officer of PeoplePC
and Chief Information Officer of Ford.  If the issue is not resolved through
such negotiations, then the issue will be considered not approved by the JOC and
the existing Rollout Plan and Ford Employee Connectivity Program will be remain
in effect unless a change is approved by the JOC or such executives of PeoplePC
and Ford.

                                   ARTICLE 3.
              SCOPE OF WORK AND FORD EMPLOYEE CONNECTIVITY PROGRAM

Section 3.1.  Scope of Work General.

     The scope of work will specify the objectives, schedule and work plan for
the implementation and roll-out of the Ford Employee Connectivity Program
("Scope of Work").  It is

                                                                             -2-
<PAGE>

anticipated that the Scope of Work will, among other things, specify: (i) on a
facility-by-facility and country-by-country basis the timing and manner for
availability of the Ford Employee Connectivity Program; (ii) the procedure for
delivery of the PeoplePC Solutions to Eligible Employees at each plant including
alternatives to in-home delivery, provided that such alternatives are cost-
neutral; (iii) the process for collection of the Co-Pay and remittance to Ford
including the manner in which payment may be made by Eligible Employees as well
as Ford's responsibilities in the event of delinquency or default by such
Eligible Employees; (iv) rollout of Localization (up to a maximum of fourteen
(14) mutually agreed upon designated languages); and (v) those other details
necessary for the implementation of the Ford Employee Connectivity Program.

Section 3.2.  Ford Employee Connectivity Program General

     The Ford employee connectivity program ("Ford Employee Connectivity
Program") will consist of certain bundled packages of hardware, software and
internet access services to be made available to Eligible Employees as further
detailed in Exhibit B (each such combined package, a "PeoplePC Solution").  Ford
acknowledges that PeoplePC shall have no obligation to provide telephone
services or electricity to enable Eligible Employees to use the PeoplePC
Solution, that Eligible Employees must determine what qualifies as a local call,
and that, the intention of Ford is that such basic services shall be the
responsibility of Eligible Employees.  While the Parties intend to provide the
basic configuration as identified in Exhibit B in the United States and similar
configurations on a worldwide basis, the Parties acknowledge that the
manufacturer or supplier of the components or individual services of a PeoplePC
Solution may vary from Eligible Employee to Eligible Employee or from region to
region and that such variation will not constitute a modification of the Ford
Employee Connectivity Program as contemplated in Section 3.3 below; provided,
however, that such variation is mutually agreed upon and each solution meets the
configuration requirements set forth therein.  Subject to the terms and
conditions of this Agreement, including the Member's Agreement, each Eligible
Employee will have the opportunity to obtain a PeoplePC Solution from PeoplePC.
Ford shall provide PeoplePC with a method and appropriate data to permit
PeoplePC to verify and authenticate the status of employees of Ford and Ford
Affiliates as Eligible Employees.

Section 3.3.  Modifications

     The Scope of Work and/or the Ford Employee Connectivity Program may only be
modified by the Parties; provided, however, that neither Party shall withhold
their consent to the modification of  the Ford Employee Connectivity Program
where required to conform to the applicable laws, rules, regulations or other
constraints in which an Eligible Employee resides.  The Parties acknowledge
that, due to applicable restrictions, the lack of suitable local infrastructure,
or otherwise, including telecommunications facilities, certain Eligible
Employees may not be provided access to or offered the opportunity to
participate in, the Ford Employee Connectivity Program on a commercially
reasonable basis.  In such instances, the Parties shall discuss in good faith
commercially reasonable alternatives to offering the PeoplePC Solutions for
Eligible Employees located in these areas and cost allocations for such
alternatives.

Section 3.4.  Implementation Responsibilities

                                                                             -3-
<PAGE>

     PeoplePC shall have primary responsibility for the administration of the
Ford Employee Connectivity Program and shall make available the PeoplePC
Solutions to Eligible Employees through the Ford Employee Connectivity Program
and to perform its other responsibilities described below in accordance with the
Scope of Work.  Ford and Ford Affiliates shall actively promote the PeoplePC
Solutions to Eligible Employees as a part of the Ford Employee Connectivity
Program and to perform its other responsibilities described below.  Each Party
shall dedicate and utilize adequate manpower and equipment to perform its
respective obligations and responsibilities under this Agreement.

Section 3.5.  Expenses and Adherence to Rules

     Except as expressly set forth in this Agreement or agreed to by the
Parties, each Party shall bear its own expenses, and all direct and related
costs associated with its personnel, in connection with conducting its
activities under this Agreement.  For employees who may from time to time work
at the other Party's site, the hosting party will provide a suitable cubicle or
other appropriate and secure office space and/or storage facilities and the
employing party will bear all other costs, including salary and benefits, for
such employees.  Each Party shall ensure that all of its personnel and
subcontractors working on the other Party's premises follow the host Party's
guidelines, policies and instructions while on the host Party's premises,
including confidentiality and security procedures.

                                   ARTICLE 4.
                              PURCHASE AND SUPPLY

Section 4.1.  Purchase and Supply of PeoplePC Solutions

     PeoplePC shall sell to Ford and Ford Affiliates, and Ford and Ford
Affiliates shall purchase from PeoplePC, the PeoplePC Solutions in the manner
set forth in Exhibit A.   Ford and Ford Affiliates acknowledge and agree that it
may only purchase the PeoplePC Solutions for the purpose of distributing them to
Eligible Employees for their home use only.  In addition, Eligible Employees the
opportunity to purchase Solutions Upgrades set forth in Exhibit B.  In no event,
however, shall PeoplePC have any obligation to offer Eligible Employees the
opportunity to downgrade PeoplePC Solutions, in whole or in part.

Section 4.2.  Promotion of Ford Employee Connectivity Program

     Ford and Ford Affiliates will make commercially reasonable efforts to
develop and implement a communication strategy to ensure Ford Employee
Connectivity Program success worldwide and bear all costs associated with such
efforts (including associated agency fees)  ("Marketing Plan").  Ford and
PeoplePC will work together to develop and implement Ford Employee Connectivity
Program communication strategies.  During the Term, except as necessary to
perform its obligations under the Existing Program, Ford and Ford Affiliates
shall not market, promote or distribute any solutions materially similar to or
competitive with the PeoplePC Solutions, in whole or in part, to Eligible
Employees or employees of Ford or Ford Affiliates.  Without limiting the
foregoing, Ford shall not materially modify or otherwise materially extend the
scope of the

                                                                             -4-
<PAGE>

Existing Program. In no event shall Ford or Ford Affiliates subsidize employee
purchases under such program(s).

                                   ARTICLE 5.
                              WEB PAGE DEVELOPMENT

Section 5.1.  Development

     PeoplePC shall design, develop, maintain and host a web page that will
welcome Eligible Employees that have obtained a PeoplePC Solution and that will
be programmed as the default home page on the installed browser of each PeoplePC
Solution ("Welcome Page").  The design of the Welcome Page will be based upon
the design of the welcome pages currently utilized by People PC.  Any changes to
such design must be mutually agreed upon by the Parties.  PeoplePC shall consult
with Ford on the content and format of the Welcome Page and shall reserve
approximately [*] of the available text space on the Welcome Page for the
display of content created by Ford and provided to PeoplePC for inclusion on the
Welcome Page and another [*] for general navigational, program management and
assistance functions including search, web basics, e-mail and help. PeoplePC
shall modify the installed browser interface to include a Ford-branded icon on
the toolbar and desktop that will point to a designated URL address identified
by Ford, as may be changed by Ford from time to time. Access to the Welcome Page
will be restricted to registered and authenticated Eligible Employees. Prior to
accessing the Welcome Page, each employee will be required to input their user
identification and password authentication information. PeoplePC shall use
industry standard security protocols.

Section 5.2.  Localization

     The JOC shall develop a plan for the Localization of the Welcome Page for
non-U.S. English speaking Eligible Employees; provided, however, that no more
than fourteen (14) mutually agreed upon designated languages are included in
such Localization plan.

Section 5.3.  Right to Use Name and Logo

  (a) Ford hereby grants to PeoplePC a limited, non-exclusive, royalty-free
license to use and display the logos of Ford ("Ford Logos") on the Welcome Page
and on other Marketing Materials approved by Ford.  Each use of the Ford Logos
shall be in accordance with the Trademark Usage Guidelines and
Publicity/Advertising Guidelines (MSP10-150) provided by Ford to PeoplePC;
except however, PeoplePC shall have the right to use Ford Logos as expressly
provided in this Agreement and Ford shall provide its prompt approval or
disapproval of use of such Ford Logo after its submission to Ford.

  (b) PeoplePC acknowledges that all right, title and interest in the Ford Logos
are owned exclusively by Ford and that no right is provided to PeoplePC except
the limited license set forth herein.  All goodwill arising from the use of the
Ford Logos shall inure solely to the benefit of Ford.

                                                                             -5-

*****Certain information on this page has been omitted and filed separately with
     the Securities and Exchange Commission. Confidential treatment has been
     requested with respect to the omitted portions.

<PAGE>

                                   ARTICLE 6.
                              SERVICE AND SUPPORT

Section 6.1.  Help Desks

     During the Term, PeoplePC shall maintain a help desk for questions about
the Ford Employee Connectivity Program available to Eligible Employees for
telephone support on a 24 hours-per-day/7 days-per-week basis.  Ford shall
provide information support regarding the Ford Employee Connectivity Program,
including without limitation the provision of information regarding the Ford
Employee Connectivity Program through e-mail communications, intranet and
personnel contacts within the various Ford facilities.

Section 6.2.  Coordination

     Ford and PeoplePC shall work together to develop a process to transfer
requests received by their respective help desks that are more properly
addressed by the other help desk.

Section 6.3.  Localization

     The JOC shall develop a plan for the Localization of the help desk support
for non-U.S. English speaking Eligible Employees; provided, however, that no
more than fourteen (14) mutually agreed upon designated languages are included
in such Localization plan.

Section 6.4.  Internet Service Providers.

     PeoplePC will obtain and maintain a network of internet service providers
for the PeoplePC Solution which provides for simple access to the Internet for
Eligible Employees where it is available on commercially reasonable terms.
PeoplePC will, with consultation from Ford, be responsible for decisions
regarding the maintenance and establishment of such network.  In addition,
PeoplePC will develop Localization capabilities (for a maximum of fourteen (14)
mutually agreed upon designated languages) for the Web pages provided to
Eligible Employees as part of the PeoplePC Solution.

Section 6.5.  Billing Services.

     People PC will administer and process payments owing by Eligible Employees
to Ford for certain services and goods related to PeoplePC Solutions (including,
without limitation, Upgrades and employee co-payments) ("EE Payments") on Ford's
behalf in a manner agreed upon in the Scope of Work.  The parties agree that the
cost of such administration processing of payments shall be borne by Ford.
PeoplePC agrees that it will not charge payment processing fees where EE
Payments are made by the Eligible Employees with valid credit cards and debit
cards ("Credit Cards"). Where payment is not available or feasible through
Credit Cards, the parties agree to use commercially reasonable efforts to
establish alternative methods of payments by Eligible Employees. Where payment
is made in a manner other than through Credit Cards, Ford shall pay for all
associated processing and billing fees incurred by PeoplePC. The parties agree
that the Scope of Work will include mutually agreeable escalation of collection
procedures.  Notwithstanding anything

                                                                             -6-
<PAGE>

in this Agreement, in no event shall PeoplePC be liable to Ford or Ford
Affiliates for an Eligible Employee's failure to pay amounts owing by Eligible
Employees to Ford.

Section 6.6  Additional Member Services.

     The Parties may agree from time to time through the Scope of Work or
otherwise in writing on (i) additional services or features to be provided to
Eligible Employees in connection with such Eligible Employee's use of the
PeoplePC Solutions (including without limitation instant messaging and content
filtering), and (ii) which Party shall bear the costs of such additional
services and features.

                                   ARTICLE 7.
                             ADDITIONAL OBLIGATIONS

Section 7.1.  Additional Obligations

     The Parties have agreed to the terms for additional obligations outlined in
Exhibit C.

                                   ARTICLE 8.
                                      DATA

Section 8.1.  Registration.

     Prior to obtaining a PeoplePC Solution, Eligible Employees will be
obligated to complete PeoplePC's registration process which includes agreeing to
the terms and conditions of the Ford Member Agreement and any other related or
necessary financing services agreements ("Registration Process").

Section 8.2.  Types

  (a) Registration Data.  All personally identifying data or information (e.g.,
name, address, e-mail address) collected from Eligible Employees during the
Registration Process will constitute "Registration Data."  Registration Data
does not include any Marketing Data.

  (b) Marketing Data.  All aggregated data or information collected from
Eligible Employees from their use of the PeoplePC Solution including their use
of the Buyers Club will constitute "Marketing Data."  Marketing Data does not
include any data that personally identifies an Eligible Employee.

Section 8.3.  Ownership and Use

  (a) Registration Data.  Subject to the terms and conditions of this Agreement,
the Registration Data will be deemed the Confidential Information of Ford.  Ford
hereby grants to PeoplePC a non-exclusive, worldwide, perpetual, irrevocable,
royalty-free license to use the Registration Data: (i) to fulfill its
obligations under this Agreement; and (ii) in the normal course of providing,
offering or supporting the PeoplePC Solution to Eligible Employees and the
administration of the Buyers Club to Eligible Employees.  Use by PeoplePC of the
Registration Data

                                                                             -7-
<PAGE>

will also be subject to the privacy policy established by the joint subcommittee
on privacy and applicable law.

  (b) Marketing Data.  Subject to the terms and conditions of this Agreement,
the Marketing Data will be deemed the Confidential Information of PeoplePC.
PeoplePC shall not use the Marketing Data in a manner which would identify in
the aggregate the participation of Eligible Employees in the Ford Employee
Connectivity Program or spending behavior of Eligible Employees as distinct from
other users of PeoplePC.

                                   ARTICLE 9.
                         REPRESENTATIONS AND WARRANTIES

Section 9.1.  Representations and Warranties of PeoplePC

     PeoplePC hereby represents and warrants that: (i) all corporate action on
the part of PeoplePC, its officers, directors and shareholders necessary for the
authorization of this Agreement and the performance of all of its obligations of
PeoplePC hereunder has been taken; (ii) this Agreement, when executed and
delivered, will be a valid and binding obligation of PeoplePC enforceable in
accordance with its terms; and (iii) entering into this Agreement and
performance hereunder does not and will not violate any agreement existing
between PeoplePC and any third party.

Section 9.2.  Representations and Warranties of Ford

     Ford hereby represent and warrant that: (i)  all corporate action on the
part of Ford, the Ford Affiliates, officers, directors and shareholders
necessary for the authorization of this Agreement and the performance of all of
the obligations of Ford and Ford Affiliates hereunder has been taken; (ii) this
Agreement, when executed and delivered, will be a valid and binding obligation
of Ford enforceable in accordance with its terms; and (iii) entering into this
Agreement and performance hereunder does not and will not violate any agreement
existing between Ford and any third party.

Section 9.3.  Disclaimer.

     EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT INCLUDING WITHOUT
LIMITATION SECTION 10 (WARRANTY) OF EXHIBIT A,  PEOPLEPC AND ITS SUPPLIERS MAKE
NO WARRANTIES OR CONDITIONS, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE RELATING
TO ANY OF THE GOODS, SERVICES OR INFORMATION PROVIDED OR MADE AVAILABLE UNDER
THIS AGREEMENT, AND PEOPLEPC AND ITS SUPPLIERS HEREBY SPECIFICALLY DISCLAIM ALL
OTHER EXPRESS, STATUTORY AND IMPLIED WARRANTIES AND CONDITIONS, INCLUDING THE
IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-
INFRINGEMENT AND THE IMPLIED CONDITION OF SATISFACTORY QUALITY.  ALL SOFTWARE IS
LICENSED ON AN "AS IS" BASIS WITHOUT WARRANTY AND INTERNET SERVICES ARE PROVIDED
ON AN "AS IS" AND "AS AVAILABLE" BASIS.  PEOPLEPC AND ITS SUPPLIERS DO NOT
WARRANT THAT (I) THE OPERATION OF PEOPLEPC SOLUTIONS WILL BE UNINTERRUPTED OR
ERROR FREE; (II) PEOPLEPC

                                                                             -8-
<PAGE>

SOLUTIONS WILL MEET THE ELIGIBLE EMPLOYEES' REQUIREMENTS; (III) THE PEOPLEPC
SOLUTIONS WILL OPERATE IN COMBINATIONS AND CONFIGURATIONS SELECTED BY THE END
USER; (IV) THAT ALL SOFTWARE ERRORS WILL BE CORRECTED, OR (V) THE UPTIME OF THE
INTERNET OR TELEPHONIC CONNECTIONS NECESSARY TO ACCESS THE INTERNET WILL BE
AVAILABLE WITHOUT INTERRUPTION.

                                  ARTICLE 10.
                                INDEMNIFICATION

Section 10.1.  Indemnification by PeoplePC

  (a) PeoplePC shall defend, at its own expense, any claim, suit, action or
proceeding brought against Ford or Ford Affiliates by any third party which, if
true would be a breach of any of the representations or warranties made by
PeoplePC under Section 9.1 of this Agreement or a violation by PeoplePC of any
law, ordinance or regulation (each, a "Ford Claim").  PeoplePC shall pay any
damages and costs finally awarded against Ford or Ford Affiliates and/or any
settlement amounts entered into with respect to such claim.

  (b) PeoplePC shall have no obligation to Ford or Ford Affiliates under this
Section 10.1 unless (i) Ford promptly notifies PeoplePC of any Ford Claim for
which indemnification is sought pursuant to this Section 10.1 by Ford; (ii) Ford
provides PeoplePC with a copy of each communication notice or other action
relating to said claim; (iii) PeoplePC has the right to assume sole authority to
conduct the trial or settlement of such claim or any negotiations related
thereto at PeoplePC's expense; and (iv) Ford provides PeoplePC with all non-
privileged information and assistance reasonably requested by PeoplePC, at its
own expense, in connection with such claim or suit.

  (c) PeoplePC shall keep Ford  informed of, and consult with Ford in connection
with the progress of each Ford Claim; and PeoplePC shall not have any right,
without Ford's written consent, to settle any Ford Claim if such settlement
arises from or is part of any criminal action, suit or proceeding or contains an
acknowledgement of liability on the part of Ford or Ford Affiliates.  Ford shall
have the right, in its absolute discretion, to employ at its own expense,
attorneys of its own choice and subject to the foregoing, to participate in the
defense of any Ford Claim.

Section 10.2.  Indemnification by Ford

  (a) Ford shall defend, at its own expense, any claim, suit, action or
proceeding brought against PeoplePC by any third party which, if true would be a
breach of any of the representations or warranties made by Ford under this
Agreement or a violation by Ford or Ford Affiliates of any law, ordinance or
regulation (each, a "PeoplePC Claim").  Ford shall pay any damages and costs
finally awarded against PeoplePC and/or any settlement amounts entered into with
respect to such claim.

  (b) Ford shall have no obligation to People under this Section 10.2 unless (i)
PeoplePC promptly notifies Ford of any PeoplePC Claim for which indemnification
is sought pursuant to this Section 10.2 by PeoplePC; (ii) PeoplePC provides Ford
with a copy of each communication notice

                                                                             -9-
<PAGE>

or other action relating to said claim; (iii) Ford has the right to assume sole
authority to conduct the trial or settlement of such claim or any negotiations
related thereto at Ford's expense; and (iv) PeoplePC provides Ford with all non-
privileged information and assistance reasonably requested by Ford, at its own
expense, in connection with such claim or suit.

  (c) Ford shall keep PeoplePC informed of, and consult with PeoplePC in
connection with the progress of each PeoplePC Claim; and Ford shall not have any
right, without PeoplePC's prior written consent, to settle any PeoplePC Claim if
such settlement arises from or is part of any criminal action, suit or
proceeding or contains an acknowledgement of liability on the part of PeoplePC.
PeoplePC shall have the right, in its absolute discretion, to employ at its own
expense, attorneys of its own choice and subject to the foregoing, to
participate in the defense of any PeoplePC Claim.

                                  ARTICLE 11.
                            LIMITATIONS OF LIABILITY

Section 11.1.  Exclusion of Damages.

     NEITHER PARTY OR ITS SUPPLIERS SHALL BE LIABLE TO THE OTHER OR ANY END USER
FOR ANY INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES, LOSSES, COSTS OR
EXPENSES OF ANY KIND, HOWEVER CAUSED AND WHETHER BASED IN CONTRACT, TORT
(INCLUDING NEGLIGENCE), PRODUCTS LIABILITY OR ANY OTHER THEORY OF LIABILITY,
INCLUDING BUT NOT LIMITED TO LOST PROFITS, COSTS OF PROCUREMENT OF SUBSTITUTE
GOODS, LOSS OF GOODWILL, LOSS OF DATA OR SYSTEM USE, AND OTHER BUSINESS LOSS,
REGARDLESS OF WHETHER SUCH PARTY OR SUPPLIER KNOWS OR HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES, LOSSES, COSTS, OR EXPENSES.

Section 11.2.  Cap

     IN NO EVENT SHALL EITHER PARTY'S LIABILITY UNDER THIS AGREEMENT, REGARDLESS
OF FORM OR THE NUMBER OF ACTION(S), EXCEED THE AMOUNTS RECEIVED BY PEOPLEPC FROM
FORD UNDER THIS AGREEMENT.

Section 11.3.  Failure of Essential Purpose.

     The limitations specified in this Article 11 shall survive and apply even
if any limited remedy specified in this Agreement is found to have failed of its
essential purpose.

                                  ARTICLE 12.
                              TERM AND TERMINATION

Section 12.1.  Term

     Unless earlier terminated in accordance with the provisions of this Article
12, this Agreement will commence on the Effective Date and continue in full
force and effect for three (3) years thereafter ("Term").

                                                                            -10-
<PAGE>

Section 12.2.  Termination for Default

     If either Party materially defaults in the performance of any of its
material obligations hereunder, and if such default is not cured within sixty
(60) days after written notice complaining thereof is received by such Party
indicating the (i) nature and basis of such default and (ii) non-defaulting
Party's intention to terminate this Agreement under this Section 12.2 if such
default is not cured or remedied, then the non-defaulting Party may terminate
this Agreement at any time by written notice to that effect to such Party, as
long as such default remains uncured or unremedied.  Notwithstanding the
foregoing, Ford may not terminate its purchase obligations under any accepted
Release, in whole or in part, without the prior written permission of PeoplePC.

Section 12.3.  Effect of Termination

     In the event of any termination or expiration of this Agreement: (i) Ford
shall pay to PeoplePC all fees or other amounts due and/or owing to PeoplePC
under Releases issued by Ford and accepted by PeoplePC at the time of such
termination upon PeoplePC's fulfillment of such orders; (ii) PeoplePC shall
provide support to Eligible Employees regarding the PeoplePC Solutions in
accordance with the terms of the Member Agreement; (iii) the end user license
agreements relating to the Software will survive in accordance with their terms;
and (iv) PeoplePC shall modify the Welcome Page to remove the content provided
by Ford and to add a link to a URL specified by Ford.

Section 12.4.  Survival.

     The following provisions of this Agreement will survive any expiration or
termination hereof: Sections 5.3(b), 6.5  and 8.3 as well as Articles 9, 10, 11,
12.3, 12.4, 13, 14 and 15 of the Agreement and Articles 9, 10 and 11 of Exhibit
A. In addition, Exhibit C shall survive for a three (3)  year period with
respect to each Eligible Employee who received a PeoplePC Solution under this
Agreement prior to the effective date of termination of this Agreement.

                                  ARTICLE 13.
                               DISPUTE RESOLUTION

Section 13.1.  Arbitration

     If either party initiates litigation on such contractual causes, the other
party shall have the right to initiate mediation and binding arbitration in
accordance with the following: (i) in the case of  Ford and Ford Affiliates
located in countries outside of Europe, the Model Procedure for Mediation of
Business Disputes of the Center for Public Resources, in the case of
arbitration, the CPR Rules for Non-Administered Arbitration of Business Disputes
("CPR"); (ii) in the case of any Ford and Ford Affiliates located in Europe,
with the then-current Model Procedure for Mediation of Business Disputes of the
CPR Institute for Business Resolution or the mediation procedures of the Centre
for Dispute Resolution ("CEDR") and, in the case of arbitration, the Rules of
the London Court of International Arbitration.

                                                                            -11-
<PAGE>

       (1) The parties will jointly appoint a mutually acceptable mediator or
arbitrator, seeking assistance in such regard from CPR or CEDR, as appropriate,
if they have been unable to agree upon such appointment within 20 days.

       (2) The parties agree to participate in good faith in the mediation and
negotiations related thereto for a period of 30 days.  If the parties are not
successful in resolving the dispute through the mediation, then the parties
agree to submit the matter to binding arbitration by a sole arbitrator in
accordance with the CPR Rules for Non-Administered Arbitration of Business
Disputes, or, where the mediation procedures of CEDR have been adopted, in
accordance with the Rules of the London Court of International Arbitration.

       (3) Unless otherwise agreed by the parties in writing, mediation or
arbitration involving Ford and any Ford Affiliate located outside of Europe,
shall take place in New York City, conducted exclusively in English and are
subject to the Federal Arbitration Act, 9 U.S.C.A. (S) 1 et seq. and judgment
upon the award rendered by the Arbitrator, if any, may be entered by any U.S.
court having jurisdiction thereof. Mediation or arbitration involving any Ford
or Ford Affiliate located in Europe shall take place in London and conducted
exclusively in English.  Equitable remedies shall be available in any
arbitration.  Punitive and exemplary damages shall not be awarded.

                                  ARTICLE 14.
                            CONFIDENTIAL INFORMATION

Section 14.1.  Confidentiality Obligation.

     Each Party may use the Confidential Information of the other Party as
necessary to fulfill their obligations or exercise their rights under this
Agreement or as otherwise expressly permitted hereunder.  The Receiving Party
shall take all reasonable measures to protect the secrecy of and avoid the
disclosure and unauthorized use of the Disclosing Party's Confidential
Information.  In preserving the confidence of the Confidential Information, the
Receiving Party shall use the same standard of care that it would use to secure
and safeguard its own confidential information, but in no event less than
reasonable care.  The Receiving Party shall, at its own expense: (i) immediately
notify the Disclosing Party of any material unauthorized possession, use or
knowledge, or attempt thereof, of the Confidential Information by any person or
entity which may have become known to such person arising from the disclosure to
the Receiving Party; (ii) promptly furnish to the Disclosing Party full details
of the unauthorized possession, use or knowledge, or attempt thereof, and use
reasonable efforts to assist the Disclosing Party in investigating or preventing
the recurrence of any unauthorized possession, use of knowledge or attempt
thereof, of the Confidential Information; and (iii) promptly use all reasonable
efforts to prevent a recurrence of any unauthorized possession, use or knowledge
of the Confidential Information.  Notwithstanding the foregoing, in the event a
third party gains access to the Confidential Information of the Disclosing Party
despite the reasonable efforts of the Receiving Party, the Receiving Party shall
not be deemed to be in breach of this Agreement so long as the Receiving Party
uses reasonable efforts to prevent further disclosure or use of such
Confidential Information.

Section 14.2.  Confidentiality of Agreement.

                                                                            -12-
<PAGE>

     Each Party agrees that the terms and conditions, but not the existence, of
this Agreement shall be treated as the other's Confidential Information and that
no reference to the terms and conditions of this Agreement or to activities
pertaining thereto can be made in any form of public or commercial advertising
without the prior written consent of the other Party; provided, however, that
each Party may disclose the terms and conditions of this Agreement:  (i) as
required by any court or other governmental body; (ii) as otherwise required by
law; (iii) to legal counsel of the Parties; (iv) in connection with the
requirements of an initial public offering or securities filing; (v) in
confidence, to accountants, banks, auditors, appraisers and financing sources
and their advisors; (vi) in confidence, in connection with the enforcement of
this Agreement or rights under this Agreement; or (vii) in confidence, in
connection with a merger or acquisition or proposed merger or acquisition, or
the like.  In addition, Ford may provide this Agreement in confidence to any
Ford Affiliate interested in participating in the FECP.

Section 14.3.  Compelled Disclosure.

     If a Receiving Party believes that it will be compelled by a court or other
authority to disclose Confidential Information of the Disclosing Party, it shall
give the Disclosing Party prompt written notice so that the Disclosing Party may
take steps to oppose or restrict such disclosure.

Section 14.4.  Remedies.

     Unauthorized use by a Party of the other Party's Confidential Information
will diminish the value of such information.  Therefore, if a Party breaches any
of its obligations with respect to confidentiality or use of Confidential
Information hereunder, the other Party shall be entitled to seek equitable
relief to protect its interest therein, including injunctive relief, as well as
money damages.

                                  ARTICLE 15.
                                 MISCELLANEOUS.

Section 15.1.  Governing Law.

     The laws of the State of New York (irrespective of its choice of law
principles) govern the validity of this Agreement, the construction of its terms
and the interpretation and enforcement of the rights and duties of the Parties.
THE PARTIES AGREE THAT THE UNITED NATIONS CONVENTION ON CONTRACTS FOR THE
INTERNATIONAL SALE OF GOODS SHALL NOT APPLY TO THIS AGREEMENT.

Section 15.2.  Independent Contractors.

     The Parties are independent contractors.  Nothing contained herein or done
pursuant to this Agreement shall constitute either Party the agent of the other
Party for any purpose or in any sense whatsoever, or constitute the Parties as
partners or joint venturers.

Section 15.3.  Assignment.

     Neither Party shall assign or delegate this Agreement, or any of its rights
or duties hereunder, directly or indirectly, to any third party without the
prior written consent of the other Party except in

                                                                            -13-
<PAGE>

connection with a Change of Control. Any act in derogation of the foregoing is
null and void. Subject to the foregoing, this Agreement will inure to the
benefit of any successors or assigns.

Section 15.4.  Amendment.

     No alteration, amendment, waiver, cancellation or any other change in any
term or condition of this Agreement is valid or binding on either Party unless
mutually assented to in writing by both Parties.

Section 15.5.  No Waiver.

     The failure of either Party to enforce at any time any of the provisions of
this Agreement, or the failure to require at any time performance by the other
Party of any of the provisions of this Agreement, may in no way be construed to
be a present or future waiver of such provisions, nor in any way affect the
validity of either Party to enforce each and every such provision thereafter.
The express waiver by either Party of any provision, condition or requirement of
this Agreement will not constitute a waiver of any future obligation to comply
with such provision, condition or requirement.

Section 15.6.  Force Majeure.

     Neither Party may be deemed in default hereunder, nor shall it hold the
other Party responsible for any cessation, interruption or delay in the
performance of its obligations under this Agreement (other than for payments due
hereunder) due to causes beyond its reasonable control, including: any fire,
flood, earthquake or other natural disaster, act of God, war or armed conflict
(whether or not officially declared), strikes, civil disturbance, disruption of
the public markets or the failure of supply, transportation, telecommunications,
power or other essential commodity or service required in the conduct of its
business, and other similar causes to those listed, in each case where failure
to perform is beyond the reasonable control, and not caused by the negligence
of, the non-performing Party (each a "Force Majeure Event"); provided that the
Party relying upon this Section 15.6: (a) has given the other Party written
notice thereof promptly thereof and (b) shall take all reasonable steps
necessary under the circumstances to mitigate the effects of the Force Majeure
Event upon which such notice is based.  The time for performance of an
obligation under this Agreement will be extended for the time period lost due to
the delay.  If PeoplePC is affected by a Force Majeure Event, then PeoplePC may,
without incurring any liability to Ford, allocate, delay or limit deliveries of
any PeoplePC Solutions; provided, however, PeoplePC allocate in a fair and
reasonable manner.  If the notifying Party is prevented from fulfilling its
obligations under this Agreement by a Force Majeure Event for a period exceeding
forty-five (45) days after such obligation is due, then the other Party may at
its option terminate this Agreement pursuant to Section 12.2 upon written
notice.

Section 15.7.  Severability.

     If, for any reason, a court of competent jurisdiction finds any provision
of this Agreement, or portion thereof, to be invalid or unenforceable, such
provision of the Agreement will be enforced to the maximum extent permissible so
as to effect the intent of the Parties, and the remainder of this Agreement will
continue in full force and effect.  The Parties agree to negotiate in good faith
an

                                                                            -14-
<PAGE>

enforceable substitute provision for any invalid or unenforceable provision that
most nearly achieves the intent and economic effect of such provision.

Section 15.8.  Currency/Language

     All payments to be made by one Party to the other Party under this
Agreement shall be made in U.S. Dollars unless otherwise reasonably requested by
PeoplePC.  All communications from one Party to the other Party under this
Agreement or proceedings relating to this Agreement shall be made or conducted
in English.

Section 15.9.  Notices.

     All notices, requests, demands, waivers, and other communications required
or permitted hereunder must be in writing and will be deemed to have been duly
given: (i) when delivered by hand or confirmed facsimile transmission; (ii) one
day after delivery by receipted overnight delivery; or (iii) four days after
being mailed by certified or registered mail, return receipt requested, with
postage prepaid to the following, or to such other person or address as either
Party shall furnish to the other Party in writing pursuant to the above:

  (a) in the case of notices to PeoplePC, to the General Counsel at the relevant
address set forth at the beginning of this Agreement, with a required copy to
Neil Wolfe, Esq., Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo
Alto, CA 94304.

  (b) in the case of notices to Ford, to  Ford IT Purchasing Manager at  5111
Auto Club Drive, Dearborn, Michigan 48121 with a copy to Office of the General
Counsel also at the address set forth in the beginning of this Agreement.

Section 15.10.   Entire Agreement.

     The terms and conditions herein contained, and the referenced Schedules and
Exhibits which are hereby incorporated herein by reference, constitute the
entire agreement between the Parties with respect to the subject matter hereof
and supersede all previous and contemporaneous agreements and understandings,
whether oral or written, between the Parties with respect to the subject matter
hereof, including without limitation that certain Memorandum of Understanding
dated January 31, 2000.  In the event of any differing, conflicting or
inconsistent terms between this Agreement and the terms of any of its Exhibits
or Schedules, including the Global Terms for Production Parts and Non-Production
Goods and Services, the Purchase Order, Release or any acceptance or
confirmation thereof in Exhibit A the terms of this Agreement shall control.

Section 15.11. Counterparts.

     This Agreement may be executed in counterparts or duplicate originals, both
of which shall be regarded as one and the same instrument, and which are the
official and governing version in the interpretation of this Agreement.

Section 15.12.    Captions and Headings.

                                                                            -15-
<PAGE>

     The captions and headings used in this Agreement are used for convenience
only and are not to be given any legal effect

Section 15.13.  Construction.

     This Agreement is to be fairly interpreted and construed in accordance with
its terms and without strict interpretation or construction in favor of or
against either Party. Each Party had  the opportunity to consult with counsel
in the negotiation of this Agreement.

     IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
by duly authorized officers or representatives to be effective as of the date
first above written.

PeoplePC, Inc.                                    Ford Motor Company

By: /s/ Nick Grouf                                By: /s/ Michael Radojevic
    ----------------------------                      --------------------------

Name:   Nick Grouf                                Name:   Michael Radojevic
      --------------------------                        ------------------------

Title: CEO                                        Title: Ford Motor Company
       -------------------------                         Purchasing
                                                         -----------------------

                                                                            -16-
<PAGE>

                                  SCHEDULE 1
                                  DEFINITIONS

1.   Definitions

     (a)  "Buyers Club" means the on-line buying club made available by PeoplePC
           -----------
to Members through which Members may purchase goods and services from Buyers
Club Partners as may be modified by PeoplePC from time to time.

     (b)  "Buyers Club Partner" means a company or person that offers goods or
           -------------------
services for sale through the Buyers Club.

     (c)  "Change of Control" means with respect to a Party: (i) the direct or
           -----------------
indirect acquisition of either (a) the majority of the voting stock of such
Party or (b) all or substantially all of the assets of such Party, by another
entity in a single transaction or series of related transactions; or (ii) such
Party is merged with, or into, another entity.

     (d)  "Confidential Information" means (i) any information disclosed by one
           ------------------------
Party (the "Disclosing Party") to the other (the "Receiving Party"), which, if
            ----------------                      ---------------
in written, graphic, machine-readable or other tangible form is marked as
"Confidential" or "Proprietary", or which, if disclosed orally or by
demonstration, is identified or should reasonably be understood to be at the
time of initial disclosure as confidential and reduced to a writing marked
"Confidential" and delivered to the Receiving Party within thirty (30) days of
such disclosure; (ii) the terms of this Agreement as set forth in Section 14.2;
and (iii) any other information so designated under this Agreement.
Confidential Information does not include, however, any information that the
Receiving Party can demonstrate: (a) was independently developed by the
Receiving Party without any use of the Disclosing Party's Confidential
Information or by the Receiving Party's employees or other agents (or
independent contractors hired by the Receiving Party) who have not been exposed
to the Disclosing Party's Confidential Information; (b) becomes known to the
Receiving Party, without restriction, from a source other than the Disclosing
Party without breach of this Agreement and that had a right to disclose it; (c)
was in the public domain at the time it was disclosed or becomes in the public
domain through no act or omission of the Receiving Party; or (d) was rightfully
known to the Receiving Party, without restriction, at the time of disclosure.

     (e)  "Co-Pay" means the amount paid by each Eligible Employee for a
           ------
PeoplePC Solution.

     (f)  "Existing Program" means the agreement in existence as of the
           ----------------
Effective Date between Ford Motor Company and a supplier ("Supplier") pursuant
to which Supplier makes available to employees of Ford various personal computer
products manufactured by such Supplier at a discount from the standard list
price.

     (g)  "Eligible Employees" means those employees of Ford and Ford Affiliates
           ------------------
determined to be eligible for receipt of a PeoplePC Solution through the Ford
Employee Connectivity Program in accordance with the following criteria as may
be modified from time to time by the JOC in

                                                                            -17-
<PAGE>

writing: all eligible full-time employees of Ford and its wholly owned
affiliates as of the Effective Date and such other employees as may be agreed
upon by the Parties in writing.

     (h)  "Equity Investment Agreements" has the meaning set forth in the
           ----------------------------
recitals.

     (i)  "Force Majeure Event" has the meaning set forth in Section 15.7.
           -------------------

     (j)  "Ford Affiliate" means a corporation, limited liability company or
           --------------
other entity of similar nature that is controlled by Ford, such control to be
measured by the beneficial ownership of a majority of the voting stock or equity
of that entity.

     (k)  "Ford Claim" has the meaning set forth in Section 10.1.
           ----------

     (1)  "Ford Employee Connectivity Program" has the meaning set forth in
           ----------------------------------
Section 3.2.

     (m)  "Ford Logos" has the meaning set forth in Section 5.3.
           ----------

     (o)  "Ford Member Agreement" means the three (3) year on-line agreement
           ---------------------
governing the relationship between Eligible Employees and PeoplePC, including
the material terms currently found at http://www.peoplepc.com/legal.asp. and
                                      ---------------------------------
such other terms as mutually agreed upon by the Parties.

     (p)  "Infringement Claim" has the meaning set forth in Section 11 of
           ------------------
Exhibit A.

     (q)  "Joint Oversight Committee" or "JOC" has the meaning set forth in
           -------------------------      ---
Section 2.1.

     (r)  "Localization" means the translation of English language materials
           ------------
into a designated non-English language such that a user fluent in such non-
English language would be able to understand and/or operate such materials to
the same extent a user fluent in English would be able to understand and/or
operate such materials in English.

     (s)  "Marketing Data" has the meaning set forth in Section 8.2.
           ---------------

     (t)  "Marketing Plan" has the meaning set forth in Section 4.2.
           --------------

     (u)  "Net Revenues" means gross revenues actually received by PeoplePC from
           ------------
a Buyers Club Partner for the sale of a Partner Product through the Buyers Club
to an Eligible Employee less amounts paid or credited to a Buyers Club Partner
for returns, refunds or other allowances.

     (v)  "Order Fulfillment Form" means the form (as determined by PeoplePC
           ----------------------
consistent with the terms of this Agreement) which shall be submitted by
Eligible Employees who desire to order a PeoplePC Solution pursuant to the terms
of this Agreement.

     (w)  "Partner Product" means a good or service offered for sale through the
           ---------------
Buyers Club.

     (x)  "PeoplePC Solution" has the meaning set forth in Section 3.2 and any
           -----------------
other software hardware or services that the Parties may agree upon.

                                                                            -18-
<PAGE>

     (y)  "Project Coordinator" has the meaning set forth in Section 2.2.
           -------------------

     (z)  "Purchase Order" a non-binding order for People PC Solutions Issued by
           --------------
Ford to PeoplePC, consistent with the terms of this Agreement.  Unless otherwise
agreed to in writing by PeoplePC, the provisions of the Purchase Order shall not
contain any obligations, restrictions or specifications on PeoplePC, and any
such provisions shall be deemed by the parties to be null and void and without
force or effect.

     (aa) "Registration Data" has the meaning set forth in Section 8.2.
           ------------------

     (bb) "Release" means a binding order by Ford or Ford Affiliates to purchase
           -------
People PC Solutions in accordance with the terms of this Agreement. Unless
otherwise agreed to in writing by PeoplePC, the provisions of the Release shall
not contain any obligations, restrictions or specifications on PeoplePC, and any
such provisions shall be deemed by the parties to be null and void and without
force or effect.

     (cc) "Scope of Work" has the meaning set forth in Section 3.1.
           -------------

     (dd) "Software" has the meaning set forth in Section 9 of Exhibit A.
           --------

     (ee) "Solution Upgrade" means an upgrade to the basic PeoplePC Solution as
           ----------------
set forth in Exhibit B and identified as the "Basic Configuration".

     (ff) "Term" has the meaning set forth in Section 12.1.
           ----

     (gg) "Warranty Period" has the meaning set forth the applicable supplier
           ---------------
warranty.

     (hh) "Welcome Page" has the meaning set forth in Section 5.1.
           ------------

     2.   Construction

     (a)  All references in this Agreement to "Articles," "Sections" and
                                               --------    --------
"Exhibits" refer to the articles, sections and exhibits of this Agreement.
 --------

     (b)  As used in this Agreement, neutral pronouns and any variations thereof
shall be deemed to include the feminine and masculine and all terms used in the
singular shall be deemed to include the plural, and vice versa, as the context
may require.

     (c)  The words "hereof," "herein" and "hereunder" and other words of
                     ------    ------       ---------
similar import refer to this Agreement as a whole, as the same may from time to
time be amended or supplemented, and not to any subdivision contained in this
Agreement.

     (d)  The word "including" when used herein is not intended to be exclusive
                    ---------
and means "including, without limitation."
           -----------------------------

                                                                            -19-
<PAGE>

                                   EXHIBIT A
                                   ---------
                                 GLOBAL TERMS
                                 ------------
          FOR PRODUCTION PARTS AND NON-PRODUCTION GOODS AND SERVICES
          ----------------------------------------------------------

     GENERAL

     These terms and conditions and associated documents are issued on behalf of
the Ford company identified on the face of a Purchase Order or Release as the
"Buyer" and will apply to all orders issued to PeoplePC as the PeoplePC for the
PeoplePC Solutions and for the prices identified in Exhibit B hereto.  PeoplePC
Solutions may be ordered by Ford or Ford Affiliates and distributed only to  its
"Eligible Employees" as that term is defined and agreed upon by the parties in
the Agreement.

     1.   OFFER and ACCEPTANCE

     (a)  Within three (3) days following the Effective Date of the Agreement,
Ford shall issue a Purchase Order. Upon receipt of a Purchase Order, PeoplePC
shall indicate its acceptance in writing or promptly inform Ford of its
rejection and reasons therefor.  Thereafter, a Release against Purchase Order is
an offer to PeoplePC by Ford or Ford Affiliates to enter into the purchase and
supply agreement it describes.  Each Release shall provide the information set
forth in the Order Fulfillment Form.

     (b)  Upon receipt of a Release, PeoplePC shall indicate its acceptance in
writing or promptly inform Ford or Ford Affiliate of its rejection and reasons
therefor.

     (c)  Once accepted, such Purchase Order or Release together with these
terms and conditions will be the complete and exclusive statement of the
agreement for purchase. Any modifications proposed by PeoplePC or Ford or Ford
Affiliates are not part of the agreement in the absence of the other party's
written acceptance.

     (d)  The Parties agree to negotiate in good faith regarding volume
commitments, inventory and delivery of PeoplePC Solutions.

     2.   MODIFICATIONS

     (a)  Ford or Ford Affiliates, may not without the written acceptance of
PeoplePC, change the design (including drawings, materials and specifications),
quantity, price, selection, processing, method of packing and shipping, and the
date or place of delivery of the PeoplePC Solutions.

     (b)  PeoplePC will not make any change in the design, processing,
selection, price, place of delivery of the PeoplePC Solutions without Ford's
written approval; provided however, PeoplePC may change hardware components such
that the hardware components are of equal or greater performance and/or
compatibility as the substituted hardware.  PeoplePC shall provide prompt notice
of any known changes in hardware components allowed under this Section 2(b)

     3.   BAILED PROPERTY

     A party receiving the property of the other party ("Recipient") bears all
responsibility for loss of and damage to any property owned by the other party
("Provider") and possessed by Recipient for use in performing in accordance with
this Agreement, including responsibility for loss and damage which occur despite
Recipient's exercise of reasonable care, but excluding normal wear and tear.
Recipient will (i) properly house and maintain such property on Recipient's
premises, and (ii) refrain from commingling it with the property of Recipient or
with that of a third party.  Provider will have the right to enter Recipient's
premises at reasonable times to inspect such property. Recipient will assign to
Provider any claims Recipient has against third parties with respect to
Provider's property.  Upon request, Recipient shall immediately deliver such
property at Provider's option F.O.B. Carrier Provider's facility (Ex Works
Loaded) or F.O.B. Provider's premises (CIF Ford Plant/Delivered Ford Plant),
properly packed and marked in accordance with the requirements of the carrier
and Provider.

                                                                            -20-
<PAGE>

     4.   DELIVERY DATES, RELEASES

     Delivery Dates will be mutually agreed upon by the parties in writing.
PeoplePC shall use its commercially reasonable efforts to meet such delivery
dates. Ford or Ford Affiliates may return overshipments (solely due to
PeoplePC's fault) to PeoplePC at PeoplePC's risk and reasonable expense for all
packing, handling, sorting, and transportation.   All deliveries will be made
FOB (Carrier facility).

     5.   PACKING, MARKING, AND SHIPPING

     (a)  PeoplePC (and its shipping contractors) will pack, mark and ship
PeoplePC Solutions in accordance with all applicable regulatory packaging
standards and, as appropriate, the carrier transporting such PeoplePC Solutions
or as otherwise agreed upon by the parties in writing.

     (b)  Upon request, Ford or Ford Affiliates will provide reasonable
assistance to PeoplePC with regard to packing, marking, routing, and shipping
that will enable PeoplePC to secure the most economical transportation rates.

     (c)  PeoplePC will not charge separately for packing, marking, or shipping,
or for materials used therein unless Ford or Ford Affiliate specifies in writing
that it will reimburse PeoplePC for such charges.

     6.   SHIPPING DOCUMENTS

     The parties shall agree in writing as to the appropriate method and
location of delivery of the PeoplePC Solutions in each instance, including
without limitation, whether shipment will be to a Ford facility or directly to a
residence. Each party will comply with applicable laws regarding shipment of
PeoplePC Solutions, including without limitation applicable export/import
regulations. The parties shall agree in writing on the form and frequency of
shipment reports to be supplied by PeoplePC to Ford.

     7.   INSPECTION

     Ford and PeoplePC shall agree in writing upon appropriate inspection
procedures, if any.

     8.   INVOICES, PAYMENT

     (a)  Payment terms shall be as agreed upon by the parties in writing, and
in absence of such agreement, payment shall be made net 30 days from the date of
invoice.

     (b)  PeoplePC agrees that all its accounts with Ford and Ford Affiliates
will be administered on a net settlement basis and that Ford and Ford Affiliates
may set off debits and credits against any of PeoplePC's accounts regardless of
the Purchase Orders or contracts from which such debits or credits arise.

     (c)  Ford and Ford Affiliates will be liable and indemnify PeoplePC for all
applicable taxes, duties, tariffs  and similar items related to the purchase of
PeoplePC Solutions by Ford, Ford Affiliates or Eligible Employees, excluding
only taxes on PeoplePC's net income.  PeoplePC shall provide its reasonable
assistance (at Ford's expense) with respect to Ford's efforts to comply with and
minimize its obligations under this Section 8(c) provided, however, nothing
herein shall be deemed to mitigate Ford's liability for all applicable taxes,
value added taxes, duties, tariffs and similar items related to its purchase of
PeoplePC Solutions, excluding only taxes on PeoplePC's net income. The total
price specified for PeoplePC Solutions on a Release and/or order confirmation
will include all elements of freight, duty and tax as specified in the relevant
delivery term with the exception of value added tax (VAT), if applicable, which
will be shown separately on PeoplePC's invoice.  Any failure to so specify or
show such amounts on the invoice will not relieve Ford and Ford Affiliates of
their liability.

     9.   SOFTWARE TITLE AND USE RESTRICTIONS.

                                                                            -21-
<PAGE>

     Notwithstanding anything else in this Agreement or any Purchase Order or
Release, Ford and Ford Affiliates shall not take any title to any software or
related documentation ("Software") provided as part of any PeoplePC Solutions
under this Agreement.  Ford's use, and the use of Eligible Employees or any
subsequent recipients, of such Software shall be subject to the terms of the
applicable license agreement. Ford's use, and the use of Eligible Employees, of
Internet services and content shall be subject to the terms and conditions set
forth therein and the privacy policy mutually agreed upon by the parties in
writing.

     10.  WARRANTY and SERVICING OF PEOPLE PC SOLUTIONS

     (a)  To the extent allowed under its agreements with its suppliers, and
applicable law, PeoplePC shall pass through the warranties provided by its
suppliers of PeoplePC Solutions to the Eligible Employees that acquire PeoplePC
Solutions hereunder.  In addition, PeoplePC shall cause its contracted service
providers to provide servicing of PeoplePC Solutions purchased hereunder to
Eligible Employees, such that Eligible Employees shall be entitled to a service
program that is no less favorable than that provided in the Service Agreement
set forth in Exhibit D ("Service Agreement").  The Parties agree and acknowledge
that Exhibit D relates to PeoplePC Solutions located in the United States and
that PeoplePC Solutions located outside of the United States will be subject to
a Service Agreement that offers substantially the same level of service as that
provided in Exhibit D (except for the provision of in-home service).  The
Parties agree that notwithstanding the terms of Exhibit D, Eligible Employees
shall have no right to transfer the Service Agreement and that as between Ford
and Eligible Employees, any refunds forthcoming under a Service Agreement shall
be the property of Ford.

     (b)  Notwithstanding the warranty of this Section 10, PeoplePC shall have
no obligation or responsibility with respect to any PeoplePC Solutions that (a)
have been disassembled, modified or altered without PeoplePC's written
authorization or subject to an attempted repair by an unauthorized technician;
(b) has not been used in accordance with documentation for such PeoplePC
Solution; (c) has been subjected to unusual electrical or physical stress;
neglect; misuse; abuse; accident; loss or damage in transit; improper storage,
testing or connection; or unauthorized repair; or (d) is no longer covered under
the Warranty Period.

     (c)  The parties shall agree in writing upon the procedures for return,
repair or replacement of the PeoplePC Solutions, including whether PeoplePC's
contracted service provider shall visit the location of the PeoplePC Solution or
whether the PeoplePC Solution shall be delivered to a drop off point.

     (d)  Ford and Ford Affiliates represent and warrant that (1) it will not
provide the PeoplePC Solutions to Eligible Employees or other third parties
without also providing copies of the user licenses and other documentation
provided with such PeoplePC Solutions, and (2) it will not make any
representations on behalf of PeoplePC regarding the PeoplePC Solutions
inconsistent or in excess of those provided by the PeoplePC.

     11.  INFRINGEMENT INDEMNITY

     (a)  PeoplePC shall defend, at its own expense, any claim, suit, action or
          proceeding brought against Ford by any third party which alleges that
          the PeoplePC Solutions infringe any present patent, copyright, trade
          mark based (i) alone, or (ii) in combination in accordance with
          applicable documentation provided to Ford or Ford's Eligible Employees
          ("Infringement Claim"). PeoplePC shall pay any damages and costs
          finally awarded against Ford and/or any settlement amounts entered
          into with respect to such claim.

     (b)  PeoplePC shall have no obligation to Ford under this Section 11 unless
          (i) Ford and Ford Affiliates promptly notifies PeoplePC of any
          Infringement Claim for which indemnification is sought pursuant to
          this Section 11 by Ford; (ii) Ford and Ford Affiliates provides
          PeoplePC with a copy of each communication notice or other action
          relating to said claim; (iii) PeoplePC has the right to assume sole
          authority to conduct the trial or settlement of such claim or any
          negotiations related thereto at PeoplePC's expense; and (iv) Ford and
          Ford Affiliates provides PeoplePC with all non-privileged information
          and assistance reasonably requested by PeoplePC, at its own expense,
          in connection with such claim or suit.

                                                                            -22-
<PAGE>

     (c)  The remedy set forth in this Section 11 shall not apply to the extent
          that such infringement arises from (a) use of the PeoplePC Solutions
          in a manner which is not provided for in the applicable documentation
          or Software license; (b) use of other than a current unaltered release
          of the Software; (c) modification of the PeoplePC Solutions not
          authorized by PeoplePC or (d) content and materials provided by Ford.
          In the event that it is adjudicatively determined or PeoplePC
          reasonably believes that the PeoplePC Solutions or any part thereof
          may infringe any intellectual property rights, PeoplePC shall, at its
          option, (i) procure for Ford and Ford Affiliates and its Eligible
          Employees the right to continue using such PeoplePC Solutions; (ii)
          modify the PeoplePC Solutions to avoid such infringement; or (iii)
          replace the PeoplePC Solutions with an equivalent non-infringing
          substitute. If all of the remedies in (i) through (iii) above are
          unavailable, PeoplePC shall (1) require that Ford and Ford Affiliates
          and Eligible Employees to return any affected PeoplePC Solutions and
          refund to Ford and Ford Affiliates the actual price paid for such
          PeoplePC Solutions less a use charge based on straight-line
          depreciation over a 36 month useful life as measured from the date of
          delivery of each People PC Solution and (2) terminate this Agreement.

     (d)  THIS SECTION 11 STATES THE ENTIRE LIABILITY AND OBLIGATION OF PEOPLEPC
          AND ITS SUPPLIERS AND, THE EXCLUSIVE REMEDY OF FORD AND FORD
          AFFILIATES AND ITS ELIGIBLE EMPLOYEES WITH RESPECT TO ANY INTELLECTUAL
          PROPERTY CLAIM RELATING TO THE PEOPLEPC SOLUTIONS.

     12.  ADVERTISING

     Any reference other than factual or nominative references to Ford and Ford
Affiliates or any of its Associated Companies or use of Ford's trade marks or
logos by PeoplePC in PeoplePC's advertising or publicity materials will comply
with Ford's Publicity/Advertising Guidelines (MSP10-150); except however,
PeoplePC shall have the right to use Ford Logos as expressly provided in this
Agreement and Ford shall provide its prompt approval or disapproval of use of
such Ford Logo.

     13.  AUDIT RIGHTS

     Ford will have the right during normal business hours  to send its
authorized representatives to examine all pertinent documents and materials in
the possession or under the control of PeoplePC relating to any of PeoplePC's
obligations this Agreement.  Ford shall be responsible for the costs and
expenses of such audit and agrees that it shall not conduct the audit in a
manner which is disruptive of PeoplePC's business.  PeoplePC shall maintain all
pertinent books and records relating to a Release for a period of two years
after completion of services or delivery of PeoplePC Solutions pursuant to that
Purchase Order.

     14.  COMPLIANCE WITH LAW

     For PeoplePC Solutions shipped to European destinations PeoplePC will
notify Ford of the 'Classification of Dangerous Goods' in conformity with the
"European Agreement concerning the International Carriage of Dangerous Goods"
prior to the first delivery of such PeoplePC Solutions.

     15.  CONFLICTING TERMS.

     Except with respect to modifications and amendments in accordance with
Section 15.5 of the Agreement, the terms and conditions of this Agreement,
including the Exhibits attached hereto, shall prevail, notwithstanding any
contrary, additional, different, altering or conflicting terms in any policy,
quotation, Purchase Order, sales acceptance or acknowledgment, confirmation or
other document issued by either party affecting the purchase and/or sale of
PeoplePC Solutions.

                                                                            -23-
<PAGE>

                                   Exhibit B

                              PeoplePC Solutions

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
                   Desk Top        Desk Top           Desk Top          Desk Top          Lap Top          Lap Top
                   Basic           Basic Plus         Premium           Ultimate          Premium          Ultimate
------------------------------------------------------------------------------------------------------------------------
<S>                <C>              <C>               <C>               <C>               <C>              <C>
Processor          Celeron 500      Celeron 533       Pentium-III       Pentium-III       Pentium-III      Pentium-III
                                                      600Mhz            733Mhz            45-500 Mhz       500-600Mhz
------------------------------------------------------------------------------------------------------------------------
RAM                64MB             64MB              128MB             256MB             64MB             128MB
------------------------------------------------------------------------------------------------------------------------
HardDrive          4.3 GB           10.2 GB           20.4 GB           40.0 GB           5 GB             10 GB
------------------------------------------------------------------------------------------------------------------------
Modem              56Kb             56Kb              56Kb              56Kb              56Kb             56Kb
                   modem            modem             modem             modem             modem            modem
------------------------------------------------------------------------------------------------------------------------
Optical 1          48x CD-          CD-RW             CD-RW             CD-RW             24x CD-          DVD
                   ROM              (burner)          (burner)          (burner)          ROM
------------------------------------------------------------------------------------------------------------------------
Optical 2          N/A              N/A               DVD Player        DVD Player        N/A              N/A
------------------------------------------------------------------------------------------------------------------------
Network            N/A              10-100            10-100            10-100            N/A              N/A
Card                                Network Card      Network Card      Network Card
------------------------------------------------------------------------------------------------------------------------
Keyboard           Keyboard         Keyboard          Keyboard          Keyboard
------------------------------------------------------------------------------------------------------------------------
Mouse              Mouse            Mouse             Mouse             Mouse             Touch Pad        Touch Pad
------------------------------------------------------------------------------------------------------------------------
Speakers           Small Polk       Small Polk        Large Polk        Large Polk        Sound Blaster    Sound Blaster
                   Audio Spkrs      Audio Spkrs       Audio Spkrs       Audio Spkrs       Pro Compatible   Pro Compatible
                                                                        and Subwoofer
------------------------------------------------------------------------------------------------------------------------
Monitor            15" color        17" Color         17" Color         19" Color         12.1" TFT        14.1" TFT
------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                                                            -24-
<PAGE>

<TABLE>
---------------------------------------------------------------------------------------------------------------------------
<S>                <C>              <C>               <C>               <C>               <C>              <C>
                   Monitor          Monitor           Monitor           Monitor
---------------------------------------------------------------------------------------------------------------------------
Video              8Mb              8Mb               Premium Video     Premium video     4MB              4MB
                                                      Card w/16MB       Card w/16MB
                                                                        and TV-out
---------------------------------------------------------------------------------------------------------------------------
Chassis            Mini-tower       Mini-tower        Mid-Tower         Mid-Tower         N/A              N/A
---------------------------------------------------------------------------------------------------------------------------
Software **        MS-works 2000,   MS-works 2000,    MS-works 2000,    MS-works 2000,    MS-works 2000,   MS-works 2000,
                   MS-Money,        MS-Money,         MS-Money,         MS-Money,         MS-Money,        MS-Money,
                   Quicken Basic    Quicken Basic     Quicken Basic     Quicken Basic     Quicken Basic    Quicken Basic
                   2000,            2000,             2000,             2000,             2000,            2000,
                   QuickLinkIII,    QuickLinkIII,     QuickLinkIII,     QuickLinkIII,     QuickLinkIII,    QuickLinkIII,
                   MS Encarta,      MS Encarta,       MS Encarta,       MS Encarta,       MS Encarta,      MS Encarta,
                   McAfee           McAfee            McAfee            McAfee            McAfee           McAfee
                   Antivirus        Antivirus         Antivirus         Antivirus         Antivirus        Antivirus
---------------------------------------------------------------------------------------------------------------------------
Power Protector    APC surge        APC surge         APC surge         APC surge         APC surge        APC surge
                   protector        protector         protector         protector         protector        protector
---------------------------------------------------------------------------------------------------------------------------
Printer            HP 610 Color     HP 610 Color      HP 610 Color      HP 610 Color      HP 610 Color     HP 610 Color
                   Inkjet           Inkjet            Inkjet            Inkjet            Inkjet           Inkjet
---------------------------------------------------------------------------------------------------------------------------
Carrying Case      N/A              N/A               N/A               N/A               Nylon Carrying   Nylon Carrying
                                                                                          Case             Case
---------------------------------------------------------------------------------------------------------------------------
Price              [*]              [*]               [*]               [*]               [*]              [*]
payable by
Ford (exclusive
of taxes, duties
and similar
charges)
---------------------------------------------------------------------------------------------------------------------------
Upgrade
Price
payable by         [*]              [*]               [*]               [*]               [*]              [*]
Employee
(exclusive of
taxes, duties
and similar
charges)
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

     The PeoplePC Solutions above are offered in U.S. English and are to be made
available to U.S.-based Eligible Employees in accordance with the terms of the
Agreement. For those Eligible Employees based outside of the U.S., the

                                                                            -25-

*****Certain information on this page has been omitted and filed separately with
     the Securities and Exchange Commission. Confidential treatment has been
     requested with respect to the omitted portions.

<PAGE>

Parties will agree upon appropriate Internet access, software and hardware
configurations and pricing thereof, with Localized versions to be provided as
agreed upon by the parties pursuant to the terms of the Agreement. Subject to
Section 3.3, included with each of the PeoplePC Solution hardware and software
configurations above, and for so long as long the user of the PeoplePC Solution
is an Eligible Employee, and subject to applicable law and local infrastructure:

               1.   PeoplePC use commercially reasonable efforts to include with
                    each PeoplePC Solution, an unlimited Internet connectivity
                    (for the additional cost of a local call). Supplier will use
                    commercially reasonable efforts to provide local call cost
                    coverage in all areas, worldwide. Because phone service
                    outside of the U.S. varies by country, PeoplePC will make
                    reasonable efforts to provide service similar to regionally
                    acceptable practices. In those areas where at least 500
                    Eligible Employees are impacted by not having a local call
                    access to the Internet, People PC will make commercially
                    reasonable efforts to extend the services to such regions.

               2.   Each PeoplePC Solution shall include two (2) e-mail
                    mailboxes, each with a 5MB storage capacity. Additional
                    mailboxes may be purchased by Eligible Employees at the
                    price of [*] per additional mailbox with 5MB storage
                    capacity for use during the term of such Eligible Employee's
                    Ford Member Agreement and additional capacity may be
                    purchased at a price to be agreed upon by the Parties.

               3.   Each PeoplePC Solution shall include web page hosting for a
                    single web page with a maximum capacity of 10MB of storage
                    and additional capacity may be made available on terms
                    mutually agreed upon by the Parties.

               4.   The People PC Solution also includes the service contract
                    which shall provide at least that level of service provided
                    in Exhibit D. Supplier will use commercially reasonable
                    efforts to provide for "at-home" service for each PeoplePC
                    Solution located within fifty (50) miles of an authorized
                    service provider ("At-Home Service Range"). For those People
                    PC Solutions located beyond Supplier's At-Home Service Range
                    in the United States, Supplier or its sub-contractors will
                    provide for postage paid depot services. For locations
                    outside of the United States, Supplier will pursue a
                    worldwide at home service capability, and offer a postage
                    paid depot service until it has achieved an at home service
                    capability.

          **  Software shall be provided with the PeoplePC Solution either
loaded on the hardware, or as a stand alone to be loaded, subject to supply
constraints and applicable law. Subject to Ford's approval, PeoplePC will
provide upgrades to the software on a going-forward basis as available without
additional cost to Ford for those PeoplePC Solutions which have not yet been
delivered under the terms of this Agreement.

          PEOPLEPC SOLUTION UPGRADE OPTIONS:

<TABLE>
<CAPTION>
          -----------------------------------------------------------------------------------------------
                                    1/ST/ UPGRADE        2/ND/ UPGRADE                3/RD/ UPGRADE
          -----------------------------------------------------------------------------------------------
           <S>                      <C>                  <C>                          <C>
           PRINTERS

           and costs payable by     HP 930 Color         HP Officejet T45XI           HP 1100 AXI
           Eligible Employees       Inkjet                                            Laserjet
                                                         Color Printer, Scanner,
           (exclusive of taxes,                          Copier
           duties and similar
           charges)                 [*]                  [*]                          [*]
          -----------------------------------------------------------------------------------------------

           LAP TOP                  Port Replicator,     N/A                          N/A
           UPGRADE: DESK            Keyboard, 17"
           TOP KIT                  Monitor, Polk
          -----------------------------------------------------------------------------------------------
</TABLE>

                                                                            -26-

*****Certain information on this page has been omitted and filed separately with
     the Securities and Exchange Commission. Confidential treatment has been
     requested with respect to the omitted portions.

<PAGE>

<TABLE>
          ------------------------------------------------------------------------------------------------
           <S>                          <C>                      <C>                     <C>
           and costs payable by         Speakers with
           Eligible Employees           sub-woofer, mouse,
           (exclusive of taxes,         10-100 network
           duties or similar            card.
           charges)
          ------------------------------------------------------------------------------------------------

           MONITORS                     From 15" to 17"          From 17" to 19"         From 17" to 19"

           and costs payable by         [*]                      [*]                     [*]
           Eligible Employees

           (exclusive of taxes,
           duties and similar           From 15" to 19"
           charges)
                                        [*]
          ------------------------------------------------------------------------------------------------
</TABLE>

     The upgrades above are offered in U.S. English and are to be made available
to U.S.-based Eligible Employees in accordance with the terms of the Agreement.
For those Eligible Employees based outside of the U.S., the parties will agree
upon possible upgrades and pricing, with Localized versions to be provided as
agreed upon by the parties pursuant to the terms of the Agreement.

                                                                            -27-

*****Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>

                                   EXHIBIT C
                             ADDITIONAL OBLIGATIONS

     Buyers Club

     As part of the PeoplePC Solution, each Eligible Employee will be provided
the opportunity to participate in the Buyers Club.  During the Term and only
after PeoplePC has recouped its Ford Costs, PeoplePC shall pay to Ford a sum
that is equal to [*] "Ford Costs" means PeoplePC's fully burdened costs of
developing, implementing and subsidizing the PeoplePC Solutions provided through
the Ford Employee Connectivity Program, with such costs currently estimated at
[*] per month per Eligible Employee (assuming [*] Eligible Employees). The
Parties acknowledge that this cost estimate is non-binding. The Parties
acknowledge that PeoplePC currently estimates that the PeoplePC shall remit to
Ford the [*] within thirty (30) days after the end of the calendar quarter in
which the [*] are recognized by PeoplePC. Each such [*] payment will be
accompanied by a report in a mutually agreed upon format detailing the
calculation of [*] by PeoplePC and such report will be deemed the Confidential
Information of PeoplePC.

     The Parties agree that provided the following conditions are met, Ford and
Ford Affiliates have the opportunity, with respect to the sale (but not the use)
of certain products and services as agreed to by Ford and PeoplePC, to obtain
either (i) the [*] (as compared to other partners in the Buyers Club who
primarily sell the same services or products (excluding in all instances Budget
Rent-A-Car and its successors in interest)) in the Buyers Club web site that is
solely directed to Eligible Employees under the Ford Employee Connectivity
Program ("Ford Buyers Club") or (ii) a "Logo" position on the applicable web
page in the Ford Buyers Club where other Buyers Club partners are generally
displayed. The foregoing is conditioned upon (1) Ford paying to PeoplePC the [*]
within thirty (30) days after the end of the calendar quarter to which such [*]
relate, and (2) Ford and PeoplePC's agreement on the value and timing of [*].
For the purpose of this Exhibit C, (a) "Logo" means a static logo provided to
PeoplePC by Ford and displayed in a mutually agreeable size and prominence and
(b) [*] means those [*] that PeoplePC would have earned had it not been for the
rights granted to Ford under this paragraph. PeoplePC agrees that the Ford
Buyers Club will not offer the sale of [*] by partners who are not Ford or Ford
Affiliates without the written consent of Ford.

     In addition, Ford Motor Credit has the option to enroll in the Generic
Buyer's Club on pricing terms no less favorable than those provided to other
Comparable Partners provided that Ford Motor Credit provides a value to PeoplePC
customers that is substantially the same as that provided by Comparable
Partners.  For the purpose of this Exhibit C, (y) "Generic Buyers Club" means
those web pages carrying the "Buyer's Club" brand generally offered to PeoplePC
customers whereby PeoplePC partners with third parties to provide discounts on
goods and services to PeoplePC customers and where PeoplePC does not have a
contractual obligation to provide a discrete Buyers Club service similar to the
Ford Buyers Club to such PeoplePC customers, and (z) "Comparable Partners" means
other sellers of competitive products and services that are comparable to those

                                                                            -28-

*****Certain information on this page has been omitted and filed separately with
     the Securities and Exchange Commission. Confidential treatment has been
     requested with respect to the omitted portions.

<PAGE>

offered by Ford or Ford Affiliate.  Nothing in this Exhibit C shall entitle Ford
Motor Credit to those terms that are provided to other entities that participate
in the Generic Buyer's Club in connection with corporate, government,
organization or other entity-based distribution programs.

     Solution Upgrades

     For each Eligible Employee that obtains a Solution Upgrade for which
PeoplePC obtains a discount from the upgrade vendor, PeoplePC shall pay to Ford
an Upgrade Adjustment.  The "Upgrade Adjustment" will be (1) where the discount
received from the Solution Upgrade supplier is [*] or less off the supplier list
price, the Upgrade Adjustment shall be equal to the amount of the discount
actually received by PeoplePC from the listed price for the Solution Upgrade
shown in Exhibit B less (i) [*] U.S. Dollars and (ii) [*], (2) where the
discount received from the Solution Upgrade supplier is over [*] off the
supplier list price, the Upgrade Adjustment shall equal [*] of those amounts
that are in excess of [*] off of [*] for such Solution Upgrade, less (y) [*]
U.S. Dollars and (z) [*]. PeoplePC shall remit to Ford the upgrade commission
within thirty (30) days after the end of the calendar quarter in which the fees
for the Upgrade Solution are recognized by PeoplePC. Each such payment will be
accompanied by a report in a mutually agreed upon format detailing the
calculation of the upgrade commission by PeoplePC and such report will be deemed
the Confidential Information of PeoplePC.

                                                                            -29-

*****Certain information on this page has been omitted and filed separately with
     the Securities and Exchange Commission. Confidential treatment has been
     requested with respect to the omitted portions.

<PAGE>

                                   EXHIBIT D

                               Service Agreement

              SERVICE NET SERVICE AGREEMENT--Terms and Conditions

          This document sets forth the entire Agreement between SNAdmin, Inc.,
hereinafter referred to as We, Us and Our; and the purchaser, hereinafter
referred to as You and Your. No representation, promise or condition herein
shall modify these terms. If this Contract is purchased in one of the following
states, SNAdmin, Inc., is contractually obligated to You to provide service
under this Contract and will administer coverage under this Contract: AL, AR,
AZ, CT, DC, DE, FL, GA, IA, IL, IN, KY, LA, MA, MS, NE, NY, OH, OK, OR, PA, RI,
SC, TN, UT, VA, VT, WI, and WV. In all other states, the retailer from which You
purchased this Contract is contractually obligated to You to provide service
under this Contract and SNAdmin, Inc., will administer coverage.

          1.   COVERAGE AND TERM. Obligations under this Contract are insured by
Continental Insurance Company, CNA Plaza, 333 S. Wabash, 25S, Chicago, IL 60685.
The policy number is 170131590 and the insurance company's telephone number is
800-831-4262. You are entitled to make a direct claim against the insurance
company if We fail to pay any claim within thirty (30) days after proof of loss
has been filed with Us, or in the event We are no longer in business or are
bankrupt. Parts and service will be furnished as necessary to maintain the
proper operating condition for the equipment covered by this Service Plan. You
are responsible for creating back-up copies of all Your data and software on a
regular basis. Parts and on-site service already covered under the original
manufacturer's warranty will be provided under that warranty and no liability
shall be established hereunder if covered by an original warranty Equipment must
have at least 30 days remaining on the first year of the original warranty to
qualify for coverage under this Agreement. There are some limitations of
coverage and You should review paragraphs 8 and 11 for details.

          2.   HARDWARE UPGRADE COVERAGE. This Agreement will cover any internal
hardware components, including memory, hard disk drive, multimedia products and
printer font cartridges purchased through a PeoplePC and installed into
equipment at the time of purchase and covered by this Agreement. This Agreement
does not cover installation of hardware upgrades installed after the time of
purchase.

          3.   TRANSFERABILITY. You may transfer this Agreement to any person in
the United States by sending written notice to: Service Net, Inc., 325 W. Main
Street, Suite 520, Louisville, KY 40202.

          4.   TIME FOR SERVICE. Service will be performed during the hours of
8:00 a.m. to 5:00 p.m. local time, Monday through Friday, excluding holidays.

          5.   PLACE OF SERVICE. Service will be provided on-site unless this
Agreement indicates carry-in service. Please see Notes for details. For service,
call 1-800-PEOPLEPC. If We determine that repairs should be performed off-site
or cannot be performed on-

                                                                            -30-
<PAGE>

site by a qualified technician, We will arrange for the off-site repairs and
return the equipment to You at Our expense.

          6.   PARTS AND SUBCONTRACTING. Parts used to repair equipment may be
either new or rebuilt at Our sole option, and service providers may use non-
original manufacturers' parts to satisfy obligations under this Agreement.
Service may be performed by subcontractors.

          7.   UNAVAILABILITY OF FUNCTIONAL PARTS OR TECHNICAL INFORMATION. If
We determine that We are unable to repair the equipment due to unavailability of
functional parts or technical information, You are entitled to a comparable
equipment replacement. In all cases, We will determine equipment comparability.

          8.   LIMITATIONS OF COVERAGE. THIS AGREEMENT DOES NOT COVER:

               a.  ANY EQUIPMENT LOCATED OUTSIDE THE UNITED STATES.

               b.  SERVICE REQUIRED AS A RESULT OF ANY ALTERATION OF THE
EQUIPMENT OR REPAIRS MADE BY OTHER THAN SERVICE PROVIDER, ITS AGENTS,
DISTRIBUTORS, CONTRACTORS OR LICENSEES OR THE USE OF SUPPLIES OTHER THAN THOSE
RECOMMENDED BY THE MANUFACTURER.

               c.  INSTALLATION OR REINSTALLATION OF ANY EQUIPMENT.

               d.  DAMAGE OR OTHER EQUIPMENT FAILURE DUE TO CAUSES BEYOND OUR
CONTROL INCLUDING, BUT NOT LIMITED TO, REPAIRS NECESSARY DUE TO OPERATOR
NEGLIGENCE, THE FAILURE TO MAINTAIN THE EQUIPMENT ACCORDING TO THE OWNER'S
MANUAL INSTRUCTIONS, ABUSE, VANDALISM, COMPUTER VIRUSES, THEFT, FIRE, FLOOD,
WIND, LIGHTNING, FREEZING, POWER FAILURE, INADEQUATE POWER SUPPLY, UNUSUAL
ATMOSPHERIC CONDITIONS, TELEPHONE FAILURE, OR ACTS OF GOD.

               e.  FAILURE RELATING TO YEAR 2000 DATING SUCH AS DIRECT OR
INDIRECT LOSS OR DAMAGE TO, OR LOSS OF PERFORMANCE INCLUDING FUNCTIONALITY OF,
ANY COVERED PROPERTY, EQUIPMENT OR EQUIPMENT SYSTEMS, INCLUDING ANY EMBEDDED
CHIPS OR COMPUTER CHIPS, CAUSED BY OR DUE TO ITS FAILURE TO CORRECTLY RECOGNIZE,
DISTINGUISH, COMPARE, PROCESS, INTERPRET, ACCEPT OR PERFORM CALCULATIONS WITH
DATE WITH THE YEAR 2000 OR ANY OTHER DATE.

               f.  EXPENDABLE ITEMS OR CONSUMABLE ITEMS SUCH AS, BUT NOT
LIMITED TO, PAPER, RIBBONS, FLOPPY  DISKS, INK JET PRINT HEADS, TONER
CARTRIDGES, COPIER DRUMS, BELTS, LASER PRINTER DRUMS, FILTERS, BATTERIES, PRINT
ENGINES AND OTHER OPERATING SUPPLIES AND CONSUMABLE ITEMS.

                                                                            -31-
<PAGE>

               g.  TELEPHONE OR OTHER LINES CONNECTING TO THE EQUIPMENT.

               h.  ANY SOFTWARE, INCLUDING, BUT NOT LIMITED TO, APPLICATION
PROGRAMS, NETWORK PROGRAMS, DATABASES, FILES, SOURCE CODE, OBJECT CODE OR
PROPRIETARY DATA, OR ANY SUPPORT, CONFIGURATION, INSTALLATION OR REINSTALLATION
OF ANY SOFTWARE OR DATA.

               i.  SERVICE NECESSARY BECAUSE OF IMPROPER STORAGE,
RECONFIGURATION OF EQUIPMENT, USE OR MOVEMENT OF THE EQUIPMENT, INCLUDING THE
FAILURE TO PLACE THE EQUIPMENT IN AN AREA THAT COMPLIES WITH THE MANUFACTURER'S
PUBLISHED SPACE OR ENVIRONMENTAL REQUIREMENTS.

               j.  EQUIPMENT USED IN INDUSTRIAL SETTINGS. EQUIPMENT USED IN
INDUSTRIAL SETTINGS MAY BE DEFINED AS: (I) ANY UTILIZATION OF EQUIPMENT THAT IS
INCONSISTENT WITH EITHER THE DESIGN OF THE EQUIPMENT OR THE WAY THE MANUFACTURER
INTENDED THE EQUIPMENT TO BE USED, (II) ANY INSTALLATION IN A WAY THAT PREVENTS
NORMAL SERVICE, AND (III) ANY AND ALL CASES IN WHICH THE MANUFACTURER OF THE
EQUIPMENT WOULD NOT HONOR ANY WARRANTY REGARDING THE EQUIPMENT.

               k.  NONFUNCTIONAL PARTS, INCLUDING DAMAGE TO CABINETRY.

               l.  DEFECTS IN THE EQUIPMENT DUE TO THE MANUFACTURER'S ERRORS
OR IMPROPER CONSTRUCTION OF THE EQUIPMENT.

               m.  DAMAGE COVERED BY MANUFACTURER'S WARRANTY, MANUFACTURER'S
RECALL, OR FACTORY BULLETINS (REGARDLESS OF WHETHER OR NOT THE MANUFACTURER IS
DOING BUSINESS AS AN ONGOING ENTERPRISE.)

               n.  EQUIPMENT SOLD WITHOUT A MANUFACTURER'S WARRANTY OR SOLD "AS
IS".

               o.  NORMAL OR PERIODIC MAINTENANCE.

               p.  CONSEQUENTIAL DAMAGE TO OR SPOILAGE OF CDS, DISKETTES, FILM
OR RECORDING TAPES AS A RESULT OF THE MALFUNCTIONING OF OR DAMAGE TO AN
OPERATING PART, OR AS A RESULT OF ANY REPAIRS OR REPLACEMENT UNDER THIS
AGREEMENT.

               q.  LOSS OR DAMAGE AS A RESULT OF VIOLATION OF EXISTING FEDERAL,
STATE AND MUNICIPAL CODES INCLUDING REPAIRS TO PRODUCTS NOT COMPLYING WITH SAID
CODES.

                                                                            -32-
<PAGE>

               r.  PRE-EXISTING CONDITIONS (INCURRED PRIOR TO THE EFFECTIVE
DATE OF COVERAGE).

               s.  CONSEQUENTIAL DAMAGES OR DELAY IN RENDERING SERVICE UNDER
THIS AGREEMENT, OR LOSS OF USE OF DATA DURING THE PERIOD THAT THE PRODUCT ISAT
THE AUTHORIZED SERVICE CENTER OR OTHERWISE AWAITING PARTS.

          9.   CANCELLATION AND REFUND. You may cancel at any time for any
reason. If You cancel this Agreement within sixty (60) days of the date
purchased, the Dealer/Retailer will refund the full purchase price less any
claims. If You cancel this Agreement thereafter, the Dealer/Retailer will refund
to You the remaining days of coverage on a monthly prorated basis, less costs
for service performed (if applicable). We may only cancel this Agreement for
failure to pay the purchase price of this Agreement, material misrepresentation
made by You, or failure to maintain the covered equipment in the manner
specified by the manufacturer. In the event We cancel, We will mail You written
notice five days prior to such cancellation. Neither You nor the Dealer/Retailer
is obligated to renew this Agreement beyond the current term.

          10.  GOVERNING LAW. Unless otherwise governed by applicable state law,
Your service contract will be interpreted and enforced according to the laws of
the State of Kentucky.

          11.  STATE VARIATIONS. The conditions listed below apply to the
following states and supercede any other provisions herein to the contrary:

               Alabama: The use of non-original manufacturer's parts is allowed
under this Contract. If no claim has been made under this Contract, You may
return this Contract within twenty (20) days of the date the Contract was mailed
to You, or within ten (10) days of delivery if the Contract was delivered to You
at the time of sale. In such a case, this Contract will be void and the
Administrator will refund to You the full amount of the purchase price of this
Contract. A 10% penalty per month applies to any refund not paid or credited
within 45 days after return of the service contract. This right to void the
Contract is not transferable and applies only to the original Contract
purchaser. If You cancel this Contract otherwise, You will be provided a pro
rata refund less reasonable handling costs, any claims that may have been paid,
and an administrative fee of up to $25.

               Arizona: If this Contract is canceled You will be provided a pro
rata refund after deducting for administrative expenses not to exceed twenty-
five dollars ($25) associated with the cancellation. Further, We will not cancel
or void this Contract due to preexisting conditions, prior use or unlawful acts
relating to the product or misrepresentation by Us or Our subcontractors. No
claim incurred or paid will be deducted from the amount to be returned. Neither
We, Our assignees, nor Our subcontractors will cancel or void coverage under
this Contract due to Our failure to provide correct information or Our failure
to perform the services or repairs provided in a timely, competent, and
workmanlike manner.

                                                                            -33-
<PAGE>

               California: If You cancel this Contract, You must provide written
notice of cancellation to the Administrator at the address indicated. If You
cancel this Contract within the first thirty (30) days after receipt of the
Contract, the full amount paid for the Contract will be returned, as long as no
claims have been made against the Contract. If a claim has been made against the
Contract within the first thirty (30) days after receipt of the Contract, a pro
rata refund will be made less reasonable handling costs and any claims that have
been paid. If the purchase of the Service Contract was financed, the
Administrator may make the refund payable to the purchaser, the assigned, or
lender of record, or both. If You cancel this Contract after the first thirty
(30) days after You received the Contract, the Administrator will provide You a
pro rata refund less reasonable handling costs and any claims that may have been
paid. In addition, the Administrator may assess a cancellation or administrative
fee, not to exceed ten (10) percent of the price of the Service Contract or
twenty-five dollars ($25), whichever is less.

               Connecticut: This Contract is automatically extended while the
product is being repaired. You may cancel this Contract if You return the
product or the product is sold, lost, stolen, or destroyed. Resolution of
Disputes: If You purchased this Service Contract in Connecticut, You may pursue
arbitration to settle disputes between You and the provider of this Contract.
You may mail Your complaint to: State of Connecticut, Insurance Department, P.O.
Box 816, Hartford, CT 06142-0816, Attn: Consumer Affairs. The written complaint
must describe the dispute, identify the price of the product and cost of repair,
and include a copy of this Contract.

               Florida: If You cancel this Contract, return of premium will be
based upon ninety percent (90%) of unearned pro rata premium less any claims
that have been paid or less the cost of repairs made on Your behalf. If We
cancel this Contract, return of premium will be based upon one hundred percent
(100%) of unearned pro rata premium.

               Georgia: The Administrator may not cancel this Contract except
for fraud, material misrepresentation or non-payment by You, for violation of
any of the terms and conditions of this Contract, or if required to do so by any
regulatory authority. Notice of such cancellation will be in writing and given
at least thirty (30) days prior to cancellation. Cancellation will comply with
Section 33-24-44 of the Georgia Code. Refunds will be based on the excess of the
consideration paid for this Contract above the customary short rate for the
expired term of the Contract.

               Illinois: If no claim has been made under this Contract, You may
return this Contract within thirty (30) days of the date of contract purchase.
Any cancellation of this Contract more than thirty (30) days after its date of
purchase made pursuant to section 9, is subject to a cancellation fee equal to
the lessor of 10% of the price of the contract or $50.

               Indiana: Proof of payment for this Contract constitutes proof of
payment to the insurer identified in Section 1 for reimbursement insurance
coverage specified in that section.

               Michigan: If the performance of this Service Contract is
interrupted because of a strike or work stoppage at the company's place of
business, the effective period of the Service Contract shall be extended for the
period of the strike or work stoppage.

                                                                            -34-
<PAGE>

               New York: If no claim has been made under this Contract, You may
return this Contract within twenty (20) days of the date the Contract was mailed
to You, or within ten (10) days of delivery if the Contract was delivered to You
at the time of sale. In such a case, this Contract will be void and We will
refund to You the full amount of the purchase price of this Contract. This right
to void the Contract is not transferable and applies only to the original
Contract purchaser. If You cancel this Contract otherwise, You will be provided
a pro rata refund less reasonable handling costs, any claims that may have been
paid, and an administrative fee of up to twenty-five dollars ($25). You may
return this Contract by mailing it to the attention of the Administrator at the
address listed in Section 3. A ten percent (10%) penalty per month will be added
to a refund that is not made within thirty (30) days of return of the Contract
to Us.

               North Carolina: The purchase of this Contract is not required
either to purchase or to obtain financing for a home appliance. The
Administrator may not cancel this Service Contract except for non-payment by You
or for violation of any of the terms and conditions of this Contract. Any
administrative fee applied to a pro rata refund will not exceed ten (10) percent
of the of the amount of the pro rata refund.

               Oklahoma: This Contract is not issued by the manufacturer or
wholesaler company marketing the product. This Contract will not be honored by
such manufacturer or wholesale company. Refunds will be based upon ninety (90)
percent of the unearned pro rata premium.

               Rhode Island: Claims may only be made directly against the
provider identified in this Contract. No claim may be made against any insurer
identified in this Contract.

               Tennessee: This Contract is automatically extended while the
product is being repaired.

               Utah: Coverage afforded under this Contract is not guaranteed by
the Property and Casualty Guaranty Association.

               Vermont: If no claim has been made under this Contract, You may
return the Contract within 20 days of the date of receipt and receive a full
refund of the purchase price of this Contract.

               Wisconsin: This Service Contract is subject to limited regulation
by the Office of the Commissioner of Insurance. This Contract will only be
canceled mid-term for material misrepresentation, substantial change in the risk
assumed, or a substantial breach of contractual duties, conditions, or
warranties. You may, within fifteen (15) calendar days of the delivery of this
Contract, reject and return this Contract for a full refund less actual costs or
changes needed to issue and service this Contract. If You cancel this Contract
at any time during the coverage period, claims will not be considered when
calculating any refund due.

          12.  ENTIRE AGREEMENT. This is the entire agreement and no other oral
modifications are valid.

                                                                            -35-
<PAGE>

          13.  LIMITATION OF LIABILITY. THE DEALER/RETAILER, SNADMIN, INC.,
THEIR AGENTS, CONTRACTORS OR LICENSEES WILL NOT UNDER ANY CIRCUMSTANCES BE
LIABLE FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING, BUT NOT LIMITED
TO, PROPERTY DAMAGE, LOST TIME, LOST DATA RESULTING FROM THE BREAKDOWN OR
FAILURE OF ANY EQUIPMENT OR FROM DELAYS IN SERVICING OR THE INABILITY TO RENDER
SERVICE ON ANY COVERED EQUIPMENT. EXCLUSION IS MADE OF ANY IMPLIED WARRANTY OF
FITNESS FOR A PARTICULAR PURPOSE. THERE ARE NO EXPRESS OR IMPLIED WARRANTIES
MADE HEREIN.

     PLEASE NOTE:

          Service Net PC Hardware Repair Service Plan may only be serviced and
considered active if all of the following criteria are met:

     1.   Contract will only be valid when "approved" and "accepted" by Service
Net. Service Net shall have the right, in its sole discretion, to accept or
reject, in whole or in part, any or all orders.

     2.   Manufacturer is responsible for parts during the manufacturer's
warranty period and must supply parts to Service Net or our servicing partners
upon request, via at least 2nd day air shipment. Service Net is not responsible
for core parts return. If parts cannot be secured from manufacturer, unit will
be sent back at our discretion.

     3.   All equipment must have at least a 1-year parts and carry-in labor
warranty to be eligible for coverage under a Service Net PC Hardware Repair
Service Plan.

     4.   Service Net does not guarantee any specific response time; we will
make our "best effort" to service your equipment by the next business day,
pending parts availability.

     5.   On-site service will be performed after a 30-day wait period from date
of contract purchase and only after membership and product information have been
received and processed.

     6.   In some cases, Service Net may be restricted or unable to provide on-
site service. For instance, on-site service will not be provided for laptop
computers, monitors, and some peripherals and components such as optical drives,
which require advanced technical repairs. These products must be returned to the
manufacturer. Factory returns may also be required when the repair cannot be
properly or safely made on-site, when special equipment is needed, when the
manufacturer's warranty requires it, or when the customer is not within 50 miles
of a service center. Also, on-site service will not be provided for equipment
that has a retail value of $350 or less such as some monitors, scanners,
printers or PDAs. Carry-in service will be provided for these items.

                                                                            -36-

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