Document:

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                                                                    EXHIBIT 10.6

                                        BLDG:   Palomar 3
                                        OWNER:  500
                                        PROP:   273
                                        UNIT:   2
                                        TENANT: 27305

                                LEASE AGREEMENT

THIS LEASE, made this 27th day of August, 1997 between JOHN ARRILLAGA, Trustee,
                      ----        ------    --         ------------------------
or his Successor Trustee, UTA dated 7/20/77 (JOHN ARRILLAGA SURVIVOR'S TRUST) as
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amended, and RICHARD T. PEERY, Trustee, or his Successor Trustee, UTA dated
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7/20/77 (RICHARD T. PEERY SEPARATE PROPERTY TRUST) as amended, hereinafter
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called Landlord and FAROUDJA LABORATORIES, INC., a California corporation,
                    -----------------------------------------------------
hereinafter called Tenant.

                                  WITNESSETH:

  Landlord hereby leases to Tenant and Tenant hereby hires and takes from
Landlord those certain premises (the "Premises") outlined in red on Exhibit "A",
attached hereto and incorporated herein by this reference thereto more
particularly described as follows:

A portion of that certain 20,000(plus or minus sign) square foot, one-story
building located at 733 Palomar Avenue, Sunnyvale, California 94086, consisting
of approximately 10,000(plus or minus sign) square feet of space. Said Premises
is more particularly shown within the area outlined in Red on Exhibit A attached
                                                              ---------
hereto. The entire parcel, of which the Premises is a part, is shown within the
area outlined in Green on Exhibit A attached. The Premises shall be improved as
                          ---------
shown on Exhibit B to be attached hereto, and is leased on an "as-is" basis, in
         ---------
its present condition, and in the configuration as shown in Red on Exhibit B to
                                                                   ---------
be attached hereto.

  The word "Premises" as used throughout this lease is hereby defined to include
the nonexclusive use of landscaped areas, sidewalks and driveways in front of or
adjacent the Premises, and the nonexclusive use of the area directly underneath
or over such sidewalks and driveways. The gross leaseable area of the building
shall be measured from outside of exterior walls to outside of exterior walls,
and shall include any atriums, covered entrances or egresses and covered loading
areas.

  Said letting and hiring is upon and subject to the terms, covenants and
conditions hereinafter set forth and Tenant covenants as a material part of the
consideration for this Lease to perform and observe each and all of said terms,
covenants and conditions. This Lease is made upon the conditions of such
performance and observance.

1.  USE Tenant shall use the Premises only in conformance with applicable
governmental laws, regulations, rules and ordinances for the purpose of general
                                                                        -------
office, light manufacturing, research and development, and storage and other
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uses necessary for Tenant to conduct Tenant's business, provided that such uses
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shall be in accordance with all applicable governmental laws and ordinances,
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and for no other purpose. Tenant shall not do or permit to be done in or about
the Promises nor bring or keep or permit to be brought or kept in or about the
Premises anything which is prohibited by or will in any way increase the
existing rate of (or otherwise affect) fire or any insurance covering the
Premises or any part thereof, or any of its contents, or will cause a
cancellation of any insurance covering the Premises or any part thereof, or any
of its contents. Tenant shall not do or permit to be done anything in, on or
about the Premises which will in any way obstruct or interfere with the rights
of other tenants or occupants of the Premises or neighboring premises or injure
or annoy them, or use or allow the Premises to be used for any improper,
immoral, unlawful or objectionable purpose, nor shall Tenant cause, maintain or
permit any nuisance in, on or about the Premises. No sale by auction shall be
permitted on the Premises. Tenant shall not place any loads upon the floors,
walls, or ceiling which endanger the structure, or place any harmful fluids or
other materials in the drainage system of the building, or overload existing
electrical or other mechanical systems. No waste materials or refuse shall be
dumped upon or permitted to remain upon any part of the Premises or outside of
the building in which the Premises are a part, except in trash containers placed
inside exterior enclosures designated by Landlord for that purpose or inside of
the building proper where designated by Landlord. No materials, supplies,
equipment, finished products or semi-finished products, raw materials or
articles of any nature shall be stored upon or permitted to remain outside the
Premises. 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, No loudspeaker or other device, system or apparatus which
can be heard outside the Premises shall be used in or at the Premises without
the prior written consent of Landlord, Tenant shall not commit or suffer to be
committed any waste in or upon the Premises. Tenant shall indemnify, defend and
hold Landlord harmless against any loss, expense, damage, reasonable attorneys'
fees, or liability arising out of failure of Tenant to comply with any
applicable law. Tenant shall comply with any covenant, condition, or restriction
("CC&R's") affecting the Premises. The provisions of this paragraph are for the
benefit of Landlord only and shall not be construed to be for the benefit of any
tenant or occupant of the Premises.

2.  TERM*

  A.  The term of the Lease shall be for a period of FIVE (5) years ELEVEN (11)
                                                     ----  -        ------  --
months TWENTY SIX (26) days (unless sooner terminated as hereinafter provided)
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and subject to Paragraphs 2B and 3 shall commence on the 6th day of October,
                                                         ---        -------
1997 and end on the 30th day of September, 2003.
  --                ----        ---------------

  B.  Possession of the Premises shall be deemed tendered and the term of the
Lease shall commence when the first of the following occurs;

     (a) One day after a Certificate of Occupancy is granted by the proper
government agency, or, if the governmental agency having jurisdiction over the
area in which the Premises are situated does not issue certificates of
occupancy, then the same number of days after certification by Landlord's
architect or contractor that Landlord's construction work has been completed; or
     (b) Upon the occupancy of the Premises by any of Tenant's operating
personnel; or
     (c) When the Tenant Improvements have been substantially completed for
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Tenant's use and occupancy, in accordance and compliance with Exhibit B of this
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Lease Agreement; or
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     (d)  As otherwise agreed in writing.

* It is agreed in the event said Lease commences on a date other than the first
  day of the month the term of the Lease will be extended to account for the
  number of days in the partial month. The Basic Rent during the resulting
  partial month will be pro-rated (for the number of days in the partial month)
  at the Basic Rent rate scheduled for he projected commencement date as shown
  in Paragraph 39.
                                                           Initials: /s/ M.H.
                                                                     -----------
                                                           Initials: /s/ J.A.
                                                                     -----------

                                  page 1 of 8
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3.  POSSESSION  If Landlord, for any reason whatsoever, cannot deliver
possession said premises to Tenant at the commencement of said term, as
hereinbefore specified, this Lease shall not be void or voidable; no obligation
of Tenant shall be affected thereby: nor shall Landlord or Landlord's agents be
liable to Tenant for any loss or damage resulting therefrom; but in that event
the commencement and termination dates of the Lease, and all other dates
affected thereby shall be revised to conform to the date of Landlord's delivery
of possession, as specified in Paragraph 2B, above. The above is, however,
subject to the provision that the period of delay of delivery of the Premises
shall not exceed 30 days from the commencement date herein (except those delays
                 --
caused by Acts of God, strikes, war, utilities, governmental bodies, weather,
unavailable materials, and delays beyond Landlord's control shall be excluded in
calculating such period) in which instance Tenant, at its option, may, by
written notice to Landlord, terminate this Lease.

4.  RENT

  A. Basic Rent.  Tenant agrees to pay to Landlord at such place as Landlord may
     ----------
designate without deduction, offset, prior notice, or demand, and Landlord
agrees to accept as Basic Rent for the leased Premises the total sum of ONE
                                                                        ---
MILLION FOUR HUNDRED NINETEEN THOUSAND SIXTEEN AND 13/100 Dollars
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($1,419,016.13) in lawful money of the United States of America payable as
  ------------
follows:

  See Paragraph 39 for Basic Rent Schedule

  B. Time for Payment.  Full monthly rent is due in advance on the first day of
     ----------------
each calendar month, in the event that the term of this Lease commences on a
date other than the first day of a calendar month, on the date of commencement
of the term hereof Tenant shall pay to Landlord as rent for the period from
such date of commencement to the first day of the next succeeding calendar month
that proportion of the monthly rent hereunder which the number of days   between
such date of commencement and the first day of the next succeeding calendar
month bears to thirty (30). In the event that the tram of this Lease for any
reason ends on a date other than the last day of a calendar month, on the first
day of the (last calendar month of the term hereto, Tenant shall pay to Landlord
as rent for the period from said first day of said last calendar month to and
including the last day of the term hereof that proportion of the monthly rent
hereunder which the number of days between said first day of said last calendar
month and the last day of the term hereof bears to thirty (30).

  C. Late Charge.  Notwithstanding any other provision of this Lease, if Tenant
     -----------
is in default in the payment of rental as set forth in this Paragraph 4 when
due, or any part thereof, Tenant agrees to pay Landlord, in addition to the
delinquent rental due, a late charge for each rental payment in default ten(10)
days. Said late charge shall equal ten percent (10%) of each rental payment so
in default.

  D. Additional Rent.  Beginning with the commencement date of the term of this
     ---------------
Lease, Tenant shall pay to Landlord or to Landlord's designated agent in
addition to the Basic Rent and as Additional Rent the following:

     (a) All Taxes relating to the Premises as set forth in Paragraph 9, and

     (b) All insurance premiums relating to the Premises, as set forth in
  Paragraph 12, and

     (c) All charges, costs and expenses, Which Tenant is required to pay
hereunder, together with all interest and penalties, costs and expenses
including reasonable attorneys' fees and legal expenses, that may accrue thereto
in the event of Tenants failure to pay such amounts, and all damages, reasonable
costs and expenses which Landlord may incur by reason of default of Tenant or
failure on Tenant's failure to comply with the terms of this Lease. in the event
of nonpayment by Tenant of Additional Rent, Landlord shall have all the rights
and remedies with respect thereto as Landlord has for nonpayment of rent

  The Additional Rent due hereunder shall be paid to Landlord or Landlord's
agent (i) within five days for taxes and insurance and within thirty days for
all other Additional Rent items after presentation of invoice from Landlord or
Landlord's agent setting forth such Additional Rent and/or (ii) at the option of
Landlord, Tenant shall pay to Landlord monthly, in advance, Tenant's, prorate
share of an amount estimated by Landlord to be Landlord's approximate average
monthly expenditure for such Additional Rent items, which estimate amount shall
be reconciled within 120 days of the end of each calendar year or more
frequently if Landlord elects to do so at Landlord's sole and absolute
discretion as compared to Landlord's actual expenditure for said Additional Rent
items, with Tenant paying to Landlord, upon demand, any amount of actual
expenses expended by Landlord in excess of said estimated amount, or Landlord
crediting to Tenant (providing Tenant is not in default in the performance of
any of the terms, covenants and conditions of this Lease) any amount of
estimated payments made by Tenant in excess of Landlord's actual expenditures
for said Additional Rent items.

  The respective obligations of Landlord and Tenant under this paragraph shall
survive the expiration or other termination of the term of this Lease, and if
the term hereof shall expire or shall otherwise terminate on a day other than
the last day of a calendar year, the actual Additional Rent incurred for the
calendar year in which the term hereof expires or otherwise terminates shall be
determined and settled on the basis of the statement of actual Additional Rent
for such calendar year and shall be prorated in the proportion which the number
of days in such calendar year preceding such expiration or termination bears to
365.

  E. Fixed Management Fee. Beginning with the Commencement Date of the Term of
     --------------------
this Lease, Tenant shall pay to Landlord, in addition to the Basic Rent and
Additional Rent, a fixed monthly management fee ("Management Fee") equal to 2%
of the Basic Rent due for each month during the Lease Term.

  F. Place of Payment of Rent and Additional Rent.  All Basic Rent hereunder and
     --------------------------------------------
all payments hereunder for Additional Rent shall be paid to Landlord at the
office of Landlord at Peery/Arrillaqa, File 1504, Box 60000, San Francisco,
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CA 94160 or to such other person or to such other place as Landlord may from
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time to time designate in writing.

*  G. Security Deposit. Concurrently with Tenant's execution of this Lease,
      ----------------
Tenant shall deposit with Landlord the sum of: FORTY TWO THOUSAND AND NO/100
                                               -----------------------------
Dollars ($42,000.00). Said sum shall be held by Landlord as a Security Deposit
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for the faithful performance by Tenant of all of the terms, covenants, and
conditions of this Lease to be kept and performed by Tenant during the term
hereof. If Tenant defaults with respect to any provision of this Lease,
including, but not limited to the provisions relating to the payment of rent and
any of the monetary sums due herewith, Landlord may (but shall not be required
to) use, apply or retain all of any part of this Security Deposit for the
payment of any other amount which Landlord may spend by reason of Tenant's
default or to compensate Landlord for

*  $21,000.00 Cash due upon Lease execution.
   $21,000.00 Promissory Note due October 1, 1998.

                                                           Initials: /s/ M.H.
                                                                     -----------

                                                           Initials: /s/ J.A.
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                                  page 2 of 8
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any other loss or damage which Landlord may suffer by reason of Tenant's
default, if any portion of said Deposit is so used or applied, Tenant shall,
within ten (10) days after written demand therefor, deposit cash with Landlord
in the amount sufficient to restore the Security Deposit to its original amount
Tenants failure to do so shall be a material breach of this Lease. Landlord
shall not be required to keep this Security Deposit separate from its general
kinds, and Tenant shall not be entitled to interest on such Deposit. If Tenant
fully and faithfully performs every provision of this Lease to be performed by
it, the Security Deposit or any balance thereof shall be returned to Tenant (or
at Landlord's option, to the last assignee of Tenants interest hereunder) at the
expiration of the Lease term and after Tenant has vacated the Premises. In the
event of termination of Landlord's interest in this Lease, Landlord shall
transfer said Deposit to Landlord's successor in interest whereupon Tenant
agrees to release Landlord from liability for the return off such Deposit or the
accounting therefor.

5.  ACCEPTANCE AND SURRENDER OF PREMISES  By entry hereunder, Tenant accepts the
Premises as being in good and sanitary order, condition and repair and accepts
the building and improvements included in the Premises in their present
condition and without representation or warranty by Landlord as to the condition
of such building or as to the use or occupancy which may be made thereof. Any
exceptions to the foregoing must be by written agreement executed by Landlord
and Tenant. Tenant agrees on the last day of the Lease term, or on the sooner
termination of this Lease, to surrender the Premises promptly and peaceably to
Landlord in good condition and repair (damage by Acts of God, fire, normal wear
and tear excepted), with all interior walls painted, or cleaned so that they
appear freshly painted, and repaired and replaced, if damaged; all floors
cleaned and waxed; all carpets cleaned and shampooed; all broken, marred or
nonconforming acoustical ceiling tiles replaced; all windows washed; the
airconditioning and heating systems serviced by a reputable and licensed service
firm and in good operating condition and repair; the plumbing and electrical
systems and lighting in good order and repair, including replacement of any
burned out or broken light bulbs or ballasts; the lawn and shrubs in good
condition including the replacement of any dead or damaged plantings; the
sidewalk, driveways and parking areas in good order, condition and repair;
together with all alterations, additions, and improvements which may have been
made in, to, or on the Premises (except moveable trade fixtures installed at the
expense of Tenant) except that Tenant shall ascertain from Landlord within
thirty (30) days before the end of the term of this Lease whether Landlord
desires to have the Premises or any part or parts thereof restored to their
condition and configuration as when the Premises were delivered to Tenant and if
Landlord shall so desire, then Tenant shall restore said Premises or such part
or parts thereof before the end of this Lease at Tenants sole cost and expense.
Tenant, on or before the end of the term or sooner termination of this Lease,
shall remove all of Tenant's personal property and trade fixtures from the
Premises, and all property not so removed on or before the end of the term or
sooner termination of this Lease shall be deemed abandoned by Tenant and title
to same shall thereupon pass to Landlord without compensation to Tenant Landlord
may, upon termination of this Lease, remove all moveable furniture and equipment
so abandoned by Tenant, at Tenants sole cost, and repair any damage caused by
such removal at Tenant's sole cost. If the Premises be not surrendered at the
end of the term or sooner termination of this Lease, Tenant shall indemnity
Landlord against loss or liability resulting from the delay by Tenant in so
surrendering the Premises including, without limitation, any claims made by any
succeeding tenant founded on such delay. Nothing contained herein shall be
construed as an extension of the term hereof or as a consent of Landlord to any
holding over by Tenant The voluntary or other surrender of this Lease or the
Premises by Tenant or a mutual cancellation of this Lease shall not work as a
merger and, at the option of Landlord, shall either terminate all or any
existing subleases or subtenancies or operate as an assignment to Landlord of
all or any such subleases or subtenancies,

6.  ALTERATIONS AND ADDITIONS  Tenant shall not make, or suffer to be made, any
alteration or addition to the Premises, or any part thereof, without the written
consent of Landlord first had and obtained by Tenant (such consent not to be
unreasonably withheld), but at the cost of Tenant, and any addition to, or
alteration of, the Premises, except moveable furniture and trade fixtures, shall
at once become a part of the Premises and belong to Landlord. Landlord reserves
the right to approve all contractors and mechanics proposed by Tenant to make
such alterations and additions. Tenant shall retain title to all moveable
furniture and trade fixtures placed in the Premises. All heating, lighting,
electrical, air conditioning, floor to ceiling partitioning, drapery, carpeting,
and floor installations made by Tenant, together with all property that has
become an integral part of the Premises, shall not be deemed trade fixtures.
Tenant agrees that it will not proceed to make such alteration or additions,
without having obtained consent from Landlord to do so, ant until live (5) days
from the receipt of such consent, in order that Landlord may post appropriate
notices to avoid any liability to contractors or material supplier for payment
for Tenants improvements. Tenant will at all limes permit such notices to be
posted and to remain posted until the completion of work. Tenant shall, if
required by Landlord, secure at Tenants own cost and expense, a completion and
lien indemnity bond, satisfactory to Landlord, for such work. Tenant further
covenants and agrees that any mechanic's lien filed against the Premises for
work claimed to have been done for, or materials claimed to have been furnished
to Tenant, will be discharged by Tenant, by bond or otherwise, within ten (10)
days after the filing thereof, at the cost and expense of Tenant, any exceptions
to the foregoing must be made in writing and executed by both Landlord and
Tenant.

7.  TENANT MAINTENANCE  Tenant shall, at its sole cost and expense, keep and
maintain the Premises (including appurtenances) and every part thereof in a high
standard of maintenance and repair, and in good and sanitary condition. Tenant's
maintenance and repair responsibilities herein referred to include, but are not
limited to janitorization, plumbing systems within the non-common areas of the
Premises (such as water and drain lines, sinks), electrical systems within the
non-common Premises (such as water and drain lines, sinks electrical systems
within the non-common areas of the Premises (such as outlets, lighting fixtures,
lamps, bulbs, tubes, ballasts), heating and airconditioning controls within the
non-common areas of the Premises (such as mixing boxes, thermostats, time
clocks, supply and return grill(s), all interior improvements within the
premises including but not limited to: wall coverings, window coverings,
acoustical ceilings, vinyl tile, carpeting, partitioning, doors(both interior
and exterior, including closing mechanisms, latches, locks), and all other
interior improvements of any nature whatsoever. Tenant agrees to provide carpet
shields under all rolling chairs or to otherwise be responsible for wear and
tear of the carpet caused by such rolling chairs if such wear and tear exceeds
that caused by normal foot traffic in surrounding areas. Areas of excessive wear
shall be replaced at Tenant's sole expense upon Lease termination.

8.

9. TAXES
   A. As Additional Rent and in accordance with Paragraph 4D of this Lease,
Tenant shall pay to Landlord, or if Landlord so directs, directly to the Tax
Collector, all Real Property Taxes relating to the Premises. In the event the
Premises leased hereunder consist of only a portion of the entire tax parcel,
Tenant shall pay to Landlord Tenant's proportionate share of such real estate
taxes allocated to the leased Premises by square footage or other reasonable
basis as calculated and determined by Landlord. (ii) the tax billing pertains
100% to the leased Premises, and Landlord chooses to have Tenant pay said real
estate taxes directly to the Tax Collector, then in such event it shall be the
responsibility of Tenant to obtain the tax and assessment bills and pay, prior
to delinquency, the applicable real property taxes and assessments pertaining to
the leased Premises, and failure to receive a bill lot taxes and/or assessments
shall not provide a basis for cancellation of or nonresponsibility for payment
of penalties for nonpayment or late payment by Tenant. The term "Real Property
Taxes", as used herein, shall mean (i) all taxes, assessments, levies and other
charges of any kind or nature whatsoever, general and special, foreseen and
unforeseen (including all installments of principal and interest required to pay
any general or special assessments for public improvements and any increases
resulting from reassessments caused by any change in ownership of the Premises)
now or hereafter imposed by any governmental or quasi-governmental authority or
special district having the direct or indirect power to tax or levy assessments,
which are levied or assessed against, or with respect to the value, occupancy or
use of, all or any portion of the Premises (as now constructed or as may at any
time hereafter be constructed, altered, or otherwise changed) or Landlord's
interest therein; any improvements located within the Premises (regardless of
ownership); the fixtures, equipment and-other proof Landlord, real or personal,
that are an integral part of and located in the Premises; or parking areas,
public utilities, or energy within the Premises (ii) all charges, levies or fees
imposed by reason of environmental regulation or other governmental control of
the Premises; and (iii) all costs and fees (including

                                                           Initials: /s/ M.H.
                                                                     ----------
                                                           Initials: /s/ J.A.
                                                                     ----------

                                  page 3 of 8
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reasonable attorney's fees) incurred by Landlord in reasonably contesting any
Real Property Tax and in negotiating with public authorities as to any Real
Property Tax. If at any time during the term of this Lease the taxation or
assessment of the Premises prevailing as of the commencement date of the Lease
shall be altered so that In lieu of or in addition to any Real Property Tax
described above there shall be levied, assessed or imposed (whether by reason of
a change in the method of taxation or assessment, creation of a new tax or
charge, or any other cause) an alternate or additional lax or charge (I) on the
value, use or occupancy of the Premises or Landlord's interest therein or (ii)
on or measured by the gross receipts, income or rentals from the Premises, on
Landlord's business of leasing the Premises or computed in any manner with
respect to the operation of the Premises, then any such tax or charge, however
designated, shall be included within the meaning of the term "Real Property
Taxes" for purposes of this Lease. If any Real Property Tax is based upon
property or rents unrelated to the Premises, then only that part of such Real
Property Tax that is fairly allocable to the Premises shall be included within
the meaning of the term "Real Property Taxes", Notwithstanding the foregoing,
the term "Real Property Taxes" shall not include estate, inheritance, gift or
franchise taxes of Landlord or the federal or state net income tax imposed on
Landlord's income from all sources.

  B. Taxes on Tenant's Property Tenant shall be liable for and shall pay ten
days before delinquency, taxes levied against any personal property or trade
fixtures placed by Tenant in or about the Premises, if any such taxes on
Tenant's personal property or trade fixtures are levied against Landlord or
Landlord's property or if the assessed value of the Premises is increased by the
inclusion therein of a value placed upon such personal property or trade
fixtures of Tenant and if Landlord, after written notice to Tenant, pays the
taxes based on such increased assessment, which Landlord shall have the right to
do regardless of the validity thereof, but only under proper protest if
requested by Tenant, Tenant shall upon demand, as the case may be, repay to
Landlord the taxes so levied against Landlord, or the proportion of such taxes
resulting from such increase in the assessment; provided that in any such event
Tenant shall have the right, in the name of Landlord and with Landlord's full
cooperation, to bring suit in any court of competent jurisdiction to recover the
amount of such taxes so paid under protest, and any amount so recovered shall
belong to Tenant.

10.  LIABILITY INSURANCE Tenant, at Tenants expense, agrees to keep in force
during the term of this Lease a policy of commercial general liability insurance
with combined single limit coverage of not less than Two Million Dollars
($2,000,000), per occurrence for bodily injury and property damage occurring in,
on or about the Premises, including parking and landscaped areas. Such insurance
shall be primary and noncontributory as respects any insurance carried by
Landlord. This policy or policies effecting such insurance shall name Landlord
as additional insureds, and shall insure any liability of Landlord contingent or
otherwise; as respects acts or omissions of Tenant, its agent, employees or
invitees or otherwise by any conduct or transactions of any of said persons in
or about or concerning the Premises, including any failure of Tenant to observe
or perform any of its obligations hereunder; shall be issued by an insurance
company admitted to transact business   in the Stale of California; and shall
provide that the insurance affected thereby shall not be canceled, except upon
thirty (30) days' prior written notice to Landlord. A  certificate of insurance
of said policy shall be delivered to Landlord. If during the term of this Lease.
in the considered Opinion of Landlord's Lender, insurance advisor, or counsel,
the amount, of insurance described in this Paragraph 10 is not adequate, Tenant
agrees to increase said coverage to such reasonable amount as Landlord's Lender,
insurance advisor, or counsel shall deem adequate.

11.  TENANT' PERSONAL PROPERTY INSURANCE AND WORKMAN'S COMPENSATION INSURANCE
Tenant shall maintain a policy or policies of fire and property damage insurance
in "all risk" form with a sprinkler leakage endorsement insuring the personal
property, inventory, trade fixtures, and leasehold improvements within the
leased Premises for the full replacement value thereof. The proceeds from any of
such policies shall be used for the repair or replacement of such items so
insured.

     Tenant shall also maintain a policy or policies of workman's compensation
insurance and any other employee benefit insurance sufficient to comply with all
laws.

12.  PROPERTY INSURANCE  Landlord shall purchase and keep in force, and as
Additional Rent and in accordance with Paragraph 4D of this Lease, Tenant shall
pay to Landlord (or Landlord's agent if so directed by Landlord) Tenants
proportionate share (allocated to the leased Premises by square footage or other
equitable basis as calculated and determined by Landlord) of the deductibles on
insurance claims and the cost of, policy or policies of insurance covering loss
or damage to the Premises (excluding routine maintenance and repairs-and
incidental damage or destruction caused by accidents or vandalism for which
Tenant is responsible under Paragraph 7) in the amount of the full   replacement
value thereof, providing protection against those perils included within the
classification of "all risks" insurance and flood and/or earthquake insurance,
if available, plus a policy of rental income insurance in the amount of one
hundred (100%) percent of twelve (12) months Basic Rent, plus sums paid as
Additional Rent if such insurance cost is increased due to Tenant's use of the
Premises, Tenant agrees to pay to Landlord the full cost of such increase.
Tenant shall have no interest in nor any right to the proceeds of any insurance
procured by Landlord for the Premises.

     Landlord and Tenant do each hereby respectively release the other, to the
extent of insurance coverage of the releasing pasty, from any liability for loss
or damage caused by are or any of the extended coverage casualties included in
the releasing party's insurance policies, irrespective of the cause of such fire
or casualty; provided, however, that if the insurance policy of either releasing
party prohibits such waiver, then this waiver shall not take effect until
consent to such waiver is obtained. If such waiver is so prohibited, the insured
parties affected shall promptly notify the other party thereof.

13.  INDEMNIFICATION  Landlord shall not be liable to Tenant and Tenant hereby
waives all claims against Landlord for any injury to or death of any person or
damage to or destruction of property in or about the Premises by or from any
cause whatsoever, including, without limitation, gas, fire, oil, electricity or
leakage of any character from the roof, walls, basement or other portion of the
Premises but excluding, however, the willful misconduct or negligence of
Landlord, its agents, servants, employees, invitees, or contractors of which
negligence Landlord has knowledge and reasonable time to correct. Except as to
injury to persons or damage to property to the extent arising from the willful
misconduct or the negligence of Landlord, its agents, servants, employees,
invitees, or contractors. Tenant shall hold Landlord harmless from and defend
Landlord against any and all expenses, including reasonable attorneys' fees, in
connection therewith, arising out of any injury to or death of any person or
damage to or destruction of property occurring in, on or about the Premises, or
any part thereof, from any cause whatsoever (excluding, however, on-site
Hazardous Materials clean up expenses that are not related to Tenant's Hazardous
Materials Activities as defined in Paragraph 49B).

14.   COMPLIANCE  Tenant, at its sole cost and expense, shall promptly comply
with all laws, statutes, ordinances and governmental rules, regulations or
requirements now or hereafter in effect; with the requirements of any board of
fire underwriters or other similar body now or hereafter constituted; and with
any direction or occupancy certificate issued pursuant to law by any public
officer; provided, however, that no such failure shall be deemed a breach of the
provisions if Tenant, immediately upon notification, commences to remedy or
rectify said failure. The judgment of any court of competent jurisdiction or the
admission of Tenant in any action against Tenant whether Landlord be a party
thereto or not that Tenant has violated any such law, statute, ordinance or
governmental rule, regulation, requirement, direction or provision, shall be
conclusive of that fact as between Landlord and Tenant. Tenant shall, at its
sole cost and expense, comply with any and all requirements pertaining to said
Premises of any insurance organization or company, necessary for the mainte-
nance of reasonable fire and public liability insurance covering requirements
pertaining to said Premises of any insurance organization or company, necessary
for the maintenance of reasonable fire and public liability insurance covering
the Premises.

15.  LIENS  Tenant shall keep the Premises free from any liens arising out of
any work performed, materials furnished or obligation incurred by Tenant. In the
event that Tenant shall not, within ten (10) days following the imposition of
such lien, cause the same to be released of record, Landlord shall have in
addition to all other remedies provided herein and by law, the right, but no
obligation, to cause the same to be released by such means as it shall deem
proper, including payment of the claim giving rise to such lien. All sums paid
by Landlord for such purpose, and all expenses incurred by it in connection
therewith, shall be payable to Landlord by Tenant on demand with interest at the
prime rate of interest as quoted by the Bank of America.

16.  ASSIGNMENT AND SUBLETTING  Tenant shall not assign, transfer, or
hypothecate the leasehold estate under this Lease or any interest therein, and
shall not sublet the Premises, or any part thereof, or any right or privilege
appurtenant thereto, or suffer any other person or entity to occupy or use the
Premises, or any portion thereof, without, in each case, the prior written
consent of Landlord which consent will not be unreasonably withheld. As a
condition for granting this consent to any assignment, transfer, or subletting
Landlord shall require Tenant to pay to Landlord, as Additional Rent, all rents
and/or additional consideration due Tenant from its assignees, transferees, or
subtenants in excess of the Rent payable by Tenant to Landlord hereunder for the
assigned, transferred and/or subleased space. Tenant shall, by thirty (30) days
written notice, advise Landlord of its intent to assign or transfer Tenant's
interest in the Lease or sublet the Premises or any portion thereof for any part
of the term hereof. Within thirty (30) days after receipt of said written
notice. Landlord may, in its sole discretion, elect to terminate this Lease as
to the portion of the Premises described in Tenant's notice on the date
specified in Tenant's notice by giving written notice of such election to
terminate if no such notice to terminate is given to Tenant within said
thirty(30) day period, Tenant may proceed to locate an acceptable sublessee,
assignee, or other transferee for presentment to Landlord for Landlord's
approval, all in accordance with the terms, covenants, and conditions of this
paragraph 16. If Tenant intends to sublet the entire Premises and landlord
elects to terminate this Lease this Lease shall be terminated on the date
specified in Tenant's notice. If, however, this Lease shall terminate pursuant
to the foregoing with respect to less than all the Premises, the rent, as
defined and reserved hereinabove shall be adjusted on a pro rata basis to the
number of square feet retained by Tenant, and this Lease as so amended shall
continue in full force and effect. In the event Tenant is allowed to assign,
transfer or sublet the whole or any part of the premises, with the prior written

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consent of Landlord, no assignee, transferee or subtenant shall assign or
transfer this Lease, either in whole or in part, or sublet the whole or any part
of the Premises without also having obtained the prior written consent of
Landlord. A consent of Landlord to one assignment, transfer, hypothecation,
subletting, occupation or use by any other person shall not release Tenant from
any of Tenant's obligations hereunder to be deemed to be a consent to any
subsequent similar or dissimilar assignment, transfer, hypothecation,
subletting, occupation or use by any other person. Any such assignment,
transfer, hypothecation, subletting, occupation or use without such consent
shall be void and shall constitute a breach of this Lease by Tenant and shall at
the option of Landlord exercised by written notice to Tenant, terminate this
Lease. The leasehold estate under this Lease shall not nor shall any interest
therein, be assignable for any purpose by operation of law without the written
consent of Landlord. As a condition to its consent, Landlord shall require
Tenant to pay all expenses in connection with the assignment, and Landlord shall
require Tenant's assignee or transferee (or other assignees or transferees) to
assume in writing all of the obligations under this Lease and for Tenant to
remain liable to Landlord under the Lease. Notwithstanding-the above, -in no
event will Landlord consent to a sub-sublease. See Paragraph 46

17.  SUBORDINATION AND MORTGAGES In the event Landlord's title or leasehold
interest is now or hereafter encumbered by a deed of trust upon the interest of
Landlord in the land and buildings in which the demised Premises are located, to
secure a loan from a lender (hereinafter referred to as "Lender") to Landlord,
Tenant shall, at the request of Landlord or Lender, execute in writing an
agreement subordinating its rights under this Lease to the lien of such deed of
trust, or, if so requested, agreeing that the lien of Lender's deed of trust
shall be or remain subject and subordinate to the rights of Tenant under this
Lease. Notwithstanding any such subordination, Tenant's possession under this
Lease shall not be disturbed if Tenant is not in default and so long as Tenant
shall pay all rent and observe and perform all of the provisions set forth in
this Lease.

18.  ENTRY BY LANDLORD Landlord reserves, and shall at all reasonable times
after at least 24 hours notice (except in emergencies) have the right to enter
the Premises to inspect them; to inform any services to be provided by Landlord
hereunder; to make repairs or provide any services to a contiguous tenant(s); to
submit the Premises to prospective purchasers, mortgagers or tenants; to post
notices of nonresponsibility; and to alter, improve or repair the Premises or
other parts of the building, all without abatement of rent, and may erect
scaffolding and other necessary structures in or through the Premises where
reasonably required by the character of the work to be performed; provided,
however that the business of Tenant shall be interfered with to the least extent
that is reasonably practical. Any entry to the Premises by Landlord for the
purposes provided for herein shall not under any circumstances be construed or
deemed to be a forcible or unlawful entry into or a detainer of the Premises or
an eviction, actual or constructive, of Tenant from the Premises or any portion
thereof.

19.  BANKRUPTCY AND DEFAULT The commencement of a bankruptcy action or
liquidation action or reorganization action or insolvency action or an
assignment of or by Tenant for the benefit of creditors, or any similar action
undertaken by Tenant, or the insolvency of Tenant, shall, at Landlord's option.
constitute a breach of this Lease by Tenant. If the trustee or receiver
appointed to serve during a bankruptcy, liquidation, reorganization, insolvency
or similar action elects to reject Tenant's unexpired Lease, the trustee or
receiver shall notify Landlord in writing of its election within thirty (30)
days after an order for relief in a liquidation action or within thirty (30)
days after the commencement of any action,

  Within thirty (30) days after court approval of the assumption of this Lease,
the trustee or receiver shall cure (or provide adequate assurance to the
reasonable satisfaction of Landlord that the trustee or receiver shall cure any
and all previous defaults under the unexpired Lease and shall compensate
Landlord for all actual pecuniary loss and shall provide adequate assurance of
future performance under same Lease to the reasonable satisfaction of Landlord.
Adequate assurance of future performance, as used herein, includes, but shall
not be limited to: (i) assurance of source and payment of rent and other -
consideration due under this Lease; (ii) assurance that the assumption or
assignment of this Lease will not breach Substantially any provision, such as
radius, location, use, or exclusivity provision, in any agreement relating to
the above described Premises.

  Nothing contained in this section shall affect the existing right of Landlord
to refuse to accept an assignment upon commencement of or in connection with a
bankruptcy, liquidation, reorganization or insolvency action or an assignment of
Tenant for the benefit of creditors or other similar act. Nothing contained in
this Lease shall be construed as giving or granting or creating an equity in the
demised Premises to Tenant in no event shall the leasehold estate under this
Lease or any interest therein, be assigned by voluntary or involuntary
bankruptcy proceeding without the prior written consent of Landlord. In no event
shall this Lease or any rights or privileges hereunder be an asset of Tenant
under any bankruptcy, insolvency or reorganization proceedings.

  The failure to perform or honor any covenant, condition or representation made
under this Lease shall constitute a default hereunder by Tenant upon expiration
of the appropriate grace period hereinafter provided. Tenant shall have a period
of five (5) days from the date of written notice from Landlord within which to
cure any default in the payment of rental or adjustment thereto. Tenant shall
have a period of thirty (30) days from the date of written notice from Landlord
within which to cure any other default under this Lease. Upon an uncured default
of this Lease by Tenant, Landlord shall have the following rights and remedies
in addition to any other rights or remedies available to Landlord at law or in
equity:

     (a) The rights and remedies provided for by California Civil Code Section
1951.2, including but not limited to, recovery of the worth al 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 rental loss for the same period that Tenant
proves could be reasonably avoided, as computed pursuant to subsection (b) of
said Section 1951.2. Any proof by Tenant under subparagraphs (2) and (3) of
Section 1951.2 of the California Civil Code of the amount of rental loss that
could be reasonably avoided shall be made in the following manner: Landlord and
Tenant shall each select a licensed real estate broker in the business of
renting property of the same type and use as the Premises and in the same
geographic vicinity. Such two real estate brokers shall select a third licensed
real estate broker, and the three licensed real estate brokers so selected shall
determine the amount of the rental loss that could be reasonably avoided from
the balance of the term of this Lease after the time of award. The decision of
the majority of said licensed real estate brokers shall be final and binding
upon the parties hereto.

     (b) The rights and remedies provided by California Civil Code Section which
allows Landlord to continue the Lease in effect and to enforce all of its rights
and remedies under this Lease, including the right to recover rent as it becomes
due, for so long as Landlord does not terminate Tenant's right to possession;
acts of maintenance or preservation, efforts to relet the Premises, or the
appointment of a receiver upon Landlord's initiative to protect its interest
under this Lease shall not constitute a termination of Tenant's right to
possession.

     (c) The right to terminate this Lease by giving notice to Tenant in
accordance with applicable law.

     (d) To the extent permitted by law the right and power, to enter the
Premises and remove therefrom all persons and properly, to store such property
in a public warehouse or elsewhere at the cost of and for the account of Tenant,
and to sell such property and apply such proceeds therefrom pursuant to
applicable California law. Landlord, may from time to time sublet the Premises
or any part thereof for such term or terms (which may extend beyond the term of
this Lease) and at such rent and such other terms as Landlord in its reasonable
sole discretion may deem advisable, with the right to make alterations and
repairs to the Premises. Upon each subletting, (i) Tenant shall be immediately
liable to pay Landlord, in addition to indebtedness other than rent due
hereunder, the reasonable cost of such subletting, including, but not limited
to, reasonable attorneys' fees, and any real estate commissions actually paid,
and the cost of such reasonable alterations and repairs incurred by Landlord and
the amount, if any, by which the rent hereunder for the period of such
subletting(to the extent such period does not exceed the term hereof exceeds the
amount to be paid as rent for the Premises for such period or (ii) at the option
of Landlord, rents received from such subletting shall be applied first to
payment of indebtedness other than rent due hereunder from Tenant to Landlord;
second, to the payment of any costs of such subletting and of such alterations
and repairs; third to payment of rent due and unpaid hereunder; and the residue,
if any, shall be held by Landlord and applied in payment of future rent as the
same becomes due hereunder. If Tenant has been credited with any rent to be
received by such subletting under option (i) and such rent shall not be promptly
paid to Landlord by the subtenant(s), or it such rentals received from such
subletting under option (it) during any month be less than that to be paid
during that month by Tenant hereunder, Tenant shall pay any such deficiency to
Landlord. Such deficiency shall be calculated and paid monthly. No taking
possession of the Premises by Landlord, shall be construed as an election on its
part to terminate this Lease unless a written notice of such intention be given
to Tenant. Notwithstanding any such subletting without termination, Landlord may
at any time hereafter elect to terminate this Lease for such previous breach.

     (e) The right to have a receiver appointed for Tenant upon application by
Landlord, to take possession of the Premises and to apply any rental collected
from the Premises and to exercise all other rights and remedies granted to
Landlord pursuant to subparagraph d above. See Paragraph 47

20.  ABANDONMENT Tenant shall not vacate or abandon the-Premises at any time
during the term of this Lease and if Tenant shall abandon, vacate or surrender
said Premises, or be dispossessed by the process of law, or otherwise, any
personal property belonging to Tenant and left on the Premises shall be deemed
to be abandoned, at the option of Landlord, except such property as may be
mortgaged to Landlord. See Paragraph 48

21.  DESTRUCTION In the event the Premises are destroyed in whole or in pat from
any cause, except for routine maintenance and repairs and incidental

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damage and destruction caused from vandalism and accidents for which Tenant is
responsible under Paragraph 7, Landlord may, at its option:

     (a) Rebuild or restore the Premises to their condition prior to the damage
         or destruction, or

     (b) Terminate the Lease. (providing that the Premises is damaged to the
         extent of 33 1/3% of the replacement cost)

  If Landlord does not give Tenant notice in writing within thirty (30) days
from the destruction of the Premises of its election to either rebuild and
restore them or to terminate this Lease, Landlord shall be deemed to have
elected to rebuild or restore them, in which event Landlord agrees, at its
expense except for any deductible, which is the responsibility of Tenant,
promptly to rebuild or restore the Premises to their condition prior to the
damage or destruction. Tenant shall be entitled to a reduction in rent while
such repair is being made in proportion that the area of the Premises rendered
untenantable by such damage bears to the total area of the Premises. If Landlord
initially estimates that the rebuilding or restoration will exceed 180 days or
if Landlord does not complete the rebuilding or restoration within one hundred
eighty (180) days following the date of destruction (such period of time to be
extended for delays caused by the fault or neglect of Tenant or because of Acts
of God, acts of public agencies, labor disputes, strikes, fires, freight
embargos, rainy or stormy weather, inability to obtain materials, supplies or
fuels, acts of contractors or subcontractors, or delay of the contractors or
subcontractors due to such causes or other contingencies beyond the control of
Landlord), then Tenant shall have the right to terminate this Lease by giving
fifteen (15) days prior written notice to Landlord. Notwithstanding anything
herein to the contrary, Landlord's obligation to rebuild or restore shall be
limited to the building and interior improvements constructed by Landlord as
they existed as of the commencement date of the Lease and shall not include
restoration of Tenant's trade fixtures, equipment merchandise, or any
improvements, alterations or additions made by Tenant to the Premises, which
Tenant shall forthwith replace or fully repair at Tenant's sole cost and expense
provided this Lease is not cancelled according to the provisions above.

  Unless this Lease is terminated pursuant to the foregoing provisions, this
Lease shall remain in full force and effect. Tenant hereby expressly waives the
provisions of Section 1932, Subdivision 2, in Section 1933, Subdivision 4 of the
California Civil Code.

  In the event that the building in which the Premises are situated is damaged
or destroyed to the extent of not less than 33 1/3% of the replacement cost
thereof, Landlord may elect to terminate this Lease, whether the Premises be
injured or not. Notwithstanding anything to the contrary herein, Landlord may
terminate this Lease in the event of an uninsured event or if insurance proceeds
are insufficient to cover one hundred percent of the rebuilding costs net of the
deductible.

22.  EMINENT DOMAIN if all or any part of the Premises shall be taken by any
public quasi-public authority under the power of eminent domain or conveyance in
lieu thereof, this Lease shall terminate as to any portion of the Premises so
taken or conveyed on the date when title vests in the condemnor, and Landlord
shall be entitled to any and all payment, income, rent, award, or any interest
therein whatsoever which may be paid or made in connection with such taking or
conveyance, and Tenant shall have no claim against Landlord or otherwise for the
value of any unexpired term of this Lease. Notwithstanding the foregoing
paragraph, any compensation specifically awarded Tenant for loss of business,
Tenant's personal property, moving cost or loss of goodwill. shall be and remain
the property of Tenant.

  If any action or proceeding is commenced for such taking of the Premises or
any part thereof, or if Landlord is advised in writing by any entity or body
having the right or power of condemnation of its intention to condemn the
premises or any portion thereof, then Landlord shall have the right to terminate
this Lease by giving Tenant written notice thereof within sixty (60) days of the
date of receipt of said written advice, or commencement of said action or
proceeding, or taking conveyance, which termination shall take place as of the
first to occur of the last day of the calendar month next following the month in
which such notice is given or the date on which title to the Premises shall vest
in the condemnor.

  In the event of such a partial taking or conveyance of the Premises, if the
portion of the Premises taken or conveyed is so substantial that the Tenant can
no longer reasonably conduct its business, .Tenant shall have the privilege of
terminating this Lease within sixty (60) days from the date of such taking or
conveyance, upon written notice to Landlord of its intention so to do, and upon
giving of such notice this Lease shall terminate on the last day of the calendar
month next following the month in which such notice is given, upon payment by
Tenant of the rent from the date of such taking or conveyance to the date of
termination.

  If a portion of the Premises be taken by condemnation or conveyance in lieu
thereof and neither Landlord nor Tenant shall terminate this Lease as provided
herein, this Lease shall continue in full force and effect as to the part of the
Premises not so taken or conveyed, and the rent herein shall be apportioned as
of the date of such taking or conveyance so that thereafter the rent to be paid
by Tenant shall be in the ratio that the area of the portion of the Premises not
so taken or conveyed bears to the total area of the Premises prior to such
taking

23.  SALE OR CONVEYANCE BY LANDLORD In the event of a sale or conveyance of the
Premises or any interest therein, by any owner of the reversion then
constituting Landlord, the transferor shall thereby be released from any further
liability upon any of the terms, covenants or conditions (express or implied)
herein contained in favor of Tenant, and in such event, insofar as such transfer
is concerned, Tenant agrees to look solely to the responsibility of the
successor in interest of such transferor in and to the Premises and this Lease.
This Lease shall not be affected by any such sale or conveyance, and Tenant
agrees (to attorn to the successor in interest of such transferor, provided
that the transferee assumes all of Landlord's obligations in writing under the
Lease.

24.  ATTORNMENT TO LENDER OR THIRD PARTY In the event the interest of Landlord
in the land and buildings in which the leased Premises are located (whether such
interest of Landlord is a fee title interest or a leasehold interest) is
encumbered by deed of trust, and such interest is acquired by the lender or any
third party through Judicial foreclosure or by exercise Of a power of sale at
private trustee's foreclosure sale, Tenant hereby agrees to attorn to the
purchaser at any such foreclosure sale and to recognize such purchaser as the
Landlord under this Lease. In the event the lien of the deed of trust securing
the loan from a Lender to Landlord is prior and paramount to the Lease, this
Lease shall nonetheless continue in full force and effect for the remainder of
the unexpired term hereof, at the same rental herein reserved and upon all the
other terms, conditions and covenants herein contained.

25.  HOLDING OVER Any holding over by Tenant after expiration or other
termination of the term of this Lease with the written consent of Landlord
delivered to Tenant shall not constitute a renewal or extension of the Lease or
give Tenant any rights in or to the leased Premises except as expressly provided
in this Lease. Any holding over after the expiration or other termination of the
term of this Lease, with the consent of Landlord, shall be construed to be a
tenancy from month to month, on the same terms and conditions herein specified
insofar as applicable except that the monthly Basic Rent shall be increased to
an amount equal to one hundred twenty five (125%) percent of the monthly Basic
Rent required during the last month of the Lease term.

26.  CERTIFICATE OF ESTOPPEL Tenant shall at any time upon not less than ten
(10) days prior written notice from Landlord execute, acknowledge and deliver to
Landlord a statement in writing (i) certifying that this Lease is unmodified and
in full force and effect (or, if modified, stating the nature of such
modification and certifying that this Lease, as so modified, is in full force
and effect) and the date to which the rent and other charges are paid in
advance, if any, and (it) acknowledging that there are not, to Tenant's
knowledge, any uncured defaults on the part of Landlord hereunder, or specifying
such defaults, if any, are claimed. Any such statement may be Conclusively
relied upon by any prospective purchaser or encumbrancer of the Premises.
Tenant's failure to deliver such statement within such time shall be conclusive
upon Tenant that this Lease is in full force and effect, without modification
except as may be represented by Landlord; that there are no uncured defaults in
Landlord's performance; and that not more than one month's rent has been paid in
advance.

27.  CONSTRUCTION CHANGES It is understood that the description of the Premises
and the location of ductwork, plumbing and other facilities therein are subject
to such minor changes as Landlord or Landlord's architect determines to be
desirable in the course of construction of the Premises, and no such changes
shall affect this Lease or entitle Tenant to any reduction of rent hereunder or
result in any liability of Landlord to Tenant. Landlord does not guarantee The
accuracy of any drawings supplied to Tenant and verification of the accuracy of
such drawings rests with Tenant.

28.  RIGHT OF-LANDLORD TO PERFORM All terms, covenants and conditions of is
Lease to be performed or observed by Tenant shall be performed or observed by
Tenant at Tenant's sole cost and expense and without any reduction of rent. If
Tenant shall fail to pay any sum of money, or other rent, required to be paid by
it hereunder and such failure shall continue for five (5) days after written
notice by Landlord, or shall fail to perform any other term or covenant
hereunder on its part to be performed, and such failure shall continue for
thirty (30) days after written notice thereof by Landlord, Landlord, without
waiving or releasing Tenant from any obligation of Tenant hereunder, may, but
shall not be obliged to, make any such payment or perform any such other term or
covenant on Tenant's part to be performed. All sums so paid by Landlord and all
necessary costs of such performance by Landlord together with interest thereon
at the rate of the prime rate of interest per annum as quoted by the Bank of
America from the date of such payment on performance by Landlord, shall be paid
(and Tenant covenants to make such payment) to Landlord On demand by Landlord,
and Landlord shall have (in addition to any other right or remedy of Landlord)
the same rights and remedies in the event of nonpayment by Tenant as in the case
of failure by Tenant in the payment of rent hereunder.

29.  ATTORNEYS' FEES

  A. In the event that either Landlord or Tenant should bring suit for the
possession of the Premises, for the recovery of any sum due under this Lease, or
because of the breach of any provision of this Lease, of for any other relief
against the other party hereunder, then all costs and expenses, including
reasonable attorney's fees.

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incurred by the prevailing party therein shall be paid by the other party, which
obligation on the part of the other party shall be deemed to have accrued on the
date of the commencement of such action and shall be enforceable whether or not
the action is prosecuted to judgment.

  B. Should Landlord be named as a defendant in any suit brought against Tenant
in connection with or arising out of Tenants occupancy hereunder, Tenant shall
pay to Landlord its costs and expenses incurred in such suit, including a
reasonable attorney's fee.

30. WAIVER  The waiver by either party of the other party's failure to perform
or observe any term, covenant or condition herein contained to be performed or
observed by such waiving party shall not be deemed to be a waiver of such term,
covenant or condition or of any subsequent failure of the party failing to
perform or observe the same or any other such term, covenant or condition
therein contained, and no custom or practice which may develop between the
parties hereto during the term hereof shall be deemed a waiver of, or in any way
affect, the right of either party to insist upon performance and observance by
the other party in strict accordance with the terms hereof.

31. NOTICES  All notices, demands, requests, advices  or designations which may
be or are required to be given by either party to the other hereunder shall be
in writing. All notices, demand, requests, advices or designations by Landlord
to Tenant shall be sufficiently given, made or delivered if personally served on
Tenant by leaving the same at the Premises of if sent by United Slated certified
or registered mail, postage prepaid, addressed to Tenant at the Premises. All
notices, demands, requests, advices or designations by Tenant to Landlord shall
be sent by United States certified or registered mail, postage prepaid,
addressed to Landlord at its offices at Peery/Arrillaga, 2560 Mission College
                                        ---------------------------------------
Blvd., Suite 101, Santa Clara, CA 95054.
---------------------------------------
Each notice, request, demand, advice or designation referred to in this
paragraph shall be deemed received on the date of the personal service or
mailing thereof in the manner herein provided, as the case may be.

32. EXAMINATION OF LEASE  Submission of this instrument for examination or
signature by Tenant does not constitute a reservation of or option for a
lease, and this instrument is not effective as a lease or otherwise until its
execution and delivery by both Landlord and Tenant.

33. DEFAULT BY LANDLORD  Landlord shall not be in default unless Landlord fails
to perform obligations required of Landlord within a reasonable time, but in no
event earlier than (30) days after written notice by Tenant to Landlord and to
the holder of any first mortgage or deed of bust covering the Premises whose
name and address shall have heretofore been furnished to Tenant in writing,
specifying wherein Landlord has failed to perform such obligations; provided,
however, that if the nature of Landlord's obligations is such that more than
thirty (30) days are required for performance, then Landlord shall not be in
default if Landlord commences performance within such thirty (30) day period and
thereafter diligently prosecutes the same to completion.

34. CORPORATE AUTHORITY  If Tenant is a corporation (or a partnership), each
individual executing this Lease on behalf of said corporation (or partner-ship)
represents and warrants that he is duly authorized to execute and deliver this
Lease on behalf of said corporation (or partnership) in accordance with the by-
laws of said corporation (or partnership in accordance with the partnership
agreement) and that this Lease is binding upon said corporation (or partnership)
in accordance with its terms, if Tenant is a corporation, Tenant shall, within
thirty (30) days after execution of this Lease, deliver to Landlord a certified
copy of the resolution of the Board of Directors of said corporation authorizing
or ratifying the execution of this Lease. See Paragraph 52

35.

36. LIMITATION OF LIABILITY  In consideration of the benefits accruing
hereunder. Tenant and all successors and assigns covenant and agree that, in the
event of any actual or alleged failure, breach or default hereunder by Landlord:
        (a) the sole and exclusive remedy shall be against Landlord's interest
in the Premises leased herein;
        (b) no partner of Landlord shall be sued or named as a party in any suit
or action (except as may be necessary to secure Jurisdiction of the
partnership);
        (c) no service of process shall be made against any partner of Landlord
(except as may be necessary to secure jurisdiction of the partnership);
        (d) no partner of Landlord shall be required to answer or otherwise
 plead to any service of process;
        (e) no judgment will be taken against any partner of Landlord;
        (f) any judgment taken against any partner of Landlord may be vacated
and set aside at any time without hearing;
        (g) no writ of execution will ever by levied against the assets of any
partner of Landlord;
        (h) these covenants and agreements are enforceable both by Landlord and
also by any partner of Landlord.
  Tenant agrees that each of the foregoing covenants and agreements shall be
applicable to any covenant or agreement either expressly contained in this Lease
or imposed by statute or at common law.

37. SIGNS  No sign, placard, picture, advertisement, name or notice shall be
inscribed, displayed or printed or affixed on or to any part of the outside of
the Premises or any exterior windows of the Premises without the written consent
of Landlord first had and obtained and Landlord shall have the right to remove
any such sign, placard, picture, advertisement, name or notice without notice to
and at the expense of Tenant. If Tenant is allowed to print or affix or in any
way place a sign in, on, or about the Premises, upon expiration or other sooner
termination of this Lease, Tenant at Tenant's sole cost and expense shall both
remove such sign and repair all damage in such a manner as to restore all
aspects of the appearance of the Premises to the condition prior to the
placement of said sign.
  All approved signs or lettering on outside doors shall be printed, painted,
affixed or inscribed at the expense of Tenant by a person approved of by
Landlord.
  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.

38. MISCELLANEOUS AND GENERAL PROVISIONS

     A. Use of Building Name. Tenant shall not, without the written consent of
Landlord, use the name of the building for any purpose other than as the address
of the business conducted by Tenant in the Premises.

                                                           Initials: /s/ M.H.
                                                                     -----------

                                                           Initials: /s/ J.A.
                                                                     -----------

                                  page 7 of 8
<PAGE>

     B. Choice of Law; Severability, This Lease shall in all respect be governed
by and construed in accordance with the laws of the State of California. If any
provision of this Lease shall be invalid, unenforceable or ineffective for any
reason whatsoever, all other provisions hereof shall be and remain in full force
and effect.

     C. Definition of Terms. The term "Premises" includes the space leased
hereby and any improvements now or hereafter installed therein or attached
thereto. The term "Landlord" or any pronoun used in place thereof includes the
plural as well as the singular and the succession and assign of Landlord. The
term "Tenant" or any pronoun used in place thereof includes the plural as well
as the singular and individuals, firms, associations, partnerships and corpora-
tions, and their and each of their respective heirs, executors, administrators,
successors and permitted assigns, according to the context hereof, and the
provisions of this Lease shall inure to the benefit of and bind such heirs,
executors, administrators, successors and permitted assigns.
  The term "person" includes the plural as well as the singular and individuals,
firms, associations, partnerships and corporations. Words used in any gender
include other genders. If there be more than one Tenant the obligations of
Tenant hereunder are Joint and several. The paragraph headings of the Lease are
for convenience of reference only and shall have no effect upon the construction
or interpretation of any provision hereof.

     D. Time of Essence. Time is of the essence of this Lease and of each and
all of its provisions.

     E. Quitclaim. At the expiration or earlier termination of this Lease,
Tenant shall execute, acknowledge and deliver to Landlord, within ten (10) days
after written demand from Landlord to Tenant, any quitclaim deed or other
document required by any reputable title company, licensed to operate in the
State of California, to remove the cloud or encumbrance created by this Lease
from the real property of which Tenant's Premises are a part.

     F. Incorporation of Prior Agreements; Amendments. This instrument along
with any exhibits and attachments hereto constitutes the entire agreement
between Landlord and Tenant relative to the Premises and this agreement and the
exhibits and attachments may be altered, amended or revoked only by an
instrument in writing signed by both Landlord and Tenant. Landlord and Tenant
agree hereby that all prior or contemporaneous oral agreements between and
among themselves and their agents or representatives relative to the leasing
of the Premises are merged in or revoked by this agreement.

     G. Recording. Neither Landlord nor Tenant shall record this Lease or a
short form memorandum hereof without the consent of the other.

     H. Amendments for Financing. Tenant further agrees to execute any
amendments required by a lender to enable Landlord to obtain financing, so long
as Tenant's rights hereunder are not substantially affected.

     I. Additional Paragraphs. Paragraphs     39     through     53     are
                                         -----------       ------------
added hereto and are included as a part of this lease.

     J. Clauses, Plats and Riders. Clauses, plats and riders, if any, signed by
Landlord and Tenant and endorsed or, or affixed to this Lease are a part hereof.

     K. Diminution of Light, Air or View. Tenant covenants and agrees that no
diminution or shutting off of light, air or view by any structure which may be
hereafter erected (whether or not by Landlord) shall in any way affect his
Lease, entitle Tenant to any reduction of rent hereunder or result in any
liability of Landlord to Tenant.

  IN WITNESS WHEREOF, Landlord and Tenant have executed and delivered this Lease
as of the day and year last written below.

LANDLORD:                                 TENANT:
JOHN ARRILLAGA SURVIVOR'S TRUST           FAROUDJA LABORATORIES, INC.
                                          A California corporation

By /s/ JOHN ARRILLAGA                     By /s/ MICHAEL HOBERG
   ________________________                  _____________________
   John Arrillaga, Trustee

Date: 10/10/97                            Title  VP FINANCE
      --------                                   -----------

RICHARD T. PEERY SEPARATE PROPERTY TRUST  Type or Print Name Michael Hoberg
                                                             ______________
By /s/ RICHARD T. PEERY                   Date: 10/6/97
  ---------------------                         --------
  Richard T. Perry, Trustee

Date: 10/9/97                                              Initials: /s/ M.H.
      _______                                                        -----------

                                                           Initials: /s/ J.A.
                                                                     -----------

                                page 8 of 8
<PAGE>

Paragraphs 39 through 53 to Lease Agreement dated August 27, 1997, By and
Between the John Arrillaga Survivor's Trust and the Richard T. Peery Separate
Property Trust, as Landlord, and Faroudja Laboratories, Inc., a California
corporation, as Tenant for 10,000 (+/-) Square Feet of Space Located at 733
Palomar Avenue, Sunnyvale, California.

39.  BASIC RENT: In accordance with Paragraph 4A herein, the total aggregate sum
     ----------
of ONE MILLION FOUR HUNDRED NINETEEN THOUSAND SIXTEEN AND 13/100 DOLLARS
($1,419,016.13), shall be payable as follows:

     On October 6, 1997, the sum of FIFTEEN THOUSAND FIVE HUNDRED SIXTEEN AND
13/100 DOLLARS ($15,516.13) shall be due, representing the Rental for the period
October 6, 1997 through October 31, 1997.

     On November 1, 1997, the sum of EIGHTEEN THOUSAND FIVE HUNDRED AND NO/100
DOLLARS ($18,500.00) shall be due, and a like sum due on the first day of each
month thereafter, through and including September 1, 1998.

     On October 1, 1998, the sum of NINETEEN THOUSAND AND NO/100 DOLLARS
($19,000.00) shall be due, and a like sum due on the first day of each month
thereafter, through and including September 1, 1999.

     On October 1, 1999, the sum of NINETEEN THOUSAND FIVE HUNDRED AND NO/100
DOLLARS ($19,500.00) shall be due, and a like sum due on the first day of each
month thereafter, through and including September 1, 2000.

     On October 1, 2000, the sum of TWENTY THOUSAND AND NO/100 DOLLARS
($20,000.00) shall be due, and a like sum due on the first day of each month
thereafter, through and including September 1, 2001.

     On October 1, 2001, the sum of TWENTY THOUSAND FIVE HUNDRED AND NO/100
DOLLARS ($20,500.00) shall be due, and a like sum due on the first day of each
month thereafter, through and including September 1, 2002.

     On October 1, 2002, the sum of TWENTY ONE THOUSAND AND NO/100 DOLLARS
($21,000.00) shall be due, and a like sum due on the first day of each month
thereafter, through and including September 1, 2003; or until the entire
aggregate sum of ONE MILLION FOUR HUNDRED NINETEEN THOUSAND SIXTEEN AND 13/100
DOLLARS ($1,419,016.13) has been paid.

40.  "AS-IS" BASIS: Subject only to Paragraph 53 and to Landlord making the
     -------------
improvements shown on Exhibit B to be attached hereto, it is hereby agreed that
                      ----------
the Premises leased hereunder is leased strictly on an "as-is" basis and in its
present condition, and in the configuration as shown on Exhibit B to be attached
                                                        ---------
hereto, and by reference made a part hereof. Except as noted herein, it is
specifically agreed between the parties that after Landlord makes the interior
improvements as shown on Exhibit B, Landlord shall not be required to make, nor
                         ---------
be responsible for any cost, in connection with any repair, restoration, and/or
improvement to the Premises in order for this Lease to commence, or thereafter,
throughout the Term of this Lease. Notwithstanding anything to the contrary
within this Lease, Landlord makes no warranty or representation of any kind or
nature whatsoever as to the condition or repair of the Premises, nor as to the
use or occupancy which may be made thereof.

41.  RULES AND REGULATIONS AND COMMON AREA: Subject to the terms and conditions
     -------------------------------------
of this Lease and such Rules and Regulations as Landlord may from time to time
prescribe, Tenant and Tenant's employees, invitees and customers shall, in
common with other occupants of the Parcel/Building in which the premises are
located, and their respective employees, invitees and customers, and others
entitled to the use thereof, have the non-exclusive right to use the access
roads, parking areas, and facilities provided and designated by Landlord for the
general use and convenience of the occupants of the Parcel/Building in which the
Premises are located, which areas and facilities are referred to herein as
"Common Area". This right shall terminated upon the

                                    Page 9            Initial: /s/ M.H. /s/ J.A.
                                                               -----------------
<PAGE>

termination of this Lease. Landlord reserves the right from time to time to make
changes in the shape, size, location, amount and extent of Common Area. Landlord
further reserves the right to promulgate such reasonable rules and regulations
relating to the use of the Common Area, and any part or parts thereof, as
Landlord may deem appropriate for the best interests of the occupants of the
Parcel/Building. Such Rules and Regulations may be amended by Landlord from time
to time, with or without advance notice, and all amendments shall be effective
upon delivery of a copy to Tenant. Landlord shall not be responsible to Tenant
for the non-performance by any other tenant or occupant of the Parcel/Building
of any of said Rules and Regulations.

Landlord shall operate, manage and maintain the Common Area. The manner in which
the Common Area shall be maintained and the expenditures for such maintenance
shall be at the discretion of Landlord.

42.  EXPENSES OF OPERATION. MANAGEMENT, AND MAINTENANCE OF THE COMMON AREAS OF
     -------------------------------------------------------------------------
THE PARCEL AND BUILDING IN WHICH THE PREMISES ARE LOCATED: As Additional Rent
---------------------------------------------------------
and in accordance with Paragraph 4D of this Lease, Tenant shall pay to Landlord
Tenant's proportionate share (calculated on a square footage or other equitable
basis as calculated by landlord) of all expenses of operation, management,
maintenance and repair of the Common Areas of the Parcel including, but not
limited to, license, permit, and inspection fees; security; utility charges
associated with exterior landscaping and lighting (including water and sewer
charges); all charges incurred in the maintenance and replacement of landscaped
areas, lakes, parking lots and paved areas (including repairs, replacement,
resealing and restriping), sidewalks, driveways, maintenance, repair and
replacement of all fixtures and electrical, mechanical and plumbing systems;
supplies, materials, equipment and tools; the cost of capital expenditures which
have the effect of reducing operating expenses, provided, however, that in the
event Landlord makes such capital improvements, Landlord may amortize its
investment in said improvements (together with interest at the rate of fifteen
(15%) percent per annum on the unamortized balance) as an operating expense in
accordance with standard accounting practices, provided, that such amortization
is not at a rate greater than the anticipated savings in the operating expenses.

As Additional Rent and in accordance with Paragraph 4D of this Lease, Tenant
shall pay its proportionate share (calculated on a square footage or other
equitable basis as calculated by Landlord) of the cost of operation (including
common utilities), management, maintenance, and repair of the building
(including structural and common areas such as lobbies, restrooms, janitor's
closets, hallways, elevators, mechanical and telephone rooms, stairwells,
entrances, spaces above the ceilings and janitorization of said common areas) in
which the Premises are located. The maintenance items herein referred to
include, but are not limited to, all windows, window frames, plate glass,
glazing, truck doors, main plumbing systems of the building (such as water
drain lines, sinks, toilets, faucets, drains, showers and water fountains), main
electrical systems (such as panels and conduits), heating and airconditioning
systems (such as compressors, fans, air handlers, ducts, boilers, heaters),
structural elements and exterior surfaces of the building; store fronts, roof,
downspouts, building common area interiors (such as wall coverings, window
coverings, floor coverings and partitioning), ceilings, building exterior doors,
skylights (if any), automatic fire extinguishing systems, and elevators (if
any); license, permit and inspection fees; security, supplies, materials,
equipment and tools; the cost of capital expenditures which have the, effect of
reducing operating expenses, provided, however, that in the event Landlord makes
such capital improvements, Landlord may amortize its investment in said
improvements (together with interest at the rate of fifteen (15%) percent per
annum on the unamortized balance) as an operating expense in accordance with
standard accounting practices, provided, that such amortization is not at a rate
greater than the anticipated savings in the operating expenses. Tenant hereby
waives all rights hereunder, and benefits of, subsection 1 of Section 1932 and
Sections 1941 and 1942 of the California Civil Code and under any similar law,
statute or ordinance now or hereafter in effect.

"Additional Rent" as used herein shall not include Landlord's debt repayments;
interest on charges, expenses directly or indirectly incurred by Landlord for
the benefit of any other tenant; cost for the installation of partitioning or
any other tenant improvements; cost of attracting tenants; depreciation;
interest; or executive salaries.

43.  UTILITIES OF THE BUILDING IN WHICH THE PREMISES ARE LOCATED: As Additional
     -----------------------------------------------------------
Rent and in accordance with Paragraph 4D of this Lease Tenant shall pay its
proportionate share (calculated on a square footage or other equitable basis as
calculated by Landlord) of the cost of all utility charges such as water, gas,
electricity, (telephone, telex and

                                    Page 10          Initial: /s/ M.H. /s/ J.A.
                                                              -----------------
<PAGE>

other electronic communications service, if applicable) sewer service, waste
pick-up and any other utilities, materials or services furnished directly to the
building in which the Premises are located, including, without limitation, any
temporary or permanent utility surcharge or other exactions whether or not
hereinafter imposed.

Landlord shall not be liable for and Tenant shall not be entitled to any
abatement or reduction of rent by reason of any interruption or failure of
utility services to the Premises when such interruption or failure is caused by
accident, breakage, repair, strikes, lockouts, or other labor disturbances or
labor disputes of any nature, or by any other cause, similar or dissimilar,
beyond the reasonable control of Landlord.

Provided that Tenant is not in default in the performance or observance of any
of the terms, covenants or conditions of this Lease to be performed or observed
by it, Landlord shall furnish to the Premises between the hours of 8:00 am and
6:00 pm, Mondays through Fridays (holidays excepted) and subject to the rules
and regulations of the Common Area hereinbefore referred to, reasonable
quantities of water, gas and electricity suitable for the intended use of the
Premises and heat and airconditioning required in Landlord's judgment for the
comfortable use and occupation, of the Premises for such purposes. Tenant agrees
that at all times it will cooperate fully with Landlord and abide by all
regulations and requirements that Landlord may prescribe for the proper
functioning and protection of the building heating, ventilating and
airconditioning systems. Whenever heat generating machines, equipment, or any
other devices (including exhaust fans) are used in the Premises by Tenant which
affect the temperature or otherwise maintained by the airconditioning system,
Landlord shall have the right to install supplementary airconditioning units in
the Premises and the cost thereof, including the cost of installation and the
cost of operation and maintenance thereof, shall be paid by Tenant to Landlord
upon demand by Landlord. Tenant will not, without the written consent of
Landlord, use any apparatus or device in the Premises (including, without
limitation), electronic data processing machines or machines using current in
excess of 110 Volts which will in any way increase the amount of electricity,
gas, water or airconditioning usually furnished or supplied to premises being
used as general office space, or connect with electric current (except through
existing electrical outlets in the Premises), or with gas or water pipes any
apparatus or device for the purposes of using electric current, gas, or water.
If Tenant shall require water, gas, or electric current in excess of that
usually furnished or supplied to premises being used as general office space,
Tenant shall first obtain the written consent of Landlord, which consent shall
not be unreasonably withheld and Landlord may cause an electric current, gas or
water meter to be installed in the Premises in order to measure the amount of
electric current, gas or water consumed for any such excess use. The cost of any
such meter and of the installation, maintenance and repair thereof, all charges
for such excess water, gas and electric current consumed (as shown by such
meters and at the rates then charged by the furnishing public utility); and any
additional expense incurred by Landlord in keeping account Of electric current,
gas, or water so consumed shall be paid by Tenant, and Tenant agrees to pay
Landlord therefor promptly upon demand by Landlord.

44.  PARKING: Tenant shall have the right to the nonexclusive use of thirty
     -------
eight (38) parking spaces in the common parking area of the building. Tenant
agrees that Tenant, Tenant's employees, agents, representatives, and/or invitees
shall not use parking spaces in excess of said 38 parking spaces allocated to
Tenant hereunder. Landlord shall have the right, at Landlord's sole discretion,
to specifically designate the location of Tenant's parking spaces within the
common parking area of the building in the event of a dispute among the tenants
occupying the building referred to herein, in which event Tenant agrees that
Tenant, Tenant's employees, agents, representatives and/or invitees shall not
use any parking spaces other than those parking spaces specifically designated
by Landlord for Tenant's use. Said parking spaces, if specifically designated by
Landlord to Tenant, may be relocated by Landlord at any time, and from time to
time. Landlord reserves the right, at Landlord's sole discretion, to rescind any
specific designation of parking spaces, thereby returning Tenant's parking
spaces to the common parking area. Landlord shall give Tenant written notice of
any change in Tenant's parking spaces. Tenant shall not, at any time, park, or
permit to be parked, any trucks or vehicles adjacent to the loading area so as
to interfere in any way with the use of such areas, nor shall Tenant, at any
time, park or permit the parking of Tenant's trucks and other vehicles or the
trucks and vehicles of Tenant's suppliers or others, in any portion of the
common areas not designated by Landlord for such use by Tenant. Tenant shall not
park nor permit to be parked, any inoperative vehicles or equipment on any
portion of the common parking area or other common areas of the building. Tenant
agrees to assume responsibility for compliance by its employees with the parking
provision, contained herein. If Tenant or its employees park in other than
designated parking areas, then Landlord may charge Tenant, as an additional
charge, and Tenant agrees to pay Ten Dollars ($10.00) per day for

                                    Page 11          Initial: /s/ M.H. /s/ J.A.
                                                              -----------------
<PAGE>

each day or partial day each such vehicle is parking in any area other than that
designated. Tenant hereby authorizes Landlord, at Tenant's sole expense, to tow
away from the building any vehicle belonging to Tenant or Tenant's employees
parked in violation of these provisions, or to attach violation stickers or
notices to such vehicles. Tenant shall use the parking area for vehicle parking
only and shall not use the parking areas for storage.

45.  ASSESSMENT CREDITS: The demised property herein may be subject to a special
     ------------------
assessment levied by the City of Sunnyvale as part of an Improvement District.
As a part of said special assessment proceedings (if any), additional bonds were
or may be sold and assessments were or may be levied to provide for construction
contingencies and reserve funds. Interest shall be earned on such funds created
for contingencies and on reserve funds which will be credited for the benefit of
said assessment district. To the extent surpluses are created in said district
through unused contingency funds, interest earnings or reserve funds, such
surpluses shall be deemed the property of Landlord. Notwithstanding that such
surpluses may be credited on assessments otherwise due against the Leased
Premises, Tenant shall pay to Landlord, as additional rent if, and at the time
of any such credit of surpluses, an amount equal to all such surpluses so
credited. For example: if (i) the property is subject to an annual assessment of
$1,000.00, and (ii) a surplus of $200.00 is credited towards the current year's
assessment which reduces the assessment amount shown on the property tax bill
from $1,000.00 to $800.00, Tenant shall, upon receipt of notice from Landlord,
pay to Landlord said $200.00 credit as Additional Rent.

46.  ASSIGNMENT AND SUBLETTING (CONTINUED):
     -------------------------------------

     A.  Notwithstanding anything stated in Paragraph 16 of this Lease, Landlord
hereby agrees to consent to an assignment or sublease to any parent or
subsidiary corporation, or related corporation which Yves and/or Isabelle
Faroudja (or their heirs) have more than a fifty-one percent (51%) interest in,
provided however, Tenant shall remain liable for 100% of the terms and
conditions and obligations of Tenant under this Lease. Notwithstanding the
above, Tenant shall be required to (a) give Landlord written notice prior to
such assignment or subletting to any party as described above, and (b) execute
Landlord's consent document prepared by Landlord reflecting the assignment or
subletting.

     B.  Any and all sublease agreement(s) between Tenant and any and all
subtenant(s) (which agreements must be consented to by Landlord, pursuant to the
requirements of this Lease) shall contain the following language:

            "If Landlord and Tenant jointly and voluntarily elect, for any
  reason whatsoever, to terminate the Master Lease prior to the scheduled Master
  Lease termination date, then this Sublease (if then still in effect) shall
  terminate concurrently with the termination of the Master Lease. Subtenant
  expressly acknowledges and agrees that (1) the voluntary termination of the
  Master Lease by Landlord and Tenant and the resulting termination of this
  Sublease shall not give Subtenant any right or power to make any legal or
  equitable claim against Landlord, including without limitation any claim for
  interference with contract or interference with prospective economic
  advantage, and (2) Subtenant hereby waives any and all rights it may have
  under law or at equity against Landlord to challenge such an early termination
  of the Sublease, and unconditionally releases and relieves Landlord, and its
  officers, directors, employees and agents, from any and all claims, demands,
  and/or causes of action whatsoever (collectively, "Claims"), whether such
  matters are known or unknown, latent or apparent, suspected or unsuspected,
  foreseeable or unforeseeable, which Subtenant may have arising out of or in
  connection with any such early termination of this Sublease. Subtenant
  knowingly and intentionally waives any and all protection which is or may be
  given by Section 1542 of the California Civil Code, which provides as
  follows: "A general release does not extend to claims which the creditor does
  not know or suspect to exist in his favor at the time of executing the
  release, which if known by him must have materially affected his settlement
  with debtor.

       The term of this  Sublease is therefore subject to early termination.
  Subtenant's initials here below evidence (a) Subtenant's consideration of and
  agreement to this early termination provision, (b) Subtenant's acknowledgment
  that, in determining the

                                    Page 12          Initial: /s/ M.H. /s/ J.A.
                                                              -----------------
<PAGE>

  net benefits to be derived by Subtenant under the terms of this Sublease,
  Subtenant has anticipated the potential for early termination, and (c)
  Subtenant's agreement to the general waiver and release of Claims above.

          Initials: ___________                   Initials: __________"
                     Subtenant                                Tenant

47.  BANKRUPTCY AND DEFAULT: Paragraph 19 is modified to provide that with
     ----------------------
respect to non-monetary defaults not involving Tenant's failure to pay Basic
Rent or Additional Rent, Tenant shall not be in default of any non-monetary
obligation if (i) more than thirty (30) days is required to cure such non-
monetary default, and (ii) Tenant commences cure of such default as soon as
reasonably practicable after receiving written notice of such default from
Landlord and thereafter continuously and with due diligence prosecutes such cure
to completion.

48.  ABANDONMENT: Paragraph 20 is modified to provide that Tenant shall not be
     -----------
in default under the Lease if it leaves all or any part of Premises vacant so
long as (i) Tenant is performing all of its other obligations under the Lease
including the obligation to pay Basic Rent and Additional Rent (ii) Tenant
provides on-site security during normal business hours for those parts of the
Premises left vacant, (iii) such vacancy does not materially and adversely
affect the validity or coverage of any policy of insurance carried by Landlord
with respect to the Premises, and (iv) the utilities and heating and ventilation
system are operated and maintained to the extent necessary to prevent damage to
the Premises or its systems.

49.  HAZARDOUS MATERIALS: Landlord and Tenant agree as follows with respect to
     -------------------
the existence or use of "Hazardous Materials" (as defined herein) on, in, under
or about the Premises and real property located beneath said Premises and the
common areas of the Parcel, which includes the entire parcel of land on which
the Premises are located as shown in Green on Exhibit A attached hereto
                                              ----------
(hereinafter collectively referred to as the "Property"):

     A.  As used herein, the term "Hazardous Materials" shall mean any material,
waste, chemical, mixture or byproduct which is or hereafter is defined, listed
or designated under Environmental Laws (defined below) as a pollutant, or as a
contaminant, or as a toxic or hazardous substance, waste or material, or any
other unwholesome, hazardous, toxic, biohazardous, or radioactive material,
waste, chemical, mixture or byproduct, or which is listed, regulated or
restricted by any Environmental Law (including, without limitation, petroleum
hydrocarbons or any distillates or derivatives or fractions thereof,
polychlorinated biphenyls, or asbestos). As used herein, the term "Environmental
Laws" shall mean any applicable Federal, State of California or local government
law (including common law), statute, regulation, rule, ordinance, permit,
license, order, requirement, agreement, or approval, or any determination,
judgment, directive, or order of any executive or judicial authority at any
level of Federal, State of California or local government (whether now existing
or subsequently adopted or promulgated) relating to pollution or the protection
of the environment, ecology, natural resources, or public health and safety.

     B.  Tenant shall obtain Landlord's written consent, which may be withheld
in Landlord's discretion, prior to the occurrence of any Tenant's Hazardous
Materials Activities (defined below); provided, however, that Landlord's consent
shall not be required for normal use in compliance with applicable Environmental
Laws of customary household and office supplies (Tenant shall first provide
Landlord with a list of said materials use), such as mild Cleaners, lubricants
and copier toner. As used herein, the term "Tenant's Hazardous Materials
Activities" shall mean any and 'all use, handling, generation, storage,
disposal, treatment, transportation, release, discharge, or emission of any
Hazardous Materials on, in, beneath, to, from, at or about the Property, in
connection with Tenant's use of the Property, or by Tenant or by any of Tenant's
agents, employees, contractors, vendors, invitees, visitors or its future
subtenants or assignees. Tenant agrees that any and all Tenant's Hazardous
Materials Activities shall be conducted in strict, full compliance with
applicable Environmental Laws at Tenant's expense, and shall not result in any
contamination of the Property or the environment. Tenant agrees to provide
Landlord with prompt written notice of any spill or release of Hazardous
Materials at the Property during the term of the Lease of which Tenant becomes
aware, and further agrees to provide Landlord with written notice of any
violation of Environmental Laws in connection with Tenant's Hazardous Materials
Activities of which Tenant becomes aware. If Tenant's Hazardous Materials

                                    Page 13          Initial: /s/ M.H. /s/ J.A.
                                                              -----------------
<PAGE>

Activities involve Hazardous Materials other than normal use of customary
household and office supplies, Tenant also agrees at Tenant's expense: (i) to
install such Hazardous Materials monitoring, storage and containment devices as
Landlord reasonably deems necessary (Landlord shall have no obligation to
evaluate the need for any such installation or to require any such
installation); (ii) provide Landlord with a written inventory of such Hazardous
Materials, including an update of same each year upon the anniversary date of
the Commencement Date of the Lease ("Anniversary Date"); and (iii) on each
Anniversary Date, to retain a qualified environmental consultant, acceptable to
Landlord, to evaluate whether Tenant is in compliance with all applicable
Environmental Laws with respect to Tenant's Hazardous Materials Activities.
Tenant, at its expense, shall submit to Landlord a report from such
environmental consultant which discusses the environmental consultant's findings
within two (2) months of each Anniversary Date. Tenant, at its expense, shall
promptly undertake and complete any and all steps necessary, and in full
compliance with applicable Environmental Laws, to fully correct any and all
problems or deficiencies identified by the environmental consultant, and
promptly provide Landlord with documentation of all such corrections.

     C.  Prior to termination or expiration of the Lease, Tenant, at its
expense, shall (i) properly remove from the Property all Hazardous Materials
which come to be located at the Property in connection with Tenant's Hazardous
Materials Activities, and (ii) fully comply with and complete all facility
closure requirements of applicable Environmental Laws regarding Tenant's
Hazardous Materials Activities, including but not limited to (x) properly
restoring and repairing the Property to the extent damaged by such closure
activities, and (y) obtaining from the local Fire Department or other
appropriate governmental authority with jurisdiction a written concurrence that
closure has been completed in compliance with applicable Environmental Laws.
Tenant shall promptly provide Landlord with copies of any claims, notices, work
plans, data and reports prepared, received or submitted in connection with any
such closure activities.

     D.  If Landlord, in its sole discretion, believes that the Property has
become contaminated as a result of Tenant's Hazardous Materials Activities,
Landlord in addition to any other rights it may have under this Lease or under
Environmental Laws or other laws, may enter upon the Property and conduct
inspection, sampling and analysis, including but not limited to obtaining and
analyzing samples of soil and groundwater, for the purpose of determining the
nature and extent of such contamination. Tenant shall promptly reimburse
Landlord for the costs of such an investigation, including but not limited to
reasonable attorneys' fees Landlord incurs with respect to such investigation,
that discloses Hazardous Materials contamination for width Tenant is liable
under this Lease. Except as may be required of Tenant by applicable
Environmental Laws, Tenant shall not perform any sampling, testing, or drilling
to identify the presence of any Hazardous Materials at the Property, without
Landlord's prior written consent which may be withheld in Landlord's discretion.
Tenant shall promptly provide Landlord with copies of any claims, notices, work
plans, data and reports prepared, received or submitted in connection with any
sampling, testing or drilling performed pursuant to the preceding sentence.

     E.  Tenant shall indemnify, defend (with legal counsel acceptable to
Landlord, whose consent shall not unreasonably be withheld) and hold harmless
Landlord, its employees, assigns, successors, successors-in-interest, agents and
representatives from and against any and all claims (including but not limited
to third party claims from a private party or a government authority),
liabilities, obligations, losses, causes of action, demands, governmental
proceedings or directives, fines, penalties, expenses, costs (including but not
limited to reasonable attorneys', consultants' and other experts' fees and
costs), and damages, which arise from or relate to: (i) Tenant's Hazardous
Materials Activities; (ii) any Hazardous Materials contamination caused by
Tenant prior to the Commencement Date of the Lease; or (iii) the breach of any
obligation of Tenant under this Paragraph 49 (collectively, "Tenant's
Environmental Indemnification"). Tenant's Environmental Indemnification shall
include but is not limited to the obligation to promptly and fully reimburse
Landlord for losses in or reductions to rental income, and diminution in fair
market value of the Property. Tenant's Environmental Indemnification shall
further include but is not limited to the obligation to diligently and properly
implement to completion, at Tenant's expense, any and all environmental
investigation, removal, remediation, monitoring, reporting, closure activities,
or other environmental response action (collectively, "Response Actions").
Tenant shall promptly provide Landlord with copies of any claims, notices, work
plans, data and reports prepared, received or submitted in connection with any
Response Actions.

It is agreed that the Tenant's responsibilities related to Hazardous Materials
will survive the expiration or termination of this Lease and that Landlord may
obtain specific performance of Tenant's responsibilities under this Paragraph
49.

                                    Page 14          Initial: /s/ M.H. /s/ J.A.
                                                              -----------------
<PAGE>

50.  CONSENT: Whenever the consent of one party to the other is required
     -------
hereunder, such consent shall not be unreasonably withheld.

51.  AUTHORITY TO EXECUTE: The parties executing this Lease Agreement hereby
     --------------------
warrant and represent that they are properly authorized to execute this Lease
Agreement and bind the parties on behalf of whom they execute this Lease
Agreement and to all of the terms, covenants and conditions of this Lease
Agreement as they relate to the respective parties hereto.

52.  LANDLORD'S CORPORATE AUTHORITY: If Landlord is a corporation (or
     ------------------------------
partnership or trust), each individual executing this Lease on behalf of said
corporation (or partnership or trust) represents and warrants that he is duly
authorized to execute this Lease on behalf of said corporation (or partnership
or trust) in accordance with the bylaws of said corporation (or partnership in
accordance with the partnership agreement, or trust in accordance with the trust
indenture) and that this Lease is binding upon said corporation (or partnership
or trust) in accordance with its terms. If Landlord is a corporation, Landlord
shall in thirty (30) days after execution of this Lease deliver to Tenant a
certified copy of the resolution of the Board of Directors of said corporation
authorizing or ratifying the execution of this Lease.

53.  PUNCH LIST: In addition to and notwithstanding anything to the contrary in
     ----------
Paragraphs 5 and 40 of this Lease, Tenant shall have thirty (30) days after the
Commencement Date to provide Landlord with a written "punch list" pertaining to
defects in the Building and in the interior improvements constructed by Landlord
for Tenant. As soon as reasonably possible thereafter, Landlord, or one of
Landlord's representatives (if so approved by Landlord), and Tenant shall
conduct a joint walk-through of the Premises (if Landlord so requires), and
inspect such Tenant Improvements, using their best efforts to agree on the
incomplete or defective construction related to the Tenant Improvements
installed by Landlord. After such inspection has been completed, Landlord shall
prepare, and both parties shall sign, a list of all "punch list" items which the
parties reasonably agree are (i) to be corrected by Landlord (but which shall
exclude any damage or defects caused by Tenant, its employees, agents or parties
Tenant has contracted with to work on the Premises) or (ii) if said defects
and/or damaged item(s) are not material, Landlord may elect, in its sole and
absolute discretion, not to repair such item(s), but to acknowledge in written
feral the defect and/or damaged item(s); in which case, notwithstanding anything
to the contrary in said Lease Paragraph 5 ("Acceptance and Surrender"), Tenant
shall not be responsible upon Lease Termination to repair said item(s) so noted
by Landlord. Landlord shall have thirty (30) days thereafter (or longer if
necessary, provided Landlord is diligently pursuing the completion of the same)
to complete, at Landlord's expense, the "punch list" items without the
Commencement Date of the Lease and Tenant's obligation to pay Rental thereunder
being affected. Notwithstanding the foregoing, a crack in the foundation, or
exterior walls or any other defect in the structure or Building that does not
endanger the structural integrity of the building, or which is not life-
threatening, shall not be considered material, nor shall Landlord be responsible
for repair of same. This Paragraph shall be of no force and effect if Tenant
shall fail to give any such notice to Landlord within thirty (30) days after the
Commencement Date of this Lease.

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                                                            Initial: ^ILLEGIBLE^
                                                                     -----------

                                    Page 15
<PAGE>

                                          [DIAGRAM: FLOOR PLAN OF 733 PALOMAR 3]
<PAGE>

                                                [DIAGRAM: SITE PLAN 733 PALOMAR]<PAGE>

                                                                    EXHIBIT 10.7

                        [Diagram: Floorplan 733 Palomar]
<PAGE>

                       EXHIBIT B TO "CONSENT TO SUBLEASE"
            SUMMARY OF AMOUNTS/CONSIDERATION TO BE PAID BY SUBTENANT

                              [insert table here]

IF ADDITIONAL SPACE IS NEEDED, PLEASE DUPLICATE AND ATTACH
*  IF PAYMENTS ARE REQUIRED OTHER THAN MONTHLY, PLEASE INCLUDE THESE PAYMENTS
   AS WELL.

** IF SUBLEASE RENT PAID INCLUDES MISCELLANEOUS EXPENSES, PLEASE IDENTIFY THE $
   AMOUNT /PSF OF THE TOTAL RENT PAYMENT ALLOCATED TO BASIC RENT AND EACH
   ADDITIONAL EXPENSE ITEM.

IS ANY ADDITIONAL CONSIDERATION (MONETARY AND/OR SERVICES) DUE UNDER THE
SUBLEASE?: YES     NO X
              ___    ___

IF "YES", IDENTIFY TYPE CONSIDERATION AND DOLLAR VALUE ASSIGNED TO SAID
CONSIDERATION:

<TABLE>
<S>                       <C>                       <C>
TYPE:___________________  VALUE:$_____________      TENANT:                             SUBTENANT
                                                    FAROUDIA LABORATORIES, INC.         CONWAY STUART MEDICAL, INC.
TYPE:___________________  VALUE:$_____________      TENANT:                             SUBTENANT
                                                    By: /s/ Kenneth S. Boschwitz        By: /s/ Alistair McLaren
TYPE:___________________  VALUE:$_____________      TENANT:                             SUBTENANT
                                                    Printed: Kenneth S. Boschwitz       Printed: Alistair McLaren
TYPE:___________________  VALUE:$_____________      TENANT:                             SUBTENANT
                                                    Title: VP Business Development &    Title: Chief Financial Officer
IF ADDITIONAL SPACE IS NEEDED,                             General Counsel
PLEASE DUPLICATE AND ATTACH
</TABLE>
<PAGE>

                                                   BLDG:   Palomar 3
                                                   OWNER:  500
                                                   PROP:   273
                                                   UNIT:   2
                                                   TENANT: 27307

                                LEASE AGREEMENT

THIS LEASE, made this 6th day of May  , 1998 between JOHN ARRILLAGA, Trustee, or
                      ---        ---      --         ---------------------------
his Successor Trustee, UTA Dated 7/20/77 (JOHN ARRILLAGA SURVIVOR'S TRUST) as
-------------------------------------------------------------------------------
amended, and RICHARD T. PEERY, Trustee, or his Successor Trustee, UTA dated
-------------------------------------------------------------------------------
7/20/77 (RICHARD T. PEERY SEPARATE PROPERTY TRUST) as amended -----------------
-------------------------------------------------------------------------------
--------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------- hereinafter
--------------------------------------------------------------------
called Landlord and CONWAY STUART MEDICAL, INC., a Delaware corporation -------
                    -----------------------------------------------------------
--------------------------------------------------------------------------------
-------------------------------------------------------------------------------
--------------------------------------------------------------------------------
-------------------------------------------------------------------------------
----------------------------------------------------------, hereinafter called
----------------------------------------------------------
Tenant.

                                  WITNESSETH:

  Landlord hereby leases to Tenant and Tenant hereby hires and takes from
Landlord those certain premises (the "Premises") outlined in red on Exhibit "A",
attached hereto and incorporated herein by this reference thereto more
particularly described as follows:

  A portion of that certain 20,000+ square foot, one-story building located at
735 Palomar Avenue, Sunnyvale, California 94086, consisting of approximately
10,000+ square feet of space. Said Premises is more particularly shown within
the area outlined in Red on Exhibit A attached hereto. The entire parcel, of
                            ---------
which the Premises is a part, is shown within the area outlined in Green on
Exhibit A attached. The premises  is leased on an "as-is" basis, in its present
---------
condition, and in the configuration as shown in Red on Exhibit B attached
                                                       ---------
hereto.

  The word "Premises" as used throughout this lease is hereby defined to include
the nonexclusive use of landscaped areas, sidewalks and driveways in front of or
adjacent to the Premises, and the nonexclusive use of the area directly
underneath or over such sidewalks and driveways. The gross leaseable area of the
building shall be measured from outside of exterior walls to outside of exterior
walls, and shall include any atriums, covered entrances or egresses and covered
building loading areas.

  Said letting and hiring is upon and subject to the terms, covenants and
conditions hereinafter set forth and Tenant covenants as a material part of the
consideration for this Lease to perform and observe each and all of said terms,
covenants and conditions. This Lease is made upon the conditions of such
performance and observance.

1.  USE  Tenant shall use the Premises only in conformance with applicable
governmental laws, regulations, rules and ordinances for the purpose of general
                                                                        -------
office, light manufacturing, research and development, and storage and other
----------------------------------------------------------------------------
uses necessary for Tenant to conduct Tenant's business, provided that such uses
-------------------------------------------------------------------------------
shall be in accordance with all applicable governmental laws and ordinances,
----------------------------------------------------------------------------
and for no other purpose. Tenant shall not do or permit to be done in or about
the Promises nor bring or keep or permit to be brought or kept in or about the
Premises anything which is prohibited by or will in any way increase the
existing rate of (or otherwise affect) fire or any insurance covering the
Premises or any part thereof, or any of its contents, or will cause a
cancellation of any insurance covering the Premises or any part thereof, or any
of its contents. Tenant shall not do or permit to be done anything in, on or
about the Premises which will in any way obstruct or interfere with the rights
of other tenants or occupants of the Premises or neighboring premises or injure
or annoy them, or use or allow the Premises to be used for any improper,
immoral, unlawful or objectionable purpose, nor shall Tenant cause, maintain or
permit any nuisance in, on or about the Premises. No sale by auction shall be
permitted on the Premises. Tenant shall not place any loads upon the floors,
wails, or ceiling which endanger the structure, or place any harmful fluids or
other materials in the drainage system of the building, or overload existing
electrical or other mechanical systems. No waste materials or refuse shall be
dumped upon or permitted to remain upon any part of the Premises or outside of
the building in which the Premises are a part, except in trash containers placed
inside exterior enclosures designated by Landlord for that purpose or inside of
the building proper where designated by Landlord. No materials, supplies,
equipment, finished products or semi-finished products, raw materials or
articles of any nature shall be stored upon or permitted to remain outside the
Premises. 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, No loudspeaker or other device, system or apparatus which
can be heard outside the Premises shall be used in or at the Premises without
the prior written consent of Landlord, Tenant shall not commit or suffer to be
committed any waste in or upon the Premises, Tenant shall indemnity, defend and
hold Landlord harmless against any loss, expense, damage, reasonable attorneys'
fees, or liability arising out of failure of Tenant to comply with any
applicable law. Tenant shall comply with any covenant, condition, or restriction
("CC&R's") affecting the Premises. The provisions of this paragraph are for the
benefit of Landlord only and shall not be construed to be for the benefit of any
tenant or occupant of the Premises.

2.  TERM*
    A.  The term of the Lease shall be for a period of THREE (3) years (unless
                                                       -----  -
sooner terminated as hereinafter provided) and, subject to Paragraphs 2B and 3,
shall commence on the 1st day of June, 1998 and end on the 31st day of May,
                      ---        ----  ----                            ---
2001.
----

    B.  Possession of the Premises shall be deemed tendered and the term of the
Lease shall commence on June 1, 1998, or

        (a)
        (b)
        (c)
        (d)  As otherwise agreed in writing.

*It is agreed in the event said Lease commences on a date other than the
first day of the month the term of the Lease will be extended to account for the
number of days in the partial month. The Basic Rent during the resulting partial
month will be pro-rated (for the number of days in the partial month) at the
Basic Rent rate scheduled for the projected commencement date as shown in
Paragraph 39.

                                                    Initials: /s/ S.E.
                                                              ------------------
                                                    Initials: /s/ J.A.
                                                              ------------------
                                                              /s/ R.P.

                                  page 1 of 8
<PAGE>

3.  POSSESSION  If Landlord, for any reason whatsoever, cannot deliver
possession said premises to Tenant at the commencement of said term, as
hereinbefore specific, this Lease shall not be void or voidable; no obligation
of Tenant shall be affected thereby: nor shall Landlord or Landlord's agents be
liable to Tenant for any loss or damage resulting therefrom; but in that event
the commencement and termination dates of the Lease, and all other dates
affected thereby shall be revised to conform to the date of Landlord's delivery
of possession, as specified Paragraph 2B, above. The above is, however, subject
to the provision that the period of delay of delivery of the Premises shall not
exceed 30 days from the commencement date herein (except those delays
       --
caused by Acts of God, Strikes, war, utilities, governmental bodies, weather,
unavailable materials and delays beyond Landlord's control shall be excluded in
calculating such period) in which instance Tenant, at its option, may, by
written notice to Landlord, terminate this Lease.

4.  RENT
  A. Basic Rent. Tenant agrees to pay to Landlord at such place as Landlord may
     ----------
designate without deduction, offset, prior notice, or demand, and Landlord
agrees to accept as Basic Rent for the leased Premises the total sum of
SEVEN HUNDRED FIFTY SIX THOUSAND AND NO/100 Dollars ($756,000.00) in lawful
-------------------------------------------          -----------
money of the United States of America payable as follows:

       See Paragraph 39 for Basic Rent Schedule

  B. Time for Payment. Full monthly rent is due in advance on the first day of
     ----------------
each calendar month, in the event that the term of this Lease commences on a
date other than the first day of a calendar month, on the date of commencement
of the term hereof Tenant shall pay to Landlord as rent for the period from such
date of commencement to the first day of the next succeeding calendar month that
proportion of the monthly rent hereunder which the number of days between such
date of commencement and the first day of the next succeeding calendar month
bears to thirty (30). In the event that the tram of this Lease for any reason
ends on a date other than the last day of a calendar month, on the first day of
the (last calendar month of the term hereto, Tenant shall pay to Landlord as
rent for the period from said first day of said last calendar month to and
including the last day of the term hereof that proportion of the monthly rent
hereunder which the number of days between said first day of said last calendar
month and the last day of the term hereof bears to thirty (30).

  C. Late Charge. Notwithstanding any other provision of this Lease, if Tenant
     -----------
is in default in the payment of rental as set forth in this Paragraph 4 when
due, or any part thereof, Tenant agrees to pay Landlord, in addition to the
delinquent rental due, a late charge for each rental payment in default ten(10)
days. Said late charge shall equal ten percent (10%) of each rental payment so
in default.

  D. Additional Rent. Beginning with the commencement date of the term of this
     ---------------
Lease, Tenant shall pay to Landlord or to Landlord's designated agent in
addition to the Basic Rent and as Additional Rent the following:

     (a) All Taxes relating to the Premises as set forth in Paragraph 9, and

     (b) All insurance premiums relating to the Premises, as set forth in
  Paragraph 12, and

     (c) All charges, costs and expenses, Which Tenant is required to pay
hereunder, together with all interest and penalties, costs and expenses
including reasonable attorneys' fees and legal expenses, that may accrue thereto
in the event of Tenants failure to pay such amounts, and all damages, reasonable
costs and expenses which Landlord may incur by reason of default of Tenant or
failure on Tenant's failure to comply with the terms of this Lease. in the event
of nonpayment by Tenant of Additional Rent, Landlord shall have all the rights
and remedies with respect thereto as Landlord has for nonpayment of rent.

  The Additional Rent due hereunder shall be paid to Landlord or Landlord's
agent (i) within five days for taxes and insurance and within thirty days for
all other Additional Rent items after presentation of invoice from Landlord or
Landlord's agent setting forth such Additional Rent and/or (ii) at the option of
Landlord, Tenant shall pay to Landlord monthly, in advance, Tenant's, prorate
share of an amount estimated by Landlord to be Landlord's approximate average
monthly expenditure for such Additional Rent items, which estimate amount shall
be reconciled within 120 days of the end of each calendar year or more
frequently if Landlord elects to do so at Landlord's sole and absolute
discretion as compared to Landlord's actual expenditure for said Additional Rent
items, with Tenant paying to Landlord, upon demand, any amount of actual
expenses expended by Landlord in excess of said estimated amount, or Landlord
crediting to Tenant (providing Tenant is not in default in the performance of
any of the terms, covenants and conditions of this Lease) any amount of
estimated payments made by Tenant in excess of Landlord's actual expenditures
for said Additional Rent items.

  The respective obligations of Landlord and Tenant under this paragraph shall
survive the expiration or other termination of the term of this Lease, and if
the term hereof shall expire or shall otherwise terminate on a day other than
the last day of a calendar year, the actual Additional Rent incurred for the
calendar year in which the term hereof expires or otherwise terminates shall be
determined and settled on the basis of the statement of actual Additional Rent
for such calendar year and shall be prorated in the proportion which the number
of days in such calendar year preceding such expiration or termination bears to
365.

  E. Fixed Management Fee. Beginning with the Commencement Date of the Term of
     --------------------
this Lease, Tenant shall pay to Landlord, in addition to the Basic Rent and
Additional Rent, a fixed monthly management fee ("Management Fee") equal to 3%
of the Basic Rent due for each month during the Lease Term.

  F. Place of Payment of Rent and Additional Rent. All Basic Rent hereunder and
     --------------------------------------------
all payments hereunder for Additional Rent shall be paid to Landlord at the
office of Landlord at Peery/Arrillaga, File 1504, Box 60000, San Francisco,
                      -----------------------------------------------------
CA 94160
--------
or to such other person or to such other place as Landlord may from time to time
designate in writing.

   G.  Security Deposit. Concurrently with Tenant's execution of this Lease,
       ----------------
Tenant shall deposit with Landlord the sum of FORTY FOUR THOUSAND AND NO/100
                                              ------------------------------
Dollars ($44,000.00).
          ---------

Said sum shall be held by Landlord as a Security Deposit for the faithful
performance by Tenant of all of the terms, covenants, and conditions of this
Lease to be kept and performed by Tenant during the term hereof. If Tenant
defaults with respect to any provision of this Lease, including, but not limited
to the provisions relating to the payment of rent and any of the monetary sums
due herewith, Landlord may (but shall not be required to) use, apply or retain
all of any part of this Security Deposit for the payment of any other amount
which Landlord may spend by reason of Tenant's default or to compensate Landlord
for

                                                    Initials: /s/ S.E.
                                                              ------------------
                                                    Initials: /s/ J.A.
                                                              ------------------
                                                              /s/ R.P.

                                  page 2 of 8
<PAGE>

any other loss or damage which Landlord may suffer by reason of Tenant's
default, if any portion of said Deposit is so used or applied, Tenant shall,
within ten (10) days after written demand therefor, deposit cash with Landlord
in the amount sufficient to restore the Security Deposit to its original amount
Tenants failure to do so shall be a material breach of this Lease. Landlord
shall not be required to keep this Security Deposit separate from its general
kinds, and Tenant shall not be entitled to interest on such Deposit. If Tenant
fully and faithfully performs every provision of this Lease to be performed by
it, the Security Deposit or any balance thereof shall be returned to Tenant (or
at Landlord's option, to the last assignee of Tenants interest hereunder) at the
expiration of the Lease term and after Tenant has vacated the Premises. In the
event of termination of Landlord's interest in this Lease, Landlord shall
transfer said Deposit to Landlord's successor in interest whereupon Tenant
agrees to release Landlord from liability for the return off such Deposit or the
accounting therefor.

5.  ACCEPTANCE AND SURRENDER OF PREMISES By entry hereunder, Tenant accepts the
Premises as being in good and sanitary order, condition and repair and accepts
the building and improvements included in the Premises in their present
condition and without representation or warranty by Landlord as to the condition
of such building or as to the use or occupancy which may be made thereof. Any
exceptions to the foregoing must be by written agreement executed by Landlord
and Tenant. Tenant agrees on the last day of the Lease term, or on the sooner
termination of this Lease, to surrender the Premises promptly and peaceably to
Landlord in good condition and repair (damage by Acts of God, fire, normal wear
and tear excepted), with all interior walls painted, or cleaned so that they
appear freshly painted, and repaired and replaced, if damaged; all floors
cleaned and waxed; all carpets cleaned and shampooed; all broken, marred or
nonconforming acoustical ceiling tiles replaced; all windows washed; the
airconditioning and heating systems serviced by a reputable and licensed service
firm and in good operating condition and repair; the plumbing and electrical
systems and lighting in good order and repair, including replacement of any
burned out or broken light bulbs or ballasts; the lawn and shrubs in good
condition including the replacement of any dead or damaged plantings; the
sidewalk, driveways and parking areas in good order, condition and repair;
together with all alterations, additions, and improvements which may have been
made in, to, or on the Premises (except moveable trade fixtures installed at the
expense of Tenant) except that Tenant shall ascertain from Landlord within
thirty (30) days before the end of the term of this Lease whether Landlord
desires to have the Premises or any part or parts thereof restored to their
condition and configuration as when the Premises were delivered to Tenant and if
Landlord shall so desire, then Tenant shall restore said Premises or such part
or parts thereof before the end of this Lease at Tenants sole cost and expense.
Tenant, on or before the end of the term or sooner termination of this Lease,
shall remove all of Tenant's personal property and trade fixtures from the
Premises, and all property not so removed on or before the end of the term or
sooner termination of this Lease shall be deemed abandoned by Tenant and title
to same shall thereupon pass to Landlord without compensation to Tenant Landlord
may, upon termination of this Lease, remove all moveable furniture and equipment
so abandoned by Tenant, at Tenants sole cost, and repair any damage caused by
such removal at Tenant's sole cost. If the Premises be not surrendered at the
end of the term or sooner termination of this Lease, Tenant shall indemnity
Landlord against loss or liability resulting from the delay by Tenant in so
surrendering the Premises including, without limitation, any claims made by any
succeeding tenant founded on such delay. Nothing contained herein shall be
construed as an extension of the term hereof or as a consent of Landlord to any
holding over by Tenant The voluntary or other surrender of this Lease or the
Premises by Tenant or a mutual cancellation of this Lease shall not work as a
merger and, at the option of Landlord, shall either terminate all or any
existing subleases or subtenancies or operate as an assignment to Landlord of
all or any such subleases or subtenancies,

6.  ALTERATIONS AND ADDITIONS Tenant shall not make, or suffer to be made, any
alteration or addition to the Premises, or any part thereof, without the written
consent of Landlord first had and obtained by Tenant (such consent not to be
unreasonably withheld), but at the cost of Tenant, and any addition to, or
alteration of, the Premises, except moveable furniture and trade fixtures, shall
at once become a part of the Premises and belong to Landlord. Landlord reserves
the right to approve all contractors and mechanics proposed by Tenant to make
such alterations and additions. Tenant shall retain title to all moveable
furniture and trade fixtures placed in the Premises. All heating, lighting,
electrical, air conditioning, floor to ceiling partitioning, drapery, carpeting,
and floor installations made by Tenant, together with all property that has
become an integral part of the Premises, shall not be deemed trade fixtures.
Tenant agrees that it will not proceed to make such alteration or additions,
without having obtained consent from Landlord to do so, ant until live (5) days
from the receipt of such consent, in order that Landlord may post appropriate
notices to avoid any liability to contractors or material supplier for payment
for Tenants improvements. Tenant will at all limes permit such notices to be
posted and to remain posted until the completion of work. Tenant shall, if
required by Landlord, secure at Tenants own cost and expense, a completion and
lien indemnity bond, satisfactory to Landlord, for such work. Tenant further
covenants and agrees that any mechanic's lien filed against the Premises for
work claimed to have been done for, or materials claimed to have been furnished
to Tenant, will be discharged by Tenant, by bond or otherwise, within ten (10)
days after the filing thereof, at the cost and expense of Tenant, any exceptions
to the foregoing must be made in writing and executed by both Landlord and
Tenant.

7.  TENANT MAINTENANCE Tenant shall, at its sole cost and expense, keep and
maintain the Premises (including appurtenances) and every part thereof in a high
standard of maintenance and repair, and in good and sanitary condition. Tenant's
maintenance and repair responsibilities herein referred to include, but are not
limited to janitorization, plumbing systems within the non-common areas of the
Premises (such as water and drain lines, sinks), electrical systems within the
non-common areas of the Premises (such as outlets, lighting fixtures, lamps
bulbs, tubes, ballasts), heating and airconditioning controls within the non-
common areas of the Premises (such as mixing boxes, thermostats, time clocks,
supply and return grill(s), all interior improvements within the premises
including but not limited to: wall coverings, window coverings, acoustical
ceilings, vinyl tile, carpeting, partitioning, doors(both interior and exterior,
including closing mechanisms, latches, locks), and all other interior
improvements of any nature whatsoever. Tenant agrees to provide carpet shields
under all rolling chairs or to otherwise be responsible for wear and tear of the
carpet caused by such rolling chairs if such wear and tear exceeds that caused
by normal foot traffic in surrounding areas. Areas of excessive wear shall be
replaced at Tenant's sole expense upon Lease termination.

8.

9. TAXES

   As Additional Rent and in accordance with Paragraph 4D of this Lease, Tenant
shall pay to Landlord, or if Landlord so directs, directly to the Tax
Collector, all Real Property Taxes relating to the Premises. In the event the
Premises leased hereunder consist of only a portion of the entire tax parcel,
Tenant shall pay to Landlord Tenant's proportionate share of such real estate
taxes allocated to the leased Premises by square footage or other reasonable
basis as calculated and determined by Landlord. If the tax billing pertains
100% to the leased Premises, and Landlord chooses to have Tenant pay said real
estate taxes directly to the Tax Collector, then in such event it shall be the
responsibility of Tenant to obtain the tax and assessment bills and pay, prior
to delinquency, the applicable real property taxes and assessments pertaining to
the leased Premises, and failure to receive a bill lot taxes and/or assessments
shall not provide a basis for cancellation of or nonresponsibility for payment
of penalties for nonpayment or late payment by Tenant. The term "Real Property
Taxes", as used herein, shall mean (i) all taxes, assessments, levies and other
charges of any kind or nature whatsoever, general and special, foreseen and
unforeseen (including all installments of principal and interest required to pay
any general or special assessments for public improvements and any increases
resulting from reassessments caused by any change in ownership of the Premises)
now or hereafter imposed by any governmental or quasi-governmental authority or
special district having the direct or indirect power to tax or levy assessments,
which are levied or assessed against, or with respect to the value, occupancy or
use of, all or any portion of the Premises (as now constructed or as may at any
time hereafter be constructed, altered, or otherwise changed) or Landlord's
interest therein; any improvements located within the Premises (regardless of
ownership); the fixtures, equipment and-other proof Landlord, real or personal,
that are an integral part of and located in the Premises; or parking areas,
public utilities, or energy within the Premises (ii) all charges, levies or fees
imposed by reason of environmental regulation or other governmental control of
the Premises; and (iii) all costs and fees (including

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reasonable attorney's fees) incurred by Landlord in reasonably contesting any
Real Property Tax and in negotiating with public authorities as to any Real
Property Tax. If at any time during the term of this Lease the taxation or
assessment of  the Premises prevailing as of the commencement date of the Lease
shall be altered so that In lieu of or in addition to any Real Property Tax
described above there shall be levied, assessed or imposed (whether by reason of
a change in the method of taxation or assessment, creation of a new  tax or
charge, or any other cause) an alternate or additional lax or charge (i) on the
value, use or occupancy of the Premises or Landlord's interest therein or (ii)
on or measured by the gross receipts, income or rentals from the Premises, on
Landlord's business of leasing the Premises or computed in any manner with
respect to the operation of the Premises, then any such tax or charge, however
designated, shall be included within the meaning of the term "Real Property
Taxes" for purposes of this Lease. If any Real Property Tax is based upon
property or rents unrelated to the Premises, then only that part of such Real
Property Tax that is fairly allocable to the Premises shall be included within
the meaning of the term "Real Property Taxes", Notwithstanding the foregoing,
the term "Real Property Taxes" shall not include estate, inheritance, gift or
franchise taxes of Landlord or the federal or state net income tax imposed on
Landlord's income from all sources.

  B. Taxes on Tenant's Property Tenant shall be liable for and shall pay ten
days before delinquency, taxes levied against any personal property or trade
fixtures placed by Tenant in or about the Premises, if any such taxes on
Tenant's personal property or trade fixtures are levied against Landlord or
Landlord's property or if the assessed value of the Premises is increased by the
inclusion therein of a value placed upon such personal property or trade
fixtures of Tenant and if Landlord, after written notice to Tenant, pays the
taxes based on such increased assessment, which Landlord shall have the right to
do regardless of the validity thereof, but only under proper protest if
requested by Tenant, Tenant shall upon demand, as the case may be, repay to
Landlord the taxes so levied against Landlord, or the proportion of such taxes
resulting from such increase in the assessment; provided that in any such event
Tenant shall have the right, in the name of Landlord and with Landlord's full
cooperation, to bring suit in any court of competent jurisdiction to recover the
amount of such taxes so paid under protest, and any amount so recovered shall
belong to Tenant.

10.  LIABILITY INSURANCE Tenant, at Tenants expense, agrees to keep in force
during the term of this Lease a policy of commercial general liability insurance
with combined single limit coverage of not less than Two Million Dollars
($2,000,000), per occurrence for bodily injury and property damage occurring in,
on or about the Premises, including parking and landscaped areas. Such insurance
shall be primary and noncontributory as respects any insurance carried by
Landlord. This policy or policies effecting such insurance shall name Landlord
as additional insureds, and shall insure any liability of Landlord contingent or
otherwise; as respects acts or omissions of Tenant, its agent, employees or
invitees or otherwise by any conduct or transactions of any of said persons in
or about or concerning the Premises, including any failure of Tenant to observe
or perform any of its obligations hereunder; shall be issued by an insurance
company admitted to transact business in the Stale of California; and shall
provide that the insurance affected thereby shall not be canceled, except upon
thirty (30) days' prior written notice to Landlord. A certificate of insurance
of said policy shall be delivered to Landlord. If during the term of this Lease.
in the considered Opinion of Landlord's Lender, insurance advisor, or counsel,
the amount, of insurance described in this Paragraph 10 is not adequate, Tenant
agrees to increase said coverage to such reasonable amount as Landlord's Lender,
insurance advisor, or counsel shall deem adequate.

11.  TENANT' PERSONAL PROPERTY INSURANCE AND WORKMAN'S COMPENSATION INSURANCE
Tenant shall maintain a policy or policies of fire and property damage insurance
in "all risk" form with a sprinkler leakage endorsement insuring the personal
property, inventory, trade fixtures, and leasehold improvements within the
leased Premises for the full replacement value thereof. The proceeds from any of
such policies shall be used for the repair or replacement of such items so
insured.

     Tenant shall also maintain a policy or policies of workman's compensation
insurance and any other employee benefit insurance sufficient to comply with all
laws.

12.  PROPERTY INSURANCE Landlord shall purchase and keep in force, and as
Additional Rent and in accordance with Paragraph 4D of this Lease, Tenant shall
pay to Landlord (or Landlord's agent if so directed by Landlord) Tenant's
proportionate share (allocated to the leased Premises by square footage or other
equitable basis as calculated and determined by Landlord) of the deductibles on
insurance claims and the cost of, policy or policies of insurance covering loss
or damage to the Premises (excluding routine maintenance and repairs-and
incidental damage or destruction caused by accidents or vandalism for which
Tenant is responsible under Paragraph 7) in the amount of the full replacement
value thereof, providing protection against those perils included within the
classification of "all risks" insurance and flood and/or earthquake insurance,
if available, plus a policy of rental income insurance in the amount of one
hundred (100%) percent of twelve (12) months Basic Rent, plus sums paid as
Additional Rent if such insurance cost is increased due to Tenant's use of the
Premises, Tenant agrees to pay to Landlord the full cost of such increase.
Tenant shall have no interest in nor any right to the proceeds of any insurance
procured by Landlord for the Premises.

     Landlord and Tenant do each hereby respectively release the other, to the
extent of insurance coverage of the releasing pasty, from any liability for loss
or damage caused by are or any of the extended coverage casualties included in
the releasing party's insurance policies, irrespective of the cause of such fire
or casualty; provided, however, that if the insurance policy of either releasing
party prohibits such waiver, then this waiver shall not take effect until
consent to such waiver is obtained. If such waiver is so prohibited, the insured
parties affected shall promptly notify the other party thereof.

13.  INDEMNIFICATION Landlord shall not be liable to Tenant and Tenant hereby
waives all claims against Landlord for any injury to or death of any person or
damage to or destruction of property in or about the Premises by or from any
cause whatsoever, including, without limitation, gas, fire, oil, electricity or
leakage of any character from the roof, walls, basement or other portion of the
Premises but excluding, however, the willful misconduct or negligence of
Landlord, its agents, servants, employees, invitees, or contractors of which
negligence Landlord has knowledge and reasonable time to correct. Except as to
injury to persons or damage to property to the extent arising from the willful
misconduct or the negligence of Landlord, its agents, servants, employees,
invitees, or contractors, Tenant shall hold Landlord harmless from and defend
Landlord against any and all expenses, including reasonable attorneys' fees, in
connection therewith, arising out of any injury t or death of any person or
damage to or destruction of property occurring in, on or about the Premises, or
any part thereof, from any cause whatsoever.

14.   COMPLIANCE Tenant, at its sole cost and expense, shall promptly comply
with all laws, statutes, ordinances and governmental rules, regulations or
requirements now or hereafter in effect; with the requirements of any board of
fire underwriters or other similar body now or hereafter constituted; and with
any direction or occupancy certificate issued pursuant to law by any public
officer; provided, however, that no such failure shall be deemed a breach of the
provisions if Tenant, immediately upon notification, commences to remedy or
rectify said failure. The judgment of any court of competent jurisdiction or the
admission of Tenant in any action against Tenant whether Landlord be a party
thereto or not that Tenant has violated any such law, statute, ordinance or
governmental rule, regulation, requirement, direction or provision, shall be
conclusive of that fact as between Landlord and Tenant. Tenant shall, at its
sole cost and expense, comply with any and all requirements pertaining to said
Premises of any insurance organization or company, necessary for the maintenance
of reasonable fire and public liability insurance covering requirements
pertaining to said Premises of any insurance organization or company, necessary
for the maintenance of reasonable fire and public liability insurance covering
the Premises.

15.  LIENS Tenant shall keep the Premises free from any liens arising out of any
work performed, materials furnished or obligation incurred by Tenant. In the
event that Tenant shall not, within ten (10) days following the imposition of
such lien, cause the same to be released of record, Landlord shall have in
addition to all other remedies provided herein and by law, the right, but no
obligation, to cause the same to be released by such means as it shall deem
proper, including payment of the claim giving rise to such lien. All sums paid
by Landlord for such purpose, and all expenses incurred by it in connection
therewith, shall be payable to Landlord by Tenant on demand with interest at the
prime rate of interest as quoted by the Bank of America.

16.  ASSIGNMENT AND SUBLETTING Tenant shall not assign, transfer, or hypothecate
the leasehold estate under this Lease or any interest  therein, and shall not
sublet the Premises, or any part thereof, or any right or privilege appurtenant
thereto, or suffer any other person or entity to occupy or use the Premises, or
any portion thereof, without, in each case, the prior written consent of
Landlord which consent will not be unreasonably withheld. As a condition for
granting this consent to any assignment, transfer, or subletting, Landlord shall
require Tenant to pay to Landlord, as Additional Rent, all rents and/or
additional consideration due Tenant from its assignees, transferees, or
subtenants in excess of the Rent payable by Tenant to Landlord hereunder for the
assigned, transferred and/or subleased space. Tenant shall, by thirty (30) days
written notice, advise Landlord of its intent to assign or transfer Tenant's
interest in the Lease or sublet the Premises or any portion thereof for any part
of the term hereof. Within thirty (30) days after receipt of said written
notice. Landlord may, in its sole discretion, elect to terminate this Lease as
to the portion of the Premises described in Tenant's notice on the date
specified in Tenant's notice by giving written notice of such election to
terminate if no such notice to terminate is given to Tenant within said
thirty(30) day period, Tenant may proceed to locate an acceptable sublessee,
assignee, or other transferee for presentment to Landlord for Landlord's
approval, all in accordance with the terms, covenants, and conditions of this
paragraph 16. If Tenant intends to sublet the entire Premises and landlord
elects to terminate this Lease this Lease shall be terminated on the date
specified in Tenant's notice. If, however, this Lease shall terminate pursuant
to the foregoing with respect to less than all the Premises, the rent, as
defined and reserved hereinabove shall be adjusted on a pro rata basis to the
number of square feet retained by Tenant, and this Lease as so amended shall
continue in full force and effect. In the event Tenant is allowed to assign,
transfer or sublet the whole or any part of the premises, with the prior written

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consent of Landlord, no assignee, transferee or subtenant shall assign or
transfer this Lease, either in whole or in part, or sublet the whole or any part
of the Premises without also having obtained the prior written consent of
Landlord. A consent of Landlord to one assignment, transfer, hypothecation,
subletting, occupation or use by any other person shall not release Tenant from
any of Tenant's obligations hereunder to be deemed to be a consent to any
subsequent similar or dissimilar assignment, transfer, hypothecation,
subletting, occupation or use by any other person. Any such assignment,
transfer, hypothecation, subletting, occupation or use without such consent
shall be void and shall constitute a breach of this Lease by Tenant and shall at
the option of Landlord exercised by written notice to Tenant, terminate this
Lease. The leasehold estate under this Lease shall not nor shall any interest
therein, be assignable for any purpose by operation of law without the written
consent of landlord transferee (or other assignees or transferees) to assume in
writing all of the obligations under this Lease and for Tenant to remain liable
to Landlord under the Lease Notwithstanding-the above, in no event will Landlord
consent to a sub-sublease.

17.  SUBORDINATION AND MORTGAGES In the event Landlord's title or leasehold
interest is now or hereafter encumbered by a deed of trust upon the interest of
Landlord in the land and buildings in which the demised Premises are located, to
secure a loan from a lender (hereinafter referred to as "Lender") to Landlord,
Tenant shall, at the request of Landlord or Lender, execute in writing an
agreement subordinating its rights under this Lease to the lien of such deed of
trust, or, if so requested, agreeing that the lien of Lender's deed of trust
shall be or remain subject and subordinate to the rights of Tenant under this
Lease. Notwithstanding any such subordination, Tenant's possession under this
Lease shall not be disturbed if Tenant is not in default and so long as Tenant
shall pay all rent and observe and perform all of the provisions set forth in
this Lease.

18.  ENTRY BY LANDLORD Landlord reserves, and shall at all reasonable times
after at least 24 hours notice (except in emergencies) have the right to enter
the Premises to inspect them; to inform any services to be provided by Landlord
hereunder; to make repairs or provide any services to a contiguous tenant(s); to
submit the Premises to prospective purchasers, mortgagers or tenants; to post
notices of nonresponsibility; and to alter, improve or repair the Premises or
other parts of the building, all without abatement of rent, and may erect
scaffolding and other necessary structures in or through the Premises where
reasonably required by the character of the work to be performed; provided,
however that the business of Tenant shall be interfered with to the least extent
that is reasonably practical. Any entry to the Premises by Landlord for the
purposes provided for herein shall not under any circumstances be construed or
deemed to be a forcible or unlawful entry into or a detainer of the Premises or
an eviction, actual or constructive, of Tenant from the Premises or any portion
thereof.

19.  BANKRUPTCY AND DEFAULT The commencement of a bankruptcy action or
liquidation action or reorganization action or insolvency action or an
assignment of or by Tenant for the benefit of creditors, or any similar action
undertaken by Tenant, or the insolvency of Tenant, shall, at Landlord's option.
constitute a breach of this Lease by Tenant. If the trustee or receiver
appointed to serve during a bankruptcy, liquidation, reorganization, insolvency
or similar action elects to reject Tenant's unexpired Lease, the trustee or
receiver shall notify Landlord in writing of its election within thirty (30)
days after an order for relief in a liquidation action or within thirty (30)
days after the commencement of any action,

Within thirty (30) days after court approval of the assumption of this Lease,
the trustee or receiver shall cure (or provide adequate assurance to the
reasonable satisfaction of Landlord that the trustee or receiver shall cure any
and all previous defaults under the unexpired Lease and shall compensate
Landlord for all actual pecuniary loss and shall provide adequate assurance of
future performance under same Lease to the reasonable satisfaction of Landlord.
Adequate assurance of future performance, as used herein, includes, but shall
not be limited to: (i) assurance of source and payment of rent and other -
consideration due under this Lease; (ii) assurance that the assumption or
assignment of this Lease will not breach Substantially any provision, such as
radius, location, use, or exclusivity provision, in any agreement relating to
the above described Premises.

  Nothing contained in this section shall affect the existing right of Landlord
to refuse to accept an assignment upon commencement of or in connection with a
bankruptcy, liquidation, reorganization or insolvency action or an assignment of
Tenant for the benefit of creditors or other similar act. Nothing contained in
this Lease shall be construed as giving or granting or creating an equity in the
demised Premises to Tenant in no event shall the leasehold estate under this
Lease or any interest therein, be assigned by voluntary or involuntary
bankruptcy proceeding without the prior written consent of Landlord. In no event
shall this Lease or any rights or privileges hereunder be an asset of Tenant
under any bankruptcy, insolvency or reorganization proceedings.

  The failure to perform or honor any covenant, condition or representation made
under this Lease shall constitute a default hereunder by Tenant upon expiration
of the appropriate grace period hereinafter provided. Tenant shall have a period
of five (5) days from the date of written notice from Landlord within which to
cure any default in the payment of rental or adjustment thereto. Tenant shall
have a period of thirty (30) days from the date of written notice from Landlord
within which to cure any other default under this Lease. Upon an uncured default
of this Lease by Tenant, Landlord shall have the following rights and remedies
in addition to any other rights or remedies available to Landlord at law or in
equity:

     (a) The rights and remedies provided for by California Civil Code Section
1951.2, including but not limited to, recovery of the worth al 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 rental loss for the same period that Tenant
proves could be reasonably avoided, as computed pursuant to subsection (b) of
said Section 1951.2. Any proof by Tenant under subparagraphs (2) and (3) of
Section 1951.2 of the California Civil Code of the amount of rental loss that
could be reasonably avoided shall be made in the following manner: Landlord and
Tenant shall each select a licensed real estate broker in the business of
renting property of the same type and use as the Premises and in the same
geographic vicinity. Such two real estate brokers shall select a third licensed
real estate broker, and the three licensed real estate brokers so selected shall
determine the amount of the rental loss that could be reasonably avoided from
the balance of the term of this Lease after the time of award. The decision of
the majority of said licensed real estate brokers shall be final and binding
upon the parties hereto.

     (b) The rights and remedies provided by California Civil Code Section which
allows Landlord to continue the Lease in effect and to enforce all of its rights
and remedies under this Lease, including the right to recover rent as it becomes
due, for so long as Landlord does not terminate Tenant's right to possession;
acts of maintenance or preservation, efforts to relet the Premises, or the
appointment of a receiver upon Landlord's initiative to protect its interest
under this Lease shall not constitute a termination of Tenant's right to
possession.

     (c) The right to terminate this Lease by giving notice to Tenant in
accordance with applicable law.

     (d) To the extent permitted by law the right and power, to enter the
Premises and remove therefrom all persons and properly, to store such property
in a public warehouse or elsewhere at the cost of and for the account of Tenant,
and to sell such property and apply such proceeds therefrom pursuant to
applicable California law. Landlord, may from time to time sublet the Premises
or any part thereof for such term or terms (which may extend beyond the term of
this Lease) and at such rent and such other terms as Landlord in its reasonable
sole discretion may deem advisable, with the right to make alterations and
repairs to the Premises. Upon each subletting, (i) Tenant shall be immediately
liable to pay Landlord, in addition to indebtedness other than rent due
hereunder, the reasonable cost of such subletting, including, but not limited
to, reasonable attorneys' fees, and any real estate commissions actually paid,
and the cost of such reasonable alterations and repairs incurred by Landlord and
the amount, if any, by which the rent hereunder for the period of such
subletting(to the extent such period does not exceed the term hereof exceeds the
amount to be paid as rent for the Premises for such period or (ii) at the option
of Landlord, rents received from such subletting shall be applied first to
payment of indebtedness other than rent due hereunder from Tenant to Landlord;
second, to the payment of any costs of such subletting and of such alterations
and repairs; third to payment of rent due and unpaid hereunder; and the residue,
if any, shall be held by Landlord and applied in payment of future rent as the
same becomes due hereunder. If Tenant has been credited with any rent to be
received by such subletting under option (i) and such rent shall not be promptly
paid to Landlord by the subtenant(s), or it such rentals received from such
subletting under option (it) during any month be less than that to be paid
during that month by Tenant hereunder, Tenant shall pay any such deficiency to
Landlord. Such deficiency shall be calculated and paid monthly. No taking
possession of the Premises by Landlord, shall be construed as an election on its
part to terminate this Lease unless a written notice of such intention be given
to Tenant. Notwithstanding any such subletting without termination, Landlord may
at any time hereafter elect to terminate this Lease for such previous breach.

     (e) The right to have a receiver appointed for Tenant upon application by
Landlord, to take possession of the Premises and to apply any rental collected
from the Premises and to exercise all other rights and remedies granted to
Landlord pursuant to subparagraph d above.

20.  ABANDONMENT Tenant shall not vacate or abandon the-Premises at any time
during the term of this Lease and if Tenant shall abandon, vacate or surrender
said Premises, or be dispossessed by the process of law, or otherwise, any
personal property belonging to Tenant and left on the Premises shall be deemed
to be abandoned, at the option of Landlord, except such property as may be
mortgaged to Landlord. See Paragraph 48

21.  DESTRUCTION In the event the Premises are destroyed in whole or in pat from
any cause, except for routine maintenance and repairs and incidental

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damage and destruction caused from vandalism and accidents for which Tenant is
responsible under Paragraph 7, Landlord may, at its option:

     (a) Rebuild or restore the Premises to their condition prior to the damage
  or destruction, or

     (b) Terminate the Lease. (providing that the Premises is damaged to the
  extent of 33 1/3% of the replacement cost)

  If Landlord does not give Tenant notice in writing within thirty (30) days
from the destruction of the Premises of its election to either rebuild and
restore them or to terminate this Lease, Landlord shall be deemed to have
elected to rebuild or restore them, in which event Landlord agrees, at its
expense except for any deductible, which is the responsibility of Tenant,
promptly to rebuild or restore the Premises to their condition prior to the
damage or destruction. Tenant shall be entitled to a reduction in rent while
such repair is being made in proportion that the area of the Premises rendered
untenantable by such damage bears to the total area of the Premises. If Landlord
initially estimates that the rebuilding or restoration will exceed 180 days or
if Landlord does not complete the rebuilding or restoration within one hundred
eighty (180) days following the date of destruction (such period of time to be
extended for delays caused by the fault or neglect of Tenant or because of Acts
of God, acts of public agencies, labor disputes, strikes, fires, freight
embargos, rainy or stormy weather, inability to obtain materials, supplies or
fuels, acts of contractors or subcontractors, or delay of the contractors or
subcontractors due to such causes or other contingencies beyond the control of
Landlord), then Tenant shall have the right to terminate this Lease by giving
fifteen (15) days prior written notice to Landlord. Notwithstanding anything
herein to the contrary, Landlord's obligation to rebuild or restore shall be
limited to the building and interior improvements constructed by Landlord as
they existed as of the commencement date of the Lease and shall not include
restoration of Tenant's trade fixtures, equipment merchandise, or any
improvements, alterations or additions made by Tenant to the Premises, which
Tenant shall forthwith replace or fully repair at Tenant's sole cost and expense
provided this Lease is not cancelled according to the provisions above.

  Unless this Lease is terminated pursuant to the foregoing provisions, this
Lease shall remain in full force and effect. Tenant hereby expressly waives the
provisions of Section 1932, Subdivision 2, in Section 1933, Subdivision 4 of the
California Civil Code.

  In the event that the building in which the Premises are situated is damaged
or destroyed to the extent of not less than 33 1/3% of the replacement cost
thereof, Landlord may elect to terminate this Lease, whether the Premises be
injured or not. Notwithstanding anything to the contrary herein, Landlord may
terminate this Lease in the event of an uninsured event or if insurance proceeds
are insufficient to cover one hundred percent of the rebuilding costs net of the
deductible.

22.  EMINENT DOMAIN if all or any part of the Premises shall be taken by any
public quasi-public authority under the power of eminent domain or conveyance in
lieu thereof, this Lease shall terminate as to any portion of the Premises so
taken or conveyed on the date when title vests in the condemnor, and Landlord
shall be entitled to any and all payment, income, rent, award, or any interest
therein whatsoever which may be paid or made in connection with such taking or
conveyance, and Tenant shall have no claim against Landlord or otherwise for the
value of any unexpired term of this Lease. Notwithstanding the foregoing
paragraph, any compensation specifically awarded Tenant for loss of business,
Tenant's personal property, moving cost or loss of goodwill. shall be and remain
the property of Tenant.

  If any action or proceeding is commenced for such taking of the Premises or
any part thereof, or if Landlord is advised in writing by any entity or body
having the right or power of condemnation of its intention to condemn the
premises or any portion thereof, then Landlord shall have the right to terminate
this Lease by giving Tenant written notice thereof within sixty (60) days of the
date of receipt of said written advice, or commencement of said action or
proceeding, or taking conveyance, which termination shall take place as of the
first to occur of the last day of the calendar month next following the month in
which such notice is given or the date on which title to the Premises shall vest
in the condemnor.

  In the event of such a partial taking or conveyance of the Premises, if the
portion of the Premises taken or conveyed is so substantial that the Tenant can
no longer reasonably conduct its business, Tenant shall have the privilege of
terminating this Lease within sixty (60) days from the date of such taking or
conveyance, upon written notice to Landlord of its intention so to do, and upon
giving of such notice this Lease shall terminate on the last day of the calendar
month next following the month in which such notice is given, upon payment by
Tenant of the rent from the date of such taking or conveyance to the date of
termination.

  If a portion of the Premises be taken by condemnation or conveyance in lieu
thereof and neither Landlord nor Tenant shall terminate this Lease as provided
herein, this Lease shall continue in full force and effect as to the part of the
Premises not so taken or conveyed, and the rent herein shall be apportioned as
of the date of such taking or conveyance so that thereafter the rent to be paid
by Tenant shall be in the ratio that the area of the portion of the Premises not
so taken or conveyed bears to the total area of the Premises prior to such
taking

23.  SALE OR CONVEYANCE BY LANDLORD In the event of a sale or conveyance of the
Premises or any interest therein, by any owner of the reversion then
constituting Landlord, the transferor shall thereby be released from any further
liability upon any of the terms, covenants or conditions (express or implied)
herein contained in favor of Tenant, and in such event, insofar as such transfer
is concerned, Tenant agrees to look solely to the responsibility of the
successor in interest of such transferor in and to the Premises and this Lease.
This Lease shall not be affected by any such sale or conveyance, and Tenant
agrees to attorn to the success in interest of such transferor, provided that
the transferee assumes all of Landlord's obligations in writing under the
Lease.

24.  ATTORNMENT TO LENDER OR THIRD PARTY In the event the interest of Landlord
in the land and buildings in which the leased Premises are located (whether such
interest of Landlord is a fee title interest or a leasehold interest) is
encumbered by deed of trust, and such interest is acquired by the lender or any
third party through Judicial foreclosure or by exercise of a power of sale at
private trustee's foreclosure sale, Tenant hereby agrees to attorn to the
purchaser at any such foreclosure sale and to recognize such purchaser as the
Landlord under this Lease. In the event the lien of the deed of trust securing
the loan from a Lender to Landlord is prior and paramount to the Lease, this
Lease shall nonetheless continue in full force and effect for the remainder of
the unexpired term hereof, at the same rental herein reserved and upon all the
other terms, conditions and covenants herein contained.

25.  HOLDING OVER Any holding over by Tenant after expiration or other
termination of the term of this Lease with the written consent of Landlord
delivered to Tenant shall not constitute a renewal or extension of the Lease or
give Tenant any rights in or to the leased Premises except as expressly provided
in this Lease. Any holding over after the expiration or other termination of the
term of this Lease, with the consent of Landlord, shall be construed to be a
tenancy from month to month, on the same terms and conditions herein specified
insofar as applicable except that the monthly Basic Rent shall be increased to
an amount equal to one hundred, twenty five (125%) percent of the monthly Basic
Rent required during the last month of the Lease term.

26.  CERTIFICATE OF ESTOPPEL Tenant shall at any time upon not less than ten
(10) days prior written notice from Landlord execute, acknowledge and deliver to
Landlord a statement in writing (i) certifying that this Lease is unmodified and
in full force and effect (or, if modified, stating the nature of such
modification and certifying that this Lease, as so modified, is in full force
and effect) and the date to which the rent and other charges are paid in
advance, if any, and (it) acknowledging that there are not, to Tenant's
knowledge, any uncured defaults on the part of Landlord hereunder, or specifying
such defaults, if any, are claimed. Any such statement may be Conclusively
relied upon by any prospective purchaser or encumbrancer of the Premises.
Tenant's failure to deliver such statement within such time shall be conclusive
upon Tenant that this Lease is in full force and effect, without modification
except as may be represented by Landlord; that there are no uncured defaults in
Landlord's performance; and that not more than one month's rent has been paid in
advance.

27.  CONSTRUCTION CHANGES It is understood that the description of the Premises
and the location of ductwork, plumbing and other facilities therein are subject
to such minor changes as Landlord or Landlord's architect determines to be
desirable in the course of construction of the Premises, and no such changes
shall affect this Lease or entitle Tenant to any reduction of rent hereunder or
result in any liability of Landlord to Tenant. Landlord does not guarantee the
accuracy of any drawings supplied to Tenant and verification of the accuracy of
such drawings rests with Tenant.

28.  RIGHT OF-LANDLORD TO PERFORM All terms, covenants and conditions of is
Lease to be performed or observed by Tenant shall be performed or observed by
Tenant at Tenant's sole cost and expense and without any reduction of rent. If
Tenant shall fail to pay any sum of money, or other rent, required to be paid by
it hereunder and such failure shall continue for five (5) days after written
notice by Landlord, or shall fail to perform any other term or covenant
hereunder on its part to be performed, and such failure shall continue for
thirty (30) days after written notice thereof by Landlord, Landlord, without
waiving or releasing Tenant from any obligation of Tenant hereunder, may, but
shall not be obliged to, make any such payment or perform any such other term or
covenant on Tenant's part to be performed. All sums so paid by Landlord and all
necessary costs of such performance by Landlord together with interest thereon
at the rate of the prime rate of interest per annum as quoted by the Bank of
America from the date of such payment on performance by Landlord, shall be paid
(and Tenant covenants to make such payment) to Landlord on demand by Landlord,
and Landlord shall have (in addition to any other right or remedy of Landlord)
the same rights and remedies in the event of nonpayment by Tenant as in the case
of failure by Tenant in the payment of rent hereunder.

29.  ATTORNEYS' FEES

  A. In the event that either Landlord or Tenant should bring suit for the
possession of the Premises, for the recovery of any sum due under this Lease, or
because of the breach of any provision of this Lease, of for any other relief
against the other party hereunder, then all costs and expenses, including
reasonable attorney's fees.

                                                    Initials: /s/ S.E.
                                                              ------------------
                                                    Initials: /s/ J.A.
                                                              ------------------
                                                              /s/ R.P.

                                  page 6 of 8
<PAGE>

incurred by the prevailing party therein shall be paid by the other party, which
obligation on the part of the other party shall be deemed to have accrued on the
date of the commencement of such action and shall be enforceable whether or not
the action is prosecuted to judgment.

  B. Should Landlord be named as a defendant in any suit brought against Tenant
in connection with or arising out of Tenants occupancy hereunder, Tenant shall
pay to Landlord its costs and expenses incurred in such suit, including a
reasonable attorney's fee.

30.  WAIVER The waiver by either party of the other party's failure to perform
or observe any term, covenant or condition herein contained to be performed or
observed by such waiving party shall not be deemed to be a waiver of such term,
covenant or condition or of any subsequent failure of the party failing to
perform or observe the same or any other such term, covenant or condition
therein contained, and no custom or practice which may develop between the
parties hereto during the term hereof shall be deemed a waiver of, or in any way
affect, the right of either party to insist upon performance and observance by
the other party in strict accordance with the terms hereof.

31.  NOTICES All notices, demands, requests, advices  or designations which may
be or are required to be given by either party to the other hereunder shall be
in writing. All notices, demand, requests, advices or designations by Landlord
to Tenant shall be sufficiently given, made or delivered if personally served on
Tenant by leaving the same at the Premises of if sent by United Slated certified
or registered mail, postage prepaid, addressed to Tenant at the Premises. All
notices, demands, requests, advices or designations by Tenant to Landlord shall
be sent by United States certified or registered mail, postage prepaid,
addressed to Landlord at its offices at Peery/Arrillaga, 2560 Mission College
                                        -------------------------------------
Blvd., Suite 101, Santa Clara, CA 95054.
---------------------------------------

Each notice, request, demand, advice or designation referred to in this
paragraph shall be deemed received on the date of the personal service or
mailing thereof in the manner herein provided, as the case may be.

32.  EXAMINATION OF LEASE Submission of this instrument for examination or
signature by Tenant does not constitute a reservation of or option for a lease,
and this instrument is not effective as a lease or otherwise until its execution
and delivery by both Landlord and Tenant.

33.  DEFAULT BY LANDLORD Landlord shall not be in default unless Landlord fails
to perform obligations required of Landlord within a reasonable time, but in no
event earlier than (30) days after written notice by Tenant to Landlord and to
the holder of any first mortgage or deed of bust covering the Premises whose
name and address shall have heretofore been furnished to Tenant in writing,
specifying wherein Landlord has failed to perform such obligations; provided,
however, that if the nature of Landlord's obligations is such that more than
thirty (30) days are required for performance, then Landlord shall not be in
default if Landlord commences performance within such thirty (30) day period and
thereafter diligently prosecutes the same to completion.

34.  CORPORATE AUTHORITY If Tenant is a corporation (or a partnership), each
individual executing this Lease on behalf of said corporation (or partner-ship)
represents and warrants that he is duly authorized to execute and deliver this
Lease on behalf of said corporation (or partnership) in accordance with the by-
laws of said corporation (or partnership in accordance with the partnership
agreement) and that this Lease is binding upon said corporation (or partnership)
in accordance with its terms, if Tenant is a corporation, Tenant shall, within
thirty (30) days after execution of this Lease, deliver to Landlord a certified
copy of the resolution of the Board of Directors of said corporation authorizing
or ratifying the execution of this Lease. See Paragraph 52

35.

36.  LIMITATION OF LIABILITY In consideration of the benefits accruing
hereunder. Tenant and all successors and assigns covenant and agree that, in the
event of any actual or alleged failure, breach or default hereunder by Landlord:

  (a) the sole and exclusive remedy shall be against Landlord's interest in the
Premises leased herein;

  (b) no partner of Landlord shall be sued or named as a party in any suit or
action (except as may be necessary to secure Jurisdiction of the partnership);

  (c) no service of process shall be made against any partner of Landlord
(except as may be necessary to secure jurisdiction of the partnership);

  (d) no partner of Landlord shall be required to answer or otherwise plead to
any service of process;

  (e) no judgment will be taken against any partner of Landlord;

  (f) any judgment taken against any partner of Landlord may be vacated and set
aside at any time without hearing;

  (g) no writ of execution will ever by levied against the assets of any partner
of Landlord;

  (h) these covenants and agreements are enforceable both by Landlord and also
by any partner of Landlord.

  Tenant agrees that each of the foregoing covenants and agreements shall be
applicable to any covenant or agreement either expressly contained in this Lease
or imposed by statute or at common law.

37.  SIGNS No sign, placard, picture, advertisement, name or notice shall be
inscribed, displayed or printed or affixed on or to any part of the outside of
the Premises or any exterior windows of the Premises without the written consent
of Landlord first had and obtained and Landlord shall have the right to remove
any such sign, placard, picture, advertisement, name or notice without notice to
and at the expense of Tenant. If Tenant is allowed to print or affix or in any
way place a sign in, on, or about the Premises, upon expiration or other sooner
termination of this Lease, Tenant at Tenant's sole cost and expense shall both
remove such sign and repair all damage in such a manner as to restore all
aspects of the appearance of the Premises to the condition prior to the
placement of said sign.

  All approved signs or lettering on outside doors shall be printed, painted,
affixed or inscribed at the expense of Tenant by a person approved of by
Landlord.

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.

38.  MISCELLANEOUS AND GENERAL PROVISIONS

  A. Use of Building Name. Tenant shall not, without the written consent of
Landlord, use the name of the building for any purpose other than as the address
of the business conducted by Tenant in the Premises.

                                                    Initials: /s/ S.E.
                                                              ------------------
                                                    Initials: /s/ J.A.
                                                              ------------------
                                                              /s/ R.P.

                                  page 7 of 8
<PAGE>

  B.  Choice of Law; Severability, This Lease shall in all respect be governed
by and construed in accordance with the laws of the State of California. If any
provision of this Lease shall be invalid, unenforceable or ineffective for any
reason whatsoever, all other provisions hereof shall be and remain in full force
and effect.

  C.  Definition of Terms. The term "Premises" includes the space leased hereby
and any improvements now or hereafter installed therein or attached thereto. The
term "Landlord" or any pronoun used in place thereof includes the plural as well
as the singular and the succession and assign of Landlord. The term "Tenant" or
any pronoun used in place thereof includes the plural as well as the singular
and individuals, firms, associations, partnerships and corporations, and their
and each of their respective heirs, executors, administrators, successors and
permitted assigns, according to the context hereof, and the provisions of this
Lease shall inure to the benefit of and bind such heirs, executors,
administrators, successors and permitted assigns.

  The term "person" includes the plural as well as the singular and individuals,
firms, associations, partnerships and corporations. Words used in any gender
include other genders. If there be more than one Tenant the obligations of
Tenant hereunder are Joint and several. The paragraph headings of the Lease are
for convenience of reference only and shall have no effect upon the construction
or interpretation of any provision hereof.

  D.  Time of Essence. Time is of the essence of this Lease and of each and all
of its provisions.

  E.  Quitclaim. At the expiration or earlier termination of this Lease, Tenant
shall execute, acknowledge and deliver to Landlord, within ten (10) days after
written demand from Landlord to Tenant, any quitclaim deed or other document
required by any reputable title company, licensed to operate in the State of
California, to remove the cloud or encumbrance created by this Lease from the
real property of which Tenant's Premises are a part.

  F.  Incorporation of Prior Agreements; Amendments. This instrument along with
any exhibits and attachments hereto constitutes the entire agreement between
Landlord and Tenant relative to the Premises and this agreement and the exhibits
and attachments may be altered, amended or revoked only by an instrument in
writing signed by both Landlord and Tenant. Landlord and Tenant agree hereby
that all prior or contemporaneous oral agreements between and among themselves
and their agents or representatives relative to the leasing of the Premises are
merged in or revoked by this agreement

  G.  Recording. Neither Landlord nor Tenant shall record this Lease or a short
form memorandum hereof without the consent of the other.

  H.  Amendments for Financing. Tenant further agrees to execute any amendments
required by a lender to enable Landlord to obtain financing, so long as Tenant's
rights hereunder are not substantially affected.

  I.  Additional Paragraphs. Paragraphs 39 through 51 are added
                                        --         --
hereto and are included as a part of this lease.

  J.  Clauses, Plats and Riders. Clauses, plats and riders, if any, signed by
Landlord and Tenant and endorsed or, or affixed to this Lease are a part hereof.

  K.  Diminution of Light, Air or View. Tenant covenants and agrees that no
diminution or shutting off of light, air or view by any structure which may be
hereafter erected (whether or not by Landlord) shall in any way affect his
Lease, entitle Tenant to any reduction of rent hereunder or result in any
liability of Landlord to Tenant.

  IN WITNESS WHEREOF, Landlord and Tenant have executed and delivered this Lease
as of the day and year last written below.

LANDLORD:                                   TENANT:
JOHN ARRILLAGA SURVIVOR'S TRUST             CONWAY STUART MEDICAL, INC.
                                            A Delaware corporation

By  /s/ JOHN ARRILLAGA, TRUSTEE             By  /s/ STUART D. EDWARDS
-------------------------------             ------------------------------------
John Arrillaga, Trustee                     Stuart D. Edwards, President and CEO

Date: 5/15/98                               Date  5/15/98
-------------------------------             ------------------------------------

RICHARD T. PEERY SEPARATE PROPERTY TRUST

By /s/ RICHARD T. PEERY
-------------------------------
Richard T. Peery, Trustee

Date: 5/15/98
-------------------------------

                                                    Initials: /s/ S.E.
                                                              ------------------
                                                    Initials: /s/ J.A.
                                                              ------------------
                                                              /s/ R.P.

                                  page 8 of 8
<PAGE>

Paragraphs 39 through 51 to Lease Agreement dated May 6, 1998, By and Between
the John Arrillaga Survivor's Trust and the Richard T. Peery Separate Property
Trust, as Landlord, and Conway Stuart Medical, Inc., a Delaware corporation, as
Tenant, for 10,000(+/-) Square Feet of Space Located at 735 Palomar Avenue,
Sunnyvale, California.

39.  BASIC RENT: In accordance with Paragraph 4A herein, the total aggregate sum
     ----------
of SEVEN HUNDRED FIFTY SIX THOUSAND AND NO/100 DOLLARS ($756,000.00), shall be
payable as follows:

     On June 1, 1998, the sum of TWENTY THOUSAND AND NO/100 DOLLARS ($20,000.00)
shall be due, and a like sum due on the first day of each month thereafter,
through and including May 1, 1999.

     On June 1, 1999, the sum of TWENTY ONE THOUSAND AND NO/100 DOLLARS
($21,000.00) shall be due, and a like sum due on the first day of each month
thereafter, through and including May 1, 2000.

     On June 1, 2000, the sum of TWENTY TWO THOUSAND AND NO/100 DOLLARS
($22,000.00) shall be due, and a like sum due on the first day of each month
thereafter, through and including May l, 2001; or until the entire aggregate sum
of SEVEN HUNDRED FIFTY SIX THOUSAND AND NO/100 DOLLARS ($756,000.00) has been
paid.

40.  "AS-IS" BASIS: It is hereby agreed that the Premises leased hereunder is
     -------------
leased strictly on an "as-is" basis and in its present condition, and in the
configuration as shown on Exhibit B attached hereto, and by reference made a
                          ----------
part hereof. It is specifically agreed between the parties that Landlord shall
not be required to make, nor be responsible for any cost, in connection with any
repair, restoration, and/or improvement to the Premises in order for this Lease
to commence, or thereafter, throughout the Term of this Lease. Notwithstanding
anything to the contrary within this Lease, Landlord makes no warranty or
representation of any kind or nature whatsoever as to the condition or repair of
the Premises, nor as to the use or occupancy which may be made thereof.

41.  RULES AND REGULATIONS AND COMMON AREA: Subject to the terms and conditions
     ---------------------------------------
of this Lease and such Rules and Regulations as Landlord may from time to time
prescribe, Tenant and Tenant's employees, invitees and customers shall, in
common With other occupants of the Parcel/Building in which the premises are
located, and their respective employees, invitees and customers, and others
entitled to the use thereof, have the non-exclusive right to use the access
roads, parking areas, and facilities provided and designated by Landlord for the
general use and convenience of the occupants of the Parcel/Building in which the
Premises are located, which areas and facilities are referred to herein as
"Common Area". This right shall terminate upon the termination of this Lease.
Landlord reserves the right from time to time to make changes in the shape,
size, location, amount and extent of Common Area. Landlord further reserves the
right to promulgate such reasonable rules and regulations relating to the use of
the Common Area, and any part or parts thereof, as Landlord may deem appropriate
for the best interests of the occupants of the Parcel/Building. Such Rules and
Regulations may be amended by Landlord from time to time, with or without
advance notice, and all amendments shall be effective upon delivery of a copy to
Tenant. Landlord shall not be responsible to Tenant for the non-performance by
any other tenant or occupant of the Parcel/Building of any of said Rules and
Regulations.

Landlord shall operate, manage and maintain the Common Area. The manner in which
the Common Area shall be maintained and the expenditures for such maintenance
shall be at the discretion of Landlord.

42.  EXPENSES OF OPERATION, MANAGEMENT, AND MAINTENANCE OF THE COMMON AREAS OF
     -------------------------------------------------------------------------
THE PARCEL, AND BUILDING IN WHICH THE PREMISES ARE LOCATED: As Additional Rent
----------------------------------------------------------
and in accordance with Paragraph 4D of this Lease, Tenant shall pay to Landlord
Tenant's proportionate share (calculated on a square footage or other equitable
basis as calculated by landlord) of all expenses of operation, management,
maintenance and repair of the Common Areas of the Parcel including, but not
limited to, license, permit, and inspection fees; security; utility charges
associated with exterior landscaping and lighting (including water and sewer
charges); all charges incurred in the maintenance and replacement of landscaped
areas,

                                    Page 9

                                            Initial: /s/ S.E. /s/ R.P. /s/ J.A.
                                                     --------------------------
<PAGE>

lakes, parking lots and paved areas (including repairs, replacement, resealing
and restriping), sidewalks, driveways, maintenance, repair and replacement of
all fixtures and electrical, mechanical and plumbing systems; supplies,
materials, equipment and tools; the cost of capital expenditures which have the
effect of reducing operating expenses, provided, however, that in the event
Landlord makes such capital improvements, Landlord may amortize its investment
in said improvements (together with interest at the rate of fifteen (15%)
percent per annum on the unamortized balance) as an operating expense ill
accordance with standard accounting practices, provided, that such amortization
is not at a rate greater than the anticipated savings in the operating expenses.

As Additional Rent and in accordance with Paragraph 4D of this Lease, Tenant
shall pay its proportionate share (calculated on a square footage or other
equitable basis as calculated by Landlord) of the cost of operation (including
common utilities), management, maintenance, and repair of the building
(including structural and common areas such as lobbies, restrooms, janitor's
closets, hallways, elevators, mechanical and telephone rooms, stairwells,
entrances, spaces above the ceilings and janitorization of said common areas) in
which the Premises are located. The maintenance items herein referred to
include, but are not limited to, all windows, window frames, plate glass,
glazing, truck doors, main plumbing systems of the building (such as water drain
lines, sinks, toilets, faucets, drains, showers and water fountains), main
electrical systems (such as panels and conduits), heating and airconditioning
systems (such as compressors, fans, air handlers, ducts, boilers, heaters),
structural elements and exterior surfaces of the building; store fronts, roof,
downspouts, building common area interiors (such as wall coverings, window
coverings, floor coverings and partitioning), ceilings, building exterior doors,
skylights (if any), automatic fire extinguishing systems, and elevators (if
any); license, permit and inspection fees; security, supplies, materials,
equipment and tools; the cost of capital expenditures which have the effect of
reducing operating expenses, provided, however, that in the event Landlord makes
such capital improvements, Landlord may amortize its investment in said
improvements (together with interest at the rate of fifteen (15%) percent per
annum on the unamortized balance) as an operating expense in accordance with
standard accounting practices, provided, that such amortization is not at a rate
greater than the anticipated savings in the operating expenses. Tenant hereby
waives all rights hereunder, and benefits of, subsection 1 of Section 1932 and
Sections 1941 and 1942 of the California Civil Code and under any similar law,
statute or ordinance now or hereafter in effect.

"Additional Rent" as used herein shall not include Landlord's debt repayments;
interest on charges, expenses directly or indirectly incurred by Landlord for
the benefit of any other tenant; cost for the installation of partitioning or
any other tenant improvements; cost of attracting tenants; depreciation;
interest; or executive salaries.

43.  UTILITIES OF THE BUILDING IN WHICH THE PREMISES ARE LOCATED: As Additional
     -----------------------------------------------------------
Rent and in accordance with Paragraph 4D of this Lease Tenant shall pay its
proportionate share (calculated on a square footage or other equitable basis as
calculated by Landlord) of the cost of all utility charges such as water, gas,
electricity, (telephone, telex and other electronic communications service, if
applicable) sewer service, waste pick-up and any other utilities, materials or
services furnished directly to the building in which the Premises are located,
including, without limitation, any temporary or permanent utility surcharge or
other exactions whether or not hereinafter imposed.

Landlord shall not be liable for and Tenant shall not be entitled to any
abatement or reduction of rent by reason of any interruption or failure of
utility services to the Premises when such interruption or failure is caused by
accident, breakage, repair, strikes, lockouts, or other labor disturbances or
labor disputes of any nature, or by any other cause, similar or dissimilar,
beyond the reasonable control of Landlord.

Provided that Tenant is not in default in the performance or observance of any
of the terms, covenants or conditions of this Lease to be performed or observed
by it, Landlord shall furnish to the Premises between the hours of 8:00 am and
6:00 pm, Mondays through Fridays (holidays excepted) and subject to the rules
and regulations of the Common Area hereinbefore referred to, reasonable
quantities of water, gas and electricity suitable for the intended use of the
Premises and heat and airconditioning required in Landlord's judgment for the
comfortable use and occupation of the Premises for such purposes. Tenant agrees
that at all times it will cooperate fully with Landlord and abide by all
regulations and requirements that Landlord may prescribe for the proper
functioning and protection of the building heating, ventilating and
airconditioning systems. Whenever heat generating machines, equipment, or any
other devices (including exhaust fans) are used in the Premises by Tenant which
affect the temperature or otherwise maintained by the

                                    Page 10

                                            Initial: /s/ S.E. /s/ R.P. /s/ J.A.
                                                     --------------------------
<PAGE>

airconditioning system, Landlord shall have tile right to install supplementary
airconditioning units in the Premises and the cost thereof, including the cost
of installation and the cost of operation and maintenance thereof, shall be paid
by Tenant to Landlord upon demand by Landlord. Tenant will not, without the
written consent of Landlord, use any apparatus or device in the Premises
(including, without limitation), electronic data processing machines or machines
using current in excess of 110 Volts which will in any way increase the amount
of electricity, gas, water or airconditioning usually furnished or supplied to
premises being used as general office space, or connect with electric current
(except through existing electrical outlets in the Premises), or with gas or
water pipes any apparatus or device for the purposes of using electric current,
gas, or water. If Tenant shall require water, gas, or electric current in excess
of that usually furnished or supplied to premises being used as general office
space, Tenant shall first obtain the written consent of Landlord, which consent
shall not be unreasonably withheld and Landlord may cause an electric current,
gas or water meter to be installed in the Premises in order to measure the
amount of electric current, gas or water consumed for any such excess use. The
cost of any such meter and of the installation, maintenance and repair thereof,
all charges for such excess water, gas and electric current consumed (as shown
by such meters and at the rates then charged by the furnishing public utility);
and any additional expense incurred by Landlord in keeping account of electric
current, gas, or water so consumed shall be paid by Tenant, and Tenant agrees to
pay Landlord therefor promptly upon demand by Landlord.

44.  PARKING: Tenant shall have the right to the nonexclusive use of thirty
     -------
eight (38) parking spaces in the common parking area of the building. Tenant
agrees that Tenant, Tenant's employees, agents, representatives, and/or invitees
shall not use parking spaces in excess of said 38 parking spaces allocated to
Tenant hereunder. Landlord shall have the right, at Landlord's sole discretion,
to specifically designate the location of Tenant's parking spaces within the
common parking area of the building in the event of a dispute among the tenants
occupying the building referred to herein, in which event Tenant agrees that
Tenant, Tenant's employees, agents, representatives and/or invitees shall not
use any parking spaces other than those parking spaces specifically designated
by Landlord for Tenant's use. Said parking spaces, if specifically designated by
Landlord to Tenant, may be relocated by Landlord at any time, and from time to
time. Landlord reserves the right, at Landlord's sole discretion, to rescind any
specific designation of parking spaces, thereby returning Tenant's parking
spaces to the common parking area. Landlord shall give Tenant written notice of
any change in Tenant's parking spaces. Tenant shall not, at any time, park, or
permit to be parked, any trucks or vehicles adjacent to the loading area so as
to interfere in any way with the use of such areas, nor shall Tenant, at any
time, park or permit the parking of Tenant's trucks and other vehicles or the
trucks and vehicles of Tenant's suppliers or others, in any portion of the
common areas not designated by Landlord for such use by Tenant. Tenant shall not
park nor permit to be parked, any inoperative vehicles or equipment on any
portion of the common parking area or other common areas of the building. Tenant
agrees to assume responsibility for compliance by its employees with the parking
provision contained herein. If Tenant or its employees park in other than
designated parking areas, then Landlord may charge Tenant, as an additional
charge, and Tenant agrees to pay Ten Dollars ($10.00) per day for each day or
partial day each such vehicle is parking in any area other than that designated.
Tenant hereby authorizes Landlord, at Tenant's sole expense, to tow away from
the building any vehicle belonging to Tenant or Tenant's employees parked in
violation of these provisions, or to attach violation stickers or notices to
such vehicles. Tenant shall use the parking area for vehicle parking only and
shall not use the parking areas for storage.

45.  ASSESSMENT CREDITS: The demised property herein may be subject to a special
     ------------------
assessment levied by the City of Sunnyvale as part of an Improvement District.
As a part of said special assessment proceedings (if any), additional bonds were
or may be sold and assessments were or may be levied to provide for construction
contingencies and reserve funds. Interest shall be earned on such funds created
for contingencies and on reserve funds which will be credited for the benefit of
said assessment district. To the extent surpluses are created in said district
through unused contingency funds, interest earnings or reserve funds, such
surpluses shall be deemed the property of Landlord. Notwithstanding that such
surpluses may be credited on assessments otherwise due against the Leased
Premises, Tenant shall pay to Landlord, as additional rent if, and at the time
of any such credit of surpluses, an amount equal to all such surpluses so
credited. For example: if (i) the property is subject to an annual assessment of
$1,000.00, and (ii) a surplus of $200.00 is credited towards the current year's
assessment which reduces the assessment amount shown on the property tax bill
from $1,000.00 to $800.00, Tenant shall, upon receipt notice from Landlord, pay
to Landlord said $200.00 credit as Additional Rent.

                                    Page 11

                                            Initial: /s/ S.E. /s/ R.P. /s/ J.A.
                                                     --------------------------
<PAGE>

46.  ASSIGNMENT AND SUBLETTING (CONTINUED):
     --------------------------------------

     A.  Tenant has advised Landlord that Tenant intends to sublease a portion
of the Premises to tile following companies which are affiliates of Tenant
Advanced Closure, Systems, Inc.; Cardiosynopsis, Inc.; Vidaderm, Inc.; and
Genesis Medical, Inc. ("Proposed Subtenants"). Landlord has agreed (i) to issue
a consent to each of said subleases, subject to (a) Tenant submitting to
Landlord a copy of each of said subleases (prior to said sublease commencing),
(b) Landlord, Tenant and Proposed Subtenants thereafter executing Landlord's
standard Consent to Sublease agreement and (c) Landlord receives payment from
Tenant of Landlord's costs for processing said Sublease Consent prior to said
sublease commencing, and (ii) provided the total combined square footage
subleased to any or all of said Proposed Subtenants is less than filly percent
(50%) of the total square footage leased by Tenant hereunder (i.e. Tenant
subleases less than 5,000 square feet), Tenant shall be entitled to retain one
hundred percent (100%) of any excess sublease rent received from said Proposed
Subtenants.

     B.  Notwithstanding the foregoing, Landlord and Tenant agree that it shall
not be unreasonable for Landlord to refuse to consent to a proposed assignment,
sublease or other transfer ("Proposed Transfer") if the Premises or ant other
portion of the Property would become subject to additional or different
Government Requirements as a direct or indirect consequence of the Proposed
Transfer and/or the Proposed Transferee's use and occupancy of the Premises and
the Property. However, Landlord may, in its sole discretion, consent to such a
Proposed Transfer where Landlord is indemnified by Tenant and (i) Subtenant or
(ii) Assignee, in form and substance satisfactory to Landlord's counsel, by
Tenant and/or the Proposed Transferee from and against any and all costs,
expenses, obligations and liability arising out of the Proposed Transfer and/or
the Proposed Transferee's use and occupancy of the Premises and the Property.

     C.  Any and all sublease agreement(s) between Tenant and any and all
subtenant(s) (which agreements must be consented to by Landlord, pursuant to the
requirements of this Lease) shall contain the following language:

               "If Landlord and Tenant jointly and voluntarily elect, for any
     reason whatsoever, to terminate the Master Lease prior to the scheduled
     Master Lease termination date, then this Sublease (if then still in effect)
     shall terminate concurrently with the termination of the Master Lease.
     Subtenant expressly acknowledges and agrees that (1) the voluntary
     termination of the Master Lease by Landlord and Tenant and the resulting
     termination of this Sublease shall not give Subtenant any right or power to
     make any legal or equitable claim against Landlord, including without
     limitation any claim for interference with contract or interference with
     prospective economic advantage, and (2) Subtenant hereby waives any and all
     rights it may have under law or at equity against Landlord to challenge
     such an early termination of the Sublease, and unconditionally releases and
     relieves Landlord, and its officers, directors, employees and agents, from
     any and all claims, demands, and/or causes of action whatsoever
     (collectively, "Claims"), whether such matters are known or unknown, latent
     or apparent, suspected or unsuspected, foreseeable or unforeseeable, which
     Subtenant may have arising out of or in connection with any such early
     termination of this Sublease. Subtenant knowingly and intentionally waives
     any and all protection which is or may be given by Section 1542 of the
     California Civil Code which provides as follows: "A general release does
     not extend to claims which the creditor does not know or suspect to exist
     in his favor at the time of executing the release, which if known by him
     must have materially affected his settlement with debtor.

          The term of this Sublease is therefore subject to early termination.
     Subtenant's initials here below evidence (a) Subtenant's consideration of
     and agreement to this early termination provision, (b) Subtenant's
     acknowledgment that, in determining the net benefits to be derived by
     Subtenant under the terms of this Sublease, Subtenant has anticipated the
     potential for early termination, and (c) Subtenant's agreement to the
     general waiver and release of Claims above.

         Initials:                Initials:
                  --------                  ---------------
                 Subtenant                  Tenant

                                    Page 12

                                            Initial: /s/ S.E. /s/ R.P. /s/ J.A.
                                                     --------------------------
<PAGE>

47.  BANKRUPTCY AND DEFAULT: Paragraph 19 is modified to provide that with
     ----------------------
respect to non-monetary defaults not involving Tenant's failure to pay Basic
Rent or Additional Rent, Tenant shall not be in default of any non-monetary
obligation if (i) more than thirty (30) days is required to cure such non-
monetary default, and (ii) Tenant commences cure of such default as soon as
reasonably practicable after receiving written notice of such default from
Landlord and thereafter continuously and with due diligence prosecutes such cure
to completion.

48.  ABANDONMENT: Paragraph 20 is modified to provide that Tenant shall not
     -----------
be in default under the Lease if it leaves all or any part of Premises vacant so
long as (i) Tenant is performing all of its other obligations under the Lease
including the obligation to pay Basic Rent and Additional Rent (ii) Tenant
provides on-site security during normal business hours for those parts of the
Premises left: vacant, (iii) such vacancy does not materially and adversely
affect the validity or coverage or any policy of insurance carried by Landlord
with respect to the Premises, and (iv) the utilities and heating and ventilation
system are operated and maintained to the extent necessary to prevent damage to
the Premises or its systems.

49.  HAZARDOUS MATERIALS: Landlord and Tenant agree as follows with respect
     -------------------
to the existence or use of "Hazardous Materials" (as defined herein) on, in,
under or about the Premises and real property located beneath said Premises and
the common areas of the Parcel, which includes the entire parcel of land on
which the Premises are located as shown in Green on A attached hereto
(hereinafter collectively referred to as the "Property"):

     A.  As used herein, the term "Hazardous Materials" shall mean any material,
waste, chemical, mixture or byproduct which is or hereafter is defined, listed
or designated under Environmental Laws (defined below) as a pollutant, or as a
contaminant, or as a toxic t)r hazardous substance, waste or material, or any
other unwholesome, hazardous, toxic, biohazardous, or radioactive material,
waste, chemical, mixture or byproduct, or which is listed, regulated or
restricted by any Environmental Law (including, without limitation, petroleum
hydrocarbons or any distillates or derivatives or fractions thereof,
polychlorinated biphenyls, or asbestos). As used herein, the term "Environmental
Laws" shall mean any applicable Federal, State of California or local government
law (including common law), statute, regulation, rule, ordinance, permit,
license, order, requirement, agreement, or approval, or any determination,
judgment, directive, or order of any executive or judicial authority at any
level of Federal, State of California or local government (whether now existing
or subsequently adopted or promulgated) relating to pollution or the protection
of the environment, ecology, natural resources, or public health and safety.

     B.  Tenant shall obtain Landlord's written consent, which may be withheld
in Landlord's discretion, prior to the occurrence of any Tenant's Hazardous
Materials Activities (defined below); provided, however, that Landlord's consent
shall not be required for normal use in compliance with applicable Environmental
Laws of customary household and office supplies (Tenant shall first provide
Landlord with a list of said materials use), such as mild cleaners, lubricants
and copier toner. As used herein, the term "Tenant's Hazardous Materials
Activities" shall mean any and all use, handling, generation, storage, disposal,
treatment, transportation, release, discharge, or emission of any Hazardous
Materials on, in, beneath, to, from, at or about the Property, in connection
with Tenant's use of the Property, or by Tenant or by any of Tenant's agents,
employees, contractors, vendors, invitees, visitors or its future subtenants or
assignees. Tenant agrees that any and all Tenant's Hazardous Materials
Activities shall be conducted in strict, full compliance with applicable
Environmental Laws at Tenant's expense, and shall not result in any
contamination of the Property or the environment. Tenant agrees to provide
Landlord with prompt written notice of any spill or release of Hazardous
Materials at the Property during the term of the Lease of which Tenant becomes
aware, and further agrees to provide Landlord with prompt written notice of any
violation of Environmental Laws in connection with Tenant's Hazardous Materials
Activities of which Tenant becomes aware. If Tenant's Hazardous Materials
Activities involve Hazardous Materials other than normal use of customary
household and office supplies, Tenant also agrees at Tenant's expense' (i) to
install such Hazardous Materials monitoring, storage and containment devices as
Landlord reasonably deems necessary (Landlord shall have no obligation to
evaluate the need for any such installation or to require any such
installation); (ii) provide Landlord with a written inventory of such Hazardous
Materials, including an update of same each year upon the anniversary date of
the Commencement Date of the Lease ("Anniversary Date"); and (iii) on each
Anniversary Date, to retain a qualified environmental consultant, acceptable to
Landlord, to evaluate whether tenant is in compliance with all applicable
Environmental Laws with respect to Tenant's Hazardous Materials Activities.
Tenant, at its expense, shall submit to Landlord a report from such
environmental consultant which discusses the

                                    Page 13

                                            Initial: /s/ S.E. /s/ R.P. /s/ J.A.
                                                     --------------------------
<PAGE>

environmental consultant's findings within two (2) months of each Anniversary
Date. Tenant, at its expense, shall promptly undertake and complete any and all
steps necessary, and in full compliance with applicable Environmental Laws, to
fully correct any and all problems or deficiencies identified by the
environmental consultant, and promptly provide Landlord with documentation of
all such corrections.

     C.  Prior to termination or expiration of the Lease, Tenant, at its
expense, shall (i) properly remove from the Property all Hazardous Materials
which come to be located at the Property in connection with Tenant's Hazardous
Materials Activities, and (ii) fully comply with and complete all facility
closure requirements of applicable Environmental Laws regarding Tenant's
Hazardous Materials Activities, including but not limited to (x) properly
restoring and repairing the Property to the extent damaged by such closure
activities, and (y) obtaining from the local Fire Department or other
appropriate governmental authority with jurisdiction a written concurrence that
closure has been completed in compliance with applicable Environmental Laws.
Tenant shall promptly provide Landlord with copies of any claims, notices, work
plans, data and reports prepared, received or submitted in connection with any
such closure activities.

     D.  If Landlord, in its sole discretion, believes that the Property has
become contaminated as a result of Tenant's Hazardous Materials Activities,
Landlord in addition to any other rights it may have under this Lease or under
Environmental Laws or other laws, may enter upon the Property and conduct
inspection, sampling and analysis, including but not limited to obtaining and
analyzing samples of soil and groundwater, for the purpose of determining the
nature and extent of such contamination. Tenant shall promptly reimburse
Landlord for the costs of such an investigation, including but not limited to
reasonable attorneys' fees Landlord incurs with respect to such investigation,
that discloses Hazardous Materials contamination for which Tenant is liable
under this Lease. Notwithstanding the above, Landlord may, at its option and in
its sole and absolute discretion, choose to perform remediation and obtain
reimbursement for cleanup costs as set forth herein from Tenant. Any cleanup
costs incurred by Landlord as the result of Tenant's Hazardous Materials
Activities shall be reimbursed by Tenant within thirty (30) days of presentation
of written documentation of the expense to Tenant by Landlord. Such reimbursable
costs shall include, but not be limited to, any reasonable consultant and
attorney fees incurred by Landlord. Tenant shall take all actions necessary to
preserve any claims it has against third parties, including, but not limited to,
its insurers, for claims related to its operation, management of Hazardous
Materials or contamination of the Property. Except as may be required of Tenant
by applicable Environmental Laws, Tenant shall not perform any sampling,
testing, or drilling to identify the presence of any Hazardous Materials at the
Property, without Landlord's prior written consent which may be withheld in
Landlord's discretion. Tenant shall promptly provide Landlord with copies of any
claims, notices, work plans, data and reports prepared, received or submitted in
connection with any sampling, testing or drilling performed pursuant to the
preceding sentence.

     E.  Tenant shall indemnify, defend (with legal counsel acceptable to
Landlord, whose consent shall not unreasonably be withheld) and hold harmless
Landlord, its employees, assigns, successors, successors-in-interest, agents and
representatives from and against any and all claims (including but not limited
to third party claims from a private party or a government authority),
liabilities, obligations, losses, causes of action, demands, governmental
proceedings or directives, fines, penalties, expenses, costs (including but not
limited to reasonable attorneys', consultants' and other experts' fees and
costs), and damages, which arise from or relate to: (i) Tenant's Hazardous
Materials Activities; (ii) any Hazardous Materials contamination caused by
Tenant prior to the Commencement Date or: the Lease; or (iii) the breach of any
obligation of Tenant under this Paragraph 49 (collectively, "Tenant's
Environmental Indemnification"). Tenant's Environmental Indemnification shall
include but is not limited to the obligation to promptly and fully reimburse
Landlord for losses in or reductions to rental income, and diminution in fair
market value of the Property. Tenant's Environmental Indemnification shall
further include but is not limited to the obligation to diligently and properly
implement to completion, at Tenant's expense, any and all environmental
investigation, removal, remediation, monitoring, reporting, closure activities,
or other environmental response action (collectively, "Response Actions").
Tenant shall promptly provide Landlord with copies of any claims, notices, work
plans, data and reports prepared, received or submitted in connection with any
Response Actions.

It is agreed that the Tenant's responsibilities related to Hazardous Materials
will survive the expiration or termination of this Lease and that Landlord may
obtain specific performance of Tenant's responsibilities under this Paragraph
49.

                                    Page 14

                                            Initial: /s/ S.E. /s/ R.P. /s/ J.A.
                                                     --------------------------
<PAGE>

50.  CONSENT: Whenever the consent of one party to tile, other is required
     -------
hereunder, such consent shall not be unreasonably withheld.

51.  AUTHORITY TO EXECUTE. The parties executing this Lease Agreement hereby
     --------------------
warrant and represent that they are properly authorized to execute this Lease
Agreement and bind the parties on behalf of whom they execute this Lease
Agreement and to all of the temps, covenants and conditions of this Lease
Agreement as they relate to the respective parties hereto.

                                    Page 15

                                            Initial: /s/ S.E. /s/ R.P. /s/ J.A.
                                                     --------------------------

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