Document:

<PAGE>

                                                                  Execution Copy
                                                                     Exhibit 4.2

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

                          SALE AND SERVICING AGREEMENT

                                      among

                   CHEVY CHASE AUTO RECEIVABLES TRUST 2001-3,
                                     Trust,

                            CHEVY CHASE BANK, F.S.B.,
                              Seller and Servicer,

                                       and

                         U.S. BANK NATIONAL ASSOCIATION,
                                Indenture Trustee

                          Dated as of December 1, 2001

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

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                          Page
<S>                                                                       <C>
ARTICLE I DEFINITIONS                                                       1

   SECTION 1.1.   Definitions ..........................................    1
   SECTION 1.2.   Other Definitional Provisions. .......................    9
   SECTION 1.3.   Interest Calculations. ...............................   10
   SECTION 1.4.   Action By Or Consent Of Noteholders. .................   10

ARTICLE II CONVEYANCE OF RECEIVABLES                                       11

   SECTION 2.1.   Conveyance of Receivables. ...........................   11
   SECTION 2.2.   Further Encumbrance of Trust Property. ...............   12
   SECTION 2.3.   Acceptance By the Trust. .............................   12

ARTICLE III THE RECEIVABLES                                                12

   SECTION 3.1.   Representations and Warranties of Seller. ............   12
   SECTION 3.2.   Repurchase upon Breach. ..............................   13
   SECTION 3.3.   Custody of Receivables Files. ........................   13
   SECTION 3.4.   Duties Of Servicer As Custodian. .....................   13
   SECTION 3.5.   Instructions and Authority to Act ....................   14
   SECTION 3.6.   Effective Period And Termination. ....................   14

ARTICLE IV ADMINISTRATION AND SERVICING OF RECEIVABLES                     16

   SECTION 4.1.   Duties of the Servicer ...............................   16
   SECTION 4.2.   Collection of Receivable Payments. ...................   16
   SECTION 4.3.   Realization upon Receivables. ........................   17
   SECTION 4.4.   Insurance. ...........................................   17
   SECTION 4.5.   Maintenance of Security Interests in Vehicles. .......   17
   SECTION 4.6.   Covenants, Representations, and Warranties of
                    Servicer ...........................................   18
   SECTION 4.7.   Purchase of Receivables Upon Breach of Covenant ......   19
   SECTION 4.8.   Servicing Fees. ......................................   19
   SECTION 4.9.   Servicer's Certificate ...............................   20
   SECTION 4.10.  Annual Statement as to Compliance, Notice of
                    Servicer Termination Event. ........................   20
   SECTION 4.11.  Annual Independent Accountants' Report. ..............   20
   SECTION 4.12.  Access to Certain Documentation and Information
                   Regarding Receivables ...............................   21
   SECTION 4.13.  Servicer Expenses. ...................................   21
   SECTION 4.14.  Reports To Noteholders. ..............................   21

ARTICLE V ACCOUNTS; DISTRIBUTIONS; STATEMENTS TO NOTEHOLDERS               21

   SECTION 5.1.   Establishment of Accounts ............................   21
   SECTION 5.2.   Collections. .........................................   23
   SECTION 5.3.   Purchase Amounts .....................................   24
   SECTION 5.4.   Distributions. .......................................   24
   SECTION 5.5.   Reserve Account. .....................................   26
   SECTION 5.6.   Overcollateralization. ...............................   27
   SECTION 5.7.   Statements to Noteholders. ...........................   27

ARTICLE VI THE SELLER                                                      29

   SECTION 6.1.   Representations of Seller. ...........................   29
   SECTION 6.2.   Liability of the Seller. .............................   30
</TABLE>

                                       ii

<PAGE>

<TABLE>
<S>                                                                         <C>
  SECTION 6.3.    Merger or Consolidation of, or Assumption of the
                    Obligations of, Seller. ...............................   31
  SECTION 6.4.    Limitation on Liability of Seller and Others ............   31

ARTICLE VII THE SERVICER                                                      31

  SECTION 7.1.    Representations of Servicer .............................   31
  SECTION 7.2.    Liability of Servicer; Indemnities. .....................   33
  SECTION 7.3.    Merger or Consolidation of, or Assumption of the
                    Obligations of the Servicer ...........................   35
  SECTION 7.4.    Limitation on Liability of Servicer and Certain
                    Related Persons. ......................................   35
  SECTION 7.5.    Servicer Not to Resign. .................................   36
  SECTION 7.6.    Delegation of Duties ....................................   36

ARTICLE VIII DEFAULT                                                          36

  SECTION 8.1.    Servicer Default. .......................................   36
  SECTION 8.2.    Appointment of Successor. ...............................   37
  SECTION 8.3.    Notification To Noteholders. ............................   38
  SECTION 8.4.    Waiver Of Past Defaults. ................................   38
  SECTION 8.5.    Effect Of Servicer Default On Sub-Servicers. ............   39

ARTICLE IX THE INDENTURE TRUSTEE                                              39

   SECTION 9.1.   Duties of the Indenture Trustee. ........................   39
   SECTION 9.2.   Rights of Indenture Trustee. ............................   41
   SECTION 9.3.   Individual Rights of Indenture Trustee ..................   42
   SECTION 9.4.   Indenture Trustee's Certificate. ........................   42
   SECTION 9.5.   Indenture Trustee's Assignment Of Purchased
                    Receivables. ..........................................   42

ARTICLE X ADMINISTRATIVE DUTIES OF THE SERVICER                               43

   SECTION 10.1.  Administrative Duties. ..................................   43
   SECTION 10.2.  Records .................................................   45
   SECTION 10.3.  Additional Information to be Furnished to the Trust .....   45

ARTICLE XI REDEMPTION                                                         46

   SECTION 11.1.  Optional Purchase of All Receivables ....................   46

ARTICLE XII MISCELLANEOUS PROVISIONS                                          46

   SECTION 12.1.  Amendment. ..............................................   46
   SECTION 12.2.  Protection Of Title To Trust. ...........................   47
   SECTION 12.3.  Limitations on Rights of Others .........................   48
   SECTION 12.4.  Governing Law ...........................................   48
   SECTION 12.5.  Notices .................................................   49
   SECTION 12.6.  Severability of Provisions ..............................   49
   SECTION 12.7.  Assignment ..............................................   49
   SECTION 12.8.  Counterparts ............................................   49
   SECTION 12.9.  Benefits Of Agreement ...................................   49
   SECTION 12.10. Headings ................................................   49
   SECTION 12.11. Limitation of Liability of Owner
                    Trustee and Indenture Trustee. ........................   49
</TABLE>

                                       iii

<PAGE>

                             SCHEDULES AND EXHIBITS

Schedule A  Schedule of Receivables
Schedule B  Schedule of Representations and Warranties

Exhibit A   Form of Officer's Certificate of the Servicer (upon payment in full
            of any Receivable)
Exhibit B   Form of Servicer's Receipt
Exhibit C   Form of Servicer's Certificate (containing information necessary for
            distributions)
Exhibit D   Form of Indenture Trustee's Certificate (upon assignment of a
            Receivable to the Seller)
Exhibit E   Form of Indenture Trustee's Certificate (upon assignment of a
            Receivable to the Servicer)

                                       iv

<PAGE>

     SALE AND SERVICING AGREEMENT dated as of December 1, 2001, among CHEVY
CHASE AUTO RECEIVABLES TRUST 2001-3, a Delaware business trust (the "Trust"),
                                                                     -----
CHEVY CHASE BANK, F.S.B., a federally chartered savings bank, as seller and
servicer (the "Seller" or the "Servicer" in its respective capacities as such),
               ------          --------
and U.S. BANK NATIONAL ASSOCIATION, in its capacity as Indenture Trustee.

     WHEREAS the Trust desires to purchase a portfolio of receivables arising in
connection with motor vehicle retail installment sale contracts and installment
loans originated or purchased by the Seller;

     WHEREAS the Seller has originated or purchased such receivables and is
willing to sell such receivables to the Trust;

     WHEREAS the Servicer is willing to service all such receivables;

     NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:

                                   ARTICLE I

                                  Definitions
                                  -----------

     Section 1.1. Definitions. Whenever used in this Agreement, the following
                  -----------
words and phrases shall have the following meanings:

     "Additional Fees" means any late fees with respect to the Receivables
      ---------------
collected by the Servicer.

     "Additional Principal Amount" means, with respect to any Payment Date, the
      ---------------------------
lesser of:

     (x)  the excess of (i) the Overcollateralization Target Amount for such
          Payment Date over (ii) the difference between (a) the Pool Balance as
          of the end of the related Collection Period and (b) the aggregate Note
          Principal Balance of all Classes of Notes on such Payment Date,
          assuming that all payments of principal in reduction of such aggregate
          Note Principal Balance have been made on such Payment Date, but
          assuming that the Additional Principal Amount for such Payment Date is
          zero,

          and

     (y)  the sum of (i) the amount of Total Available Funds remaining on
          deposit in the Note Account after the funding of the items described
          in clause (i) through (x) of Section 5.4(a) on such Payment Date and
          (ii) any amount released from the Reserve Account and to be included
          in the Additional Principal Amount pursuant to Section 5.5(a)(iii)(C)
          hereof on such Payment Date.

<PAGE>

     "Aggregate Principal Parity Amount" means, with respect to any Payment
     ----------------------------------
Date, the sum of the Class A Principal Parity Amount and the Class B Principal
Parity Amount on that Payment Date.

     "Agreement" means this Sale and Servicing Agreement, as the same may be
     ----------
amended and supplemented from time to time.

     "Amount Financed", with respect to a Receivable, means the amount advanced
      ---------------
under the Receivable toward the purchase price of the Financed Vehicle and any
related costs, except with respect to Receivables originated through
applications submitted by Obligors directly to the Seller, exclusive of the
amount allocable to the premium of credit life, disability or hospitalization
insurance covering the Financed Vehicle or the Obligor.

     "Annual Percentage Rate" or "APR" of a Receivable means the annual interest
      ----------------------      ---
rate stated in the Receivable.

     "APR": see "Annual Percentage Rate."
      ---

     "Available Funds" means, with respect to a Payment Date, for the related
      ---------------
Determination Date, any and all amounts then held in the Collection Account and
deposited therein with respect to the Receivables during or otherwise with
respect to the related Collection Period including Additional Fees and
Liquidation Proceeds received during the Collection Period and investment
earnings on the Collection Account and the Note Account related to such
Determination Date, net of any amounts specified in clauses (i) and (ii) of
Section 5.2(a), to the extent deposited therein. Available Funds does not
include amounts, if any, on deposit in or withdrawn from the Reserve Account and
does not include any amounts that cannot be distributed to the Noteholders by
the Indenture Trustee as a result of proceedings under the United States
Bankruptcy Code.

     "Balloon Receivable" means any Receivable that on the date of origination
      ------------------
provided for scheduled monthly payments in level amounts substantially lower
than the amount of the final scheduled payment.

     "Certificateholder" means the Person in whose name a Certificate is
      -----------------
registered on the Certificate Register.

     "Certificate of Trust" means the certificate of trust of the Trust
      --------------------
substantially in the form of Exhibit B to the Trust Agreement.

     "Class A Principal Parity Amount" means, with respect to any Payment Date,
      -------------------------------
the lesser of (I) the excess, if any, of (x) the aggregate Note Principal
Balance of the Class A Notes immediately prior to such Payment Date over (y) the
Pool Balance as of the end of the immediately preceding Collection Period and
(II) the amount of Total Available Funds remaining on deposit in the Note
Account after the funding of the items described in clauses (i) through (iv) of
Section 5.4(a) on such Payment Date.

     "Class B Principal Parity Amount" means, with respect to any Payment Date,
      -------------------------------
the lesser of (I) the excess of (A) the excess, if any, of (x) the aggregate
Note Principal Balance of the Class A Notes and of the Class B Notes, in each
case immediately prior to such Payment Date

                                       2

<PAGE>

over (y) the Pool Balance as of the end of the immediately preceding Collection
Period over (B) the Class A Principal Parity Amount for such Payment Date and
(II) the amount of Total Available Funds remaining on deposit in the Note
Account after the funding of the items described in clauses (i) through (vi) of
Section 5.4(a) on such Payment Date.

     "Collateral Insurance" shall have the meaning specified in Section 4.4(b).
      --------------------

     "Collection Account" means the account designated as such, established and
      ------------------
maintained pursuant to Section 5.1(a)(i) hereof.

     "Cram Down Loss" means, with respect to a Receivable, if a court of
      --------------
appropriate jurisdiction in an insolvency proceeding issues a final order
reducing the amount owed on the Receivable or otherwise modifying or
restructuring the scheduled payments to be made on the Receivable, an amount not
less than (1) the excess of the Principal Balance of the Receivable immediately
prior to the order over the Principal Balance of the Receivable as reduced
and/or (2) if the court issues an order reducing the effective rate of interest
on the Receivable, the excess of the Principal Balance of the Receivable
immediately prior to the order over the net present value - using as the
discount rate the higher of the APR on the auto loan or the rate of interest, if
any, specified by the court in the order - of the scheduled payments as so
modified or restructured; the Servicer may in its discretion assign a value to a
Cram Down Loss in excess of the amount just described, but not in excess of the
Principal Balance of such Receivable. A Cram Down Loss shall be deemed to have
occurred on the date of the order's issuance.

     "Cut-Off Date" means December 1, 2001.
      ------------

     "Dealer" means the seller of a Financed Vehicle who arranged for a sales
      ------
contract or loan from the Seller to the purchaser of a Financed Vehicle under an
existing agreement with the Seller.

     "Defaulted Receivable", with respect to a Payment Date, means a Receivable
      --------------------
(other than a Purchased Receivable) as to which the earlier of the following has
occurred: (i) a scheduled payment is 180 days contractually delinquent as of the
end of the most recently completed Collection Period or (ii) the Servicer has
determined in accordance with its customary servicing practices, during the
Collection Period preceding such Payment Date, that eventual payment in full of
the Amount Financed is unlikely.

     "Deposit Date" means, with respect to any Payment Date, the Business Day
      ------------
immediately preceding such Payment Date.

     "Final Scheduled Payment Date" means, with respect to each Class of Notes,
      ----------------------------
the Payment Date listed below:

                          Final Scheduled Payment Date
              ----------------------------------------------------
              Class A-1                          December 16, 2002
              Class A-2                             March 15, 2004
              Class A-3                               May 16, 2005
              Class B                            February 15, 2008

                                       3

<PAGE>

     "Financed Vehicle" means an automobile, light duty truck or van, together
      ----------------
with all accessions thereto, securing an Obligor's indebtedness under the
respective Receivable.

     "Fitch" means Fitch Inc., or any successor thereto.
      -----

     "Indenture" means the Indenture dated as of December 1, 2001, between the
      ---------
Trust and U.S. Bank National Association, as Indenture Trustee, as the same may
be amended and supplemented from time to time.

     "Indenture Trustee" means the Person acting as Indenture Trustee under the
      -----------------
Indenture, its successors in interest and any successor Indenture Trustee under
the Indenture.

     "Indenture Trustee's Fee" means, for any Payment Date, one twelfth of the
      -----------------------
product of (a) the aggregate of the Note Principal Balance of each Class of
Notes as of the end of the related Collection Period and (b) 0.0025%.

     "Initial Note Principal Balance" means with respect to each Class of Notes,
      ------------------------------
the amount listed below:

                 Class            Initial Note Principal Balance
                 -----            ------------------------------
               Class A-1                     $87,000,000.00
               Class A-2                     $82,000,000.00
               Class A-3                     $57,600,000.00
                Class B                       $9,485,000.00

     "Insurance Policies" means the insurance policies described in item 11 of
      ------------------
Schedule B attached hereto.

     "Interest Rate" means, with respect to (i) the Class A-1 Notes, 2.0375% per
      -------------
annum, (ii) the Class A-2 Notes, 2.88% per annum, (iii) the Class A-3 Notes,
3.95% per annum and (iv) the Class B Notes, 4.70% per annum.

     "Lien" means a security interest, lien, charge, pledge, equity, or
      ----
encumbrance of any kind other than tax liens, mechanics' liens, and any liens
which attach to the respective Receivable by operation of law.

     "Liquidation Expenses" shall have the meaning provided in Section 5.2(a).
      --------------------

     "Liquidation Proceeds" means, with respect to a Payment Date, all monies
      --------------------
collected with respect to a Defaulted Receivable during the related Collection
Period from whatever source (other than withdrawals from the Reserve Account),
including insurance proceeds and proceeds of Financed Vehicles and Defaulted
Receivables which have been sold or otherwise disposed of, during the related
Collection Period, net of (i) Liquidation Expenses plus any (ii) amounts
required by law to be remitted to the Obligor.

     "Matured Principal Shortfall" means, with respect to any Payment Date and
      ---------------------------
for any Class of Notes which would have a Note Principal Balance greater than
zero on such Payment Date,

                                       4

<PAGE>

after taking into account the payment of all other principal amounts to such
Class on such Payment Date, and as to which such Payment Date is either the
Final Scheduled Payment Date for such Class, or a Payment Date subsequent to
such Final Scheduled Payment Date, the Note Principal Balance of such Class on
such Payment Date, after taking into account the payment of all other principal
amounts to such Class on such Payment Date.

     "Monthly Servicing Fee" means, for any Payment Date, one-twelfth of the
      ---------------------
product of (a) the Pool Balance as of the beginning of the related Collection
Period and (b) the Servicing Fee Rate.

     "Note Account" means the account designated as such, established and
      ------------
maintained pursuant to Section 5.1(a)(ii) hereof.

     "Note Current Interest" means, with respect to any Collection Period and
      ---------------------
any Payment Date, an amount equal to:

     (A) for the Class A-1 Notes, the product of (1) a fraction, the numerator
of which is the actual number of days elapsed in the related interest accrual
period and the denominator of which is 360, (2) the related Interest Rate and
(3) the aggregate Note Principal Balance of the related Class A-1 Notes
outstanding immediately prior to the related Payment Date or, in the case of the
first Payment Date, the Initial Note Principal Balance for the Class A-1 Notes;
and

     (B) for each other Class of Notes, the product of (1) a fraction, the
numerator of which is 30 and the denominator of which is 360 (or with respect to
the initial Payment Date, a fraction, the numerator of which is 33 and the
denominator of which is 360), (2) the related Interest Rate and (3) the
aggregate Note Principal Balance of the related Class of Notes outstanding
immediately prior to the related Payment Date or, in the case of the first
Payment Date, the Initial Note Principal Balance for such Class.

     "Note Factor" means, for a Class of Notes and any Payment Date, a seven
      -----------
digit decimal number equal to the Note Principal Balance of such Class on such
Payment Date (after taking into account any reduction in such Note Principal
Balance on such Payment Date) divided by the Initial Note Principal Balance of
such Class.

     "Note Interest" means, for a Class of Notes and any Collection Period, the
      -------------
sum of the Note Current Interest and the Overdue Interest for the Class.

     "Note Principal Balance" means, with respect to any Class of Notes at any
      ----------------------
time, the Initial Note Principal Balance of such Class minus all amounts
previously distributed to Noteholders and allocable to principal for such Class.

     "Officer's Certificate", with respect to this Agreement, means a
      ---------------------
certificate signed by the chairman of the board, the president, any vice
chairman of the board, any executive vice president, any senior vice president,
any group vice president, any vice president, the treasurer, or the controller
of the Seller or the Servicer, as appropriate.

     "Optional Purchase Price" means the amount specified as such in Section
      -----------------------
11.1.

                                       5

<PAGE>

          "Original Pool Balance" shall be $236,677,504.03.
           ---------------------

          "Overcollateralization Initial Amount" shall be equal to approximately
           ------------------------------------
0.25% of the Original Pool Balance.

          "Overcollateralization Reduction Amount" means, with respect to any
           --------------------------------------
Payment Date, (i) the excess, if any, of (a) the Pool Balance as of the end of
the related Collection Period over (b) the aggregate Note Principal Balance of
all Classes of Notes on such Payment Date, assuming that all payments of
principal in reduction of such aggregate Note Principal Balance have been made
on such Payment Date, but assuming that the Overcollateralization Reduction
Amount for such Payment Date is zero, minus (ii) the Overcollateralization
Target Amount for such Payment Date.

          "Overcollateralization Target Amount" means, with respect to any
           -----------------------------------
Payment Date, the greater of:

            (I)  1.75% of the Pool Balance as of the end of the immediately
     preceding Collection Period, minus the amount in the Reserve Account on
                                  -----
     such Payment Date, after taking into account any deposits thereto and
     withdrawals therefrom on such Payment Date; and

            (II) 75% of the aggregate Principal Balance of all Receivables which
     were 90 or more days contractually delinquent as of the end of the
     immediately preceding Collection Period including Receivables with respect
     to which the Financed Vehicle has been repossessed, but which are not
     Defaulted Receivables, minus the amount on deposit in the Reserve Account
     on such Payment Date, after taking into account any deposits thereto and
     withdrawals therefrom on such Payment Date.

          "Overdue Interest" means, for a Class of Notes and any Payment Date,
           ----------------
the difference between:

          (A)    the sum of (1) the excess, if any, of any Note Current Interest
due on the immediately preceding Payment Date for that Class over the Note
Current Interest paid on that Class on the immediately preceding Payment Date,
plus (2) without duplication of the amount described in clause (1), the amount
of the Overdue Interest for that Class due and unpaid as of the immediately
preceding Payment Date; and

          (B)    any Overdue Interest for that Class paid on the Payment Date.

          "Owner Trustee" means Wilmington Trust Company, not in its individual
           -------------
capacity but solely as Owner Trustee under the Trust Agreement, its successors
in interest or any successor Owner Trustee under the Trust Agreement.

          "Owner Trustee's Fee" means, for any Payment Date, one twelfth of
           -------------------
$4,000.

          "Person" means any individual, corporation, estate, partnership,
           ------
limited liability company, joint venture, association, joint stock company,
trust, unincorporated organization, or government or any agency or political
subdivision thereof.

                                       6

<PAGE>

          "Pool Balance" as of any date means the aggregate Principal Balance of
           ------------
the Receivables as of the close of business on such date (excluding Defaulted
Receivables and Purchased Receivables, which are deemed to have a Principal
Balance of zero).

          "Pool Balance Decline" means, with respect to any Payment Date, the
           --------------------
decline on the Pool Balance from the opening of the related Collection Period to
the end of the related Collection Period.

          "Pool Factor" means, at any time, a seven digit decimal number equal
           -----------
to the current Pool Balance divided by the Original Pool Balance.

          "Principal Balance" of a Receivable, at any time, means the Amount
           -----------------
Financed minus (i) that portion of all payments received by the Servicer on or
before such time allocable to principal of such Receivable and (ii) the amount
of any Cram Down Loss with respect to that Receivable.

          "Purchase Amount" means, with respect to a Purchased Receivable as of
           ---------------
a Payment Date, the amount equal to the sum of the Principal Balance of such
Receivable as of the last day of the related Collection Period and any unpaid
interest accrued thereon at the related APR through the date such Receivable is
purchased or repurchased, after giving effect to the receipt of monies collected
on such Receivable in such related Collection Period.

          "Purchased Receivable" means, with respect to a Payment Date, a
           --------------------
Receivable purchased not later than the last day of the Collection Period
immediately preceding such Payment Date by the Servicer pursuant to Section 4.2,
4.7 or 11.1 or repurchased not later than the last day of the Collection Period
immediately preceding such Payment Date by the Seller pursuant to Section 3.2.

          "Receivable" means any motor vehicle retail installment sales contract
           ----------
or motor vehicle installment loan executed by an Obligor in respect of a
Financed Vehicle, including, without limitation, any extension or revision
agreement relating thereto and all payments due thereunder on or after the
Cut-Off Date and all proceeds thereof, which Receivable appears on the Schedule
of Receivables.

          "Receivable Files" means the documents specified in Section 3.3.
           ----------------

          "Regular Principal Amount" means, with respect to any Payment Date,
           ------------------------
the least of:

          (I)  the amount necessary, after taking into account the amount of the
Aggregate Principal Parity Amount on such Payment Date, to reduce the aggregate
Note Principal Balance of all Classes of Notes to zero;

               and

          (II) the excess of (A) the Pool Balance Decline over (B) the sum of
the Aggregate Principal Parity Amount plus the Overcollateralization Reduction
Amount;

               and

                                       7

<PAGE>

          (III) the amount of Total Available Funds remaining on deposit in the
Note Account after the funding of the items described in clauses (i) through
(vii) of Section 5.4(a) on such Payment Date.

          "Reserve Account" means the Reserve Account established pursuant to
           ---------------
Section 5.1(a)(iii) hereof.

          "Reserve Account Deposit Amount" means, with respect to any Payment
           ------------------------------
Date, the lesser of (x) the excess of (i) the Specified Reserve Balance on such
Payment Date over (ii) the amount on deposit in the Reserve Account on such
Payment Date, after taking into account (a) the amount of any Reserve Account
Withdrawal Amount on such Payment Date and (b) the amount, if any, on deposit in
the Reserve Account representing net investment earnings to be withdrawn
pursuant to Section 5.5(a) and (y) the amount remaining in the Note Account
after taking into account the distributions therefrom described in clauses (i)
through (ix) of Section 5.4(a).

          "Reserve Account Withdrawal Amount" means, with respect to any Payment
           ---------------------------------
Date, the lesser of (x) any shortfall in the amount of Available Funds available
to pay the amounts specified in clauses (iv) through (vii) and (ix) of Section
5.4(a) (taking into account application of Available Funds to the priority of
payments specified in Section 5.4(a) and ignoring any provision hereof which
otherwise limits the amounts described in such clauses to the amount of funds
available) and (y) the amount on deposit in the Reserve Account on such Payment
Date prior to application of amounts on deposit therein pursuant to Section
5.4(a) but after distribution of net investment earnings on deposit therein to
the Certificateholder pursuant to Section 5.5(a).

          "Reserve Initial Deposit" shall be $591,693.76, such amount being
           -----------------------
equal to 0.25% of the Original Pool Balance.

          "Schedule of Receivables" shall be, as of any date, the schedule of
           -----------------------
Receivables included in the Trust on such date. The initial Schedule of
Receivables as of the Cut-Off Date is attached hereto as Schedule A and sets
forth as to each Receivable, among other things, (a) its identifying number; (b)
its date of origination; (c) the original number of months to stated maturity;
(d) the original stated maturity; (e) the Principal Balance as of the Cut-Off
Date; (f) the original Principal Balance; (g) the APR and (h) the scheduled
monthly payment of principal and interest.

          "Seller" means Chevy Chase Bank, F.S.B. in its capacity as the seller
           ------
of the Receivables under this Agreement, and each successor to Chevy Chase Bank,
F.S.B. (in the same capacity).

          "Servicer" means Chevy Chase Bank, F.S.B. in its capacity as the
           --------
servicer of the Receivables, and each successor to Chevy Chase Bank, F.S.B. (in
the same capacity) pursuant to Sections 7.3 and 8.2.

          "Servicer Default" means an event specified in Section 8.1.
           ----------------

          "Servicer's Certificate" means a certificate completed and executed by
           ----------------------
the Servicer pursuant to Section 4.9.

          "Servicing Fee Rate" means 1.00% per annum.
           ------------------

                                       8

<PAGE>

          "Servicing Office" means, at the date of this Agreement, the office of
           ----------------
the Servicer specified in this Agreement, or such other address as the Servicer
may designate from time to time by notice to the Seller and the Indenture
Trustee.

          "Servicing Officer" means any officer of the Servicer involved in, or
           -----------------
responsible for, the administration and servicing of the Receivables whose name
appears on a list of servicing officers annexed to an Officer's Certificate
furnished to the Indenture Trustee by the Servicer, as the case may be, as such
list may from time to time be amended.

          "Specified Reserve Balance" means, with respect to any Payment Date,
           -------------------------
the lesser of (A) $1,775,081.28, such amount being equal to 0.75% of the
Original Pool Balance, and (B) the aggregate Note Principal Balance for all
Classes of Notes on such Payment Date, after taking into account all payments of
principal on that Payment Date.

          "Sub-Serviced Receivables" means any Receivables being sub-serviced by
           ------------------------
a Sub-Servicer.

          "Sub-Servicer" means any sub-servicer appointed by the Servicer with
           ------------
respect to any particular Receivables or any particular servicing functions.

          "Total Available Funds" has the meaning described in Section 5.4(a)
           ---------------------
hereof.

          "Trust Property" means the property of the trust created by this
           --------------
Agreement, which shall consist of the Receivables listed in the Schedule of
Receivables (other than Purchased Receivables) and all monies (including accrued
interest) due or received thereon on or after the Cut-Off Date; security
interests in the Financed Vehicles; the Note Account, the Reserve Account and
the Collection Account; funds deposited in the Collection Account, the Reserve
Account and the Note Account and all investment of such funds; Purchase Amounts;
any property (including the right to receive future Liquidation Proceeds) that
shall have secured a Receivable and that shall have been acquired by or on
behalf of the Trust; proceeds from claims on any physical damage, theft,
vendor's single interest, credit life, disability, or hospitalization insurance
policies covering Financed Vehicles or Obligors; and other property described in
Section 2.1.

          Section 1.2. Other Definitional Provisions.
                       -----------------------------

                    (a) Capitalized terms used herein and not otherwise defined
herein have the meanings assigned to them in the Indenture, or, if not defined
therein, in the Trust Agreement.

                    (b) All terms defined in this Agreement shall have the
defined meanings when used in any instrument governed hereby and in any
certificate or other document made or delivered pursuant hereto unless otherwise
defined therein.

                    (c) As used in this Agreement, in any instrument governed
hereby and in any certificate or other document made or delivered pursuant
hereto or thereto, accounting terms not defined in this Agreement or in any such
instrument, certificate or other document, and accounting terms partly defined
in this Agreement or in any such instrument, certificate or other

                                       9

<PAGE>

document to the extent not defined, shall have the respective meanings given to
them under generally accepted accounting principles as in effect on the date of
this Agreement or any such instrument, certificate or other document, as
applicable. To the extent that the definitions of accounting terms in this
Agreement or in any such instrument, certificate or other document are
inconsistent with the meanings of such terms under generally accepted accounting
principles, the definitions contained in this Agreement or in any such
instrument, certificate or other document shall control.

                    (d) The words "hereof," "herein," "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement; and the term
"including" shall mean "including without limitation."

                    (e) The definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such terms and to the
masculine as well as to the feminine and neuter genders of such terms.

                    (f) Any agreement, instrument or statute defined or referred
to herein or in any instrument or certificate delivered in connection herewith
means such agreement, instrument or statute as from time to time amended,
modified or supplemented and includes (in the case of agreements or instruments)
references to all attachments thereto and instruments incorporated therein;
references to a Person are also to its permitted successors and assigns.

                    (g) All references to Articles, Sections, subsections,
paragraphs, clauses, Exhibits and Schedules in this Agreement shall be to such
portions of this Agreement unless otherwise specified.

     Section 1.3.   Interest Calculations.
                    ---------------------

                    (a) All allocations of payments with respect to a Receivable
to principal and interest and determinations of periodic charges and the like
shall be made using the simple interest method, based on the actual number of
days elapsed and the actual number of days in the calendar year. Each payment on
a Receivable (net of fees and charges) shall be applied first to the amount of
interest accrued on such Receivable to the date of receipt and then to reduce
the principal amount outstanding on the Receivable.

                    (b) All calculations of interest on the Class A-1 Notes
shall be made on the basis of a 360-day year and the actual number of days in
the accrual period; all calculations of interest on all other Classes of Notes
shall be made with respect to the initial Payment Date, on the basis of a 360
day year and an accrual period from the Closing Date to the initial Payment
Date, and otherwise, on the basis of a 360-day year comprised of twelve 30-day
months.

     Section 1.4.   Action By Or Consent Of Noteholders.
                    -----------------------------------

     Solely for the purposes of giving any consent, waiver, request, or demand
pursuant to this Agreement, the interest evidenced by any Note registered in the
name of the Seller or the Servicer, or any Person controlling, controlled by, or
under common control with the Seller or

                                       10

<PAGE>

the Servicer, other than a Note pledged by any such Person to a nonaffiliated
third party, shall not be taken into account in determining whether the
requisite percentage necessary to effect any such consent, waiver, request, or
demand shall have been obtained unless all of the Notes outstanding are
registered in the name of the Seller, the Servicer and any such Persons. For
purposes of the foregoing, a trust or other entity formed for the securitization
of assets is not a Person controlling, controlled by or under common control
with, or affiliated with, the Seller or the Servicer.

                                   Article II

                            Conveyance of Receivables
                            -------------------------

     Section 2.1.   Conveyance of Receivables. In consideration of the Trust's
                    -------------------------
delivery to or upon the order of the Seller on the Closing Date of the net
proceeds from the sale of the Notes, the Certificates and the other amounts to
be distributed from time to time to the Seller in accordance with the terms of
this Agreement, the Seller does hereby sell, transfer, assign, set over and
otherwise convey to the Trust, without recourse (subject to the obligations set
forth herein), all right, title and interest of the Seller in and to the
following property, wherever located and in whatever form, whether tangible or
intangible, whether now existing or hereafter acquired:

                    (a) the Receivables listed in the Schedule of Receivables,
including all monies (including accrued interest) due or received thereon on or
after the Cut-Off Date and all property (including the right to receive future
Liquidation Proceeds) that secures a Receivable;

                    (b) the security interests of the Seller in the Financed
Vehicles granted by Obligors pursuant to the Receivables;

                    (c) the Note Account, the Reserve Account and the Collection
Account and funds deposited therein and all investments of such funds;

                    (d) the interest of the Seller in the documents and
instruments constructively delivered to the Indenture Trustee pursuant to
Section 3.3;

                    (e) the interest of the Seller in any Liquidation Proceeds
and any proceeds from claims on any physical damage, theft, vendor's single
interest, credit life, disability or hospitalization insurance policies covering
Financed Vehicles or Obligors; and

                    (f) the proceeds of any and all of the foregoing.

     It is the intention of the Seller that the transfer and assignment
contemplated by this Agreement shall constitute a sale of the Receivables and
other Trust Property from the Seller to the Trust and the beneficial interest in
and title to the Receivables and the other Trust Property shall not be part of
the Seller's estate in the event of the insolvency of the Seller. In the event
that, notwithstanding the intent of the Seller, the transfer and assignment
contemplated hereby is held not to be a sale, this Agreement shall constitute a
grant of a security interest in the property

                                       11

<PAGE>

referred to in this Section for the benefit of the Noteholders and that this
Agreement shall constitute a security agreement under applicable law.

     Section 2.2.   Further Encumbrance of Trust Property.
                    -------------------------------------

                    (a) Immediately upon the conveyance to the Trust by the
Seller of any item of the Trust Property pursuant to Section 2.1, all right,
title and interest of the Seller in and to such item of Trust Property shall
terminate, and all such right, title and interest shall vest in the Trust, in
accordance with the Trust Agreement and Sections 3802 and 3805 of the Business
Trust Statute (as defined in the Trust Agreement).

                    (b) Immediately upon the vesting of the Trust Property in
the Trust, the Trust shall have the sole right to pledge or otherwise encumber
such Trust Property. Pursuant to the Indenture, the Trust shall grant a security
interest in the Trust Property to the Indenture Trustee to secure the repayment
of the Notes. The Certificates shall represent the beneficial ownership interest
in the Trust Property, and the Certificateholder shall be entitled to receive
distributions with respect thereto as set forth herein.

                    (c) Following the payment in full of the Notes and the
release and discharge of the Indenture, all covenants of the Trust under Article
III of the Indenture shall remain as covenants of the Trust for the benefit of
the Certificateholder, enforceable by the Certificateholder to the same extent
as such covenants were enforceable by the Noteholders prior to the discharge of
the Indenture. Any rights of the Indenture Trustee under Article III of the
Indenture, following the discharge of the Indenture, shall vest in the
Certificateholder.

                    (d) The Indenture Trustee shall, at such time as there are
no Notes outstanding and all sums due to the Indenture Trustee pursuant to the
Indenture or pursuant to this Agreement, have been paid, release any remaining
portion of the Trust Property to the Certificateholder.

     Section 2.3.   Acceptance By the Trust.
                    -----------------------

     The Trust does hereby accept the assignment by the Seller pursuant to
Section 2.1 and declares that the Trust accepts such assignment upon the trusts
herein set forth for the benefit of the Noteholders and the Certificateholder,
as their respective interests may appear, subject to the terms and provisions of
this Agreement. The assignment will not constitute, and is not intended to
result in, an assumption by the Trust or any Noteholder of any obligation of the
Seller or any other Persons in connection with the Receivables, the Receivables
Files, the Insurance Policies or under any agreements or instruments relating to
any of them.

                                   Article III

                                 The Receivables
                                 ---------------

     Section 3.1.   Representations and Warranties of Seller. The Seller hereby
                    ----------------------------------------
represents and warrants that each of the representations and warranties set
forth on the Schedule of Representations attached hereto as Schedule B is true
and correct on which the Trust is deemed

                                       12

<PAGE>

to have relied in acquiring the Receivables and issuing the Notes, on which the
Indenture Trustee is deemed to have relied in authenticating the Notes and on
which the Noteholders are deemed to have relied in purchasing the Notes. Such
representations and warranties speak as of the Closing Date, but shall survive
the sale, transfer, and assignment of the Receivables to the Trust and the
pledge thereof to the Indenture Trustee pursuant to the Indenture. The
representations and warranties contained in items 21 through 28 on Schedule B
may not be waived.

     Section 3.2.   Repurchase upon Breach. The Seller, the Servicer, the
                    ----------------------
Indenture Trustee or the Owner Trustee, as the case may be, shall inform the
other parties to this Agreement promptly, by notice in writing, upon the
discovery of any breach of the Seller's representations and warranties made
pursuant to Section 3.1; provided, that the Indenture Trustee shall have no duty
to inquire concerning, or to investigate, the breach of any of such
representations and warranties. Unless the breach shall have been cured by the
last day of the Collection Period following the Collection Period during which
the Seller becomes aware of, or receives written notice of, such breach, the
Seller shall repurchase as of such day (or, at the Seller's option, as of the
last day of the month in which such breach was discovered) any Receivable
materially and adversely affected by such breach and any Receivable in which the
interest of the Noteholders is materially and adversely affected by such breach
(unless such Receivable is otherwise being purchased pursuant to Section 11.1).
In consideration of the purchase of the Receivable, the Seller shall remit the
Purchase Amount, in the manner specified in Section 5.3. The sole remedy of the
Trust, the Owner Trustee, Indenture Trustee or the Noteholders with respect to a
breach of the Seller's representations and warranties contained in Section 3.1
shall be to require the Seller to repurchase Receivables pursuant to this
Section 3.2.

     Section 3.3.   Custody of Receivables Files.
                    ----------------------------

                    (a)  To assure uniform quality in servicing the Receivables
and to reduce administrative costs, the Indenture Trustee, upon the execution
and delivery of this Agreement, hereby revocably appoints the Servicer, and the
Servicer hereby accepts such appointment, to act as the agent of the Indenture
Trustee as custodian of the following documents or instruments which are hereby
constructively delivered to the Indenture Trustee with respect to each
Receivable:

                         (i)   The original of the Receivable fully executed by
          the Obligor;

                         (ii)  The original credit application fully executed by
          the Obligor;

                         (iii) The original certificate of title (or, if the
          original is not returned to the Seller under applicable state law, a
          copy thereof) held by the Seller evidencing the security interest of
          the Seller in the Financed Vehicle; and

                         (iv)  Any and all other documents that the Servicer or
          the Seller shall keep on file, in accordance with its customary
          procedures, relating to a Receivable, an Obligor, or a Financed
          Vehicle.

    Section 3.4.    Duties Of Servicer As Custodian.
                    -------------------------------

                                       13

<PAGE>

                    (a) The Servicer, in its capacity as custodian, shall hold
the Receivable Files on behalf of the Indenture Trustee for the use and benefit
of all present and future Noteholders and maintain such accurate and complete
accounts, records, and computer systems pertaining to each Receivable File as
shall enable the Indenture Trustee to comply with this Agreement. In performing
its duties as custodian, the Servicer shall act with reasonable care, using that
degree of skill and attention that the Servicer exercises with respect to the
receivable files relating to all comparable automotive receivables that the
Servicer services for itself. The Servicer shall conduct, or cause to be
conducted, periodic audits of the Receivable Files held by it under this
Agreement, and of the related accounts, records, and computer systems, in such a
manner as shall enable the Indenture Trustee to verify the accuracy of the
Servicer's record keeping. The Servicer shall promptly report to the Indenture
Trustee any failure on the Servicer's part to hold the Receivable Files and
maintain its accounts, records, and computer systems as herein provided and
promptly take appropriate action to remedy any such failure.

                    (b) The Servicer shall maintain each Receivable File at its
office specified in this Agreement, or at an offsite document retention facility
operated by a third party or at such other of its office or offices, as shall be
specified by the Servicer to the Indenture Trustee by prior written notice. The
Servicer shall make available to the Indenture Trustee or its respective duly
authorized representatives, attorneys, or auditors a list of locations of the
Receivable Files, and the related accounts, records, and computer systems
maintained by the Servicer at such times during normal business hours as the
Indenture Trustee shall instruct, which does not unreasonably interfere with the
Servicer's normal operations or customer or employee relations.

-                    (c) Upon instruction from the Indenture Trustee, the
Servicer shall release any document in a Receivable File to the Indenture
Trustee, the agent of the Indenture Trustee, or the Indenture Trustee's
designee, as the case may be, at such place or places as the Indenture Trustee
may designate, as soon as practicable.

                    (d) The Servicer shall require any Sub-Servicer to comply
with the preceding provisions of this Section 3.4 with respect to the
Sub-Serviced Receivables. Notwithstanding anything to the contrary, the Servicer
shall remain primarily liable for its duties as custodian with respect to all
Receivables, including the Sub-Serviced Receivables.

     Section 3.5.   Instructions and Authority to Act. The Servicer shall be
                    ---------------------------------
deemed to have received proper instructions with respect to the Receivable Files
upon its receipt of written instructions signed by a Responsible Officer of the
Indenture Trustee.

     Section 3.6.   Effective Period And Termination.
                    --------------------------------

                    (a) The appointment of the Servicer as custodian shall
become effective as of the Cut-Off Date and shall continue in full force and
effect for the term of the Trust unless terminated earlier pursuant to this
Section 3.6. If the Servicer shall resign in accordance with the provisions of
Section 7.5 or if all of the rights and obligations of the Servicer shall have
been terminated under Section 8.1, the appointment of the Servicer as custodian
may be terminated by the Indenture Trustee or by the Majority Noteholders. The
Indenture Trustee shall notify the Rating Agencies of any termination of the
Servicer's

                                       14

<PAGE>

appointment as custodian pursuant to this Section 3.6. As soon as practicable
after any termination of such appointment, the Servicer shall deliver the
Receivable Files to the Indenture Trustee or the Indenture Trustee's agent at
such place or places as the Indenture Trustee may reasonably designate.

               The following procedures shall apply if the appointment of the
Servicer as the custodian has been terminated:

                         (i) Upon payment in full of any Receivable, the
               Servicer will notify the Indenture Trustee by an Officer's
               Certificate, substantially in the form of Exhibit A attached
               hereto, (which certification shall include a statement to the
               effect that all amounts received in connection with such payments
               which are required to be deposited in the Collection Account
               pursuant to Section 5.2 have been so deposited) and shall request
               delivery of the Receivable and Receivable File to the Servicer.

                         (ii) From time to time as appropriate for servicing and
               enforcing any Receivable, the Indenture Trustee shall, upon
               written request of an officer of the Servicer and delivery to the
               Indenture Trustee of a receipt signed by such officer in a form
               satisfactory to the Indenture Trustee and substantially in the
               form of Exhibit B attached hereto, cause the original Receivable
               and the related Receivable File to be released to the Servicer.
               The Servicer's receipt for a Receivable and/or Receivable File
               shall obligate the Servicer to return the original Receivable and
               the related Receivable File to the Indenture Trustee when the
               Servicer's need for such Receivable and/or Receivable File has
               ceased unless the Receivable shall be liquidated or repurchased
               as described in Section 3.2, 4.2 or 4.7.

                         (iii) The Indenture Trustee may rely and shall be
               protected when acting or refraining from acting upon any
               certificate, request or receipt under this Section 3.6.

                         (iv) The Indenture Trustee shall permit the Servicer
               access to the Receivables Files at all reasonable times during
               the Indenture Trustee's normal business hours. The Indenture
               Trustee shall, within two Business Days of the request of the
               Servicer, execute such documents and instruments as are prepared
               by the Servicer and delivered to the Indenture Trustee, as the
               Servicer deems necessary to permit the Servicer, in accordance
               with its customary servicing procedures, to enforce the
               Receivable on behalf of the Trust and any related Insurance
               Policies covering the Obligor, the Receivable or Financed Vehicle
               so long as such execution in the Indenture Trustee's sole
               discretion does not conflict with this Agreement and will not
               cause it undue risk or liability. The Indenture Trustee shall not
               be obligated to release any document from any Receivable File
               unless it receives a trust receipt from the Servicer as described
               in clause (ii) of this Section 3.6.

                                       15

<PAGE>

                                   ARTICLE IV

                   Administration and Servicing of Receivables
                   -------------------------------------------

       SECTION 4.1. Duties of the Servicer. The Servicer, as an independent
                    ----------------------
contractor on behalf of the Trust and for the benefit of the Noteholders, will
be responsible for managing, servicing and administering the Receivables and
enforcing and making collections on the Receivables and any insurance polices
relating to the Financed Vehicles and for enforcing any security interest in any
of the Financed Vehicles, with reasonable care, using that degree of skill and
attention that the Servicer exercises with respect to all comparable automotive
receivables that it services for itself. The Servicer's responsibilities shall
include collecting and posting all payments, responding to inquiries of Obligors
or of federal, state or local governmental authorities with respect to the
Receivables, investigating delinquencies, sending payment coupons or statements
to Obligors, accounting for collections, furnishing monthly and annual
statements to the Indenture Trustee with respect to distributions, providing
appropriate federal income tax information for use in providing information to
Noteholders and attempting to maintain the perfected security interest of the
Seller in the Financed Vehicles, in accordance with the provisions set forth
herein. The Servicer shall follow its customary standards, policies, and
procedures in performing its duties as Servicer. Without limiting the generality
of the foregoing, the Servicer is authorized and empowered by the Indenture
Trustee to execute and deliver, on behalf of itself, the Trust, the Noteholders,
or the Indenture Trustee or any of them, any and all instruments of satisfaction
or cancellation, or partial or full release or discharge, and all other
comparable instruments, with respect to such Receivables or to the Financed
Vehicles securing such Receivables. If the Servicer shall commence a legal
proceeding to enforce a Receivable, the Indenture Trustee shall thereupon be
deemed to have automatically assigned, solely for the purpose of collection,
such Receivable to the Servicer. The Indenture Trustee shall execute any
documents prepared by the Servicer and delivered to the Indenture Trustee for
execution that are necessary or appropriate to enable the Servicer to carry out
its servicing and administrative duties hereunder.

       SECTION 4.2. Collection of Receivable Payments. The Servicer shall use
                    ---------------------------------
its best efforts to collect all payments called for under the terms and
provisions of the Receivables as and when the same shall become due and shall
follow such collection procedures as it follows with respect to all comparable
automotive receivables that it services for itself. If payments are extended in
the ordinary course of the Servicer's collection procedures, and, as a result,
any Receivable would be outstanding on the first day after the end of the
Collection Period immediately preceding the latest Final Scheduled Payment Date,
then the Servicer shall be obligated to purchase such Receivable in the manner
set forth in Section 4.7 (unless such Receivable is otherwise being purchased
pursuant to Section 11.1) as of the last day of the Collection Period following
the Collection Period in which the extension was made (or, at the Servicer's
option, as of the last day of the Collection Period in which the extension was
made); provided, however, that the purchase obligation with respect to a
Receivable shall be the obligation of the Servicer which granted the extension,
and not of any successor Servicer; and provided, further, that the purchase
obligation of any Servicer shall survive the termination of such Servicer as
Servicer. The Servicer may in its discretion waive any Additional Fees.

                                       16

<PAGE>

       SECTION 4.3. Realization upon Receivables. On behalf of the Trust, the
                    ----------------------------
Servicer shall use its best efforts, consistent with its customary servicing
procedures, to repossess or otherwise convert the ownership of the Financed
Vehicle securing any Receivable as to which the Servicer shall have determined
that eventual payment in full is unlikely. The Servicer shall follow such
customary and usual practices and procedures as it shall deem necessary or
advisable in its servicing of automotive receivables, which may include
reasonable efforts to realize upon any recourse to Dealers, selling the Financed
Vehicle at a public or private sale and selling any Defaulted Receivable. The
foregoing shall be subject to the provision that, in any case in which the
Financed Vehicle shall have suffered damage, the Servicer shall not expend funds
in connection with the repair or the repossession of such Financed Vehicle
unless it shall determine in its discretion that such repair and/or repossession
will increase the Liquidation Proceeds of the related Receivable by an amount
equal to or greater than the amount of such expenses.

       SECTION 4.4. Insurance.
                    ---------

                 (a) The Servicer may sue to enforce or collect upon the
Insurance Policies, in its own name, if possible, or as agent of the Trust. If
the Servicer elects to commence a legal proceeding to enforce an Insurance
Policy, the act of commencement shall be deemed to be an automatic assignment of
the rights of the Trust under such Insurance Policy to the Servicer for purposes
of collection only. If, however, in any enforcement suit or legal proceeding it
is held that the Servicer may not enforce an Insurance Policy on the grounds
that it is not a real party in interest or a holder entitled to enforce the
Insurance Policy, the Indenture Trustee, on behalf of the Trust, at the
Servicer's expense, or the Seller, at the Seller's expense, shall take such
steps as the Servicer deems necessary to enforce such Insurance Policy,
including bringing suit in its name or the name of the Indenture Trustee for the
benefit of the Noteholders.

                 (b) The Servicer shall maintain a vendor's single interest or
other collateral protection insurance policy with respect to all Financed
Vehicles ("Collateral Insurance") which policy by its terms insures against
           --------------------
physical damage in the event any Obligor fails to maintain physical damage
insurance with respect to the related Financed Vehicles. The Seller will be the
named insured under all policies of Collateral Insurance.

                 (c) Costs incurred by the Servicer in maintaining Collateral
Insurance shall be paid by the Servicer.

       SECTION 4.5. Maintenance of Security Interests in Vehicles. The Servicer
                    ---------------------------------------------
shall, in accordance with its customary servicing procedures, take such steps as
are necessary to maintain perfection of the security interest created by each
Receivable in the related Financed Vehicle. The Indenture Trustee hereby
authorizes the Servicer to take such steps as are necessary to re-perfect such
security interest on behalf of the Trust in the event of the relocation of a
Financed Vehicle or for any other reason. In the event that the assignment of a
Receivable to the Trust is insufficient, without a notation on the related
Financed Vehicle's certificate of title, or without fulfilling any additional
administrative requirements under the laws of the State in which the Financed
Vehicle is located, to grant to the Trust a perfected security interest in the
related Financed Vehicle, the Seller hereby agrees that the listing of the
Seller as the secured party on the certificate of title is in its capacity as
agent of the Trust.

                                       17

<PAGE>

       SECTION 4.6. Covenants, Representations, and Warranties of Servicer. By
                    ------------------------------------------------------
its execution and delivery of this Agreement, the Servicer makes the following
representations, warranties and covenants on which the Trust is deemed to have
relied in acquiring the Receivables and issuing the Notes and on which the
Indenture Trustee is deemed to have relied in authenticating the Notes.

                 (a)   The Servicer covenants as follows:

                        (i) Liens in Force. The Servicer, unless required to do
                            --------------
            so as a result of a bankruptcy court order with respect to a
            bankrupt Obligor, or other court action, shall not (a) release the
            Financed Vehicle securing any Receivable from the security interest
            granted by such Receivable in whole or in part except in the event
            of payment in full by or on behalf of the Obligor thereunder or
            repossession, (b) impair the rights of the Trust or the Noteholders
            in the Receivables, (c) change the amount of the scheduled payment
            under a Receivable (except for an extension permitted pursuant to
            Section 4.2) or change the APR of or the Amount Financed under a
            Receivable, or (d) fail to comply with the provisions of any
            Insurance Policy, if the failure to so comply would impair the
            protection or benefit to be afforded by such Insurance Policy.

                        (ii) Compliance With Applicable Laws. The Servicer shall
                             -------------------------------
            comply with any law or, to the best of the Servicer's knowledge, any
            order, rule or regulation applicable to the Servicer of any court or
            of any federal or state regulatory body, administrative agency, or
            other governmental instrumentality having jurisdiction over the
            Servicer or its properties, the failure to comply with which may
            materially and adversely affect the performance by the Servicer of
            its obligations under, or the validity or enforceability of, this
            Agreement, or the Notes.

                        (iii) Corporate Existence. The Servicer shall maintain
                              -------------------
            its corporate existence and shall at all times continue to be duly
            organized under the laws of its jurisdiction of organization and
            duly qualified and duly authorized and shall conduct its business in
            accordance with the terms of its charter and bylaws; provided,
            however, that the Servicer shall not be required to maintain its
            existence as a federally chartered thrift if the board of directors
            of the Servicer shall determine that the preservation of such status
            is no longer desirable and that the loss thereof is not
            disadvantageous in any material respect to the Noteholders.

                        (iv) Financial Statements; Accountants' Reports; Other
                             -------------------------------------------------
            Information. The Servicer shall keep or cause to be kept in
            -----------
            reasonable detail books and records of account of its assets and
            business, including, but not limited to, books and records relating
            to this Agreement.

                        (v) Maintenance Of Insurance. The Servicer shall
                            ------------------------
            maintain with a responsible company, and at its own expense, a
            blanket fidelity bond and an errors and omissions insurance policy
            in a minimum amount generally maintained

                                       18

<PAGE>

            by prudent federally chartered thrift institutions engaged in the
            servicing of automotive receivables and having servicing portfolios
            of a similar size.

                        (vi) Notice Of Material Events. The Servicer shall
                             -------------------------
            promptly inform the Rating Agencies in writing of the receipt of
            notice of any proceeding by any regulatory body seeking any
            determination or ruling that might materially and adversely affect
            the performance by the Servicer of its obligations under, or the
            validity or enforceability of, this Agreement or the Notes.

                        (vii) Maintenance Of Licenses. The Servicer shall
                              -----------------------
            maintain all licenses, permits, charters and registrations which are
            material to the performance of its obligations under this Agreement
            or the Notes.

       SECTION 4.7. Purchase of Receivables Upon Breach of Covenant. The
                    -----------------------------------------------
Servicer or the Indenture Trustee shall inform the other parties promptly, in
writing, upon the discovery of any breach by the Servicer of its obligations
under Section 4.5 or 4.6; provided, that the Indenture Trustee shall have no
duty to inquire concerning, or to investigate, the breach of any of such
obligations. Unless the breach shall have been cured by the last day of the
Collection Period following the Collection Period during which the Servicer
becomes aware of, or receives written notice of such breach, the Servicer shall
purchase as of such day (or, at the Servicer's option, as of the last day of the
month in which such breach was discovered) any Receivable materially and
adversely affected by such breach and any Receivable in which the interest of
the Noteholders is materially and adversely affected by such breach (unless such
Receivable is otherwise being purchased pursuant to Section 3.2 or 11.1). In
consideration of the purchase of such Receivable, the Servicer shall remit the
Purchase Amount with respect to such Receivable in the manner specified in
Section 5.3. The sole remedy of the Indenture Trustee or the Noteholders with
respect to a breach pursuant to Section 4.5 or 4.6 shall be to require the
Servicer to purchase Receivables pursuant to this Section 4.7.

       SECTION 4.8. Servicing Fees.
                    --------------

                 (a) The servicing fee for a Collection Period shall equal the
Monthly Servicing Fee (except that in the case of a Successor Servicer, the
servicing fee shall equal such amount as is arranged in accordance with Section
8.2).

                 (b) The Servicer shall deposit into the Collection Account all
Additional Fees, which shall be included in Available Funds. Investment earnings
on the Collection Account and the Note Account, if any, shall be deposited into
the respective accounts and shall be included in Available Funds.

                 (c) Investment earnings on the Reserve Account shall be paid to
the Certificateholder or its designee as provided in Section 5.5(a).

                 (d) The Liquidation Expenses and any servicing compensation
(other than the Monthly Servicing Fee) may be retained by the Servicer from the
aggregate interest collections on the Receivables during the related Collection
Period, prior to the deposit of such amount in the Collection Account pursuant
to Section 5.2.

                                       19

<PAGE>

       SECTION 4.9. Servicer's Certificate. On or before each Determination
                    ----------------------
Date, the Servicer shall deliver to the Indenture Trustee by 12:00 p.m. New York
City time a Servicer's Certificate in the form of Exhibit C attached hereto
containing all information necessary to make the distributions pursuant to
Section 5.4, to make any transfers of funds pursuant to Sections 5.1, 5.2 and
5.5 and all information required in the statements to Noteholders pursuant to
Section 5.7. Receivables purchased by the Servicer or repurchased by the Seller
as of the last day of such Collection Period shall be identified by the Seller's
account number with respect to such Receivable (as specified in the Schedule of
Receivables).

       SECTION 4.10. Annual Statement as to Compliance, Notice of Servicer
                     -----------------------------------------------------
Termination Event.
-----------------

                 (a) The Servicer shall deliver to the Indenture Trustee, the
Owner Trustee and each Rating Agency, on or before December 31 of each year,
beginning December 31, 2002, an Officer's Certificate stating that (i) a review
of the activities of the Servicer during the preceding 12-month period ended
September 30 of such year (or such longer or shorter period since the date of
this Agreement) and of its performance under this Agreement has been made under
such officers' supervision and (ii) to the best of such officers' knowledge,
based on such review, the Servicer has fulfilled all of its obligations under
this Agreement throughout such year, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
officers and the nature and status thereof.

                 (b) The Servicer shall deliver to the Indenture Trustee, the
Owner Trustee and each Rating Agency, promptly after having obtained knowledge
thereof, but in no event later than one Business Day thereafter, written notice
in an Officer's Certificate of any event which with the giving of notice or
lapse of time, or both, would become a Servicer Default under clause (i) of
Section 8.1(a). The Seller shall deliver to the Owner Trustee, the Indenture
Trustee and each Rating Agency, promptly after having obtained knowledge
thereof, but in no event later than five Business Days thereafter, written
notice in an Officer's Certificate of any event which with the giving of notice
or lapse of time, or both, would become a Servicer Default under any other
clause of Section 8.1(a).

       SECTION 4.11. Annual Independent Accountants' Report.
                     --------------------------------------

       The Servicer shall cause a firm of nationally recognized independent
certified public accountants (the "Independent Accountants"), who may also
render other services to the Servicer or to the Seller, to deliver to the
Indenture Trustee, the Owner Trustee, and each Rating Agency, on or before
December 31 of each year concerning the 12-month period ended September 30 of
such year (or such longer or shorter period since the date of this Agreement),
beginning December 31, 2002, a report addressed to the Board of Directors of the
Servicer, to the effect that such firm has read the monthly Servicer's
Certificates delivered pursuant to Section 4.9 with respect to each Collection
Period during such one-year (or longer) period and reviewed the servicing of the
Receivables by the Servicer and that such review (1) included tests relating to
automobile, light duty truck and van loans serviced for others in accordance
with the requirements of the Uniform Single Attestation Program for Mortgage
Bankers, to the extent the procedures in such program are applicable to the
servicing obligations set forth in this Agreement, and (2) except as described
in the report, disclosed no exceptions or errors in the

                                       20

<PAGE>

records relating to automobile, light duty truck and van loans serviced for
others that, in the firm's opinion, paragraph four of such program requires such
firm to report.

         The report will also indicate that the firm is independent of the
Servicer within the meaning of the Code of Professional Ethics of the American
Institute of Certified Public Accountants.

         Section 4.12. Access to Certain Documentation and Information Regarding
                       ---------------------------------------------------------
Receivables. The Servicer shall provide to the Noteholders and the Indenture
-----------
Trustee access to the Receivables Files in such cases where the Noteholder or
the Indenture Trustee shall be required by applicable statutes or regulations to
review such documentation. Access shall be afforded without charge, but only
upon reasonable request and during the normal business hours at the respective
offices of the Servicer. Nothing in this Section shall affect the obligation of
the Servicer to observe any applicable law prohibiting disclosure of information
regarding the Obligors, and the failure of the Servicer to provide access to
information as a result of such obligation shall not constitute a breach of this
Section 4.12.

         Section 4.13. Servicer Expenses. The Servicer shall be required to pay
                       -----------------
all expenses incurred by it in connection with its activities hereunder,
including fees and disbursements of independent accountants and taxes imposed on
the Servicer.

         Section 4.14. Reports To Noteholders. The Indenture Trustee shall
                       ----------------------
provide to any Noteholder, who so requests in writing (addressed to the
Corporate Trust Office) and the Rating Agencies a copy of any certificate
described in Section 4.9, or the annual statement described in Section 4.10, or
the annual report described in Section 4.11. The Indenture Trustee may require
the Noteholder to pay a reasonable sum to cover the cost of the Indenture
Trustee's compliance with such request.

                                    Article V
                            Accounts; Distributions;
                            ------------------------
                            Statements to Noteholders
                            -------------------------

         Section 5.1. Establishment of Accounts. (a) (i) The Indenture Trustee,
                      -------------------------
for the benefit of the Noteholders and the Certificateholder, shall establish
the Collection Account (the "Collection Account") as a segregated trust account
                             ------------------
in its own name with the Corporate Trust Office of the Indenture Trustee. The
Servicer shall direct the Indenture Trustee to invest the amounts in the
Collection Account in Eligible Investments that mature not later than the
Business Day prior to the next succeeding Deposit Date and to hold such Eligible
Investments to maturity. The Collection Account shall always be maintained as an
Eligible Account and shall bear a designation clearly indicating that the funds
deposited therein are held on behalf of the Indenture Trustee, for the benefit
of the Noteholders and the Certificateholder. The Indenture Trustee may trade
with itself or an affiliate in the purchase or sale of Eligible Investments.

                                       21

<PAGE>

                         (ii)    The Indenture Trustee, for the benefit of the
         Noteholders, shall establish the Note Account (the "Note Account") as a
                                                             ------------
         segregated trust account in its own name with the Corporate Trust
         Office of the Indenture Trustee. The Servicer shall direct the
         Indenture Trustee to invest the amounts in the Note Account in Eligible
         Investments that mature not later than the next succeeding Deposit
         Date, and to hold such Eligible Investments to maturity. The Note
         Account shall always be maintained as an Eligible Account and shall
         bear a designation clearly indicating that the funds deposited therein
         are held on behalf of the Indenture Trustee, for the benefit of the
         Noteholders. The Indenture Trustee may trade with itself or an
         affiliate in the purchase or sale of Eligible Investments.

                         (iii)   The Indenture Trustee, for the benefit of the
         Noteholders, shall establish the Reserve Account (the "Reserve
                                                                -------
         Account") as a segregated trust account in its own name with the
         -------
         Corporate Trust Office of the Indenture Trustee. The Servicer shall
         direct the Indenture Trustee to invest the amounts in the Reserve
         Account in Eligible Investments that mature not later than the next
         succeeding Deposit Date, and to hold such Eligible Investments to
         maturity. The Reserve Account shall always be maintained as an Eligible
         Account and shall bear a designation clearly indicating that the funds
         deposited therein are held on behalf of the Indenture Trustee, for the
         benefit of the Noteholders. The Indenture Trustee may trade with itself
         or an affiliate in the purchase or sale of Eligible Investments.

                   (b)   The Indenture Trustee agrees as follows with respect to
         the Eligible Investments, and the proceeds thereof, held from time to
         time in each Account:

                         (i)   any Eligible Investment that is a "deposit
         account" (as defined in Section 9-102(a)(29) of the UCC or any
         successor provision) shall be subject to the "control" (as set forth in
         Section 9-104 of the UCC or any successor provision) of the Indenture
         Trustee, and the Indenture Trustee shall be the customer of the bank
         with respect to such deposit account and shall have sole signature
         authority with respect thereto;

                         (ii)  any Eligible Investment that constitutes Physical
         Property (as defined in the definition of "Delivery") shall be
         delivered to the Indenture Trustee in accordance with paragraph (a) of
         the definition of "Delivery" and shall be held, pending maturity or
         disposition, solely by the Indenture Trustee or a securities
         intermediary (as such term is defined in Section 8-102(a)(14) of the
         UCC) acting solely for the Indenture Trustee that has agreed to treat
         such property as a financial asset;

                         (iii) any Eligible Investment that is a book-entry
         security held through the Federal Reserve System pursuant to federal
         book-entry regulations shall be delivered to the Indenture Trustee in
         accordance with paragraph (b) of the definition of "Delivery" and shall
         be maintained by the Indenture Trustee, pending maturity or
         disposition, through continued book entry registration of such Eligible
         Investment as described in such paragraph;

                         (iv)  any Eligible Investment that is an
         "uncertificated security" under Article 8 of the UCC and that is not
         governed by clause (iii) above shall be

                                       22

<PAGE>

         delivered to the Indenture Trustee in accordance with paragraph (c) of
         the definition of "Delivery" and shall be maintained by the Indenture
         Trustee, pending maturity or disposition, through continued
         registration of the Indenture Trustee's (or its nominee's) ownership of
         such security directly or through one or more securities intermediaries
         acting solely for the Indenture Trustee as described in such paragraph;
         and

                         (v)  with respect to any Eligible Investment that is
         not governed by clauses (i) - (iv) above, such procedures as may be
         appropriate to effect the complete transfer of ownership of such
         Eligible Investment to the Indenture Trustee free and clear of any
         adverse claims in accordance with applicable law and regulations and
         the interpretation thereof.

                         (vi) The Servicer shall have the power, revocable by
         the Indenture Trustee, to instruct the Indenture Trustee to make
         withdrawals and payments from each Account for the purpose of making
         distributions of funds on deposit in such Accounts in accordance with
         the provisions hereof.

                  (c)    In the event of any change of law regarding matters
relating to the perfection of security interests in any Account or the amounts
or any Eligible Investments held therein, the Seller shall cause to be furnished
to the Indenture Trustee and each Rating Agency an Opinion of Counsel addressing
such matters and if necessary, the Seller shall cooperate with the Indenture
Trustee in taking all actions necessary to comply with the change in law.

         Section 5.2. Collections.
                      -----------

                  (a)    The Servicer shall remit by wire transfer to the
Collection Account within two Business Days following receipt thereof all
payments by or on behalf of the Obligors on the Receivables and all Liquidation
Proceeds (including payments made under any of the Insurance Policies or the
Collateral Insurance to the extent applicable to payments due on the
Receivables), both as collected during the Collection Period, net of (i) the
Servicer's actual out-of-pocket expenses reasonably incurred with respect to
Defaulted Receivables or Financed Vehicles ("Liquidation Expenses"), which shall
                                             --------------------
be paid from amounts actually recovered with respect to any Defaulted Receivable
or Financed Vehicle and (ii) charge backs attributable to errors in posting,
returned checks, or rights of offset for amounts that should not have been paid
or that must be refunded as the result of a successful claim or defense under
bankruptcy or similar laws as provided in Section 4.8. The amounts specified in
clauses (i) and (ii), to the extent deposited into the Collection Account, shall
not be included in Available Funds and will be withdrawn from the Collection
Account and paid to the Servicer from time to time.

                  (b)    On the Determination Date in each month, the Servicer
shall instruct the Indenture Trustee to withdraw from the Collection Account the
Available Funds with respect to the next Payment Date, including Additional Fees
and Liquidation Proceeds, received during the Collection Period and investment
earnings on the Collection Account and the Note Account related to such
Determination Date, net of any amounts specified in clauses (i) and (ii) of
Section 5.2(a), to the extent deposited therein, and deposit such amount in
immediately available funds or by wire transfer in immediately available funds
into the Note Account.

                                       23

<PAGE>

                  (c)    On or before each Determination Date, the Servicer
shall determine (i) the amount of Available Funds and (ii) the amount of funds
necessary to make the distributions required pursuant to Section 5.4(a) on the
next Payment Date. The Servicer shall by a Servicer's Certificate notify the
Indenture Trustee of such amounts by telecopy to the Corporate Trust Office (or
such other number as the Indenture Trustee may from time to time provide),
followed promptly by mailing such notice to the Indenture Trustee at the
Corporate Trust Office.

     Section 5.3. Purchase Amounts. On the Determination Date following each
                  ----------------
Collection Period, the Servicer or the Seller, as the case may be, shall remit
to the Note Account the aggregate Purchase Amount for such Collection Period
pursuant to Sections 3.2, 4.2 and 4.7.

     Section 5.4. Distributions.
                  -------------

                  (a)    On each Payment Date, the Indenture Trustee shall apply
or cause to be applied the sum of (x) the Available Funds (after withdrawing
amounts deposited in error and Liquidation Proceeds relating to Purchased
Receivables) for the related Collection Period and (y) the Reserve Account
Withdrawal Amount for such Payment Date, (such sum, the "Total Available Funds")
                                                         ---------------------
to make the following distributions from the Note Account in the listed order of
priority:

                         (i)    to the Servicer, the Monthly Servicing Fee;

                         (ii)   to the Indenture Trustee, the Indenture
Trustee's Fee, and any overdue Indenture Trustee's Fee;

                         (iii)  to the Owner Trustee, the Owner Trustee's fee,
and any overdue Owner Trustee's Fee;

                         (iv)   to the Holders of the Class A Notes, pari passu,
                                                                     ---- -----
the Note Interest due on each Class of Class A Notes;

                         (v)    for distribution as provided in paragraph (b)
below, the Class A Principal Parity Amount;

                         (vi)   to the Holders of the Class B Notes, the Note
Interest due on the Class B Notes;

                         (vii)  for distribution as provided in paragraph (b)
below, the Class B Principal Parity Amount;

                         (viii) for distribution as provided in paragraph (b)
below, the Regular Principal Amount;

                         (ix)   for distribution as provided in paragraph (b)
below, the Matured Principal Shortfall;

                                       24

<PAGE>

                         (x)   to the Reserve Account, the Reserve Account
         Deposit Amount for such Payment Date;

                         (xi)  for distribution as provided in paragraph (b)
         below, the Additional Principal Amount; and

                         (xii) to the Certificateholder, the aggregate amount
         remaining in the Note Account.

               If the Servicer exercises the purchase option on any Payment Date
pursuant to Section 11.1, the Optional Purchase Price shall be deposited into
the Note Account on the Determination Date related to such Payment Date.

                   (b)   On each Payment Date the Indenture Trustee shall apply
or cause to be applied the aggregate of the amounts described in clause (v),
(vii), (viii), (ix) and (xi) of paragraph (a) above on that Payment Date in the
listed order of priority:

                         (i)   to the Class A-1 Noteholders in reduction of the
         Note Principal Balance of the Class A-1 Notes, until the Note Principal
         Balance thereof has been reduced to zero;

                         (ii)  to the Class A-2 Noteholders in reduction of the
         Note Principal Balance of the Class A-2 Notes, until the Note Principal
         Balance thereof has been reduced to zero;

                         (iii) to the Class A-3 Noteholders in reduction of the
         Note Principal Balance of the Class A-3 Notes, until the Note Principal
         Balance thereof has been reduced to zero; and

                         (iv)  to the Class B Noteholders in reduction of the
         Note Principal Balance of the Class B Notes, until the Note Principal
         Balance thereof has been reduced to zero;

notwithstanding the foregoing, on any Payment Date which occurs after the
declaration of an Event of Default, if such Event of Default is still
continuing, such aggregate amount shall be applied in reduction of the aggregate
Note Principal Balance of the Class A-1 Notes, the Class A-2 Notes and the Class
A-3 Notes, concurrently and in proportion to their then outstanding Note
Principal Balances, rather than sequentially as provided in clauses (i) through
(iii) above. Once the aggregate Note Principal Balance of all Class A Notes has
been reduced to zero, the amount on deposit in the Note Account shall be
applied, as provided in clause (iv) above.

                   (c)   In making the distributions described in paragraphs (a)
and (b) above, the Indenture Trustee shall be entitled to rely upon (without
investigation, confirmation or recalculation) all information and calculations
contained in the Servicer's Certificate delivered to the Indenture Trustee
pursuant to Section 4.9.

                   (d)   All monthly distributions to Noteholders shall be made
by wire transfer (if wiring instructions are received from the Noteholders), or,
in the absence of such instructions, by check mailed to each Noteholder of
record on the preceding Record Date at its

                                       25

<PAGE>

address appearing on the Note Register, or by such other means as the Noteholder
and the Indenture Trustee shall agree. Payments to the Certificateholder or its
designee shall be made by wire transfer based on instructions received by the
Indenture Trustee from such Person. Notwithstanding the foregoing, the final
payment on each Note shall be made only against the presentation and surrender
of the Note at the office or agency then maintained by the Indenture Trustee.

                  (e)   Each Noteholder shall promptly notify the Indenture
Trustee in writing upon the receipt of a nonappealable court order of a court
having competent jurisdiction seeking to recover payments to Noteholders or the
Trust as a voidable preference by a trustee in bankruptcy pursuant to the United
States Bankruptcy Code and shall enclose a copy of such order with such notice
to the Indenture Trustee.

                  (f)   If the Servicer has failed to provide the Indenture
Trustee with the notice required pursuant to Section 5.2, the Indenture Trustee
may but shall not be required to calculate Note Current Interest and apply
funds, if any, in the Collection Account as of the last day of the prior
Collection Period, to make a distribution of Note Current Interest to the
Noteholders.

                  (g)   In the event that any withholding tax is imposed on the
Trust's payment (or allocations of income) to a Noteholder, such tax shall
reduce the amount otherwise distributable to the Noteholder in accordance with
this Section. The Indenture Trustee is hereby authorized and directed to retain
from amounts otherwise distributable to the Noteholders sufficient funds for the
payment of any tax attributable to the Trust (but such authorization shall not
prevent the Indenture Trustee from contesting any such tax in appropriate
proceedings, and withholding payment of such tax, if permitted by law, pending
the outcome of such proceedings). The amount of any withholding tax imposed with
respect to a Noteholder shall be treated as cash distributed to such Noteholder
at the time it is withheld by the Trust and remitted to the appropriate taxing
authority. If there is a possibility that withholding tax is payable with
respect to a distribution (such as a distribution to a non-US Noteholder), the
Indenture Trustee may in its sole discretion withhold such amounts in accordance
with this clause (g). In the event that a Noteholder wishes to apply for a
refund of any such withholding tax, the Indenture Trustee shall reasonably
cooperate with such Noteholder in making such claim so long as such Noteholder
agrees to reimburse the Indenture Trustee for any out-of-pocket expenses
(including legal fees and expenses) incurred.

     Section 5.5. Reserve Account.
                  ---------------

                 (a)   (i) On the Closing Date, the Seller shall deposit the
Reserve Initial Deposit into the Reserve Account. Amounts held from time to time
in the Reserve Account shall be held by the Indenture Trustee for the benefit of
the Noteholders.

                           (ii) The Seller may, from time to time after the date
         hereof, request each Rating Agency to approve a formula for determining
         the Specified Reserve Balance that is different from the formula set
         forth herein, which may result in a decrease in the amount of the
         Specified Reserve Balance or change the manner by which the Reserve
         Account is funded. Notwithstanding any other provision of this
         Agreement, if

                                       26

<PAGE>

         each Rating Agency then rating the Notes notifies the Indenture Trustee
         and the Seller in writing that the use of any such new formula, and any
         decrease in the amount of the Specified Reserve Balance or change in
         the manner by which the Reserve Account is funded, will not result in
         the qualification, reduction or withdrawal of its then current rating
         of the Notes then the Specified Reserve Balance will be determined in
         accordance with such new formula and this Agreement will be amended to
         reflect such new formula without the consent of any Noteholder.

                         (iii) On each Payment Date (A) if the amount on deposit
         in the Reserve Account (without taking into account any amount on
         deposit in the Reserve Account representing net investment earnings) is
         less than the Specified Reserve Balance, the Indenture Trustee shall,
         after payment of any amounts required to be distributed pursuant to
         clauses (i) through (ix) of Section 5.4(a), deposit in the Reserve
         Account the Reserve Account Deposit Amount pursuant to Section
         5.4(a)(x), (B) the Indenture Trustee shall distribute any amount on
         deposit in the Reserve Account representing net investment earnings to
         the Certificateholder, and (C) if the amount on deposit in the Reserve
         Account (after giving effect to all other deposits thereto and
         withdrawals therefrom to be made on such Payment Date, including
         withdrawals pursuant to clause (B) of this paragraph) is greater than
         the Specified Reserve Balance, the Indenture Trustee shall distribute
         the amount of such excess first, as part of the Additional Principal
         Amount, to the extent necessary, if the amount described in clause (x)
         of the definition of Additional Principal Amount exceeds the amount
         described in clause (y)(i) of the definition of Additional Principal
         Amount, in each case on such Payment Date and second, to the
         Certificateholder or their designee on such Payment Date.

                   (b)   On each Payment Date, the Servicer shall instruct the
Indenture Trustee (based on the information contained in the Servicer's
Certificate delivered on the related Determination Date) to withdraw the Reserve
Account Withdrawal Amount from the Reserve Account and deposit such amounts in
the Note Account to be included as Total Available Funds for that Payment Date.

                   (c)   Amounts properly received by the Certificateholder
pursuant to this Agreement shall not be available to the Indenture Trustee or
the Trust for the purpose of making deposits to the Reserve Account, or making
payments to the Noteholders, nor shall the Certificateholder be required to
refund any amount properly received by it.

      Section 5.6. Overcollateralization.  The initial level of
                   ---------------------
overcollateralization shall be the Overcollateralization Initial Amount. The
level of overcollateralization will increase to, and thereafter be maintained
at, the Overcollateralization Target Amount. The level of overcollateralization
is increased and maintained in accordance with Section 5.4(a).

      Section 5.7. Statements to Noteholders.
                   -------------------------

                   (a)   On each Payment Date, the Indenture Trustee shall mail
or send by facsimile to the Noteholders and the Rating Agencies a statement
prepared by the Servicer, setting forth for the Collection Period relating to
such Payment Date the following information

                                       27

<PAGE>

(which in the case of items (i), (ii) and (iii) shall be based on a Note in
a principal amount of $1,000):

                   (i)    the amount of the distribution allocable to principal
         for each Class of Notes, including any overdue principal;

                   (ii)   the amount of the distribution allocable to interest
         for each Class of Notes, including any overdue interest;

                   (iii)  the Monthly Servicing Fee, including any overdue
         Monthly Servicing Fee, the Owner Trustee's Fee and the Indenture
         Trustee's Fee;

                   (iv)   the remaining balance in the Reserve Account, together
         with the Reserve Account Withdrawal Amount;

                   (v)    the Pool Balance and Pool Factor as of the end of the
         related Collection Period;

                   (vi)   the Note Factor for each Class of Notes on such
         Payment Date;

                   (vii)  the aggregate Principal Balance of all Receivables
         which were delinquent (1) 30 days or more and (2) 90 days or more as of
         the last day of the related Collection Period;

                   (viii) the Note Principal Balance for each Class of Notes
         (after giving effect to any distribution in respect of principal on
         such Payment Date) on which Note Current Interest will be calculated
         with respect to the next succeeding Payment Date;

                   (ix)   the aggregate of all Purchase Amounts received on the
         related Determination Date; and

                   (x)    the aggregate amount received with respect to

         Defaulted Receivables, including Liquidation Proceeds, during the
         related Collection Period; and

              (b)  Within the prescribed period of time for tax reporting
purposes after the end of each calendar year during the term of this Agreement,
the Indenture Trustee shall mail, to each Person who at any time during such
calendar year shall have been a Noteholder, a statement containing the sum of
the amounts determined in clauses (i), (ii) and (iii) for such calendar year or,
in the event such Person shall have been a Noteholder during a portion of such
calendar year, for the applicable portion of such year, unless substantially
comparable information has been provided to such Noteholder, for the purposes of
such Noteholder's preparation of federal income tax returns.

                                       28

<PAGE>

                                   ARTICLE VI

                                   The Seller
                                   ----------

       SECTION 6.1. Representations of Seller.
                    -------------------------

                  (a)   The Seller makes the following representations on which
the Trust is deemed to have relied in acquiring the Receivables on which the
Trust is deemed to have relied in acquiring the Receivables and issuing the
Notes and on which the Indenture Trustee is deemed to have relied in
authenticating the Notes. The representations speak as of the execution and
delivery of this Agreement and as of the Closing Date and shall survive the sale
of the Receivables to the Trust and the pledge thereof to the Indenture Trustee
pursuant to the Indenture.

                        (i) Due Organization And Good Standing. The Seller shall
                            ----------------------------------
       have been duly organized and shall be validly existing as a federal
       savings bank in good standing under the laws of the United States of
       America, with the corporate power and authority to own its properties and
       to conduct its business as such properties shall be currently owned and
       such business is presently conducted, and had at all relevant times, and
       shall have, the corporate power and authority and legal right to acquire
       and own the Receivables.

                        (ii) Due Qualification. The Seller shall be duly
                             -----------------
       qualified to do business as a foreign corporation in good standing, and
       shall have obtained all necessary licenses and approvals in all
       jurisdictions in which the ownership or lease of property or the conduct
       of its business shall require such qualifications, except where the
       failure to be so qualified or to have obtained such licenses or approvals
       would not have a material adverse effect on the transactions contemplated
       by this Agreement.

                        (iii) Power And Authority. The Seller shall have the
                              -------------------
       corporate power and authority to execute and deliver this Agreement and
       to carry out its terms, the Seller shall have full power and authority to
       sell and assign the property to be sold and assigned to and deposited
       with the Indenture Trustee as part of the Trust and shall have duly
       authorized such sale and assignment to the Indenture Trustee by all
       necessary corporate action; and the execution, delivery, and performance
       of this Agreement shall have been duly authorized by the Seller by all
       necessary corporate action.

                        (iv) Valid Sale; Binding Obligations. This Agreement
                             -------------------------------
       shall evidence a valid sale, transfer, and assignment of the Receivables,
       enforceable against creditors of and purchasers from the Seller; and
       shall be a legal, valid, and binding obligation of the Seller enforceable
       in accordance with its terms, except as enforceability may be limited by
       bankruptcy, insolvency, reorganization, or other similar laws affecting
       the enforcement of creditors' rights or other obligees' rights in general
       or the rights of creditors or obligees of federally chartered stock
       savings banks, the deposits of which are insured by the FDIC, and by
       general principles of equity, regardless of whether such enforceability
       shall be considered in a proceeding in equity or at law.

                                       29

<PAGE>

                        (v) No Violation. The consummation of the transactions
                            ------------
       contemplated by this Agreement and the fulfillment of the terms hereof
       shall not conflict with, result in any breach of any of the terms and
       provisions of, nor constitute (with or without notice or lapse of time) a
       default under, the charter or by-laws of the Seller, or any indenture,
       agreement, or other instrument to which the Seller is a party or by which
       it shall be bound; nor result in the creation or imposition of any Lien
       upon any of its properties pursuant to the terms of any such indenture,
       agreement, or other instrument (other than this Agreement); nor violate
       any law or, to the best of the Seller's knowledge, any order, rule, or
       regulation applicable to the Seller of any court or of any federal or
       state regulatory body, administrative agency, or other governmental
       instrumentality having jurisdiction over the Seller or its properties.

                        (vi) No Proceedings. There are no proceedings or
                             --------------
       investigations pending or, to the Seller's best knowledge, threatened
       before any court, regulatory body, administrative agency, or other
       governmental instrumentality having jurisdiction over the Seller or its
       properties (A) asserting the invalidity of this Agreement or the Notes,
       (B) seeking to prevent the issuance of the Notes or the consummation of
       any of the transactions contemplated by this Agreement, (C) seeking any
       determination or ruling that might materially and adversely affect the
       performance by the Seller of its obligations under, or the validity or
       enforceability of, this Agreement or the Notes, or (D) which might
       adversely affect the federal income tax attributes of the Notes.

                        (vii) No Consent Required. The Seller is not required to
                              -------------------
       obtain the consent of any other Person or any consent, license, approval
       or authorization of, or make any registration or declaration with, any
       governmental authority or agency in connection with the execution,
       delivery and performance of this Agreement (except as have been
       obtained), other than as may be required under the Blue Sky laws of any
       state or the Securities Act.

                        (viii) No Insolvency. The execution and delivery of this
                               -------------
       Agreement and the consummation of the transactions contemplated hereby
       were not made in contemplation of the insolvency of the Seller or after
       the commission of any act of insolvency by the Seller.

                        (ix) Not An Investment Company. The Trust is not
                             -------------------------
       required to be registered as an "investment company" under the Investment
       Company Act of 1940, as amended.

                        (x) Official Record. This Agreement and all other
                            ---------------
       documents related hereto to which the Seller is a party have been
       approved by the Seller's board of directors, which approval is reflected
       in the minutes of such board, and shall continuously from the time of
       each such document's execution, be maintained as an official record of
       the Seller.

       SECTION 6.2. Liability of the Seller. The Seller shall be liable in
                    -----------------------
accordance herewith only to the extent of the obligations specifically
undertaken and the representations made by the Seller under this Agreement.

                                       30

<PAGE>

       SECTION 6.3. Merger or Consolidation of, or Assumption of the Obligations
                    ------------------------------------------------------------
of, Seller. Any Person (a) into which the Seller may be merged or consolidated,
----------
(b) which may result from any merger or consolidation to which the Seller shall
be a party, or (c) which may succeed to the properties and assets of the Seller
substantially as a whole, which Person in any of the foregoing cases executes an
agreement of assumption to perform every obligation of the Seller under this
Agreement, shall be the successor to the Seller hereunder without the execution
or filing of any document or any further act by any of the parties to this
Agreement; provided, further, that (x) the Seller shall have delivered to the
Indenture Trustee an Officer's Certificate and an Opinion of Counsel each
stating that such consolidation, merger, or succession and such agreement of
assumption comply with this Section 6.3, and (y) all conditions precedent, if
any, provided for in this Agreement relating to such merger, consolidation or
succession have been complied with. Notwithstanding the above, no such
transaction shall result in the Seller becoming subject to the provisions of the
United States Bankruptcy Code or similar laws of any State. The Seller or its
successor hereunder shall provide the Indenture Trustee, the Servicer and the
Rating Agencies with prompt notice of any such transaction.

       SECTION 6.4. Limitation on Liability of Seller and Others. No recourse
                    --------------------------------------------
under or upon any obligation or covenant of this Agreement, or of any Note or
for any claim based thereon or otherwise in respect thereof, shall be had
against any incorporator, shareholder, officer or director as such, of the
Seller or of any successor corporation, either directly or through the Seller,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise. This Agreement and the
obligations created hereunder are solely corporate obligations, and no personal
liability whatever shall attach to, or is or shall be incurred by the
incorporators, shareholders, officers or directors, as such, of the Seller, or
any of them, because of the issuance of the Notes, or under or by reason of the
obligations, covenants or agreements contained in this Agreement or in any of
the Notes or implied therefrom. Any and all such personal liability, either at
common law or in equity or by constitution or statute, of, and any and all such
rights and claims against, every such incorporator, shareholder, officer or
director, as such, because of the issuance of the Notes, or under or by reason
of the obligations, covenants or agreements contained in this Agreement or in
any of the Notes or implied therefrom, are hereby expressly waived and released
as a condition of, and as a consideration for, the execution of this Agreement
and the issuance of the Notes. The Seller and any director, officer, employee or
agent of the Seller may rely in good faith on any document of any kind prima
facie properly executed and submitted by any Person respecting any matters
arising hereunder.

                                   ARTICLE VII

                                  The Servicer
                                  ------------

       SECTION 7.1. Representations of Servicer. The Servicer makes the
                    ---------------------------
following representations on which the Trust is deemed to have relied in
acquiring the Receivables, on which the Trust is deemed to have relied in
acquiring the Receivables and issuing the Notes, on which the Indenture Trustee
is deemed to have relied in authenticating the Notes and on which the
Noteholders are deemed to have relied in purchasing the Notes. The
representations speak as of the execution and delivery of this Agreement and as
of the Closing Date, and shall survive the

                                       31

<PAGE>

sale of the Receivables to the Trust and the pledge thereof to the Indenture
Trustee pursuant to the Indenture.

                        (i)   Representations and Warranties. The
                              ------------------------------
       representations and warranties set forth on the Schedule of
       Representations attached hereto as Schedule B are true and correct,
       provided that such representations and warranties contained therein and
       herein shall not apply to any entity other than Chevy Chase Bank, F.S.B.

                        (ii)  Organization and Good Standing. The Servicer shall
                              ------------------------------
       have been duly organized and shall be validly existing as a federal
       savings bank in good standing under the laws of the United States of
       America, with the corporate power and authority to own its properties and
       to conduct its business as such properties shall be currently owned and
       such business is presently conducted, and had at all relevant times, and
       shall have, the corporate power and authority and legal right to acquire,
       own, sell, and service the Receivables and to hold the Receivable Files
       as custodian on behalf of the Indenture Trustee.

                        (iii) Due Qualification. The Servicer shall be duly
                              -----------------
       qualified to do business as a foreign corporation in good standing, and
       shall have obtained all necessary licenses and approvals in all
       jurisdictions in which the ownership or lease of property or the conduct
       of its business (including the servicing of the Receivables as required
       by this Agreement) shall require such qualifications, except where the
       failure to be so qualified or to have obtained such licenses or approvals
       would not have a material adverse effect on the transactions contemplated
       by this Agreement and would not render any Receivable unenforceable by
       the Indenture Trustee on behalf of the Noteholders.

                        (iv)  Power and Authority. The Servicer shall have the
                              -------------------
       corporate power and authority to execute and deliver this Agreement and
       to carry out its terms, and the execution, delivery, and performance of
       this Agreement shall have been duly authorized by the Servicer by all
       necessary corporate action.

                        (v)   Binding Obligation. This Agreement shall
                              ------------------
       constitute a legal, valid, and binding obligation of the Servicer
       enforceable in accordance with its terms, except as enforceability may be
       limited by bankruptcy, insolvency, reorganization, or other similar laws
       affecting the enforcement of creditors' or other obligees' rights in
       general or the rights of creditors or obligees of federally chartered
       stock savings banks, the deposits of which are insured by the Federal
       Deposit Insurance Corporation, and by general principles of equity,
       regardless of whether such enforceability shall be considered in a
       proceeding in equity or at law.

                        (vi)  No Violation. The consummation of the transactions
                              ------------
       contemplated by this Agreement and the fulfillment of the terms hereof
       shall not conflict with, result in any breach of any of the terms and
       provisions of, nor constitute (with or without notice or lapse of time) a
       default under, the charter or by-laws of the Servicer, or any indenture,
       agreement, or other instrument to which the Servicer is a party or by
       which it shall be bound; nor result in the creation or imposition of any
       Lien upon any of its properties pursuant to the terms of any such
       indenture, agreement, or other instrument

                                       32

<PAGE>

       (other than this Agreement); nor violate any law or, to the best of the
       Servicer's knowledge any order, rule, or regulation applicable to the
       Servicer of any court or of any federal or State regulatory body,
       administrative agency, or other governmental instrumentality having
       jurisdiction over the Servicer or its properties.

                        (vii) No Proceedings. There are no proceedings or
                              --------------
       investigations pending or, to the Servicer's best knowledge, threatened
       before any court, regulatory body, administrative agency, or other
       governmental instrumentality having jurisdiction over the Servicer or its
       properties (A) asserting the invalidity of this Agreement or the Notes,
       (B) seeking to prevent the issuance of the Notes or the consummation of
       any of the transactions contemplated by this Agreement, (C) seeking any
       determination or ruling that might materially and adversely affect the
       performance by the Servicer of its obligations under, or the validity or
       enforceability of, this Agreement or the Notes, or (D) which might
       adversely affect the federal income tax attributes of the Notes.

       SECTION 7.2. Liability of Servicer; Indemnities.
                    ----------------------------------

                  (a)   The Servicer shall be liable in accordance herewith only
to the extent of the obligations specifically undertaken and the representations
made by the Servicer under this Agreement, including its duties as custodian of
the Receivable Files.

                        (i)   The Servicer, except as set forth in this Section
       7.2, shall not be under any liability to the Trust, the Owner Trustee,
       the Indenture Trustee or the Noteholders for taking any action or for
       refraining from taking any action pursuant to this Agreement, or for
       errors in judgment; provided, however, that this provision shall not
       protect the Servicer against any liability which would otherwise be
       imposed upon the Servicer by reason of its willful misfeasance, bad faith
       or negligence in the performance of its duties or by reason of its
       reckless disregard of its obligations and duties as Servicer hereunder.

                        (ii)  The Servicer shall indemnify, defend, and hold
       harmless the Indenture Trustee, its officers, directors, agents and
       employees, the Trust, the Owner Trustee and its officers, directors,
       employees and agents, the Noteholders from and against any and all costs,
       expenses, losses, damages, claims, and liabilities, arising out of or
       resulting from the use, ownership or operation by the Servicer or any
       affiliate thereof of a Financed Vehicle; provided, that the Servicer
       shall have no obligation to indemnify any Person against any credit
       losses on any Receivable serviced by the Servicer in accordance with the
       requirements of this Agreement.

                        (iii) The Servicer shall indemnify, defend and hold
       harmless the Trust, the Indenture Trustee and its officers, directors,
       employees and agents, the Owner Trustee and its officers, directors,
       employees and agents, from and against any loss, liability, expense,
       damage or injury, including any judgment, award, settlement and other
       costs or expenses incurred in connection with the defense of any action,
       proceeding or claim, to the extent such loss, liability, expense, damage
       or injury arose out of, or was imposed upon such persons through, the
       willful misfeasance, bad faith or negligence of

                                       33

<PAGE>

       the Servicer in the performance of its duties or by reason of its
       reckless disregard of its obligations and duties as Servicer hereunder.

                        (iv)   The initial Servicer shall indemnify, defend and
       hold harmless the Indenture Trustee, its officers, directors, employees
       and agents from and against any loss, liability or expense incurred
       without negligence or bad faith on the part of the Indenture Trustee or
       its officers, directors, employees or agents or the Owner Trustee and its
       officers, directors, employees and agents, and arising out of or in
       connection with the acceptance or administration by the Indenture Trustee
       of this Agreement or the Indenture or the Owner Trustee of the Trust, as
       applicable, including the costs and expenses of defending itself against
       any claim or liability in connection with the exercise or performance of
       any of the powers or duties of the Indenture Trustee hereunder.

                        (v)    The Servicer shall defend, indemnify and hold
       harmless the Trust, the Owner Trustee and its officers, directors,
       employees and agents and the Indenture Trustee and its officers,
       directors, agents and employees, the Noteholders from and against any
       taxes that may at any time be asserted against the Trust, the Indenture
       Trustee, the Owner Trustee or the Noteholders with respect to the
       transactions contemplated in this Agreement, including, without
       limitation, any sales, gross receipts, general corporation, tangible
       personal property, privilege or license taxes (but not including any
       personal property taxes asserted with respect to ownership of the
       Receivables, or federal or other income taxes arising out of
       distributions on the Notes) and costs and expenses in defending against
       the same.

                        (vi)   Indemnification under this Section 7.2 shall
       include reasonable fees and expenses of counsel and expenses of
       litigation.

                        (vii)  Within a reasonable period after receipt by the
       Indenture Trustee, the Trust, the Owner Trustee or the Noteholders of
       notice of the commencement of any action with respect to which
       indemnification is sought under this Section 7.2, such party shall notify
       the Servicer in writing of the commencement thereof. In case any such
       action shall be brought, the Servicer shall be entitled to participate in
       and, to the extent that it shall wish, to assume the defense thereof,
       with counsel satisfactory to such indemnified party, and after notice
       from the Servicer to the indemnified party of its election so to assume
       the defense thereof, the Servicer shall not be liable to such indemnified
       party for any legal or other expenses subsequently incurred by such
       indemnified party in connection with the defense thereof other than
       reasonable costs of investigation.

                        (viii) The Servicer shall not be liable for any
       settlement of any litigation or proceeding effected without the written
       consent of the Servicer (which shall not be unreasonably withheld). The
       indemnified party shall not, without the Servicer's written consent
       (which shall not be unreasonably withheld), settle or compromise any
       claim or consent to entry of any judgment which would impose an
       injunction or other equitable relief on the Servicer or which does not
       include as an unconditional term thereof the release by the claimant or
       the plaintiff of the Servicer from all liability in respect of such
       claim.

                                       34

<PAGE>

                        (ix) The rights to indemnification under this Section
       7.2 shall survive the termination, resignation or removal of the Servicer
       with respect to acts and omissions to act of the Servicer giving rise to
       such rights and occurring prior to such termination, resignation or
       removal. In addition, the rights to indemnification under this Section
       7.2 shall survive the termination of the Trust.

       SECTION 7.3. Merger or Consolidation of, or Assumption of the Obligations
                    ------------------------------------------------------------
of the Servicer. Any Person (a) into which the Servicer may be merged or
---------------
consolidated, (b) which may result from any merger or consolidation to which the
Servicer shall be a party, or (c) which may succeed to the properties and assets
of the Servicer substantially as a whole, which Person in any of the foregoing
cases executes an agreement of assumption to perform every obligation of the
Servicer hereunder, shall be the successor to the Servicer under this Agreement
without the execution or filing of any document or any further act on the part
of any of the parties to this Agreement; provided, however, that (x) the
Servicer shall have delivered to the Indenture Trustee an Officer's Certificate
and an Opinion of Counsel each stating that such consolidation, merger or
succession and such agreement of assumption comply with this Section 7.3 and (y)
all conditions precedent, if any, provided for in this Agreement relating to
such merger, consolidation or succession have been complied with. The Servicer
or its successor hereunder shall provide the Indenture Trustee, the Seller and
the Rating Agencies with prompt notice of any such transaction.

       SECTION 7.4. Limitation on Liability of Servicer and Certain Related
                    -------------------------------------------------------
Persons.
-------

                  (a)   No recourse under or upon any obligation or covenant of
this Agreement, or of any Note or for any claim based thereon or otherwise in
respect thereof, shall be had against any incorporator, shareholder, officer or
director as such, of the Servicer or of any successor corporation, either
directly or through the Servicer, whether by virtue of any constitution, statute
or rule of law, or by the enforcement of any assessment or penalty or otherwise.
This Agreement and the obligations created hereunder are solely corporate
obligations, and no personal liability whatever shall attach to, or is or shall
be incurred by the incorporators, shareholders, officers or directors, as such,
of the Servicer, or any of them, because of the issuance of the Notes, or under
or by reason of the obligations, covenants or agreements contained in this
Agreement or in any of the Notes or implied therefrom. Any and all such personal
liability, either at common law or in equity or by constitution or statute, of,
and any and all such rights and claims against, every such incorporator,
shareholder, officer or director, as such, because of the issuance of the Notes,
or under or by reason of the obligations, covenants or agreements contained in
this Agreement or in any of the Notes or implied therefrom, are hereby expressly
waived and released as a condition of, and as a consideration for, the execution
of this Agreement and the issuance of the Notes. The Servicer and any director,
officer, employee or agent of the Servicer may rely in good faith on any
document of any kind prima facie properly executed and submitted by any Person
respecting any matters arising hereunder.

                  (b)   Except as provided in this Agreement, the Servicer shall
not be under any obligation to appear in, prosecute, or defend any legal action
that shall not be incidental to its duties to service the Receivables in
accordance with this Agreement (collection actions with respect to Defaulted
Receivables are understood to be incidental to the Servicer's

                                       35

<PAGE>

duties to service the Receivables), and that in its opinion may involve it in
any expense or liability.

     Section 7.5. Servicer Not to Resign. Chevy Chase Bank, F.S.B., as initial
                  ----------------------
Servicer, shall not resign from its obligations and duties under this Agreement
except upon determination that the performance of its duties shall no longer be
permissible under applicable law (any such determination permitting the
resignation of the Servicer shall be evidenced by an Opinion of Counsel to such
effect delivered to the Indenture Trustee). Notice of any such determination
permitting the resignation of the Servicer, shall be communicated to the
Indenture Trustee and the Rating Agencies at the earliest practicable time and
any such determination permitting the resignation of the Servicer shall be
evidenced by an Opinion of Counsel to such effect delivered to the Indenture
Trustee concurrently with such notice. No such resignation shall become
effective until the Trustee or other successor Servicer shall have assumed the
responsibilities and obligations of the Servicer in accordance with Section 8.2.

     Section 7.6. Delegation of Duties. The Servicer may at any time delegate
                  --------------------
any duties hereunder to any Person, including, without limitation, any
Sub-Servicer who agrees to conduct such duties in accordance with this
Agreement; provided, however, that the Servicer may not delegate its duties as
custodian except as provided in Section 3.4 of this Agreement. Such delegation
shall not relieve the Servicer of its responsibilities and liabilities with
respect to such duties, and shall not constitute a resignation within the
meaning of Section 7.5.

                                  Article VIII

                                     Default
                                     -------

     Section 8.1. Servicer Default.
                  ----------------

                (a)  If any one of the following events ("Servicer Default")
                                                          ----------------
shall occur and be continuing:

                     (i)  any failure by the Servicer to deliver to the
     Indenture Trustee on or prior to the Determination Date the Servicer's
     Certificate for the related Collection Period or to deliver to the
     Indenture Trustee for distribution to the Noteholders any proceeds or
     payment required to be so delivered under the terms of the Notes and this
     Agreement that shall continue unremedied for a period of more than three
     Business Days after written notice from the Indenture Trustee or the
     Holders of Notes evidencing not less than 25% of the Note Principal
     Balance; or

                     (ii) any failure on the part of the Servicer duly to
     observe or to perform in any material respect any other covenants or
     agreements of the Servicer, set forth in the Notes or in this Agreement,
     which failure shall (a) materially and adversely affect the rights of the
     Noteholders and (b) continue unremedied for a period of more than 30 days
     after the date on which written notice of such failure, requiring the same
     to be remedied, shall have been given (y) to the Servicer by the Indenture
     Trustee, or (z) to the Servicer or the Seller, as the case may be, and to
     the Indenture Trustee by the Holders of Notes evidencing not less than 25%
     of the Note Principal Balance; or

                                       36

<PAGE>

                     (iii) the entry of a decree or order by a court or agency
     or supervisory authority having jurisdiction in the premises for the
     appointment of a conservator, receiver, or liquidator for the Servicer in
     any insolvency, readjustment of debt, marshaling of assets and liabilities,
     or similar proceedings, or for the winding up or liquidation of its
     affairs, and the continuance of any such decree or order unstayed and in
     effect for a period of 60 consecutive days; or

                     (iv)  the consent by the Servicer to the appointment of a
     conservator or receiver or liquidator in any insolvency, readjustment of
     debt, marshaling of assets and liabilities, or similar proceedings of or
     relating to the Servicer or of or relating to substantially all of its
     property; or the admission by the Servicer in writing of its inability to
     pay its debts generally as they become due, the filing by the Servicer of a
     petition to take advantage of any applicable insolvency or reorganization
     statute, the making by the Servicer of an assignment for the benefit of its
     creditors, or the voluntary suspension by the Servicer of payment of its
     obligations;

     then, and in each and every case, so long as a Servicer Default shall not
have been remedied, the Indenture Trustee or the Holders of Notes evidencing
more than 50% of the Note Principal Balance (and to the Indenture Trustee if
given by the Noteholders), may terminate all of the rights and obligations of
the Servicer under this Agreement.

                (b)  On or after the receipt by the Servicer of such written
notice, all authority and power of the Servicer under this Agreement, whether
with respect to the Notes or the Receivables or otherwise, shall, without
further action, pass to and be vested in the Indenture Trustee or such successor
Servicer as may be appointed under Section 8.2 pursuant to and under this
Section 8.1; and, without limitation, the Servicer, the Indenture Trustee or
such other successor Servicer, as the case may be, is hereby authorized and
empowered to execute and deliver, on behalf of the predecessor Servicer, as
attorney-in-fact or otherwise, any and all documents and other instruments, and
to do or accomplish all other acts or things necessary or appropriate to effect
the purposes of such notice of termination, whether to complete the transfer and
endorsement of the Receivables and related documents, or otherwise; provided,
however, that the Indenture Trustee or any successor Servicer shall not be
liable for any acts, omissions or obligations of the Servicer prior to such
succession. The predecessor Servicer shall cooperate with the successor Servicer
and the Indenture Trustee in effecting the termination of the responsibilities
and rights of the predecessor Servicer under this Agreement, including the
transfer to the successor Servicer of electronic records related to the
Receivables in such form as the successor Servicer may reasonably request and
the transfer to the successor Servicer for administration by it of all cash
amounts that shall at the time be held by the predecessor Servicer for deposit,
or shall thereafter be received with respect to a Receivable. The Indenture
Trustee shall give the Rating Agencies notice of any termination of the Servicer
pursuant to the terms of this Section 8.1.

     Section 8.2. Appointment of Successor.
                  ------------------------

                (a)  Upon the Servicer's receipt of notice of termination
pursuant to Section 8.1 or the Servicer's resignation in accordance with the
terms of this Agreement, the predecessor Servicer shall continue to perform its
functions as Servicer under this Agreement, in

                                       37

<PAGE>

the case of termination, only until the date specified in such termination
notice or, if no such date is specified in a notice of termination, until
receipt of such notice and, in the case of resignation, until the later of (x)
the date 45 days from the delivery to the Indenture Trustee of written notice of
such resignation (or written confirmation of such notice) in accordance with the
terms of this Agreement and (y) the date upon which the predecessor Servicer
shall become unable to act as Servicer, as specified in the notice of
resignation and accompanying Opinion of Counsel. In the event of the Servicer's
resignation or termination hereunder, the Indenture Trustee shall appoint a
successor Servicer, and the successor Servicer shall accept its appointment by a
written assumption in form acceptable to the Indenture Trustee. In the event
that a successor Servicer has not been appointed at the time when the
predecessor Servicer has ceased to act as Servicer in accordance with this
Section 8.2, the Indenture Trustee without further action shall automatically be
appointed the successor Servicer; provided, however, that the Indenture Trustee
shall not be liable for any acts, omissions or obligations of the Servicer prior
to such succession. Notwithstanding the above, the Indenture Trustee shall, if
it shall be legally unable so to act, appoint, or petition a court of competent
jurisdiction to appoint, any established financial institution, having a net
worth of not less than $50,000,000 and whose regular business shall include the
servicing of automotive receivables, as the successor to the Servicer under this
Agreement.

                (b) Upon appointment, the successor Servicer shall be the
successor in all respects to the predecessor Servicer and shall be subject to
all the responsibilities, duties, and liabilities arising thereafter relating
thereto placed on the predecessor Servicer, and shall be entitled to all of the
rights granted to the predecessor Servicer, by the terms and provisions of this
Agreement. The successor Servicer shall not be liable for any losses resulting
from the failure of the predecessor Servicer to transfer Receivables Files and
related documents to the successor Servicer in a manner as shall be necessary to
effectuate such succession.

                (c) In connection with such appointment, the Indenture Trustee
may make such arrangements for the compensation of a successor Servicer out of
payments on Receivables as it and such successor Servicer shall agree; provided,
however, that no such compensation shall be in excess of that permitted the
original Servicer under this Agreement. The Indenture Trustee and such successor
Servicer shall take such action, consistent with this Agreement, as shall be
necessary to effectuate any such succession.

     The Servicer shall cooperate with the successor Servicer in effecting the
transfer of the rights and responsibilities of the Servicer under this
Agreement.

     Section 8.3. Notification To Noteholders. Upon any notice of a Servicer
                  ---------------------------
Default or upon any termination of, or appointment of a successor to, the
Servicer pursuant to this Article VIII, the Indenture Trustee shall give prompt
written notice thereof to Noteholders at their respective addresses appearing in
the Note Register, to the Rating Agencies.

     Section 8.4. Waiver Of Past Defaults. The Majority Noteholders, on behalf
                  -----------------------
of all Holders of Notes, may waive any default by the Servicer or the Seller in
the performance of its obligations hereunder and its consequences, except a
default in making any required deposits to or payments from the Note Account in
accordance with this Agreement. Upon any such waiver of a past default, such
default shall cease to exist, and any Servicer Default arising therefrom

                                       38

<PAGE>

shall be deemed to have been remedied for every purpose of this Agreement. No
such waiver shall extend to any subsequent or other default or impair any right
consequent thereon.

     Section 8.5. Effect Of Servicer Default On Sub-Servicers. Any removal of
                  -------------------------------------------
the Servicer pursuant to this Article VIII shall ipso facto constitute a removal
of all Sub-Servicers.

                                   Article IX

                              The Indenture Trustee
                              ---------------------

     Section 9.1. Duties of the Indenture Trustee.
                  -------------------------------

                (a) The Indenture Trustee, both prior to and after the
occurrence of a Servicer Default, shall undertake to perform such duties as are
specifically set forth in this Agreement. If a Servicer Default shall have
occurred and shall not have been cured, the Indenture Trustee shall exercise
such of the rights and powers vested in it by this Agreement, and shall use the
same degree of care and skill in their exercise, as a prudent man or woman would
exercise or use under the circumstances in the conduct of his or her own
affairs; provided, however, that if the Indenture Trustee shall assume the
duties of the Servicer pursuant to Section 8.2, the Indenture Trustee in
performing such duties shall use the degree of skill and attention customarily
exercised by a servicer with respect to automobile receivables that it services
for itself or others.

                (b)  The Indenture Trustee, upon receipt of all resolutions,
certificates, statements, opinions, reports, documents, orders or other
instruments furnished to the Indenture Trustee that shall be specifically
required to be furnished pursuant to any provision of this Agreement, shall
examine them to determine whether they conform as to form to the requirements of
this Agreement.

                (c)  No provision of this Agreement shall be construed to
relieve the Indenture Trustee from liability for its own negligent action, its
own negligent failure to act, or its own bad faith; provided, however, that:

                     (i)  prior to the occurrence of a Servicer Default, and
     after the curing of all such Servicer Defaults that may have occurred, the
     duties and obligations of the Indenture Trustee shall be determined solely
     by the express provisions of this Agreement, the Indenture Trustee shall
     not be liable except for the performance of such duties and obligations as
     shall be specifically set forth in this Agreement, no implied covenants or
     obligations shall be read into this Agreement against the Indenture Trustee
     and, in the absence of bad faith on the part of the Indenture Trustee, or
     manifest error, the Indenture Trustee may conclusively rely on the truth of
     the statements and the correctness of the opinions expressed in any
     certificates or opinions furnished to the Indenture Trustee and conforming
     to the requirements of this Agreement;

                     (ii) the Indenture Trustee shall not be liable for an error
     of judgment made in good faith by a Responsible Officer, unless it shall be
     proved that the Indenture Trustee shall have been negligent in ascertaining
     the pertinent facts;

                                       39

<PAGE>

                     (iii) the Indenture Trustee shall not be liable with
     respect to any action taken, suffered, or omitted to be taken in good faith
     in accordance with this Agreement or at the direction of the Holders of
     Notes evidencing not less than 25% of the Note Principal Balance relating
     to the time, method, and place of conducting any proceeding for any remedy
     available to the Indenture Trustee, or exercising any trust or power
     conferred upon the Indenture Trustee, under this Agreement;

                     (iv)  the Indenture Trustee shall not be charged with
     knowledge of any failure by the Servicer to comply with the obligations of
     the Servicer referred to in clause (i) or (ii) of Section 8.1, or of any
     failure by the Seller to comply with the obligations of the Seller referred
     to in clause (ii) of Section 8.1, unless a Responsible Officer of the
     Indenture Trustee has actual knowledge or receives written notice of such
     failure (it being understood that knowledge of the Servicer or the Servicer
     as custodian, in its capacity as agent for the Indenture Trustee, is not
     attributable to the Indenture Trustee) from the Servicer, the Seller, or
     the Holders of Notes evidencing not less than 25% of the Note Principal
     Balance; and

                     (v)   without limiting the generality of this Section or
     Section 9.4, the Indenture Trustee shall have no duty (i) to see to any
     recording, filing, or depositing of this Agreement or any agreement
     referred to herein or any financing statement evidencing a security
     interest in the Receivables or the Financed Vehicles, or to see to the
     maintenance of any such recording or filing or depositing or to any
     rerecording, refiling or redepositing of any thereof, (ii) to see to any
     insurance of the Financed Vehicles or Obligors or to effect or maintain any
     such insurance, (iii) to see to the payment or discharge of any tax,
     assessment, or other governmental charge or any Lien or encumbrance of any
     kind owing with respect to, or assessed or levied against, any part of the
     Trust, (iv) to confirm or verify the contents of any reports or
     certificates of the Servicer delivered to the Indenture Trustee pursuant to
     this Agreement believed by the Indenture Trustee to be genuine and to have
     been signed or presented by the proper party or parties, or (v) to inspect
     the Financed Vehicles at any time or ascertain or inquire as to the
     performance or observance of any of the Seller's or the Servicer's
     representations, warranties or covenants or the Servicer's duties and
     obligations as Servicer and as custodian of the Receivable Files under this
     Agreement.

                (d) The Indenture Trustee shall not be required to expend or
risk its own funds or otherwise incur financial liability in the performance of
any of its duties hereunder, or in the exercise of any of its rights or powers,
if there shall be reasonable ground for believing that the repayment of such
funds or adequate indemnity against such risk or liability shall not be
reasonably assured to it, and none of the provisions contained in this Agreement
shall in any event require the Indenture Trustee to perform, or be responsible
for the manner of performance of, any of the obligations of the Servicer under
this Agreement except during such time, if any, as the Indenture Trustee shall
be the successor to, and be vested with the rights, duties, powers, and
privileges of, the Servicer in accordance with the terms of this Agreement.

                (e) Money held in trust by the Indenture Trustee need not be
segregated from other funds except to the extent required by law or the terms of
this Agreement.

                                       40

<PAGE>

               (f) The Indenture Trustee shall, and hereby agrees that it will,
perform all of the obligations and duties required of it under this Agreement.
In no event shall U.S. Bank National Association, in any of its capacities
hereunder, be deemed to have assumed any duties of the Owner Trustee under the
Delaware Business Trust Statute, common law, or the Trust Agreement.

               (g) U.S. Bank National Association by its execution hereof
accepts its appointment as Indenture Trustee under the Indenture and this
Agreement. The Indenture Trustee shall act upon and in compliance with the
written instructions of the Declaring Noteholders delivered pursuant to the
Indenture promptly following receipt of such written instructions; provided that
the Indenture Trustee shall not act in accordance with any instructions (i)
which are not authorized by, or in violation of the provisions of, the Indenture
or this Agreement, (ii) which are in violation of any applicable law, rule or
regulation or (iii) for which the Indenture Trustee has not received indemnity
reasonably satisfactory to it. Receipt of such instructions shall not be a
condition to the exercise by the Indenture Trustee of its express duties
hereunder, except where the Indenture or this Agreement provides that the
Indenture Trustee is permitted to act only following and in accordance with such
instructions.

     Section 9.2. Rights of Indenture Trustee.
                  ---------------------------

               (a) The Indenture Trustee may conclusively rely on any document
believed by it to be genuine and to have been signed or presented by the proper
person. The Indenture Trustee need not investigate any fact or matter stated in
the document.

               (b) Before the Indenture Trustee acts or refrains from acting, it
may require an Officer's Certificate or an Opinion of Counsel. The Indenture
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on the Officer's Certificate or Opinion of Counsel.

               (c) The Indenture Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys or a custodian or nominee, and the Indenture Trustee shall
not be responsible for any misconduct or negligence on the part of, or for the
supervision of, Chevy Chase Bank, F.S.B., or any other such agent, attorney,
custodian or nominee appointed with due care by it hereunder.

               (d) The Indenture Trustee shall not be liable for any action it
takes or omits to take in good faith which it believes to be authorized or
within its rights or powers; provided, however, that the Indenture Trustee's
                             --------  -------
conduct does not constitute willful misconduct, negligence or bad faith.

               (e) The Indenture Trustee may consult with counsel, and the
advice or opinion of counsel with respect to legal matters relating to the
Indenture and the Notes shall be full and complete authorization and protection
from liability in respect to any action taken, omitted or suffered by it
hereunder in good faith and in accordance with the advice or opinion of such
counsel.

               (f) The Indenture Trustee shall be under no obligation to
institute, conduct or defend any litigation under the Indenture or in relation
to the Indenture, at the request,

                                       41

<PAGE>

order or direction of any of the Noteholders, pursuant to the provisions of this
Agreement, unless such Noteholders shall have offered to the Indenture Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that may be incurred therein or thereby; provided, however, that the Indenture
                                         --------  -------
Trustee shall, upon the occurrence of an Event of Default (that has not been
cured), exercise the rights and powers vested in it by the Indenture with
reasonable care and skill.

               (g) The Indenture Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order,
approval, bond or other paper or document, unless requested in writing to do so
by Noteholders evidencing not less than 25% of the Outstanding Amount thereof;
provided, however, that if the payment within a reasonable time to the Indenture
--------  -------
Trustee of the costs, expenses or liabilities likely to be incurred by it in the
making of such investigation is, in the opinion of the Indenture Trustee, not
reasonably assured to the Indenture Trustee by the security afforded to it by
the terms of the Indenture or this Agreement, the Indenture Trustee may require
reasonable indemnity against such cost, expense or liability as a condition to
so proceeding; the reasonable expense of every such examination shall be paid by
the Person making such request, or, if paid by the Indenture Trustee, shall be
reimbursed by the Person making such request upon demand.

               (h) The Indenture Trustee shall not be liable for any losses on
investments except for losses resulting from the failure of the Indenture
Trustee to make an investment in accordance with instructions given in
accordance hereunder. If the Indenture Trustee acts as the Note Paying Agent or
Note Registrar, the rights and protections afforded to the Indenture Trustee
shall be afforded to the Note Paying Agent and Note Registrar.

     Section 9.3.  Individual Rights of Indenture Trustee. The Indenture Trustee
                   --------------------------------------
in its individual or any other capacity may become the owner or pledgee of Notes
and may otherwise deal with the Trust or its Affiliates with the same rights it
would have if it were not Indenture Trustee.

     Section 9.4.  Indenture Trustee's Certificate. On or as soon as practicable
                   -------------------------------
after each Payment Date on which Receivables shall be (i) assigned to the Seller
pursuant to Section 3.2 or (ii) assigned to the Servicer pursuant to Section
4.2, 4.7 or 11.1, the Indenture Trustee shall execute a Indenture Trustee's
Certificate, substantially in the form of, in the case of an assignment to the
Seller, Exhibit D, or, in the case of an assignment to the Servicer, Exhibit E,
based on the information contained in the Servicer's Certificate for the related
Collection Period, amounts deposited to the Note Account, and notices received
pursuant to this Agreement, identifying the Receivables repurchased by the
Seller pursuant to Section 3.2 or 11.1 or purchased by the Servicer pursuant to
Section 4.2 or 4.7 with respect to such Collection Period, and shall deliver
such Indenture Trustee's Certificate, accompanied by a copy of the Servicer's
Certificate for such Collection Period to the Seller or the Servicer, as the
case may be. The Indenture Trustee's Certificate shall be an assignment pursuant
to Section 9.5.

     Section 9.5.  Indenture Trustee's Assignment Of Purchased Receivables. With
                   -------------------------------------------------------
respect to each Receivable repurchased by the Seller pursuant to Section 3.2 or
11.1 or purchased by the Servicer pursuant to Section 4.2 or 4.7, the Indenture
Trustee shall assign, on the day on which the Indenture Trustee receives payment
for such Receivable, effective as of the last day of the

                                       42

<PAGE>

     Collection Period during which such Receivable became subject to repurchase
     by the Seller or purchase by the Servicer, without recourse,
     representation, or warranty, to the Seller or the Servicer (as the case may
     be) all the Indenture Trustee's right, title, and interest in and to such
     Receivables, and all security and documents relating thereto, and all
     proceeds thereof, such assignment being an assignment outright and not for
     security. If in any enforcement suit or legal proceeding it shall be held
     that the Servicer may not enforce a Receivable on the ground that it shall
     not be a real party in interest or a holder entitled to enforce the
     Receivable, the Indenture Trustee shall, at the Servicer's expense, take
     such steps as the Indenture Trustee deems necessary to enforce the
     Receivable, including bringing suit in its name or the name of the
     Noteholders.

                                   Article X
                      Administrative Duties of the Servicer
                      -------------------------------------

          Section 10.1. Administrative Duties.
                        ---------------------

               (a) Duties with Respect to the Indenture. The Servicer shall
                   ------------------------------------
     perform all its duties and the duties of the Trust under the Indenture. In
     addition, the Servicer shall consult with the Owner Trustee as the Servicer
     deems appropriate regarding the duties of the Trust under the Indenture.
     The Servicer shall monitor the performance of the Trust and shall advise
     the Owner Trustee when action is necessary to comply with the Trust's
     duties under the Indenture. The Servicer shall prepare for execution by the
     Trust or shall cause the preparation by other appropriate Persons of all
     such documents, reports, filings, instruments, certificates and opinions as
     it shall be the duty of the Trust to prepare, file or deliver pursuant to
     the Indenture. In furtherance of the foregoing, the Servicer shall take all
     necessary action that is the duty of the Trust to take pursuant to the
     Indenture, including, without limitation, pursuant to Sections 2.7, 3.4,
     3.5, 3.6, 3.7, 3.9, 3.10, 3.17, 5.1, 5.4, 7.3, 8.3, 8.4, 9.2, 9.3, 11.1 and
     11.15 of the Indenture.

               (b) Duties with Respect to the Trust.
                   --------------------------------

                   (i)  In addition to the duties of the Servicer set forth in
          this Agreement or any of the Basic Documents, the Servicer shall
          perform such calculations and shall prepare for execution by the Trust
          or the Owner Trustee or shall cause the preparation by other
          appropriate Persons of all such documents, reports, filings,
          instruments, certificates and opinions as it shall be the duty of the
          Trust or the Owner Trustee to prepare, file or deliver pursuant to
          this Agreement or any of the Basic Documents or under state and
          federal tax and securities laws, and at the request of the Owner
          Trustee shall take all appropriate action that it is the duty of the
          Trust to take pursuant to this Agreement or any of the Basic
          Documents, including, without limitation, pursuant to Sections 2.6 and
          2.11 of the Trust Agreement. In accordance with the directions of the
          Trust or the Owner Trustee, the Servicer shall administer, perform or
          supervise the performance of such other activities in connection with
          the Collateral (including the Basic Documents) as are not covered by
          any of the foregoing provisions and as are expressly requested by the
          Trust or the Owner Trustee and are reasonably within the capability of
          the Servicer.

                   (ii) Notwithstanding anything in this Agreement or any of the
          Basic Documents to the contrary, the Servicer shall be responsible for
          promptly notifying

                                       43

<PAGE>

     the Owner Trustee and the Indenture Trustee in the event that any
     withholding tax is imposed on the Trust's payments (or allocations of
     income) to an Owner (as defined in the Trust Agreement) as contemplated
     this Agreement. Any such notice shall be in writing and specify the amount
     of any withholding tax required to be withheld by the Owner Trustee or the
     Indenture Trustee pursuant to such provision.

               (iii) Notwithstanding anything in this Agreement or the Basic
     Documents to the contrary, the Servicer shall be responsible for
     performance of the general duties of the Trust set forth in Section 5.2 of
     the Trust Agreement with respect to, among other things, accounting and
     reports to Owners (as defined in the Trust Agreement); provided, however,
                                                            --------  -------
     that once prepared by the Servicer the Owner Trustee shall retain
     responsibility for the distribution of the Schedule K-1s necessary to
     enable the Certificateholder to prepare its federal and state income tax
     returns.

               (iv)  The Servicer shall perform the duties of the Servicer
     specified in Section 9.3 of the Trust Agreement required to be performed in
     connection with the resignation or removal of the Owner Trustee, and any
     other duties expressly required to be performed by the Servicer under this
     Agreement or any of the Basic Documents.

               (v)   In carrying out the foregoing duties or any of its other
     obligations under this Agreement, the Servicer may enter into transactions
     with or otherwise deal with any of its Affiliates; provided, however, that
                                                        --------  -------
     the terms of any such transactions or dealings shall be in accordance with
     any directions received from the Trust and shall be, in the Servicer's
     opinion, no less favorable to the Trust in any material respect.

         (c)   Tax Matters.
               -----------

               (i)   For so long as the Seller is an owner of the Trust, it
     shall prepare, or have prepared, and sign all tax returns, other than Forms
     1099, required to be filed by or regarding the Trust. If the Seller is no
     longer an owner of the Trust, all tax returns, other than Forms 1099, shall
     be prepared and signed by (x) the owner of the Trust, if the Trust has a
     single owner, or (y) the partner responsible for tax matters, if the Trust
     has more than one owner.

               (ii)  The Servicer shall prepare, or have prepared and delivered
     to the Seller, financial statements and such annual or other reports
     attributable to the activities engaged in by the Issuer as are necessary
     for the preparation of the tax returns.

               (iii) In accordance with Section 5.7(b) of this Agreement, the
     Indenture Trustee shall prepare and deliver to each Noteholder a Form 1099
     for purposes of such Noteholder's preparation of federal income tax
     returns. In no event shall the Indenture Trustee be liable for any
     liabilities, costs or expenses of the Trust or the Noteholders under any
     tax law, including without limitation federal, state or local income or
     excise taxes or any other tax imposed or measured by income (or any
     interest or penalty with respect thereto or arising from a failure to
     comply therewith).

                                       44

<PAGE>

               (d) Non-Ministerial Matters. With respect to matters that in the
                   -----------------------
reasonable judgment of the Servicer are non-ministerial, the Servicer shall not
take any action pursuant to this Article unless within a reasonable time before
the taking of such action, the Servicer shall have notified the Owner Trustee
and the Indenture Trustee of the proposed action and the Owner Trustee and, with
respect to items (A), (B), (C) and (D) below, the Indenture Trustee shall not
have withheld consent or provided an alternative direction. For the purpose of
the preceding sentence, "non-ministerial matters" shall include:

               (A) the amendment of or any supplement to the Indenture;

               (B) the initiation of any claim or lawsuit by the Trust and the
          compromise of any action, claim or lawsuit brought by or against the
          Trust (other than in connection with the collection of the
          Receivables);

               (C) the amendment, change or modification of this Agreement or
          any of the Basic Documents;

               (D) the appointment of successor Note Registrars, successor
          Paying Agents and successor Indenture Trustees pursuant to the
          Indenture or the appointment of Successor Servicers or the consent to
          the assignment by the Note Registrar, Paying Agent or Indenture
          Trustee of its obligations under the Indenture; and

               (E) the removal of the Indenture Trustee or the Owner Trustee.

               (e) Exceptions. Notwithstanding anything to the contrary in this
                   ----------
Agreement, except as expressly provided herein or in the other Basic Documents,
the Servicer, in its capacity hereunder, shall not be obligated to, and shall
not, (1) make any payments to the Noteholders or Certificateholder under the
Basic Documents, (2) sell the Trust Property pursuant to Section 5.4 of the
Indenture, (3) take any other action that the Trust directs the Servicer not to
take on its behalf or (4) in connection with its duties hereunder assume any
indemnification obligation of any other Person.

               (f) The successor Servicer shall not be responsible for any
obligations or duties of the servicer under Section 10.1.

     Section 10.2.  Records. The Servicer shall maintain appropriate books of
                    -------
account and records relating to services performed under this Agreement, which
books of account and records shall be accessible for inspection by the Trust at
any time during normal business hours.

     Section 10.3.  Additional Information to be Furnished to the Trust. The
                    ---------------------------------------------------
Servicer shall furnish to the Trust from time to time such additional
information regarding the Collateral as the Trust shall reasonably request.

                                       45

<PAGE>

                                   Article XI

                                   REDEMPTION
                                   ----------

     Section 11.1.  Optional Purchase of All Receivables. (a) The Servicer shall
                    ------------------------------------
have the option to purchase the corpus of the Trust on any Payment Date on which
the aggregate Note Principal Balance is 5% or less of the aggregate Initial Note
Principal Balance. To exercise such option, the Servicer shall deposit in the
Note Account an amount equal to the outstanding Note Principal Balance plus all
accrued and unpaid interest thereon (the "Optional Purchase Price"). The Trust
                                          -----------------------
shall deposit the Optional Purchase Price with the Indenture Trustee in the Note
Account in immediately available funds by 12:00 noon, New York City time, on
such Payment Date and, upon notice to the Indenture Trustee of such deposit, the
Indenture Trustee shall release the Receivables and the Receivable Files and all
other property of the Trust to the Seller, whereupon all such Notes shall be due
and payable on the Redemption Date upon the furnishing of a notice complying
with Section 10.2 of the Indenture to each Holder of Notes.

               (b) Notice of any redemption of the Trust shall be given by the
Servicer to the Owner Trustee, the Indenture Trustee and the Rating Agencies as
soon as practicable after the Servicer has received notice thereof.

                                  Article XII

                            Miscellaneous Provisions
                            ------------------------

     Section 12.1.  Amendment.
                    ---------

               (a) This Agreement may be amended by the parties hereto, without
the consent of any of the Noteholders, (i) to cure any ambiguity or defect, (ii)
to correct or supplement any provisions in this Agreement, or (iii) to correct
any typographical error or to add any other provisions with respect to matters
or questions arising under this Agreement; provided, however, that such action
shall not, as evidenced by an Opinion of Counsel, adversely affect in any
material respect the interests of any Noteholder.

               (b) This Agreement may also be amended from time to time by the
parties hereto with the consent of the Majority Noteholders for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement, or of modifying in any manner the rights of the
Holders of Notes; provided, however, that no such amendment shall, without the
consent of the Holders of all Notes then outstanding, reduce the aforesaid
percentage required to consent to any such amendment. In no case may any such
amendment increase or reduce in any manner the amount of, or accelerate or delay
the timing of, collections of payments on Receivables or distributions that
shall be required to be made on any Note without the consent of the Holder of
such Note.

               (c) The Indenture Trustee shall notify each Rating Agency prior
to any amendment of this Agreement; to the extent practicable, such notice shall
be given not less than 10 days prior to the date on which such amendment is
executed.

                                       46

<PAGE>

               (d) Promptly after the execution of any amendment or consent, the
Indenture Trustee shall furnish written notification of the substance of such
amendment or consent to each Noteholder and each Rating Agency.

               (e) It shall not be necessary for the consent of Noteholders
pursuant to this Section 12.1 to approve the particular form of any proposed
amendment or consent, but it shall be sufficient if such consent shall approve
the substance thereof. The manner of obtaining such consents and of evidencing
the authorization of the execution thereof by Noteholders shall be subject to
such reasonable requirements as the Indenture Trustee may prescribe.

               (f) Prior to the execution of any amendment to this Agreement
pursuant to Section 12.1 (a), the Indenture Trustee shall be entitled to receive
and rely upon an Opinion of Counsel stating that the execution of such amendment
is authorized or permitted by this Agreement and the Opinion of Counsel referred
to in Section 12.1(a). The Indenture Trustee may, but shall not be obligated to,
enter into any such amendment which affects the Indenture Trustee's own rights,
duties, or immunities under this Agreement.

     Section 12.2.  Protection Of Title To Trust.
                    ----------------------------

               (a) The Seller shall file, or cause to be filed, such financing
statements and cause to be filed such amendments and continuation statements,
all in such manner and in such places as may be required by law fully to
preserve, maintain, and protect the interest of the Trust, the Noteholders and
the Indenture Trustee under this Agreement in the Receivables and in the
proceeds thereof. The Seller shall deliver (or cause to be delivered) to the
Owner Trustee and the Indenture Trustee file-stamped copies of, or filing
receipts for, any document filed as provided above, as soon as available
following such filing.

               (b) Neither the Seller nor the Servicer shall change its name,
identity, or corporate structure in any manner that would, could, or might make
any financing statement or continuation statement filed by the Seller in
accordance with Section 12.2(a) above seriously misleading within the meaning of
Section 9-506 of the UCC or any successor provision, or take any other action
that would otherwise require the filing of a financing statement or amendment or
execution and delivery of an agreement to be bound by the terms of this
Agreement, unless the Seller, Servicer or successor entity shall have filed (or
cause to be filed) Uniform Commercial Code financing statements and executed and
delivered such agreement upon any of the stated events.

               (c) If, as a result of a change of the Seller's or Servicer's
"location" (determined as provided in Section 9-307 of the UCC or any successor
provision) or jurisdiction of organization, the applicable provisions of the UCC
would require the filing of any amendment of any previously filed financing or
continuation statement or of any new financing statement, then the Seller or the
Servicer shall file or cause to be filed such amendment or continuation
statement or new financing statement within the period of time necessary fully
to preserve and protect the interest of the Trust and the Indenture Trustee in
the Receivables. The Servicer shall at all times maintain each office from which
it shall service Receivables, its principal place of business and "location"
(determined as provided in Section 9-307 of the UCC or any successor provision)
within the United States of America.

                                       47

<PAGE>

               (d) The Servicer shall maintain accounts and records as to each
Receivable accurately and in sufficient detail to permit (i) the reader thereof
to know at any time the status of such Receivable, including payments and
recoveries made and payments owing (and the nature of each) and (ii)
reconciliation between payments or recoveries on (or with respect to) each
Receivable and the amounts from time to time deposited in the Note Account in
respect of such Receivable.

               (e) The Servicer shall maintain its computer systems so that,
from and after the time of sale under this Agreement of the Receivables to the
Trust, the Servicer's master computer records (including any back-up archives)
that refer to a Receivable shall indicate clearly with reference to the
particular Trust that such Receivable is owned by the Trust. Indication of the
Trust's ownership of a Receivable shall be deleted from or modified on the
Servicer's computer systems when, and only when, the Receivable shall have been
paid in full or repurchased or purchased hereunder.

               (f) If at any time the Seller or the Servicer shall propose to
sell, grant a security interest in, or otherwise transfer any interest in
automotive receivables to any prospective purchaser, lender, or other
transferee, the Servicer shall give to such prospective purchaser, lender, or
other transferee computer tapes, records, or print-outs (including any restored
from back-up archives) that, if they shall refer in any manner whatsoever to any
Receivable, shall indicate clearly that such Receivable has been sold and is
owned by the Trust.

               (g) The Servicer shall permit the Owner Trustee and the Indenture
Trustee and their respective agents at any time during normal business hours to
inspect, audit, and make copies of and abstracts from the Servicer's records
regarding any Receivable to the extent permitted by applicable banking, privacy
and other laws limiting such access.

               (h) Upon request, the Servicer shall furnish to the Owner Trustee
or the Indenture Trustee, within five Business Days, a list of all Receivables
(by contract number and name of Obligor) then held as part of the Trust,
together with a reconciliation of such list to the Schedule of Receivables and
to each of the Servicer's Notes furnished before such request indicating removal
of Receivables from the Trust.

     Section 12.3.  Limitations on Rights of Others. The provisions of this
                    -------------------------------
Agreement are solely for the benefit of the parties hereto, the Indenture
Trustee and the Noteholders, as third-party beneficiaries. Nothing in this
Agreement, whether express or implied, shall be construed to give to any other
Person any legal or equitable right, remedy or claim in the Trust Estate or
under or in respect of this Agreement or any covenants, conditions or provisions
contained herein.

     Section 12.4.  Governing Law. THE PARTIES AGREE THAT IN ACCORDANCE WITH
                    -------------
SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK, THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED
WITHIN THE STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS, AND REMEDIES OF THE
PARTIES UNDER THIS AGREEMENT SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

                                       48

<PAGE>

     Section 12.5.  Notices. All demands, notices, and communications under this
                    -------
Agreement shall be in writing, personally delivered or mailed by certified mail,
return receipt requested, and shall be deemed to have been duly given upon
receipt (a) in the case of the Seller or the Servicer, to the agent for service
as specified in this Agreement, at the following address: Chevy Chase Bank,
F.S.B., 7501 Wisconsin Avenue, Bethesda, Maryland 20814, Attention: General
Counsel, with a copy to Chevy Chase Bank, F.S.B., 7501 Wisconsin Avenue,
Bethesda, Maryland 20814, Attention: Stephen R. Halpin, Jr. or at such other
address as shall be designated by the Seller or the Servicer in a written notice
to the Indenture Trustee and (b) in the case of the Indenture Trustee, at the
Corporate Trust Office and (c) in the case of the Trust or the Owner Trustee, at
the Corporate Trust Office of the Owner Trustee, with a copy to Trustee, at the
Corporate Trust Office. Any notice required or permitted to be mailed to a
Noteholder shall be given by first class mail, postage prepaid, at the address
of such Holder as shown in the Note Register. Any notice so mailed within the
time prescribed in this Agreement shall be conclusively presumed to have been
duly given, whether or not the Noteholder shall receive such notice.

     Section 12.6.  Severability of Provisions. If any one or more of the
                    --------------------------
covenants, agreements, provisions, or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions, or
terms shall be deemed severable from the remaining covenants, agreements,
provisions, or terms of this Agreement and shall in no way affect the validity
or enforceability of the other provisions of this Agreement or of the Notes or
the rights of the Holders thereof.

     Section 12.7.  Assignment. This Agreement shall inure to the benefit of and
                    ----------
be binding upon the parties hereto and their respective successors and permitted
assigns. Notwithstanding anything to the contrary contained herein, except as
provided in Sections 6.3 and 7.3 and as provided in the provisions of this
Agreement concerning the resignation of the Servicer, this Agreement may not be
assigned by the Seller or the Servicer without the prior written consent of the
Owner Trustee, the Indenture Trustee and the Majority Noteholders.

     Section 12.8.  Counterparts. For the purpose of facilitating the execution
                    ------------
of this Agreement and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and all of which counterparts shall constitute but
one and the same instrument.

     Section 12.9.  Benefits Of Agreement. This Agreement shall inure to the
                    ---------------------
benefit of and be binding upon the parties hereto, the Noteholders and their
respective successors and assigns, and to the extent provided herein. Except as
otherwise provided in this Agreement, no other person shall have any rights or
obligations hereunder.

     Section 12.10. Headings. The headings of the various Articles and Sections
                    --------
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.

     Section 12.11. Limitation of Liability of Owner Trustee and Indenture
                    ------------------------------------------------------
Trustee.
-------

               (a) Notwithstanding anything contained herein to the contrary,
this Agreement has been countersigned by Wilmington Trust Company not in its
individual capacity

                                       49

<PAGE>

but solely in its capacity as Owner Trustee of the Trust and in no event shall
Wilmington Trust Company in its individual capacity or, except as expressly
provided in the Trust Agreement, as Owner Trustee have any liability for the
representations, warranties, covenants, agreements or other obligations of the
Trust hereunder or in any of the certificates, notices or agreements delivered
pursuant hereto, as to all of which recourse shall be had solely to the assets
of the Trust. For all purposes of this Agreement, in the performance of its
duties or obligations hereunder or in the performance of any duties or
obligations of the Trust hereunder, the Owner Trustee shall be subject to, and
entitled to the benefits of, the terms and provisions of Articles V, VI and VII
of the Trust Agreement.

               (b) Notwithstanding anything contained herein to the contrary,
this Agreement has been executed and delivered by U.S. Bank National
Association, not in its individual capacity but solely as Indenture Trustee and
in no event shall U.S. Bank National Association, have any liability for the
representations, warranties, covenants, agreements or other obligations of the
Trust hereunder or in any of the certificates, notices or agreements delivered
pursuant hereto, as to all of which recourse shall be had solely to the assets
of the Trust.

               (c) In no event shall U.S. Bank National Association, in any of
its capacities hereunder, be deemed to have assumed any duties of the Owner
Trustee under the Delaware Business Trust Statute, common law, or the Trust
Agreement.

                                       50

<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective duly authorized officers as of
the day and the year first above written.

                                          CHEVY CHASE AUTO RECEIVABLES TRUST
                                          2001-3

                                          By: Wilmington Trust Company, not in
                                          its individual capacity but solely as
                                          Owner Trustee on behalf of the Trust,

                                          By: ___________________________
                                                  Name:
                                                  Title:

                                          CHEVY CHASE BANK, F.S.B., as Seller
                                          and Servicer,

                                          By: ___________________________
                                                  Name:   Mark Holles
                                                  Title:  Group Vice President

                                          U.S. BANK NATIONAL ASSOCIATION, as
                                          Indenture Trustee,

                                          By: ___________________________
                                                  Name:    Eve D. Kaplan
                                                  Title:   Vice President

                         [Sale and Servicing Agreement]

<PAGE>

                                   SCHEDULE A
                             SCHEDULE OF RECEIVABLES
                             -----------------------

<PAGE>

                                                                      SCHEDULE B

                  REPRESENTATIONS AND WARRANTIES OF THE SELLER
                  --------------------------------------------

     1.  CHARACTERISTICS OF RECEIVABLES. Each Receivable (a) shall have been
originated or purchased by the Seller, (b) shall have been fully and properly
executed by the parties thereto, (c) is a fully-amortizing simple interest
installment contract or installment loan which provides for level monthly
payments over its original term, provided that some Receivables may include a
payment in the last month in the life of the Receivable which due to
delinquencies or partial prepayments may be different from the level monthly
payment, (d) shall have created or shall create a valid, subsisting, and
enforceable first priority security interest in favor of the Seller in the
Financed Vehicle, which security interest shall be assignable and shall have
been validly assigned by the Seller to the Trust, and by the Trust to the
Indenture Trustee, (e) shall contain customary and enforceable provisions such
that the rights and remedies of the holder thereof shall be adequate for
realization against the collateral of the benefits of the security and (f) is
payable in United States dollars. No Receivable is a Balloon Receivable.

     2.  SCHEDULE OF RECEIVABLES. The information set forth in the Schedule of
Receivables shall be true and correct in all material respects as of the opening
of business on the Cut-Off Date. The Seller shall have caused its electronic
ledger relating to each related Receivable to be clearly and unambiguously
marked to show that such Receivable has been sold to the Trust for the benefit
of the Noteholders pursuant to this Agreement.

     3.  COMPLIANCE WITH LAW. Each Receivable and each sale of the related
Financed Vehicle shall have complied at the time it was originated or made and
at the execution of this Agreement shall comply in all material respects with
all requirements of applicable federal, State, and local laws, and regulations
thereunder, including, without limitation, usury laws, the Federal
Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit Billing
Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the
Federal Trade Commission Act, the Magnuson Moss Warranty Act, the Federal
Reserve Board's Regulations B and Z, and State adaptations of the National
Consumer Act and of the Uniform Consumer Credit Code, and other applicable
consumer credit laws and equal credit opportunity and disclosure laws.

     4. BINDING OBLIGATION. Each Receivable represents the genuine, legal,
valid, and binding payment obligation in writing of the related Obligor,
enforceable by the holder thereof in accordance with its terms. All parties to
such Receivable have full legal capacity to execute and deliver such Receivable
and all other documents related thereto and to grant the security interest
granted thereby and the terms of such Receivable have not been waived or
modified in any respect (other than modifications or extensions of payments
granted in the ordinary course of the Servicer's collection procedures and the
term of which does not extend beyond the last day of the Collection Period
immediately preceding the latest Final Scheduled Payment Date).

<PAGE>

     5.  NO GOVERNMENT OBLIGOR. None of the Receivables shall be due from the
United States of America or any State or local government or from any agency,
department, or instrumentality of the United States of America or any State or
local government. NO BANKRUPT OBLIGOR. None of the Receivables shall be due from
an Obligor who has commenced a voluntary case under the United States Bankruptcy
Code or consented to the entry of or failed to have stayed within 60 days of
entry an order for relief against it in an involuntary case under the United
States Bankruptcy Code.

     6.  COMPOSITION OF RECEIVABLES. Each Receivable is secured by a Financed
Vehicle which is a new or used automobile, light duty truck or van.

     7.  MATURITY OF RECEIVABLES. Each Receivable shall have an original term to
stated maturity of at least 12 months and not more than 72 months.

     8.  MINIMUM AND MAXIMUM ANNUAL PERCENTAGE RATE. Each Receivable shall have
an Annual Percentage Rate no less than 6.00% and no more than 16.99%.

     9. MINIMUM AND MAXIMUM PRINCIPAL BALANCE. Each Receivable shall have a
Principal Balance as of the Cut-Off Date no less than $1,175.21 and no more than
$42,504.60.

     10. STATES OF OBLIGOR RESIDENCE. Except with respect to Receivables with an
aggregate Principal Balance as of the Cut-Off Date representing 17.65% of the
Original Pool Balance, the Obligor under each Receivable has a billing address
in Georgia, Virginia, Texas, Maryland or North Carolina.

     11. LOCATION OF RECEIVABLE FILES. The Receivable Files shall be kept by the
Servicer as custodian for the Indenture Trustee at 7926 Jones Branch Drive,
McLean, Virginia 22102, or at such other location or locations as may be
designated from time to time by notice to the Indenture Trustee.

     12. ADVANCE PAYMENTS. As of the day prior to the Cut-Off Date, no
Receivable has been paid more than 180 days in advance.

     13. NO ADVERSE SELECTION. The Receivables were selected from retail
installment sales contracts and motor vehicle installment loans in the Seller's
portfolio that had met the applicable conditions specified in this Schedule B
utilizing no selection procedures adverse to the Noteholders relative to similar
retail installment sales contracts and motor vehicle installment loans in the
Seller's portfolio.

     14. NO DEFAULT. Except for payment defaults continuing for a period of not
more than 59 days, as of the Cut-Off Date, no default, breach, violation or
event permitting acceleration under the terms of any Receivable shall exist; no
continuing condition that with notice or lapse of time would constitute a
default, breach, violation or event permitting acceleration under the terms of
any Receivable shall exist; and the Seller shall not have waived any of the
foregoing.

                                       2

<PAGE>

     15.  INSURANCE. The Servicer, in accordance with its customary procedures,
shall have (i) required that the Obligor obtain physical damage and theft
insurance covering the Financed Vehicle as of the date of related contract and
(ii) obtained vendor's single interest insurance covering the Financed Vehicle.

     16.  RECEIVABLES IN FORCE. No Receivable shall have been satisfied,
subordinated, or rescinded, nor shall any Financed Vehicle have been released
from the lien granted by the related Receivable in whole or in part.

     17.  NO DEFENSES. No facts exist which would give rise to any right of
rescission, setoff, counterclaim or defense nor shall have any right of
rescission, setoff, counterclaim, or defense been asserted or threatened with
respect to any Receivable.

     18.  NO LIENS. No liens or claims shall have been filed, including liens
for work, labor, materials or taxes relating to a Financed Vehicle, that shall
be liens prior to, or equal or coordinate with, the security interest in the
Financed Vehicle granted by the Obligor pursuant to the Receivable.

     19.  NO ASSIGNMENT. The Seller has not taken any action to convey any right
to any Person that would result in such Person having a right to payments due
under the Receivable that is senior to or equal with that of the Trust.

     20.  LAWFUL ASSIGNMENT. No Receivable shall have been originated in, or
shall be subject to the laws of, any jurisdiction under which the sale,
transfer, and assignment of such Receivable under this Agreement or transfers of
the Notes would be unlawful, void, or voidable.

     21.  Continuing Security Interest. This Agreement creates a valid and
continuing security interest (as defined in Uniform Commercial Code as in effect
in the Commonwealth of Virginia) in the Receivables in favor of the Trust, which
security interest is prior to all other liens, and is enforceable as such
against creditors of and purchasers from the Seller and the Trust.

     22.  SECURITY INTEREST IN FINANCED VEHICLE. Immediately prior to the sale,
assignment, and transfer thereof to the Trust, each Receivable shall be secured
by a validly perfected first priority security interest in the Financed Vehicle
in favor of the Seller as secured party and all necessary and appropriate
actions with respect to such Receivable shall have been taken to perfect a first
priority security interest in the Financed Vehicle in favor of the Seller as
secured party, which security interest is assignable and has been so assigned to
the Trust and by the Trust to the Indenture Trustee.

     23.  NO OTHER FILINGS. The Seller has not authorized the filing of and is
not aware of any financing statements against the Indenture Trustee or the Trust
that include a description of collateral covering the Receivables other than any
financing statement relating to the security interest granted to the Trust
hereunder or to the Indenture Trustee under the Indenture or that has been
terminated. The Seller is not aware of any judgment or tax lien filings against
the Seller.

                                       3

<PAGE>

     24.  TITLE. It is the intention of the Seller that the transfer and
assignment herein contemplated, taken as a whole, constitutes a sale of the
Receivables and other property of the Trust from the Seller to the Trust and
that the beneficial interest in and title to the Receivables and other Trust
property not be part of the receivership or conservatorship estate in the event
of the appointment of a receiver or conservator for the Seller. No Receivable
has been sold, transferred, assigned, or pledged by the Seller to any Person
other than the Trust. Immediately prior to the transfer and assignment herein
contemplated, the Seller had good and marketable title to each Receivable free
and clear of all Liens, and, immediately upon the transfer thereof, the Trust
shall have good and marketable title to each Receivable, free and clear of all
Liens and rights of others, except for the rights of the Noteholders; and the
transfer has been perfected under the Uniform Commercial Code of the
Commonwealth of Virginia or the District of Columbia.

     25.  ALL FILINGS MADE. All filings (including, without limitation, Uniform
Commercial Code filings) necessary in any jurisdiction to give the Indenture
Trustee a first priority perfected security interest in the Receivables shall
have been made. 26. ONE ORIGINAL. There shall be only one original executed copy
of each Receivable, and immediately prior to the constructive delivery thereof
to the Indenture Trustee pursuant to Section 3.3, such copy shall have been in
the custody and possession of the Seller.

     27.  CHATTEL PAPER; HOME OFFICE. The Receivables constitute "tangible
chattel paper" within the meaning of the Uniform Commercial Code as in effect in
the Commonwealth of Virginia. The home office of the Seller is located in the
Commonwealth of Virginia as designated in the Seller's federal charter.

     28.  RECEIVABLES, FINANCING STATEMENTS. The Receivables do not have any
marks or notations indicating that they have been pledged, assigned or otherwise
conveyed to any Person other than the Trust or the Indenture Trustee. All
financing statements filed or to be filed against the Seller in favor of the
Trust in connection herewith describing the Receivables contain a statement to
the following effect: "A purchase of or security interest in any collateral
described in this financing statement will violate the rights of the Trust."

                                       4

<PAGE>

                                                                       EXHIBIT A

      SERVICER'S CERTIFICATE UPON PAYMENT IN FULL OF A RECEIVABLE PURSUANT
            TO SECTION 3.6(a)(i) OF THE SALE AND SERVICING AGREEMENT
            --------------------------------------------------------

          Reference is made to Section 3.6(a)(i) of the Sale and Servicing
Agreement (the "Sale and Servicing Agreement"), dated as of December 1, 2001,
among Chevy Chase Bank, F.S.B. (the "Servicer"), Chevy Chase Auto Receivables
Trust 2001-3 (the "Trust") and U.S. Bank National Association, as indenture
trustee (the "Indenture Trustee").

          The undersigned _________________ hereby certifies that he/she is an
officer of the Servicer holding the office set forth beneath his/her signature,
and hereby further certifies as follows:

          With respect to that Receivable (as defined in the Sale and Servicing
Agreement), identified as ______________, in the Schedule of Receivables,
attached to the Sale and Servicing Agreement and included in the Trust Estate of
the Trust, all payments in full of all principal and interest have been made.

          The undersigned further certifies that all amounts received by the
Servicer in connection with such payments, with respect to such Receivable,
which are required to be deposited in the Collection Account pursuant to Section
5.2 of the Sale and Servicing Agreement, have been so deposited.

          The undersigned hereby requests delivery of the Receivable and the
related Receivable File (as defined in the Sale and Servicing Agreement) to the
Servicer.

          IN WITNESS WHEREOF, I have hereunto set my hand this _______ day of
__________, 200_.

                                            ____________________________________

                                            By ___________________________
                                            Name:
                                            Title:

<PAGE>

                                                                       EXHIBIT B

      SERVICER'S RECEIPT FOR RECEIVABLE/RECEIVABLE FILE PURSUANT TO SECTION
      ---------------------------------------------------------------------
                 3.6(a)(ii) OF THE SALE AND SERVICING AGREEMENT
                 ----------------------------------------------

          Reference is made to Section 3.6(a)(ii) of the Sale and Servicing
Agreement (the "Sale and Servicing Agreement"), dated as of December 1, 2001,
among Chevy Chase Bank, F.S.B. (the "Servicer"), Chevy Chase Auto Receivables
Trust 2001-3 (the "Trust") and U.S. Bank National Association, as indenture
trustee (the "Indenture Trustee").

          The undersigned _________________ hereby certifies that he/she is an
officer of the Servicer holding the office set forth beneath his/her signature,
and hereby further certifies as follows:

          The undersigned hereby acknowledges that the Servicer has received
from the Indenture Trustee that Receivable (as defined in the Sale and Servicing
Agreement), identified as ______________, in the Schedule of Receivables,
attached to the Sale and Servicing Agreement and included in the Trust Estate of
the Trust and the related Receivable File (as defined in the Sale and Servicing
Agreement).

          The undersigned further certifies that it shall return the original
Receivable and the related Receivable File to the Indenture Trustee when the
Servicer's need for such Receivable and/or Receivable File has ceased unless the
Receivable shall be liquidated or repurchased as described in Section 3.2, 4.2
or 4.7 of the Sale and Servicing Agreement.

          The undersigned hereby requests delivery of the Receivable and the
Receivable File to the Servicer.

          IN WITNESS WHEREOF, I have hereunto set my hand this _______ day of
__________, 200_.

                                                ________________________________

                                                By __________________________
                                                Name:
                                                Title:

<PAGE>

                                                                       EXHIBIT C

                         FORM OF SERVICER'S CERTIFICATE
                    CHEVY CHASE AUTO RECEIVABLES TRUST 2001-3
                2.0375% AUTO RECEIVABLES BACKED NOTES, CLASS A-1
                 2.88% AUTO RECEIVABLES BACKED NOTES, CLASS A-2
                 3.95% AUTO RECEIVABLES BACKED NOTES, CLASS A-3
                  4.70% AUTO RECEIVABLES BACKED NOTES, CLASS B

Payment Date:          ________________

Collection Period:     ________________

Record Date:           ________________

          Under the Sale and Servicing Agreement, dated as of December 1, 2001,
among Chevy Chase Bank, F.S.B. (as "Seller" and "Servicer"), Chevy Chase Auto
Receivables Trust 2001-3 (the "Trust") and U.S. Bank National Association, as
indenture trustee, the Servicer is required to prepare certain information each
month regarding current distributions to Noteholders and the performance of the
Trust during the previous month. The information which is required to be
prepared with respect to the Payment Date and Collection Period listed above is
set forth below. Certain of the information is presented on the basis of an
original principal amount of $1,000 per Note, and certain other information is
presented based upon the aggregate amounts for the Trust as a whole.

A.   Information Regarding the Current Monthly Distribution.

     1.   Class A-1 Notes

          (a)  The aggregate amount of the distribution to Class      $
               A-1 Noteholders on the Payment Date

          (b)  The amount of the distribution set forth in            $
               paragraph (a) above allocable to principal,
               including any overdue principal

          (c)  The amount of the distribution set forth in            $
               paragraph (a) above allocable to interest,
               including any overdue interest

<PAGE>

<TABLE>
<S>                                                                                     <C>
     (d)  The amount of the distribution set forth in paragraph (a) above, per          $
          Class A-1 Note in a principal amount of $1,000

     (e)  The amount of the distribution set forth in paragraph (b) above, per          $
          Class A-1 Note in a principal amount of $1,000

     (f)  The amount of the distribution set forth in paragraph (c) above, per          $
          Class A-1 Note in a principal amount of $1,000

2.   Class A-2 Notes

     (a)  The aggregate amount of the distribution to Class A-2 Noteholders on          $
          the Payment Date

     (b)  The amount of the distribution set forth in paragraph (a) above               $
          allocable to principal, including any overdue principal

     (c)  The amount of the distribution set forth in paragraph (a) above               $
          allocable to interest, including any overdue interest

     (d)  The amount of the distribution set forth in paragraph (a) above, per          $
          Class A-2 Note in a principal amount of $1,000

     (e)  The amount of the distribution set forth in paragraph (b) above, per          $
          Class A-2 Note in a principal amount of $1,000

     (f)  The amount of the distribution set forth in paragraph (c) above, per          $
          Class A-2 Note in a principal amount of $1,000

3.   Class A-3 Notes

     (a)  The aggregate amount of the distribution to Class A-3 Noteholders on          $
          the Payment Date

     (b)  The amount of the distribution set forth in paragraph (a) above               $
          allocable to principal, including any overdue principal
</TABLE>

                                       C-2

<PAGE>
<TABLE>
<S>                                                                                     <C>
     (c)  The amount of the distribution set forth in paragraph (a) above               $
          allocable to interest, including any overdue interest

     (d)  The amount of the distribution set forth in paragraph (a) above, per          $
          Class A-3 Note in a principal amount of $1,000

     (e)  The amount of the distribution set forth in paragraph (b) above, per          $
          Class A-3 Note in a principal amount of $1,000

     (f)  The amount of the distribution set forth in paragraph (c) above, per          $
          Class A-3 Note in a principal amount of $1,000

4.   Class B Notes

     (a)  The aggregate amount of the distribution to Class B Noteholders on the        $
          Payment Date

     (b)  The amount of the distribution set forth in paragraph (a) above               $
          allocable to principal, including any overdue principal

     (c)  The amount of the distribution set forth in paragraph (a) above               $
          allocable to interest, including any overdue interest

     (d)  The amount of the distribution set forth in paragraph (a) above, per          $
          Class B Note in a principal amount of $1,000

     (e)  The amount of the distribution set forth in paragraph (b) above, per          $
          Class B Note in a principal amount of $1,000

     (f)  The amount of the distribution set forth in paragraph (c) above, per          $
          Class B Note in a principal amount of $1,000

5.   Note Principal Balances

     (a)  The Class A-1 Note Principal Balance as of such Payment Date (after           $
          giving effect to any distribution on such Payment Date)
</TABLE>

                                       C-3

<PAGE>

<TABLE>
<S>                                                                                                     <C>
          (b)     The Class A-2 Note Principal Balance as of such Payment Date                          $
                  (after giving effect to any distribution on such Payment
                  Date)

          (c)     The Class A-3 Note Principal Balance as of such Payment Date                          $
                  (after giving effect to any distribution on such Payment Date)

          (d)     The Class B Note Principal Balance as of such Payment Date                            $
                  (after giving effect to any distribution on such Payment Date)

6.        Reserve Account

          (a)     Reserve Account Withdrawal Amount                                                     $

          (b)     The balance of the Reserve Account, after giving effect to                            $
                  distributions and deposits on such Payment Date and the change
                  in the balances from that of the prior Payment Date

7.        Monthly Fees                                                                                  $

          (a)     Monthly Indenture Trustee's Fee                                                       $

          (b)     Monthly Servicing Fee                                                                 $

          (c)     Monthly Owner Trustee's Fee                                                           $

          (d)     Aggregate of all Purchase Amounts received on the related                             $
                  Determination Date

          (e)     Aggregate amount received with respect to Defaulted                                   $
                  Receivables, including Liquidation Proceeds, during the
                  related Collection Period

8.        Delinquencies and Pool Balance.

          (a)     The aggregate Principal Balance of all Receivables which were                         $
                  delinquent (1) 30 days or more or (2) 90 days or more as of
                  the last day of the related Collection Period.

          (b)     The Pool Balance as of the end of the related Collection                              $
                  Period.

          (c)     The Pool Factor as of the end of the related Collection                               $
                  Period.
</TABLE>

                                       C-4

<PAGE>

(d)      The Note Factor for each Class of Notes on such                   $
         Payment Date.

                                       C-5

<PAGE>

                                                                       EXHIBIT D

                     FORM OF INDENTURE TRUSTEE'S CERTIFICATE
                             PURSUANT TO SECTION 9.4
                       OF THE SALE AND SERVICING AGREEMENT

                  U.S. Bank National Association, as indenture trustee (the
"Indenture Trustee") of the Chevy Chase Auto Receivables Trust 2001-3 (the
"Trust") created pursuant to an Amended and Restated Trust Agreement (the "Trust
Agreement"), dated as of December __, 2001, between Chevy Chase Bank, F.S.B. and
Wilmington Trust Company, and with reference to the Sale and Servicing Agreement
(the "Sale and Servicing Agreement"), dated as of December 1, 2001, among Chevy
Chase Bank, F.S.B. (the "Seller" and the "Servicer"), the Trust and the
Indenture Trustee, does hereby sell, transfer, assign and otherwise convey to
the Seller, without recourse, representation or warranty, all of the Indenture
Trustee's right, title and interest in and to all of the Receivables (as defined
in the Sale and Servicing Agreement) identified in the attached Servicer's
Certificate as "Purchased Receivables," which are to be repurchased by the
Seller pursuant to Sections 3.2, and all insurance policies, security and
documents relating thereto.

                  IN WITNESS WHEREOF, I have hereunto set my hand this _______
day of __________, 200_.

                                          ______________________________

<PAGE>

                                                                       EXHIBIT E

                     FORM OF INDENTURE TRUSTEE'S CERTIFICATE
                             PURSUANT TO SECTION 9.4
                       OF THE SALE AND SERVICING AGREEMENT

                  U.S. Bank National Association, as indenture trustee (the
"Indenture Trustee") of the Chevy Chase Auto Receivables Trust 2001-3 (the
"Trust") created pursuant to an Amended and Restated Trust Agreement (the "Trust
Agreement"), dated as of December __, 2001, between Chevy Chase Bank, F.S.B. and
Wilmington Trust Company, and with reference to the Sale and Servicing Agreement
(the "Sale and Servicing Agreement"), dated as of December 1, 2001, among Chevy
Chase Bank, F.S.B. (the "Seller" and the "Servicer"), the Trust and the
Indenture Trustee, does hereby sell, transfer, assign and otherwise convey to
the Servicer, without recourse, representation or warranty, all of the Indenture
Trustee's right, title and interest in and to all of the Receivables (as defined
in the Sale and Servicing Agreement) identified in the attached Servicer's
Certificate as "Purchased Receivables," which are to be purchased by the
Servicer pursuant to Sections 4.2 or 4.7 or 11.2, and all insurance policies,
security and documents relating thereto.

                  IN WITNESS WHEREOF, I have hereunto set my hand this _______
day of ____________, 200_.

                          _____________________________<PAGE>

                                                                    Exhibit 10.1

                               SUBLEASE AGREEMENT

                                     Between

                                 CERTICOM CORP.

                                 as Sublandlord,

                                       and

                            GUAVA TECHNOLOGIES INC.

                                  as Subtenant

                             Dated: November 1, 200l

<PAGE>

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                Page
                                                                                ----
<S>                                                                             <C>
ARTICLE 1 - SUBLEASE ...........................................................   1

 1.1 Sublease ..................................................................   1

ARTICLE 2 - HEADLEASE ..........................................................   1

 2.1 Subleases Subject to Headlease ............................................   1
 2.2 Compliance with Headlease .................................................   2
 2.3 Services ..................................................................   2
 2.4 Exercise of Rights and Remedies Under Headlease ...........................   3
 2.5 Exclusion from Headlease ..................................................   3

ARTICLE 3 - SUBLEASE TERM ......................................................   3

 3.1 Sublease Term .............................................................   3
 3.2 Common Area ...............................................................   4
 3.3 Surrender of Premises .....................................................   4
 3.4 Holding Over ..............................................................   6
 3.5 Subtenant's Letter of Credit ..............................................   6

ARTICLE 4 - RENT ...............................................................   7

 4.1 Rent ......................................................................   7
 4.2 Basic Rent ................................................................   7
 4.3 Chattels ..................................................................   7
 4.4 Additional Rent ...........................................................   8
 4.5 Payments Generally ........................................................   8
 4.6 Net Sublease ..............................................................   9

ARTICLE 5 - DELIVERY OF PREMISES; ALTERATIONS ..................................   9

 5.1 Delivery of Premises ......................................................   9
 5.2 Condition .................................................................  10
 5.3 Signs .....................................................................  10
 5.4 Access and Inspection .....................................................  10

ARTICLE 6 - USE, ASSIGNMENT AND SUBLETTING .....................................  11

 6.1 Use .......................................................................  11
 6.2 Legal Requirements ........................................................  11
 6.3 Assignment and Subletting .................................................  11
 6.4 Hazardous Materials .......................................................  12
</TABLE>

<PAGE>

                                      -ii-

<TABLE>
<S>                                                                               <C>
ARTICLE 7 - MAINTENANCE; UTILITIES .............................................  12

 7.1  Maintenance ..............................................................  12

ARTICLE 8 - INSURANCE ..........................................................  12

 8.1  Subtenant's Insurance ....................................................  12
 8.2  Indemnification of Sublandlord by Subtenant ..............................  13
 8.3  Indemnification of Subtenant by Sublandlord ..............................  13
 8.4  Legal Fees ...............................................................  14

ARTICLE 9 - TAXES ..............................................................  14

 9.1  Taxes ....................................................................  14

ARTICLE 10 - CASUALTY ..........................................................  14

 10.1   Casualty ...............................................................  14

ARTICLE 11 - DEFAULT ...........................................................  15

 11.1   Subtenant's Default ....................................................  15
 11.2   General Provisions Regarding Default ...................................  16

ARTICLE 12 - GENERAL PROVISIONS ................................................  17

 12.1   Mortgage Subordination .................................................  17
 12.2   Estoppel Certificates and Financial Statements .........................  17
 12.3   Representations and Warranties of Subtenant ............................  17
 12.4   Representation and Warranties of Sublandlord ...........................  17
 12.5   Notices; Demands and Other Instruments .................................  18
 12.6   Chattels ...............................................................  18

ARTICLE 13 - MISCELLANEOUS .....................................................  18

 13.1   Severability ...........................................................  18
 13.2   Binding Effect .........................................................  18
 13.3   Interpretation .........................................................  19
 13.4   Governing Law ..........................................................  19
 13.5   Recitals ...............................................................  19
 13.6   Headings and Captions ..................................................  19
 13.7   Survival or Representations and Warranties .............................  19
 13.8   Entire Agreement .......................................................  19
 13.9   Amendments .............................................................  19
 13.10  Number, Gender .........................................................  19
 13.11  Brokers ................................................................  20
 13.12  Condition Precedent ....................................................  20
 13.13  Facsimile Copies .......................................................  20
</TABLE>

<PAGE>

                                    SUBLEASE
                                    --------

     THIS SUBLEASE is made as of October ___, 2001 between CERTICOM CORP., a
Delaware Corporation, having an address at 200 Matheson Blvd. W., Mississauga,
Ontario, Canada ("Sublandlord"), and GUAVA TECHNOLOGIES INC., a Delaware
corporation having an address at 863 C Mitten Road, Burlingame, California
("Subtenant").

                                    Recitals:
                                    --------

     A.   By a lease dated October 20, 1998 (the "Original Lease") between THE
MULTI-EMPLOYER PROPERTY TRUST, A TRUST ORGANIZED UNDER 12 C.F.R. SECTION 9.18
(the "Landlord") and Sublandlord, as amended by an amending agreement dated
November 17, 1998 (the "First Amendment to Lease") and an amending agreement
dated March 15, 1998 (the "Second Amendment to Lease") (the Original Lease,
First Amendment to Lease and Second Amendment to Lease are hereinafter
collectively referred to as the "Headlease"), a redacted copy of which is
attached hereto as Exhibit C, Sublandlord, as tenant, leases all of the Building
                   ---------
located at 25801 Industrial Blvd. (the "Premises"), Mt. Eden Business Park (the
"Property") Hayward, California, being approximately 42,855 rentable square
feet, the approximate location of which is shown on Exhibit A attached hereto
                                                    ---------
for a term of 8 years 4 months commencing March 1, 1999 and ending July 31,
2007. The entity from time to time holding the Landlord's interest under the
Headlease is referred to as "Headlandlord".

     B.   Subtenant desires to sublease from Sublandlord and Sublandlord desires
to sublease to Subtenant the Premises upon the terms and conditions hereinafter
set forth.

     NOW, THEREFORE, in consideration of the Premises, the rents reserved herein
and the mutual benefits to be derived by Sublandlord and Subtenant, the parties
hereby agree as follows:

                              ARTICLE 1 - SUBLEASE
                              --------------------

1.1  Sublease.
     --------

     Sublandlord hereby subleases to Subtenant and Subtenant hereby subleases
from Sublandlord for the term at the rental, and upon all of the conditions set
forth herein, the Premises.

                              ARTICLE 2 - HEADLEASE
                              ---------------------

2.1  Sublease Subject to Headlease.
     -----------------------------

     Except as otherwise expressly provided in this Sublease and the Consent to
Sublease Agreement the ("Consent") executed by Landlord, Sublandlord and
Subtenant following the execution of this Sublease, Sublandlord and Subtenant
hereby acknowledge and agree that this Sublease is subject and subordinate to
all terms, conditions and covenants of the Headlease. As between Sublandlord and
Subtenant, however, subject to any modifications contained in the

<PAGE>
                                      -2-

Consent, the terms of this Sublease shall govern in the event of any
inconsistency between the Sublease and the Headlease.

 2.2 Compliance with Headlease.
     -------------------------

(a)  For the purposes of this Sublease only, Subtenant covenants and agrees to
assume all of the responsibilities and obligations of Sublandlord as the tenant
under the Headlease with respect to the Premises for the entire Sublease Term
(as hereinafter defined) (other than those provisions specifically excluded or
modified in this Sublease, including, but not limited to, the obligations to pay
rent which payment obligations are governed by this Sublease). Sublandlord and
Subtenant each covenant and agree to deliver promptly to the other copies of any
and all notices or other correspondence received by each from the Headlandlord
which are applicable to the Premises, and each further agrees, notwithstanding
anything contained in Article 12.5 hereof to the contrary, to deliver such
notices in the manner most appropriate to insure that the other will be able to
respond to any of such notices or other correspondence from the Headlandlord
within any time periods set forth in the Headlease.

(b) Subtenant covenants and agrees not to do, permit or allow any act which
would or might violate or constitute a breach of or a default under any of the
terms and conditions of the Headlease, or which would or might render
Sublandlord liable for any damage, claim, charge, penalty or expense thereunder.

(c) Subtenant agrees that Sublandlord shall not be required to perform any of
the covenants, agreements and/or obligations of Headlandlord under the Headlease
and, insofar as any of the covenants, agreements and obligations of Sublandlord
hereunder are required to be performed under the Headlease by the Headlandlord,
Subtenant agrees that Sublandlord shall be entitled to look to Headlandlord for
such performance. Notwithstanding the foregoing, Sublandlord shall promptly take
such action as may reasonably be indicated, under the circumstances, to secure
such performance upon Subtenant's request to Sublandlord to do so and shall
thereafter diligently prosecute such performance on the part of Headlandlord.

 2.3 Services.
     --------

     Except as otherwise provided in the Consent and as otherwise limited
herein, Subtenant hereby acknowledges and agrees that the only services,
amenities and rights to the Premises, and to which Subtenant is entitled under
this Sublease are those to the Premises to which Sublandlord is entitled under
the Headlease, subject to all the provisions, restrictions and conditions set
forth in the Headlease and this Sublease. Sublandlord shall not be liable to
Subtenant for Headlandlord's failure to provide any such services, amenities
and rights, nor shall any such failure be construed as a breach of this Sublease
by Sublandlord or an eviction of Subtenant, unless any such failure is the
result, directly or indirectly, of Sublandlord's act or failure to act in
accordance with the Headlease, during a period when Subtenant is not in default
under this Sublease. Further, Headlandlord's failure to provide any such
services, amenities and rights shall not entitle Subtenant to an abatement of
any of the Basic Rent, Additional Rent (as hereinafter defined) or any other
sums payable under this Sublease, except and only to the extent that (a)
Sublandlord receives an abatement under the Headlease with respect thereto, or
(b) such

<PAGE>

                                       -3-

failure to provide services, amenities or rights is due solely to Sublandlord's
uncured default under the Headlease.

2.4  Exercise of Rights and Remedies Under Headlease.
     ------------------------------------------------

     Subtenant shall not have the right to exercise any of Sublandlord's options
or elections permitted or authorized under the Headlease, or to institute any
action or proceeding against Headlandlord for the enforcement of the Headlease.
If Headlandlord shall default in the performance of any of its obligations
under the Headlease, Sublandlord shall, upon the written request of Subtenant
and at Subtenant's sole cost and expense, use its good faith efforts to enforce
the Headlease and obtain Headlandlord's compliance with its obligations
thereunder. Sublandlord shall in no event be liable to Subtenant for any default
by Headlandlord in the performance of its obligations under the Headlease, nor
shall any such default be construed as a breach of this Sublease by Sublandlord
or an eviction of Subtenant, or entitle Subtenant to an abatement of any of
Basic Rent, Additional Rent or any other sums payable under this Sublease,
except and only to the extent that (a) Sublandlord receives an abatement under
the Headlease with respect thereto, or (b) such failure to provide services,
amenities or rights is due to Sublandlord's uncured default under the Headlease
during a period when Subtenant is not in default under this Sublease.

2.5  Exclusion from Headlease
     ------------------------

     Subject to the Consent, the following Articles and Exhibits of the
Headlease are, without limitation, expressly excluded from this Sublease and
shall not apply to the Subtenant except where expressly identified in this
Sublease: Basic Lease Information, Articles 2(a) and 2(b), Article 4, Article 7,
Article 9(a) (with respect to "Alteration Fee" only), Article 9(c) (with respect
to the second sentence only), Article 9(d), Article 12 (first sentence only),
Article 14(a) (clause (i.) of the first subparagraph), Article 14(c), Article
15(a)(v), Article 17, Article 27, Article 36, Article 39(m), Exhibit B, Exhibit
C, First Amendment to Lease and Second Amendment to Lease.

                            ARTICLE 3 - SUBLEASE TERM
                            -------------------------

3.1  Sublease Term.
     -------------

(a)  Sublandlord hereby subleases and demises to Subtenant and Subtenant hereby
subleases and takes from Sublandlord the Premises for a term (the "Sublease
Term") commencing January 1, 2002 (the "Term Commencement Date") and expiring as
providkd in the Headlease on July 30, 2007 (the "Expiration Date"), unless
terminated earlier according to the terms hereof or extended according to the
terms of Article 3.1(b), for the rent herein reserved and upon and subject to
the covenants, agreements, terms, conditions and provisions hereinafter set
forth. Except as otherwise provided in the Consent, if the Headlease is
terminated in accordance with its terms (whether by expiry, termination or
surrender) this Sublease shall be automatically terminated at the same time as
the Headlease is terminated. Subtenant agrees to accept possession of the
Premises on or after November 12, 200l.

<PAGE>

                                      -4-

(b)  Notwithstanding the foregoing provisions of Article 3.1(a), if the
Sublandlord exercises the option to renew the Headlease as provided in Article
40 of the Headlease, the Sublandlord, at th.e same time as written notice of
such exercise is delivered to the Headlandlord, shall send to Subtenant a copy
of said notice. Subtenant shall then have the option to renew this Sublease for
an additional term equal to the term set forth in Article 40 of the Headlease.
Such renewal option must be exercised, if at all, by written notice given to
Sublandlord not later than three (3) months after receipt of a copy of
Sublandlord's notice to Headlandlord. Notwithstanding the foregoing provisions
of this Article 3.1(b), this renewal option shall be null and void and Subtenant
shall have no right to renew this Sublease if, (i) the Sublandlord fails to
renew the Headlease, or (ii) on the date Subtenant exercises such renewal option
or on the date immediately preceding the commencement of the renewal period
Subtenant is in default of any of its obligations under this Sublease. If
Subtenant exercises such renewal option, then during the renewal period the Base
Rent payable by Subtenant shall be determined as provided in the second
paragraph of Article 40(a) of the Headlease; provided, however, that the term
"fair market rent" as used in said second paragraph of Article 40(a) of the
Headlease shall mean the rental rate for comparable space under a sublease (and
not a primary lease) to new subtenants.

(c)  Subtenant shall throughout the Sublease Term lease the chattels listed or
described in Exhibit C attached hereto (collectively, the "Chattels") and shall
use the Chattels in connection with the use of the Premises only; provided,
however, that Subtenant may remove all or any portion of the Chattels from the
Premises and store said Chattels in a commercial facility engaged in the
business of storing similar property of its customers. Such storage of the
Chattels shall be at the sole cost and expense of Subtenant and shall be in
addition to the rent payable by Subtenant for such Chattels pursuant to Article
4.3. In the event that all or any portion of the Chattels are removed from the
Premises for storage, Subtenant shall provide to Sublandlord written notice
specifying the location of Chattels so removed and a complete inventory of the
Chattels removed from the Premises and placed in storage.

 3.2 Common Area.
     -----------

     Except as otherwise provided in the Consent, Subtenant's use of the Common
Area shall be subject to all restrictions, covenants and rules and regulations
of the Headlease, including the CC&R%. Except as otherwise provided in the
Consent, Subtenant covenants not to do or permit to be done any act in or on the
Common Area which would unreasonably interfere with the use or enjoyment of the
Common Area by the other tenants and occupants of other buildings on the
Property.

 3.3 Surrender of Premises.
     ---------------------

(a)  On the Expiration Date or upon the earlier termination of the Sublease or
of Subtenant's right to possession of the Premises, Subtenant will at once
surrender and deliver up the Premises, together with all improvements thereon,
to Sublandlord in good condition and repair, reasonable wear and tear excepted;
conditions existing because of Subtenant's failure to perform maintenance,
repairs or replacements as required of Subtenant under this Sublease shall not
be deemed "reasonable wear and tear." Said improvements shall include all
plumbing, lighting, electrical, heating, cooling and ventilating fixtures and
equipment and other articles of personal

<PAGE>

                                      -5-

property used in the operation of the Premises (as distinguished from operations
incident to the business of Subtenant). Subtenant shall surrender to Sublandlord
all keys to the Premises and make known to Sublandlord the combination of all
combination locks which Subtenant is permitted to leave on the Premises.

(b)  All Initial Alterations (as defined in Article 5.1(a)) and Other Subtenant
Alterations (as defined in Article 5.l(a))in or upon the Premises made by
Subtenant shall become a part of and shall remain upon the Premises upon such
termination without compensation, allowance or credit to Subtenant; provided,
however, that Sublandlord shall have the right to require Subtenant to remove
any Other Subtenant Alterations, or portions thereof unless Consent specifically
states that no such removal required. Said right shall be exercisable by
Sublandlord's giving written notice thereof to Subtenant not less than sixty
(60) days prior to such Expiration Date or more than twenty (20) days after such
termination. In addition to the foregoing, Subtenant shall also remove any Other
Subtenant Alterations made by Subtenant, or portion thereof, which Headlandlord
may require Sublandlord to remove, pursuant to the terms of the Headlease. In
any such event, Subtenant shall restore the Premises to their condition prior to
the making of such Other Subtenant Alterations, repairing any damage occasioned
by such removal or restoration. If Sublandlord or Headlandlord requires removal
of any Other Subtenant Alteration, or a portion thereof, and Subtenant does not
make such removal in accordance with this Article 3.3, Sublandlord may remove
the same (and repair any damage occasioned thereby), and dispose thereof, or at
its election, warehouse the same. Subtenant shall pay the costs of such removal,
repair and warehousing on demand.

(c)  As between Sublandlord and Subtenant, Subtenant shall not be required to
remove any Alterations performed by Sublandlord prior to the Term Commencement
Date or to restore the Premises to their condition prior to the making of such
Alterations. If Sublandlord is required under the Headlease to remove any
Alterations performed prior to the Commencement Date, Subtenant shall permit
Sublandlord to enter the Premises for a reasonable period of time prior to the
Expiration Date, subject to such conditions as Subtenant may reasonably impose,
for the purpose of removing Sublandlord's Alterations and restoring the Premises
as required by the Headlease.

(d)  On the Expiration Date, or upon the earlier termination of the Sublease or
of Subtenant's right to possession of the Premises, Subtenant shall remove
Subtenant's articles of personal property incident to Subtenant's business
("Trade Fixtures"); provided, however that Subtenant shall repair any injury or
damage to the Premises which may result from such removal, and shall restore the
Premises to the same condition as prior to the installation thereof. If
Subtenant does not remove Subtenant's Trade Fixtures from the Premises on or
before the Expiration Date or the earlier termination of this Sublease,
Sublandlord may, at its option, remove the same (and repair any damage
occasioned thereby and restore the Premises as aforesaid) and dispose thereof or
warehouse the same, and Subtenant shall pay the cost of such removal, repair,
restoration or warehousing to Sublandlord on demand, or Sublandlord may treat
said Trade Fixtures as having been conveyed to Sublandlord with this Sublease
acting as a Bill of Sale therefor, without further payment or credit by
Sublandlord to Subtenant shall indemnify, defend and hold harmless from all
damages, loss, cost and expense (including reasonable attorneys' fees) arising
out of or in

<PAGE>

                                      -6-

connection with Subtenant's failure to surrender the Premises in accordance
with this Article 3.3. This Article 3.3 shall survive the termination or
expiration of this Sublease.

3.4  Holding Over.
     ------------

     If Subtenant remains in occupancy of the Premises beyond the Expiration
Date or earlier termination of the Sublease, it shall remain solely as a
subtenant from month-to-month, and all provisions of this Sublease applicable to
the Sublease Term shall remain in full force and effect, except that Basic Rent
shall be 150% of that in effect upon the expiration or termination date. Nothing
in this Article is intended or shall be construed to permit Subtenant to remain
in occupancy of the Premises beyond the expiration or termination of the
Sublease Term or to waive any right or remedy of Sublandlord as a result
thereof. Subtenant shall defend, indemnify and save Sublandlord, its successors
and assigns, harmless from any cost, loss, damage or expense, including, without
limitation, attorneys' fees, incurred by Sublandlord as a result of any claim,
suit, liability or demand arising out of, pertaining to or involving Subtenant's
remaining in occupancy of the Premises beyond the expiration or termination of
the Sublease Term.

3.5 Subtenant's Letter of Credit.
    ----------------------------

(a) Concurrently with the execution of this Sublease by Subtenant, Subtenant
shall deliver to Headlandlord an unconditional irrevocable letter of credit
("Letter of Credit"), in the form and content required by the Consent, as
consideration for Subtenant's execution of this Sublease and as consideration
for the granting of an attornment clause to Subtenant by Headlandlord, as
provided in the Consent. The Letter of Credit shall be maintained in effect from
the date of this Sublease through thirty (30) days after the expiration or
earlier termination of the Term, provided, however, that if the term of the
Letter of Credit will expire prior to the expiration of such thirty (30) day
period, Subtenant shall deliver to Headlandlord, at least fifteen (15) calendar
days prior to the expiration date of the Letter of Credit, a renewal of the
Letter of Credit or a replacement Letter of Credit which satisfies the
conditions of this Article 3.6 and the Consent. Further, Subtenant shall deliver
to Headlandlord, during said fifteen (15) day period, a confirmation from the
issuer of said extension or replacement Letter of Credit.

(b) The Letter of Credit shall be issued, at Subtenant's sole expense, by a
Chicago office of UBS Paine Webber, another similarly qualified financial
institution or a San Francisco or New York office of a major national bank
reasonably satisfactory to Subtenant and Sublandlord (the "Bank"), name the
Headlandlord as the beneficiary, in the amount of $600,000.00 from and during
the Sublease Term. The Letter of Credit shall be for a one-year term or, at
Subtenant's election, longer, and shall not vary materially in form and content
from Exhibit E. In the event that the Bank shall fail to notify Headlandlord
that the Letter of Credit will be renewed for at least one (1) year beyond the
then applicable expiration date, and Subtenant shall not have delivered to
Headlandlord, at least fifteen (15) days prior to the relevant annual expiration
date, a replacement Letter of Credit in the amount required hereunder and
otherwise meeting the requirements set forth above, then Headlandlord shall be
entitled to draw on the expiring Letter of Credit, up to the full amount
thereof, and shall hold and apply the proceeds of such draw as Letter of Credit
Proceeds pursuant to Article 3.5(a) above.

<PAGE>

                                      -7-

                                ARTICLE 4 - RENT
                                ----------------

 4.1     Rent.
         ----

         The Subtenant acknowledges that it has examined a copy of the Headlease
 and the covenants and obligations of the Landlord contained therein. The
 Subtenant shall honor, perform and observe all of the Sublandlord's covenants,
 obligations, and agreements therein respectively reserved and contained with
 respect to the Premises, including the payment of all rentals, charges, costs
 and other expenses of any kind or nature whatsoever to be paid by the
 Sublandlord under the Headlease, as if the same were a part of this Sublease.

 4.2     Basic Rent.
         ----------

         Commencing on January 1, 2002 (the "Rent Commencement Date"), and
 continuing throughout the Sublease Term, commencing in each year on the
 anniversary date of the Rent Commencement Date, Subtenant shall pay to
 Sublandlord or as it may from time to time direct as "Basic Rent", as rent, for
 the Premises:

         (i)     during Year 1 of the Sublease Term $694,251.00;

         (ii)    during Year 2 of the Sublease Term $715,078.56;

         (iii)   during Year 3 of the Sublease Term $736,530.84;

         (iv)    during Year 4 of the Sublease Term $758,626.80;

         (v)     during Year 5 of the Sublease Term $781,385.52; and

         (vi)    during Year 6 of the Sublease Term $804,827.16;

payable in each case in equal monthly installments in advance on the Rent
Commencement Date and on the first day of each month thereafter during the
Sublease Term. Basic Rent for any broken month shall be pro-rated.

4.3      Chattels.
         --------

         Commencing on the Rent Commencement Date and continuing throughout the
Sublease Term, Subtenant shall pay to Sublandlord or as it may from time to time
direct, as rent, for the Chattels:

         (i)     during Year 1 of the Sublease Term $150,000.00;

         (ii)    during Year 2 of the Sublease Term $154,500.00;

         (iii)   during Year 3 of the Sublease Term $159,135.00;

         (iv)    during Year 4 of the Sublease Term $163,909.05;

<PAGE>

                                      -8-

     (v)  during Year 5 of the Sublease Term $168,826.32 and

     (vi) during Year 6 of the Sublease Term $173,891.10;

payable in each case in equal monthly installments in advance on the Rent
Commencement Date and on the first day of each month thereafter during the
Sublease Term. Rent for any broken month shall be pro-rated.

4.4  Additional Rent.
     ---------------

(a)  The Subtenant agrees to pay to the Sublandlord as additional rent in
respect of the Premises, commencing on the Rent Commencement Date, all sums
which the Sublandlord is from time to time required to pay to the Headlandlord
as additional rent under the Headlease, including without limiting the
generality of the foregoing the payments for Real Property Taxes, Tenant's
Percentage Share of Operating Expenses, payments for taxes, rates, duties and
assessments, water, utilities, bulbs, and other amounts due under the Headlease
(collectively, "Additional Rent"). Additional Rent may be collected by the
Sublandlord as rent, with all rights of distress and otherwise as reserved to
the Sublandlord hereunder or at law in respect of rent in arrears.

(b)  All payments of Additional Rent required to be paid by the Subtenant to the
Sublandlord hereunder, shall be paid by the Subtenant to the Sublandlord not
later than the times that such are payable by the Sublandlord to the
Headlandlord under the Headlease.

4.5  Payments Generally.
     ------------------

     Payments by the Subtenant to the Sublandlord of whatsoever nature required
or contemplated by this Sublease shall: (i) be made when due hereunder, without
notice or demand therefor and without any abatement, set-off, compensation or
deduction whatsoever at the address of the Sublandlord set forth above or at
such other place as the Sublandlord may designate from time to time to
Subtenant; (ii) be applied towards amounts then outstanding hereunder in such
manner as the Sublandlord determines; and (iii) shall be subject to the late
payment charges set out in Article 3 of the Headlease. In the event of any
non-payment of any amounts required to be paid pursuant to the provisions of
this Sublease, or the Headlease, as the case may be, the Sublandlord, in
addition to any other rights hereunder or at law, shall have the same remedies
and may take the same steps for the recovery of all amounts as the Sublandlord
may have for recovery of rent in arrears under the terms of this Sublease or at
law.

4.6  Net Sublease.
     -------------

     The Subtenant acknowledges and agrees that it is the intention of the
parties that this Sublease shall be a completely carefree net Sublease for the
Sublandlord, and that the Sublandlord shall not be responsible during the
Sublease Term for any loss, charges, expenses and outlays of any nature or kind
whatsoever arising from or relating to the Premises or the contents thereof and
the Subtenant shall pay all such charges, impositions and expenses of every kind
and nature relating to the Premises, as is required to be paid by the
Sublandlord under the terms and provision of the Headlease save such as to be
perfomed by the Headlandlord under

<PAGE>

                                       -9-

the Headlease, and covenants with the Sublandlord accordingly. Any amount and
any obligation relating to the Premises or this Sublease which is not expressly
declared in this Sublease to be the responsibility of the Sublandlord shall be
the responsibility of the Subtenant to be paid or performed by or at the
Subtenant's expense.

                  ARTICLE 5 - DELIVERY OF PREMISES; ALTERATIONS
                  ---------------------------------------------

5.1     Delivery of Premises.
        ---------------------

(a)     Alterations. Sublandlord has reviewed and approved detailed plans and
specifications for the initial alterations and additions to the Premises and
Common Area listed in Exhibit D (the "Initial Alterations"). Sublandlord hereby
approves and consents to the construction by Subtenant of the Initial
Alterations, provided that the Consent includes the consent of the Landlord to
the construction of the Initial Improvements. Subtenant shall not make any
other alterations in or additions to the Premises ("Other Subtenant
Alterations"), if to do so would constitute a default under the Headlease
(without regard to any requirement of notice or cure period). If Subtenant's
proposed Other Subtenant Alterations would not constitute a default under the
Headlease, Sublandlord's consent thereto shall nonetheless be required, but
Sublandlord's consent to such Other Subtenant Alterations shall not be
unreasonably withheld, and if Sublandlord consents thereto, Sublandlord shall
use reasonable efforts to obtain the consent of the Headlandlord if such
consent is required under the Headlease. If Other Subtenant Alterations are
permitted or consented to, Subtenant shall make all Other Subtenant Alterations
in accordance with all requirements set forth in the Headlease and this
Sublease, and Subtenant shall be responsible to pay, directly to Headlandlord,
all sums required to be paid in connection with the making of Alterations under
the Headlease. Subtenant shall indemnify, defend and hold harmless Sublandlord
against liability, loss, cost, damage, liens and expense imposed on Sublandlord
arising out of the performance of Other Subtenant Alterations by Subtenant.

(b)     Removal of Other Subtenant Alterations. If Subtenant performs any Other
Subtenant Alterations, Subtenant shall be obligated to remove such Other
Subtenant Alterations and restore the Premises to the condition existing on the
Term Commencement Date if the Headlease or the Consent requires such removal and
restoration.

(c)     No Liens. Subtenant shall not do any act which in any way encumbers the
title of the Headlandlord in and to the Premises, the Building or the Property
(or any part thereof) nor shall the interest or estate of Headlandlord or
Sublandlord be in any way subject to any claim by way of lien or encumbrance,
whether by operation of law or by virtue of any express or implied contract by
Subtenant, or by reason of any other act or omission of Subtenant. Any lien
shall, at Subtenant's expense, be discharged within ten (10) days after Notice
is hereby given that Sublandlord and Headlandlord will not be liable for any
labor, service or material furnished or to be furnished to Subtenant, and that
no mechanics or other liens for such labor, services or materials shall attach
to or affect the interest of Sublandlord or Headlandlord in and to the Premises
or any part thereof. Subtenant shall defend, indemnify and save Sublandlord,
Headlandlord and Headlandlord's mortgagee, if any, and their respective
successors and assigns, harmless from any cost, loss, damage or expense,
including, without limitation, attorneys' fees, incurred as a result of any
claim, suit, liability or demand arising out of, pertaining to or

<PAGE>

                                      -10-

involving any mechanics' or other lien or security interest which Subtenant
permits to be filed against the Premises.

5.2  Condition.
     ---------

(a)  The Premises are subleased and assigned to Subtenant and the rights to the
Common Area are granted to Subtenant in their present condition by Sublandlord,
without representation or warranty, express or implied, subject and subordinate
to the Headlease, all easements, restrictions, agreements and recorded matters,
all taxes and Real Property Taxes, not yet due and payable, and all applicable
zoning restrictions, regulations and ordinances and building restrictions and
governmental regulations now or hereafter in effect.

(b)  By execution of this Sublease and except as expressly set forth herein,
Subtenant acknowledges and agrees that it has inspected the Premises, the
Building and the Property and shall accept the Premises and the Common Area on
the Term Commencement Date in their then "as is" and "where is" physical and
environmental condition. Subtenant acknowledges and agrees that neither
Sublandlord nor its agents or employees has made any express warranty or
representation regarding the physical or environmental condition of the
Premises, the Common Area, the Building or the Property, the quality of material
or workmanship of the Premises, the Common Area, the Building or the Property,
latent or patent, or the fitness of the Premises, the Common Area, the Building
or the Property for any particular use or purpose and that no such
representation or warranty shall be implied by law, it being agreed that all
such risks are to be borne by Subtenant.

(c)  Subtenant acknowledges that Exhibit A is an approximation only of the
                                 ---------
buildings and improvements on the Property and that no representation or
warranty, express or implied, is hereby made by Sublandlord, its employees or
agents, regarding the existence, location or size of any buildings or
improvements in the Property. Subtenant acknowledges that, without Subtenant's
consent, the owners, tenants and occupants of the Building or buildings on the
Property may have the right to modify the buildings and improvements or
construct additions or additional buildings or improvements in the Building or
on the Property.

(d)  The Sublandlord agrees, at its own expense, to deliver the Premises in a
broom swept condition.

5.3  Signs.
     ------

     Subtenant acknowledges that any signage shall be subject to the terms of
Article 21 of the Headlease, CC&R's, Headlandlord's approval and all Legal
Requirements, and at Subtenant's sole expense.

5.4  Access and Inspection.
     ----------------------

     Upon reasonable prior notice to Subtenant (but nothing in the foregoing
shall limit any right of Headlandlord to enter the Premises under the
Headlease), Sublandlord and Headlandlord, and their respective agents, shall
have access to the Premises at all reasonable times to (i) examine and inspect
and the Premises; (ii) repair the Premises or any part thereof in accordance

<PAGE>

                                      -ll-

with the Headlease; (iii) show the Premises to prospective mortgagees and
purchasers; and (iv) during the last one hundred twenty (120) days of the
Sublease Term, to show the Premises to prospective assignees, subtenants.

                   ARTICLE 6 - USE, ASSIGNMENT AND SUBLETTING
                   ------------------------------------------

 6.1 Use.
     ---

     The Subtenant shall use and occupy the Premises from and after the Rent
Commencement Date and shall thereafter conduct its business therein. The
Premises may be used for general office and administrative purposes, including
computer hardware and software development, engineering and laboratory
facilities for development of scientific instrumentation and chemical reagents,
light manufacturing facilities for the assembly of scientific instruments and
production of chemical reagents, the development, light manufacturing and
marketing of medical instruments or similar products and the storage of
materials used in foregoing activities, including, but not limited to, chemicals
which are classified by Article 8 of the Headlease as "Hazardous Materials" (the
"Permitted Use"), and for no other purpose without the prior written consent of
Landlord and Sublandlord; provided that such purpose is not precluded by and is
in accordance with Article 8 (as modified by the Consent) and any other
provisions of the Headlease and all other Legal Requirements applicable to the
Premises and Subtenant's operations therein.

6.2  Legal Requirements.
     ------------------

     Subtenant shall comply with and cause the Premises to comply with: (a) all
Legal Requirements and federal laws, orders and regulations now or hereafter
applicable to the Premises or the occupancy or use thereof or the health and
welfare of Subtenant's employees, invitees, licensees or customers, including,
without limitation, Legal Requirements which require unforeseen or structural
alterations or repairs to the Premises; (b) the Headlease; and (c) all
easements, agreements, restrictions and recorded matters affecting or relating
to the Premises, and all agreements entered into by Subtenant and Sublandlord
with regard to the Premises, including insurance policies. Subtenant covenants
not to do or permit to be done any act in the Premises which would unreasonably
interfere with the use or enjoyment of the Premises, the Building or the other
buildings on the Property by the occupants of the Premises, the Building or any
of the other buildings on the Property.

6.3  Assignment and Subletting.
     -------------------------

     Subtenant may not assign or transfer this Sublease or sublet all or any
part of the Premises without Sublandlord's prior written consent, and any
assignment or subletting without Sublandlord's consent shall be void and of no
effect. If Subtenant assigns this Sublease or sublets all or any part of the
Premises, Subtenant shall nevertheless remain primarily liable to Sublandlord
for the full payment of Basic Rent, Additional Rent and any other sum due under
this Sublease and the observance and performance of all obligations, covenants
and agreements under this Sublease as payments and obligations of a principal
and not of a guarantor or surety as

<PAGE>

                                      -12-

though no assignment or subletting had been made. Each sublease shall expressly
be made subject to the provisions of this Sublease.

6.4  Hazardous Materials.
     -------------------

     Subject to the Consent, Sublandlord acknowledges and agrees that Subtenant,
in addition to the Hazardous Materials permitted in, on or about the Premises or
Real Property by Article 8 of the Headlease, shall be permitted to store and use
in, on or about the Premises or Real Property, in a normal and customary manner
for Subtenant's permitted uses of the Premises under this Article 6, the
Hazardous Materials listed in Exhibit F attached hereto; provided that the
Handling of such Hazardous Materials shall comply at all times with all Legal
Requirements, including Hazardous Material Laws (as defined in the Headlease).
When applying Article 8(d) of the Headlease as an incorporated provision of this
Sublease, the Subtenant's indemnity of the Headlandlord and the Sublandlord
shall not apply to the extent the Claim arises by reason of Hazardous Materials
conditions existing upon the Premises or the Real Property as of the Term
Commencement Date of this Sublease.

                       ARTICLE 7 - MAINTENANCE; UTILITIES
                       ----------------------------------

 7.1   Maintenance.
       -----------

     Subtenant covenants and agrees to comply with Article 10 of the Headlease.
During the Sublease Term, Subtenant shall keep fully paid a contract for regular
servicing and maintenance (at least once quarterly) of the heating, ventilating
and air conditioning systems serving the Premises, which contractor shall be
approved by Sublandlord, such approval not to be unreasonably withheld.
Sublandlord shall not be required to maintain, repair or rebuild the Premises.
Subtenant hereby waives the right to perform maintenance or make repairs at the
expense of Sublandlord pursuant to any law at any time in effect.

                              ARTICLE 8 - INSURANCE
                              ---------------------

8.1  Subtenant's Insurance.
     ---------------------

     (a)  Commencing on the Term Commencement Date, Subtenant shall take out and
at all times during the Sublease Term Subtenant shall keep in force such
insurance in respect of the Premises as shall comply with the obligations of the
Sublandlord pursuant to Article 13 of the Headlease, and shall be subject to the
same limitations of liability with respect to damage, loss or injury as are set
out in the Headlease. Each policy shall name as additional insureds the
Headlandlord, Headlandlord's mortgagee, if any, and Sublandlord. In addition,
every policy shall provide that such policy shall not be canceled or materially
amended without at least thirty (30) days prior written notice to the named and
additional insureds and that it shall not be invalidated or the proceeds not
payable by or due to any act or neglect of Subtenant or the additional insureds,
occupancy or use of the Premises for purposes more hazardous than permitted by
such policy, any foreclosure or other proceedings relating to the Premises or
change in title to or ownership of the Premises, or part thereof. Such policies
shall not require Subtenant and the additional insureds to pay any portion of
any loss, damage or claim prior to payment by the insurer. On the

<PAGE>

                                      -13-

date that this Sublease is executed by Subtenant and thereafter not less than
thirty (30) days prior to the expiration of such insurance, Subtenant shall
deliver to Sublandlord certificates of such insurance. Subtenant shall not
obtain or carry separate insurance concurrent in form or contributing in the
event of loss with that required by this Sublease.

(b) Sublandlord and Subtenant each hereby waives any and all rights of recovery
against the other or against the directors, officers, shareholders, partners,
employees, agents and representatives of the other, on account of loss or damage
of such waiving party or its property, or the property of others under its
control, to the extent that such loss or damage is insured against under any
property coverage insurance policy which either may have in force at the time of
such loss or damage. Subtenant shall, upon obtaining the policies of property
insurance required under this Sublease, give notice to its insurance carrier(s)
that the foregoing mutual waiver of subrogation is contained in this Sublease.
The waivers set forth herein shall be required to the extent that same are
available from each party's insurer without additional premium, if an extra
charge is incurred to obtain such waiver, it shall be paid by the party in whose
favor the waiver runs within fifteen (15) days after written notice from the
other party.

 8.2 Indemnification of Sublandlord by Subtenant.
     -------------------------------------------

     Subtenant shall indemnify and hold harmless Sublandlord and the
Headlandlord, and each of their agents and employees (collectively the
"Indemnified Parties"), from and against any and all claims, suits, demands,
damages, judgments, costs and expenses arising from Subtenant's use of the
Premises, or from the conduct of Subtenant's business, or from any activity,
work, act or omission of Subtenant and its agents, employees, contractors or
invitees, or permitted or suffered by Subtenant in or about the Premises or
elsewhere unless such claims, suits, demands, damages, judgments, costs and
expenses are caused by or arise from the negligence or wilful conduct of any of
the Indemnified Parties, and shall further indemnify and hold harmless
Sublandlord or the Headlandlord, as the case may be, from and against any and
all claims, suits, demands, damages, judgments, costs and expenses arising from
any breach or default in the performance of any obligation on Subtenant's part
to be performed under the terms of this Sublease, or arising from any negligence
of Subtenant or any of Subtenant's agents, invitees, contractors, or employees,
and from and against all costs, expenses and liabilities (including, without
limitation, reasonable legal fees and disbursements) incurred in the defence of
any such claim or any action or proceeding brought thereon. Subtenant agrees
that should any action or proceeding be brought against Sublandlord or the
Headlandlord by reason of any such claim, upon notice from Sublandlord or the
Headlandlord, unless caused by or arising from the negligence or willful conduct
of any of the Indemnified Parties, as the case may be, Subtenant shall defend
the same at Subtenant's expense by counsel reasonably satisfactory to
Sublandlord or the Headlandlord, as the case may be. The indemnifications set
forth in this paragraph shall survive the expiration or earlier termination of
this Sublease.

 8.3 Indemnification of Subtenant by Sublandlord.
     -------------------------------------------

     Sublandlord shall indemnify and hold harmless Subtenant and each of its
agents and employees (collectively the "Subtenant Indemnified Parties"), from
and against any and all claims, suits, demands, damages, judgments, costs and
expenses arising from the use of the

<PAGE>

                                      -14-

Premises by Sublandlord, or from the conduct of Sublandlord's business, or from
any activity, work, act or omission of Sublandlord and its agents, employees,
contractors or invitees, or permitted or suffered by Sublandlord in or about the
Premises or elsewhere unless such claims, suits, demands, damages, judgments,
costs and expenses are caused by or arise from the negligence or wilful conduct
of any of the Subtenant Indemnified Parties, and shall further indemnify and
hold harmless Subtenant from and against any and all claims, suits, demands,
damages, judgments, costs and expenses arising from any breach or default in the
performance of any obligation on Sublandlord's part to be performed under the
terms of this Sublease, or arising from any negligence of Sublandlord or any of
Sublandlord's agents, invitees, contractors, or employees, and from and against
all costs, expenses and liabilities (including, without limitation, reasonable
legal fees and disbursements) incurred in the defence of any such claim or any
action or proceeding brought thereon. Sublandlord agrees that should any action
or proceeding be brought against Subtenant by reason of any such claim, upon
notice from Subtenant, unless caused by or arising from the negligence or
willful conduct of any of the Subtenant Indemnified Parties, as the case may be,
Sublandlord shall defend the same at Sublandlord's expense by counsel reasonably
satisfactory to Subtenant, as the case may be. The indemnifications set forth in
this paragraph shall survive the expiration or earlier termination of this
Sublease.

8.4    Legal Fees.
       -----------

       In the event a Party to this Sublease, without any fault on its part, is
a party to any litigation commenced by or against the other Party, the other
Party shall pay all costs including, without limitation, reasonable legal fees
incurred by or imposed by or upon the Party in connection with such litigation.

                                ARTICLE 9 - TAXES
                                -----------------
9.1    Taxes.
       ------

       The Subtenant shall pay all taxes, Real Property Taxes, rates, duties and
assessments as may be levied, rated, charged or assessed against or in respect
of all improvements, equipment and facilities on or in the Premises and in
respect of any business carried on thereon or therein or in respect of the use
or occupancy thereof by the Subtenant pursuant to the Headlease, including
without limitation all sales, ad Valorem, business transfer, whether imposed on
the Sublandlord, the Headlandlord or the Subtenant.

                              ARTICLE 10 - CASUALTY
                              ---------------------

10.1   Casualty.
       ---------

(a)    If, during the Sublease Term, the Premises shall be partially or
totally damaged or destroyed by fire or other casualty, Subtenant shall
immediately notify Sublandlord of the existence and extent of such damage.

<PAGE>

                                      -15-

(b)  If Headlandlord would have the right under Article 11 of the Headlease and
elects to terminate pursuant to the terms of the Headlease, Sublandlord shall
give prompt notice thereof to Subtenant and this Sublease shall terminate as of
the same date as the Headlease terminates.

                              ARTICLE 11 - DEFAULT
                              --------------------

11.1 Subtenant's Default.
     -------------------

(a)  Any one or more of following events shall be considered an "Event of
Default" by Subtenant, as such term is used in this Sublease:

     (i)     Subtenant shall be adjudged an involuntary bankrupt, or a decree or
             order approving, as properly filed, a petition or answer filed
             against Subtenant asking reorganization of Subtenant under the
             Federal bankruptcy laws as now or hereafter amended, or under the
             laws of any state, shall be entered, and any such decree or
             judgment or order shall not have been vacated or stayed or set
             aside within sixty (60) days from the date of the entry or granting
             thereof; or

     (ii)    Subtenant shall file, or admit the jurisdiction of the court and
             the material allegations contained in, any petition in bankruptcy,
             or any petition pursuant or purporting to be pursuant to the
             Federal Bankruptcy laws now or hereafter amended, or Subtenant
             shall institute any proceedings for relief of Subtenant under any
             bankruptcy or insolvency laws or any laws relating to the relief of
             debtors, readjustment of indebtedness, re-organization,
             arrangements, composition or extension; or

     (iii)   Subtenant shall make any assignment for the benefit of creditors or
             shall apply for or consent to the appointment of a receiver for
             Subtenant or any of the property of Subtenant; or

     (iv)    Subtenant shall admit in writing its inability to pay its debts as
             they become due; or

     (v)     The Premises are levied on by any revenue officer or similar
             officer; or

     (vi)    A decree or order appointing a receiver of the property of
             Subtenant shall be made and such decree or order shall not have
             been vacated, stayed or set aside within thirty (30) days from the
             date of entry or granting thereof; or

     (vii)   Subtenant shall vacate or abandon the Premises during the Sublease
             Term or assign this Sublease or further sublet of the Premises
             other than in strict accordance with Article 6.3; or

     (viii)  Subtenant fails to make any payment of rent required to be made by
             Subtenant as and when the same is due, notwithstanding the
             foregoing, Sublandlord shall give Subtenant notice of non-payment
             and three (3) days from receipt of such notice to

<PAGE>

                                      -16-

             cure such non-payment before assessing late fees and/or interest
             provided that in no event shall Subtenant be late in payment of any
             rent more than twice during any year of the Sublease Term; or

     (ix)    Subtenant fails to secure insurance or to provide proper evidence
             of insurance as set forth in Article 8 of this Sublease or fails to
             keep the Premises, the Building or the Property free of lien claims
             as set forth in Article 5 of this Sublease and either such failure
             continues for more than seven (7) days after written notice thereof
             to Subtenant; or

     (x)     Subtenant, by its act or omission, causes an event or condition
             under the Headlease which either is an Event of Default or default
             thereunder; or

     (xi)    Subtenant fails to fulfill, keep, observe or perform any of the
             other covenants and obligations herein contained to be fulfilled,
             kept, observed and performed by Subtenant, and such failure
             continues for more than five (5) days after notice thereof in
             writing to Subtenant, provided, however, that if Subtenant, upon
             receipt of said notice, commences action to cure the default within
             such five (5) day period and diligently pursues such action to
             completion, such event shall not be considered an "Event of
             Default". Notwithstanding the foregoing, in the event the default
             is not cured within thirty (30) days of receipt of the aforesaid
             notice, such default shall be an "Event of Default".

(b)  Upon the occurrence of any one or more Events of Defaults, Sublandlord may
exercise any remedy against Subtenant which Headlandlord may exercise for Events
of Default by Sublandlord under the Headlease. Without limiting the generality
of the foregoing, Sublandlord may exercise the damage remedies available under
California Civil Code Sections 1951.2 and 1951.4 or any similar or successor
statute which provides that a lessor may continue a lease in effect and recover
damages as they become due.

11.2 General Provisions Regarding Default.
     ------------------------------------

     No right or remedy under this Sublease or at law or equity shall be
exclusive of any other right or remedy but shall be cumulative. Failure to
insist upon strict performance of any provision of a this Sublease or to
exercise any right or remedy of this Sublease or at law or equity shall not
constitute a waiver of any future performance. Receipt by Sublandlord of any
Basic Rent, Additional Rent or other sum payable under this Sublease with
knowledge of an Event of Default or Subtenant's breach of this Sublease shall
not constitute a waiver of such Event of Default or breach. No waiver by either
party of any provision of this Sublease shall be deemed to have been made unless
made in writing. Each party shall be entitled to injunctive relief in the event
of violation or threatened violation of the other party's material obligations
hereunder beyond applicable cure periods. Subtenant hereby waives and surrenders
for itself and all those claiming under it, including creditors of all kinds,
any right and privilege which it or any of them may have to redeem the Premises
or to have a continuance of this Sublease after expiration or termination of
Subtenant's right of occupancy by order or judgment, any legal process or writ,
or under the terms of this Sublease.

<PAGE>

                                      -17-

                         ARTICLE 12 - GENERAL PROVISIONS
                         -------------------------------

12.1      Mortgage Subordination.
          -----------------------

          Upon request by Sublandlord or Headlandlord, Subtenant shall execute
and deliver an agreement subordinating this Sublease and Subtenant's interest in
the Premises to any mortgage upon the Premises, the Building or the Property (or
part thereof) or to any mortgage of Sublandlord's leasehold interest under the
Headlease; provided that the holder of such mortgage shall agree in writing not
to disturb Subtenant's tenancy if there is no Event of Default.

12.2      Estoppel Certificates and Financial Statements.
          -----------------------------------------------

          Subtenant shall, from time to time, upon ten (10) days prior written
request from Sublandlord, cause to be executed, acknowledged and delivered a
certificate stating that this Sublease is unmodified and in full effect (or, if
there have been modifications, that this Sublease is in full effect as modified
and setting forth such modifications), the amount of Basic Rent, the dates to
which Basic Rent has been paid, and stating that, to the knowledge of Subtenant,
either no default exists under this Sublease or specifying each such default of
which Subtenant has knowledge. Subtenant shall, from time to time, but not more
than once in any calendar year during the Sublease Term, upon ten (10) days
prior written request from the Sublandlord, deliver or cause to be delivered to
Sublandlord or its designee, then current financial statements (including a
statement of cash flows) certified as accurate by a certified public accountant
and prepared in conformance with generally accepted accounting principles for
(i) Subtenant, (ii) any entity which owns a controlling interest in Subtenant,
(iii) any entity the controlling interest of which is owned by Subtenant, and
(iv) any successor entity to Subtenant by merger or operation of law.

12.3      Representations and Warranties of Subtenant.
          --------------------------------------------

          Subtenant represents and warrants to Sublandlord that: (i) Subtenant
is a corporation, duly organized, validly existing and in good standing under
the laws of California and has the power to own its property and assets and
carry on its business in California (ii) the execution of this Sublease
constitutes the binding obligation of Subtenant and has been authorized by
Subtenant's Board of Directors; and (iii) the Sublease of the Premises will not
conflict with or result in a breach of Subtenant's Articles of Incorporation or
Bylaws or any agreement to which Subtenant is a party or by which it may be
bound, or violate any state or federal governmental law, statute, ordinance or
regulation.

12.4      Representation and Warranties of Sublandlord.
          ---------------------------------------------

          Sublandlord represents and warrants to Subtenant that: (i) the
Headlease is valid and subsisting and to the best of Sublandlord's knowledge,
there are no and have been no defaults thereunder (ii) all payments of rent and
other charges have been paid under the Headlease to the date of this Sublease
and will be paid to the Rent Commencement Date.

<PAGE>

                                      -18-

12.5      Notices; Demands and Other Instruments.
          ---------------------------------------

          All notices, demands or other communications given pursuant to this
Sublease shall be in writing and shall be deemed given on the date mailed if
sent by overnight delivery by nationally recognized overnight courier or by
registered or certified mail, return receipt requested, with postage prepaid if:
(a) when mailed to Sublandlord, it is addressed to Sublandlord at its address
set forth above, marked "Attention: Chief Financial Officer", and (b) when
mailed to Subtenant, it is addressed to Subtenant at its address set forth
above. The parties may specify any other address in the United States or Canada
with not less than fifteen (15) days' written notice to the other party.

12.6      Chattels.
          ---------

          The Chattels are made available for Subtenant's use on an "as is" and
"with all faults" basis, and Sublandlord shall have no obligation to alter or
repair the Chattels in anticipation of Subtenant's use. Such right of use shall
end upon the termination of this Sublease. During the Sublease Term, Subtenant
shall (a) insure the Chattels against loss, (b) maintain the Chattels in good
condition and repair, (c) not remove the Chattels from the Premises except with
Sublandlord's consent, and (d) bear all risk of loss to the Chattels.
Notwithstanding the foregoing, Subtenant shall be entitled upon the expiration
of the Sublease Term by affluxion of time but not otherwise and so long as all
rent payable hereunder has been paid to purchase the Chattels from Sublandlord
for $1.00.

                           ARTICLE 13 - MISCELLANEOUS
                           --------------------------

13.1      Severability.
          -------------

          If any provision of this Sublease or its application to any person or
circumstance shall be declared invalid or unenforceable, the remaining
provisions of this Sublease, or the application of such provision to persons or
circumstances other than those to which it is invalid or unenforceable, shall
not be affected thereby and each provision shall be valid and enforceable to the
extent permitted by law.

13.2      Binding Effect.
          ---------------

          Subject to the terms and restrictions of Article 6.3 and this Article
all provisions contained in this Sublease shall be binding upon, inure to the
benefit of, and be enforceable by, the respective heirs, executors,
representatives, successors and assigns of Sublandlord and Subtenant. The
covenants and obligations of Sublandlord under this Sublease shall not be
binding upon the Sublandlord herein named or any subsequent Sublandlord with
respect to any period subsequent to the transfer of all its interests in the
Premises, and, in the event of any such transfer, Subtenant agrees to look
solely to the transferee for the performance of any term, covenant, obligation,
warranty or representation of Sublandlord hereunder, but only with respect to
the period beginning with such transfer and ending with a subsequent transfer of
such interest. If Sublandlord terminates the Headlease and assigns this Sublease
to the Headlandlord, Subtenant hereby agrees to attorn to the Headlandlord as
the "Sublandlord" under this Sublease

<PAGE>

                                      -19-

provided that Headlandlord assumes Sublandlord's obligations under this
Sublease. If Sublandlord shall acquire a fee interest in the Building or the
Property, this Sublease shall continue as a direct lease between. Sublandlord,
as landlord, and Subtenant, as tenant.

13.3  Interpretation.
      --------------

      Where used in this Sublease, any word or term which is specifically
defined in the Headlease shall have the meaning ascribed to it in the Headlease
unless such word or term is otherwise defined in this Sublease. This Sublease is
the product of negotiation and the parties agree that it shall be interpreted in
accordance with its fair and apparent meaning and not for or against either
party.

13.4  Governing Law.
      -------------

      This Sublease shall be interpreted under and is governed by the laws of
California.

13.5  Recitals.
      --------

      The recitals to this Sublease are hereby incorporated in this Sublease.

13.6  Headings and Captions.
      ---------------------

      The Article and Subarticle captions are for the convenient reference of
the parties only and are not intended to and shall not be deemed to modify the
interpretation of the Article or subarticle from that which is indicated by the
text of the Article or subarticle alone.

13.7  Survival or Representations and Warranties.
      ------------------------------------------

      All of the representations, warranties and indemnities contained in this
Sublease shall survive indefinitely the expiration or termination of this
Sublease.

13.8  Entire Agreement.
      ----------------

      Sublease contains the entire agreement between the parties with respect to
the Premises and all prior negotiations or agreements, whether oral or written,
are superseded and merged herein.

13.9  Amendments.
      ----------

      This Sublease may not be changed or amended except by a writing duly
authorized and executed by the party against whom enforcement is sought.

13.10 Number, Gender.
      --------------

      Word importing the singular number only include the plural and vice versa,
words importing the masculine gender shall include the feminine and
neuter gender, and word importing persons shall include firms and corporations,
and vice versa.

<PAGE>

                                      -20-

 13.11  Brokers.
        -------

        Except for CB Richard Ellis and Charles E. Smith Commercial Realty,
 LP, Sublandlord and Subtenant covenant and represent to each other that no
 parties are entitled to be paid a fee or commission in connection with the
 transaction contemplated by this Sublease. If any other individual or entity
 shall assert a claim to a finder's fee or commission as a broker or a finder,
 then the party who is alleged to have retained such individual or entity or
 whose acts, omissions or representations are alleged to give rise to such claim
 shall defend (with counsel reasonably acceptable to the indemnified party),
 indemnify and hold harmless the other party from and against any such claim and
 all costs, expenses, liabilities and damages incurred in connection with such
 claim or any action or proceeding brought thereon. Subtenant agrees and
 acknowledges that no broker is entitled to any commissions arising from the
 leasing of the Chattels by the Sublandlord to the Subtenant. Subtenant shall
 indemnify and hold harmless Sublandlord and its agents and employees, from and
 against any and all claims, suits, demands, damages, judgments, costs and
 expenses arising with respect to commissions' claimed by any broker pertaining
 to the Chattels.

 13.12  Condition Precedent.
        -------------------

        This Sublease is subject to the execution of the Consent by the Landlord
and delivery of the Consent to the Sublandlord and Subtenant on or before the
Term Commencement Date. If the Landlord refuses to consent to this Sublease,
then this Sublease shall simultaneously terminate and neither party shall have
any further rights or obligations under the Sublease and hereby release any
claims against one another, and each party releases the other from any cost,
loss, damage, claim, liability, expense, fee or charge related thereto or
arising therefrom.

 13.13  Facsimile Copies.
        ----------------

        The parties hereto (i) have each agreed to permit the use, from time to
time and where appropriate, of telecopied signatures in order to expedite the
transaction contemplated by this Agreement, (ii) each intend to be bound by its
respective telecopied signature, (iii) are each aware that the other will rely
on the telecopied signature, and (iv) each acknowledge such reliance and waive
any defenses to the enforcement of the documents effecting the transaction
contemplated by this Agreement based on a telecopied signature.

 13.14  Counterparts.
        ------------

        This agreement may be executed in any number of counterparts, each of
which shall constitute an original hereof and all of which together shall
constitute a single instrument.

<PAGE>

                                      -21-

13.15  Memorandum of Sublease.
       ----------------------

       This Sublease shall not be recorded. If a party records this Sublease, it
shall be a default hereunder by such party.

       IN WITNESS WHEREOF, the parties hereto have caused this Sublease to be
executed as of the date first above written.

                                              "SUBLANDLORD"

                                              CERTICOM CORP.,

                                              a Delaware Corporation
                                                --------------------------------

                                              By: /s/ Gregory M. Capitolo
                                                  ------------------------------
                                                  Name: Gregory M. Capitolo
                                                        ------------------------
                                                  Its:  CFO
                                                        ------------------------

                                              By: ______________________________

                                                  Name: ________________________

                                                  Its:  ________________________

                                              "SUBTENANT"
                                              GUAVA TECHNOLOGIES INC.,

                                              a ________________________________

                                              By: /s/ [SIGNATURE ILLEGIBLE]
                                                  ------------------------------
                                                  Name: [SIGNATURE ILLEGIBLE]
                                                        ------------------------
                                                  Its:  President
                                                        ------------------------

                                              By: /s/ Jack Giroux
                                                  ------------------------------
                                                  Name: Jack Giroux
                                                        ------------------------
                                                  Its:  Executive V.P.
                                                        ------------------------

<PAGE>

                                    EXHIBIT A
                                    ---------

                                  The Premises

                       Exhibit A from Headlease attached

<PAGE>

                                   EXHIBIT A
                                   ---------

                             Mt. Eden Business Park
                                  Hayward, CA

                        [DRAWING OF MOUNT EDEN BUSINESS]

                     PREMISES: Building A (Entire Building)

<PAGE>

                                    EXHIBIT B
                                    ---------

                                    Chattels

                          INVENTORY LIST FOR BUILDING A

Bldg. A                         Description                                  Qty

          Teknion 8'xlO' cubes include -                                     46
          (1) worksurface, (1) two drawer with one file cabinet, (1)
          two drawer file, (1) mobile ped, (1) overhead bin, (1) set of
          cube access., (1) shelf, (1) corner shelf, (1) chair.

          Hard wall office furniture includes -                              11
          (new side of building)
          (1) desk, (1) return, (1) credenza, (1) credenza hutch, (l)
          wardrobe, (1) under desk storage, (1) desk chair (2) wood
          back chairs.

          Concierge office                                                    1
          (1) desk, (1) return, (1) credenza (1) hutch  for credenza,
          (1) 36" round table, (l) ward-robe, (1) desk chair, (3) wood
          back chairs.

          Executive office includes -
          (1) desk, (1) credenza, (1) credenza hutch, (2) wardrobe,
          (1) round table,(l) desk chair.

          Workrooms includes - (new side)                                     4
          (1) 48 round table, (4) chairs, corner table

          Boardroom B includes                                                1
          (1) confer. table, (14) chairs, (1) corner table

          Main Boardroom includes -                                           1
          (1) conference table (16"x4"), (14) chairs
          (1) wall white board with wood front
          (1) retractable ceiling screen

          Classroom one includes -                                            1
          (8) tables, (14) chairs
          Classroom two includes -                                            1
          (8) tables, (14) chairs

<PAGE>

                                      -2-

          lateral file cabinets with wood tops
          Three drawer lateral 42" wide file                              9
          Three drawer lateral 36" wide file                              2

          Upholstery
          Brayton sofa (fabric/leather)                                   1
          Brayton sofa *                                                  1
          Matching chairs (large) *                                       2
          Brayton chairs(leather) with attached work surface.             3
          Dual colored leather chair                                      2

          Other breakout furniture
          oval wood/glass coffee table                                    2
          round wood/glass coffee table                                   1
          round wood/glass end table                                      2

          Additional furniture wood furniture

          credenza (122"w X 20d X 26h)                                    1

          Breakout kitchen
          Refrigerator                                                    1
          Microwave                                                       1

          Hayworth Workstations (older side)

          Hayworth 8 x 10 cubes include -                                25
          (1) worksurface,(1) two drawer lateral file
          (1) overhead bin and a chair
          Keyboard trays                                                 11

          Hayworth 8 X 8 cubes include -                                 20
          (1) worksurface, (1) 2 drawer lateral file
          (1) 2 drawer w/file,
          (1) overhead bin and chair
          Keyboard trays                                                  5

          Hayworth 8 X 7 cubes include -                                  5
          (1) worksurface, (1) 2 drawer narrow file
          (1) 2 drawer w/file,(l) overhead bin and a chair
          Keyboard trays                                                  2

          Hayworth 7 X 10 cubes include -                                 3
          (1) 2 drawer w/file, overhead bin and chair

          hard wall offices older side of building
          offices have one desk, small credenza

<PAGE>

                                      -3-

                with hutch top and a chair                          6

                offices have one desk, small credenza
                bookcase and a chair                                2

                Additional furniture

                whiteboards hung in cubes                          27
                whiteboards in building not hung                    5

                file cabinets metal (light gray)
                30" file cabinets two drawer                        6
                36" file cabinet two drawer                         1
                42" file cabinet two drawer                         3

                Additional file cabinets metal (dark gray)
                30" file cabinets three drawer                      7
                36" file cabinets three drawer                     13
                42" file cabinets three drawer                      2
                30" file cabinets two drawer                        3

                metal file cabinet (16w X 22d X 23h)                2
                metal file cabinet (15w X 24d X 28h)                2

                It. Yellow metal bookcase(3lw X 13dx 54h)           1
                36" round tables                                    9

                Bookcases with 3 shelves (dark gray)                8
                bookcases with 4 shelves (dark gray)                5

                mail slot cabinets 37"x13"x60"                      2
                mail slot cabinets 37"x13"X36"                      6
                mail slot cabinets 37"xl3"x71"                      1

                5 drawer tilt lid file cab.(36w X 18d X 64h)        3

                metal desk with laminate top and side               3
                return with 2 attached files and 2 drawers
                and a chair

                metal desk with laminate top, 2 attached            1
                drawer w/file and pencil drawer and a chair

                wood two sided white board with                     1
                storage at the bottom (45w X 16dX 58h)

                very large curved whiteboard                        1

                plastic table (59w X 29d X 28h)                     1
                plastic table (computer)                            1

<PAGE>

                                       -4-

          It. Gray table (48w X 30d X 28h)                          1

          folding table (72w X 30d X 29h)                           1

          freestanding millwork - L shape                           1
          (7 feet long, 38 inches deep, 34 inches high

          Extra desk chairs not in cubes or offices                23

          workrooms on older side of building                       2
          table, (4) chairs, small phone table

          Kitchen table and chairs

          Tall table                                                8
          Barstools                                                42
          Table                                                     4
          Chair                                                    12
          Refrigerator                                              3
          Microwave                                                 2
          large serving table                                       1
          Dishwasher                                                2
          floor mat                                                 2

          Phones and equipment

          M2008 phones, one in every office                       126
          and one in every cube and workroom

          paging system                                             1

          alarm system and access control computer                  1

<PAGE>

                                   EXHIBIT C
                                   ---------

                                    Headlease

                                    Attached

<PAGE>

                                    NET LEASE
                             BASIC LEASE INFORMATION

DATE:       October 30, l998

LANDLORD:   The Multi-Employer Property Trust, a trust organized under 12 C.F.R.
            Section 9.18

TENANT:     Certicom Corp., a Delaware corporation

PREMISES:   All of the Building located at 25801 Industrial Blvd., Hayward,
            California

PROPERTY:   Mt. Eden Business Park, Hayward, California

USE:        General Office and Administrative Purposes, including computer
            hardware and software development

TERM:       Approximately Seven (7) Years

ESTIMATED COMMENCEMENT DATE:         January 15, 1999.

INITIAL BASE RENT:                   $53,568.75

TENANT'S PERCENTAGE SHARE:           100%

SECURITY DEPOSIT:                    $75,000 & Letter of Credit described in
                                     Section 17

GUARANTOR:                           Certicom Corp. an Ontario corporation

BROKERS:    CB Commercial Real Estate Group Inc.; Colliers Parish International
            Inc; Presco

ADDRESS FOR NOTICES:  Landlord:      The Multi-Employer Property Trust
                                     c/o Riggs & Company
                                     808 17th Street N.W.
                                     Washington, D.C. 20006
                                     Attn: Patrick O. Mayberry

                      Tenant:        Certicom Corp.
                                     200 Matheson Blvd. W
                                     Mississauga, Ontario
                                     Canada L5R 3L7

     After Commencement Date:        To Tenant at the Premises

LANDLORD'S CONTRIBUTION
TO TENANT IMPROVEMENTS:              $857,100.00

LANDLORD'S INITIALS:                 TENANT'S INITIALS:

/s/ [SIGNATURE ILLEGIBLE]            /s/ [SIGNATURE ILLEGIBLE]
--------------------------------     ------------------------------------

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                           Page
                                                                           ----
   <S>                                                                     <C>
   1.  Premises.                                                              1
   2.  Term.                                                                  1
   3.  Rent.                                                                  1
   4.  Base Rent                                                              2
   5.  Operating Expenses                                                     2
   6.  Proration of Rent                                                      4
   7.  Tenant Improvements                                                    4
   8.  Use of the Premises                                                    5
   9.  Alterations                                                            7
   1O. Repairs                                                                8
   11. Damage or Destruction                                                  8
   12. Eminent Domain                                                         9
   13. Indemnity and Insurance                                               10
   14. Assignment or Sublet                                                  12
   15. Default                                                               15
   16. Landlord's Right to Perform Tenant's Covenants                        16
   17. Security Deposit; Letter of Credit                                    16
   18. Surrender of Premises                                                 18
   19. Holding Over                                                          18
   20. Access to Premises                                                    19
   21. Signs                                                                 19
   22. Subordination                                                         20
   23. Transfer of the Property                                              20
   24. Estoppel Certificates; Financial Statements                           21
   25. Mortgagee Protection                                                  21
   26. Attorneys' Fees                                                       21
   27. Brokers                                                               21
   28. Parking                                                               22
   29. Utilities and Services                                                22
   30. Intentionally Deleted                                                 22
   31. Acceptance                                                            22
   32. Use of Building Name                                                  22
   33. Recording                                                             23
   34. Quitclaim                                                             23
   35. Notices                                                               23
   36. Landlord's Exculpation                                                23
   37. Additional Structures                                                 23
   38. Consents and Approvals                                                24
   39. General                                                               24
   40. Renewal Option                                                        25
</TABLE>

   EXHIBIT "A": Premises and Business Park Site Plan
   EXHIBIT "B": Tenant Improvements
   EXHIBIT "C": Commencement Date Memorandum
   EXHIBIT "D": Rules and Regulations
   EXHIBIT "E": Form of Tenant Estoppel Certificate
   EXHIBIT "F": Appraisal Procedure

<PAGE>

                                   NET LEASE

     THIS LEASE, which is effective as of the date set forth in the Basic Lease
Information, is entered by Landlord and Tenant, as set forth in the Basic Lease
Information. Terms which are capitalized in this Lease shall have the meanings
set forth in the Basic Lease Information.

1. Premises.
   --------

     Landlord leases to Tenant, and Tenant leases from Landlord, the Premises
described in the Basic Lease Information (as shown on Exhibit A), together with
                                                      ---------
the right in common to use the Common Areas. The Common Areas shall mean the
areas and facilities within the land shown on Exhibit A (the "Land") and within
                                              ---------
the Building identified in the Basic Lease Information (the "Building") and
within all other buildings and improvements now or hereafter located on the
Land, provided and designated by Landlord for the general use, convenience or
benefit of Tenant and other tenants and occupants of the Property (e.g.,
                                                                   ---
restrooms; janitorial, telephone and electrical closets; sidewalks; driveways,
public lobbies, entrances and stairs; and unreserved parking areas). The Common
Areas shall include the Cultural Center delineated on Exhibit A (the "Cultural
                                                      ---------
Center"); provided, however, that Landlord may from time to time prescribe rules
and regulations for use of and access to the Cultural Center by Tenant and other
tenants of the Property. Without limitation of the provisions of any such rules
and regulations, Tenant acknowledges that (i) no tenant of the Property
(including Tenant) shall have exclusive rights to use the Cultural Center, (ii)
on up to ten (10) occasions each calendar year some or all of the tenants of the
Property (including Tenant) may be excluded from use of the Cultural Center,
(iii) access to the Cultural Center shall be restricted by means of a locked
gate or other apparatus daily from 6:00 p.m. to 8:00 a.m. Landlord reserves the
right to make changes to the Common Areas. The Building and such other buildings
and improvements now or hereafter located on the Land are collectively referred
to in this Lease as the "Buildings". The Land, the Buildings and the Common
Areas are collectively referred to in this Lease as the "Property" or the "Real
Property".

2. Term.
   ----

     a. Lease Term. The term of this Lease (the "Term") shall commence on the
        ----------
date the "Commencement Date") which is the later to occur of (x) January
15, 1999, or (y) Substantial Completion of the Tenant Improvements. "Substantial
Completion of the Tenant Improvements" shall be deemed to have occurred when the
Tenant Improvements (as defined in Exhibit B) have been completed in accordance
                                   ---------
with Final Plans (as defined in Exhibit B), subject only to the completion or
                                ---------
correction of Punch List Items. "Punch List Items" shall mean incomplete or
defective work or materials in the Tenant Improvements which do not materially
impair Tenant's use of the Premises for the conduct of Tenant's business
therein. The Term shall end on the last day of the calendar month in which the
seventh (7th) annual anniversary of the Commencement Date occurs (the
"Expiration Date"). Notwithstanding the foregoing, if the Commencement Date is
delayed due to Tenant Delay (as defined in Exhibit B), then for purposes of
                                           ---------
determining the commencement of Tenant's obligation to pay Base Rent and
Operating Expenses pursuant to Sections 4 and 5 below, the Commencement Date
shall be deemed accelerated by the period of Tenant Delay.

     b. Premises Not Delivered. If, for any reason, the Commencement Date does
        ----------------------
not occur by the Estimated Commencement Date, the failure shall not affect the
validity of this Lease, or the obligations of Tenant under this Lease, and
Landlord shall not be subject to any liability.

     c. Commencement Date Memorandum. When the Commencement Date is determined,
        ----------------------------
the parties shall execute a Commencement Date Memorandum, in the form attached
hereto as Exhibit C, setting forth the Commencement Date and the Expiration
          ---------
Date.

     d. Early Entry. If Tenant is permitted by Landlord to enter the Premises
        -----------
prior to the Commencement Date for the purpose of fixturing or any purpose other
than the conduct of Tenant's business, the entry shall

                                       1

<PAGE>

be subject to all the terms and provisions of this Lease, except that Tenant's
obligation to pay Base Rent and Operating Expenses shall not commence until the
Commencement Date. Without limitation, in no event will Landlord consent to such
early access if Landlord shall reasonably determine that the same might delay or
interfere with Landlord's construction of the Tenant Improvements, or increase
the cost of the Tenant Improvements.

3.   Rent.
     ----

As used in this Lease, the term "Rent" shall include: (i) the Base Rent; (ii)
Operating Expenses payable by Tenant pursuant to Section 5 below; and (iii) all
other amounts which Tenant is obligated to pay under the terms of this Lease.
All amounts of money payable by Tenant to Landlord shall be paid without prior
notice or demand, deduction or offset. If any installment of Base Rent is not
paid by Tenant by the fifth (5th) day of the month, or if any payment of
Operating Expenses or any other amount payable by Tenant is not paid within five
(5) days of the due date thereof, Tenant shall pay to Landlord a late payment
charge equal to five percent (5%) of the amount of the delinquent amount, in
addition to the amount of Rent then owing, regardless of whether a notice of
default or notice of termination has been given by Landlord. In addition to the
five percent (5%) late charge, any Base Rent, Operating Expenses or other
amounts owing hereunder which are not paid within five (5) days after the date
they are due shall thereafter bear interest at the rate ("Interest Rate") which
is the lesser of eighteen percent (18%) per annum or the maximum rate permitted
by applicable law. Notwithstanding the foregoing, Landlord shall give Tenant
notice of non-payment and three (3) days from receipt of such notice to cure
such non-payment twice in any calendar year before assessing such late fees
and/or interest in such calendar year.

4.   Base Rent.
     ---------

  a. Initial Base Rent. Commencing on the Commencement Date, and thereafter on
     -----------------
the first day of each calendar month of the Term, Tenant shall pay Base Rent to
Landlord (or other entity designated by Landlord), in advance, at Landlord's
address for notices (as set forth in the Basic Lease Information) or at such
other address as Landlord may designate. The Initial Base Rent shall be the
amount set forth in the Basic Lease Information. Base Rent payable hereunder for
the first full calendar month after Tenant's obligation to pay Base Rent
commences shall be paid upon Tenant's execution of this Lease.

  b. Base Rent Adjustment. Commencing on the first day of the 37th full calendar
     --------------------
month of the Term, the base Rent shall increase to $56,831.09 per month, and
shall be payable in such amount through the end of the 60th full calendar month
of the Term. Commencing on the first day of the 61st full calendar month of the
Term, the Base Rent shall increase to $60,292.10 per month, and shall be payable
in such amount through the Expiration Date.

5.   Operating Expenses.
     ------------------

  a. Operating Expenses. Tenant shall pay Tenant's Percentage Share of Operating
     ------------------
Expenses incurred by Landlord during each calendar year falling in whole or in
part during the Term.

  b. Operating Expenses. The term "Operating Expenses" shall include all
     ------------------
reasonable expenses and costs of every kind and nature, except as provided in
the next paragraph, which Landlord shall pay or become obligated to pay because
of or in connection with the ownership, management, administration, maintenance,
repair and operation of the Premises, the Buildings, the Common Areas and the
balance of the Property, to the extent allocable to the Building in which the
Premises is located. The allocation of Operating Expenses to the Building shall
be made on the same ratio that the rentable square footage of the Building bears
to the aggregate rentable square footage of all buildings in the Business Park
(assuming for such purpose that all buildings in the Business Park, as shown on
Exhibit A, attached hereto, are fully constructed); except where Landlord shall
---------
reasonably determine, for good cause, that the nature of any given

                                       2

<PAGE>

Operating Expense requires that it be allocated in another reasonable manner.
Operating Expenses shall include, without limitation, the following: (i) all
impositions relating to the Real Property, including Real Property Taxes (as
defined in Section 5.d.); (ii) premiums for insurance relating to the Real
Property, including as set forth in Sections 13.b., 13.d. and 13.i., and
insurance deductibles paid by Landlord; (iii) wages, salaries, bonuses and
expenses and benefits (including hospitalization, medical, surgical, retirement
plan, pension plan, union dues, life insurance, including group life insurance,
welfare and other fringe benefits, and vacation, holidays and other paid absence
benefits, and costs of uniforms) of all on-site and off-site employees of
Landlord or its agents, at the rank of property manager or below, engaged in
operation, management, administration, maintenance, repair and security of the
Real Property, including, without limitation, administrative, management and
accounting personnel and the individual(s) responsible for management of the
Property, and payroll, social security, workers' compensation, unemployment and
similar taxes with respect to such employees of Landlord or its agents, and the
cost of providing disability or other benefits imposed by law or otherwise, with
respect to such employees; (iv) costs of all supplies, materials and equipment
rentals used in operations; (v) all maintenance, janitorial, security and
service costs; (vi) a management fee not to exceed 4% of all gross revenues from
the Real Property, including revenues attributable to Tenant's and other
tenants' payments of Operating Expenses; (vii) legal and accounting expenses,
including the cost of audits by certified public accountants; (viii) all repair,
painting and maintenance costs relating to the Real Property and its Common
Areas, including sidewalks, landscaping, service areas, mechanical rooms,
parking areas, Building exterior and driveways; (ix) all charges for heat,
water, gas, steam, fuel, electricity and other utilities used or consumed in the
Buildings and Common Areas; (x) costs of repairs, replacements, and general
maintenance to and of the Building Systems and the Base Building Components (as
such terms are defined in Sections 9.a. and 10.a.; respectively, below); (xi)
the costs of capital improvements, capital replacements, capital repairs,
capital equipment, and capital tools and devices installed or paid for by
Landlord and intended to reduce other Operating Expenses or required to comply
with Legal Requirements (as defined in Section 8.c. below) or intended for the
protection of the health and safety of the cccupants of the Property; and (xii)
Landlord's costs of maintaining the Cultural Center, which costs shall be
deemed, for purposes of this Lease, the sum of $60,000.00, as such sum shall be
increased on January 30, 1999 and each January 30th thereafter (each, an
"Adjustment Date"), by the percentage increase in the Index over the one (1)
year period ending on the date on which the Index is published in the month
immediately preceding the Adjustment Date. With respect to any costs included in
Operating Expenses under clause (x) which are capital expenditures, as
determined by Landlord in accordance with generally accepted accounting
principles consistently applied, and with respect to the costs of items included
in Operating Expenses under clause (xi), such costs shall be amortized over a
period determined by Landlord, together with interest on the unamortized balance
at a rate per annum equal to three (3) percentage points over the Treasury Rate
charged at the time such item is constructed or acquired, or at such higher rate
as may have been paid by Landlord on funds borrowed for the purpose of acquiring
or constructing such item, but in either case not more than the maximum rate
permitted by law at the time such item is acquired or constructed. As used
herein, "Treasury Rate" means the six-month United States treaty bill rate in
effect from time to time by the San Francisco Main Office of Bank of America,
NT&SA (or any successor bank thereto), or if there is no such rate, the rate
quoted by such bank in pricing ninety day commercial loans to substantial
commercial borrowers.

     The term "Index" as used herein shall mean the Consumer Price Index for All
Urban Consumers (1982-84 = 100) San Francisco-Oakland-San Jose, California, All
Items, published by the Bureau of Labor Statistics of the U.S. Department of
Labor. If the Bureau of Labor Statistics ceases to publish the above Index, or
if the above Index is otherwise renamed, discontinued or superseded, the parties
agree that the Bureau of Labor Statistics or any successor governmental agency
thereto will be the sole judge of the comparability of successive indexes, but
if no succeeding index is published, the calculations under this Lease based on
the Index shall be made using the most closely comparable statistics on the
purchasing power of the consumer dollar as published by a responsible financial
authority and selected by Landlord.

                                        3

<PAGE>

         Operating Expenses shall not include the following: (i) depreciation
on the Buildings or equipment or systems therein; (ii) debt service; (iii)
rental under any ground or underlying lease; (iv) attorneys' fees and expenses
incurred in connection with lease negotiations or disputes with past, current or
prospective Building tenants; (v) the cost of decorating, improving for tenant
occupancy, painting or redecorating portions of the Buildings to be demised to
tenants; (vi) advertising expenses; (vii) costs reimbursed by insurance
proceeds; or (viii) real estate broker's or other leasing commissions.

         The parties agree that statements in this Lease to the effect that
Landlord is to perform certain of its obligations hereunder at its own or sole
cost and/or expense shall not be interpreted as excluding any cost from
Operating Expenses if such cost is an Operating Expense pursuant to the terms of
this Section 5.b.

     c.  Monthly Increments; Adjustment. Promptly following the commencement of
         ------------------------------
the Term and prior to the commencement of each subsequent calendar year (or as
soon thereafter as practicable), Landlord shall estimate the Operating Expenses
payable by Tenant for such calendar year pursuant to this Section. Tenant shall
pay to Landlord, on the first day of each month, in advance, one-twelfth (l/12)
of Landlord's estimated amount. If at any time during the course of the year
Landlord determines that the Operating Expenses payable by Tenant will vary from
the then estimated amount, by notice to Tenant Landlord may revise the amount
payable by Tenant during the balance of the calendar year such that the total
estimated additional amount due from Tenant for such calendar year is paid by
Tenant during the balance of the calendar year in equal monthly amounts. Within
ninety (90) days (or as soon thereafter as practicable) after the close of each
calendar year, Landlord shall provide Tenant with a statement to account for any
difference between the actual and the estimated Operating Expenses for the
previous year. Landlord's annual statement shall be final and binding upon
Landlord and Tenant unless, within ninety (90) days after delivery thereof to
Tenant, Landlord shall revise or Tenant shall contest any item therein by
written notice to the other, specifying each item revised or contested and the
reason therefor. Notwithstanding the foregoing, the Real Property Taxes included
in any such annual statement may be modified by any subsequent adjustment or
retroactive application of Real Property Taxes affecting the calculation of
Operating Expenses. If Tenant has overpaid the amount of Operating Expenses
owing pursuant to this Section, Landlord shall credit the overpayment against
Tenant's next payments due under this Section 5. If Tenant has underpaid the
amount of Operating Expenses owing pursuant to this Section, Tenant shall pay
the amount of the underpayment to Landlord within thirty (30) days after
Tenant's receipt of Landlord's statement. If all of the buildings in the
Business Park shown on Exhibit A attached hereto are not fully constructed
                       ---------
during any calendar year, or if the rentable area of all such buildings or of
the Building is not fully occupied during any calendar year, Operating Expenses
for such calendar year shall be adjusted to equal Landlord's reasonable estimate
of the Operating Expenses which would have been incurred during such calendar
year if all buildings in the Business Park were constructed and the total
rentable area of all such buildings and the Building were occupied, and such
adjusted Operating Expenses shall be allocated to the Building as provided in
Section 5.b. above.

     d.  Definition of Real Property Taxes. The term "Real Property Taxes" shall
         ---------------------------------
mean any ordinary or extraordinary form of assessment or special assessment,
license fee, rent tax, levy, penalty (if a result of Tenant's delinquency), or
tax (other than net income, estate, succession, inheritance, transfer or
franchise taxes), imposed by any authority having the direct or indirect power
to tax, or by any city, county, state or federal government for any maintenance
or improvement or other district or division thereof. The term shall include all
transit charges, housing fund assessments, real estate taxes and all other taxes
relating to the Premises, Building and/or Property, all other taxes which may be
levied in lieu of real estate taxes, all assessments, assessment bonds, levies,
fees, and other governmental charges (including, but not limited to, charges for
traffic facilities, improvements, child care, water services studies and
improvements, and fire services studies and improvements) for amounts necessary
to be expended because of governmental orders, whether general or special,
ordinary or extraordinary, unforeseen as well as foreseen, of any kind and
nature for public improvement, services, benefits or any other purposes which
are assessed, levied, confirmed, imposed or become a lien upon the Premises,
Building or Property or become payable during the Term.

                                       4

<PAGE>

e.   Acknowledgment of Parties. It is acknowledged by Landlord and Tenant that
     -------------------------
Proposition 13 was adopted by the voters of the State of California in the
June, 1978 election, and that assessments, taxes, fees, levies and charges may
be imposed by governmental agencies for such purposes as fire protection,
street, sidewalk, road, utility construction and maintenance, refuse removal and
for other governmental services which formerly may have been provided without
charge to property owners or occupants. It is the intention of the parties that
all new and increased assessments, taxes, fees, levies and charges due to
Proposition 13 or any other cause are to be included within the definition of
Real Property Taxes for purposes of this Lease.

f.   Taxes on Tenant Improvements and Personal Property. Notwithstanding any
     --------------------------------------------------
other provision hereof, Tenant shall pay the full amount of any increase in Real
Property Taxes during the Term resulting from any and all Alterations (as
defined in Section 9.a below) of any kind whatsoever placed in, on or about the
Premises for the benefit of, at the request of, or by Tenant. Tenant shall pay,
prior to delinquency, all taxes assessed or levied against Tenant's personal
property, equipment, furniture or fixtures (collectively, "Personal Property")
in, on or about the Premises. When possible, Tenant shall cause its Personal
Property to be assessed and billed separately from the real or personal property
of Landlord. Tenant recognizes that pursuant to Section 107.6 of the California
Revenue and Taxation Code Tenant's possessory interest under this Lease may be
subject to property taxation based on the full cash value, as defined in
Sections 110 and 110.1 of the California Revenue and Taxation Code.

g.   Fiscal Year. Landlord shall have the right to account and bill for
     -----------
Operating Expenses on the basis of a fiscal year, rather than a calendar year as
set forth above, and to revise such fiscal year from time to time, provided that
Landlord follows generally accepted accounting principles consistently applied
in connection therewith.

h.   Net Lease.  This shall be a Net Lease and Base Rent shall be paid to
     ---------
Landlord absolutely net of all costs and expenses except as expressly herein
provided. The provisions for Tenant's payment of Tenant's Percentage Share of
Operating Expenses are intended to pass on to Tenant and reimburse Landlord for
Tenant's Percentage Share of all costs and expenses associated with the Real
Property, except as expressly provided in this Lease.

6.   Proration of Rent. If the Commencement Date is not the first day of a
     -----------------
calendar month, or if the end of the Term is not the last day of a calendar
month, Base Rent payable by Tenant pursuant to Section 4, and Operating
Expenses payable by Tenant pursuant to Section 5, shall be prorated on a daily
basis (based upon a thirty (30) day month) for such fractional month. The
termination of this Lease shall not affect the obligations of Landlord and
Tenant pursuant to Section 5.c. which are to be performed after the termination.

7.   Tenant Improvements. Landlord agrees to construct within the Premises
     ------------------
certain improvements to the Premises ("Tenant Improvements") pursuant to the
terms of Exhibit B. Subject to completion of the Tenant Improvements (including,
         ---------
without limitation, the Punch List Items with respect thereto), the Premises
shall be delivered to Tenant in its then "as-is" condition, and Landlord shall
not have any obligation to make or pay for any alterations, additions,
improvements or repairs to prepare the Premises for Tenant's occupancy. The
foregoing shall not relieve Landlord from responsibility for correcting any
latent defects in the construction of the Tenant Improvements, provided that
written notice thereof is given by Tenant to Landlord within one (1) year from
the Commencement Date.

8.   Use of the Premises.
     -------------------

a.   Use. The Premises shall be used solely for the use set forth in the Basic
     ---
Lease Information and for no other use or purpose. Tenant shall not do or suffer
or permit anything to be done in or about the Premises or the Real Property
which will in any way obstruct or interfere with the rights of other tenants or
occupants of the Building or injure or annoy them, or use or suffer or permit
the Premises to be used for any immoral, unlawful or objectionable purpose, nor
shall Tenant cause, maintain, suffer or petit any nuisance

                                        5

<PAGE>

in, on or about the Premises or the Real Property. Without limiting the
foregoing, Tenant shall not permit any odors, smoke, dust, gas, substances,
noise or vibration to emanate from the Premises, and no loudspeakers or
other similar device which can be heard outside the Premises shall, without the
prior written approval of Landlord, be used in or about the Premises. Tenant
shall not commit or suffer to be committed any waste in, to or about the
Premises. Tenant agrees not to employ any person, entity or contractor for any
work in the Premises (including moving Tenant's equipment and furnishings in,
out or around the Premises) whose presence may give rise to a labor or other
disturbance in the Building and, if necessary to prevent such a disturbance in a
particular situation, Landlord may require Tenant to employ union labor for the
work.

   b.     Rules and Regulations: CC&R's.  Tenant shall comply with the Rules and
          -----------------------------
Regulations attached hereto as Exhibit D, as the same may be modified from time
                               ---------
to time by Landlord upon prior notice to Tenant (the "Rules"), to the extent
Landlord the Rules are not in conflict with the other provisions of this Lease.
In addition, Tenant shall comply with any covenants, conditions and restrictions
("CC&R's") applicable to the Real Property, and all rules, regulations and
restrictions imposed by any association formed pursuant to the CC&R's, in each
case to the extent Landlord has delivered a copy thereof to Tenant and the same
are not in conflict with the provisions of this Lease.

   c.     Compliance. Tenant shall not permit the Premises to be used in
          ----------
violation of or in conflict with, and at its sole cost and expense shall
promptly comply with, all laws, statutes, ordinances and governmental rules,
regulations or requirements now in force or which hereinafter may be in force,
with the requirements of any board of fire underwriters or other similar board
now or hereafter constituted, with any direction or occupancy certificate
issued pursuant to any law by any public officer or officers, as well as the
provisions of all recorded documents affecting the Premises (all of the
foregoing, collectively, "Legal Requirements"), insofar as any thereof relate to
or affect the condition, use or occupancy of the Premises, and Tenant shall
perform all work to the Premises and other portions of the Real Property
required to effect such compliance (or, at Landlord's election, Landlord may
perform such work at Tenant's expense). The judgement of any court of competent
jurisdiction or the admission of Tenant in any actions against Tenant, whether
Landlord be a party thereto or not, that Tenant has so violated any such law,
statute, ordinance, rule, regulation or requirement, shall be conclusive of such
violation as between Landlord or Tenant.

          In no event shall the foregoing, or any other provisions of this
Lease, impose any obligation or liability upon Tenant to perform any work or
otherwise remedy any non-compliant condition to the extent that such work or
condition arises by reason of Landlord's failure to construct the Tenant
Improvements and Landlord's Work (as defined in Exhibit B) in compliance with
                                                ---------
all Legal Requirements.

   d.     Hazardous Materials. Tenant shall not cause or permit the storage,
          -------------------
use, generation, release, handling or disposal (collectively, "Handling") of any
Hazardous Materials (as defined below), in, on, or about the Premises or the
Real Property by Tenant or any agents, employees, contractors, licensees,
subtenants, customers, guests or invitees of Tenant (collectively with Tenant,
"Tenant Parties"), except that Tenant shall be permitted to use in the Premises
in a normal and customary manner normal quantities of office supplies or
products (such as copier fluids or cleaning supplies) customarily used in the
conduct of general business office activities ("Common Office Chemicals"),
provided that the Handling of such Common Office Chemicals shall comply at all
times with all Legal Requirements, including Hazardous Materials Laws (as
defined below). Upon Landlord's request from time to time, Tenant shall provide
to Landlord a complete written inventory of all Hazardous Materials which Tenant
anticipates using or storing on, or discharging from, the Premises along with
copies of all reports, permits and business plans filed with any federal, state,
local or other governmental agency. Tenant shall update the inventory as
frequently as required to reflect any material changes to the items required to
be disclosed therein. Tenant shall be solely responsible for and shall
indemnify, defend and hold Landlord and all other Indemnitees (as defined in
Section 13.a. below), harmless from and against all Claims (as defined in
Section 13.a. below), arising out of or in connection with, or otherwise
relating to (i) any Handling of Hazardous Materials by any Tenant Party or
Tenant's breach of its obligations hereunder, or (ii) any removal, cleanup, or
restoration work and

                                       6

<PAGE>

materials necessary to return the Real Property or any other property of
whatever nature located on the Real Property to their condition existing prior
to the Handling of Hazardous Materials in, on or about the Premises by any
Tenant Party. Tenant shall promptly provide Landlord with copies of all notices
received by it, including, without limitation, any notice of violations, notice
of responsibility or demand for action from any federal, state or local
authority or official in connection with the presence of Hazardous Materials in
or about the Premises or any other portion of the Property. In the event of any
release of Hazardous Materials upon the Premises or any other portion of the
Property, or upon adjacent lands, if caused by Tenant or any other Tenant Party,
Tenant shall promptly remedy the problem in accordance with all applicable Legal
Requirements. For purposes of this Lease, "Hazardous Materials" means any
explosive, radioactive materials, hazardous wastes, or hazardous substances,
including without limitation asbestos containing materials, PCB's, CFC's, or
substances defined as "hazardous substances" in the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section
961-9657; the Hazardous Materials Transportation Act of 1975, 49 USC. Section
1801-1812; the Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section
6901-6987; or any other Legal Requirement regulating, relating to, or imposing
liability or standards of conduct concerning any such materials or substances
now or at any time hereafter in effect (collectively, "Hazardous Materials
Laws"). Tenant's obligations under this Section 8.d. shall survive the
expiration or other termination of this Lease.

  9.      Alterations.
          -----------

     a.   Alterations. Tenant shall not make any alteration, addition or
improvement in, to or upon the Premises ("Alteration") without the prior written
consent of Landlord in each instance, which consent shall not be unreasonably
withheld with respect to proposed Alterations which (i) are not structural in
nature, (ii) do not affect the Base Building Components, (iii) are, in
Landlord's opinion, compatible with the Building and the balance of the Real
Property and the Building's mechanical, plumbing, electrical,
heating/ventilation/air conditioning, communication, security and fire and other
life safety systems (collectively, the "Building Systems"), and (iv) in
Landlord's opinion will not interfere with the use and occupancy of any other
portion of the Building or the Real Property by any other tenant or permitted *
occupant thereof. Tenant shall give Landlord not less than ten (10) days' prior
written notice of any Alteration Tenant desires to make. Any Alterations as to
which Landlord shall consent shall be made only by contractors approved in
advance, in writing by Landlord, which approval shall not be unreasonably
withheld; provided, however, that Landlord may, in its sole discretion, specify
the engineers and contractors to perform any work relating to or affecting the
Building Systems or the Base Building Components. Tenant shall comply with all
Legal Requirements applicable to each Alteration and shall deliver to Landlord a
complete set of "as built" plans and specifications for each Alteration. Any
work to the balance of the Building or Real Property related to or affected or
triggered by Tenant's Alterations shall be performed by Tenant at Tenant's
expense (or, at Landlord's election, Landlord may perform such work at Tenant's
expense). Tenant shall be solely responsible for maintenance and repair of all
Alterations made by Tenant. Tenant shall pay Landlord on demand (whether prior
to or during the course of construction) an amount (the "Alteration Fee") equal
to five percent (5%) of the total cost of each Alteration (and for purposes of
calculating the Alteration Fee, such cost shall include architectural and
engineering fees, but shall not include permit fees) as compensation to Landlord
for miscellaneous costs incurred by Landlord in connection with the Alteration.
In addition, Tenant shall reimburse Landlord for all third party fees paid by
Landlord in connection with reviewing the proposed Alterations (whether or not
the proposed Alterations are ultimately approved by Landlord or made by Tenant),
including, without limitation, Landlord's architectural and engineering fees.
All Alterations shall be performed diligently and in a first-class workmanlike
manner and in accordance with plans and specifications approved by Landlord, and
shall comply with Landlord's construction procedures and requirements for the
Building (including Landlord's requirements relating to insurance and contractor
qualifications and scheduling of the work).

     b.   Liens. If because of any act or omission of Tenant or anyone claiming
          -----
by, through, or under Tenant, any mechanic's lien or other lien is filed against
the Premises or any other portion of the Real

                                        7

<PAGE>

Property or against other property of Landlord (whether or not the lien is valid
or enforceable), Tenant shall, at its own expense, cause it to be discharged of
record within a reasonable time, not to exceed ten (10) days, after the date of
the filing. In addition, Tenant shall defend and indemnify Landlord and hold it
harmless from any and all Claims resulting from the lien. Without limitation of
Landlord's other remedies, Landlord shall have the rights under Section 16 below
if any such lien is not timely discharged by Tenant.

  c.    Ownership of Alterations. All Alterations shall immediately become
        ------------------------
Landlord's property. Except as provided in Section 9.d., Landlord may require
Tenant, at Tenant's sole expense and by the end of the Term, to remove any
Alterations and to restore the Premises to its condition prior to the
Alteration.

  d.    Request Regarding Removal Obligation. At the time that Tenant requests
        ------------------------------------
Landlord's consent to any Alteration, Tenant may request that Landlord notify
Tenant if Landlord will require Tenant, at Tenant's sole expense, to remove any
or all of the Alteration by the end of the Term, and to restore the Premises to
its condition prior to the Alteration. Unless Landlord shall have expressly
agreed in writing not to require such removal and restoration, Landlord's
election right under Section 9.c. shall continue through the end of the Term as
to such Alterations.

10.     Repairs.
        -------

  a. Landlord's Repairs. Landlord shall maintain the roof, foundations, floor
     ------------------
slabs and exterior walls of the Building (collectively, the "Base Building
Components") in good condition and repair, reasonable wear and tear excepted.
The term walls as used herein shall not include windows, glass or plate glass,
doors, special store fronts or office entries. The term roof as used herein
shall not include skylights, smoke hatches or roof vents. Landlord shall also
maintain in good condition and repair, reasonable wear and tear excepted, the
Common Areas, including, but not limited to, the landscaped areas, parking areas
and driveways. Tenant shall reimburse Landlord for Landlord's costs of complying
with its obligations under this Section 10 in accordance with Section 5 above,
provided, however, that any damage caused by or repairs necessitated by any act
of Tenant or any other Tenant Party may be repaired by Landlord at Landlord's
option and at Tenant's expense. Tenant shall give Landlord prompt written notice
of any repairs required of Landlord pursuant to this Section 10, after which
notice Landlord shall have reasonable opportunity to perform the same.

  b. Tenant's Repairs. Tenant shall, at Tenant's expense, maintain all parts of
     ----------------
the Premises in a good, clean and secure condition, promptly making all
necessary repairs and replacements including, but not limited to, all windows,
glass or plate glass, doors and any special store fronts or office entries,
walls and wall finishes, floor covering, Building Systems, truck doors, dock
bumpers, dock plates and levelers, plumbing work and fixtures, downspouts,
skylights, smoke hatches, roof vents and utility equipment, in each case to the
extent the same are located within or exclusively serve the Premises. Tenant
shall, at Tenant's expense, also perform necessary pest extermination and
regular removal of trash and debris. Landlord shall, at Tenant's expense, enter
into a regularly scheduled preventive maintenance/service contract with a
maintenance contractor for servicing all hot water, heating and air
conditioning systems and equipment within or serving the Premises. Tenant shall
not damage any demising wall or disturb the integrity and support provided by
any demising wall and shall, at its sole expense, immediately repair any damage
to any demising wall caused by Tenant or its employees, agents or invitees or
any other Tenant Party. Tenant hereby waives all right to make repairs at the
expense of Landlord or in lieu thereof to vacate the Premises and its other
similar rights as provided in California Civil Code Sections 1932(l), 1941 and
1942 or any other Legal Requirement (whether now or hereafter in effect).

11.     Damage or Destruction.
        ---------------------

  a.    Landlord's Obligation to Rebuild. If the Premises are damaged or
        --------------------------------
destroyed, Landlord shall promptly and diligently repair the Premises unless
Landlord has the option to terminate this Lease as

                                       8

<PAGE>

provided herein, and Landlord elects to terminate.

  b.    Right to Terminate. Landlord shall have the option to terminate this
        ------------------
Lease if the Premises or the building is destroyed or damaged by fire or other
casualty, regardless of whether the casualty is insured against under this
Lease, if Landlord reasonably estimates that the repair of the Premises or the
Building cannot be completed within one hundred eighty (180) days after the
casualty. Landlord shall also have the right to terminate this Lease if the
repair is not fully covered by insurance maintained (or required to be
maintained) by the Landlord pursuant to this Lease other than by reason of the
deductible amounts under Landlord's insurance policies. Tenant shall have the
option to terminate this Lease if the Premises is damaged or destroyed by fire
or other casualty, and Landlord reasonably estimates that the repair of the
Premises cannot be completed within one (1) year after the casualty. Landlord
shall notify Tenant of Landlord's reasonable repair period estimate within (60)
days after the casualty. If a party desires to exercise the right to terminate
this Lease as a result of a casualty, the party shall exercise the right by
giving the other party written notice of its election to terminate within thirty
(30) days after delivery of Landlord's repair period estimate, in which event
this Lease shall terminate fifteen (15) days after the date of the terminating
party's notice. If neither Landlord nor Tenant exercises the right to terminate
this Lease, this Lease shall continue in full force and effect and Landlord
shall promptly commence the process of obtaining necessary permits and
approvals, and shall commence repair of the Premises or the Building as soon as
practicable and thereafter prosecute the repair diligently to completion.

  c.    Limited Obligation to Repair. Landlord's obligation, should Landlord
        ----------------------------
elect or be obligated to repair or rebuild, shall be limited to the Building
shell and any tenant improvements in the Premises which are constructed and paid
for by Landlord pursuant to Exhibit B. Tenant, at its option and expense, shall
                            ---------
replace or fully repair all trade fixtures, equipment, Alterations and other
improvements installed by Tenant and existing at the time of the damage or
destruction.

  d.    Abatement of Rent. In the event of any damage or destruction to the
        -----------------
Premises which does not result in termination of this Lease, the Base Rent shall
be temporarily abated proportionately to the degree the Premises are
untenantable as a result of the damage or destruction, commencing from the date
of the damage or destruction and continuing during the period required by
Landlord to substantially complete its repair and restoration of the Premises;
provided, however, that nothing herein shall preclude Landlord from being
entitled to collect the full amount of any rent loss insurance proceeds. Tenant
shall not be entitled to any compensation or damages from Landlord for loss of
the use of the Premises, damage to Tenant's Personal Property or any
inconvenience occasioned by any damage, repair or restoration. Tenant hereby
waives the provisions of Section 1932, Subdivision 2, and Section 1933,
Subdivision 4, and Sections 1941 and 1942 of the California Civil Code, and the
provisions of any similar Legal Requirement (whether now or hereafter in
effect).

  e.    Insurance Proceeds. If this Lease is terminated, Landlord may keep all
        ------------------
the insurance proceeds resulting from the damage payable pursuant to insurance
coverage maintained by Landlord, and Tenant shall have no claims thereto.

12.     Eminent Domain. If all or any material part of the Premises or balance
        --------------
of the Real Property is taken for public or quasi-public use by a governmental
authority under the power of eminent domain or is conveyed to a governmental
authority in lieu of such taking (a "taking"), Landlord may terminate this Lease
by written notice to Tenant within thirty (30) days after the taking. If all or
any material part of the Premises is taken, and if the taking causes the
remaining part of the Premises to be untenantable and inadequate for use by
Tenant for the purpose for which they were leased, then Tenant, at its option
and by giving notice within fifteen (15) days after the taking, may terminate
this Lease as of the date Tenant is required to surrender possession of the
Premises. If part of the Premises is taken but the remaining part is tenantable
and adequate for Tenant's use, then this Lease shall be terminated as to the
part taken as of the date Tenant is requited to surrender possession, and,
unless Landlord shall have terminated this Lease

                                       9

<PAGE>

pursuant to the foregoing provisions, Landlord shall make such repairs,
alterations and improvements as may be necessary to render the part not taken
tenantable, and the Base Rent shall be reduced in proportion to the part of the
Premises taken. All compensation awarded for the taking shall be the property of
Landlord without any deduction therefrom for any estate of Tenant, and Tenant
hereby assigns to Landlord all its right, title and interest in and to the
award. Tenant shall have the right, however, to recover from the governmental
authority, but not from Landlord, such compensation as may be awarded to Tenant
on account of the interruption of Tenant's business, moving and relocation
expenses and removal of Tenant's Personal Property, provided that any such award
to Tenant will not reduce the award which would otherwise be made to Landlord.

13.  Indemnity and Insurance.
     -----------------------

     a. Indemnity. Tenant shall hold Landlord and its constituent shareholders,
        ---------
partners, members or other owners, and all of their agents, contractors,
servants, officers, directors, employees and licensees (collectively with
Landlord, the "Indemnitees") harmless from and indemnify the Indemnitees against
my and all claims, liabilities, damages, costs and expenses, including
reasonable attorneys' fees and costs incurred in defending against the same
(collectively, "Claims"), to the extent arising from (a) the acts or omissions
of Tenant or any other Tenant Party in, on or about the Real Property, or (b)
any construction or other work undertaken by or on behalf of Tenant in, on or
about the Premises, whether prior to or during the Term, or (c) any accident,
injury or damage, howsoever and by whomsoever caused, to any person or property,
occurring in, on or about the Premises; except to the extent such Claims are
caused by the negligence or willful misconduct of Landlord or its authorized
representatives. In case any action or proceeding be brought against any of the
Indemnitees by reason of any such Claim, Tenant, upon notice from Landlord,
covenants to resist and defend at Tenant's sole expense such action or
proceeding by counsel reasonably satisfactory to Landlord. The provisions of
this Section 13.a. shall survive the expiration or earlier termination of this
Lease with respect to any injury, illness, death or damage occurring prior to
such expiration or termination.

     b. Fire and Extended Coverage. Landlord shall procure and maintain in full
        --------------------------
force and effect with respect to the Building (including any tenant improvements
in the Premises constructed and paid for by Landlord pursuant to Exhibit B) a
                                                                 ---------
policy or policies of all risk insurance (including sprinkler, vandalism and
malicious mischief coverage, and any other endorsements desired by the Landlord
or required by the holder of any fee or leasehold mortgage on the Real Property,
but excluding, at Landlord's option, the insurance described in Section 13.i.
below) in such amount as Landlord shall determine, but in an amount at least
equal to eighty percent (80%) (or such greater percentage as shall be required
to preclude Landlord from being deemed a coinsurer)) of the full replacement
cost (including debris removal, and demolition, but excluding the land and the
footings, foundations and installations below the basement level) thereof. Such
insurance, and all other insurance maintained by Landlord under this Lease,
shall be for the sole benefit of Landlord, and the proceeds therefrom shall be
under Landlord's sole control.

     c. Public Liability. Tenant, at its own cost and expense, shall keep and
        ----------------
maintain in full force and effect during the Term the following insurance
coverages, written by an insurance company licensed by and admitted to issue
insurance in the State of California, with a general policyholders' rating of
"A" or better and a financial size ranking of "Class X" or higher, in the most
recent edition of Best's Insurance Guide, in the form customary to the locality,
(i) commercial general liability insurance, including contractual liability
coverage, insuring Tenant's activities with respect to the Premises and/or the
Building against loss, damage or liability for personal injury or death of any
person or loss or damage to property occurring in, upon or about the Premises,
with a minimum coverage of One Million Dollars ($1,000,000) per occurrence/Two
Million Dollars ($2,000,000) general aggregate, plus a Five Million Dollar
($5,000,000) per occurrence/general aggregate umbrella, (ii) fire damage legal
liability insurance and personal/advertising injury insurance (which shall not
be subject to the contractual liability exclusion), each in the minimum amount
of One Million Dollars ($1,000,000), (iii) medical payments insurance in the
minimum amount of

                                       10

<PAGE>

Five Thousand Dollars ($5,000), (iv) worker's compensation insurance in
statutory amounts, and (v) if Tenant operates owned, leased or non-owned
vehicles on the Property, comprehensive automobile liability insurance with a
minimum coverage of $1,000,000 per occurrence/Two Million Dollars ($2,000,000)
general aggregate; provided, however, that if, at any time during the Term,
Tenant shall have in full force and effect a blanket policy of public liability
insurance with the same coverage for the Premises as described above, as well as
coverage of other premises and properties of Tenant, or in which Tenant has some
interest, the blanket insurance shall satisfy the requirement hereof and be
endorsed to separately apply to the Premises.

     d. Rental Abatement Insurance. Landlord may keep and maintain in full force
        --------------------------
and effect during the Term rental abatement insurance against abatement or loss
of rents with respect to the Real Property in such amount as determined by
Landlord.

     e. Insurance Certificates. Tenant shall furnish to Landlord, on or before
        ----------------------
the Commencement Date and thereafter within thirty (30) days prior to the
expiration of each policy, an original certificate of insurance issued by the
insurance carrier of each policy of insurance carried by Tenant pursuant to this
Section 13. The certificates shall expressly provide that the policies shall not
be cancelable or subject to reduction of coverage or otherwise be subject to
modification except after thirty (30) days' prior written notice to the parties
named as insureds. Landlord, its successors and assigns, and any nominee of
Landlord holding any interest in the Premises, including, without limitation,
any ground lessor or the holder of any fee or leasehold mortgage, shall be named
as an additional insured under each policy of insurance maintained by Tenant
pursuant to this Lease. The policies and certificates shall further provide that
the coverage shall be primary, and that any coverage carried by Landlord shall
be secondary and noncontributory with respect to Tenant's policy.

     f. Tenant's Failure. If Tenant fails to maintain any insurance required by
        ----------------
this Lease, Tenant shall be liable for any loss or cost resulting from the
failure. This Section shall not be deemed to be a waiver of any of Landlord's
rights and remedies under any other provision of this Lease.

     g. Waiver of Subrogation. Any policy or policies of fire, extended coverage
        ---------------------
or similar casualty insurance which either party obtains in connection with the
Building, the Premises, or Tenant's Personal Property shall include a clause or
endorsement denying the insurer any rights of subrogation against the other
party (and the other parties named as additional insureds pursuant to Section
13.e. above) to the extent rights have been waived by the insured prior to the
occurrence of injury or loss. Landlord and Tenant each waives any rights of
recovery against the other (and the other parties named as additional insureds
pursuant to Section 13.e. above) for injury or loss due to hazards insurable by
policies of fire, extended coverage or similar casualty insurance, regardless of
whether such insurance policies or coverage shall actually have been obtained by
the party granting such waiver, and regardless of the cause of such fire or
casualty, including the negligence of the party benefiting from such waiver.
Because this Section 13.g will preclude the assignment of any claim mentioned in
it by way of subrogation or otherwise to an insurance company or any other
person, each party to this Lease agrees immediately to give to each of its
insurance companies written notice of the terms of the mutual waivers contained
in this Section 13.g and to have the insurance policies properly endorsed, if
necessary, to prevent the invalidation of the insurance coverages by reason of
the mutual waivers contained in this Section 13.g.

     h. Tenant's Property and Fixtures. Tenant shall assume the risk of damage
        ------------------------------
to any of Tenant's furniture, equipment, machinery, goods, supplies or fixtures
or other Personal Property, and to any Alterations which Tenant may make to the
Premises, and shall insure the same throughout the Term, for their full
replacement cost, under insurance policies reasonably satisfactory to Landlord
(certificates of which shall be delivered to Landlord as set forth above in
Section 13.e). Tenant hereby releases Landlord from any obligation to insure the
foregoing items and from any liability for loss of or damage to such items,
regardless of cause.

                                       11

<PAGE>

     i. Earthquake and Flood Insurance. In addition to any other insurance
        ------------------------------
policies carried by Landlord in connection with the Building, Landlord may elect
to procure and maintain in full force and effect during the Term with respect to
the Building a policy of earthquake/volcanic action and flood and/or surface
water insurance, including rental value insurance against abatement or loss of
rent in the case of damage or loss covered under the earthquake/volcanic and
flood and/or surface water insurance, in an amount up to one hundred percent
(100%) of the full replacement cost (including debris removal and demolition) of
the Building.

14.     Assignment or Sublet.
        --------------------

     a. Tenant shall not assign this Lease or sublet the Premises or any portion
thereof without the prior written consent of Landlord in each instance, which
consent shall not, subject to Landlord's rights under clause (i) below, be
unreasonably withheld. If Tenant desires to assign this Lease or to sublet the
Premises, or any part thereof, Tenant shall give to Landlord written notice of
its intent at least sixty (60) days in advance of the date on which Tenant
desires to assign or sublet the Premises, which notice shall designate the terms
of the proposed assignment or sublet, the identity of the proposed assignee or
sublessee, and shall be accompanied by financial statements of such proposed
assignee or sublessee and such other information regarding such party and its
business and reputation as shall be required by Landlord to evaluate the
proposed assignment or sublet. Landlord shall have thirty (30) days after
receipt of Tenant's written notice and the above specified information within
which to notify Tenant in writing that Landlord elects to (i) terminate this
Lease, in the case of a proposed assignment, or to terminate this Lease as to
that portion of the Premises to be sublet, in the case of a proposed sublet,
(ii) consent to the proposed assignment or sublet as described in Tenant's
notice, or (iii) reasonably refuse to consent to Tenant's proposed assignment or
sublet, stating the reasons for such refusal. If Landlord fails to notify Tenant
in writing of its election within the thirty (30) day period, Landlord shall be
deemed to have made the election in clause (iii) above. No consent by Landlord
to any assignment or sublet shall be deemed to be a consent to a use not
permitted under this Lease, to any act in violation of this Lease or to any
subsequent assignment or sublet. No assignment or sublet by Tenant shall relieve
Tenant of any liability theretofore or thereafter arising under this Lease. Any
attempted assignment or sublet by Tenant in violation of the terms and covenants
of this Section shall be void.

     During the first six (6) months of the Term, the sixty (60) and thirty (30)
day periods in the preceding paragraph shall each be reduced to ten (10) days.

     Notwithstanding the provisions of the foregoing paragraph, Landlord shall
not have the termination option described in clause (i) of the preceding
paragraph as to any sublease proposed by Tenant which will terminate three (3)
years or earlier from the Commencement Date, unless the space subject to such
sublease, taken together with all other portions of the Premises subject to any
sublease, would exceed fifty percent (50%) of the total Premises then demised
under this Lease. In addition, Landlord shall not have the termination option
described in clause (i) of the preceding paragraph as to any sublease proposed
by Tenant if, within ten (10) days after Tenant's receipt of notice from
Landlord that Landlord is exercising such termination right, Tenant withdraws
its request for Landlord's consent to such sublease.

     If Tenant shall propose to assign this Lease effective as of a date which
is during the first two (2) years of the Term, or if Tenant shall propose to
sublease any portion of the Premises effective as of a date which is during the
first two (2) years of the Term and the term of such sublease is for more than
three (3) years, due to the potential material adverse affect such proposed
transaction would have on Landlord's ability to lease the balance of the Real
Property, Landlord's refusal to consent to any such proposed transaction shall
be deemed reasonable (without limitation of any other reasonable grounds
Landlord may have for refusing to consent to any assignment or subletting).

     b. Processing Expenses. Tenant shall pay to Landlord, as Landlord's cost of
        -------------------
processing each

                                       12

<PAGE>

proposed assignment or subletting (whether or not the same is ultimately
approved by Landlord or consummated by Tenant), an amount equal to the sum of
(i) Landlord's reasonable attorneys' and other professional fees, plus (ii) the
sum of $1000.00 for the cost of Landlord's administrative, accounting and
clerical time (collectively, "Processing Costs"). Notwithstanding anything to
the contrary herein, Landlord shall not be required to process any request for
Landlord's consent to an assignment or subletting until Tenant has paid to
Landlord the amount of Landlord's estimate of the Processing Costs. When the
actual mount of the Processing Costs is determined, it shall be reconciled with
Landlord's estimate, and any payments or refunds required as a result thereof
shall promptly thereafter be made by the parties.

  c.     Consideration to Landlord. In the event of any assignment or sublease,
         -------------------------
whether or not requiring Landlord's consent, Landlord shall be entitled to
receive, as additional rent hereunder, seventy-five percent (75%) of any
consideration (including, without limitation, payment for leasehold improvements
and any "Leasehold Profit" as defined below) paid by the assignee or subtenant
for the assignment or sublease and, in the case of a sublease, the excess of the
amount of rent paid for the sublet space by the subtenant over the amount of
Monthly Base Rent under Section 4 above and Operating Expenses under Section 5
above attributable to the sublet space for the corresponding month; except that
Tenant may recapture, on an amortized basis over the term of the sublease or
assignment, any brokerage commissions paid by Tenant in connection with the
subletting or assignment (not to exceed commissions typically paid in the market
at the time of such subletting or assignment), Tenant's reasonable costs of
advertising the space for sublease or assignment, any improvement allowance paid
by Tenant to the subtenant or assignee, and any improvement costs paid by Tenant
solely to prepare the space for the assignment or sublet.. "Leasehold Profit"
shall be the value allocated to the leasehold between the parties to the
assignment or sublease, but in no event less than the excess of the present
value of the fair market rent of the Premises for the remaining term of this
Lease after such assignment or sublease, over the Base Rent payable hereunder
for such remaining term, as reasonably determined by Landlord. Upon Landlord's
request, Tenant shall direct any subtenant or assignee to pay the directly to
Landlord the amounts due to it pursuant to this Section 14.c. on account of such
sublease or assignment. If there is more than one sublease under this Lease, the
amounts (if any) to be paid by Tenant to Landlord pursuant to this Section 14.c.
shall be separately calculated for each sublease and amounts due Landlord with
regard to any one sublease may not be offset against rental and other
consideration pertaining to or due under any other sublease.

  d.     Documentation. No permitted assignment or subletting by Tenant shall be
         -------------
effective until there has been delivered to Landlord a fully executed
counterpart of the assignment or sublease which expressly provides that (i) in
the case of a sublease, the subtenant may not assign its sublease or further
sublet the sublet space without Landlord's prior written consent, (ii) in the
case of an assignment, the assignee assumes all of Tenant's obligations under
this Lease arising on or after the date of the assignment, and (iii) in the case
of a sublease, the subtenant agrees to be and remain jointly and severally
liable with Tenant to Landlord for the payment of Rent pertaining to the sublet
space in the amount set forth in the sublease, and for the performance of all of
the terms and provisions of this Lease pertaining to the sublet space. In
addition to the foregoing, no assignment or sublease by Tenant shall be
effective until there has been delivered to Landlord a fully executed
counterpart of Landlord's consent to assignment or sublease form, as applicable.
The failure or refusal of a subtenant or assignee to execute any such instrument
shall not release or discharge the subtenant or assignee from its liability as
set forth above. Notwithstanding the foregoing, no subtenant or assignee shall
be permitted to occupy the Premises unless and until such subtenant or assignee
provides Landlord with certificates evidencing that such subtenant or assignee
is carrying all insurance coverage required of it under this Lease.

  e.     No Merger. Without limiting any of the provisions of this Section 14,
         ---------
the voluntary or other surrender of this Lease by Tenant, or a mutual
cancellation by Landlord and Tenant, shall not work a merger, and shall, at the
option of Landlord, terminate all or any existing subleases or subtenancies or,
at the option of Landlord, operate as an assignment to Landlord of any or all
such subleases or subtenancies. If Landlord does elect that such surrender or
cancellation operate as an assignment of such subleases or subtenancies,

                                       13

<PAGE>

Landlord shall in no way be liable for any previous act or omission by Tenant
under the subleases or for the return of any deposit(s) under the subleases that
have not been actually delivered to Landlord, nor shall Landlord be bound by any
sublease modification(s) executed without Landlord's consent or for any advance
rental payment by the subtenant in excess of one month's rent.

 f. Indirect Assignments. For purposes of this Section 14, the following
    --------------------
events shall be deemed an assignment or sublease, as appropriate: (i) the
issuance of equity interests (whether stock, partnership interests or otherwise)
in Tenant or any subtenant or assignee, or any entity controlling any of them,
to any person or group of related persons, in a single transaction or a series
of related or unrelated transactions, such that, following such issuance, such
person or group shall have Control (as defined below) of Tenant or any subtenant
or assignee; (ii) a transfer of Control of Tenant or any subtenant or assignee,
or any entity controlling any of them, in a single transaction or a series of
related or unrelated transactions (including, without limitation, by
consolidation, merger, acquisition or reorganization), except that the transfer
of outstanding capital stock or other listed equity interests by persons or
parties other than "insiders" within the meaning of the Securities Exchange Act
of 1934, as amended, through the "over-the-counter" market or any recognized
national or international securities exchange, shall not be included in
determining whether Control has been transferred; (iii) a reduction of Tenant's
assets to the point that this Lease and/or other leases are substantially
Tenant's only asset(s); or (iv) a change or conversion in the form of entity of
Tenant, any subtenant or assignee, or any entity controlling any of them, which
has the effect of limiting the liability of any of the partners, members or
other owners of such entity. "Control" shall mean direct or indirect ownership
of 50% or more of all of the voting stock of a corporation or 50% or more of the
voting legal or equitable interest in any other business entity, or the power to
direct the management and operations of any entity (by equity ownership,
contract or otherwise).

 g. Affiliates: Successors. Notwithstanding anything to the contrary in
    ----------------------
Section 14.a or Section 14.c., but subject to the other provisions of this
Section 14, Tenant may assign this Lease or sublet the Premises or any portion
thereof, without Landlord's consent, to any partnership, corporation or other
entity which controls, is controlled by, or is under common control with Tenant
(control being defined for such purposes as ownership of 50% or more of all of
the voting stock of a corporation or 50% or more of the voting legal or
equitable interest in any other business entity, and the power to direct the
management and operations of, the relevant entity) (an "Affiliate") or to any
partnership, corporation or other entity resulting from a merger or
consolidation with Tenant or which acquires all or substantially all of Tenant's
assets (through a transfer of assets or equity interests in Tenant) as a going
concern and such assets include substantial assets other than this Lease (a
"Successor'), provided that (i) Landlord receives at least ten (10) days' prior
written notice of the assignment or subletting, in which Tenant shall expressly
confirm that Tenant remains primarily liable (together with the assignee in the
event of an assignment) for all of the obligations of the Tenant under this
Lease, (ii) in the case of an assignment to a Successor, the Successor's net
worth is not less than Tenant's net worth immediately prior to such assignment
(or series of transactions of which such assignment is a part), (iii) in the
case of a subletting or assignment to an Affiliate, the Affiliate remains an
Affiliate for the duration of the subletting or the balance of the term in the
event of an assignment, (iv) Landlord receives a fully executed copy of the
assignment or sublease agreement between Tenant and the Affiliate or Successor
at least ten (10) days prior to the effective date of such assignment or
sublease, in which the Affiliate or Successor, as the case may be, assumes (in
the event of an assignment) all of Tenant's obligations under this Lease, and
agrees (in the event of a sublease) that such subtenant will, at Landlord's
election, attorn directly to Landlord in the event that this Lease is terminated
for any reason, and (v) in the case of an assignment, the essential purpose of
such assignment is to transfer an active, ongoing business with substantial
assets in addition to this Lease, and in the case of an assignment or sublease
the transaction is for legitimate business purposes unrelated to this lease and
the transaction is not a subterfuge by Tenant to avoid it obligations under
this Lease or the restrictions on assignment and subletting contained herein.

                                       14

<PAGE>

 15.  Default.
      -------

  a.  Tenant's Default. A material breach of this Lease by Tenant shall exist
      ----------------
if any of the following events (severally, "Event of Default"; collectively,
"Events of Default") shall occur: (i) if Tenant shall have failed to pay Base
Rent, Tenant's Percentage Share of increased Operating Expenses, or any other
sum required to be paid hereunder when due, including any interest due under
Section 3; (ii) if Tenant shall have failed to perform any term, covenant or
condition of this Lease except those requiring the payment of money, and Tenant
shall have failed to cure the breach within fifteen (15) days after written
notice from Landlord if the breach could reasonably be cured within the fifteen
(15) day period; provided, however, if the failure could not reasonably be cured
within the fifteen (15) day period, then Tenant shall not be in default unless
it has failed to promptly commence and thereafter continue to make diligent and
reasonable efforts to cure the failure as soon as practicable as reasonably
determined by Landlord; (iii) if Tenant shall have assigned its assets for the
benefit of its creditors; (iv) if the sequestration of, attachment of, or
execution on, any material part of the property of Tenant or on any property
essential to the conduct of Tenant's business shall have occurred, and Tenant
shall have failed to obtain a return or release of the property within thirty
(30) days thereafter, or prior to sale pursuant to any sequestration, attachment
or levy, whichever is earlier; (v) if Tenant shall have failed to continuously
and uninterruptedly conduct its business in the Premises, or shall have
abandoned or vacated the Premises; (vi) if a court shall have made or entered
any decree or order adjudging Tenant to be insolvent, or approving as properly
filed a petition seeking reorganization of Tenant, or directing the winding up
or liquidation of Tenant, and the decree or order shall have continued for a
period of thirty (30) days; (vii) if Tenant shall make or suffer any transfer
which constitutes a fraudulent or otherwise avoidable transfer under any
provision of the federal Bankruptcy Laws or any applicable state law; or (viii)
if Tenant shall have failed to comply with the provisions of Sections 23 or 25
of this Lease within the time periods stated therein. An Event of Default shall
constitute a default under this Lease.

  b.  Remedies Upon Tenant's Default. Upon an Event of Default, Landlord shall
      ------------------------------
have the following remedies, in addition to all other rights and remedies
provided by law, equity, statute or otherwise provided in this Lease, to which
Landlord may resort cumulatively or in the alternative:

      (i)  Landlord has the remedy described in California Civil Code Section
1951.4 (a landlord may continue the lease in effect after the tenant's breach
and abandonment and recover rent as it becomes due, if the tenant has the right
to sublet and assign subject only to reasonable limitations), and may continue
this Lease in full force and effect, and this Lease shall continue in full force
and effect as long as Landlord does not terminate Tenant's right to possession,
and Landlord shall have the right to collect Rent when due. During the period
Tenant is in default, Landlord may enter the Premises and relet it, or any part
of it, to third parties for Tenant's account, provided that any Rent in excess
of the Rent due hereunder shall be payable to Landlord. Tenant shall be liable
immediately to Landlord for all costs Landlord incurs in reletting the Premises,
including, without limitation, brokers' commissions, expenses of cleaning and
redecorating the Premises required by the reletting and like costs. Reletting
may be for a period shorter or longer than the remaining Term of this Lease.
Tenant shall pay to Landlord the Rent and other sums due under this Lease on the
dates the Rent is due, less the Rent and other sums Landlord receives from any
reletting. No act by Landlord allowed by this Subsection (i) shall terminate
this Lease unless Landlord notifies Tenant in writing that Landlord elects to
terminate this Lease.

      (ii) Landlord may terminate Tenant's right to possession of the Premises
at any time by giving written notice to that effect. No act by Landlord other
than giving written notice to Tenant of such termination shall terminate this
Lease. Acts of maintenance, efforts to relet the Premises or the appointment of
a receiver on Landlord's initiative to protect Landlord's interest under this
Lease shall not constitute a termination of Tenant's right to possession. On
termination, Landlord shall have the right to remove all personal property of
Tenant and store it at Tenant's cost and to recover from Tenant as damages: (a)
the worth at the time of award of unpaid Rent and other sums due and payable
which had been earned at the

                                       15

<PAGE>

time of termination; plus (b) the worth at the time of award of the amount by
which the unpaid Rent and other sums due and payable which would have been
payable after termination until the time of award exceeds the amount of the Rent
loss that Tenant proves could have been reasonably avoided; plus (c) the worth
at the time of award of the amount by which the unpaid Rent and other sums due
and payable for the balance of the Term after the time of award exceeds the
amount of the Rent loss that Tenant proves could be reasonably avoided; plus (d)
any other amount necessary to compensate Landlord for all the detriment
proximately caused by Tenant's failure to perform Tenant's obligations under
this Lease, or which, in the ordinary course of things, would be likely to
result therefrom, including, without limitation, any costs or expenses incurred
by Landlord: (1) in retaking possession of the Premises, including reasonable
attorneys' fees and costs therefor; (2) maintaining or preserving the Premises
for reletting to a new tenant, including repairs or alterations to the Premises
for the reletting; (3) leasing commissions; (4) any other costs necessary or
appropriate to relet the Premises; and (5) at Landlord's election, such other
amounts in addition to or in lieu of the foregoing as may be permitted from time
to time by California Civil Code Section 1951.2 or any other laws of the State
of California.

The "worth at the time of award" of the amounts referred to in Subsections
(ii)(a) and (ii)(b) is computed by allowing interest at the lesser of eighteen
percent (18%) per annum or the maximum rate permitted by law, on the unpaid
Rent and other sums due and payable from the date due through the date of award.
The "worth at the time of award" of the amount referred to in Subsection (ii)(c)
is computed by discounting the amount at the discount rate of the Federal
Reserve Bank of San Francisco at the time of award, plus one percent (1%).
Tenant waives redemption or relief from forfeiture under California Code of
Civil Procdure Sections 1174 and 1179, or under any other present or future law,
if Tenant is evicted or Landlord takes possession of the Premises by reason
of any default of Tenant hereunder.

  c. Landlord's Default. Landlord shall not be deemed to be in default in the
     ------------------
performance of any obligation required to be performed by Landlord hereunder
unless and until Landlord has failed to perform the obligation within thirty
(30) days after receipt of written notice by Tenant to Landlord specifying the
obligation Landlord has failed to perform; provided, however, that if the nature
of Landlord's obligation is such that more than thirty (30) days are required
for its performance, then Landlord shall not be deemed to be in default if
Landlord shall commence the performance of such obligation within the thirty
(30) day period and thereafter shall diligently prosecute the same to
completion.

16.  Landlord's Right to Perform Tenant's Covenants.
     ----------------------------------------------

  If Tenant shall at any time fail to make any payment or perform any other

act on its part to be made or performed under this Lease, Landlord may, but
shall not be obligated to, make the payment or perform any other act to the
extent Landlord may deem desirable and, in connection therewith, pay expenses
and employ counsel. Any payment or performance by Landlord shall not waive or
release Tenant from any obligations of Tenant under this Lease. All sums so paid
by Landlord, and all penalties, interest and costs in connection therewith,
shall be due and payable by Tenant on the next day after any payment by
Landlord, together with interest thereon at the Interest Rate, from that date to
the date of payment thereof by Tenant to Landlord, plus collection costs and
attorneys' fees. Landlord shall have the same rights and remedies for the
nonpayment thereof as in the case of default in the payment of Base Rent.

17.  Security Deposit: Letter of Credit.
     ----------------------------------

  a. Security Deposit. Tenant has deposited with Landlord the Security
     ----------------
Deposit, in the amount specified in the Basic Lease Information, as security for
the full and faithful performance of every provision of this Lease to be
performed by Tenant. If Tenant defaults with respect to any proviSion of this
Lease, Landlord may use, apply or retain all or any part of the Security Deposit
for the payment of any Rent or other sum in default, for the payment of any
amount which Landlord may expend or become obligated to expend by reason of
Tenant's default, or for any loss or damage which Landlord may suffer by reason
of

<PAGE>

Tenant's default; provided, however, that the Security Deposit shall not be
deemed an advance rent deposit or an advance payment of any kind, or a measure
or limitation of Landlord's damages or constitute a bar or defense to any of the
Landlord's other remedies under this Lease or at law upon Tenant's default. If
any portion of the Security Deposit is used or applied, Tenant shall deposit
with Landlord, within ten (10) days after written demand therefor, cash in an
amount sufficient to restore the Security Deposit to its original amount.
Landlord shall not be required to keep the Security Deposit separate from its
general funds, and Tenant shall not be entitled to interest on the Security
Deposit. Upon the expiration or earlier termination of this Lease, and Tenant's
fulfillment of all of its obligations hereunder (including any obligations which
survive such expiration or earlier termination), Landlord shall return the
Security Deposit (or the balance thereof after application as aforesaid) to
Tenant.

     b. Letter of Credit. In addition to the Security Deposit made by Tenant
        ----------------
pursuant to Section 17.a., concurrently with Tenant's execution and delivery of
this Lease to Landlord, Tenant has delivered to Landlord the Letter of Credit
described below as security for Tenant's performance of all of Tenant's
covenants and obligations under this Lease; provided, however, that neither the
Letter of Credit nor any proceeds therefrom (the "Letter of Credit Proceeds")
shall be deemed an advance rent deposit or an advance payment of any other kind,
or a measure or limitation of Landlord's damages or constitute a bar or defense
to any of the Landlord's  other remedies under this Lease or at law upon
Tenant's default. The Letter of Credit shall be maintained in effect from the
date of this Lease through ninety (90) days after the expiration or earlier
termination of the Term, and on or prior to the expiration of such ninety (90)
day period, Landlord shall return to Tenant the Letter of Credit (unless
presented for payment as provided herein) and any Letter of Credit Proceeds then
held by Landlord (other than those held for application by Landlord as provided
below, including application to cure any failure by Tenant to restore the
Premises as required by this Lease upon the surrender thereof); provided,
however, that in no event shall any such return be construed as an admission by
Landlord that Tenant has performed all of its obligations hereunder. Landlord
shall not be required to segregate the Letter of Credit Proceeds from its other
funds and no interest shall accrue or be payable to Tenant with respect thereto.
Landlord may (but shall not be required to) draw upon the Letter of Credit and
use the Letter of Credit Proceeds or any portion thereof to cure any Event of
Default by Tenant under this Lease or to compensate Landlord for any damage
Landlord incurs as a result of Tenant's failure to perform any of its
obligations hereunder, it being understood that any use of the Letter of Credit
Proceeds shall not constitute a bar or defense to any of Landlord's other
remedies under this Lease. In such event and upon written notice from Landlord
to Tenant specifying the amount of the Letter of Credit Proceeds so utilized by
Landlord and the particular purpose for which such amount was applied, Tenant
shall immediately deliver to Landlord an amendment to the Letter of Credit or a
replacement thereof in an amount equal to one hundred percent (100%) of the
amount specified below for the applicable period. Tenant's failure to deliver
such amendment or replacement to Landlord within five (5) days of Landlord's
notice shall constitute an Event of Default hereunder. No lessor under any
ground or underlying lease or holder of or beneficiary under a mortgage or deed
of trust, nor any purchaser at any judicial or private foreclosure sale of the
Property or any portion thereof, shall be responsible to Tenant for such Letter
of Credit or any Letter of Credit Proceeds unless such lessor, holder or
purchaser shall have actually received the same.

     C. As used herein, Letter of Credit shall mean an unconditional,
irrevocable letter of credit (hereinafter referred to as the "Letter of Credit")
issued at Tenant's sole expense by the San Francisco or New York office of a
major national bank satisfactory to Landlord (the "Bank"), naming Landlord as
beneficiary, and in form and substance satisfactory to Landlord, in the amount
of One Million Dollars ($1,000,000.00) (subject to increase by the amount of the
Improvement Advance as described below) for the during the period from the date
of this Lease through the first annual anniversary of the Commencement Date, and
reducing in amount on the first annual anniversary of the Commencement Date and
on each subsequent annual anniversary of the Commencement Date by twenty percent
(20%) of the original amount of the Letter of Credit; provided, however, that if
on the date the Letter of Credit amount would otherwise reduce, an Event of
Default, or default that with notice or the passage of time or both could mature
into an Event of Default, shall have occurred and be continuing, the Letter of
Credit amount shall not reduce on such date and shall not thereafter

                                       17

<PAGE>

reduce until the later of the next scheduled reduction date or the date such
Event of Default or default shall have been cured. The Letter of Credit shall be
for a one-year or, at Tenant's election, longer, term and shall provide: (i)
that Landlord may make partial and multiple draws thereunder, up to the face
amount thereof, (ii) that Landlord may draw upon the Letter of Credit up to the
full amount thereof, as determined by Landlord, and the Bank will pay to
Landlord the amount of such draw upon receipt by the Bank of a sight draft
signed by Landlord and accompanied by a written certification from Landlord to
the Bank stating either: (a) that an Event of Default has occurred and is
continuing under this Lease, or (b) that Landlord has not received notice from
the Bank that the Letter of Credit will be renewed by the Bank for at least one
(1) year beyond the then relevant expiration date and Tenant has not furnished
Landlord with a replacement Letter of Credit as hereinafter provided, or (c)
that Bank no longer meets the requirements set forth above and Tenant has not
furnished Landlord with a replacement Letter of Credit as required hereunder
from a Bank meeting such requirements; and (iii) that, in the event of
Landlord's assignment or other transfer of its interest in this Lease, the
Letter of Credit shall be freely transferable by Landlord, without charge and
without recourse, to the assignee or transferee of such interest and the Bank
shall confirm the same to Landlord and such assignee or transferee. The Letter
of Credit shall further provide that a draw thereon pursuant to clause (ii)(b)
above may only be made during the thirty (30) day period preceding the then
applicable expiration date of the Letter of Credit. In the event that the Bank
shall fail to notify Landlord that the Letter of Credit will be renewed for at
least one (1) year beyond the then applicable expiration date, and Tenant shall
not have delivered to Landlord, at least thirty (30) days prior to the relevant
annual expiration date, a replacement Letter of Credit in the amount required
hereunder and otherwise meeting the requirements set forth above, then Landlord
shall be entitled to draw on the Letter of Credit as provided above, and shall
hold and apply the proceeds of such draw as Letter of Credit Proceeds pursuant
to Paragraph 17.b above.

  Notwithstanding the foregoing, in the event that Landlord shall make an
Improvement Advance as described in Exhibit B attached hereto, within thirty
                                    ---------
(30) days of the determination of the total amount of the Improvement Advance
Tenant shall increase the initial amount of the Letter of Credit by the amount
of the Improvement Advance.

18.  Surrender of Premises.
     ---------------------

  By taking possession of the Premises, Tenant shall be deemed to have accepted
the Premises and the Property in good, clean and completed condition and repair,
subject to all applicable laws, codes and ordinances. On the Expiration Date or
earlier termination of this Lease, Tenant shall surrender the Premises to
Landlord in its condition as of the Commencement Date, normal wear and tear
excepted. Tenant shall remove from the Premises all of Tenant's Personal
Property and any Alterations required to be removed pursuant to Section 9 of
this Lease. Tenant shall repair any damage or perform any restoration work
required by the removal. If Tenant fails to timely remove any Personal Property
or Alterations as aforesaid, Landlord may remove the property and store and/or
dispose of the same at Tenant's expense, including interest at the Interest
Rate. If the Premises are not so surrendered at the termination of this Lease,
Tenant shall indemnify Landlord against all Claims resulting from delay by
Tenant in so surrendering the Premises, including, without limitation, any
claims made by any succeeding tenant, losses to Landlord due to lost
opportunities to lease to succeeding tenants, and attorneys' fees and costs.
Tenant shall give written notice to Landlord at least thirty (30) days prior to
vacating the Premises and shall meet with Landlord for a joint inspection of the
Premises at the time of vacating. In the event of Tenant's failure to give such
notice or participate in such joint inspection, Landlord's inspection at or
after Tenant's vacating the Premises shall conclusively be deemed correct for
purposes of determining Tenant's responsibility for removal of Alterations and
repairs and restoration of the Premises.

19.  Holding Over.
     ------------

  If Tenant remains in possession of all or any part of the Premises after the
expiration of the Term or the

                                       18

<PAGE>

earlier termination of this Lease without Landlord's prior written consent, the
tenancy shall be a tenancy at sufferance only and shall not constitute a renewal
or extension for any further term, regardless of whether Landlord shall accept
Rent for any such period. In such event, Base Rent shall be increased in an
amount equal to two hundred percent (200%) of the Base Rent during the last
month of the Tern (including any extensions), and any other sums due under this
Lease shall be payable in the amount, and at the times, specified in this Lease.
The tenancy shall be subject to every other term, condition, covenant and
agreement contained in this Lease, except that any renewal or extension option
in favor of Tenant shall not be applicable. No such increase shall impair
Landlord's other rights and remedies against Tenant by reason of such holding
over by Tenant, and Tenant shall vacate the Premises immediately upon Landlord's
request.

20.     Access to Premises.
        ------------------

  Tenant shall permit Landlord and its agents to enter the Premises at all
reasonable times upon reasonable notice, except in the case of an emergency (in
which event entry may be made when necessary and without notice), to inspect the
Premises, to post Notices of Nonresponsibility and similar notices, to show the
Premises to interested parties such as prospective mortgagees, purchasers and
tenants to provide any services required of Landlord hereunder, to make
necessary alterations, additions, improvements or repairs either to the
Premises, the Building, or other premises within the Building, and to discharge
Tenant's obligations hereunder when Tenant has failed to do so within a
reasonable time after written notice from Landlord. No such entry shall
constitute a constructive eviction or give rise to an abatement of Rent
hereunder, constitute a constructive eviction, or otherwise diminish Tenant's
obligations under this Lease. In exercising its rights under this Section 20,
Landlord shall at all times endeavor to minimize interference with Tenant's
operations, to the extent practicable. During the last year of the Term,
Landlord shall have the right to erect on the exterior of the Premises and/or on
the exterior or in the Common Areas of the Building and the Property suitable
signs indicating that the Premises are available for lease.

21.     Signs.
        -----

  a. The size, design, color, location and other physical aspects of any sign in
or on the Premises shall be subject to the CC&R's, Rules, Landlord's approval
prior to installation, and to all Legal Requirements. The costs of any permitted
sign, and the costs of its installation, maintenance and removal, shall be at
Tenant's sole expense and shall be paid within ten (10) days of Tenant's receipt
of a bill from Landlord for the costs. In no event shall Tenant be permitted to
place any sign, logo or other identification on the exterior of the Building, in
the Building's Common Areas (other than on a Building directory maintained to
identify the Building's tenants), or upon the Property, or which is inside the
Premises but visible from outside of the Premises (other than upon the door(s)
to the Premises).

  b. Exterior Building Signage. Notwithstanding Section 21.a., so long as
     -------------------------
the Tenant under this Lease (i) is the Tenant originally named under this Lease
in the Basic Lease Information, or any Affiliate or Successor of such original
Tenant, (ii) is in occupancy pursuant to this Lease of at least seventy-five
percent (75%) of the entire Premises originally demised under this Lease, and
(iii) is not in default of any of its obligations hereunder beyond the
expiration of any applicable grace or cure period, Tenant shall be permitted to
maintain identification signage at the top of one exterior side of the Building
in a location reasonably approved by Landlord. The installation, maintenance and
removal of Tenant's signage pursuant to this Section 21.b. shall be performed by
Tenant at Tenant's expense, but in coordination with Landlord and its reasonable
installation procedures and requirements, or at Landlord's option, by Landlord
at Tenant's expense. Such signage of Tenant shall be subject to Landlord's prior
approval and all Legal Requirements, and shall be limited to Tenant's name
and/or logo. If Tenant shall fail to meet the signage conditions specified
herein, Landlord may immediately remove Tenant's signage at Tenant's expense,
and Tenant's signage rights pursuant to this Section 21.b. shall thereafter
forever cease and terminate; provided, however, that if applicable Legal
                             -----------------
Requirements do not require removal of such signage prior to the expiration of
the thirty (30) day period hereinafter provided, Landlord shall not remove such
signage unless it shall have

                                       19

<PAGE>

given Tenant thirty (30) days' prior notice of the signage conditions Tenant has
failed to meet, and such failure continues after the expiration of such thirty
(30) day period. Upon the expiration or earlier termination of this Lease,
Tenant shall, at Tenant's expense, or at Landlord's option Landlord shall, at
Tenant's expense, remove Tenant's signage and repair any damage to the Building
caused by such removal.

22.    Subordination.
       -------------

 a.    Subordinate Nature. Except as provided in Subsections b. and c., this
       ------------------
Lease is subject and subordinate to all ground and underlying leases, mortgages
and deeds of trust which now or may hereafter affect the Real Property or any
portion thereof, to the CC&R's, and to all renewals, modifications,
consolidations, replacements and extensions of the foregoing, without the
necessity of any further documentation evidencing such subordination.
Notwithstanding such self-operative subordination, within ten (10) days after
Landlord's written request therefor, Tenant shall execute any and all documents
required by Landlord, the lessor under any ground or underlying lease ("Ground
Lessor"), or the holder or holders of any mortgage or deed of trust ("Holder"),
evidencing this Lease to be subordinate to the lien of any such lease, mortgage
or deed of trust, as the case may be. Tenant hereby irrevocably appoints
Landlord as Tenant's attorney-in-fact to execute and deliver any such instrument
in the name of Tenant if Tenant fails to do so within such time. If the interest
of Landlord in the Real Property or the Building is transferred to any Ground
Lessor or Holder pursuant to or in lieu of proceedings for enforcement of any
such lease, mortgage, or deed of trust, Tenant shall immediately and
automatically attorn to the Ground Lessor or Holder, and this Lease shall
continue in full force and effect as a direct lease between the Ground Lessor or
Holder and Tenant on the terms and conditions set forth herein.

 b.    Possible Priority of Lease. If a Ground Lessor or a Holder advises
       --------------------------
Landlord that it desires or requires this Lease to be prior and superior to a
lease, mortgage or deed of trust, Landlord may notify Tenant. Within seven (7)
days of Landlord's notice, Tenant shall execute, have acknowledged and deliver
to Landlord any and all documents or instruments, in the reasonable form
presented to Tenant, which Landlord, Ground Lessor or Holder deems necessary or
desirable to make this Lease prior and superior to the lease, mortgage or deed
of trust.

 c.     Lease Modification. If, in connection with obtaining financing for the
        ------------------
Real Property or any portion thereof, any Holder or Ground Lessor shall request
reasonable modification to this Lease as a condition to such ground lease or
financing, Tenant shall execute and deliver to Landlord, within ten (10) days of
Landlord's request, any such modification agreement so requested, provided such
modifications do not adversely affect Tenant's rights or increase Tenant's
obligations hereunder (other than additional obligations requiring Tenant to
send such Holder or Ground Lessor copies of notices given to Landlord).

 d.     Nondisturbance Agreement. It shall be a condition to the subordination
        ------------------------
of this Lease to any Superior Interest created after the date of this Lease (as
distinguished from any Superior Interest in effect as of the date of this Lease,
or any amendment or modification thereto), that Tenant shall receive from the
Ground Lessor or Holder, as applicable, of such Superior Interest a so-called
non-disturbance agreement in the form reasonably required by such Ground Lessor
or Holder.

23.    Transfer of the Property.
       ------------------------

Upon transfer of the Real Property and assignment of this Lease, Landlord shall
be entirely freed and relieved of all liability under any and all of its
covenants and obligations contained in or derived from this Lease occurring
after the consummation of the transfer and assignment, and if Landlord shall
transfer the Security Deposit to the transferee of Landlord's interest in the
Real Property, Landlord shall be released from all liability for the Security
Deposit. Tenant shall attorn to any entity purchasing or otherwise acquiring the
Premises at any sale or other proceeding.

                                       20

<PAGE>

24.  Estoppel Certificates: Financial Statements.
     -------------------------------------------
Within ten (10) days following written request by Landlord from time to time
throughout the Term, Tenant shall execute and deliver to Landlord an estoppel
certificate in the form attached hereto as Exhibit E, duly completed by Tenant.
                                           ---------
At the request of Landlord from time to time during the Term, Tenant shall
provide to Landlord its current financial statements or other information
setting forth Tenant's financial condition and net worth. Landlord shall use
such documentation solely for purposes of this Lease and in connection with the
ownership, financing, management and disposition of the Real Property.

25.  Mortgagee Protection.
     --------------------
 In the event of any default on the part of Landlord, Tenant will give notice by
registered or certified mail to each Ground Lessor and Holder whose identity has
been disclosed to Tenant, and shall offer the Ground Lessor or Holder a
reasonable opportunity after such notice (but in no event less than thirty (30)
days) to cure the default, including time to obtain possession of the Property
or the Premises by lease termination, power of sale or a judicial foreclosure
(as applicable), if such should prove necessary to effect a cure. In no event
shall any Ground Lessor or Holder in any way or to any extent be: (a) liable for
any act or omission of any prior Landlord in contravention of any provision of
this Lease; or (b) subject to any offsets, claims or defenses which Tenant might
have against any prior Landlord; or (c) bound by any Rent which Tenant might
have paid for more than thirty (30) days in advance to any prior Landlord; or
(d) bound by any agreement or modification of this Lease made without such
Ground Lessor's or Holder's written consent. Tenant agrees that if any Ground
Lessor or Holder acquires possession of the Premises or title to the Real
Property as a result of termination of its ground lease or foreclosure of such
Holder's deed of trust or other security instrument, as applicable, the
acceptance of a lease surrender or deed in lieu of such foreclosure, or
otherwise, the provisions of Section 36 below shall be applicable to liability
of such Ground Lessor or Holder as successor Landlord under this Lease.

26.  Attorneys' Fees.
     ---------------

 If either party shall bring any action or legal proceeding for damages for an
alleged breach of any provision of this Lease, to recover rent or other sums
due, to terminate the tenancy of the Premises or to enforce, protect or
establish any term, condition or covenant of this Lease or right of either
party, the prevailing party shall be entitled to recover, as a part of the
action or proceedings, or in a separate action brought for that purpose,
reasonable attorneys' fees and court costs as may be fixed by the court or jury.
The prevailing party shall be the party which secures a final judgment in its
favor, provided that if the party bringing any action shall dismiss the same
without the consent of the other party, the other party shall be deemed the
prevailing party.

27.  Brokers.
     -------

 Tenant warrants and represents that it has had no dealings with any real estate
broker or agent in connection with the negotiation of this Lease, except for the
brokers(s) specified in the Basic Lease Information (the "Brokers"), and that it
knows of no other real estate broker or agent who is or might be entitled to a
fee, commission or other compensation in connection with this Lease. Tenant
shall indemnify and hold harmless Landlord from and against any and all
liabilities or expenses (including reasonable attorneys' fees and costs) arising
out of claims made by any broker or individual (other than the Brokers) for a
fee, commission or other compensation resulting from this Lease. Pursuant to the
terms of separate agreement(s) between Landlord and the Brokers, Landlord shall
pay the Brokers any fee, commission or other compensation to which they are
entitled from Landlord by reason of this Lease. Tenant shall have no liability
to the Brokers for any fee, commission or other compensation.

                                       21

<PAGE>

28.     Parking.
        -------

   Tenant shall have the right to park in the Building's parking facilities, in
common with other tenants of the Building, upon such terms and conditions as may
from time to time be established by Landlord. There shall be no charge for any
portion of the parking facilities which is not reserved. Tenant agrees not to
use in excess of its proportionate share (i.e. the rentable square footage of
the Premises in proportion to the rentable square footage of the Building or
Buildings served by such parking facilities) of parking facilities and agrees to
cooperate with Landlord and other tenants in the use of the parking facilities.
Landlord reserves the right, in its absolute discretion, to determine whether
the parking facilities are becoming crowded and to allocate and assign parking
spaces among Tenant and the other tenants. Landlord shall not be liable to
Tenant, nor shall this Lease be affected, if any parking is impaired by
moratorium, initiative, referendum, law, ordinance, regulation or order passed,
issued or made by any governmental or quasi-governmental body or by fire or
other casualty.

29.     Utilities and Services.
        ----------------------

   Tenant shall arrange for all telephone, water, gas, electricity and other
power and utilities which it shall require in connection with its use or
occupancy of the Premises and shall pay for the same, together with any taxes,
penalties, surcharges or the like pertaining thereto. Landlord shall have no
obligation to furnish any utilities or services to the Premises or any equipment
providing for the same. Without limitation, Tenant shall be solely responsible
for providing such heating, ventilation and air conditioning ("HVAC") to the
Premises as Tenant shall require for the comfortable occupancy thereof. Any
equipment or systems which Tenant shall require in order to supply HVAC shall be
subject to the provisions of Section 9 above. Tenant shall obtain, at its
expense all electric light bulbs, ballasts and tubes as it shall require for the
Premises. If any of the foregoing utilities or services are not separately
metered to Tenant, Tenant shall pay a reasonable proportion, as determined by
Landlord, of all charges jointly serving the Premises and other premises.
Landlord shall not be liable for any damages directly or indirectly resulting
from nor shall the Base Rent, Operating Expenses or any other monies owed by
Tenant to Landlord under this Lease be abated or reduced by reason of (a) the
installation, use or interruption of use of any equipment used in connection
with the furnishing of any of the foregoing utilities and services, (b) failure
to furnish or delay in furnishing any such utilities or services for any reason
whatsoever, or (c) the limitation, curtailment, rationing or restriction on use
of water, electricity, gas or any other form of energy or any other service or
utility whatsoever serving the Premises or the Real Property. Landlord shall be
entitled to cooperate voluntarily and in a reasonable manner with the efforts of
national, state or local government agencies or utility suppliers in reducing
energy or other resource consumption. The obligation to make services available
hereunder shall be subject to the limitations of any such voluntary, reasonable
program.

30.     Intentionally Deleted.
        ----------------------

31.     Acceptance.
        ----------

   Delivery of this Lease, duly executed by Tenant, constitutes Tenant's offer
to lease the Premises as set forth herein, and under no circumstances shall such
delivery be deemed to create an option or reservation to lease the Premises for
the benefit of Tenant. This Lease shall become effective and binding only upon
execution hereof by Landlord and delivery of a signed copy to Tenant. If
Landlord does not accept the Tenant's offer, any sums delivered by Tenant with
its offer shall be returned to Tenant.

32.     Use of Building Name.
        --------------------

   Tenant shall not employ the name of the Building in the name or title of its
business or occupation, or for my other purpose, except to identify the address
of the Building, without Landlord's prior written consent, which consent
Landlord may withhold in its sole discretion. Landlord reserves the right to
change the name

                                       22

<PAGE>

of the Building without Tenant's consent and without any liability to Tenant.

33.    Recording.
       ---------

  Neither Landlord nor Tenant shall record this Lease, nor a short form
memorandum of this Lease, without the prior written consent of the other.

34.    Quitclaim.
       ---------

  Upon any termination or expiration of this Lease pursuant to its terms,
Tenant, at Landlord's request, shall execute, have acknowledged and deliver to
Landlord a quitclaim deed of all Tenant's interest in the Premises, Building and
Property created by this Lease.

35.    Notices.
       -------

  Any notice, demand or request required or desired to be given under this
Lease shall be in writing sent to the address of the party specified in this
Lease, and shall be given by hand delivery, electronic mail (e.g., telecopy),
                                                             ---
overnight courier service (e.g. Federal Express), or the United States mail,
registered or certified, the postage prepaid. All notices shall be deemed to
have been given when received at the address of the party to which it has been
sent (or when such receipt is refused). As of the date of execution of this
Lease, the addresses of Landlord and Tenant are as specified in the Basic Lease
Information. Either party may change its address by giving notice of the change
in accordance this Section.

36.    Landlord's Exculpation.
       ----------------------

  The term "Landlord," as used in this Lease, shall mean only the owner or
owners of the Real Property at the time in question. Notwithstanding any other
provision of this Lease, the liability of Landlord for its obligations under
this Lease is limited solely to Landlord's interest in the Real Property as the
same may from time to time be encumbered, and no personal liability shall at any
time be asserted or enforceable against any other assets of Landlord or against
the constituent shareholders, partners or other owners of Landlord, or the
directors, officers, employees and agents of Landlord or such constituent
shareholder, partner or other owner, on account of any of Landlord's
obligations or actions under this Lease. Notwithstanding any other provision of
this Lease, Landlord shall not be liable for any consequential damages or
interruption or loss of business, income or profits, nor shall Landlord be
liable for loss of or damage to artwork, currency, jewelry, bullion, unique or
valuable documents, securities or other valuables, or for other property not
in the nature of ordinary fixtures, furnishings and equipment. Wherever in this
Lease Tenant (a) releases Landlord from any claim or liability, (b) waives or
limits any right of Tenant to assert any claim against Landlord or to seek
recourse against any property of Landlord or (c) agrees to indemnify Landlord
against any matters, the relevant release, waiver, limitation or indemnity shall
run in favor of and apply to Landlord, the constituent shareholders, partners or
other owners of Landlord, and the directors, officers, employees and agents of
Landlord and each such constituent shareholder, partner or other owner. In no
event shall any shareholder, partner, member, officer, director or other
constituent of Landlord or its direct or indirect constituents ever be
personally liable for Landlord's obligations or liability under this Lease.

37.    Additional Structures.
       ---------------------

  Any diminution or interference with light, air or view by any structure
which may be erected on land adjacent to the Building shall in no way alter this
Lease or impose any liability on Landlord.

                                       23

<PAGE>

 38.    Consents and Approvals.
        ----------------------

   Wherever the consent, approval, judgment or determination of Landlord is
required or permitted under this Lease, except as expressly provided herein
Landlord may exercise its sole discretion in granting or withholding such
consent or approval or in making such judgment or determination. Whenever Tenant
requests Landlord to take any action or give any consent or approval, Tenant
shall reimburse Landlord for all of Landlord's costs incurred in reviewing the
proposed action or consent (whether or not Landlord consents to any such
proposed action), including, without limitation, reasonable attorneys' or
consultants' fees and expenses, within ten (10) days after Landlord's delivery
to Tenant of a statement of such costs. If it is determined that Landlord failed
to give its consent or approval where it was required to do so under this Lease,
Tenant's sole remedy will be an order of specific performance or mandatory
injunction of the Landlord's agreement to give its consent or approval. The
review and/or approval by Landlord of any item shall not impose upon Landlord
any liability for accuracy or sufficiency of any such item or the quality or
suitability of such item for its intended use. Any such review or approval is
for the sole purpose of protecting Landlord's interest in the Real Property,
and neither Tenant nor any Tenant Party nor any person or entity claiming by,
through or under Tenant, nor any other third party shall have any rights
hereunder by virtue of such review and/or approval by Landlord.

39.     General.
        -------

   a.   Captions. The captions and headings used in this Lease are for the
        --------
purpose of convenience only and shall not be construed to limit or extend the
meaning of any part of this Lease.

   b.   Time. Time is of the essence for the performance of each term, condition
        ----
and covenant of this Lease.

   c.   Severability.  If any  provision of this Lease is held to be invalid;
        ------------
illegal or inenforceable, the invalidity, illegality, or unenforceability shall
not affect any other provision of this Lease, but this Lease shall be construed
as if the invalid, illegal or unenforceable provision had not been contained
herein.

   d.   Choice of Law: Construction. This Lease shall be construed and enforced
        ---------------------------
in accordance with the laws of the State of California. The language in all
parts of this Lease shall in all cases be construed as a whole according to its
fair meaning and not strictly for or against either Landlord or Tenant.

   e.   Gender: Singular. Plural. When the context of this Lease requires, the
        ------------------------
neuter gender includes the masculine, the feminine, a partnership or corporation
or joint venture, and the singular includes the plural.

   f.   Binding Effect.  The covenants and agreements contained in this Lease
        --------------
shall be binding on the parties hereto and, subject to Section 14 above, on
their respective successors and assigns.

   g.   Waiver. The waiver of Landlord of any breach of any term, condition or
        ------
covenant of this Lease shall not be deemed to be a waiver of the provision or
any subsequent breach of the same or any other term, condition or covenant of
this Lease. The subsequent acceptance of Rent hereunder by Landlord shall not be
deemed to be a waiver of any preceding breach at the time of acceptance of the
payment. No covenant, term or condition of this Lease shall be deemed to have
been waived by Landlord unless the waiver is in writing signed by Landlord.

   h.   Entire Agreement.  This Lease is the entire agreement between the
        ----------------
parties, and supersedes all prior agreements, including letters of intent,
between them, and there are no agreements or representations between the parties
except as expressly set forth herein. Except as otherwise provided herein, no
subsequent change or addition to this Lease shall be binding unless in writing
and signed by the parties hereto.

                                       24

<PAGE>

   i. Waiver of Jury. Tenant hereby waives any right it may have to a jury trial
      --------------
in the event of litigation between Tenant and Landlord pertaining to this Lease.
Landlord and Tenant agree that this paragraph constitutes a written consent to
waiver of trial by jury within the meaning of California Code of Civil Procedure
Section 631(a)(2), and Tenant does hereby authorize and empower Landlord to
file this paragraph and or this Lease, as required, with the clerk or judge of
any court of competent jurisdiction as a written consent to waiver of jury
trial.

   j. Counterparts. This Lease may be executed in counterparts, each of which
      ------------
shall be an original, and all of which together shall constitute but one
instrument.

   k. Exhibits. The Basic Lease Information and all exhibits attached
      --------
hereto are hereby incorporated herein and made an integral part hereof.

   l. Addendum. The Addendum, if any, attached hereto is hereby incorporated
      --------
herein and made an integral part hereof.

   m. Other Leases. Tenant represents and warrants to Landlord that, with the
      ------------
exception of this Lease, neither Tenant nor any affiliate of Tenant is a tenant
under a lease or any other tenancy agreement (1) with (a) Riggs & Company; a
division of Riggs Bank NA., as trustee of the Multi-Employer Property Trust, (b)
Riggs Bank N.A., as trustee of the Multi-Employer Property Trust, (c) the
Multi-Employer Property Trust, (d) the National Bank of Washington
Multi-Employer Property Trust, the previous name of the Multi-Employer Property
Trust, (e) The Riggs National Bank of Washington, DC., as trustee of the Multi-
Employer Property Trust, (f) Northridge Business Center LLC, (g) the Corporate
Drive Corporation, as trustee of the Corporate Drive Nominee Realty Trust, (h)
Arboretum Lakes-I, L,L.C., a Delaware limited liability company, (i) Village
Green at Seven Bridges, L.L.C., (j) Pine Street Development, L.L.C., (k) MEPT
Realty LLC, a New York limited liability company, (1) MEPT, L.L.C., a Delaware
1imited liability company, (m) Cabrillo Properties LLC, (n) Valencia LLC, (o)
Mission Trails LLC, or (p) Centrepointe Distribution Center LLC, or (2)
involving any property in which any one or more of the entities named in clauses
(l)(a) through (e) are known by Tenant to have an ownership interest.

40.   Renewal Option.
      --------------

  a. Tenant shall have the option to renew this Lease for one (1) additional
term of five (5) years, commencing upon expiration of the initial Term. Such
renewal option must be exercised, if at all, by written notice given by Tenant
to Landlord not later than nine (9) months prior to expiration of the initial
Term. Notwithstanding the foregoing, this renewal option shall be null and void
and Tenant shall have no right to renew this Lease if (i) as of the date
immediately preceding the commencement of the renewal period the original Tenant
named under this Lease in the Basic Lease Information is not in occupancy of the
entire Premises then demised hereunder or such Tenant does not intend to
continue to occupy the entire Premises then demised hereunder (but intends to
assign this Lease or sublet the Premises in whole or in part), or (ii) on the
date Tenant exercises such renewal option or on the date immediately preceding
the commencement date of the renewal period Tenant is in default of any of its
obligations under this Lease.

    If Tenant exercises such renewal option, then during the renewal period the
Base Rent payable by Tenant shall be the then fair market rent for the Premises
based upon the terms of this Lease, as renewed. For purposes of this Section 40,
the term "fair market rent" shall mean the rental rate for comparable space
under primary lease (and not sublease) to new tenants, taking into consideration
such amenities as existing improvements, view, floor on which the Premises are
situated and the like, situated in comparable first-class office buildings in
comparable business parks in a fifteen (15) mile radius of the Property, taking
into consideration the then-prevailing ordinary rental market practices with
respect to tenant concessions (if any) (e.g. not offering extraordinary rental,
promotional deals and other concessions to tenants which deviate from what is
the then-prevailing ordinary practice in an effort to alleviate cash flow
problems, difficulties

                                       25

<PAGE>

in meeting loan obligations or other financial distress, or in response to a
greater than average vacancy rate). Fair market rent shall include the periodic
rental increases, if any, that would be included for space leased for the
renewal period. The fair market rent shall be mutually agreed upon by Landlord
and Tenant in writing within the thirty (30) calendar day period commencing
three (3) months prior to commencement of the renewal period. If Landlord and
Tenant do not agree upon the fair market rent within said thirty (30) day
period, then the fair market rent shall be established by appraisal in
accordance with the procedures set forth in Exhibit F attached hereto.
                                            ---------

   b. Notwithstanding anything in the foregoing or in Exhibit F to the contrary,
                                                      ---------
in no event shall the Base Rent during the renewal period be less than the Base
Rent payable by Tenant for the month immediately preceding the commencement of
the renewal period (without regard to any temporary abatement of rental then in
effect pursuant to the provisions of this Lease).

          IN WITNESS WHEREOF, the parties have executed this Lease on the dates
set forth below, effective as of the date first above written.

Landlord:                                     Tenant:

THE MULTI-EMPLOYER                            CERTICOM CORP.,
PROPERTY TRUST, A TRUST                       a Delaware corporation
ORGANIZED UNDER 12 C.F.R
SECTION 9.18, by its trustee
Riggs & Company, a division of                BY: /s/ [ILLEGIBLE]
                                                 ----------------------------
Riggs Bank N.A.
                                              Its: CHAIRMAN & CEO
                                                  ---------------------------

By: /s/ Maryanne Martins                      By: /s/ [ILLEGIBLE]
   ----------------------------------            ----------------------------
    MARY ANNE MARTINS

Its: Managing Director                        Its: VICE PRESIDENT & CEO
    ---------------------------------             ---------------------------

                                       26

<PAGE>

                                   EXHIBIT A

                             Mt. Eden Business Park
                                  Hayward, CA

                      [DRAWING OF MT. EDEN BUSINESS PARK]

                     PREMISES: Building A (Entire Building)

<PAGE>

                                    EXHIBIT B

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

          1.  Tenant Improvements.
              -------------------

          a.  Plans. Improvements shall be constructed in the Premises in
              -----
accordance with this Paragraph 1. On or before October 27, 1998, Tenant shall
furnish to Landlord for Landlord's review and approval (which approval shall not
be unreasonably withheld) detailed layout plans and finish specifications (the
"Space Plans") prepared by an architect approved by Landlord. The Space Plans
shall show all of the improvements which Tenant desires to be constructed in the
Premises, and all such improvements shall comply with all applicable building
codes and other Legal Requirements. The Space Plans shall separately note any
proposed structural work or extraordinary or supplemental electrical, plumbing
or HVAC requirements, and shall contain such detail and specifications as would
permit a general contractor to obtain preliminary estimates of the cost of
performing all work shown thereon. Tenant shall respond promptly to any
reasonable objections of Landlord to the Space Plans and shall resubmit
appropriately revised Space Plans prepared by Tenant's architect within three
(3) Business Days of Tenant's receipt of Landlord's objections. The Space Plans,
as finally approved in writing by Landlord, shall be referred to herein as the
"Final Space Plans." Landlord shall furnish to Tenant for Tenant's written
approval (which shall not be unreasonably withheld) working plans and
specifications (the "Working Drawings") prepared by Landlord's architect for the
improvements which Tenant desires to be constructed in the Premises. The
Working Drawings shall show improvements that conform to the Final Space Plans
(except to the extent specifically noted therein or in accompanying
specifications). Tenant shall respond to the Working Drawings within three (3)
Business Days of its receipt thereof. Landlord shall respond promptly to any
reasonable objections of Tenant to the Working Drawings and shall resubmit to
Tenant for Tenant's approval (which shall not be unreasonably withheld)
appropriately revised Working Drawings prepared by Landlord's architect. Tenant
shall respond to the revised Working Drawings within three (3) Business Days of
its receipt thereof. If Tenant fails to respond to the Working Drawings or the
revised Working Drawings within the periods described above, Tenant shall be
deemed to have approved the Working Drawings or revised Working Drawings, as
applicable. The Working Drawings, as approved in writing by Landlord and Tenant,
as revised in accordance with the following provisions of this Paragraph 1, are
hereinafter called the "Final Plans", and the improvements to be performed in
accordance with the Final Plans are hereinafter called the "Tenant
Improvements". Any delay in Substantial Completion of the Tenant Improvements or
increased cost of the Tenant Improvements caused directly or indirectly by any
revision to the Space Plans or the Working Drawings requested by Tenant shall
constitute a Tenant Delay under Paragraph 1.e. below.

          b.  Construction. Upon approval of the Final Plans, Landlord shall
              -----------
submit the same for pricing to a contractor selected by Landlord ("Landlord's
Contractor"), and thereafter provide Tenant with an estimated budget for the
Tenant Improvements, including Landlord's Construction Operations Fee (as
defined in Paragraph 1.f.iii.B. below). Tenant shall have five (5) Business Days
after the receipt of Landlord's estimated budget to approve or reasonably
disapprove of the same. If Tenant disapproves of the budget within such five (5)
Business Day period, Tenant shall so notify Landlord and the Final Plans shall
promptly be modified by Landlord's architect in order to satisfactorily reduce
the amount of the estimated budget, as requested by Tenant. Any and all
revisions to the Final Plans shall be subject to Landlord's and Tenant's
reasonable approval. Upon Landlord's revision of the Final Plans, Landlord shall
cause Landlord's Contractor to promptly issue new pricing and upon receipt of
such pricing Landlord shall prepare and submit to Tenant a revised estimated
budget. Tenant shall respond to the revised estimated budget in the manner
described above. Any delay in Substantial Completion of the Tenant Improvements
or increased cost of the

                                        1

<PAGE>

Tenant Improvements caused directly or indirectly by any revision to the Final
Plans or the estimated budget to address Tenant's disapproval of the estimated
budget shall constitute a Tenant Delay under Paragraph 1.e. below. If Tenant
fails to raise any objections to the budget within the five (5) Business Day
period(s) described above, Tenant shall be deemed to have approved Landlord's
proposed budget. Landlord shall commence construction of the Tenant Improvements
promptly after approval of the Final Plans, and thereafter diligently pursue
such construction to completion (but in no event shall Landlord be required to
pursue a construction schedule which would cause Substantial Completion to occur
prior to January 15, 1999). Landlord shall use reasonable care in preparing the
budget, but it shall be good faith estimate only and will not limit Tenant's
obligation to pay for its share of the costs of the Tenant Improvements as set
forth below in this Paragraph 1.

          c.  Changes. In the event that Tenant shall request any change in or
              -------
to the Final Plans (a "Change"), Landlord's architect shall prepare for
Landlord's and Tenant's review and written approval a change order with respect
to such Change (the "Change Order"), together with, if appropriate, revised
Working Drawings incorporating the requested Change and clearly identifying
the same as such on the revised Working Drawings. Landlord shall not
unreasonably withhold or delay its approval of the Change Order or revised
Working Drawings, provided, however, that Landlord shall have at least three (3)
Business Days after receipt thereof to review any proposed Change. In the event
that Landlord shall approve any proposed Change, together with such approval,
if practicable, and if not practicable as soon thereafter as is practicable,
Landlord shall give Tenant Landlord's estimated increase or decrease in the
cost of the Tenant Improvements which would result from incorporating such
Change and Landlord's estimate of the delay, if any, in the commencement or
completion of the Tenant Improvements which would result from incorporating such
Change. Landlord will use reasonable care in preparing the estimates, but they
shall be good faith estimates only and will not limit Tenant's obligation to pay
for the actual increase in the cost of the Tenant Improvements or Tenant's
responsibility for the actual construction delay resulting from the Change.
Within two (2) Business Days after receipt of such cost and delay estimates,
Tenant shall notify Landlord in writing whether Tenant approves the Change. If
Tenant fails to approve the change within such two (2) Business Day period,
construction of the Tenant Improvements shall proceed as provided in accordance
with the Final Plans as they existed prior to the requested Change. If,
following Tenant's review of the estimated costs and delays, Tenant desires
Landlord to incorporate the Change into the Tenant Improvements, then Tenant and
Landlord shall execute a change order for such Change on Landlord's standard
form therefor, and the term "Final Plans" shall thereafter be deemed to refer to
the Working Drawings as so revised and approved.

          d.  Landlord's Work. In addition to construction of the Tenant
              ---------------
Improvements, Landlord shall construct the Building as a watertight shell, with
all utilities brought to the Building, in accordance with plans prepared by
Landlord's architect and previously delivered to Tenant (collectively,
"Landlord's Work"). Landlord's Work shall be performed at Landlord's sole cost
and expense (except for any costs resulting from Tenant Delays, including any
Changes) by such general contractor as Landlord shall determine.

          e.  Tenant Delays. Tenant shall be responsible for, and shall pay to
              -------------
Landlord, any and all costs and expenses (including lost rent) incurred by
Landlord in connection with the following, or by reason of any delay in the
commencement or completion of Landlord's Work or the Tenant Improvements or in
Landlord's timely delivery of the Premises caused by the following: (i) the
failure of Tenant to submit the Space Plans or Final Space Plans to Landlord by
the dates or within the time periods set forth in Paragraph 1.a. above, or the
failure of the Space Plans or Final Space Plans to meet the applicable
requirements of Paragraph 1.a. above, (ii) Tenant's failure to respond to the
Working Drawings within the time period(s) set forth in Paragraph 1.a above,
(iii) any changes in the Space Plans requested by Tenant, or any changes in the
Working Drawings requested by Tenant (including any costs or delays resulting
from proposed changes that are not ultimately

                                       2

<PAGE>

made), (iv) any failure by Tenant to promptly respond to inquiries regarding the
construction of the Tenant Improvements or Landlord's Work or to promptly grant
Tenant's approval of materials or finishes for the Tenant Improvements or
Landlord's Work, (v) any failure by Tenant to timely pay any amounts due from
Tenant hereunder (it being acknowledged that if Tenant fails to make or
otherwise delays making such payments, Landlord may stop Landlord's Work rather
than incur costs which Tenant is obligated to fund but has not yet done so and
any delay from such a work stoppage will be a Tenant Delay), (vi) any
interference by Tenant with the construction of the Tenant Improvements or
Landlord's Work, or (vii) any other delay requested or caused by Tenant,
including, without limitation, any delay caused by Tenant's early entry into any
portion of the Premises pursuant to Section 2.d. of the Lease. Each of the
foregoing is referred to herein and in the Lease as a "Tenant Delay".

          Landlord shall notify Tenant in writing of any Tenant Delay
(identifying the nature of the Tenant Delay) as soon as reasonably practicable
after Landlord becomes actually aware of such Tenant Delay, together with
Landlord's then good faith estimate of the probable duration of such Tenant
Delay. Without limitation, Landlord will use its good faith efforts to notify
Tenant of "long lead item" as soon as reasonably practicable after actually
being advised of the delay by the suppliers involved, or otherwise actually
becoming aware of the delay. Landlord will suggest alternative products to
alleviate the delay, if possible, and may substitute reasonably equivalent
products as deemed reasonably necessary by Landlord.

          f.  Cost of Improvements. The cost of the construction and
              --------------------
installation of the Tenant Improvements shall be borne as follows:

                    i.   Landlord shall pay the entire cost of Landlord's Work
               (as described in Paragraph 1.d. above), including costs of
               obtaining permits for the same.

                    ii.  Landlord's architectural, engineering and other
               consultant fees in connection with the design and construction of
               the Tenant Improvements, including the costs of producing the
               Working Drawings and Final Plans, shall be paid by Tenant upon
               Landlord's demand, subject to Tenant's right to use a portion of
               Landlord's Contribution towards the amount of such costs as
               provided below.

                    iii. Landlord shall contribute toward the cost of the
               construction and installation of the Tenant Improvements an
               amount not to exceed $857,100.00 (which is the product of $20.00
               times the stipulated number of rentable square feet of the
               Premises as set forth in the Basic Lease Information)
               ("Landlord's Contribution"). The following provisions shall
               govern the payment of Landlord's Contribution:

                         A.  Excess Cost: Shares of Costs. If the total cost of
                             ----------------------------
               construction of the Tenant Improvements (including the
               Construction Operations Fee described below and the City of
               Hayward Interim Supplemental Building Construction and
               Improvement Tax) exceeds the funds available therefor from
               Landlord's Contribution, then tenant shall pay all such excess
               (the "Excess Cost"). Based on the estimated cost (the "Estimated
               Costs") of the construction of the Tenant Improvements, the
               prorata share of the Estimated Costs payable by Landlord and
               Tenant shall be determined and an appropriate percentage share
               established for each (a "Share of Costs"). Tenant and Landlord
               shall fund the cost of such work as the same is performed, in
               accordance with their respective Share of Costs for such work. At
               such time as Landlord's Contribution has been entirely disbursed,
               Tenant shall pay the remaining Excess Cost, if any, which
               payments shall be made in installments as

                                       3

<PAGE>

construction progresses in the same manner as Tenant's payments of Tenant's
Share of Costs were paid.

          B.  Construction Operations Fee. Landlord shall retain from the amount
              ---------------------------
of Landlord's Contribution, in the manner described below, an aggregate sum
equal to four percent (4%) of the total cost of the construction and
installation of the Tenant Improvements (which cost of the construction and
installation shall include architectural and engineering fees but shall not
include permit fees) (the "Construction Operations Fee") as compensation to
Landlord for review of plans, specifications and budgets, coordinating the
schedule for construction of the Tenant Improvements, and for other
miscellaneous costs incurred by Landlord as a result of the construction work.
At the time Landlord makes any disbursement of Landlord's Contribution, Landlord
shall retain from Landlord's Contribution, as a partial payment of the
Construction Operations Fee, a proportionate amount of the Construction
Operations Fee based upon Landlord's reasonable estimate of the amount required
to be withheld from such disbursement in order to ensure that the entire
Construction Operations Fee is retained over the course of construction on a
prorata basis. At such time as Landlord's Contribution has been entirely
disbursed, if the entire Construction Operations Fee has not yet been paid to
Landlord, Tenant shall pay to Landlord a prorata portion of each payment made by
Tenant on account of the Tenant Improvements in order to ensure that the balance
of the Construction Operations Fee is paid to Landlord over the course of
construction on a prorata basis.

          C.  Certain Costs. Portions of Landlord's Contribution may, at
              -------------
Tenant's election, be applied toward Tenant's architectural fees in connection
with the production of the Space Plans and Final Space Plans, and Landlord's
architectural, engineering and other consultant fees in connection with the
design and construction of the Tenant Improvements, including the costs of
producing the Working Drawings and Final Plans; provided, however, that the
portion of Landlord's Contribution applied to such fees may not exceed One
Dollar ($1.00) per rentable square foot of the Premises and any excess shall be
paid directly by Tenant to Landlord from Tenant's own funds. In no event may any
portions of Landlord's Contribution be applied towards the costs of Tenant's
engineering fees (if any), trade fixtures, personal property, equipment or
furniture, or towards rent due under this Lease.

          D.  Entire Premises to be Improved. Tenant acknowledges that
              ------------------------------
Landlord's Contribution is to be applied to the Tenant Improvements (and the
costs permitted under Paragraph l.f.iii.C. above) covering the entire Premises.
If Tenant does not improve the entire Premises, then, without limitation of any
other rights or remedies of Landlord hereunder, Landlord's Contribution shall be
adjusted on a prorata per rentable square foot basis to reflect the number of
rentable square feet actually being improved.

          E.  Provisions Applicable to Phases. Landlord and Tenant acknowledge
              -------------------------------
that the Premises may be improved by Tenant in two phases based on Tenant's
anticipated occupancy schedule for the Premises. Accordingly, the foregoing
provisions shall apply separately as to each phase of the Premises, and where
the foregoing provisions refer to the "Premises", such reference shall be deemed
a reference to the applicable phase of the Premises.

     iv.  Improvement Advance. Notwithstanding the foregoing provisions, if the
          -------------------
cost of the Tenant Improvements shall exceed Landlord's Contribution, upon
Tenant's request Landlord shall advance to Tenant the Excess Cost, up to a total

                                       4

<PAGE>

          advance of $299,985.00 (which is $7.00 per rentable square foot of the
          Premises). The amount of the total Excess Cost advanced by Landlord
          (the "Improvement Advance") shall be repaid by Tenant, together with
          interest on amounts thereof from time to time unpaid at the rate of
          eleven percent (11%) per annum, in equal monthly installments of
          principal and interest, as additional rent hereunder, payable with the
          monthly Basic Rent. Such installments shall be in such amount as will
          fully amortize the amount of the Improvement Advance, together with
          such interest, over the initial Term. Upon the determination of the
          amount of the Improvement Advance, Landlord and Tenant shall promptly
          execute a written memorandum of the amount of such installments.
          Notwithstanding anything in the foregoing to the contrary, in the
          event this Lease is terminated prior to the originally scheduled
          Expiration Date, for any reason whatsoever, the then-outstanding
          balance of Improvement Advance, together with accrued and unpaid
          interest thereon, but without any prepayment penalty, shall become
          immediately due and payable in full by Tenant.

                                        5

<PAGE>

                                 EXHIBIT C
                                 ---------

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

LANDLORD:   ________________________________
            ________________________________

TENANT:     ________________________________
            ________________________________

LEASE DATE: ________________________________

PREMISES:   ________________________________
            ________________________________
            ________________________________

Pursuant to Section 2.d. of the above-referenced Lease, the Commencement Date
hereby is established as ___________________, and the Expiration Date hereby is
established as _______________.

          LANDLORD:

          ______________________________
          a_____________________________

          By____________________________
            Its_________________________

          TENANT:

          ______________________________
          a_____________________________

          BY____________________________
            Its_________________________

<PAGE>

                                    EXHIBIT D
                                    ---------

                             RULES AND REGULATIONS
                             ---------------------

1.  No sign, placard, picture, advertisement, name or notice shall be installed
or displayed on any part of the outside or inside of the Building without the
prior written consent of Landlord. Landlord shall have the right to remove, at
Tenant's expense and without notice, any sign installed or displayed in
violation of this rule. All approved signs or lettering on doors, windows and
walls shall be printed, painted, affixed or inscribed at the expense of Tenant
by a person chosen by Landlord, using materials of Landlord's choice and in a
style and format approved by Landlord.

2.  The directory of the Building will be provided exclusively for the display
of the name and location of tenants, and Landlord reserves the right to exclude
any other names therefrom. Tenant shall pay Landlord's standard charge for
Tenant's listing thereon and for any changes by Tenant.

3.  Except as consented to in writing by Landlord or in accordance with Building
standard improvements, no draperies, curtains, blinds, shades, screens or other
devices shall be hung at or used in connection with any window or exterior door
or doors of the Premises. No awning shall be permitted on any part of the
Premises. Tenant shall not place anything against or near glass partitions or
doors or windows which may appear unsightly from outside the Premises.

4.  Tenant shall not obstruct any sidewalks, halls, lobbies, passages, exits,
entrances, elevators or stairways of the Building. No tenant and no employee or
invitee of any tenant shall go upon the roof of the Building or make any roof or
terrace penetrations. Tenant shall not allow anything to be placed on the
outside terraces or balconies without the prior written consent of Landlord.

5.  No Tenant shall invite to the Premises, or permit the visit of, persons in
such numbers or under such conditions as to interfere with the use and enjoyment
of the Common Areas of the Building by other tenants.

6.  Intentionally Deleted.

7.  Landlord will furnish Tenant, free of charge, two (2) keys to Tenant's suite
entrance. Landlord may  make a reasonable charge for any additional keys and for
having any locks changed. Tenant shall not make or have made additional keys
without Landlord's prior written consent, and Tenant shall not alter any lock or
install a new additional lock or bolt on any door of its Premises without
Landlord's prior written consent. Tenant shall deliver to Landlord, upon the
termination of its tenancy, the keys to all locks for doors on the Premises. If
Tenant loses any keys furnished by Landlord, Tenant shall pay Landlord the cost
of rekeying the Premises.

 Landlord will furnish Tenant, free of charge, two (2) building access cards. A
reasonable charge will be assessed for any additional cards and lost or stolen
cards. Tenant shall deliver to Landlord, upon the termination of its tenancy,
all access cards.

8.  If Tenant requires telegraphic, telephonic, burglar alarm or similar
services, it shall first obtain, and comply with, Landlord's instructions for
their installation.

9.  Intentionally Deleted.

10. Tenant shall not place a load upon any floor of the Premises which exceeds
the maximum load per square foot which the floor was designed to carry and
which is allowed by law. Tenant's business machines and mechanical equipment
which cause noise or vibration which may be transmitted to the structure of the

<PAGE>

Building or to any space therein, and which is objectionable to Landlord or to
any tenants in the Building, shall be placed and maintained by Tenant, at
Tenant's expense, on vibration eliminators or other devices sufficient to
eliminate noise or vibration.

11. Tenant shall not use or keep in the Premises any toxic or hazardous
materials or any kerosene gasoline or inflammable or combustible fluid or
material other than those limited quantities necessary for the operation or
maintenance of office equipment. Tenant shall not use or permit to be used in
the Premises any foul or noxious gas or substance, or permit or allow the
Premises to be occupied or used in a manner offensive or objectionable to
Landlord or other occupants of the Building by reason of noise, odors or
vibrations. No animal, except seeing eye dogs when in the company of their
masters, may be brought into or kept in the Building.

12. Tenant shall not use any method of heating or air-conditioning other than
that supplied by Landlord, unless Tenant receives the prior written consent of
Landlord.

13. Tenant shall cooperate fully with Landlord to assure the most effective
operation of the Building's heating and air-conditioning and to comply with any
governmental energy-saving rules, laws or regulations of which Tenant has actual
notice. Tenant shall refrain from attempting to adjust controls other than room
thermostats installed for Tenant's use.

14. All entrance doors to the Premises shall be left locked when the Premises
are not in use, and all doors opening to public corridors shall be kept closed
except for normal ingress and egress to and from the Premises.

15. Landlord reserves the right, exercisable without notice and without
liability to Tenant, to change the name and street address of the Building.

16. Landlord reserves the right to prevent access to the Building by closing the
doors or by other appropriate action in case of invasion, mob, riot, public
excitement or other commotion.

17. Tenant shall close and lock the doors of its Premises, shut off all water
faucets or other water apparatus and turn off all lights and other equipment
which is not required to be continuously run. Tenant shall be responsible for
any damage or injuries sustained by other tenants or occupants of the Building
or Landlord for noncompliance with this Rule.

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

19. Tenant shall not install any radio or television antenna, loudspeaker or
other device on the roof or exterior walls of the Building, except as part of
Alterations approved by Landlord pursuant to Section 9 of the Lease. Tenant
shall not interfere with radio or television broadcasting or reception from or
in the Building or elsewhere.

20. Intentionally Deleted.

21. Tenant shall not install, maintain or operate upon the Premises any vending
machine (other than vending machines for use by Tenant's employees) without the
prior written consent of Landlord.

22. Canvassing, soliciting and distributing handbills or any other written
material and peddling in the Building are prohibited, and each tenant shall
cooperate to prevent these activities.

23. Landlord reserves the right to exclude or expel from the Building any person
who, in Landlord's

<PAGE>

judgment, is intoxicated or under the influence of liquor or drugs, or who is in
violation of any of the Rules and Regulations of the Building.

24. Tenant shall store all its trash and garbage within its Premises. Tenant
shall not place in any trash box or receptacle any material which cannot be
disposed of in the ordinary and customary manner of trash and garbage disposal
within the Building. All garbage and refuse disposal shall be made in accordance
with directions issued from time to time by Landlord.

25. Use by Tenant of Underwriters' Laboratory approved equipment for brewing
coffee, tea, hot chocolate and similar beverages and microwaving food shall be
permitted, provided that the equipment and use is in accordance with all
applicable federal, state, county and city laws, codes, ordinances, rules and
regulations.

26. Tenant shall not use the name of the Building in connection with or in
promoting or advertising the business of Tenant, except as Tenant's address,
without the written consent of Landlord.

27. Tenant shall comply with all safety, fire protection and evacuation
procedures and regulations established by Landlord or any governmental agency.
Tenant shall be responsible for any increased insurance premiums attributable to
Tenant's use of the Premises, Building or Property.

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

29. Tenant shall not use the Premises, or suffer or permit anything to be done
on, in or about the Premises, which may result in an increase to Landlord in the
cost of insurance maintained by Landlord on the Building and Common Areas.

30. Tenant's requests for assistance will be attended to only upon appropriate
application to the office of the Building by an authorized individual.
Employees of Landlord shall not perform any work or do anything outside of their
regular duties unless under special instructions from Landlord, and no
employee of Landlord will admit any person (Tenant or otherwise) to any office
without specific instructions from Landlord.

31. Tenant shall not park its vehicles in any parking areas designated by
Landlord as areas for parking by visitors to the Building or other reserved
parking spaces. Tenant shall not leave vehicles in the Building parking areas
overnight, nor park any vehicles in the Building parking areas other than
automobiles, motorcycles, motor driven or non-motor driven bicycles or
four-wheeled trucks. Tenant, its agents, employees and invitees shall not park
any one (1) vehicle in more than one (1) parking space.

32. The scheduling and manner of all Tenant move-ins and move-outs shall be
subject to the discretion and approval of Landlord, and move-ins and move-outs
shall take place only after 6:00 p.m. on weekdays, on weekends, or at other
times as Landlord may designate. Landlord shall have the right to approve or
disapprove the movers or moving company employed by Tenant, and Tenant shall
cause the movers to use only the entry doors and elevators designated by
Landlord. If Tenant's movers damage the elevator or any other part of the
Property, Tenant shall pay to Landlord the amount required to repair the damage.

33. No cooking shall be permitted on the Premises, except with a microwave oven
or using facilities constructed as Alterations approved by Landlord pursuant to
Section 9 of the Lease, nor shall the Premises be used for washing clothes, for
lodging or for any improper, objectionable or immoral purpose.

34. Tenant shall not use in any space or in the public halls of the Building,
any hand trucks except those equipped with rubber tires and side guards or such
other material-handling equipment as Landlord may approve. Tenant shall not
bring any bicycles or other vehicles of any kind into the building.

<PAGE>

35. Landlord shall have the right to control and operate the public portions of
the Building and the public facilities, heating and air conditioning, as well as
facilities furnished for the common use of the tenants, in such manner as it
deems best for the benefit of the tenants generally.

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

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

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

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

<PAGE>

                                    EXHIBIT E

                       TO DEVELOPMENT SERVICES AGREEMENT

                          Tenant Estoppel Certificate
                          ---------------------------

TO:  The Multi-Employer Property Trust, a trust organized under 12 C.F.R.
     Section 9.18 ("Landlord")
          c/o Kennedy Associates Real Estate Counsel, Inc.
          2400 Financial Center Building
          1215 Fourth Avenue
          Seattle, Washington 98161

THIS IS TO CERTIFY:

     1.   That the undersigned is the Tenant under that certain Lease dated
___________, and, if applicable, amended on ______________, by and between The
Multi-Employer Property Trust by its trustee Riggs & Company, a division of
Riggs Bank N.A. ("Landlord"), and the undersigned ("Tenant") covering those
certain premises located as shown on the drawing made part of the Lease (the
"Premises").

     2.   That said Lease is in full force and effect and, except as noted in
paragraph 1 above, has not been modified, changed, altered or amended in any
respect, and is the only lease or agreement between the Tenant and the Landlord
affecting the Premises.

     3.   To the best of Tenant's knowledge, the information set forth below is
true and correct:

          3.1   Square footage of the Premises:_________________________________

          3.2   Annual rent as of the commencement of Lease:$___________________

          3.3   Current annual rent (if different than at commencement):$_______

          3.4   Commencement date of Lease:_____________________________________

          3.5   Lease termination date:_________________________________________

          3.6   Rent paid to and including:_____________________________________

          3.7   Security deposit:_______________________________________________

          3.8   Prepaid rent for and in amount of:$_____________________________

          3.9   Free Rent Period:______________________ to _____________________

          3.10  Amount of current monthly escrow payment obligations with
                respect to taxes, insurance, and Common Area Maintenance charges
                under the Lease:

                    Taxes:                                   $__________________

                    Insurance:                               $__________________

                    Common Area Maintenance Charges:         $__________________

<PAGE>

          3.11  Dates through which Tenant has paid monthly escrow payments and
                Common Area Maintenance charges:

                    Escrow Payment for Taxes:                   ________________

                    Escrow Payment for Insurance:               ________________

                    Common Area Maintenance charge:             ________________

          3.12  Base Amounts (stops) established in leases for monthly escrow
                payments:

                    Base Amount Taxes:                          $_______________

                    Base Amount Insurance:                      $_______________

                    Base Amount Maintenance Charge:             $_______________

     4.   Tenant now occupies the Premises, accepts the Premises in their
current condition subject only to those punch list items listed in Exhibit A, if
                                                                   ---------
any, and is not aware of any defect in the Premises except as described in
Exhibit A, if any.
---------

     5.   No rent has been paid in the current month other than as disclosed in
paragraph 3. No free rent or other concessions, benefits, or inducements other
than as specified in the Lease have been granted to Tenant or undertaken by the
Landlord.

     6.   Tenant has not been granted any renewal, expansion or purchase options
and has not been granted any rights of first refusal except as disclosed in
writing in the Lease.

     7.   Neither Tenant nor to the best of Tenant's knowledge, Landlord is in
breach of the Lease and there has not occurred any event, act, omission or
condition which by notice or lapse of time or both or otherwise, will result in
any breach by Tenant or to the best of Tenant's knowledge, by Landlord. As of
the date hereof, and except as set forth in the Lease, the undersigned is
entitled to no credit, offset or deduction in rent. Tenant knows of no
liabilities or obligations of Landlord which have accrued but are unsatisfied
under the Lease as of the date of this Certificate.

     8.   To the best of Tenant's knowledge, there are no actions, whether
voluntary or otherwise, pending against the undersigned under the bankruptcy
laws or other laws for the relief of debtors of the United States or any state
thereof.

     9.   With the exception of this Lease, neither the Tenant nor any affiliate
of the Tenant is a tenant under a lease or any other tenancy arrangement (1)
with (a) Riggs & Company, a division of Riggs Bank N.A., as trustee of the
Multi-Employer Property Trust; (b) Riggs Bank N.A., as trustee of the
Multi-Employer Property Trust, (c) the Multi-Employer Property Trust; (d) the
National Bank of Washington Multi-Employer Property Trust, the previous name of
the Multi-Employer Property Trust; (e) The Riggs National Bank of Washington,
D.C., as trustee of the Multi-Employer Property Trust; (f) the Corporate Drive
Corporation as trustee of the Corporate Drive Nominee Realty Trust; (g)

                                      -2-

<PAGE>

Arboretum Lakes-l, L.L.C., a Delaware limited liability company; (h) Village
Green at Seven Bridges, L.L.C.; (i) Pine Street Development, L.L.C.; (j) MEPT
Realty LLC; (k) MEPT, L.L.C.; (l) Cabrillo Properties LLC; (m) Valencia LLC; (n)
Centrepointe Distribution Center LLC; (o) Mission Trails LLC; or (p) Northridge
Business Center LLC; or (2) involving any property in which any one or more of
the entities named in clauses (i) (a) through (e) are known by the Tenant to
have an ownership interest. [This paragraph will be updated from time to time.]

          DATED this ___ day of _____, 19__.

                                         TENANT:
                                         ------

                                         ______________________________________
                                         a ____________________________________

                                         By: __________________________________
                                                 Name: ________________________
                                                 Its: _________________________

                                       -3-

<PAGE>

                    EXHIBIT A to Tenant Estoppel Certificate

                                List of Defects
                                ---------------

<PAGE>

                            FIRST AMENDMENT TO LEASE

                   THIS FIRST AMENDMENT TO LEASE (this "Amendment"), is made as
of the 17th day of November, 1998, by and between THE MULTI-EMPLOYER PROPERTY
TRUST, A TRUST ORGANIZED UNDER 12 C.F.R. SECTION 9.18 ("Landlord"), and
CERTICOM CORP., a Delaware corporation ("Tenant").

                   WHEREAS, Landlord and Tenant entered into that certain lease
dated October 30, 1998 (the "Lease"), with respect to certain premises (the
"Premises") located at 25801 Industrial Blvd. in the Mt. Eden Business Park in
Hayward, California;

                   WHEREAS, the lease incorrectly sets forth the agreement of
 Landlord and Tenant regarding Base Rent adjustments, and the parties desire to
 amend the Lease to correct such error. Unless otherwise defined herein,
 capitalized terms are used herein as defined in the Lease.

                   NOW, THEREFORE, the parties hereto do hereby agree as
follows:

                   1. Base Rent Adjustment. Section 4.b. of the Lease is hereby
                      --------------------
amended to read in its entirety as follows:

"b. Base Rent Adjustment. Commencing on the first day of the 37th full calendar
    --------------------
month of the Term, the Base Rent shall increase to $58,536.00 per month, and
shall be payable in such amount through the end of the 72nd full calendar month
of the Term. Commencing on the first day of the 73rd full calendar month of the
Term, the Base Rent shall increase to $63,964.00 per month, and shall be payable
in such amount through the Expiration Date."

                   2. Ratification. Except as amended hereby, the Lease remains
                      ------------
unmodified and in full force and effect.

                   3. Entire Understanding. This Amendment represents the entire
                      --------------------
understanding between of the parties concerning the subject matter hereof, and
there are no understandings or agreements between them relating to the Lease or
the leased premises not set forth in writing and signed by the parties hereto.
No party hereto has relied upon any representation, warranty or understanding
not set forth herein, either oral or written, as an inducement to enter into
this Amendment.

                   4. Counterparts. This Amendment may be executed in any number
                      ------------
of counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.

                                        1

<PAGE>

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

Landlord:                                Tenant:

THE MULTI-EMPLOYER                       CERTICOM CORP.,
PROPERTY TRUST, A TRUST                  a Delaware corporation
ORGANIZED UNDER 12 C.F.R.
SECTION 9.18, by its trustee
Riggs & Company, a division of           By: /s/ [ILLEGIBLE]
Riggs Bank N.A.                             ----------------------------

                                         Its: CHAIRMAN & CEO
                                             ---------------------------

By: /s/ [ILLEGIBLE]                      By: /s/ BRUCE MACINNIS
   -------------------------------          ----------------------------

Its: Managing Director                   Its: VP FINANCE & CEO
    ------------------------------           ---------------------------

          The undersigned, as Guarantor of the Lease pursuant to that certain
Continuing Guaranty of Lease dated as of October 30, 1998 (the "Guaranty"),
hereby consents to the foregoing Amendment and agrees that the Guaranty shall
remain in full force and effect arid shall apply to the foregoing Amendment and
to the Lease as amended thereby.

                                         Guarantor

                                         CERTICOM CORP., an Ontario corporation,

                                         By: /s/ BRUCE MACINNIS
                                            -------------------------------

                                         Name: BRUCE MACINNIS
                                              -----------------------

                                         Title: VP FINANCE & CEO
                                               ----------------------

                                       2

<PAGE>

                            SECOND AMENDMENT TO LEASE

                  THIS SECOND AMENDMENT TO LEASE (this "Amendment") is made as
of the 15 day of March, 2000, by and between THE MULTI-EMPLOYER PROPERTY TRUST,
A TRUST ORGANIZED UNDER 12 C.F.R. SECTION 9.18 ("Landlord"), and CERTICOM CORP.,
a Delaware corporation ("Tenant").

                  WHEREAS, Landlord and Tenant entered into that certain lease
dated October 30,1998, as amended by First Amendment to Lease dated as of
November 17,1998 (as so amended, the "Lease"), with respect to certain premises
(the "Original Premises") located at 25801 Industrial Blvd. in the Mt. Eden
Business Park in Hayward, California (the "Business Park");

                  WHEREAS, the parties desire to amend the Lease to add
 additional space in the Business Park to the premises demised thereunder and to
 make certain changes to the Lease in connection therewith. Unless otherwise
 defined herein, capitalized terms are used herein as defined in the Lease.

                   NOW, THEREFORE, the parties hereto do hereby agree as
follows:

                   1. Additional Premises.
                      -------------------

                   a. Effective as of April 1, 2000 (the "Additional Premises
Commencement Date"), the Additional Premises shall be added to the premises
demised to Tenant under the Lease. The term of the Lease, as applicable to the
Additional Premises, shall expire on the date (the "Additional Premises
Expiration Date") that is seven (7) years from the Additional Premises Rent
Commencement Date (as defined in Paragraph 3 below). The "Additional Premises'
shall mean that portion of the building known as 25821 Industrial Boulevard,
located in the Business Park, as shown on Exhibit A attached hereto. The
                                          ---------
parties hereby stipulate that for all purposes of this Amendment and the Lease,
the Additional Premises consist of 68,182 rentable square feet. From and after
the Additional Premises Commencement Date, the term "Premises" used in the Lease
shall be deemed to refer to the Original Premises and the Additional Premises,
and all of the terms, covenants and conditions of the Lease applicable to the
Original Premises shall be applicable to the Additional Premises, except as
hereinafter set forth or to the extent in conflict with the provisions of this
Amendment.

                   b. The Additional Premises shall be delivered to Tenant in
  their then "as-is" condition, and Landlord shall not have any obligation to
  make or, except as provided in Paragraph 2 below, pay for any alterations,
  additions or improvements to prepare the Additional Premises for Tenant's
  occupancy.

                   c. If, for any reason, Landlord cannot deliver possession of
  the Additional Premises to Tenant on the Additional Premises Commencement
  Date, (i) Tenant's obligations hereunder with respect to the Additional
  Premises shall not commence, and the Additional Premises Commencement Date
  shall not be deemed to have occurred, until possession of the Additional
  Premises is delivered to Tenant, (ii) the failure shall not affect the
  validity of this Amendment or the Lease, or, except as provided in clause (i),
  the obligations of Tenant

                                       1

<PAGE>

hereunder or under the Lease, (ii) such failure shall not serve to extend the
Additional Premises Expiration Date, and (iii) Landlord shall not be subject to
any liability.

        2. Tenant Improvements. Any alterations, additions or improvements which
           -------------------
Tenant desires to make to the Additional Premises to prepare the same for
Tenant's initial occupancy (the "Tenant Improvements") shall be performed in
accordance with, and be subject to all provisions of, Section 9 of the Lease.
Landlord shall contribute toward the cost of the construction of the Tenant
Improvements an amount not to exceed $681,820.00 (which is the product of
$10.00 times the stipulated number of rentable square feet of the Additional
Premises)("Landlord's Contribution"). The following provisions shall govern the
payment of Landlord's Contribution:

        A. Excess Cost: Share of Costs. If the total cost of construction of the
           ---------------------------
Tenant Improvements (including the Alteration Fee described in Section 9 of the
Lease and the City of Hayward Interim Supplemental Building Construction and
Improvement Tax) exceeds the funds available therefor from Landlord's
Contribution, then Tenant shall pay all such excess (the "Excess Cost"). Based
on the estimated cost (the "Estimated Costs") of the construction of the Tenant
Improvements, the prorata share of the Estimated Costs payable by Landlord and
Tenant shall be determined and an appropriate percentage share established for
each (a "Share of Costs"). Tenant and Landlord shall fund the cost
of such work as the same is performed, in accordance with their respective Share
of Costs for such work. At such time as Landlord's Contribution has been
entirely disbursed, Tenant shall pay the remaining Excess Cost, if any, which
payments shall be made in installments as construction progresses in the same
manner as Tenant's payments of Tenant's Share of Costs were paid. At the time
Landlord makes any disbursement of Landlord's Contribution, Landlord shall
retain from Landlord's Contribution, as a partial payment of the Alteration Fee,
a proportionate amount of the Alteration Fee based upon Landlord's reasonable
estimate of the amount required to be withheld from such disbursement in order
to ensure that the entire Alteration Fee is retained over the course of
construction on a prorata basis. At such time as Landlord's Contribution has
been entirely disbursed, if the entire Alteration Fee has not yet been paid to
Landlord, Tenant shall pay to Landlord a prorata portion of each payment made by
Tenant on account of the Tenant Improvements in order to ensure that the balance
of the Alteration Fee is paid to Landlord over the course of construction on a
prorata basis. Notwithstanding anything to the contrary in this Paragraph 2,
Landlord's Contribution shall be available for disbursement pursuant to the
terms hereof only during the calendar year 2000. Accordingly, if any portion
of Landlord's Contribution is not utilized prior to December 31, 2000, such
unused potion shall be forfeited by Tenant.

        B. Certain Costs. Portions of Landlord's Contribution may, at
           -------------
Tenant's election, be applied toward Tenant's architectural fees in connection
with the design and construction of the Tenant Improvements; provided, however,
that the portion of Landlord's Contribution applied to such fees may not exceed
One Dollar ($1.00) per rentable square foot of the Additional Premises and any
excess shall be paid directly by Tenant to Landlord from Tenant's own funds. In
no event may any portions of Landlord's Contribution be applied towards the
costs of Tenant's engineering fees (if any), trade fixtures, personal property,
equipment or furniture, or towards rent due under this Lease.

        C. Entire Additional Premises to be Improved. Tenant acknowledges that
           -----------------------------------------
Landlord's Contribution is to be applied to the Tenant Improvements (and the
costs permitted under Paragraph 2.B. above) covering the entire Additional
Premises. If Tenant does not

                                       2

<PAGE>

improve the entire Additional Premises, then, without limitation of any other
rights or remedies of Landlord hereunder, Landlord's Contribution shall be
adjusted on a prorata per rentable square foot basis to reflect the number of
rentable square feet actually being improved.

                3. Base Rent. Commencing as of the date (the "Additional
                   ---------
Premises Rent Commencement Date") that is the earlier of (i) one-hundred twenty
(120) days after the Additional Premises Commencement Date, or (ii) Tenant's
occupancy of the Additional Premises or any portion thereof for the conduct of
business, and thereafter on the first day of each calendar month of the Term,
Tenant shall pay to Landlord (or other entity designated by Landlord) Base Rent
for the Additional Premises, in advance, at Landlord's address for notices (as
set forth in the Basic Lease Information in the Lease) or at such other address
as Landlord may designate. The initial Base Rent for the Additional Premises
shall be Sixty-One Thousand Three Hundred Sixty-Four Dollars ($61,364.00).
Effective as of each annual anniversary of the Additional Premises Rent
Commencement Date, the Base Rent payable by Tenant for the Additional Premises
shall increase to one-hundred three percent (103%) of the Base Rent then in
effect for the Additional Premises. From and after the Additional Premises Rent
Commencement Date, the term "Base Rent" as used in the Lease shall mean the
Base Rent payable for the Original Premises and the Base Rent payable for the
Additional Premises, collectively. The Base Rent for the Additional Premises
shall be payable by Tenant in addition to the Base Rent payable by Tenant for
the Original Premises, as set for the in the Lease.

                4  Operating Expenses. Commencing as of the Additional Premises
                   ------------------
Rent Commencement Date, and continuing thereafter during the balance of the
Term, the provisions of Section 5 of the Lease shall be applicable to the
Additional Premises. As so applied to the Additional Premises, the term
"Tenant's Percentage Share" shall mean seventy-five percent (75%), and the term
"Building" shall mean the building in which the Additional Premises are located
The Operating Expenses for the Additional Premises shall be payable by Tenant
in addition to the Operating Expenses payable by Tenant for the Original
Premises, as set forth in the Lease.

                5. Security Deposit:Letter of Credit.
                   ---------------------------------

                a. Concurrently with Tenant's execution and delivery of this
Amendment to Landlord, Tenant shall increase the Security Deposit delivered to
Landlord pursuant to Section 17 of the Lease to the amount of One Hundred Fifty
Thousand Dollars ($150,000.00), and the term "Security Deposit", as used in the
Lease, shall thereafter refer to the Security Deposit in such amount.

                b. In addition to the increase in the Security Deposit required
pursuant to Paragraph 5.a. above, and in addition to the Letter of Credit
previously delivered by Tenant pursuant to the Lease (the "Original Letter of
Credit"), on or prior to the Additional Premises Commencement Date, Tenant
shall deliver an additional Letter of Credit to Landlord as further security for
Tenant's performance of all of Tenant's covenants and obligations under the
Lease. Such additional Letter of Credit (the "Additional Letter of Credit"),
and any proceeds therefrom, shall be subject to all of the terms, covenants and
conditions applicable to the Original Letter of Credit, as set forth in Section
17 of the Lease, except that the Additional Letter of Credit shall be in the
original amount of One Million Two Hundred Thousand Dollars ($1,200,000.00)
during the period from the Additional Premises Commencement Date through the
third annual anniversary of the Additional Premises Rent Commencement Date,
and reducing in amount on

                                       3

<PAGE>

the third annual anniversary of the Additional Premises Rent Commencement Date
and on each subsequent annual anniversary of the Additional Premises Rent
Commencement Date by twenty percent (20%) of the original amount of the
Additional Letter of Credit; provided, however, that if on the date the
Additional Letter of Credit amount would otherwise reduce, an Event of Default,
or default that with notice or the passage of time or both could mature into an
Event of Default, shall have occurred and be continuing, the Additional Letter
of Credit amount shall not reduce on such date and shall not thereafter reduce
until the later of the next scheduled reduction date or the date such Event of
Default or default shall have been cured. Where reference is made in Section 17
of the Lease to the Term of the Lease (for purposes of determining the period
during which the Original Letter of Credit or the Additional Letter of Credit,
as applicable, must be maintained in effect), as respects the Original Letter of
Credit such reference shall mean the Term of the Lease as respects the Original
Premises, and as respects the Additional Letter of Credit such reference shall
mean the Term of the Lease as respects the Additional Premises.

                6. Lease Term. Effective as of the Additional Premises
                   ----------
Commencement Date, the expiration date of the term of the Lease, as applicable
to the Original Premises, shall be deemed extended from February 28, 2006 (which
the parties acknowledge to be the current expiration date of the term of the
Lease as respects the Original Premises) to the Additional Premises Expiration
Date. All of the terms, covenants and conditions of the Lease shall apply
during such extension period (the "Extension Period"), except the Base Rent
payable by Tenant for the Original Premises shall be the "fair market rent" for
the Original Premises for the Extension Period. "Fair market rent" shall have
the meaning given in Section 40 of the Lease, with all references to the
"renewal period" being deemed references to the "Extension Period". The "rent
floor" specified in Section 40.b. of the Lease shall be fully applicable as
respects the Extension Period.

                7. Renewal Option. Pursuant to Section 40 of the Lease, as of
                   --------------
the date of this Amendment Tenant has the option to renew the Lease for one (1)
additional term of five (5) years. In the event that Tenant validly exercises
its option to renew the Lease for such additional five (5) year term, the
parties hereby agree that such exercise shall apply to the entire premises then
demised hereunder (i.e. both the Original Premises and the Additional Premises),
and such option may not be exercised as to less than all of the premises then
demised hereunder. The "rent floor" specified in Section 40.b. of the Lease
shall be determined, for purposes of such renewal, by reference to the average
Base Rent, per rentable square foot, payable by Tenant for all of the premises
then demised hereunder.

                8. Building Definition. The definition of the "Building"
                   -------------------
contained in the Lease is hereby modified to mean, collectively, the buildings
in which the Original Premises and the Additional Premises are located, unless
the context expressly requires otherwise. As used in Section 11 and Section 12
of the Lease, the term "Building" means only the building in which the Original
Premises or Additional Premises are located which has been damaged or destroyed
or the subject of the taking by eminent domain (or conveyance in lieu thereof),
as applicable, and notwithstanding anything to the contrary contained in Section
11 or Section 12 of the Lease, where Landlord or Tenant is granted in any such
Section a right or option to terminate this Lease by reason of damage or
destruction to, or a taking by eminent domain (or conveyance in lieu thereof),
of the Premises or the Building, such right or option shall only permit
termination of the Lease as to the space demised thereunder in the building
which has been damaged or destroyed or subject to the taking by eminent domain
(or conveyance in lieu thereof).

                                        4

<PAGE>

                9.  Ratification. Except as amended hereby, the Lease remains
                    ------------
unmodified and in full force and effect.

                10. Brokers. Each party hereto represents and warrants to
                    -------
the other party hereto that it has dealt with no broker or finder who can
properly claim a commission, fee or other compensation by reason of this
Amendment or Tenant's lease of the Additional Premises, except that Landlord
acknowledges that it has dealt with Colliers Parish International, Inc.
("Landlord's Broker") in connection with this Amendment. Each party hereto shall
indemnify, protect and hold harmless the other party hereto from and against any
and all loss, cost, damage, liability and expense (including attorneys' fees and
costs) arising out of my breach or alleged breach of its foregoing
representation and warranty. In addition, Landlord shall pay any commission due
to Landlord's Broker by reason of this Amendment pursuant to the terms of a
separate agreement.

                11. Entire Understanding. This Amendment represents the
                    --------------------
entire understanding between of the parties concerning the subject matter
hereof, and there are no understandings or agreements between them relating to
the Lease or the leased premises not set forth in writing and signed by the
parties hereto. No party hereto has relied upon any representation, warranty or
understanding not set forth herein, either oral or written, as an inducement to
enter into this Amendment.

                12. Counterparts. This Amendment may be executed in any
                    ------------
number of counterparts, each of which shall be deemed an original, and all of
which together shall constitute one and the same instrument.

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

Landlord:                                       Tenant:

THE MULTI-EMPLOYER                              CERTICOM CORP.,
PROPERTY TRUST, A TRUST                         a Delaware corporation
ORGANIZED UNDER 12 C.F.R.
SECTION 9.18, by its trustee
Riggs & Company, a division of                  By: /s/ Richard P. Dalmazzi
Riggs Bank N.A.                                    ----------------------------
                                                        Richard P. Dalmazzi
                                                        President and CEO

By:  /s/ [ILLEGIBLE]                          By: /s/ Richard D. Brounstein
    ------------------------------                 -----------------------------
                                                      Richard D. Brounstein
Its: Managing Director                                 Chief Financial Officer
    ------------------------------

<PAGE>

          The undersigned, as Guarantor of the Lease pursuant to that certain
Continuing Guaranty of Lease dated as of October 30, 1998 (the "Guaranty"),
hereby consents to the foregoing Amendment and agrees that the Guaranty shall
remain in full force and effect and shall apply to the foregoing Amendment and
to the Lease as amended thereby. The undersigned represents and warrants to
Landlord that it is the successor entity to the entity which originally executed
the Guaranty and the confirmation of the Guaranty contained at the end of the
First Amendment to the Lease.

                                            Guarantor:

                                            CERTICOM CORP., A Yukon corporation

                                            By: /s/ Richard P. Dalmazzi
                                               ---------------------------------
                                                    Richard P. Dalmazzi
                                                    President and CEO

                                            By: /s/ Richard D. Brounstein
                                               ---------------------------------
                                                    Richard D. Brounstein
                                                    Chief Financial Officer

                                       6

<PAGE>

                                   EXHIBIT A
                                   ---------

Floor Plan - Building D
-----------------------

                                                                         MT EDEN
                                                                           LOGO

                       [DRAWING OF FLOOR PLAN OF MT EDEN]

<PAGE>

                                    EXHIBIT D
                                    ---------

                               Initial Alterations

Plans and specifications dated 9/28/01, prepared by Weske + Associates, pages
PP-1 and PP-2 and the demolition plans dated 9/20/01 prepared by Weske +
Associates, page PP-1 only.

<PAGE>

                                    EXHIBIT E
                                    ---------

                                Letter of Credit

                                    Attached

<PAGE>

                          [LETTERHEAD OF PAINEWEBBER]

Beneficiary:                            Irrevocable Standby
Riggs & Company, a division of Riggs    Letter of Credit No. RA09Al
Bank N.A., as trustee of the            Issuance Date: November 4, 2001
Multi-Employer Property Trust           Expiration Date: November 5, 2002
Attention Patrick O. Maybery
808 17th Street, NW, 7th Floor          Applicant: Guava Technologies Inc.
Washington, DC 20006

Ladies and Gentlemen:

     We hereby establish our Irrevocable Standby Letter of Credit in your favor
for the account of Guava Technologies Inc. for a maximum amount of US$600,000.00
(six hundred thousand and 00/100 USD) available for payment at sight by your
draft(s) drawn on us when accompanied by the following document:

     Beneficiary's dated statement purportedly signed by one of its officers
reading: "This draw in the amount of ______________ USD ($__________) [not to
exceed $600,000.00] under UBS PaineWebber Inc. Irrevocable Standby Letter of
Credit No. RA09A1 represents funds due and owing to us as a result of Guava
Technologies Inc. default beyond applicable notice and cure periods under one or
more of the terms of that certain Sublease dated as of November 1, 2001 by and
between Certicom as landlord with Beneficiary as master landlord, and Guava
Technologies Inc. as subtenant" or under the Consent dated as of November __,
2001 by and among Certicom, Guava Technologies, Inc. and Beneficiary.

     It is a condition of this Irrevocable Standby Letter of Credit that it will
be considered automatically renewed without amendment for a one year period upon
the expiration date set forth above and upon each anniversary of such date,
unless at least 60 (sixty) days prior to such expiration date or applicable
anniversary thereof, we notify you in writing by certified mail, return receipt
requested, that we elect not to so renew this Irrevocable Standby Letter of
Credit.

     This Letter of Credit cannot be modified or revoked without Beneficiary's
written consent. Multiple and partial draws are allowed under this Letter of
Credit.

     This Letter of Credit is transferable in its entirety and not in part. We
shall not recognize any transfer of this Letter of Credit until an executed
transfer form satisfactory to us is filed with us. The form required is attached
as Exhibit A. Our transfer fee of $75.00 is for the account of Guava
Technologies Inc. It shall not be a condition of transfer that such fee
accompanies the transfer request. Payment of the transfer fee is not required
prior to our completing the transfer.

                                                           Continued on Page Two

                                    ORIGINAL

<PAGE>

                        [lETTERHEAD OF UBS PAINEWEBBER]

Page Two
L/C No.RA09A1

     Drafts and Documents must be presented for payment at our office located at
1200 Harbor Blvd., 4th Floor, Weehawken, NJ 07086 to the attention of the Letter
of Credit Dept. on or before expiration date described herein.

     The date of presentment of any draw shall be the date a copy of the sight
draft and draw statement are faxed from Beneficiary to UBS PaineWebber Inc. at
201-352-7622, followed by originals sent by overnight courier to the address
stated below.

     This credit is subject to the Uniform Customs and Practice for Documentary
Credits (1993 revision) International Chamber of Commerce Publication No. 500,
and to the extent not inconsistent therewith, the law of the State of
California, including Article 5 of the California Uniform Commercial Code.

     We hereby engage with you to honor drafts and documents drawn under and in
compliance with the terms of this credit.

     All communications to us with respect to this L/C must be addressed to our
office located at 1200 Harbor Blvd., 4th Floor, Weehawken, NJ 07086 to the
attention of the Letter of Credit Dept.

Very Truly Yours,

/s/ [ILLEGIBLE]                                         /s/ [ILLEGIBLE]
Authorized Signature                                    Authorized Signature

                                    ORIGINAL

<PAGE>

                                   EXHIBIT A

                        [LETTERHEAD OF UBS PAINEWEBBER]

THIS FORM TO BE USED WHERE A LETTER OF CREDIT IS TRANSFERRED IN ITS ENTIRETY

                                                    Date: ___________________

Re: Letter of Credit Number: ____________________ issued by UBS PaineWebber Inc.

Gentlemen:

For value received, the undersigned beneficiary hereby irrevocable transfers to:

________________________________________________________________________________
                              (Name of Transferee)

________________________________________________________________________________
                                    (Address)

all rights of the undersigned beneficiary to draw under the above Letter of
Credit in its entirety.

By this transfer, all rights of the undersigned beneficiary in such Letter of
Credit are transferred to the transferee and the transferee shall have the sole
rights as beneficiary thereof, including sole rights relating to any amendments
whether increases or extensions or other amendments and whether now existing or
hereafter made.

All amendments are to be advised direct to the transferee without necessity of
any consent of or notice to the undersigned beneficiary.

The original advice of such Letter of Credit is returned herewith together with
any and all amendments, and we ask you to endorse the transfer on the reverse
of the original advice, and forward it to the transferee with your customary
notice of transfer.

                                                        Yours very truly,

SIGNATURE GUARANTEED

_______________________________                 _______________________________
Name of Bank                                         Name of Beneficiary

_______________________________                 _______________________________
Authorized Signature                                 Authorized Signature

<PAGE>

                                    EXHIBIT F
                                    ---------

                         Permitted Hazardous Substances

To:         City of Hayward, Planning Department - Submission pending

Re:         Guava Technology Control Zone Total by UBC ranking 3-D, 3-E
            Industrial Road, Hayward, CA
            Control zone I Proposed Chemical List

Date:       8/23/01

                      Chemical List by UBC ranking 3-D, 3-E

 No category total exceeds the amount permitted (exempt quantities) per control
 zone. Units are shown in gallons (gal), pounds(lb) or cubic feet (cu ft)

<TABLE>
<CAPTION>
Category                                     Storage        Use-closed        Use-open        Total
<S>                                           <C>            <C>               <C>             <C>
Combustible Liquid                           0              0                 0
Combustible Fiber                            0              0                 0
Cryogenic Flammable or oxidizing             0              0                 0
Explosives                                   0              0                 0
Flammable Solid                              0              0                 0
Flammable Gas                                0              0                 0
Flammable Liquid Combination                 233.0gal       6gal              1.0gal          240gal

I-A                                          26gal          lgal              .5gal            27.5gal
I-B                                          140            3                 .5gal           143.5gal
I-C                                          67             1                 .5gal           68.5

Organic Peroxide-unclassified, detonable     0              0                 0                -
Organic Peroxide I-V                         0              0                 0
Oxidizer 4-1                                 1              .25               .25
Oxidizer- gas                                0              0                 0
Pyrophoric                                   0              0                 0
Unstable 4-1                                 0              0                 0
Water Reactive 3-l                           0              0                 0

Carcinogen                                   .125lb         0                 .125lb          .1l lb
corrosives                                   20lb           3.25lb            .0125lb         23.375lb
                                             5gal           .25gal            .25gal          7.5 gal
Highly toxics                                0              .0                .0125lb         .0125lb
Irritants                                    1lb            .0125lb           .0125lb         1.025lb
</TABLE>

<PAGE>

                                      -2-

<TABLE>
<CAPTION>
Category                                   Storage          Use-closed     Use-open     Total
<S>                                        <C>              <C>            <C>          <C>
Radioactives                               0                0              0
Sensitizers                                0                0              0
Other Health Hazards *are listed in carcinogens irritants, and toxics lists
Toxics                                     .25lb            0              .25          .25lb
                                           15. gal          3              1.0  gal
Non Flammable Gas                          13900cu ft
Non regulated materials - media, buffers
</TABLE>

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