Document:

LEASE

                               DATED MAY 10, 1999

                                 BY AND BETWEEN

                           ORCHARD JAY INVESTORS, LLC
                                      and
                                 DAVID J. BROWN

                                  as Landlord

                                      and

                               CYLINK CORPORATION

                                   as Tenant

                      AFFECTING PREMISES COMMONLY KNOWN AS

                            3131 and 3151 Jay Street
                            Santa Clara, California

                  [12/15/95 MULTI TENANT NET INDUSTRIAL LEASE]

<PAGE>

                                     LEASE
--------------------------------------------------------------------------------
                               TABLE OF CONTENTS
                                                                           PAGE:
                                                                           -----
ARTICLE 1 - DEFINITIONS
         1.1      General                                                    1
         1.2      Additional Rent                                            1
         1.3      Address for Notices                                        1
         1.4      Agents                                                     1
         1.5      Agreed Interest Rate                                       1
         1.6      Base Monthly Rate                                          1
         1.7      Building                                                   1
         1.8      Commencement Date                                          1
         1.9      Common Area                                                1
         1.10     Common Operating Expense                                   1
         1.11     Consumer Price Index                                       1
         1.12     Effective Date                                             1
         1.13     Event of Tenant's Default                                  1
         1.14     Hazardous Materials                                        1
         1.15     Insured and Uninsured Peril                                1
         1.16     Law                                                        1
         1.17     Lease                                                      1
         1.18     Lease Term                                                 1
         1.19     Lender                                                     1
         1.20     Permitted Use                                              1
         1.21     Premises                                                   1
         1.22     Project                                                    2
         1.23     Private Restrictions                                       2
         1.24     Real Property Taxes                                        2
         1.25     Scheduled Commencement Date                                2
         1.26     Security Instrument                                        2
         1.27     Summary                                                    2
         1.28     Tenant's Alterations                                       2
         1.29     Tenant's Share                                             2
         1.30     Trade Fixtures                                             2

ARTICLE 2 - DEMISE, CONSTRUCTION, AND ACCEPTANCE                             2
         2.1      Demise of Premises                                         2
         2.2      Commencement Date                                          2
         2.3      Construction of Improvements                               2
         2.4      Delivery and Acceptance of Possession                      2
         2.5      Early Occupancy                                            3

ARTICLE 3 - RENT                                                             3
         3.1      Base Monthly Rent                                          3
         3.2      Additional Rent                                            3
         3.3      Payment of Rent                                            3
         3.4      Late Charge and Interest on Rent in Default                3
         3.5      Security Deposit                                           3

ARTICLE 4 - USE OF PREMISES                                                  3
         4.1      Limitation on Use                                          3
         4.2      Compliance with Regulations                                4
         4.3      Outside Areas                                              4
         4.4      Signs                                                      4
         4.5      Parking                                                    4
         4.6      Rules and Regulations                                      4

                                       i
<PAGE>

                                     LEASE
--------------------------------------------------------------------------------
                               TABLE OF CONTENTS
                                  (continued)

                                                                           PAGE:
                                                                           -----
ARTICLE 5 - TRADE FIXTURES AND ALTERATIONS                                   4
         5.1      Trade Fixtures                                             4
         5.2      Tenant's Alterations                                       4
         5.3      Alterations Required by Law                                5
         5.4      Amortization of Certain Capital Improvements               5
         5.5      Mechanic's Liens                                           5
         5.6      Taxes on Tenant's Property                                 6

ARTICLE 6 - REPAIR AND MAINTENANCE                                           6
         6.1      Tenant's Obligation to Maintain                            6
         6.2      Landlord's Obligation to Maintain                          6
         6.3      Control of Common Area                                     6

ARTICLE 7 - WASTE DISPOSAL AND UTILITIES                                     7
         7.1      Waste Disposal                                             7
         7.2      Hazardous Materials                                        7
         7.3      Utilities                                                  8
         7.4      Compliance with Governmental Regulations                   8

ARTICLE 8 - COMMON OPERATING EXPENSES                                        8
         8.1      Tenant's Obligation to Reimburse                           8
         8.2      Common Operating Expenses Defined                          8
         8.3      Real Property Taxes Defined                                9

ARTICLE 9 - INSURANCE                                                        9
         9.1      Tenant's Insurance                                         9
         9.2      Landlord's Insurance                                      10
         9.3      Tenant's Obligation to Reimburse                          10
         9.4      Release and Waiver of Subrogation                         10

ARTICLE 10 - LIMITATION ON LANDLORD'S LIABILITY AND INDEMNITY               11
         10.1     Limitation on Landlord's Liability                        11
         10.2     Limitation on Tenant's Recourse                           11
         10.3     Indemnification of Landlord                               11
         10.4     Indemnification of Tenant                                 11

ARTICLE 11 - DAMAGE TO PREMISES                                             11
         11.1      Landlord's Duty to Restore                               11
         11.2      Landlord's Right to Terminate                            11
         11.3      Tenant's Right to Terminate                              12
         11.4      Abatement of Rent                                        12

                                       ii
<PAGE>

                                     LEASE
--------------------------------------------------------------------------------
                               TABLE OF CONTENTS
                                  (continued)

                                                                           PAGE:
                                                                           -----
ARTICLE 12 - CONDEMNATION                                                   12
        12.1      Landlord's Termination Right                              12
        12.2      Tenant's Termination Right                                12
        12.3      Restoration and Abatement of Rent                         13
        12.4      Temporary Taking                                          13
        12.5      Division of Condemnation Award                            13

ARTICLE 13 - DEFAULT AND REMEDIES                                           13
        13.1      Events of Tenant's Default                                13
        13.2      Landlord's Remedies                                       13
        13.3      Waiver                                                    14
        13.4      Limitation on Exercise of Rights                          14
        13.5      Waiver by Tenant of Certain Remedies                      15
        13.6      Events of Landlord's Default                              15

ARTICLE 14 - ASSIGNMENT AND SUBLETTING                                      15
        14.1      Transfer by Tenant                                        15
        14.2      Transfer by Landlord                                      17

ARTICLE 15 - GENERAL PROVISIONS                                             17
        15.1      Landlord's Right to Enter                                 17
        15.2      Surrender of the Premises                                 17
        15.3      Holding Over                                              18
        15.4      Subordination                                             18
        15.5      Mortgagee Protection and Attornment                       18
        15.6      Estoppel Certificates and Financial Statements            18
        15.7      Reasonable Consent                                        18
        15.8      Notices                                                   19
        15.9      Attorney's Fees                                           19
        15.10     Corporate Authority                                       19
        15.11     Miscellaneous                                             19
        15.12     Termination by Exercise of Right                          19
        15.13     Brokerage Commissions                                     19
        15.14     Force Majeure                                             20
        15.15     Entire Agreement                                          20
        15.16     Quiet Possession                                          20

EXHIBITS

         Exhibit A - Site plan of the Project  containing a  description  of the
         Premises

         Exhibit B - Improvement Agreement

         Exhibit C - Approved Specifications

         Exhibit D - Acceptance Agreement

         Exhibit E - Description of Private Restrictions

         Exhibit F - Sign Criteria

         Exhibit G - Form of Subordination Agreement

         Exhibit H - Hazardous Materials Questionnaire

         Exhibit I - Santa Clara File A.3429

                                      iii
<PAGE>

                          SUMMARY OF BASIC LEASE TERMS

        SECTION
    (LEASE REFERENCE)               TERMS

           A.             Lease Reference Date: May 10, 1999
     (Introduction)

           B.             Landlord:    Orchard Jay Investors, LLC
     (Introduction)                    a California limited liability company
                                       and David J. Brown

           C.             Tenant:      Cylink Corporation
     (Introduction)                    a California corporation

           D.             Premises:    That area  consisting  of  95,828  square
       (ss.1.21)                       feet  of   gross   leasable   area,   the
                                       addresses  of which are 3131 and 3151 Jay
                                       Street,  Santa Clara,  California  within
                                       the Buildings as shown on Exhibit A.

           E.             Project:     The  land  and   improvements   shown  on
       (ss.1.22)                       Exhibit   A   consisting   of  three  (3)
                                       buildings,  the aggregate  gross leasable
                                       area of which is 142,552 square feet.

           F.             Building:    The  buildings  in which the Premises are
       (ss. 1.7)                       located   known   as  3131   Jay   Street
                                       containing  49,104  square  feet of gross
                                       leasable   area  and   3151  Jay   Street
                                       containing  46,724  square  feet of gross
                                       leasable area.

           G.             Tenant's Share:   100% of Buildings B and C
       (ss.1.29)                            67.22% of the Project

           H.             Tenant's Allocated Parking Stalls:  362 stalls.
       (ss.4.5)

           I.             Scheduled Commencement Date: September 1, 1999.
      (ss. 1.25)

           J.             Lease Term:  120  calendar  months  (plus the  partial
      (ss. 1.18)                       month following the Commencement  Date if
                                       such  date  is  not  the  first  day of a
                                       month).

           K.
       (ss. 3.1)          Base Monthly Rent:   Months  1  -  12: $174,406.96
                                               Months 13  -  24: $179,639.17
                                               Months 25  -  36: $185,028.34
                                               Months 37  -  48: $190,579.19
                                               Months 49  -  60: $196,296.57
                                               Months 61  -  72: $202,185.47
                                               Months 73  -  84: $208,251.03
                                               Months 85  -  96: $214,498.56
                                               Months 97  - 108: $220,933.52
                                               Months 109 - 120: $227.561.52

           L.             Prepaid Rent:     $174,406.96
       (ss. 3.3)

           M.             Security Deposit: $827,561.52.
       (ss. 3.5)                            Refer  to  First  Addendum  to Lease
                                            Paragraph 3.

           N.             Permitted Use:    General office, marketing, research,
       (ss. 4.1)                            assembly,  testing  and other  legal
                                            related   uses.   However,   without
                                            Landlord's     permission,     which
                                            Landlord  may  withhold  in its sole
                                            discretion,  neither  Tenant nor any
                                            successor, assignee, or subtenant of
                                            Tenant,  shall use the  facility  in
                                            any way which is  inconsistent  with
                                            or in violation of the provisions of
                                            that  certain  hazardous   materials
                                            condition  for  Orchard  Properties'
                                            Project at 3131 and 3151 Jay Street,
                                            Santa  Clara  (File   A.3429)  dated
                                            March 13,  1998,  a copy of which is
                                            attached  hereto  as  Exhibit  I and
                                            incorporated herein by reference.

           0.             Permitted Tenant's Alterations Limit:   $10,000.00
       (ss. 5.2)

<PAGE>

           P.
       (ss. 9.1)          Tenant's Liability Insurance Minimum:   $2,000,000.00

           Q.             Landlord's Address: Orchard Jay Investors, LLC
       (ss. 1.3)                              and David J. Brown
                                              c/o Orchard Properties
                                              2290 North First Street, Suite 300
                                              San Jose, CA 95131

           R.             Tenant's Address:   Prior to the Commencement Date:
       (ss. 1.3)
                                              Cylink Corporation
                                              Attn:  Chief Financial Officer
                                              910 Hermosa Court
                                              Sunnyvale, CA 94088-3759

                                              Cylink Corporation
                                              Attn:  General Counsel
                                              910 Hermosa Court
                                              Sunnyvale, CA 94088-3759

                                              After the Commencement Date:

                                              Cylink Corporation
                                              Attn:  Chief Financial Officer
                                              3151 Jay Street
                                              Santa Clara, CA 95054

                                              Cylink Corporation
                                              Attn:  General Counsel
                                              3151 Jay Street
                                              Santa Clara, CA 95054

           S.             Retained Real Estate Brokers:   CB Richard Ellis
      (ss. 15.13)

           T.             Lease:       This Lease  includes  the  summary of the
       (ss. 1.17)                      Basic  Lease  Terms,  the Lease,  and the
                                       following  exhibits  and  addenda:  First
                                       Addendum  to Lease;  Exhibit A (Site plan
                                       of the Project containing  description of
                                       the  Premises),  Exhibit  B  (Improvement
                                       Agreement),     Exhibit    C    (Approved
                                       Specifications),  Exhibit  D  (Acceptance
                                       Agreement),  Exhibit  E  (Description  of
                                       Private  Restrictions),  Exhibit  F (Sign
                                       Criteria),    Exhibit    G    (Form    of
                                       Subordination   Agreement),   Exhibit   H
                                       (Hazardous   Materials    Questionnaire),
                                       Exhibit I (Santa Clara File A.3429)

         The foregoing Summary is hereby incorporated into and made part of this
Lease.  Each  reference in this Lease to any term of the Summary  shall mean the
respective  information set forth above shall be construed to incorporate all of
the  terms  provided  under  the   particular   paragraph   pertaining  to  such
information. In the event of any conflict between the Summary and the Lease, the
Summary shall control.

LANDLORD:                                      TENANT:

ORCHARD JAY INVESTORS LLC                      CYLINK CORPORATION
a California limited liability company         a California corporation

By: /s/ David J. Brown                         By: /s/ [ILLEGIBLE]
    -----------------------                        -----------------------
        David J. Brown
        Managing Member                        Its: Chief Financial Officer
                                                    -----------------------
Dated: May 11, 1999
       --------------------                    Dated: May 10, 1999
                                                      -----------------------

DAVID J. BROWN
                                               By: /s/ [ILLEGIBLE]
By: /s/ David J. Brown                             -----------------------
    -----------------------
                                               Its: Corporate Secretary
Dated: May 11, 1999                                 -----------------------
       --------------------
                                               Dated: May 10, 1999
                                                      -----------------------

                                       2
<PAGE>

                                     LEASE
--------------------------------------------------------------------------------

This Lease is dated as of the lease reference date specified in Section A of the
Summary and is made by and between the party identified as Landlord in Section B
of the Summary and the party identified as Tenant in Section C of the Summary.

                                   ARTICLE I

                                  DEFINITIONS

         1.1 General:  Any  initially  capitalized  term that is given a special
meaning by this Article 1, the Summary,  or by any other provision of this Lease
(including  the exhibits  attached  hereto) shall have such meaning when used in
this  Lease  or any  addendum  or  amendment  hereto  unless  otherwise  clearly
indicated by the context.

         1.2 Additional Rent: The term "Additional Rent" is defined in P.13.2.

         1.3 Address for Notices:  The term "Address for Notices" shall mean the
addresses set forth in Sections Q and R of the Summary; provided,  however, that
after the Commencement  Date,  Tenant's Address for Notices shall be the address
of the Premises.

         1.4  Agents:  The term  "Agents"  shall  mean the  following:  (i) with
respect to Landlord or Tenant, the agents, employees,  contractors, and invitees
of such party; and (ii) in addition with respect to Tenant,  Tenant's subtenants
and their respective agents, employees, contractors, and invitees.

         1.5 Agreed  Interest Rate:  The term "Agreed  Interest Rate" shall mean
that interest  rate  determined as of the time it is to be applied that is equal
to the  lesser of (i) 5% in  excess  of the  discount  rate  established  by the
Federal  Reserve Bank of San  Francisco as it may be adjusted from time to time,
or (ii) the maximum interest rate permitted by Law.

         1.6 Base  Monthly  Rent:  The term "Base  Monthly  Rent" shall mean the
fixed  monthly  rent  payable by Tenant  pursuant to P.3.1 which is specified in
Section K of the Summary.

         1.7 Building:  The term "Building" shall mean the building in which the
Premises are located which  Building is identified in Section F of the Seminary,
the gross  leasable area of which is referred to herein as the  "Building  Gross
Leasable Area."

         1.8  Commencement  Date: The term  "Commencement  Date" is the date the
Lease Term commences, which term is defined in P.2.2.

         1.9  Common  Area:  The term  "Common  Area"  shall  mean all areas and
facilities  within the  Project  that are not  designated  by  Landlord  for the
exclusive  use of Tenant or any other  lessee or other  occupant of the Project,
including the parking areas, access and perimeter roads,  pedestrian  sidewalks,
landscaped areas,  trash  enclosures,  recreation areas and the like. The Common
Area does not include any portion of the interior of 3101 Jay Street.

         1.10 Common Operating Expenses: The term "Common Operating Expenses" is
defined in P.8.2.

         1.11 Consumer Price Index:  The term "Consumer Price Index" shall refer
to the Consumer Price Index, All Urban Consumers,  subgroup "All Items", for the
San Francisco-Oakland-San Jose metropolitan area (base year 1982-84 equals 100),
which is presently  being published  monthly by the United States  Department of
Labor,  Bureau of Labor  Statistics.  However,  if this Consumer  Price Index is
changed so that the base year is altered  from that used as of the  commencement
of the initial term of this Lease,  the Consumer  Price Index shall be converted
in  accordance  with  the  conversion  factor  published  by the  United  States
Department of Labor,  Bureau of Labor Statistics to obtain the same results that
would have been  obtained had the base year not been  changed.  If no conversion
factor is  available,  or if the  Consumer  Price  Index is  otherwise  changed,
revised or  discontinued  for any  reason,  there shall be  substituted  in lieu
thereof and the term "Consumer Price Index" shall  thereafter  refer to the most
nearly comparable  official price index of the United States government in order
to obtain  substantially  the same  result as would have been  obtained  had the
original Consumer Price Index not been discontinued,  revised or changed,  which
alternative index shall be selected by Landlord and shall be subject to Tenant's
written approval.

         1.12 Effective Date: The term "Effective  Date" shall mean the date the
last  signatory to this Lease whose  execution is required to make it binding on
the parties hereto shall have executed this Lease

         1.13 Event of Tenant's Default: The term "Event of Tenant's Default" is
defined in P.13.1.

         1.14  Hazardous   Materials:   The  terms  "Hazardous   Materials"  and
"Hazardous Materials Laws" are defined in P.7.2E.

         1.15  Insured  and  Uninsured  Peril:  The terms  "Insured  Peril"  and
"Uninsured Peril" are defined in P.11.2E.

         1.16 Law:  The term "Law" shall mean any  judicial  decision,  statute,
constitution,  ordinance, resolution, regulation, rule, administrative order, or
other requirement of any municipal,  county,  state, federal or other government
agency or authority  having  jurisdiction  over the parties to this Lease or the
Premises, or both, in effect either at the Effective Date or any time during the
Lease Term.

         1.17 Lease: The term "Lease" shall mean the Summary and all elements of
this Lease  identified  in Section T of the  Summary,  all of which are attached
hereto and incorporated herein by this reference.

         1.18 Lease  Term:  The term  "Lease  Term"  shall mean the term of this
Lease which shall commence on the Commencement  Date and continue for the period
specified in Section J of the Summary.

         1.19 Lender:  The term "Lender" shall mean any beneficiary,  mortgagee,
secured party, lessor, or other holder of any Security Instrument.

         1.20  Permitted  Use:  The  term  "Permitted  Use"  shall  mean the use
specified in Section N of the Summary.

         1.21  Premises:  The term  "Premises"  shall  mean that  building  area
described in Section D of the Summary that is within the Building.

         1.22 Project:  The term "Project" shall mean that real

<PAGE>

                                     LEASE
--------------------------------------------------------------------------------

property and the  improvements  thereon  which are specified in Section E of the
Summary, the aggregate gross leasable area of which is referred to herein as the
"Project Gross Leasable Area."

         1.23 Private Restrictions:  The term "Private  Restrictions" shall mean
all  recorded  covenants,  conditions  and  restrictions,   private  agreements,
reciprocal easement agreements, and any other recorded instruments affecting the
use of the  Premises  which  (i)  exist as of the  Effective  Date,  or (ii) are
recorded after the Effective Date and are approved by Tenant in writing.

         1.24 Real Property Taxes:  The term "Real Property Taxes" is defined in
P.8.3.

         1.25  Scheduled  Commencement  Date: The term  "Scheduled  Commencement
Date" shall mean the date specified in Section I of the Summary.

         1.26 Security Instrument: The term "Security Instrument" shall mean any
underlying  lease,  mortgage or deed of trust which now or hereafter affects the
Project, and any renewal, modification,  consolidation, replacement or extension
thereof.

         1.27 Summary:  The term "Summary" shall mean the Summary of Basic Lease
Terms executed by Landlord and Tenant that is part of this Lease.

         1.28 Tenant's Alterations:  The term "Tenant's  Alterations" shall mean
all improvements, additions, alterations, and fixtures installed in the Premises
by Tenant at its expense which are not Trade Fixtures.

         1.29  Tenant's  Share:   The  term  "Tenant's  Share"  shall  mean  the
percentage  obtained by dividing  Tenant's  Gross  Leasable Area by the Building
Gross Leasable Area, which as of the Effective Date is the percentage identified
in Section G of the Summary.

         1.30 Trade Fixtures:  The term "Trade Fixtures" shall mean (i) Tenant's
inventory,  furniture,  signs, and business equipment, and (ii) anything affixed
to the  Premises by Tenant at its expense  for  purposes of trade,  manufacture,
ornament  or  domestic  use  (except  replacement  of similar  work or  material
originally  installed by Landlord) which can be removed without  material injury
to the  Premises  unless  such thing has,  by the manner in which it is affixed,
become an integral part of the Premises.

                                   ARTICLE 2

                      DEMISE, CONSTRUCTION AND ACCEPTANCE

         2.1 Demise of Premises:  Landlord  hereby leases to Tenant,  and Tenant
leases from  Landlord,  for the Lease Term upon the terms and conditions of this
Lease,  the Premises  for  Tenant's own use in the conduct of Tenant's  business
together  with  (i) the  non-exclusive  right  to use  the  number  of  Tenant's
Allocated  Parking Stalls within the Common Area (subject to the limitations set
forth in P.4.5),  and (ii) the  non-exclusive  right to use the Common  Area for
ingress to and egress  from the  Premises  and for the  purposes  of  performing
Tenant's obligations hereunder. Landlord reserves the use of the exterior walls,
the roof and the area beneath and above the Premises, together with the right to
install,  maintain,  use, and replace ducts,  wires,  conduits and pipes leading
through the  Premises in  locations  which will not  materially  interfere  with
Tenant's use of the Premises.

         2.2 Commencement Date: The Scheduled Commencement Date shall be only an
estimate  of the actual  Commencement  Date,  and subject to the  provisions  of
Exhibit  B,  the term of this  Lease  shall  begin on the  first to occur of the
following,  which shall be the "Commencement  Date" (provided,  that in no event
shall the  Commencement  Date occur prior to  September  1, 1999):  (i) the date
Landlord  offers to  deliver  possession  of the  Premises  to Tenant  following
Substantial  Completion (as defined in Exhibit B hereto) of all  improvements to
be constructed  by Landlord  pursuant to P.2.3 except for punch list items which
do not prevent  Tenant from using the  Premises for the  Permitted  Use and such
work as  Landlord  is  required  to perform  but cannot  complete  until  Tenant
performs  necessary  portions of construction work it has elected or is required
to do; or (ii) the date Tenant  enters into  occupancy  of the  Premises  (which
shall not include any Early Occupancy Period).

         2.3  Construction  of  Improvements:  Prior to the  Commencement  Date,
Landlord shall construct  certain  improvements  that shall constitute or become
part of the Premises if required by, and then in accordance  with,  the terms of
Exhibit B and Exhibit C.

         2.4 Delivery and  Acceptance  of  Possession:  If Landlord is unable to
(deliver  possession  of the  Premises  to  Tenant on or  before  the  Scheduled
Commencement  Date for any reason  whatsoever,  this Lease  shall not be void or
void able,  so long as the  Premises are  Substantially  Complete (as defined in
Exhibit B, the Interior Improvement Agreement) not later than December 31, 1999,
plus one day for each day of delay in completion  caused by Tenant as defined in
Paragraph 7 of Exhibit B, the Interior  Improvement  Agreement,  and one day for
each day of delay caused by force majeure  factors as defined in Paragraph 15.14
of this Lease and Landlord  shall not be liable to Tenant for any loss or damage
resulting  therefrom.  However,  no more than thirty (30) calendar days shall be
added to the foregoing  period on account of force majeure.  Tenant shall accept
possession  and enter  into good faith  occupancy  of the  entire  Premises  and
endeavor to commence the operation of its business  therein within 30 days after
the Commencement  Date.  Tenant  acknowledges  that it has had un opportunity to
conduct,  and has  conducted,  such  inspections  of the  Premises  as it  deems
necessary to evaluate its condition.  Except as otherwise  specifically provided
herein,  (including the warranties of Landlord set forth herein, which shall not
be  affected by  Tenant's  acceptance  of  possession)  Tenant  agrees to accept
possession of the Premises in its then existing  condition,  "as-is",  including
all patent and latent  defects.  Tenant's  taking  possession of any part of the
Premises  shall  be  deemed  to be an  acceptance  by  Tenant  of  any  work  of
improvement done by Landlord in such part as complete and in accordance with the
terms of this Lease  except  for  defects  of which  Tenant  has given  Landlord
written  notice prior to the time Tenant takes  possession  and except for items
covered  under the  Landlord's  warranties  provided in this Lease.  At the time
Landlord  delivers  possession  of the  Premises to Tenant,  Landlord and Tenant
shall together execute an acceptance agreement in the form attached as Exhibit D
appropriately   completed.   Landlord   shall  have  no  obligation  to  deliver
possession,  nor shall  Tenant be entitled to take  occupancy,  of the  Premises
until such acceptance  agreement has been executed,  and Tenant's  obligation to
pay Base  Monthly  Rent and  Additional  Rent  shall not be  excused  or delayed
because of Tenant's failure to execute such acceptance

                                       2

<PAGE>

                                     LEASE
--------------------------------------------------------------------------------

agreement.

         2.5 Early  Occupancy:  If Tenant enters or permits its  contractors  to
enter the Premises  prior to the  Commencement  Date pursuant to Paragraph 4A of
the First Addendum to Lease,  it shall do so upon all of the terms of this Lease
(including  its  obligations  regarding  indemnity and  insurance)  except those
regarding the obligation to pay rent,  which shall commence on the  Commencement
Date.

                                   ARTICLE 3

                                      RENT

         3.1  Base  Monthly  Rent:  Commencing  on  the  Commencement  Date  and
continuing  throughout  the Lease Term,  Tenant  shall pay to Landlord  the Base
Monthly Rent set forth in Section K of the Summary.

         3.2 Additional Rent: Commencing on the Commencement Date and continuing
throughout  the Lease Term,  Tenant shall pay the following as  additional  rent
(the "Additional  Rent"): (i) any late charges or interest due Landlord pursuant
to P.3.4; (ii) Tenant's Share of Common Operating Expenses as provided in P.8.1;
(iii)   Landlord's  share  of  any  Subrent  received  by  Tenant  upon  certain
assignments and sublettings as required by P.14.1; (iv) any legal fees and costs
due Landlord pursuant to P.15.9; and (v) any other charges due Landlord pursuant
to this Lease.

         3.3 Payment of Rent:  Concurrently  with the execution of this Lease by
both parties,  Tenant shall pay to Landlord the amount set forth in Section L of
the Summary as prepayment of rent for credit against the first installment(s) of
Base Monthly Rent. All rent required to be paid in monthly installments shall be
paid in advance on the first day of each  calendar  month during the Lease Term.
If  Section  K of the  Summary  provides  that  the Base  Monthly  Rent is to be
increased  during the Lease Term and if the date of such  increase does not fall
on the first day of a calendar  month,  such increase shall become  effective on
the first day of the next calendar month. All rent shall be paid in lawful money
of the United  States,  without any  abatement,  deduction or offset  whatsoever
(except as  specifically  provided in P.11.4 and P.12.3),  and without any prior
demand  therefor.  Rent shall be paid to  Landlord  at its  address set forth in
Section Q of the Summary,  or at such other place as Landlord may designate from
time to time. Tenant's obligation to pay Base Monthly Rent and Tenant's Share of
Common  Operating  Expenses shall be prorated at the commencement and expiration
of the Lease Term.

         3.4 Late Charge and  Interest on Rent in  Default:  If any Base Monthly
Rent or Additional  Rent is not received by Landlord from Tenant within five (5)
business days after Landlord has notified Tenant in writing that payment of such
rent has not been  received by Landlord,  then Tenant shall  immediately  pay to
Landlord a late charge equal to 5% of such delinquent rent as liquidated damages
for Tenant's  failure to make timely  payment.  In no event shall this provision
for a late charge be deemed to grant to Tenant a grace  period or  extension  of
time within which to pay any rent or prevent  Landlord from exercising any right
or remedy  available to Landlord upon Tenant's failure to pay any rent due under
this Lease in a timely  fashion,  including  any right to  terminate  this Lease
pursuant to P.13.2C. If any rent remains delinquent for a period in excess of 30
days  then,  in  addition  to such late  charge,  Tenant  shall pay to  Landlord
interest  on any rent  that is not paid  when due at the  Agreed  Interest  Rate
following the date such amount became due until paid.

         3.5 Security Deposit:  On the Effective Date, Tenant shall deposit with
Landlord  the amount set forth in Section M of the Summary as  security  for the
performance by Tenant of its obligations under this Lease, and not as prepayment
of rent (the  "Security  Deposit").  Landlord  may from time to time  apply such
portion of the Security  Deposit as is  reasonably  necessary  for the following
purposes:  (i) to remedy any default by Tenant in the  payment of rent;  (ii) to
repair damage to the Premises caused by Tenant; (iii) to clean the Premises upon
termination of the Lease;  and (iv) to remedy any other default of Tenant to the
extent  permitted  by  Law  and,  in  this  regard,  Tenant  hereby  waives  any
restriction  on the uses to which the Security  Deposit may be put  contained in
California  Civil Code Section 1950.7.  In the event the Security Deposit or any
portion  thereof is so used,  Tenant  agrees to pay to  Landlord  promptly  upon
demand an amount in cash sufficient to restore the Security  Deposit to the full
original amount. Landlord shall not be deemed a trustee of the Security Deposit,
may use the Security Deposit in business, and shall not be required to segregate
it from its general  accounts.  Tenant  shall not be entitled to any interest on
the Security Deposit.  If Landlord transfers the Premises during the Lease Term,
Landlord may pay the Security  Deposit to any transferee of Landlord's  interest
in conformity with the provisions of California Civil Code Section 1950.7 and/or
any successor statute, in which event the transferring Landlord will be released
from all liability for the return of the Security Deposit.

                                   ARTICLE 4

                                USE OF PREMISES

         4.1  Limitation  on Use:  Tenant shall use the Premises  solely for the
Permitted  Use  specified  in  Section  N of the  Summary.  Tenant  shall not do
anything in or about the Premises which will (i) cause structural  injury to the
Building,  or (ii) cause damage to any part of the Building except to the extent
reasonably  necessary  for the  installation  of  Tenant's  Trade  Fixtures  and
Tenant's Alterations, and then only in a manner which has been first approved by
Landlord in writing.  Tenant shall not operate any equipment within the Premises
which will (i) materially  damage the Building or the Common Area, (ii) overload
existing  electrical  systems  or  other  mechanical   equipment  servicing  the
Building,  (iii) impair the efficient  operation of the sprinkler  system or the
heating,  ventilating or air conditioning ("HVAC") equipment within or servicing
the  Building,  or (iv) damage,  overload or corrode the sanitary  sewer system.
Tenant shall not attach, hang or suspend anything from the ceiling,  roof, walls
or  columns of the  Building  or set any load on the floor in excess of the load
limits for which such items are designed nor operate hard wheel forklifts within
the Premises.  Any dust,  fumes, or waste products  generated by Tenant's use of
the Premises  shall be contained and disposed so that they do not  (i) create an
unreasonable fire or health hazard, (ii) damage the Premises, or (iii) result in
the  violation  of any Law.  Except as approved by  Landlord,  Tenant  shall not
change the exterior of the  Building or install any  equipment or antennas on or
make any penetrations of the exterior or roof of the Building.  Tenant shall not
commit any waste in or about the Premises, and Tenant shall keep the Premises in
an neat,

                                       3

<PAGE>

                                     LEASE
--------------------------------------------------------------------------------

clean  attractive  and orderly  condition,  free of any  nuisances.  If Landlord
designates a standard  window  covering for use throughout the Building,  Tenant
shall use this  standard  window  covering to cover all windows in the Premises.
Tenant  shall not conduct on any portion of the Premises or the Project any sale
of  any  kind,   including   any   public  or   private   auction,   fire  sale,
going-out-of-business sale, distress sale or other liquidation sale.

         4.2 Compliance with  Regulations:  Tenant shall not use the Premises in
any manner  which  violates  any Laws or Private  Restrictions  which affect the
Premises.  Tenant shall abide by and  promptly  observe and comply with all Laws
and Private Restrictions.  Tenant shall make any alteration,  addition, or other
capital  improvement  which is required by any Laws or Private  Restrictions for
Tenant's  particular use of the Premises.  Landlord  shall make any  alteration,
additions,  or other  capital  improvements  which are  required  by any Laws or
Private  Restrictions  for buildings in general and shall be reimbursed for such
matters to the extent otherwise  allowed by the Lease.  Tenant shall not use the
Premises in any manner which will cause a cancellation  of any insurance  policy
covering Tenant's  Alterations or any improvements  installed by Landlord at its
expense or which poses an unreasonable risk of damage or injury to the Premises.
Tenant  shall not sell,  or  permit  to be kept,  used,  or sold in or about the
Premises  any  article  which may be  prohibited  by the  standard  form of fire
insurance  policy.  Tenant shall comply with all reasonable  requirements of any
insurance company,  insurance  underwriter,  or Board of Fire Underwriters which
are necessary to maintain the insurance  coverage  carried by either Landlord or
Tenant pursuant to this Lease.

         4.3  Outside  Areas:  No  materials,  supplies,  tanks  or  containers,
equipment,   finished  products  or  semi-finished   products,   raw  materials,
inoperable  vehicles or articles of any nature shall be stored upon or permitted
to remain  outside of the Premises  except in fully  fenced and  screened  areas
outside the  Building  which have been  designed  for such purpose and have been
approved in writing by Landlord for such use by Tenant.

         4.4 Signs:  Tenant  shall not place on any portion of the  Premises any
sign, placard, lettering in or on windows, banner, displays or other advertising
or  communicative  material  which is visible  from the exterior of the Building
without the prior written  approval of Landlord.  All such approved  signs shall
strictly conform to all Laws, Private Restrictions, and Landlord's sign criteria
Exhibit F, and expenses  shall be  allocated,  as set forth in Exhibit F. Tenant
shall maintain such signs in good condition and repair.

         4.5 Parking: Tenant is allocated and shall have the non-exclusive right
to use not more than the number of Tenant's  Allocated  Parking Stalls contained
within the Project described in Section H of the Summary for its use and the use
of Tenant's Agents, the location of which may be designated from time to time by
Landlord.  Tenant shall not at any time use more parking  spaces than the number
so  allocated  to Tenant or park its  vehicles or the  vehicles of others in any
portion of the Project not  designated  by Landlord as a  non-exclusive  parking
area.  Tenant shall not have time  exclusive  right to use any specific  parking
space.  If Landlord  grants to any other tenant the  exclusive  right to use any
particular  parking space(s),  Tenant shall not use such spaces.  Landlord
reserves the right,  after having given Tenant  reasonable  notice,  to have any
vehicles owned by Tenant or Tenant's Agents  utilizing  parking spaces in excess
of the  parking  spaces  allowed for  Tenant's  use to be towed away at Tenant's
cost.  All trucks and delivery  vehicles  shall be (i) parked at the rear of the
Building, (ii) loaded and unloaded in a manner which does not interfere with the
businesses of other  occupants of the Project,  and (iii) permitted to remain on
the Project  only so long as is  reasonably  necessary  to complete  loading and
unloading.  In the event  Landlord  elects or is required by any Law to limit or
control parking in the Project,  whether by validation of parking tickets or any
other method of assessment,  Tenant agrees to participate in such  validation or
assessment  program under such reasonable rules and regulations as are from time
to time established by Landlord. [See First Addendum to Lease, Paragraph 7.]

         4.6 Rules and  Regulations:  Landlord may from time to time  promulgate
reasonable  and  nondiscriminatory  rules  and  regulations  applicable  to  all
occupants of the Project for the care and orderly  management of the Project and
the safety of its  tenants and  invitees.  Such rules and  regulations  shall be
binding upon Tenant, and Tenant agrees to abide by such rules and regulations as
long as: (i) the rules and  regulations  do not require tenant to pay additional
Base  Monthly  Rent  or  Additional  Rent;  (ii) no  rules  and  regulations  or
amendments  or  additions  thereto are binding on Tenant  until the tenth (10th)
business day after Tenant  receives  written notice of the change,  and no rules
and regulations or amendments or additions  thereto applies  retroactively;  and
(iii) the rules and  regulations  or  amendments  or additions  thereto,  do not
materially decrease Tenant's rights or materially increase Tenant's  obligations
under the terms and conditions  under this Lease. If there is a conflict between
the  rules  and  regulations  and  any of the  provisions  of  this  Lease,  the
provisions of this Lease shall prevail.  Landlord  shall not be responsible  for
the  violation  by any  other  tenant  of the  Project  of any  such  rules  and
regulations.

                                   ARTICLE 5

                         TRADE FIXTURES AND ALTERATIONS

         5.1 Trade Fixtures:  Throughout the Lease Term,  Tenant may provide and
install,  and shall maintain good condition,  any Trade Fixtures required in the
conduct  of its  business  in the  Premises.  All Trade  Fixtures  shall  remain
Tenant's property.

         5.2   Tenant's   Alterations:   Construction   by  Tenant  of  Tenant's
Alterations shall be governed by the following:

                  A. Tenant  shall not  construct  any Tenant's  Alterations  or
otherwise alter the Premises without  Landlord's prior written approval.  Tenant
shall  be  entitled,   without  Landlord's  prior  approval,  to  make  Tenant's
Alterations  (i) which do not affect the  structural or exterior  parts or water
tight  character of the  Building,  and (ii) the  reasonably  estimated  cost of
which,  plus the original cost of any part of the Premises removed or materially
altered in connection with such Tenant's Alterations, together do not exceed the
Permitted  Tenant  Alterations  Limit  specified in Section O of the Summary per
work  of  improvement.  In  the  event  Landlord's  approval  for  any  Tenant's
Alterations  is required,  Tenant shall not construct the Leasehold  Improvement
until  Landlord has approved in writing the plans and  specifications  therefor,
and such Tenant's  Alterations shall be constructed  substantially in compliance
with such

                                       4

<PAGE>

                                     LEASE
--------------------------------------------------------------------------------

approved plans and  specifications  by a licensed  contractor  first approved by
Landlord. All Tenant's Alterations constructed by Tenant shall be constructed by
a licensed  contractor in  accordance  with all Laws using new materials of good
quality.

                  B. Tenant  shall not  commence  construction  of any  Tenant's
Alterations until (i) all required governmental  approvals and permits have been
obtained (ii) all requirements  regarding  insurance  imposed by this Lease have
been  satisfied,  (iii)  Tenant has given  Landlord  at least  five days'  prior
written  notice of its  intention  to commence  such  construction,  and (iv) if
reasonably  requested by Landlord,  Tenant has obtained contingent liability and
broad form  builders'  risk insurance in an amount  reasonably  satisfactory  to
Landlord  if there are any perils  relating  to the  proposed  construction  not
covered by insurance carried pursuant to Article 9.

                  C. All  Tenant's  Alterations  shall  remain the  property  of
Tenant  during  the Lease  Term but shall not be  altered  or  removed  from the
Premises.  At the  expiration  or  sooner  termination  of the Lease  Term,  all
Tenant's  Alterations shall be surrendered to Landlord as part of the realty and
shall then become Landlord's property,  and Landlord shall have no obligation to
reimburse Tenant for all or any portion of the value or cost thereof;  provided,
however,  that if Landlord  requires Tenant to remove any Tenant's  Alterations,
Tenant shall so remove such  Tenant's  Alterations  prior no the  expiration  or
sooner  termination of the Lease Term.  Notwithstanding  the  foregoing,  Tenant
shall not be obligated to remove any Tenant's  Alterations with respect to which
the  following  is true:  (i) Tenant was  required,  or  elected,  to obtain the
approval  of  Landlord  to the  installation  of the  Leasehold  Improvement  in
question;  and (ii) at the time Landlord granted its approval, it did not inform
Tenant  in  writing  that it would  require  Tenant  to  remove  such  Leasehold
Improvement at the expiration of the Lease Term.

         5.3  Alterations  Required by Law:  Tenant  shall make any  alteration,
addition  or  change of any sort to the  Premises  that is  required  by any Law
because of (i) Tenant's  particular  use or change of use of the Premises;  (ii)
Tenant's application for any permit or governmental  approval; or (iii) Tenant's
construction or installation of any Tenant's Alterations or Trade Fixtures.  Any
other  alteration,  addition,  or  change  required  by Law  which  is  not  the
responsibility  of Tenant  pursuant to the  foregoing  shall be made by Landlord
(subject to Landlord's right to reimbursement from Tenant specified in P.5.4).

         5.4  Amortization  of Certain  Capital  Improvements:  Tenant shall pay
Additional Rent in the event Landlord  reasonably  elects or is required to make
any of the following  kinds of capital  improvements to the Project and the cost
thereof  is  not  reimbursable  as  a  Common  Operating  Expense:  (i)  capital
improvements  required  to be  constructed  in  order  to  comply  with  any Law
(excluding  any  Hazardous  Materials  Law) not in effect or  applicable  to the
Project as of the Effective Date; (ii)  modification of existing or construction
of additional  capital  improvements or building service equipment to the extent
that the cost thereof would reduce the cost of consumption  of utility  services
or the cost of Common Operating Expenses of the Project payable by Tenant; (iii)
replacement of capital improvements or building service equipment existing as of
the  Effective  Date when  required  because of normal  wear and tear;  and (iv)
restoration  of any part of the Project  that has been  damaged  by any peril to
the  extent the cost  thereof is not  covered  by  insurance  proceeds  actually
recovered by Landlord up to a maximum  amount per  occurrence  of 2% of the then
replacement cost of the Project.  The amount of Additional Rent Tenant is to pay
with respect to each such capital improvement shall be determined as follows:

                  A. All costs paid by Landlord to construct  such  improvements
(including  financing  costs)  shall be  amortized  over the useful life of such
improvement  (as reasonably  determined by Landlord in accordance with generally
accepted accounting  principles) with interest on the unamortized balance at the
then prevailing market rate Landlord would pay if it borrowed funds no construct
such improvements from an institutional lender, and Landlord shall inform Tenant
of the monthly  amortization  payment  required to so amortize  such costs,  and
shall also provide Tenant with the information upon which such  determination is
made;  provided,  that Tenant shall not be  responsible  for amortized  payments
attributable  to any  portion  of such  useful  life  occurring  after the Lease
expires (as it may be extended) or if it is terminated earlier without breach by
Tenant.

                  B. As Additional Rent,  Tenant  shall pay at the same time the
Base Monthly  Rent is due an amount  equal to Tenant's  Share of that portion of
such  monthly   amortization  payment  fairly  allocable  no  the  Building  (as
reasonably  determined by Landlord) for each month after such  improvements  are
completed  until the first to occur of (i) the  expiration of the Lease Term (as
it may be  extended),  or (ii) the end of the term over  which  such  costs were
amortized.

         For the sole purpose of distinguishing between capital events for which
Landlord is  reimbursed  under this  Paragraph  5.4  and repair  items which are
Landlord's  responsibility  and which are to be reimbursed to Landlord as a part
of common Operating Expenses,  a "capital expense" shall be a single expense (i)
which  would  be  denominated  a  "capital  expense"  under  generally  accepted
accounting  principles as applied under industry  practice in the commercial and
industrial real estate industry; and (ii) which exceeds in the aggregate the sum
of  $50,000.00.  Expenses of this nature which  otherwise meet the definition of
capital  expense  but which do not  exceed  $50,000.00  shall  be  deemed  to be
repairs and billed a pair of Common Operating Expenses.

         Notwithstanding the foregoing in this Paragraph, Tenant is not required
to pay any Additional  Rent related to repairs,  replacement or  improvements to
the structural portions of the Property (defined as structural portions of roof,
foundations, floor slab and steel frame).

         5.5 Mechanic's Liens: Tenant shall keep the Project free from any liens
and shall pay when due all bills  arising out of any work  performed,  materials
furnished,  or obligations incurred by Tenant or Tenant's Agents relating to the
Project.  If any claim of lien is recorded  (except  those caused by Landlord or
Landlord's  Agents),  Tenant shall bond against or discharge  the same within 10
days  after  Tenant  receives  written  notice  that the same has been  recorded
against the Project.  Should any lien be filed against the Project or any action
be commenced affecting title to the Project,  the party receiving notice of such
lien or action shall immediately give the other party written notice thereof

         5.6 Taxes on Tenant's Property: Tenant shall pay

                                       5

<PAGE>

                                     LEASE
--------------------------------------------------------------------------------

before  delinquency  any and all  taxes,  assessments,  license  fees and public
charges  levied,  assessed or imposed  against Tenant or Tenant's estate in this
Lease or the property of Tenant  situated  within the Premises  which become due
during  the  Lease  Term.  If  any  tax  or  other  charge  is  assessed  by any
governmental  agency  because of the execution of this Lease,  such tax shall be
paid by Tenant.  On demand by  Landlord,  Tenant  shall  furnish  Landlord  with
satisfactory evidence of these payments.

                                   ARTICLE 6

                             REPAIR AND MAINTENANCE

         6. 1 Tenant's  Obligation to Maintain:  Except as otherwise provided in
P.6.2, P.11.1, and P.12.3,  Tenant shall be responsible for the following during
the Lease Term:

                  A. Tenant shall clean and  maintain in good order,  condition,
and repair and replace  when  necessary  the  Premises  and every part  thereof,
through regular  inspections and servicing,  including,  but not limited to: (i)
all plumbing and sewage facilities  (including all sinks,  toilets,  faucets and
drains),  and all ducts,  pipes,  vents or other  parts of the HVAC or  plumbing
system; (ii) all fixtures,  interior walls, floors, carpets and ceilings;  (iii)
all windows, doors,  entrances,  plate glass, showcases and skylights (including
cleaning both interior and exterior  surfaces);  (iv) all electrical  facilities
and all equipment  (including all lighting fixtures,  lamps, bulbs, tubes, fans,
vents,  exhaust equipment and systems);  and (v) any automatic fire extinguisher
equipment in the Premises.

                  B. With  respect to utility  facilities  serving the  Premises
(including electrical wiring and conduits,  gas lines, water pipes, and plumbing
and sewage fixtures and pipes),  Tenant shall be responsible for the maintenance
and repair of any such facilities  which serve only the Premises,  including all
such  facilities  that are  within  the  walls or  floor,  or on the roof of the
Premises,  and any part of such facility  that is not within the  Premises,  but
only up to the point  where such facilities join a main or other junction (e.g.,
sewer main or  electrical  transformer)  from which such  utility  services  are
distributed  to other  parts of the Project as well as to the  Premises.  Tenant
shall  replace  any  damaged  or broken  glass in the  Premises  (including  all
interior and exterior  doors and windows) with glass of the same kind,  size and
quality.  Tenant  shall repair any damage to the  Premises  (including  exterior
doors and windows) caused by vandalism or any unauthorized entry.

                  C.  Tenant  shall  (i)  maintain,   repair  and  replace  when
necessary all HVAC equipment  which  services only the Premises,  and shall keep
the same in good condition  through regular  inspection and servicing,  and (ii)
maintain  continuously  throughout  the Lease  Term a service  contract  for the
maintenance  of  all  such  HVAC  equipment  with a  licensed  HVAC  repair  and
maintenance  contractor  approved by Landlord,  which contract  provides for the
periodic  inspection  and servicing of the HVAC equipment at least once every 60
days during the Lease Term. Notwithstanding the foregoing, Landlord may elect at
any time to assume responsibility for the maintenance, repair and replacement of
such HVAC  equipment  which  serves only the  Premises.  Tenant  shall  maintain
continuously throughout the Lease Term a service contract for the washing of all
windows (both interior and exterior surfaces) in time Premises with a contractor
approved by Landlord,  which contract  provides for the periodic  washing of all
such  windows at least once every 60 days  during the Lease Term.  Tenant  shall
furnish Landlord with copies of all such service contracts,  which shall provide
that  they may not be  cancelled  or  changed  without  at least 30 days'  prior
written notice to landlord.

                  D. All repairs and  replacements  required of Tenant  shall be
promptly made with new  materials of like kind and quality.  If the work affects
the  structural  parts of the Building or if the  estimated  cost of any item of
repair or replacement is in excess of the Permitted Tenant's  Alterations Limit,
then Tenant shall first obtain  Landlord's  written approval of the scope of the
work, plans therefor, materials to be used, and the contractor.

                  E.  Notwithstanding  anything  to the  contrary in this Lease,
Tenant  shall not be  required to repair any items which are covered by or under
the provisions of any warranty given by Landlord hereunder.

         6.2 Landlord's Obligation to Maintain:  Landlord shall repair, maintain
and operate  the Common  Area and repair and  maintain  the roofs,  exterior and
structural parts of the building(s)  located on the Project so that the same are
kept in good  order  and  repair.  If there is  central  HVAC or other  building
service equipment and/or utility  facilities serving portions of the Common Area
and/or  both the  Premises  and  other  parts of the  Building,  Landlord  shall
maintain and operate (and replace when necessary) such equipment. Landlord shall
not be responsible for repairs  required by an accident,  fire or other peril or
for damage caused to any part of the Project by any act or omission of Tenant or
Tenant's Agents except as otherwise  required by Article 11. Landlord may engage
contractors  of its choice to perform  the  obligations  required  of it by this
Article,  and the necessity of any expenditure to perform such obligations shall
be at the sole discretion of Landlord.

         6.3 Control of Common Area:  Landlord shall at all times have exclusive
control of the Common  Area.  Landlord  shall have the right,  without  the same
constituting an actual or constructive  eviction and without entitling Tenant to
any  abatement  of rent,  to: (i) close any part of the Common  Area to whatever
extent  required  in the opinion of  Landlord's  counsel to prevent a dedication
thereof or the accrual of any  prescriptive  rights  therein;  (ii)  temporarily
close the Common  Area to perform  maintenance  or for any other  reason  deemed
sufficient by Landlord; (iii) change the shape, size, location and extent of the
Common Area;  (iv) eliminate from or add to the Project any land or improvement,
including  multi-deck  parking  structures;  (v) make changes to the Common Area
including, without limitation, changes in the location of driveways,  entrances,
exits, parking spaces,  parking areas, sidewalks or the direction of the flow of
traffic and the site of the Common Area; (vi) remove  unauthorized  persons from
the  Project;  and/or  (vii)  change the name of the  Building or Project or the
address  of the  Building  or  Project  if, and only if, the change is made as a
result of a change  made by a  governmental  authority.  Tenant  shall  keep the
Common Area clear of all obstructions created or permitted by Tenant.  If in the
opinion of  Landlord  unauthorized  persons  are using any of the Common Area by
reason of the  presence  of  Tenant  in the  Building,  Tenant,  upon  demand of
Landlord, shall restrain such unauthorized use  by appropriate  proceedings.  In
exercising any such rights regarding time Common Area, (i) Landlord shall make a
reasonable

                                       6

<PAGE>

                                     LEASE
--------------------------------------------------------------------------------

effort to minimize any disruption to Tenant's business,  and (ii) Landlord shall
not  exercise  its rights to  control  the  Common  Area in a manner  that would
materially interfere with Tenant's use of the Premises,  or substantially reduce
Tenant's  Allocated  Parking Stalls  without first  obtaining  Tenant's  consent
Landlord  shall have no obligation to provide guard  services or other  security
measures for the benefit of the Project.  Tenant assumes all  responsibility for
the  protection  of Tenant  and  Tenant's  Agents  from  acts of third  parties;
provided,  however, that nothing contained herein shall prevent Landlord, at its
sole option, from providing security measures for the Project

                                   ARTICLE 7

                          WASTE DISPOSAL AND UTILITIES

         7.1 Waste  Disposal:  Tenant  shall store its waste  either  inside the
Premises or within outside trash  enclosures  that are fully fenced and screened
in compliance with all Private Restrictions,  and designed for such purpose. All
entrances to such outside trash enclosures shall be kept closed, and waste shall
be stored in such manner as not to be visible  from the exterior of such outside
enclosures. Tenant shall cause all of its waste to be regularly removed from the
Premises  at  Tenant's  sole  cost.  Tenant  shall keep all fire  corridors  and
mechanical equipment rooms in the Premises free and clear of all obstructions at
all times.

         7.2  Hazardous  Materials:  Landlord  and Tenant  agree as follows with
respect to the existence or use of Hazardous Materials on the Project:

                  A. Any handling, transportation,  storage, treatment, disposal
or use of Hazardous  Materials by Tenant and Tenant's Agents after the Effective
Date in or  about  time  Project  shall  strictly  comply  with  all  applicable
Hazardous  Materials  Laws.  Tenant  shall  indemnify,  defend  upon demand with
counsel reasonably  acceptable to Landlord,  and hold harmless Landlord from and
against any liabilities,  losses, claims,  damages, host profits,  consequential
damages,  interest,  penalties,  fines,  monetary  sanctions,  attorneys'  fees,
experts' fees, court costs,  remediation costs,  investigation  costs, and other
expenses  which  result from or arise in any manner  whatsoever  out of the use,
storage, treatment, transportation,  release, or disposal of Hazardous Materials
on or about the Project by Tenant or Tenant's Agents after the Effective Date.

                  B. If the  presence  of  Hazardous  Materials  on the  Project
caused or knowingly  permitted by Tenant or Tenant's  Agents after the Effective
Date results in  contamination  or deterioration of water or soil resulting in a
level of contamination  greater than the levels established as acceptable by any
governmental  agency having  jurisdiction over such  contamination,  then Tenant
shall promptly take any and all action  necessary to  investigate  and remediate
such  contamination  if  required by Law or as a  condition  to the  issuance or
continuing  effectiveness of any governmental  approval which relates to the use
of the Project or any part thereof. Tenant shall  further be solely  responsible
for, and shall defend,  indemnify and hold Landlord and its agents harmless from
and against,  all claims,  costs and liabilities,  including attorneys' fees and
costs,  arising out of or in connection with any  investigation  and remediation
required  hereunder to return the Project to its condition existing prior to the
appearance of such Hazardous Materials.

                  C.  Landlord and Tenant shall each give written  notice to the
other as soon as reasonably  practicable of (i) any communication  received from
any governmental  authority  concerning Hazardous Materials which relates to the
Project,  and (ii) any contamination of the Project by Hazardous Materials which
constitutes a violation of any  Hazardous  Materials  Law.  Tenant may use small
quantities of household  chemicals such as adhesives,  lubricants,  and cleaning
fluids in order to conduct its business at the Premises and such other Hazardous
Materials  as are  necessary  for the  operation  of Tenant's  business of which
Landlord  receives  notice prior to such Hazardous  Materials being brought onto
the  Premises  and which  Landlord  consents in writing may be brought  onto the
Premises.  At any time during the Lease Term, Tenant shall, within five business
days after written request therefor received from Landlord,  disclose in writing
all Hazardous Materials that are being used by Tenant on the Project, the nature
of such use, and the manner of storage and disposal.

                  D.  Landlord  may cause  testing  wells to be installed on the
Project,  and may cause the ground  water to be tested to detect the presence of
Hazardous  Material  by the use of such tests as are then  customarily  used for
such purposes.  If Tenant so requests,  Landlord shall supply Tenant with copies
of  such  test  results.  The  cost  of  such  tests  and of  the  installation,
maintenance,  repair and  replacement  of such wells  shall be paid by Tenant if
such tests  disclose  the  existence  of facts which give rise to  liability  of
Tenant pursuant to its indemnity given in P.7.2A and/or P.7.2B.

                  E. As used herein,  the term "Hazardous  Material,"  means any
hazardous or toxic substance, material or waste which is or becomes regulated by
any local governmental  authority,  the State of California or the United States
Government.   The  term  "Hazardous  Material,"  includes,  without  limitation,
petroleum products,  asbestos, PCB's, and any material or substance which is (i)
listed under Article 9 or defined as hazardous or extremely  hazardous  pursuant
to Article 11 of Title 22 of the  California  Administrative  Code,  Division 4,
Chapter 20, (ii) defined as a "hazardous  waste" pursuant to Section 1004 of the
Federal  Resource  Conservation  and  Recovery  Act, 42 U.S.C.  6901 et seq. (42
U.S.C.  6903), or (iii) defined as a "hazardous  substance"  pursuant to Section
101 of the Comprehensive Environmental Response; Compensation and Liability Act,
42 U.S.C.  9601 et seq. (42 U.S.C.  9601).  As used herein,  the term "Hazardous
Material  Law" shall mean any statute,  law,  ordinance,  or  regulation  of any
governmental body or agency (including the U.S. Environmental Protection Agency,
the  California  Regional  Water  Quality  Control  Board,  and  the  California
Department of Health  Services)  which  regulates the use,  storage,  release or
disposal of any Hazardous Material.

                  F. To the actual  knowledge of Michael J.  Biggar,  Landlord's
executive  handling this Project,  as of the Effective Date, without having made
any  investigation  (and  without  having  been deemed to have  investigated  or
discovered any unknown facts which such investigation would have disclosed), and
subject to and qualified by all information  and  disclosures  made to Tenant by
Landlord  (including but not limited to those  disclosures  made or described in
Exhibit I and Paragraph 6 of the First Addendum to Lease, and reports referenced
therein) (i) the soil,  surface  water,  or groundwater on or under the

                                       7

<PAGE>

                                     LEASE
--------------------------------------------------------------------------------

Premises and the Project does not contain  Hazardous  Materials in amounts which
violate any Hazardous  Materials Laws to the extent that any governmental entity
could require either Landlord or Tenant to take any remedial action with respect
to such Hazardous Materials; (ii) no asbestos-containing  building materials are
present in the Buildings; and (iii) no action,  proceeding,  or claim is pending
or  threatened  regarding the Premises or the Project  concerning  any Hazardous
Materials.

                  G.  Tenant  shall  not   be  liable  to  Landlord   under  any
provisions  of  Article 7 of this  Lease  for any  claims  arising  out of or in
connection with any Hazardous  Materials present on the Premises or the Project,
or the soil, air, improvements,  groundwater, or surface water thereof as of the
Commencement Date and not resulting from Tenant's acts or omissions.

                  H. The  obligations  of Landlord  and Tenant  under this P.7.2
shall  survive the  expiration  or earlier  termination  of the Lease Term.  The
rights mind  obligations of Landlord and Tenant with respect to issues  relating
to Hazardous  Materials are exclusively  established by this P.7.2. In the event
of any  inconsistency  between any other part of this Lease and this P.7.2,  the
terms of this P.7.2 shall control.

         7.3  Utilities:  Tenant shall promptly pay, as the same become due, all
charges for water, gas, electricity, telephone, sewer service, waste pick-up and
any other  utilities,  materials  or services  furnished  directly to or used by
Tenant on or about  the  Premises  during  the Lease  Term,  including,  without
limitation,  (i) meter, use and/or connection fees, hook-up fees, or standby fee
(excluding  any  connection  fees or  hook-up  fees  which  relate to making the
existing electrical,  gas, and water service available to the Premises as of the
Commencement Date), and (ii) penalties for discontinued or interrupted  service.
If any utility  service is not separately  metered to the Premises,  then Tenant
shall pay its pro rata share of the cost of such utility service with all others
served by the service not separately metered,  However, if Landlord  (determines
that  Tenant is using a  disproportionate  amount  of any  utility  service  not
separately  metered,  then Landlord at its election may (i) periodically  charge
Tenant, as Additional Rent, a sum equal to Landlord's reasonable estimate of the
cost of Tenant's excess use of such utility service,  or (ii) install a separate
meter (at  Tenant's  expense)  to measure the  utility  service  supplied to the
Premises.

         7.4 Compliance with Governmental Regulations: Landlord and Tenant shall
comply with all rules,  regulations  and  requirements  promulgated by national,
state or local governmental  agencies or utility suppliers concerning the use of
utility services,  including any rationing,  limitation or other control. Tenant
shall not be entitled to  terminate  this Lease nor to any  abatement in rent by
reason of such compliance.

                                   ARTICLE 8

                            COMMON OPERATING EXPENSES

         8. 1 Tenant's Obligation to Reimburse: As Additional Rent, Tenant shall
pay  Tenant's  Share  (specified  in  Section G of the  Summary)  of all  Common
Operating  Expenses;  provided,  however,  if the Project contains more than one
building,  then Tenant shall pay Tenant's Share of all Common Operating Expenses
fairly allocable to the Building,  including (i) all Common  Operating  Expenses
paid  with  respect  to the  maintenance,  repair,  replacement  and  use of the
Building,  and (ii) a proportionate  share (based on the Building Gross Leasable
Area as a percentage of the Project Gross Leasable Area) of all Common Operating
Expenses which relate to the Project in general are not fairly  allocable to any
one  building  that is part of the  Project.  Tenant shall pay such share of the
actual  Common  Operating   Expenses  incurred  or  paid  by  Landlord  but  not
theretofore  billed to Tenant  within 10 days after  receipt  of a written  bill
therefor from Landlord, on such periodic basis as Landlord shall designate,  but
in no event more frequently than once a month. Alternatively,  Landlord may from
time to time require that Tenant pay Tenant's Share of Common Operating Expenses
in advance in estimated monthly installments,  in accordance with the following:
(i)  Landlord  shall  deliver to Tenant  Landlord's  reasonable  estimate of the
Common  Operating  expenses  it  anticipates  will be paid or  incurred  for the
Landlord's  fiscal year in  question;  (ii) during such  Landlord's  fiscal year
Tenant  shall pay such  share of the  estimated  Common  Operating  Expenses  in
advance  in  monthly   installments   as  required  by  Landlord  due  with  the
installments  of Base  Monthly  Rent;  and (iii) within 90 days after the end of
each  Landlord's  fiscal year,  Landlord  shall furnish to Tenant a statement in
reasonable  detail of the actual Common  Operating  Expenses paid or incurred by
Landlord during the just ended Landlord's  fiscal year and thereupon there shall
be an adjustment between Landlord and Tenant, with payment to Landlord or credit
by Landlord  against the next installment of Base Monthly Remit or reimbursement
to Tenant if this Lease has terminated,  as the case may require, within 10 days
after delivery by Landlord to Tenant of said  statement,  so that Landlord shall
receive the entire amount of Tenant's Share of all Common Operating Expenses for
such  Landlord's  fiscal  year and no more.  Tenant  shall have the right at its
expense,  exercisable upon reasonable prior written notice to Landlord, to audit
at Landlord's  office during nominal business hours Landlord's books and records
as they relate to Common Operating  Expenses.  Such inspection must be within 90
days of Tenant's receipt of Landlord's  annual statement for the same, and shall
be limited to  verification of the charges  contained in such statement.  Tenant
may not withhold payment of such bill pending  completion of such audit. If such
audit reveals that Landlord has overcharged Tenant, the amount overcharged shall
be  credited  to  Tenant's  account  within  thirty (30) days after the audit is
concluded.  In the event that an  audit proves that Tenant has been  overcharged
by more than ten percent (10%), Landlord shall reimburse Tenant for the costs of
such audit within thirty (30) days after  receipt of a statement and  supporting
documents  therefor;  provided,  however,  that the following  limitations shall
apply;  (i) Landlord shall not be responsible for  reimbursing  Tenant for audit
costs in excess of $2,000.00 for the audit of a single year; (ii) Landlord shall
not be obligated  to  reimburse  for audit costs if the audit is conducted by an
employee of Tenant;  (iii) the auditor  retained by Tenant  shall be a certified
public  accountant and not be  engaged on a  "contingency  fee" basis;  and (iv)
Landlord is not bound by the conclusions of Tenant's auditor.

         8.2 Common  Operating  Expenses  Defined:  The term  "Common  Operating
Expenses" shall mean time following:

                  A. All costs and  expenses  paid or  incurred  by  Landlord in
doing the following  (including  payments to independent  contractors  providing
services  related  to  the

                                       8

<PAGE>

                                     LEASE
--------------------------------------------------------------------------------

performance  of  the  following):  (i)  maintaining,   cleaning,  repairing  and
resurfacing  the roof  (including  repair of leaks)  and the  exterior  surfaces
(including  painting) of all buildings located on the Project;  (ii) maintenance
of the  liability,  fire and  property  damage  insurance  covering  the Project
carried by Landlord pursuant to P. 9.2 (including the prepayment of premiums for
coverage  of up to  one  year);  (iii)  maintaining,  repairing,  operating  and
replacing when necessary HVAC equipment,  utility  facilities and other building
service  equipment;  (iv)  providing  utilities  to the Common  Area  (including
lighting,  trash removal and water for  landscaping  irrigation);  (v) complying
with all applicable Laws and Private Restrictions; (vi) operating,  maintaining,
repairing, cleaning, painting, restriping and resurfacing the Common Area; (vii)
replacement or installation of lighting fixtures, directional or other signs and
signals,  irrigation  systems,  trees,  shrubs,  ground  cover and  other  plant
materials,  and  all  landscaping  in the  Common  Area;  and  (viii)  providing
security.

                  B. The following  costs: (i) Real Property Taxes as defined in
P. 8.3;  (ii) the amount of any  "deductible"  paid by Landlord  with respect to
damage caused by any Insured Peril; (iii) the cost to repair damage caused by an
Uninsured Peril up to a maximum amount in any 12 month period equal to 2% of the
replacement cost of the buildings or other improvements  damaged;  and (iv) that
portion of all  compensation  (including  benefits  and  premiums  for  workers'
compensation  and other insurance) paid to or on behalf of employees of Landlord
but only to the extent they are substantially involved in the performance of the
work described by P.8.2A that is fairly allocable to the Project;

                  C. Fees for management services rendered by either Landlord or
a third party manager engaged by Landlord (which may be a party  affiliated with
Landlord),  except that the total  amount  charged for  management  services and
included in Tenant's  Share of Common  Operating  Expenses  shall not exceed the
monthly rate of 4% of the Base Monthly Rent.

                  D. All additional costs and expenses incurred by Landlord with
respect to the operation, protection, maintenance, repair and replacement of the
Project  which  would  be  considered  a  current  expense  (and  not a  capital
expenditure)  pursuant to generally accepted  accounting  principles;  provided,
however,  that Common Operating Expenses shall not include any of the following:
(i)  payments  on any  loans  or  ground  leases  affecting  the  Project;  (ii)
depreciation of any buildings or any major systems of building service equipment
within  the  Project;  (iii)  leasing  commissions;  (iv)  the  cost  of  tenant
improvements  installed  for the  exclusive use of other tenants of the Project;
(v) any cost incurred in complying with Hazardous  Materials Laws, which subject
is  governed  exclusively  by  P.7.2;  and (vi)  legal  fees  incurred  in lease
preparation;  (vii) the cost of initial Interior Improvements of the Premises to
the extent of the Tenant Improvement  Allowance as defined in the First Addendum
to Lease, Paragraph 5; (viii) costs actually reimbursed to Landlord by insurance
or any third party;  (ix) advertising and leasing costs; (x) costs of compliance
with the warranties made by Landlord hereunder; (xi) depreciation, amortization,
or other expense reserves;  (xii) costs and expenses for which Tenant reimburses
or pays Landlord  directly;  and (xiii) costs no comply with any Laws which were
in effect and applicable to the Project as of the Commencement Date (which shall
not  include  any  matters  where  Landlord  was not  required  to  comply  with
particular  Laws, as of the  Commencement  Date, but is later required to comply
due to intervening events).

         8.3 Real Property Taxes Defined:  The term "Real Property  Taxes" shall
mean all taxes,  assessments,  levies,  and other  charges of any kind or nature
whatsoever,   general  and  special,  foreseen  and  unforeseen  (including  all
installments  of principal  and interest  required to pay any existing or future
general or special  assessments for public  improvements,  services or benefits,
and any  increases  resulting  from  reassessments  resulting  from a change  in
ownership,  new construction,  or any other cause),  now or hereafter imposed by
any governmental or quasi-governmental  authority or special district having the
direct  or  indirect  power to tax or levy  assessments,  which  are  levied  or
assessed against,  or with respect to the value,  occupancy or use of all or any
portion of the Project (as now  constructed  or as may at any time  hereafter be
constructed,  altered, or otherwise changed) or Landlord's interest therein, the
fixtures,  equipment and other property of Landlord,  real or personal, that are
an integral part of and located on the Project,  the gross receipts,  income, or
rentals from the Project,  or the use of parking  areas,  public  utilities,  or
energy within the Project,  or Landlord's business of leasing the Project. If at
any time  during time Lease Term the method of  taxation  or  assessment  of the
Project  prevailing as of the Effective Date shall be altered so that in lieu of
or in addition to any Real Property Tax  described  above there shall be levied,
assessed or imposed  (whether by reason of a change in the method of taxation or
assessment, creation of a new tax or charge, or any other cause) an alternate or
additional  tax or charge (i) on the value,  use or  occupancy of the Project or
Landlord's  interest  therein,  or (ii) on or  measured  by the gross  receipts,
income or rentals  from the  Project,  on  Landlord's  business  of leasing  the
Project, or computed in any manner with respect to the operation of the Project,
then any such tax or charge,  however  designated  shall be included  within the
meaning of the term "Real  Property  Taxes" for  purposes of this Lease.  If any
Real Property Tax is based upon property or rents unrelated to the Project, then
only that part of such Real Property Tax that is fairly allocable to the Project
shall be  included  within  the  meaning  of the  term  "Real  Property  Taxes".
Notwithstanding the foregoing,  the term "Real Property Taxes" shall not include
estate,  inheritance,  transfer,  gift or  franchise  taxes of  Landlord or time
federal or state net income tax imposed on  Landlord's  income from all sources.
Tenant  shall have the right (but not the  obligation),  at its own  expense and
risk, to contest the amount of Real Property Taxes or the underlying  appraisal,
both for the  entire  Project,  which  is a  single  parcel.  Tenant  agrees  to
indemnify,  defend,  and hold  harmless  Landlord  against any claims,  damages,
losses or costs  incurred  by Landlord  on account of  Tenant's  activities.  If
Landlord is actively  contesting  the Real  Property  Taxes,  the above right of
Tenant shall be limited to a right to be included as a co-party,  but under such
circumstances, Landlord reserves all final decisions to itself.

                                   ARTICLE 9

                                   INSURANCE

         9.1 Tenant's Insurance:  Tenant shall maintain insurance complying with
all of the following:

                                       9

<PAGE>

                                     LEASE
--------------------------------------------------------------------------------

                  A. Tenant  shall  procure,  pay for and keep in full force and
effect the following:

                           (1).   Commercial   general   liability    insurance,
including property damage, against liability for personal injury, bodily injury,
death and  damage  to  property  occurring  in or about,  or  resulting  from an
occurrence in or about,  the Premises with combined single limit coverage of not
less than the  amount of  Tenant's  Liability  Insurance  Minimum  specified  in
Section  P  of  the  Summary,  which  insurance  shall  contain  a  "contractual
liability"  endorsement  insuring Tenant's performance of Tenant's obligation to
indemnify Landlord contained in P.10.3;

                           (2). Fire and property damage  insurance in so-called
"all risk" form insuring  Tenant's Trade Fixtures and Tenant's  Alterations  for
the full actual replacement cost thereof;

                           (3).  Such  other   insurance   that  is  either  (i)
reasonably  required by any Lender, or (ii) reasonably  required by Landlord and
customarily carried by tenants of similar property in similar businesses.

                  B. Where  applicable and required by Landlord,  each policy of
insurance  required  to be carried by Tenant  pursuant  to this  P.9.1:  (i) the
insurance  under 9.1.  (A)(I)  shall  name  Landlord  and such other  parties in
interest as Landlord reasonably  designates as additional insured; (ii) shall be
primary  insurance  which provides that the insurer shall be liable for the full
amount of the loss up to and  including  the total amount of liability set forth
in the declarations  without the right of contribution  from any other insurance
coverage  of  Landlord;  (iii)  shall be in a form  reasonably  satisfactory  to
Landlord;  (iv)  shall  be  carried  with  companies  reasonably  acceptable  to
Landlord;   (v)  shall  provide  that  such  policy  shall  not  be  subject  to
cancellation,  except after at least 30 days prior written notice to Landlord so
long as such  provision of 30 days notice is reasonably  obtainable,  but in any
event  not  less  than 10 days  prior  written  notice;  (vi)  shall  not have a
"deductible" in excess of $ 10,000 unless approved in writing by Landlord; (vii)
shall  contain  a cross  liability  endorsement;  and  (viii)  shall  contain  a
"severability"  clause.  If Tenant has in full force and effect a blanket policy
of liability  insurance  with the same  coverage for time  Premises as described
above, as well as other coverage of other premises and properties of Tenant,  or
in which Tenant has some  interest,  such blanket  insurance  shall  satisfy the
requirements of this P.9.1.

                  C. A copy of each  paid-up  policy  evidencing  the  insurance
required  to  be  carried  by  Tenant  pursuant  to  this  P.9.1  (appropriately
authenticated  by the insurer) or a certificate of the insurer,  certifying that
such policy has been issued, providing the coverage required by this P.9. 1, and
containing the provisions specified herein, shall be delivered to Landlord prior
to the time Tenant or any of its Agents  enters the Premises and upon renewal of
such  policies,  but not less than 5 days prior to the expiration of the term of
such coverage.  Landlord may, at any time, and from time to time, inspect and/or
copy any and all insurance  policies  required to be procured by Tenant pursuant
to this P.9.1. If any Lender  reasonably  determines at any time that the amount
of coverage required for any policy of insurance Tenant is to obtain pursuant to
this P.9.1 is not  adequate,  then Tenant shall  increase such coverage for such
insurance to such amount as such Lender reasonably deems adequate, not to exceed
the  level of  coverage  for  such  insurance  commonly  carried  by  comparable
businesses similarly situated.

         9.2 Landlord's Insurance: Landlord shall have the following obligations
and options regarding insurance:

                  A.  Landlord  shall  maintain a policy or policies of fire and
property  damage  insurance in so-called "all risk" form insuring  Landlord (and
such others as Landlord may designate)  against loss of rents (both Base Monthly
Rent and  Additional  Rent) for a period  of not less  than 12  months  and from
physical  damage  to due  Project  with  coverage  of not  less  than  the  full
replacement cost thereof.  Landlord may so insure the Project separately, or may
insure the Project with other property  owned by Landlord which Landlord  elects
to insure  together  under the same policy or  policies.  Such fire and property
damage  insurance  (i) may be endorsed  to cover loss caused by such  additional
perils against which Landlord may elect to insure,  including  earthquake and/or
flood, and to provide such additional coverage as Landlord reasonably  requires,
and (ii) shall contain reasonable "deductibles" which, in the case of earthquake
and flood insurance,  may be up to 15% of the replacement  value of the property
insured or such higher amount as is then commercially reasonable. Landlord shall
not be required to cause such  insurance to cover any Trade Fixtures or Tenant's
Alterations of Tenant.

                  B.  Landlord may  maintain a policy or policies of  commercial
general liability insurance insuring Landlord (and such others as are designated
by Landlord)  against  liability for personal injury,  bodily injury,  death and
damage to property occurring or resulting from an occurrence in, on or about the
Project,  with  combined  single limit  coverage in such amount as Landlord from
time to time determines is reasonably necessary for its protection.

         9.3 Tenant's Obligation to Reimburse: If Landlord's insurance rates for
the Building  are  increased at my time during the Lease Term as a result of the
nature of Tenant's use of the Premises,  Tenant shall reimburse Landlord for the
full amount of such  increase  immediately  upon receipt of a bill from Landlord
therefor.

         9.4 Release and Waiver of Subrogation:  The parties hereto release each
other, and their respective agents and employees,  from any liability for injury
to any person or damage to property  that is caused by or results  from any risk
insured  or  required  to be  insured  against  under any valid and  collectible
insurance  policy  carried by either of the parties  which  contains a waiver of
subrogation by the insurer and is in force at the time of such injury or damage;
subject to the  following  limitations:  (i) the foregoing  provision  shall not
apply to the commercial general liability  insurance  described by subparagraphs
P.9.1A and P.9.2B; (ii) such release shall apply to liability resulting from any
risk  insured  against or covered by  self-insurance  maintained  or provided by
Tenant to satisfy  the  requirements  of  P.9.1 to the extent  permitted by this
Lease;  and (iii)  Tenant shall not be released  from any such  liability to the
extent any damages  resulting front such injury or damage are not covered by the
recovery obtained by Landlord from such insurance,  but only if the insurance in
question  permits such partial  release in connection with obtaining a waiver of
subrogation  from the insurer  this  release shall  be in effect only so long as
the  applicable  insurance  policy  contains  a clause to the  effect  that this
release  shall not affect the right of the insured to recover under such policy.
Each party shall

                                       10

<PAGE>

                                     LEASE
--------------------------------------------------------------------------------

use reasonable  efforts to cause each insurance policy obtained by it to provide
that the insurer waives all right of recovery by way of subrogation  against the
other party and its agents and employees in connection with any injury or damage
covered by such policy. However, if any insurance policy cannot be obtained with
such a waiver of  subrogation,  despite the party's  exercise of such reasonable
efforts,  or if such waiver of subrogation is only available at additional  cost
and the party for whose  benefit the waiver is to be obtained  does not pay such
additional  cost, then the party obtaining such insurance shall notify the other
party of that fact and thereupon  shall be relieved of the  obligation to obtain
such  waiver  of  subrogation  rights  from  the  insurer  with  respect  to the
particular insurance involved.

                                   ARTICLE 10

                            LIMITATION ON LANDLORD'S
                             LIABILITY AND INDEMNITY

         10.1 Limitation on Landlord's  Liability:  Landlord shall not be liable
to  Tenant,  nor shall  Tenant be  entitled  to  terminate  this Lease or to any
abatement of rent (except as expressly  provided  otherwise in this Lease),  for
any injury to Tenant or  Tenant's  Agents,  damage to the  property of Tenant or
Tenant's  Agents,  or  loss to  Tenant's  business  resulting  from  any  cause,
including without  limitation any: (i) failure,  interruption or installation of
any HVAC or other utility system or service; (ii) failure to furnish or delay in
furnishing  any  utilities  or services  when such failure or delay is caused by
fire or other peril, the elements,  labor disturbances of any character,  or any
other accidents or other conditions  beyond the reasonable  control of Landlord;
(iii) limitation,  curtailment,  rationing or restriction on the use of water or
electricity,  gas or any other form of energy or any services or utility serving
the Project;  (iv)  vandalism or forcible entry by  unauthorized  persons or the
criminal act of any person; or (v) penetration of water into or onto any portion
of the Premises or the Building through roof leaks or otherwise. Notwithstanding
the  foregoing  but  subject  to P.9.4,  Landlord  shall be liable  for any such
injury,  damage  or loss  which is  proximately  caused  by  Landlord's  willful
misconduct or active negligence.

         10.2  Limitation on Tenant's  Recourse:  If Landlord is a  corporation,
trust, partnership,  joint venture,  unincorporated association or other form of
business entity:  (i) the obligations of Landlord shall not constitute  personal
obligations of the officers,  directors,  trustees,  partners,  joint venturers,
members,  owners,  stockholders,  or other principals or representatives of such
business  entity;  and (ii) Tenant shall not have recourse to the assets of such
officers,  directors,  trustees,  partners,  joint venturers,  members,  owners,
stockholders,  principals  or  representatives  except  to the  extent  of their
interest in the  Project.  Tenant  shall have  recourse  only to the interest of
Landlord in the Project for the  satisfaction of the obligations of Landlord and
shall not have recourse to any other assets of Landlord for the  satisfaction of
such obligations.

         10.3 Indemnification of Landlord: Tenant shall hold harmless, indemnify
and defend Landlord, and its employees,  agents and contractors,  with competent
counsel  reasonably  satisfactory  to Landlord  (and  Landlord  agrees to accept
counsel  that any insurer  requires  be used),  from all  liability,  penalties,
losses,  damages,  costs,  expenses,  causes of action,  claims and/or judgments
arising by reason of any  death,  bodily  injury,  personal  injury or  property
damage resulting from (i) any cause or causes whatsoever (other than the willful
misconduct or active  negligence of Landlord  occuring  in or about or resulting
from an  occurrence  in or about the  Premises  during the Lease Term;  (ii) the
negligence  or  willful  misconduct  of  Tenant  or its  agents,  employees  and
contractors, wherever the same may occur; or (iii) an Event of Tenant's Default.
The provisions of this P.10.3 shall survive the expiration or sooner termination
of this Lease.

         10.4.   Indemnification  of  Tenant:   Landlord  shall  hold  harmless,
indemnify and defend Tenant,  and its employees,  agents and  contractors,  with
competent counsel reasonably satisfactory to Tenant (and Tenant agrees to accept
counsel  that any insurer  requires  be used),  from all  liability,  penalties,
losses,  damages,  costs,  expenses,  causes of action,  claims and/or judgments
arising by reason of any  death,  bodily  injury,  personal  injury or  property
damage resulting from the active negligence or willful misconduct of Landlord or
Landlord's intentional violation of any Laws.

                                   ARTICLE 11

                               DAMAGE TO PREMISES

         11.1  Landlord's  Duty to Restore:  If the  Premises are damaged by any
peril after the Effective  Date,  Landlord shall restore the Premises unless the
Lease is  terminated  by Landlord  pursuant  to P.11.2 or by Tenant  pursuant to
P.11.3  All  insurance  proceeds  available  from the fire and  property  damage
insurance  carried by Landlord pursuant to P.9.2 shall be paid to and become the
property of Landlord.  If this Lease is terminated  pursuant to either P.11.2 or
P.11.3,  then all insurance  proceeds available from insurance carried by Tenant
which  covers  loss to property  that is  Landlord's  property  or would  become
Landlord's property on termination of this Lease shall be paid to and become the
property of Landlord.  If this Lease is not so terminated,  then upon receipt of
the insurance proceeds (if the loss is covered by insurance) and the issuance of
all  unnecessary  governmental  permits,  Landlord shall commence and diligently
prosecute to completion  the  restoration  of the  Premises,  to the extent then
allowed by Law, to  substantially  the same condition in which the Premises were
immediately  prior to such damage.  Landlord's  obligation  to restore  shall be
limited to the  Premises and interior  improvements  constructed  by Landlord as
they existed as of the  Commencement  Date  excluding any Tenant's  Alterations,
Trade Fixtures  and/or personal  property  constructed or installed by Tenant in
the  Premises.  Tenant  shall  forthwith  replace or fully  repair all  Tenant's
Alterations  and Trade Fixtures  installed by Tenant and existing at the time of
such damage or destruction,  and all insurance  proceeds received by Tenant from
the  insurance  carried  by it  pursuant  to  P.9.1A(2)  shall  be used for such
purpose.

         11.2  Landlord's  Right to Terminate:  Landlord shall have the right to
terminate this Lease in the event any of the following  occurs,  which right may
be  exercised  only by  delivery  to Tenant of a written  notice of  election to
terminate within 30 days after the date of such damage:

                  A. The  Buildings  are damaged by an Insured  Peril to such an
extent  that the  estimated  cost to  restore  exceeds  50% of the  then  actual
replacement  cost thereof;

                                       11

<PAGE>

                                     LEASE
--------------------------------------------------------------------------------

provided,  however,  that  Landlord  may not  terminate  this  Lease  under this
Subparagraph  if the insurance  proceeds  actually  received equal or exceed the
actual  replacement  cost of the damage,  or if not, Tenant agrees in writing to
pay the amount by which the cost to restore  the  damage  exceeds  the amount of
insurance proceeds actually received and subsequently  deposits such amount with
Landlord  within 30 days after  Landlord has notified  Tenant of its election to
terminate this Lease;

                  B. A  Building  is damaged  by an  Uninsured  Peril to such an
extent  that  the  estimated  cost to  restore  exceeds  4% of the  then  actual
replacement  cost thereof;  provided,  however,  that Landlord may not terminate
this Lease  pursuant to this P.11.2B if one or more tenants of the Project agree
in writing to pay the  amount by which time cost to restore  the damage  exceeds
such amount and  subsequently  deposit such amount with Landlord  within 30 days
after Landlord has notified Tenant of its election to terminate this Lease;

                  C. The  Premises  are damaged by any peril within 12 months of
the last day of the Lease  Term to such an  extent  that the  estimated  cost to
restore  equals or exceeds an amount  equal to six times the Base  Monthly  Rent
then due; provided, however, that Landlord may not terminate this Lease pursuant
to this P.1l.2C if Tenant, at the time of such damage,  has a then valid express
written  option to extend  the Lease Term and Tenant  exercises  such  option to
extend  the Lease  Term no later than 15 days  following  receipt of  Landlord's
written notice electing to terminate this Lease; or

                  D. A Building is damaged by any peril and, because of the Laws
then in force,  (i) cannot be restored at reasonable cost to  substantially  the
same  condition in which it was prior to such damage;  provided,  however,  that
Landlord may not terminate this Lease under this  Subparagraph  if the insurance
proceeds  actually  received  equal or exceed  the  actual  cost to  restore  to
substantially the same condition, or if not, Tenant agrees in writing to pay the
amount by which the cost to restore to substantially  the same condition exceeds
the amount of insurance  proceeds  actually  received and subsequently  deposits
such amount with Landlord  within 30 days after Landlord has notified  Tenant of
its election to terminate this Lease;  or (ii) cannot be used for  substantially
the same use being made  thereof  before  such damage if restored as required by
this Article.

                  E.  As  used  herein,  the  following  terms  shall  have  the
following  meanings:  (i) the term "Insured  Peril" shall mean a peril  actually
insured against for which the insurance  proceeds  actually received by Landlord
are sufficient (except for any "deductible"  amount specified by such insurance)
to restore the  Project  under then  existing  building  codes to the  condition
existing  immediately  prior to the damage;  and (ii) the term "Uninsured Peril"
shall  mean  any  peril  which is not aim  Insured  Peril.  Notwithstanding  the
foregoing,  if the "deductible" for earthquake or flood insurance  exceeds 2% of
the replacement cost of the improvements  insured, such peril shall be deemed an
"Uninsured Peril".

         11.3 Tenant's  Right to  Terminate:  If the Premises are damaged by any
peril and Landlord does not elect to terminate  this Lease or is not entitled to
terminate this Lease pursuant to P.11.2, then as soon as reasonably practicable,
Landlord shall furnish Tenant with the written  opinion of Landlord's  architect
or construction  consultant as to when the restoration work required of Landlord
may be  completed. Tenant  shall have the might to  terminate  this Lease in the
event any of the following occurs, which right may be exercised only by delivery
to Landlord of a written  notice of election to  terminate  within 15 days after
Tenant  receives  from Landlord the estimate of the time needed to complete such
restoration.

                  A.  The  Premises  are  damaged  by  any  peril  and,  in  the
reasonable  opinion of  Landlord's  architect or  construction  consultant,  the
restoration of the Premises cannot be  substantially  completed  within 270 days
after the date of such damage; or

                  B. The  Premises  are damaged by any peril within 12 months of
the last day of the Lease Term and,  in the  reasonable  opinion  of  Landlord's
architect or construction consultant, the restoration of time Premises cannot be
substantially  completed  within 90 days after the date of such  damage and such
damage renders unusable more than 15% of the Premises.

                  C. The  Buildings  are damaged by any peril and because of the
Laws then in force, the Buildings cannot be used for the  substantially the same
use being made  thereof  before such damage  occurred if restored as required by
this Article.

         11.4  Abatement of Rent:  In the event of damage to the Premises  which
does not result in the termination of this Lease,  the Base Monthly Rent and the
Additional Rent shall be temporarily  abated during the period of restoration in
proportion  to the degree to which  Tenant's  use of the Premises is impaired by
such damage.  Tenant shall not be entitled to any  compensation  or damages from
Landlord for loss of Tenant's  business or property or for any  inconvenience or
annoyance  caused by such  damage  or  restoration.  Tenant  hereby  waives  the
provisions  of  California  Civil Code  Sections  1932(2)  and  1933(4)  and the
provisions of any similar law hereinafter enacted.

                                   ARTICLE 12

                                  CONDEMNATION

         12.1  Landlord's  Termination  Right:  Landlord shall have the right to
terminate this Lease if, as a result of a taking by means of the exercise of the
power of eminent domain  (including a voluntary sale or transfer  by Landlord to
a condemnor under threat of condemnation),  (i) all or any part of a Building is
so taken,  or (ii) more than 50% of the Common Area is so taken.  Any such right
to terminate by Landlord must be exercised  within a reasonable  period of time,
to be effective as of the date possession is taken by the condemnor.  Landlord's
right to terminate shall be exercised only as to any Building which is wholly or
partially taken by condemnation,  and Landlord may not terminate the Lease as to
any Building unaffected by the condemnation.

         12.2  Tenant's  Termination  Right:  Tenant  shall  have  the  right to
terminate  this Lease as to any  Building if, as a result of any taking by means
of the exercise of the power of eminent domain  (including any voluntary sale or
transfer by Landlord to any condemnor under threat of condemnation),  (i) 10% or
more the Building's leasable area is so taken and that part of the Premises that
remains cannot be restored  within a reasonable  period of time and thereby made
reasonably  suitable for the continued  operation of the Tenant's  business,  or
(ii)  there is a taking  affecting  the  Common  Area  and,  as a result of such

                                       12

<PAGE>

                                     LEASE
--------------------------------------------------------------------------------

taking,  Landlord  cannot  provide  parking  spaces  within the Project equal in
number to at least 80% of the number of spaces  allocated to Tenant by P.2.1, by
rearrangement  of the  remaining  parking  areas in the Common  Area  (including
construction  of multi-deck  parking  structures or restriping  for compact ears
where  permitted by Law).  Tenant must  exercise  such right within a reasonable
period of time,  to be effective on the date that  possession of that portion of
the Premises or Common Area that is condemned is taken by the condemnor.

         12.3  Restoration and Abatement of Rent: If any part of the Premises or
the Common Area is taken by condemnation and this Lease is not terminated,  then
Landlord shall restore the remaining portion of the Premises and Common Area and
interior  improvements  constructed  by  Landlord  as  they  existed  as of  the
Commencement  Date,  excluding any Tenant's  Alterations,  Trade Fixtures and/or
personal property constructed or installed by Tenant. Thereafter,  except in the
case of a temporary  taking, as of the date possession is taken the Base Monthly
Rent and Additional  Rent shall be reduced in the same proportion that the floor
area of that part of the Premises so taken (less any addition  thereto by reason
of any reconstruction) bears to the original floor area of the Premises.

         12.4  Temporary  Taking:  If any portion of the Premises is temporarily
taken for one year or less, this Lease shall remain in effect. If any portion of
the Premises is temporarily taken by condemnation for a period which exceeds one
year or which extends beyond the natural  expiration of the Lease Term, and such
taking materially and adversely affects Tenant's ability to use the Premises for
the  Permitted  Use,  then Tenant shall have the right to terminate  this Lease,
effective on the date possession is taken by the condemnor.

         12.5 Division of Condemnation  Award: Any award made as a result of any
condemnation  of the  Premises or the Common Area shall belong to and be paid to
Landlord,  and Tenant  hereby  assigns to Landlord  all of its right,  title and
interest in any such award; provided,  however, that Tenant shall be entitled to
receive any condemnation award that is made directly to Tenant for the following
so long as the award made to Landlord is not thereby reduced: (i) for the taking
of  personal  property  or Trade  Fixtures  belonging  to  Tenant;  (ii) for the
interruption  of  Tenant's  business  or its  moving  costs;  (iii)  for loss of
Tenant's  goodwill;  or (iv) for any  temporary  taking  where this Lease is not
terminated  as a result of such  taking.  The  rights  of  Landlord  and  Tenant
regarding any condemnation shall be determined as provided in this Article,  and
each party hereby waives the  provisions of California  Code of Civil  Procedure
Section  1265.130  and the  provisions  of any similar law  hereinafter  enacted
allowing  either party to petition the Superior Court to terminate this Lease in
the event of a partial taking of the Premises.

                                   ARTICLE 13

                              DEFAULT AND REMEDIES

         13.1  Events of  Tenant's  Default:  Tenant  shall be in default of its
obligations under this Lease if any of the following events occurs (an "Event of
Tenant's Default"):

                  A.  Tenant  shall  have  failed  to pay Base  Monthly  Rent or
Additional  Rent  when due,  and such  failure is not cured  within 3 days after
delivery  of  written  notice  from  Landlord  specifying  such  failure to pay,
provided, that before the deadline to pay expires, Tenant must have at least two
(2) business days to pay; or

                  B. Tenant shall have failed to perform any term, covenant,  or
condition of this Lease except those  requiring the payment of Base Monthly Rent
or Additional  Rent,  and Tenant shall have failed to cure such breach within 30
days after  written  notice from Landlord  specifying  the nature of such breach
where such breach could  reasonably  be cured  within said 30 day period,  or if
such breach  could not be  reasonably  cured  within said 30 day period,  Tenant
shall have failed to commence such cure within said 30 day period and thereafter
continue  with due diligence to prosecute  such cure to  completion  within such
time period as is reasonably needed or

                  C.  Tenant  shall have sublet the  Premises  or  assigned  its
interest in the Lease in violation of the provisions contained in Article 14; or

                  D.  Tenant  shall  have  abandoned  the  Premises  or left the
Premises substantially vacant; or

                  E. The occurrence of the  following:  (i) the making by Tenant
of any general  arrangements or assignments  for the benefit of creditors;  (ii)
Tenant  becomes a "debtor" as defined in 11 USC ss.101 or any successor  statute
thereto  (unless,  in the case of a petition filed against  Tenant,  the same is
dismissed  within 60 days);  (iii) the  appointment  of a trustee or receiver to
take possession of substantially  all of Tenant's assets located at the Premises
or of Tenant's  interest  in this Lease,  where  possession  is not  restored to
Tenant  within 30 days;  or (iv) the  attachment,  execution  or other  judicial
seizure of  substantially  all of Tenant's  assets located at the Premises or of
Tenant's interest in this Lease,  where such seizure is not discharged within 30
days;  provided,  however, in the event that any provision of this Section 13.1E
is  contrary  to any  applicable  Law,  such  provision  shall be of no force or
effect; or

                  F. Tenant shall have failed to deliver  documents  required of
it pursuant to P.15.4 or P.15.6  within the time periods  specified  therein and
Tenant  further fails to satisfy such  obligations  within five (5) days after a
further  written  notice of this breach from Landlord which states that "FAILURE
TO  RESPOND  TO THIS  NOTICE  WITHIN  FIVE (5) DAYS  WILL  MEAN THAT AN EVENT OF
TENANT'S DEFAULT UNDER THE LEASE WILL EXIST".

         13.2  Landlord's  Remedies:  If an Event of  Tenant's  Default  occurs,
Landlord shall have the following remedies,  in addition to all other rights and
remedies  provided by any Law or  otherwise  provided  in this  Lease,  to which
Landlord may resort cumulatively or in the alternative:

                  A.  Landlord  may keep this Lease in effect and  enforce by an
action at law or in equity  all of its  rights and  remedies  under this  Lease,
including  (i) the right to recover  the remit and other sums as they become due
by appropriate legal action;  (ii) the right to make payments required of Tenant
or perform Tenant's obligations and be reimbursed by Tenant for the cost thereof
with  interest  at the  Agreed  Interest  Rate  from the date the sum is paid by
Landlord  until  Landlord is  reimbursed  by Tenant;  and (iii) the  remedies of
injunctive  relief mind  specific  performance  to compel  Tenant to perform its
obligations under this Lease.  Notwithstanding anything contained in

                                       13

<PAGE>

                                     LEASE
--------------------------------------------------------------------------------

this Lease, in the event of a breach of an obligation by Tenant which results in
a condition  which  poses an  imminent  danger to safety of persons or damage to
property, an unsightly condition visible from the exterior of the Building, or a
threat to insurance coverage,  then if Tenant does not cure such breach within 3
days after  delivery  to it of written  notice  from  Landlord  identifying  the
breach, Landlord  may cure the breach of Tenant and be  reimbursed by Tenant for
the cost thereof with interest at the Agreed Interest Rate from the date the sum
is paid by Landlord until Landlord is reimbursed by Tenant,

                  B.  Landlord  may enter the Premises and release them to third
parties for Tenant's account for any period,  whether shorter or longer than the
remaining  Lease Term.  Tenant shall be liable  immediately  to Landlord for all
reasonable costs Landlord incurs in releasing the Premises,  including  brokers'
commissions,  expenses of altering and  preparing  the Premises  required by the
releasing.  Tenant  shall pay to Landlord the rent and other sums due under this
Lease  on the date the rent is due,  less  the  rent  and  other  sums  Landlord
received from any  releasing.  No act by Landlord  allowed by this  subparagraph
shall  terminate  this Lease  unless  Landlord  notifies  Tenant in writing that
Landlord elects to terminate this Lease. Notwithstanding  any releasing  without
termination,  Landlord  may later elect to terminate  this Lease  because of the
default by Tenant.

                  C. Landlord may terminate  this Lease by giving Tenant written
notice of termination, in which event this Lease shall terminate on the date set
forth for termination in such notice.  Any termination  under this P.13.2C shall
not relieve Tenant from its obligation to pay sums then due Landlord or from any
claim against Tenant for damages or rent previously accrued or then accruing. In
no event  shall any one or more of the  following  actions by  Landlord,  in the
absence of a written election by Landlord to terminate this Lease,  constitute a
termination of this Lease:  (i)  appointment of a receiver or keeper in order to
protect  Landlord's  interest  hereunder;  (ii) consent to any subletting of the
Premises  or  assignment  of this  Lease  by  Tenant,  whether  pursuant  to the
provisions  hereof  or  otherwise;  or (iii) any other  action  by  Landlord  or
Landlord's Agents intended to mitigate the adverse effects of any breach of this
Lease by Tenant,  including without  limitation any action taken to maintain and
preserve  the Premises or any action taken to relet the Premises or any portions
thereof to the extent  such  actions do  not  affect a  termination  of Tenant's
right to possession of the Premises.

                  D. In the event  Tenant  breaches  this Lease and abandons the
Premises,  this Lease shall not terminate  unless  Landlord gives Tenant written
notice of its  election to so  terminate  this Lease.  No act by or on behalf of
Landlord intended to mitigate the adverse effect of such breach, including those
described  by P.13.C,  shall  constitute  a  termination  of  Tenant's  right to
possession  unless Landlord gives Tenant written notice of  termination.  Should
Landlord not terminate this Lease by giving Tenant written notice,  Landlord may
enforce all its rights and  remedies  under this Lease,  including  the right to
recover the rent  as it becomes  due under the Lease as  provided in  California
Civil Code Section 1951.4.

                  E. In the event Landlord terminates this Lease, Landlord shall
be entitled,  at  Landlord's  election,  to damages in an amount as set forth in
California  Civil Code Section  1951.2 as in effect on the Effective  Date.  For
purposes of computing  damages pursuant to California Civil Code Section 1951.2,
(i) an  interest  rate  equal to  the Agreed  Interest  Rate shall be used where
permitted,  and (ii) the term "rent"  includes Base Monthly Rent and  Additional
Rent. Such damages shall include:

                           (1).  The worth at the time of award of the amount by
which  the  unpaid  rent for the  balance  of the term  after  the time of award
exceeds the amount of such rental loss that Tenant  proves  could be  reasonably
avoided, computed by discounting such amount at the discount rate of the Federal
Reserve Bank of San Francisco at the time of award plus one percent (1%); and

                           (2).  Any  other  amount   necessary  no   compensate
Landlord for all  detriment  proximately  caused by Tenant's  failure to perform
Tenant's obligations under this Lease, or which in the ordinary course of things
would be likely to result therefrom,  including the following:  (i) expenses for
cleaning,  repairing or restoring  the  Premises;  (ii)  expenses for  altering,
remodeling  or otherwise  improving  the Premises for the purpose of  reletting,
including  installation of leasehold  improvements (whether such installation be
funded by a reduction of rent,  direct payment or allowance to a new tenant,  or
otherwise);  (iii)  broker's  fees,  advertising  costs  and other  expenses  of
reletting  the  Premises;  (iv) costs of carrying the  Premises,  such as taxes,
insurance premiums, utilities and security precautions; (v) expenses in retaking
possession of time Premises;  and (vi)  attorneys' fees and court costs incurred
by Landlord in retaking possession of the Premises and in releasing the Premises
or otherwise incurred as a result of Tenant's default.

                  F.  Nothing in this  P.13.2  shall limit  Landlord's  right to
indemnification from Tenant as provided in P.7.2 and P.10.3. Any notice given by
Landlord in order to satisfy the  requirements  of P.13.1A or P.13.B above shall
also  satisfy the notice  requirements  of  California  Code of Civil  Procedure
Section 1161 regarding unlawful detainer proceedings.

         13.3 Waiver: One party's consent to or approval of any act by the other
party  requiring  the fist  party's  consent or approval  shall not be deemed to
waive or render  unnecessary  the first  party's  consent to or  approval of any
subsequent  similar act by the other party.  The receipt by Landlord of any rent
or payment with or without knowledge of the breach of any other provision hereof
shall not be deemed a waiver of any such breach unless such waiver is in writing
and signed by  Landlord.  No delay or omission  in the  exercise of any right or
remedy  accruing  to either  party upon any breach by the other party under this
Lease shall  impair such right or remedy or be construed as a waiver of any such
breach  theretofore or thereafter  occurring.  The waiver by either parry of any
breach of any  provision of this Lease shall not be deemed to be a waiver of any
subsequent breach of the same or of any other provisions herein contained

         13.4  Limitation  On Exercise  of Rights:  At any time that an Event of
Tenant's  Default  has  occurred  and  remains  uncured,  (i)  it  shall  not be
unreasonable for Landlord to deny or withhold any consent or approval  requested
of it by Tenant  which  Landlord  would  otherwise be obligated to give and (ii)
Tenant may not exercise any option to extend,  right to terminate this Lease, or
other right  granted to it by this Lease which would  otherwise  be available to
it.

         13.5 Waiver by Tenant of Certain Remedies: Tenant waives the provisions
of Sections 1932(1),  1941 and

                                       14

<PAGE>

                                     LEASE
--------------------------------------------------------------------------------

1942 of the  California  Civil Code and any similar or successor  law  regarding
Tenant's  right to  terminate  this  Lease or to make  repairs  and  deduct  the
expenses  of such  repairs  from the rent due under this  Lease.  Tenant  hereby
waives any right of redemption or relief from  forfeiture  under the laws of the
State of  California,  or under any other  present or future law,  including the
provisions of Sections 1174 and 1179 of the California Code of Civil Procedure.

         13.6 Events of Landlord's Default:  Landlord shall be in default of its
obligations  under this Lease if Landlord shall have failed to perform any term,
covenant,  or condition of this Lease,  and thereafter shall have failed to cure
such  breach  within  thirty  (30) days after  written  notice has been given by
Tenant to  Landlord  and any  Lender  whose  name and  address  shall  have been
furnished to Tenant in writing specifying the nature of such breach,  where such
breach could reasonably be cured within said thirty (30) day period,  or if such
breach could not  reasonably be cured in 30 days,  Landlord shall have failed to
commence such cure within said thirty (30) day period and  thereafter  continued
with due diligence to prosecute such cure to completion  within such time period
as is reasonably needed.

                                   ARTICLE 14

                            ASSIGNMENT AND SUBLETTING

         14.1 Transfer By Tenant:  The following  provisions  shall apply to any
assignment,  subletting or other transfer by Tenant or any subtenant or assignee
or other successor in interest of the original Tenant (collectively  referred to
in this P.14.1 as "Tenant"):

                  A.  Tenant  shall  not do any of the  following  (collectively
referred to herein as a "Transfer"),  whether  voluntarily,  involuntarily or by
operation of law,  without the prior written consent of Landlord,  which consent
shall not be unreasonably withheld or delayed: (i) sublet all or any part of the
Premises  or allow it to be  sublet,  occupied  or used by any  person or entity
other than  Tenant;  (ii) assign its interest in this Lease;  (iii)  mortgage or
encumber  the Lease (or  otherwise  use the Lease as a  security  device) in any
manner;  or (iv)  materially  amend or modify an  assignment,  sublease or other
transfer that has been previously  approved by Landlord.  Tenant shall reimburse
Landlord for all reasonable  costs and  attorneys'  fees incurred by Landlord in
connection  with  the  evaluation,   processing,  and/or  documentation  of  any
requested  Transfer  (which,  in the ease of attorneys'  fees,  shall not exceed
$1,200.00  per request  unless there is litigation  between the parties  arising
therefrom),  whether or not Landlord's consent is granted. Landlord's reasonable
costs  shall  include  the cost of any  review  or  investigation  performed  by
Landlord or consultant  acting on Landlord's  behalf of (i) Hazardous  Materials
(as defined in Section 7.2E of this Lease) used, stored,  released,  or disposed
of by the potential  Subtenant or Assignee,  and/or (ii) violations of Hazardous
Materials  Law (as  defined in Section  7.2E of this Lease) by the Tenant or the
proposed  Subtenant or Assignee.  Any Transfer so approved by Landlord shall not
be effective  until Tenant has delivered to Landlord an executed  counterpart of
the document  evidencing the Transfer which (i) is in a form reasonably approved
by Landlord;  (ii) contains the same terms and  conditions as stated in Tenant's
notice  given to  Landlord  pursuant  to  P.14.1B;  and  (iii) in the case of an
assignment of the Lease,  contains the  agreement of the proposed  transferee to
assume all  obligations  of Tenant under this Lease  arising after the effective
date of such Transfer and to remain jointly and severally  liable  therefor with
Tenant.  Any attempted  Transfer without  Landlord's consent shall constitute an
Event of Tenant's Default and shall be voidable at Landlord's option. Landlord's
consent to any one Transfer  shall not  constitute a waiver of the provisions of
this  P.14.1  as to any  subsequent  Transfer  or a  consent  to any  subsequent
Transfer. No Transfer,  even with the consent of Landlord,  shall relieve Tenant
of its personal and primary obligation to pay the rent and to perform all of the
other obligations to be performed by Tenant hereunder. The acceptance of rent by
Landlord  from any person  shall not be deemed to be a waiver by Landlord of any
provision of this Lease nor to be a consent to any Transfer.

                  B. At least 15 days  before a proposed  Transfer  is to become
effective,  Tenant shall give Landlord  written  notice of the proposed terms of
such Transfer and request  Landlord's  approval,  which notice shall include the
following: (i) the name and legal composition of the proposed transferee; (ii) a
current  financial  statement of the  transferee,  financial  statements  of the
transferee  covering  the  preceding  three  years  if the same  exist,  and (if
available) an audited financial  statement of the transferee for a period ending
not more than one year prior to the proposed effective date of the Transfer, all
of  which  statements  are  prepared  in  accordance  with  generally   accepted
accounting principles; (iii) the nature of the proposed transferee's business to
be carried on in the Premises;  (iv) all consideration to be given on account of
the  Transfer;  (v) a  current  financial  statement  of  Tenant;  and  (vi)  an
accurately  filled out  response  to  Landlord's  standard  Hazardous  Materials
Questionnaire. Tenant shall provide to Landlord such other information as may be
reasonably  requested by Landlord within three days after Landlord's  receipt of
such notice from Tenant.  Landlord shall respond in writing to Tenant's  request
for Landlord's  consent to a Transfer within the later of (i) 10 days of receipt
of such request together with the required accompanying  documentation,  or (ii)
seven days after Landlord's receipt of all information which Landlord reasonably
requests within three days after it receives Tenant's first notice regarding the
Transfer  in  question.  If  Landlord  fails to respond in writing  within  said
period,  Landlord  will be deemed to have  withheld  consent  to such  Transfer.
Tenant shall  immediately  notify  Landlord of any material  modification to the
proposed  terms of such Transfer.  However,  if Landlord does not respond within
the time specified  above,  then within five (5) business days after such period
has expired  without a response (and provided that no response has been received
in the  interim),  then Tenant may give Landlord a second  notice,  specifically
identifying  the proposed  Transfer and  conspicuously  stating that "FAILURE TO
RESPOND  TO  THIS   NOTICE  WITH  EITHER   APPROVAL   OR   DISAPPROVAL   OF  THE
ABOVE-IDENTIFIED  PROPOSED TRANSFER WITHIN FIVE (5) BUSINESS DAYS WILL MEAN THAT
THE  ABOVE-IDENTIFIED  PROPOSED TRANSFER WILL BE DEEMED APPROVED WITHOUT FURTHER
ACTION ON YOUR PART".  Said notice must be given to Landlord at its then-current
notice address, and must also be given to John Marshall Collins, 111 W. St. John
St., Suite 400, San Jose, CA 95113 (or such other address as Collins may specify
from time to time by notice  hereunder).  If said notice is given to both notice
recipients  as  required  above and  contains  the  information  and  statements
required and set forth above, then upon the expiration of five (5) business days
from the effective

                                       15

<PAGE>

                                     LEASE
--------------------------------------------------------------------------------

date of said notice,  if Landlord has not given its approval or  disapproval  of
the proposed Transfer,  Landlord's consent shall be deemed to have been given to
the  Proposed  Transfer.  In such event,  Tenant and the  proposed  subtenant or
assignee  shall  nevertheless  be  required  to  execute  Landlord's  Consent of
Landlord  form to  the  extent such would have been  required  if  Landlord  had
expressly consented.

                  C. In the event that  Tenant to seeks  assign its  interest in
this Lease (other than by means of a Permitted  Transfer) or to sublease  either
Building  for ninety  percent  (90%) or more of the  then-remaining  term of the
Lease  (other than by means of a Permitted  Transfer),  Landlord  shall have the
right to terminate this Lease or, in the case of a sublease relating to a single
Building  terminate this Lease as to that Building,  by giving written notice to
Tenant  within the time during which  Landlord may accept or reject the proposed
Transfer,  either (i) on the condition that the proposed transferee  immediately
enter into a direct lease of the Premises  with  Landlord  (or, in the ease of a
sublease relating to one Building,  a lease for the Building ) on the same terms
and  conditions  contained  in  Tenant's  notice,  or (ii) so that  Landlord  is
thereafter free to lease the Premises (or, in the case of a sublease relating to
one  Building,  the  Building  to  whomever  it  pleases on  whatever  terms are
acceptable to Landlord. In the event Landlord elects to so terminate this Lease,
then  (i) if such  termination  is  conditioned  upon the  execution  of a lease
between Landlord and the proposed  transferee,  Tenant's  obligations under this
Lease shall not be terminated  until such  transferee  executes a new lease with
Landlord,  enters into possession and commences the payment of rent, and (ii) if
Landlord  elects  simply to terminate  this Lease (or, in the case of a sublease
relating to one Building,  terminate this Lease as to the  Building),  the Lease
shall so terminate in its entirety (or as to the  applicable  Building)  fifteen
(15) days after Landlord has notified  Tenant in writing of such election.  Upon
such  termination,  Tenant shall be released from any further  obligation  under
this Lease if it is terminated  in its  entirety,  or shall be released from any
further  obligation  under the Lease with respect to the applicable  Building in
the case of a proposed  sublease relating to only one Building (but in each such
case,  Tenant shall not be released from any obligations which would survive the
expiration  or  earlier  termination  of the  Lease).  In the ease of a  partial
termination  of the Lease,  the Base Monthly Rent,  Tenant's share, and Tenant's
Allocated  Parking  Spaces  shall be reduced to an amount  which  bears the same
relationship  to the  original  amount  thereof  as the area of that part of the
Premises  which  remains  subject to the Lease bears to the original area of the
Premises.  Landlord and Tenant  shall  execute a  cancellation  and release with
respect  to the  Lease or the  applicable  portion  of the  Lease in the ease of
termination as to a single Building to effect such termination.

                  D. If  Landlord  consents  to a Transfer  proposed  by Tenant,
Tenant may enter into such Transfer,  and if Tenant does so, the following shall
apply:

                           (1) Tenant  shall mint be released  of its  liability
for the performance of all of its obligations under the lease.

                           (2) If Tenant  assigns  its  interest  in this Lease,
then Tenant shall pay to Landlord 50% of all Subrent (as defined in  P.14.1D(5))
received by Tenant  over and above (i) the  assignee's  agreement  to assume the
obligations  of Tenant under this Lease,  and (ii) all Permitted  Transfer Costs
related to such  assignment.  In the case of  assignment,  the amount of Subrent
owed to Landlord shall be paid to Landlord on the same basis whether periodic or
in lump sum, that such Subrent is paid to Tenant by the assignee.

                           (3).  If Tenant  sublets  any part of  the  Premises,
then with respect to the space so subleased, Tenant shall pay to Landlord 50% of
the positive  difference,  if any, between (i) all Subrent paid by the subtenant
to  Tenant,  less  (ii) the sum of all Base  Monthly  Rent and  Additional  Rent
allocable to the space sublet and all Permitted  Transfer  Costs related to such
sublease.  Such amount  shall be paid to  Landlord  on the same  basis,  whether
periodic or in lump sum,  that such Subrent is paid to Tenant by its  subtenant.
In calculating Landlord's share of any periodic payments, all Permitted Transfer
Costs shall be first recovered by Tenant.

                           (4).  Tenant's  obligations  under this P.14.1D shall
survive any Transfer,  and Tenant's failure to perform its obligations hereunder
shall be an Event of Tenant's  Default.  At the time Tenant makes any payment to
Landlord required by this P.14.1D, Tenant shall deliver an itemized statement of
the method by which the  amount to which  Landlord is entitled  was  calculated,
certified  by  Tenant  as true and  correct.  Landlord  shall  have the right at
reasonable  intervals  to inspect  Tenant's  books and  records  relating to the
payments due hereunder.  Upon request therefor, Tenant shall deliver to Landlord
copies of all bills, invoices or other documents upon which its calculations are
based.  Landlord may  condition  its approval of any Transfer  upon  obtaining a
certification  from both Tenant and time proposed  transferee of all Subrent and
other amounts that are to be paid to Tenant in connection with such Transfer

                           (5).  As used in this  P.14.1D,  the  term  "Subrent"
shall mean any  consideration  of any kind  received,  or  to  be  received,  by
Tenant  as a result  of the  Transfer,  if such  sums are  related  to  Tenant's
interest in this Lease or in the Premises,  including payments from or on behalf
of time  transferee (in excess of the book value  thereof) for Tenant's  assets,
fixtures,  leasehold improvements,  inventory,  accounts,  goodwill,  equipment,
furniture,  and  general  intangibles.  As  used  in this  P.  14.1D,  the  term
"Permitted  Transfer  Costs" shall mean (i) all reasonable  leasing  commissions
paid to third parties not affiliated with Tenant in order to obtain the Transfer
in question; (ii) all reasonable attorneys' fees incurred by Tenant with respect
to the Transfer in question;  (iii) the cost of any reasonable improvements made
to the Premises by Tenant  specifically for any assignee or subtenant;  and (iv)
any moving  costs or costs  relating  to the  termination  of the  subtenant  or
assignee's  former space which Tenant  actually pays pursuant to the contractual
obligation  to do so pursuant  to  the  sublease or  assignment  document.  If a
proposed Transfer involves payment of a portion of the Subrent to Landlord under
Subparagraphs  14.1D(2) or (3) above,  then upon  submission  of its request for
approval of a Transfer,  Tenant shall  identify any Permitted  Transfer Costs in
writing.

                  E. If Tenant is a corporation, the following shall be deemed a
voluntary  assignment of Tenant's  interest in this Lease:  (i) any dissolution,
merger,  consolidation,  or other reorganization of or affecting Tenant, whether
or non Tenant is the  surviving  corporation;  and (ii) if the capital  stock of
Tenant is not publicly traded,  the sale or transfer to one person or entity

                                       16

<PAGE>

                                     LEASE
--------------------------------------------------------------------------------

(or no any group of related persons or entities) stock  possessing more than 50%
of the total  combined  voting  power of all classes of Tenant's  capital  stock
issued,  outstanding  and  entitled to vote for the  election of  directors.  If
Tenant is a partnership,  any  withdrawal or  substitution  (whether  voluntary,
involuntary or by operation of law, and whether  occurring at one time or over a
period of time) of any partner owning 25% or more (cumulatively) of any interest
in the  capital  or  profits  of the  partnership,  or  the  dissolution  of the
partnership, shall be deemed a voluntary assignment of Tenant's interest in this
Lease

                  F. Notwithstanding  anything contained,  in P.14.1, so long as
Tenant  otherwise  complies with the  provisions of P.14.1 Tenant may enter into
any of the following transfers (a "Permitted Transfer") without Landlord's prior
written  consent,  and  Landlord  shall not be entitled to  terminate  the Lease
pursuant to P.14.1C or to receive any part of any  Subrent  resulting  therefrom
that would otherwise be due it pursuant to P.14.1D:

                           (1).  Tenant may sublease all or part of the Premises
or assign its  interest  in this Lease to any  corporation  which  controls,  is
controlled by, or is under common control with the original Tenant to this Lease
by means of an ownership interest of at least 50%;

                           (2). Tenant may assign its interest in the Lease to a
corporation which results from a merger,  consolidation or other  reorganization
in which  Tenant  is not the  surviving  corporation,  so long as the  surviving
corporation  is  demonstrated  by  Tenant  to have a net  worth  at time of such
assignment than is equal to or greater than the net worth of Tenant  immediately
prior to such transaction; and

                           (3).  Tenant may assign this Lease  to a  corporation
which purchases or otherwise  acquires all or substantially all of the assets of
Tenant, so long as such acquiring corporation is demonstrated by Tenant to be as
creditworthy as Tenant  immediately prior to such transaction,  judged according
to the standards used by reasonable landlords in the market area of the Premises
in evaluating the creditworthiness of prospective tenants.

         14.2  Transfer By  Landlord:  Landlord and its  successors  in interest
shall have the right to transfer their interest in this Lease and the Project at
any time and to any person or  entity.  In the event of any such  transfer,  the
Landlord  originally named herein (and, in the case of any subsequent  transfer,
the  transferror)  from  the  date  of such  transfer,  shall  be  automatically
relieved,  without any further act by any person or entity, of all liability for
the  performance of the  obligations of the Landlord  hereunder which may accrue
after the date of such transfer.  After the date of any such transfer,  the term
"Landlord"  as used herein  shall mean the  transferee  of such  interest in the
Premises.

                                   ARTICLE 15

                               GENERAL PROVISIONS

         15.1 Landlord's  Right to Enter:  Landlord and its agents may enter the
Premises an any reasonable  tine after giving at least 24 hours' prior notice to
Tenant  (and  immediately  in the  case of  emergency)  for the  purpose  of (i)
inspecting  time  same;  (ii)  posting  notices  of  non-responsibility;   (iii)
supplying  any service no be provided  by Landlord to Tenant;  (iv)  showing the
Premises to prospective purchasers,  mortgagees or tenants; (v) making necessary
alterations,  additions or repairs;  (vi) performing  Tenant's  obligations when
Tenant has failed to do so after  written  notice from  Landlord;  (vii) placing
upon the Premises  ordinary  "for lease"  signs or "for sale" signs;  and (viii)
responding  to an  emergency.  Landlord  shall have the right to use any and all
means  Landlord  may deem  necessary  and  proper  to enter the  Premises  in an
emergency.  Any entry into the Premises  obtained by Landlord in accordance with
this P.15.1  shall not be a forcible or unlawful  entry into,  or a detainer of,
the  Premises,  or an  eviction,  actual or  constructive,  of  Tenant  from the
Premises. In  connection with any entry by Landlord  pursuant to this  Paragraph
15.1, the business of Tenant and use of the Premises shall be interfered with to
the least extent that is reasonably practical.

         15.2  Surrender  of  the  Premises:   Upon  the  expiration  or  sooner
termination  of this Lease,  Tenant shall vacate and  surrender  the Premises to
Landlord in the same condition as existed at the Commencement  Date,  except for
(i) reasonable wear and tear,  (ii) damage caused by any peril or  condemnation,
and  (iii)  contamination  by  Hazardous  Materials  for  which  Tenant  is  not
responsible pursuant to P.7.2A or P.7.2B. In this regard,  normal  wear and tear
shall be  construed  to mean wear and tear caused to the Premises by the natural
aging process which occurs in spite of prudent application of the best standards
for maintenance,  repair and janitorial practices, and does not include items of
neglected  or  deferred  maintenance.  In any  event,  Tenant  shall  cause  the
following to be done prior to the  expiration or the sooner  termination of this
Lease:  (i) all  interior  walls shall be painted or cleaned so that they appear
freshly  painted;  (ii) all tiled floors  shall be cleaned and waxed;  (iii) all
carpets  shall be cleaned and  shampooed;  (iv) all broken,  marred,  stained or
nonconforming  acoustical ceiling tiles shall be replaced; (v) all windows shall
be washed;  (vi) the HVAC system  shall be serviced by a reputable  and licensed
service firm and left in good operating  condition and repair as so certified by
such firm; and (vii) the plumbing and  electrical  systems and lighting shall be
placed in good  order and  repair  (including  replacement  of any  burned  out,
discolored  or broken light bulbs,  ballasts,  or lenses).  Notwithstanding  the
foregoing,  Tenant shall not be required to take an action  required by the HVAC
service firm in order for said firm to certify the HVAC as meeting the standards
of  subparagraph  (vi)  above if, and to the extent  that such  action  requires
repair or replacement  which is in the nature of a capital expense as defined in
Paragraph 5.4,  provided,  however,  that Tenant shall not be relieved from such
duty by this  sentence  if time  need for such  repair or  replacement  results,
wholly or in part,  from Tenant's breach of its duties under this Lease relating
to the HVAC  system,  including  but not  limited  to the  duties  set  forth in
Paragraph 6.1C. If Landlord so requests,  Tenant shall,  prior to the expiration
or sooner  termination of this Lease, (i) remove any Tenant's  Alterations which
Tenant is required to remove  pursuant to P.5.2 and repair all damage  caused by
such removal, and (ii) subject to Paragraph 5.2, return the Premises or any part
thereof to its original  configuration existing as of the time the Premises were
delivered to Tenant.  If the Premises are not so surrendered at the  termination
of this  Lease,  Tenant  shall be liable to  Landlord  for all costs  reasonably
incurred by Landlord in returning the Premises to the required  condition,  plus
interest  on all costs  incurred  at the  Agreed  Interest  Rate.  Tenant  shall
indemnify  Landlord against loss or liability  resulting from delay by Tenant in
so surrendering the Premises,  including,

                                       17

<PAGE>

                                     LEASE
--------------------------------------------------------------------------------

without  limitation,  any  claims  made by any  succeeding  tenant  or losses to
Landlord due to lost opportunities to lease to succeeding tenants.

         15.3 Holding Over: This Lease shall terminate without further notice at
the expiration of the Lease Term. Any holding over by Tenant after expiration of
the Lease Term shall not  constitute a renewal or extension of the Lease or give
Tenant any rights in or to the  Premises  except as  expressly  provided in this
Lease.  Any  holding  over after such  expiration  with the  written  consent of
Landlord  shall be  construed  to be a tenancy  from  month to month on the same
terms and conditions  herein  specified  insofar as applicable  except that Base
Monthly Rent shall,  be increased to an amount equal to 150% of the Base Monthly
Rent payable during the last full calendar month of the Lease Term.

         15.4   Subordination:   The  following   provisions  shall  govern  the
relationship of this Lease to any Security Instrument:

                  A. The  Lease  is  subject  and  subordinate  to all  Security
Instruments  existing  as of the  Effective  Date.  However,  if any  Lender  so
requires,  this Lease  shall  become  prior and  superior  to any such  Security
Instrument.

                  B. At Landlord's election, this Lease shall become subject and
subordinate  to any  Security  Instrument  created  after  the  Effective  Date.
Notwithstanding  such  subordination,  Tenant's right to quiet possession of the
Premises shall not be disturbed so long as Tenant is not in default and performs
all of its  obligations  under  this  Lease,  unless  this  Lease  is  otherwise
terminated pursuant to its terms.

                  C.  Tenant  shall  upon   request   execute  any  document  or
instrument  reasonably required by any Lender to make this Lease either prior or
subordinate  to a Security  Instrument,  which may include such other matters as
the  Lender  customarily  and  reasonably   requires  in  connection  with  such
agreements,  including  provisions  that the  Lender  not be liable  for (i) the
return of any security deposit unless the Lender receives it from Landlord,  and
(ii) any defaults on the part of Landlord occurring prior to the time the Lender
takes  possession  of the  Project in  connection  with the  enforcement  of its
Security Instrument. Tenant's failure to execute any such document or instrument
within 10 days after  written  demand  therefor  shall  constitute  an  Event of
Tenant's  Default.  Tenant  approves  as  reasonable  the form of  subordination
agreement attached to this Lease as Exhibit G.

                  D. As a condition  to Tenant's  obligations  under this Lease,
not later than the  Commencement  Date,  Landlord  shall  supply  Tenant  with a
Subordination   Agreement;   Acknowledgment  of  Lease   Assignment;   Estoppel,
Attornment,  and Non-Disturbance  Agreement in substantially the form of Exhibit
G, which is a sample of such an  agreement  from Wells  Fargo  Bank,  Landlord's
construction Lender.  Tenant  approves  Exhibit  G and  agrees  that it will not
unreasonably  withhold,  delay, or condition its approval of changes required by
the Lender in such document.  Landlord  will use its best efforts to obtain such
Agreement as soon as possible.

                  E. Subordination of Tenant's Lease to any Security Instruments
created  after  the  Effective  Date of this  Lease  and  Tenant's  duty to sign
documents  confirming  such  subordination  shall  be  subject  to the  Landlord
providing  Tenant with a subordination  agreement  substantially  in the form of
Exhibit G if the Lender is Wells Fargo, or in any commercial  Lender's  standard
form. Tenant agrees that it will not unreasonably  withhold,  delay or condition
its approval of changes required by the Lender in such document.

         15.5 Mortgagee  Protection and Attornment:  In the event of any default
on the part of the Landlord,  Tenant will use reasonable  efforts to give notice
by  registered  mail to any Lender  whose name has been  provided  to Tenant and
shall offer such Lender a reasonable opportunity to cure the default,  including
time to  obtain  possession  of the  Premises  by power  of  smile  or  judicial
foreclosure  or  other  appropriate  legal  proceedings,  if such  should  prove
necessary to effect a cure. Tenant shall attorn to any purchaser of the Premises
at any  foreclosure  sale or private  sale  conducted  pursuant to any  Security
Instrument  encumbering the Premises, or to any grantee or transferee designated
in any deed given in lieu of foreclosure,  provided that the purchaser, grantee,
or transferee is subject to the obligations of the Landlord hereunder.

         15.6  Estoppel  Certificates  and  Financial  Statements:  At all times
during the Lease Term,  each party  agrees,  following  any request by the other
party,  promptly to execute and deliver to the  requesting  party within 15 days
following delivery of such request an estoppel certificate:  (i) certifying that
this Lease is unmodified  and in full force and effect or, if modified,  stating
the nature of such  modification and certifying that this Lease, as so modified,
is in full force and effect,  (ii)  stating the date to which the rent and other
charges are paid in advance,  if any, (iii) acknowledging that there are not, to
the certifying party's knowledge,  any uncured defaults on the part of any party
hereunder  or, if there are  uncured  defaults,  specifying  the  nature of such
defaults,  and (iv) certifying such other  information about the Lease as may be
reasonably  required by the  requesting  party. A failure to deliver an estoppel
certificate  within 15 days  after  delivery  of a request  therefor  shall be a
conclusive admission that, as of the date of the request for such statement: (i)
this Lease is unmodified except as may be represented by the requesting party in
said request and is in full force and effect, (ii) there are no uncured defaults
in the requesting party's performance, and (iii) no rent has been paid more than
30 days in  advance.  At any time during the Lease Term  Tenant  shall,  upon 15
days' prior written notice from Landlord, provide Tenant's most recent financial
statement  and  financial  statements  covering the 24 month period prior to the
date of such most recent  financial  statement to any existing  Lender or to any
potential Lender or buyer of time Premises. Such statements shall be prepared in
accordance  with generally  accepted  accounting  principles and, if such is the
normal practice of Tenant,  shall be audited by an independent  certified public
accountant. So long as Tenant is a publicly traded company (and if Tenant ceases
to be a publicly  traded  company but has a direct or indirect  parent  which is
publicly  traded and whose public  reports and financial  statements  separately
state the  financial  strength  and worth of  Tenant),  Tenant may  satisfy  the
foregoing  requirements by providing  Tenant's most recently filed public report
and the public reports filed by Tenant for the immediately  preceding 24 months,
or the same documents for the parent.  If Tenant does not meet the conditions in
the immediately  preceding  section,  then Tenant shall supply financial data as
set forth above, but in such case, Landlord agrees that is shall be kept in

                                       18

<PAGE>

                                     LEASE
--------------------------------------------------------------------------------

confidence, to be disclosed in confidence only to Landlord's Lenders,  potential
lenders,  potential  purchasers,  accountants,  and  attorneys,  and under  such
circumstances, Tenant is only required to disclose reports prepared by Tenant in
the  ordinary  course of its  business  and is not  required  to make up reports
specifically to meet these requirements.

         15.7 Reasonable  Consent:  Whenever any party's  approval or consent is
required by this Lease  before an action may be taken by the other  party,  such
approval or consent shall not be unreasonably withheld or delayed.

         15.8 Notices: Any notice required or desired to be given regarding this
Lease shall be in writing and may be given by personal  delivery,  by  facsimile
telecopy,  by courier service, or by mail. A notice shall be deemed to have been
given (i) when  delivered or refused if such notice was  deposited in the United
States mail, certified or registered, postage prepaid, addressed to the party to
be served at its Address for Notices  specified in Section Q or Section R of the
Summary (as applicable),  (ii) when delivered if given by personal delivery, and
(iii) in all other  cases when  actually  received  at the  party's  Address for
Notices.  Either  party may change its  address by giving  notice of the same in
accordance  with this  P.15.8,  provided,  however,  that any  address  to which
notices  may be sent must be a  California  address.  Notwithstanding  any other
provision  hereof,  notice that is  personally  delivered  is not required to be
personally  delivered  to  more  than  one  person,  and is not  required  to be
delivered to the  particular  persons or officers  identified  in the Summary of
Basic  Lease  Terms,  Section  9, and such  personal  delivery  shall be  deemed
complete if personally delivered to Tenant.

         15.9  Attorneys'  Fees:  In the event  either  Landlord or Tenant shall
bring any action or legal  proceeding  for an alleged breach of any provision of
this Lease,  to recover rent,  to terminate  this Lease or otherwise to enforce,
protect or establish any term or covenant of this Lease,  the  prevailing  party
shall be  entitled to recover as a part of such  action or  proceeding,  or in a
separate  action brought for that purpose,  reasonable  attorneys'  fees,  court
costs, and experts' fees as may be fixed by the court.

         15.10 Corporate Authority: If Tenant is a corporation (or partnership),
each individual executing this Lease on behalf of Tenant represents and warrants
that he is duly  authorized  to execute and deliver this Lease on behalf of such
corporation in accordance  with the by-laws of such  corporation (or partnership
in accordance with the partnership  agreement of such partnership) and that this
Lease is binding upon such  corporation (or  partnership) in accordance with its
terms.  Each of the persons executing this Lease on behalf of a corporation does
hereby  covenant and warrant that the party for whom it is executing  this Lease
is a duly  authorized  and  existing  corporation,  that it is  qualified  to do
business in California, and that the corporation has full right and authority to
enter into this Lease.

         15.11  Miscellaneous:  Should any  provision  of this lease prove to be
invalid or illegal, such invalidity or illegality shall in no way affect, impair
or invalidate any other provision  hereof,  and such remaining  provisions shall
remain in full force and  effect.  Time is of the  essence  with  respect to the
performance  of every  provision of this Lease in which time of performance is a
factor.  The captions used in this Lease are for convenience  only and shall not
be considered in the construction or interpretation of any provision hereof. Any
executed copy of this Lease shall be deemed an original for all  purposes.  This
Lease shall, subject to the provisions regarding  assignment,  apply to and bind
the  respective  heirs,  successors,  executors,  administrators  and assigns of
Landlord  and Tenant.  "Party"  shall mean  Landlord  or Tenant,  as the context
implies.  If Tenant consists of more than one person or entity, then all members
of Tenant shall be jointly and severally liable  hereunder.  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.  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.  The terms  "shall"," will" and
"agree" are mandatory.  The term "may" is permissive When a party is required to
do something by this Lease,  it shall do so at its sole cost and expense without
right of  reimbursement  from the other party  unless a provision  of this Lease
expressly requires  reimbursement.  Landlord and Tenant agree that (i) the gross
leasable area of the Premises  includes any atriums,  depressed  loading  docks,
covered  entrances or egresses,  and covered loading areas, (ii) each has had an
opportunity to determine to its  satisfaction the actual area of the Project and
the  Premises,  (iii)  all  measurements  of area  contained  in this  Lease are
conclusively  agreed to be  correct  and  binding  upon the  parties,  even if a
subsequent  measurement of any one of these areas  determines that it is more or
less  than  the  amount  of area  reflected  in this  Lease,  and  (iv) any such
subsequent  determination that the area is more or less than shown in this Lease
shall not  result in a change in any of the  computations  of rent,  improvement
allowances,  or other  matters  described  in this Lease where area is a factor.
Where a party  hereto is  obligated  not to perform any act,  such party is also
obligated to restrain any others  within its control from  performing  said act,
including  the Agents of such  party.  Landlord  shall not become or be deemed a
partner or a joint  venturer  with  Tenant by reason of the  provisions  of this
Lease.

         15.12  Termination  by Exercise of Right:  If this Lease is  terminated
pursuant  to  its  terms  by  the  proper  exercise  of  a  right  to  terminate
specifically  granted to Landlord or Tenant by this Lease, then this lease shall
terminate 30 days after the date the right to  terminate  is properly  exercised
(unless  another date is specified in that part of the Lease creating the right,
in which event the date so specified for termination  shall  prevail),  the rent
and all  other  charges  dime  hereunder  shall  be  prorated  as of the date of
termination,  and neither  Landlord nor Tenant shall have any further  rights or
obligations  under this Lease  except for those that have  accrued  prior to the
date of termination or those obligations which this Lease specifically  provides
are to survive termination. This P.15.12 does not apply to a termination of this
Lease by Landlord as a result of an Event of Tenant's Default.

         15.13  Brokerage  Commissions:  Each party  hereto (i)  represents  and
warrants  to the other  that it has not had any  dealings  with any real  estate
brokers, leasing agents or salesmen, or incurred any obligations for the payment
of real estate  brokerage  commissions or finder's fees which would be earned or
due and  payable by reason of the  execution  of this  Lease,  other than to the
Retained  Real Estate  Brokers  described in Section 6 of the Summary,  and (ii)
agrees to  indemnify,  defend,  and hold harmless the other party from any claim
for  any  such

                                       19

<PAGE>

                                     LEASE
--------------------------------------------------------------------------------

commission  or fees which  result  from the actions of the  indemnifying  party.
Landlord  shall be  responsible  for the payment of any  commission  owed to the
Retained Real Estate Brokers if there is a separate written commission agreement
between  Landlord  and the  Retained  Real  Estate  Brokers for the payment of a
commission as a result of the execution of this Lease.

         15.14 Force Majeure: Any prevention,  delay or stoppage due to strikes,
lock-outs,  inclement  weather,  labor  disputes,  inability  to  obtain  labor,
materials, fuels or reasonable substitutes therefor,  governmental restrictions,
regulations,  controls,  action or inaction, civil commotion, fire or other acts
of God, and other causes beyond  the  reasonable  control of the party obligated
to perform (except  financial  inability)  shall excuse the  performance,  for a
period equal to the period of any said  prevention,  delay or  stoppage,  of any
obligation  hereunder  except the  obligation of Tenant to pay rent or any other
sums due hereunder.

         15.15 Entire  Agreement:  This Lease  constitutes the entire  agreement
between the  parties,  and there are no binding  agreements  or  representations
between the parties except as expressed herein. Tenant acknowledges that neither
Landlord nor Landlord's  Agents has made any legally binding  representation  or
warranty as to any matter except those expressly set forth herein, including any
warranty as to (i) whether the Premises  may be used for  Tenant's  intended use
under existing Law, (ii) the  suitability of the Premises or the Project for the
conduct of Tenant's business, or (iii) the condition of any improvements.  There
are no oral agreements  between  Landlord and Tenant  affecting this Lease,  and
this  Lease   supercedes   and  cancels  any  and  all  previous   negotiations,
arrangements, brochures, agreements and understandings, if any, between Landlord
and Tenant or displayed by Landlord to Tenant with respect to the subject matter
of this Lease. This instrument shall not be legally binding until it is executed
by both  Landlord  and Tenant.  No  subsequent  change or addition to this Lease
shall be binding unless in writing and signed by Landlord and Tenant.

         1516.  Quiet  Possession.  Tenant shall peacefully have, hold and enjoy
the Premises subject to the other terms of this Lease,  provided Tenant pays the
Base Monthly Rent and Additional Rent and performs all of Tenant's covenants and
agreement contained in this Lease.

         IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease within
the intent to be legally  bound  thereby,  to be effective  as of the  Effective
Date.

LANDLORD:

Orchard Jay Investors, LLC
a California limited liability company

By: /s/ David J. Brown
    -----------------------
        David J. Brown
        Managing Member

Dated: May 11, 1999
       --------------------

DAVID J. BROWN

By: /s/ David J. Brown
    -----------------------

Dated: May 11, 1999
       --------------------

TENANT:

Cylink Corporation
a California corporation

By: /s/ [ILLEGIBLE]
    -----------------------

/s/ [ILLEGIBLE]
---------------------------
typed or printed name

Title: Chief Financial Officer
       -----------------------

By: /s/ [ILLEGIBLE]
    -----------------------

/s/ [ILLEGIBLE]
---------------------------
typed or printed name

Title: Corporate Secretary
       -----------------------

Dated: May 10, 1999
       -----------------------

                                       20

<PAGE>

                            FIRST ADDENDUM TO LEASE

         THIS FIRST ADDENDUM To Lease is dated for reference purposes as May 10,
1999,  and is made a part of that Lease  Agreement  (the "Lease")  dated May 10,
1999, by and between Orchard Jay Investors,  LLC, a California limited liability
company and David J. Brown,  ("Landlord") and Cylink  Corporation,  a California
corporation  ("Tenant")  affecting  certain real property commonly known as 3131
and 3151 Jay Street,  Santa Clara,  California,  with reference to the following
facts:

1. Tenant's Right of First Offer for Additional Space

                  A.  Grant and Right of First  Offer:  Landlord  hereby  grants
Tenant a right of first offer (the "RFO") to lease all or any part of the "First
Offer  Space",  which  consists of the Building  located  within the Project and
commonly  known  as 3101 Jay  Street,  Santa  Clara,  California,  on the  terms
contained in this Paragraph.

                  B.  Effective  Period:   The  effective  period  for  the  RFO
("Effective  Period")  shall begin only after the period while Landlord is first
leasing the First Offer Space,  that is, the period from the  Effective  Date of
this Lease to the time when all of the First Offer Space has been leased, or the
period of one (1) year from the Effective  Date of this Lease,  whichever  shall
first end, and shall extend  throughout  the term of this Lease and any extended
term pursuant to an exercise of an option.

                  C.  Notice:  If Landlord  proposes to lease all or part of the
First  Offer  Space at any time  during  the  Effective  Period  and  before the
expiration or earlier  termination of this RFO,  Landlord shall notify Tenant in
writing (the "RFO  Notice") of the  following  basic  business  terms upon which
Landlord would be willing to lease all or any part of the First Offer Space: (a)
the  portion of the First  Offer  Space  which  Landlord  proposes to lease (the
"Offered Space"); (b) the rent for the Offered Space; and (c) any other material
business terms Landlord elects to specify. The RFO shall not be deemed under any
circumstances  an offer to lease the Offered Space,  but is simply a notice that
Tenant has until the end of the Offer Period to make an offer to lease.

                  D. Offer  Period:  Tenant shall have three (3)  business  days
(the "Offer Period") from the RFO Notice within which to make a written offer to
lease the Offered Space,  whether on the terms set forth in Landlord's notice or
otherwise.  During the Offer  Period,  Landlord  will not enter into any legally
binding agreement to lease the Offered Space to any third party.

                  E. Neither Party Bound:  Neither  Landlord nor Tenant shall be
bound to agree to or accept any terms and conditions for such lease except those
which each party, in  its sole  discretion,  wishes to agree to, nor shall there
be any legally enforceable  standards for Landlord's  acceptance or rejection of
Tenant's  offer  made  pursuant  to the RFO,  nor  shall any  agreement  between
Landlord and Tenant for the lease of Offered Space be binding unless and until a
full and formal  Lease,  prepared and reviewed by Landlord's  counsel,  has been
executed by both  Landlord and Tenant.  Landlord is not bound to agree to any or
all of the terms set forth in the RFO Notice if it  determines  at any time that
one or more of said terms is not in Landlord's best  interests,  notwithstanding
that  Tenant may have  accepted  such terms in writing,  and no such  acceptance
creates a binding contract.

                  F. Landlord's Rights and Obligations: Landlord will respond in
writing to Tenant's offer within five (5) days of receipt.  If Landlord does not
accept Tenant's  offer,  then the parties revert to their ordinary rights in the
marketplace, that is, Tenant is free to make any and all further offers or enter
into any negotiations to which Landlord  consents,  and Landlord is free to deal
or not to deal with Tenant as determined in its sole and unfettered  discretion.
Once Tenant has had the opportunity to make its offer,  Landlord is not bound to
enter into negotiations  with Tenant,  and is free to offer the Offered Space to
any one or more third  parties,  on such terms and  conditions  as Landlord  may
elect,  and Landlord shall not,  thereafter,  have any duty to further offer the
Offered

                                       1
<PAGE>

Space to Tenant  unless and until the  Offered  Space has been leased to a third
party which has entered into  possession and paid rent thereon,  at which point,
as to future availability of the Offered Space, the RFO shall once again apply.

                  G.  Non-Assignability;  Termination:  The  right   granted  to
Tenant in this  Paragraph  is  personal  to Tenant,  and may not be  assigned by
Tenant to any third party,  either alone or in conjunction with an assignment of
this  Lease  or a  sublease  of all or any  part  of the  Premises,  and  either
voluntarily or by operation of law; provided,  however,  that it may be assigned
in  conjunction  with an  assignment or sublease  which is a Permitted  Transfer
under Paragraph 14.1F hereof.  The rights granted to Tenant under this paragraph
shall terminate upon the earliest of the following to occur: (i) the  expiration
or  earlier  termination  of the  Lease;  (ii) any  assignment  by Tenant of its
interest in this Lease;  (iii) any subletting by Tenant of substantially  all of
the Premises for  substantially all of the remainder of the Lease Term; (iv) the
termination of this right by default as set forth in  Subparagraph  H. below; or
(v) as to any Offered  Space,  when Tenant has had the  above  granted  right to
make an offer and either  failed to make an offer or Landlord did not accept the
offer (until the Offered Space is leased to a third party which takes possession
and pays rent, after which time the RFO is revived).

                  H.  Termination  By Default:  The rights of Tenant  under this
Paragraph  shall not be  effective  at any time when Tenant is in default  under
this Lease beyond any applicable  cure period  provided in this Lease. If such a
default  exists,  Landlord  shall not be  required  to give the RFO Notice as to
Offered  Space,  and Tenant shall  permanently  lose the RFO with regard to such
space. If Tenant,  with the agreement of Landlord,  shall nevertheless cure such
default, then the rights provided hereunder shall be reinstated on a prospective
basis only,  and any  Offered  Space  first  offered  during the period when the
condition of default existed shall not be subject to the RFO, which shall not be
reinstated as to such space, until such Offered Space has been leased to a third
party which takes possession and pays rent.

                  I. No Right To Negotiate For Renewal  Or Extension  Space: The
right  granted to Tenant by this  Paragraph  shall not arise on account of or in
connection  with the renewal or extension of the term of any then existing lease
affecting  all or any portion of the First  Offer Space,  including both renewal
or extension  pursuant to the exercise,  of an option or other contractual right
by the tenant and  renewal or  extension  by  voluntary  agreement  between  the
existing tenant and Landlord.

         2. Option to Extend Lease Term:  Landlord hereby grants to  Tenant  the
option to extend the Lease Term for one (1) five (5) year term  commencing  when
the  prior term expires, under the following terms and conditions:

                  A. Exercise Dates: Tenant must give Landlord notice in writing
of its  exercise of the option no earlier  than two hundred  seventy  (270) days
before the date the Lease Term would end but for said  exercise  (the  "Earliest
Exercise  Date") and no later than one hundred eighty (180) days before the date
the Lease Term would end but for said exercise (the "Last Exercise Date").

                  B. Conditions to Exercise of Option:  Tenant's right to extend
is conditioned upon and subject to each of the following:

                           (1) In order to exercise its option to extend, Tenant
must give written  notice of such election to Landlord and Landlord must receive
same by  the Last Exercise Date, but not prior to the Earliest Exercise Date. If
proper  notification of the exercise of the option is not given and/or received,
such  option  shall  automatically  expire.   Failure  to  exercise  the  option
terminates that option.  Tenant  acknowledges  that because of the importance of
Landlord of knowing no later than the Last  Exercise  Date whether or not Tenant
will exercise the option,  the failure of Tenant to notify  Landlord by the Last
Exercise  Date will  conclusively  be  presumed  an  election   by Tenant not to
exercise the option.

                           (2) Tenant shall have no right to exercise the option
(i) if an Event of Tenant's Default has occurred and is continuing either on the
date of exercise of

                                       2
<PAGE>

the option or on the date on which the Lease would terminate  absent exercise of
the option or (ii) in the event that  Landlord has  given to Tenant three (3) or
more  notices  of  separate  Defaults  during  the 12 month  period  immediately
preceding the exercise of the option, whether or not the Defaults are cured. The
period of time within which the option may be exercised shall not be extended or
enlarged by reason  of Tenant's inability to exercise  the option because of the
provisions of this  Paragraph.

                  C. Creation of Extended Term:  Upon the timely exercise of the
option to extend and the  commencement  of the extended  term, all references in
the Lease to the Term shall be   considered  to mean the term as extended by the
exercise  of the option,  which  shall be  referred  to herein as the  "Extended
Term".

                  D. Options Personal: The option is personal to the Tenant, and
cannot be  assigned  to or  exercised  by  anyone  other  than the  Tenant or an
assignee or sublessee pursuant to a permitted  transfer.  The option can only be
exercised at a time when the Tenant and/or an assignee or sublessee  pursuant to
a permitted transfer is in full possession of the Premises.

                  E. The Base  Monthly  Rent for the Option  Period shall be the
greater of (i) one hundred  percent (100%) of the Base Monthly Rent due the last
month of the previous Lease Term, or (ii) one hundred percent (100%) of the then
fair market monthly rent determined as of the  commencement of the option period
in question based upon like buildings with like  improvements in the area within
the  boundaries  of the City of Santa  Clara.  Said Base  Monthly  Rent (and any
scheduled increases thereto) shall apply to every month during the Option Period
in question,  and accordingly,  Tenant shall not be entitled to any free rent or
other rent concession  during the Option Periods.  Further,  Tenant shall not be
entitled to any Tenant Improvement  Allowance nor reimbursement for improvements
in  connection  with any  Option  Period,  and shall  accept the  Premises,  the
Building,  and the Project in there "as is" condition as of the first day of the
Option Period in question.

                  F. Upon  exercise  of an option,  the  parties  shall  conduct
discussions  in an attempt to reach  agreement on the Base Monthly Rent (and any
scheduled increases thereto) for the Option Period under the standards set forth
in  Subparagraph E above.  If the parties are unable to agree upon the such Base
Monthly Rent and increases  for the Option  Period at least one  hundred  twenty
(120) days prior to the commencement of the option period,  then the fair market
monthly  rent  shall be   determined  by  appraisal  conducted  pursuant  to the
following  provisions of this  Subparagraph F. In the event it becomes necessary
to determine  by appraisal  the fair market rent of the Premises for the purpose
of establishing  the Base Monthly Rent during the Option Period,  then such fair
market monthly rent shall be determined by three (3) real estate appraisers, all
of whom shall be members of the  American  Institute  of Real Estate  Appraisers
with not less than five (5) years  experience  appraising  real property  (other
than  residential  or  agricultural  property)  located in  Santa Clara  County,
California, in accordance with the following procedures:

                           (1) The party  demanding an appraisal (the "Notifying
Party")  shall  notify the other party (the  "Non-Notifying  Party")  thereof by
delivering a written demand for appraisal,  which demand, to be effective,  must
give the name,  address,  and  qualifications  of an  appraiser  selected by the
Notifying  Party.   Within  ten  (10)  days  of  receipt  of  said  demand,  the
Non-Notifying  Party shall select its appraiser and notify the Notifying  Party,
in writing, of the name, address, and qualifications of an appraiser selected by
it. Failure by the  Non-Notifying  Party to select a qualified  appraiser within
said ten (10) day  period  shall be  deemed a waiver  of its  right to  select a
second appraiser on its own behalf and the Notifying Party shall select a second
appraiser  on behalf of the  Non-Notifying  Party within five (5) days after the
expiration  of said ten (10) day period.  Within ten (10) days from the date the
second  appraiser shall have been appointed,  the two (2) appraisers so selected
shall appoint a third  appraiser.  If the two appraisers  fail to select a third
qualified  appraiser,  the third  appraiser  shall be selected  by the  American
Arbitrations Association or if it shall refuse to perform this function, then at
the request of either Landlord or Tenant, such third appraiser shall be promptly
appointed by the then

                                       3
<PAGE>

Presiding  Judge of the Superior Court of the State of California for the County
of Santa Clara.

                           (2) The three (3)  appraisers so selected  shall meet
in Santa Clara County, California, not later than twenty (20) days following the
selection of the third  appraiser.  At said meeting the  appraisers  so selected
shall attempt to determine the fair market  monthly rent of the Premises for the
option  period  in  question  (including  the  timing  and  amount  of  periodic
increases).

                           (3) If the  appraisers  so  selected  are  unable  to
complete their  determinations  in one meeting,  they may continue to consult at
such times as they deem necessary for a fifteen (15) day period from the date of
the first meeting,  in an attempt to have at least two (2) of them agree. If, at
the initial meeting or at any time during said fifteen (15) day period,  two (2)
or more of the  appraisers  so  selected  agree on the fair  market  rent of the
Leased  Premises,  such  agreement  shall be  determinative  and  binding on the
parties  hereto,  and the  agreeing  appraisers  shall,  in simple  letter  form
executed by the agreeing  appraisers,  forthwith notify both Landlord and Tenant
of the amount set by such agreement.

                           (4) If two (2) or more  appraisers  do  not so  agree
within said  fifteen (15) day period, then each appraiser shall, within five (5)
days  after  the  expiration  of  said  fifteen  (15)  day  period,  submit  his
independent  appraisal in simple letter form to Landlord and Tenant  stating his
determination   of the fair market rent of the Premises for the option period in
question. The parties shall then determine the fair market rent for the Premises
by  determining  the  average  of  the  fair  market  rent  set by  each  of the
appraisers.  However, if the lowest appraisal is less than eighty-five   percent
(85%) of the middle  appraisal then such lowest  appraisal  shall be disregarded
and/or if the highest  appraisal   is greater than one hundred  fifteen  percent
(115%) of the middle appraisal then such highest appraisal shall be disregarded.
If the fair market rent set by any appraisal is so disregarded, then the average
shall be determined by computing  the average set by the other  appraisals  that
have not been disregarded.

                           (5) Nothing  contained  herein shall prevent Landlord
and Tenant from  jointly  selecting a single  appraiser  to  determine  the fair
market rent of the Premises,  in which event the determination of such appraisal
shall be conclusively deemed the fair market rent of the Premises.

                           (6) Each party  shall bear the fees and  expenses  of
the  appraiser  selected  by or for it, and the fees and  expenses  of the third
appraiser  (or the joint  appraiser  if one joint  appraiser  is  used) shall be
borne fifty percent (50%) by Landlord and fifty percent (50%) by Tenant.

         3. Security Deposit:

                  A.  Tenant  shall  provide  to  Landlord  a  Security  Deposit
totaling $827,561.52,  of which up to $600,000.00 can be, at Tenant's sole cost,
an  irrevocable  letter of credit  which (i) is for an initial  term of at least
twelve  (12)  months;  (ii) is drawn  upon a local  commercial  bank  reasonably
acceptable to Landlord; (iii) is in the amount of $600,000.00; (iv) is in a form
satisfactory   to  Landlord;  and (v) may be drawn on by  Landlord  solely  upon
submission of a written  certification of Landlord that there exists an Event of
Tenant's  Default  (as  defined  in  Paragraph  13.1  of this  Lease  or in this
Paragraph), that Tenant has not cured such Event of Default, and that the amount
drawn on the  letter of credit  is the net  amount   due  Landlord  after  first
applying any cash Security Deposit then being held by Landlord. Tenant's failure
to replenish any cash Security Deposit which is applied by Landlord,  within ten
(10) days  after notice that it has been applied, shall be an immediate Event of
Tenant's  Default,  without  further notice or opportunity to cure,  which shall
entitle  Landlord  to resort to the  letter   of  credit to  replenish  its cash
Security Deposit. Except as provided in Subparagraph B herein, Tenant shall keep
the letter of credit in effect  during  the  entire  Lease term plus a period of
four (4) weeks  thereafter,  and Tenant's failure to renew a letter of credit at
least  thirty (30) days prior to its  expiration  for  additional  periods of at
least twelve (12) months and to furnish written evidence thereof to Landlord (or
to provide a cash deposit in lieu

                                       4
<PAGE>

thereof) shall be deemed an Event of Tenant's  Default under this Lease upon the
expiration  of the  thirtieth  (30th) day prior to the date of expiration of the
then-current  letter of credit.  If Tenant  provides  Landlord  with a letter of
credit meeting the foregoing requirements,  any cash Security Deposit previously
provided to Landlord in excess of $227,561.52  shall be returned to Tenant.  Any
proceeds  received  by Landlord  by drawing  upon the letter of credit  shall be
applied in accordance  with the  provisions  of Paragraph  3.5 of the Lease.  If
Landlord  draws upon the letter of credit,  thereafter  Tenant  shall once again
have the right to post a letter of credit in place of a cash Security Deposit so
long as there exits no Event of Tenant's  Default  under the Lease.  If Landlord
transfers the Premises during the Lease Term, and if a letter of credit is still
posted as part of the Security  Deposit,  Tenant  agrees to take such actions as
are necessary to have the letter of credit  redrawn in favor of the new owner of
the Premises, at Tenant's sole cost and expense.

                  B. Notwithstanding the foregoing, the letter of credit and any
cash  Security  Deposit  held by  Landlord  in excess of  $227,561.52  shall  be
released by Landlord upon the  achievement by Tenant of the following  financial
goals:

                           (1) Tenant shall have achieved  four (4)  consecutive
quarters of positive  Net Income,  as disclosed  in Tenant's  audited  financial
statements, and

                           (2) Tenant's Net Income over the four (4) consecutive
quarters described in subsection 1 above, shall equal a minimum of $6,000,000.00
in the aggregate.

         4. Early Occupancy:

                  A.  As   consideration   for  Tenant's   performance   of  all
obligations  to be performed by Tenant under the Lease,  and upon receipt of (i)
the first month's Base Monthly Rent and Security Deposit totaling $1,001,968.48,
and (ii) a  certificate  of insurance as provided by  Article 9.1C of the Lease,
Landlord  shall permit  Tenant to enter and use the Premises  commencing  thirty
(30)  days  prior to the  Scheduled  Commencement  Date  (the  "Early  Occupancy
Period").  Such occupancy  during the Early Occupancy Period shall be subject to
all of the terms, covenants and conditions of the Lease provided,  however, that
the rent payable during the Early Occupancy Period shall be waived.

                  B. In the event  either  party shall bring any action or legal
proceeding for damages for alleged breach of any provision of this agreement, to
recover rent, to terminate  tenancy of the Premises,  or to enforce,  protect or
establish any term or covenant of this agreement or the Lease or right of remedy
of either party,  the prevailing party shall be entitled to recover as a part of
such action or proceeding,  reasonable attorney's fees and court costs as may be
fixed by the court or jury.

                  C. Tenant  agrees to  cooperate  with  construction  personnel
completing the Interior  Improvements  (as defined in Exhibit B to the Lease) in
the Premises and not cause any delay in the completion of these improvements. It
is the intent of Landlord and Tenant that  Tenant's  obligation  to pay the Base
Monthly Rent and all Additional Rent not be delayed by any cause or other act of
Tenant and, if it is so delayed,  and provided that Landlord  promptly  notifies
Tenant in writing of each separate delay and the estimated period of delay, then
Tenant's  obligation to pay the Base Monthly Rent and all Additional  Rent shall
commence  as of the date it would have  commenced  absent  said delay  caused by
Tenant.

                  D. During the Early Occupancy Period,  Tenant shall arrange to
have all utility services, including but not limited to gas, electric, water and
trash, billed directly to Tenant for payment.

         5. Tenant Improvement Allowances:

                  A. The term  "Tenant  Improvement  Allowance"  shall  mean the
maximum  amount  Landlord is  required  to spend  toward the payment of Interior

                                       5
<PAGE>

Improvement  Costs (as  defined  in  Exhibit B to the  Lease)  for all  Interior
Improvements  constructed  in the Premises,  which amount is Two Million,  Three
Hundred Ninety-Five Thousand,  Seven Hundred and no/100 Dollars  ($2,395,700.00)
(i.e., $25.00 per square foot for Tenant's Gross Leasable Area within the entire
Premises).

                  B. No  credit  in the  Base  Monthly  Rent  shall be made if a
portion of the Tenant Improvement Allowance is not spent. Additionally, Landlord
shall not be obligated to provide future use of any Tenant Improvement Allowance
not spent prior to the  completion  of all "punch  list" items (as  described in
Exhibit B to the Lease).

         6.  Hazardous  Materials  Disclosure:  Tenant  acknowledges  Landlord's
disclosure  that a  neighboring  property  has  suffered  a  Hazardous  Material
problem,  and that as a result of a past common ownership of the Project and the
business which operated on this neighboring  property,  an air stripper has been
installed  on the  Project to service  this  neighboring  property  and is being
operated by third parties who are responsible for such problem under  government
approval  and   supervision,   all  as  more  fully  detailed  in  the  Phase  I
Environmental Site Assessment and Phase II Groundwater Investigation of 3151 Jay
Street, Santa Clara,  California,  dated November 10, 1997, and performed by PES
Environmental,  Inc.;  the  Semi-Annual  Status Report on the  3080/3100  Alfred
Street Site in Santa Clara,  California dated as of January,  1999 and performed
by Locus  Technologies;  and the  report  of  Erler &  Kalinowski,  Inc.,  dated
February   24,  1998,   which  Tenant  has  reviewed   pursuant  to  a  separate
confidentiality agreement.

         7. Parking:  Notwithstanding anything to the contrary in Paragraph 4.5,
a total of ten (10) of  Tenant's  Allocated  Parking  Stalls  may,  at  Tenant's
option,  be designated for Tenant's  non-exclusive  use as "Visitor"  spaces. If
Tenant  desires  to mark and use such  stalls,  it shall be under the  following
terms and conditions:

                  A.  All   expenses   associated   with  the  marking  of  such
non-exclusive "Visitor" parking spaces shall be paid by Tenant.

                  B. Tenant shall designate not more than five (5) non-exclusive
"Visitor"  parking spaces for each of its two Buildings.  The "Visitor"  parking
spaces shall be located  reasonably near to the entrance to each Building,  with
due regard for the rights of the tenant(s) of the other  building  which make up
the Project. Their exact location, and the location and nature of any associated
markings,  shall be submitted to and approved in writing by Landlord before work
is commenced.

                  C. If Tenant  elects to paint the  parking  lot with  markings
relating to the "Visitor" spaces,  then on expiration or earlier  termination of
this Lease,  Tenant  shall  remove  markings  and restore the parking lot to its
condition prior to their placement, to Landlord's satisfaction,  and at Tenant's
expense.  Tenant's marking of the designated  "Visitor"  parking spaces shall be
limited to inscribing the word  "Visitors" on the asphalt  parking area.  Tenant
shall not  apply any markings  other than as stated above,  and Tenant shall not
erect any or maintain any signs relating to these spaces.

                  D. Landlord shall not be responsible  for enforcing the use of
said spaces, provided, however, that Landlord will not grant to any other Tenant
of the Project the right to  exclusive  use of such stalls or any other  parking
stalls without Tenant's  consent.  Landlord shall not be required,  in any other
lease of the  property in the  Project,  to prohibit the tenant under such lease
from any use of the "Visitor"  spaces,  or otherwise to make any rules  relating
thereto.  Tenant shall not post or mark the "Visitor" spaces with any "tow away"
or similar signs, and shall not have the right to any physical  enforcement,  by
towing or otherwise, relating to said parking spaces.

         8. Warranty for Building Shell and Grounds:  Landlord warrants that the
portion of the Buildings and surrounding parking,  landscaping, and grounds area
existing prior to the construction of the Interior Improvements under Exhibit B,
the Interior  Improvement  Agreement  (collectively  the  "Building  Shell") was
constructed in a good and workmanlike  manner with materials and equipment which
were  new  and  otherwise  of  good  quality,   installed  in  accordance   with
manufacturer's  and vendor's  specifications.  The foregoing  warranty  shall be
subject to, and limited by, the following:

                                       6
<PAGE>

                  A. Once  Landlord  is notified in writing of any breach of the
above-described warranty,  Landlord  shall  promptly  commence  the cure of such
breach  and  complete  such  cure with  diligence  at  Landlord's  sole cost and
expense.

                  B.  Landlord's  liability  pursuant to such warranty  shall be
limited to the cost of correcting the defect or other matter in question.  In no
event  shall  Landlord  be liable to Tenant  for any  loss,  damage,  claim,  or
liability  incurred  by  Tenant  as a result  of such  defect  or other  matter,
including  without  limitation  damages  resulting  from any loss of business by
Tenant or other consequential damages.

                  C.  Notwithstanding  anything  contained in this  Paragraph 8,
Landlord shall not be liable pursuant to the warranty  granted by this Paragraph
8 for any defect in design,  construction,  or equipment  in the Building  Shell
which is discovered and of which  Landlord  receives  written notice from Tenant
after the first (1st)  anniversary of the  recordation of a notice of completion
for the work of  improvement  affected by the defect or the  Commencement  Date,
whichever is later.

                  D.  With  respect  to  defects  for  which   Landlord  is  not
responsible  pursuant to  subparagraph  C, Tenant  shall have the benefit of any
construction  or equipment  warranties  existing in favor of Landlord that would
assist  Tenant in  correcting  such defect and in  discharging  its  obligations
regarding the repair and  maintenance  of the Premises.  Upon request by Tenant,
Landlord  shall  inform  Tenant  of  all  written  construction   and  equipment
warranties  existing  in favor of  Landlord  which  affect the  Building  Shell.
Landlord  shall  cooperate  with  Tenant in  enforcing  such  warranties  and in
bringing any suit that may be necessary to enforce  liability with regard to any
defect for which Landlord is not responsible pursuant to this Paragraph or under
the Lease so long as Tenant pays all costs reasonably incurred by Landlord in so
acting.

                  E. Landlord  makes no other  express or implied  warranty with
respect to the design, construction or operation of the Building Shell except as
that  set forth in this  Paragraph.  Notwithstanding  anything  to the  contrary
contained in the Lease or this  Agreement,  Tenant's  acceptance of the Premises
shall not be deemed a waiver of the foregoing warranty. THE FOREGOING DISCLAIMER
INCLUDES A DISCLA]MER OF ALL WARRANTIES AND REPRESENTATIONS, EXPRESS OR IMPLIED,
WITH RESPECT TO THE MATTERS DESCRIBED HEREIN,  INCLUDING ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

          9. To the actual knowledge of Michael J. Biggar,  Landlord's executive
handling  this  Project,  as of the  Effective  Date,  without  having  made any
investigation (and without having been deemed to have investigated or discovered
any unknown facts which such investigation  would  have disclosed),  and subject
to and qualified by all information and disclosures  made to Tenant by Landlord,
Landlord  represents  that Landlord does not know of any person who has,  during
Landlord's  ownership of the Project,  served in the function of Declarant under
the Private Restrictions.

          10. Building Signage:  Landlord agrees that,  provided the parties can
reach mutual  agreement on the size,  quality,  and  appearance of the sign (and
Landlord will not unreasonably withhold its agreement on such matters),  that it
will not object to Tenant's  maintenance of a tasteful sign on the north side of
one building  facing toward Highway 101 which states solely  Tenant's  corporate
name.

                                       7
<PAGE>

             11. If the  Lease is  terminated  pursuant  to a right  granted  to
Tenant under Paragraph 2.4 of the Lease,  all monies deposited or paid by Tenant
to  Landlord  as a Security  Deposit or Prepaid  Rent under the Summary of Basic
Lease Terms, Paragraphs L and M and Paragraphs 3.3 and 3.5 of the Lease shall be
returned  to Tenant on  demand,  but  Landlord  shall have no duty to refund any
other  monies  paid  hereunder,  including  but not  limited  to monies  paid or
 contributed  for  Interior  Improvements  and/Or  under the Cost  Reimbursement
Agreement between the parties.

LANDLORD:                                TENANT:

ORCHARD JAY INVESTORS LLC                CYLINK CORPORATION
a California limited liability company   a California corporation

By:   /s/ David J. Brown                 By:   /s/ [ILLEGIBLE]
      --------------------------------         --------------------------------
          David J. Brown
          Managing Member                Its:  Chief Financial Officer
                                               --------------------------------
Dated: May 11, 1999
       -------------------------------   Dated: May 10, 1999
                                               --------------------------------

DAVID J. BROWN
                                         By:   /s/ [ILLEGIBLE]
                                               --------------------------------
By:   /s/ David J. Brown
      --------------------------------
          David J. Brown                 Its:  Corporate Secretary
                                               --------------------------------

Dated: May 11, 1999
      --------------------------------   Dated: May 10, 1999
                                               --------------------------------

                                       8
<PAGE>

LANDLORD:                                TENANT:

ORCHARD JAY INVESTORS LLC                CYLINK CORPORATION
a California limited liability company   a California corporation

By:                                      By:
      --------------------------------         --------------------------------
          David J. Brown
          Managing Member                Its:
                                               --------------------------------
Dated:
       -------------------------------   Dated:
                                               --------------------------------

DAVID J. BROWN
                                         By:
                                               --------------------------------
By:
      --------------------------------
          David J. Brown                 Its:
                                               --------------------------------

Dated:
      --------------------------------   Dated:
                                               --------------------------------

                                       8
<PAGE>

                                   Exhibit A

                            ORCHARD BUSINESS CENTRE
                                  SANTA CLARA

                               (GRAPHIC OMITTED)

                                   JAY STREET

                      COMMUNICATIONS AND FIBER OPTIC LOOP

                                                   ______   Six 4" Conduits
                                                   ------   Four 4" Conduits
                                                     [ ]    Junction Box.

The  information  contained  herein  has  been  obtained  from  sources  we deem
reliable.  We have no reason to doubt its accuracy,  but we do not guarantee it.
All  information  should be  verified  prior to  lease.  Site plan may not be to
scale.

<PAGE>

                                   EXHIBIT B

                         INTERIOR IMPROVEMENT AGREEMENT

         THIS INTERIOR IMPROVEMENT AGREEMENT  ("Agreement") is made part of that
Lease dated May 10, 1999,  (the "Lease") by and between  Orchard Jay  Investors,
LLC, a California  limited liability  company and David J. Brown,  ("Landlord"),
and Cylink  Corporation,  a  California  corporation,  ("Tenant").  Landlord and
Tenant agree that the following terms are part of the Lease:

         1. Purpose of Improvement  Agreement:  The purpose of this  Improvement
Agreement is to set forth the rights and obligations of Landlord and Tenant with
respect to the construction of Interior Improvements within the Premises.

         2. Definitions:  As used in this Interior  Improvement  Agreement,  the
following  terms  shall have the  following  meanings,  and terms  which are not
defined  below,  but which are  defined  in the Lease and which are used in this
Interior Improvement Agreement,  shall have the meanings ascribed to them by the
Lease:

                  A. Approved Specifications: The term "Approved Specifications"
shall mean those specifications for the Interior  Improvements to be constructed
by Landlord which are described by Exhibit "C" to the Lease.

                  B. Interior  Improvements:  The term  "Interior  Improvements"
shall mean all interior improvements to be constructed by Landlord in accordance
with  the  Approved  Specifications  (e.g.,  HVAC  equipment  and  distribution,
transformer  and  power  distribution,   partitions,  floor,  wall,  and  window
covering, lighting fixtures).

                  C. Interior Improvement Costs: The term "Interior  Improvement
Costs"  shall  mean the  following:  (i) the total  amount due  pursuant  to the
general construction contract entered into by Landlord to construct the Interior
Improvements, including costs for any and all building code compliance; (ii) the
cost of all governmental  approvals  required as a condition to the construction
of the Interior  Improvements  (including all construction  taxes imposed by the
City of Santa Clara) in  connection  with the issuance of a building  permit for
the Interior  Improvements;  (iii) all utility connection or use fees; (iv) fees
of architects or engineers for services  rendered in connection  with the design
and  construction  of the  Interior  Improvements;  (v) the cost of payment  and
performance  bonds obtained by Landlord or Prime Contractor to assure completion
of the  Interior  Improvement  (but only if Tenant  requests  or  approves  such
bonds);  (vi)  the  cost of any  fees or other  exactions  of any  municipal  or
governmental  entities  which  arise  out of the  construction  of the  Interior
Improvements;  (vii) costs  associated  with  compliance with the Americans with
Disabilities Act and/or such California laws and/or  regulations which relate to
facilities  for the  disabled;  and (viii) costs to comply with  Paragraph 12 of
this Agreement.  There shall not be included in the Interior  Improvement  Costs
any  expenses of Landlord for building the shell and the grounds of the Project,
nor complying with legal requirements  relating thereto and required by any Laws
or Private Restrictions for building shells and exteriors in general.

                  D. Substantial  Completion  and  Substantially  Complete:  The
terms "Substantial  Completion" and "Substantially Complete" shall each mean the
date when all of the  following  have  occurred  with  respect  to the  Interior
Improvements in question:  (i) the construction of the Interior Improvements has
been substantially  completed in accordance with the requirements of this Lease;
(ii) the  architect  responsible  for  preparing the plans shall have executed a
certificate or statement representing that the Interior Improvements in question
have  been   substantially   completed   in   accordance   with  the  plans  and
specifications  therefor;  (iii) the  Building  Department  of the City of Santa
Clara has completed its final  inspection of such  improvements  and has "signed
off the  building  inspection  card  approving  such work as  complete;  (iv) if
applicable,  a Certificate of Occupancy has been issued and any other  necessary
governmental  approvals for occupancy have been obtained;  (v) all utilities are
hooked up and

<PAGE>

EXHIBIT B

available  for use; and (vi) Tenant has received  written  notice that all above
parts of Substantial Completion have taken place.

         3. Schedule of  Performance:  Set forth in this paragraph is a schedule
of certain  critical  dates  relating  to  Landlord's  and  Tenant's  respective
obligations  regarding  the  construction  of  the  Interior  Improvements  (the
"Schedule of  Performance").  Landlord and Tenant shall each be obligated to use
reasonable  efforts  to perform  their  respective  obligations  within the time
periods set forth in the Schedule of Performance  and elsewhere in this Interior
Improvement Agreement. The Schedule of Performance is as follows:

           Action                                                 Responsible
           Items                 Due Date                            Party
           -----                 --------                            -----

A.       Delivery to             Completed.                        Tenant
         Landlord of
         Tenant's
         Interior
         Requirements

B.       Delivery to             Completed.                        Landlord
         Tenant of
         Preliminary
         Interior
         Improvement
         Plans

C.       Approval by             Within three (3) business days    Tenant
         Tenant of               after Tenant receives
         Preliminary             Preliminary Interior Plans.
         Interior Plans

D.       Delivery to             Within seventeen (17) business    Landlord
         Tenant of               days after approval of the
         Final                   Preliminary Interior Plans.
         Interior Plans

E.       Approval by             Within five (5) business  days    Tenant
         Tenant of               after Tenant receives Final
         Final                   Interior Plans.
         Interior Plans

F.       Approval by             Within three (3) business days    Tenant
         Tenant of               after receipt of construction
         Construction            costs.
         Costs

G.       Issuance of             By June 21, 1999.                 Landlord
         Building Permits

H.       Commence-               Within ten (10)  business days    Landlord
         ment of                 after issuance of all
         construction            necessary governmental
         of Interior             approvals and approval of
         Improvement             construction costs by Tenant
                                 and Landlord.

                                       2
<PAGE>

EXHIBIT B

           Action                                                 Responsible
           Items                 Due Date                            Party
           -----                 --------                            -----

I.       Substantial    Within ten (10) weeks after                Landlord
         Completion     execution of construction contract
         of Interior    for the Interior Improvements.
         Improvements   Estimated August 30, 1999.

J.       Commence-      Rent shall commence on                     Tenant
         ment of Rent   the Commencement Date.
         Payments

         4. Construction of Interior Improvements:  Landlord shall construct the
Interior Improvements in accordance with the following:

                  A.  Development  and Approval of Preliminary  Interior  Plans:
Tenant  has  delivered  to  Landlord  a  proposed  floor  plan  identifying  its
requirements for the Interior  Improvements that is consistent with the Approved
Specifications  ("Tenant's  Interior  Requiremens").  On or before  the due date
specified in the Schedule of  Performance,  Landlord shall and deliver to Tenant
for its review and  approval  preliminary  plans for the  Interior  Improvements
which are consistent with and conform to Tenant's Interior  Requirements and the
Approved Specifications (the "Preliminary Interior Plans"). On or before the due
date specified in the Schedule of Performance,  Tenant shall either approve such
plans  or  notify  Landlord  in  writing  of  its  specific  objections  to  the
Preliminary  Interior  Plans.  If Tenant so objects,  Landlord  shall revise the
Preliminary  Interior  Plans to address such  objections in a manner  consistent
with the  parameters  for the Interior  Improvements  set forth in this Interior
Improvement  Agreement and the Approved  Specifications  and shall resubmit such
revised Preliminary  Interior Plans as soon as reasonably  practicable to Tenant
for its approval.  When such revised Preliminary  Interior Plans are resubmitted
to Tenant,  it shall either approve such plans or notify Landlord of any further
objections in writing  within two (2) business days after  receipt  thereof.  If
Tenant has further  objections to the revised  Preliminary  Interior Plans,  the
parties  shall meet and confer to develop  Preliminary  Interior  Plans that are
acceptable  to both  Landlord  and Tenant  within five (5)  business  days after
Tenant has  notified  Landlord  of its second  set of  objections.  In the event
Tenant and Landlord do not resolve all of Tenant's  objections  within such five
(5) business day period,  Landlord and Tenant shall immediately cause Landlord's
architect to meet and confer with Tenant's architect or construction consultant,
who shall apply the standards set forth in this Interior  Improvement  Agreement
to  resolve  Tenant's  objections  and  incorporate  such  resolution  into  the
Preliminary  Interior Plans, which process Landlord and Tenant shall cause to be
completed  within five (5) business  days after the  conclusion  of the five (5)
business day period referred to in the immediately preceding sentence.

                  B. Development and Approval of Final Interior Plans:  Once the
Preliminary  Interior Plans have been approved by Landlord and Tenant (including
all changes made to resolve Tenant's objections approved by Landlord's architect
and Tenant's architect or construction  consultant pursuant to subparagraph 4A),
Landlord  shall  complete  and submit to Tenant for its approval  final  working
drawings for the Interior Improvements by the due date specified in the Schedule
of  Performance.   Tenant  shall  approve  the  final  plans  for  the  Interior
Improvements or notify Landlord in writing of its specific objections by the due
date specified in the Schedule of Performance. If Tenant so objects, the parties
shall confer and reach  agreement  upon final working  drawings for the Interior
Improvements within five (5) business days after Tenant has notified Landlord of
its objections.  In the event Tenant and Landlord do not resolve all of Tenant's
objections  within such five (5) business day period,  Landlord and Tenant shall
immediately  cause  Landlord's  architect  to  meet  and  confer  with  Tenant's
architect or

                                       3
<PAGE>

EXHIBIT B

construction  consultant,  who shall  apply  the  standards  set  forth  in this
Interior  Improvement  Agreement to resolve Tenant's  objections and incorporate
such resolution into the Final Interior Plans, which process Landlord and Tenant
shall cause to be completed  within five (5) business days after the  conclusion
of the five (5) business  day period  referred to in the  immediately  preceding
sentence.  The final  working  drawings  so  approved  by  Landlord  and  Tenant
(including  all  changes  made  to  resolve  Tenant's   objections  approved  by
Landlord's  architect and Tenant's  architect or  construction  consultant)  are
referred to herein as the "Final Interior Plans".

                  C. Building Permit:  Not later than immediately  following the
time that the Final  Interior  Plans have been  approved by Landlord and Tenant,
Landlord shall apply for a building  permit for the Interior  Improvements,  and
shall diligently prosecute to completion such approval process.

                  D. Construction Contract:  Landlord and Tenant shall cooperate
to cause the Interior Improvements to be constructed by a general contractor who
is  engaged  by  Landlord  in  accordance  with  the  procedures  set  forth  in
subparagraph 4D(1) hereof

                           (1) The  Interior  Improvements  will be  constructed
pursuant  to  a  "fixed  price"  construction  contract  awarded  to  a  general
contractor  selected by Landlord and approved by Tenant.  Landlord has submitted
to Tenant Landlord's  recommendation of  the general contractor--Hollander Smith
Inc.-- which Tenant has approved.  Landlord  shall submit to Tenant the terms of
the "fixed  price"  construction  contract  for the  Interior  Improvements  for
Tenant's  approval,  which  shall be deemed  given if  objection  is not made by
Tenant  within three (3) business  days after  receipt  of  such  proposal  from
landlord.  Subject to mutual  agreement  of  Landlord  and  Tenant,  the general
construction  contract will provide that major  subcontractors  for  electrical,
plumbing,  mechanical  and  HVAC,  and  elevator  work  (as  well  as all  other
subcontractors  as  to  which  Landlord  and  Tenant  agree)  for  the  Interior
Improvements shall be engaged on a "design-build"  basis where Tenant shall have
the  right to  reasonably  approve  such  subcontractors.  Tenant  and  Landlord
acknowledge that the total Interior  Improvement  Costs are likely to exceed the
amount  stated in Paragraph 5 of the First Addendum to Lease.  Tenant shall have
the right to approve the total Interior  Improvement Costs. After all such costs
are  known,  in the event  that  Tenant  does not  approve  the  total  Interior
Improvement Costs, Tenant may request that changes be made to the Final Interior
Plans (subject to Landlord's  approval which shall not be unreasonably  withheld
or delayed) for the purpose of lowering the total  Interior  Improvement  Costs.
Other major subcontracts shall go through the bid process,  wherein Tenant shall
have the right to  reasonably  approve  such  subcontractors  and to have  major
subcontracts  rebid if Tenant  does not approve  the bid.  Delays  caused by any
modifications to the Final Interior Plans and rebidding or re-pricing  requested
by Tenant  shall be deemed  delays  caused by Tenant for purposes of Paragraph 7
hereof.

                           (2)  Landlord and Tenant shall use their best efforts
to  approve  the  general   contractor  and  all   subcontractors  so  that  the
construction contract may be executed as soon as possible.  Tenant shall have no
liability  to  the  general  contractor  or  to  any  subcontractor   under  the
construction  contract  and/or any  subcontractor  otherwise with respect to the
Interior Improvements.

                  E. Commencement of Interior Improvements: On or before the due
date  specified  in  the  Schedule  of  Performance,   Landlord  shall  commence
construction for the Interior  Improvements and shall diligently  prosecute such
construction to completion,  using all reasonable efforts to achieve Substantial
Completion  of the  Interior  Improvements  by the  due  date  specified  in the
Schedule of Performance.

                                       4
<PAGE>

EXHIBIT B

         5.  Payment of Interior  Improvement  Costs:  Landlord and Tenant shall
have  the  following  obligations  with  respect  to  the  payment  of  Interior
Improvement Costs:

                  A.  Landlord  shall be obligated to pay an amount equal to the
Tenant  Improvement  Allowance  as  provided  for in  Paragraph  5 of the  First
Addendum To Lease for the Payment of Interior Improvement Costs. If the total of
Interior   Improvement   Costs  exceeds  the  amount  of   Landlord's   required
contribution, Tenant shall be obligated to pay the entire amount of such excess,
including  Landlord's  construction  management  fee of Four Percent (4%) of the
hard costs of construction in excess of the Tenant Improvement Allowance.  In no
event shall  Landlord be  obligated  to pay for  Interior  Improvement  Costs in
excess of the  allowance  provided for in  Paragraph 5 of the First  Addendum to
Lease.  If  Tenant  becomes  obligated  to  contribute  toward  paying  Interior
Improvement  Costs  pursuant  to  this  subparagraph  5A,  then  Landlord  shall
determine  the  amount of such excess prior to  commencing  construction  of the
Interior  Improvements and Tenant shall pay to Landlord the total amount of such
estimated  excess  costs as  follows:  Within  ten (10) days  after  receipt  of
Landlord's  statement of such excess costs,  Tenant shall pay to Landlord 20% of
such excess cost; within ten (10) days after receipt of Landlord's certification
that 50% of the Interior  Improvement work has been completed,  Tenant shall pay
to Landlord a further 40% of such excess  cost;  within ten (10) days of receipt
of Landlord's  certification that 90% of the Interior  Improvement work has been
completed,  Tenant  shall pay to  Landlord a further  30% of such  excess  cost.
Landlord's  certification  of progress  shall be  accompanied  by a contractor's
written certification  confirming the progress of construction,  and on request,
Landlord shall supply Tenant with other back-up documents  reasonably  requested
by Tenant in regard to such  progress  determination.  If changes are  approved,
Landlord may, at its discretion, provide Tenant with a new and updated statement
of the amount of excess costs based on the additional costs of approved changes,
and in such event (a) all further  progress  payments  shall be based on the new
statement  of  excess  costs and (b) at the time of the next  progress  payment,
Tenant shall pay an additional  amount sufficient to bring all previous progress
payments current based on the new statement of excess costs.  Within thirty (30)
days after the Building is Substantially  Completed,  the amount of all Interior
Improvement Costs has been finally  determined,  and all "punch-list" items have
been competed,  Tenant shall pay Landlord any portion of the actual excess costs
that  remains  due and unpaid.  The excess  costs  remaining  due and unpaid are
comprised of the amount  determined by Landlord as the excess costs prior to the
work being performed,  less all progress  payments made as set forth above, plus
any added  costs  resulting  from  approved  changes  to the plans and the work.
Landlord  shall  not be  obligated  to  commence  construction  of the  Interior
Improvements  unless and until the first payment of these excess costs have been
paid by Tenant to Landlord,  and at  Landlord's  option,  if Tenant does not pay
such amount within the time specified above,  Landlord may give Tenant a further
five (5) day notice to pay such costs or commit an Event of Tenant's  Default as
defined in the Lease,  and if Tenant  does not,  within such five (5) day period
after such notice, pay such amount to Landlord,  then Tenant shall be considered
to have  committed an Event of Tenant's  Default  without any further  notice or
cure periods, and Landlord shall be entitled, in addition to any other rights or
remedies hereunder, to all of its rights and remedies prescribed in the Lease in
the case of an Event of Tenant's  Default.  At the time the final  accounting is
rendered  by  Landlord  pursuant to  subparagraph  5C hereof,  there shall be an
adjustment  between Landlord and Tenant such that each shall only be required to
contribute to the payment of Interior  Improvement  Costs in accordance with the
obligations  set forth in this  subparagraph 5A which  adjustment  shall be made
within five (5) days after Landlord notifies Tenant of the required  adjustment.
If Tenant is  required  to make a payment to  Landlord,  Tenant  shall make such
payment  even if Tenant  elects to audit the  statement  submitted  by  Landlord
pursuant to  subparagraph  5C. In the event  Tenant's  audit  discloses  that an
overpayment  or  underpayment  was made by Tenant,  there shall be an adjustment
between  Landlord and Tenant as soon as  reasonably  practicable  such that each
shall only be required to contribute to the payment of costs in accordance  with
the obligations set forth in this subparagraph 5A.

                  B. If Tenant fails to pay any amount when due pursuant to this
Paragraph 5, then (i) Landlord may (but without the obligation to do so) advance
such

                                       5
<PAGE>

funds on Tenant's  behalf,  and Tenant shall be obligated to reimburse  Landlord
for the amount of funds so  advanced on its  behalf,  and (ii)  Tenant  shall be
liable for the  payment of a late  charge and  interest in the same manner as if
Tenant had failed to pay Base  Monthly  Rent when due as  described in Paragraph
3.4 of the Lease.  Any  amounts  paid to  Landlord  by Tenant  pursuant  to this
subparagraph  shall be held by Landlord as Tenant's agent,  for disbursal to the
general contractor in payment for work costing in excess of Landlord's  required
contribution.

                  C. When the Interior Improvements are Substantially Completed,
Landlord shall submit to Tenant a final and detailed  accounting of all Interior
Improvement Costs paid by Landlord,  certified as true and correct by Landlord's
financial officers. Tenant shall have the right to audit the books, records, and
supporting  documents  of  Landlord to the extent  necessary  to  determine  the
accuracy of such  accounting  during normal business hours after giving Landlord
at least two (2) days prior written  notice.  Tenant shall bear the cost of such
audit,  unless such audit  discloses  that Landlord has  overstated the total of
such costs by more than two percent (2%) of the actual amount of such costs,  in
which event Landlord shall pay the cost of Tenant's  audit.  Any such audit must
be conducted,  if it all,  within ninety (90) days after Landlord  delivers such
accounting to Tenant.

         6. Changes to Approved  Plans:  Subject to  Paragraph  4.D.1,  once the
Final  Interior  Plans have been approved by Landlord and Tenant,  neither shall
have the  right  to order  extra  work or  change  orders  with  respect  to the
construction of the Interior  Improvements  without the prior written consent of
the other (which, in the case of Tenant's approval,  may be withheld in its sole
discretion).  All extra work or change  orders  requested by either  Landlord or
Tenant  shall be made in  writing,  shall  specify  any  added or  reduced  cost
(including the construction manager's fees of Landlord for the management of the
construction  specified  under such change order or extra work,  as set forth in
Paragraph 5A) and/or  construction  time resulting  therefrom,  and shall become
effective  and a part of the Final  Interior  Plans once  approved in writing by
both parties.  If a change order  requested by Tenant  results in an increase in
the  cost of  constructing  the  Interior  Improvements,  (including  Landlord's
construction  management  fee  of  Four  Percent  (4%)  of  the  hard  costs  of
construction), Tenant shall pay the amount of such increase caused by the change
order  requested  by Tenant at the time the  change  order is  approved  by both
Landlord  and Tenant if and to the extent such change  order causes the Interior
Improvement Costs to exceed Landlord's required  contribution  thereto described
in subparagraph 5A. If a change order requested by Tenant results in an increase
in the amount of  construction  time needed by Landlord to complete the Interior
Improvements, Paragraph 7 hereof may apply.

         7. Delay in Completion Caused by Tenant: The parties hereto acknowledge
that the date on which Tenant's  obligation to pay the Base Monthly Rent and the
Additional Rent would otherwise commence may be delayed because of: (i) Tenant's
failure to submit necessary information to Landlord when required; (ii) Tenant's
failure to promptly  review and approve the plans for the Interior  Improvements
in accordance with the Schedule for  Performance;  (iii) any act by Tenant which
interferes  with  or  delays  the  completion  of the  plans  for  the  Interior
Improvements or Landlord's  construction  work; (iv) change orders  requested by
Tenant and approved by Landlord;  (v) special  materials or equipment ordered or
specified  by Tenant that cannot be obtained by Landlord at normal cost within a
reasonable period of time because of limited availability;  or (vi) any delay or
default by Tenant in paying  the  estimated  cost of  construction  of  Interior
Improvements in excess of the Landlord's required contribution. It is the intent
of the parties hereto that the  commencement  of Tenant's  obligation to pay the
Base Monthly Rent and all  Additional  Rent not be delayed by any of such causes
or by any  other act of  Tenant,  and in the  event it is so  delayed,  Tenant's
obligation to pay the Base Monthly Rent and all  Additional  Rent shall commence
as of the date it would otherwise have commenced  absent delay caused by Tenant,
provided  that  within  a  reasonable  period  of  time  after  learning  of the
occurrence of the cause of any such delay,  Landlord  notifies Tenant in writing
of the fact that such delay has occurred and the known or anticipated  extent of
any such delay,  (but  Landlord is not  required to give any notice in regard to
failure to pay estimated  excess Interior  Improvement  Costs except the initial
notice to pay

                                       6
<PAGE>

EXHIBIT B

such costs required by Paragraph 5A above as of the Effective  Date,  there have
not been any Tenant Delays).

         8. Delivery of Possession,  Punch List, and  Acceptance  Agreement:  As
soon as the Interior  Improvements  are  Substantially  Completed,  Landlord and
Tenant  shall  together  walk  through the  Premises  and  inspect all  Interior
Improvements so completed,  using reasonable efforts to discover all uncompleted
or defective  construction in the Interior  Improvements.  After such inspection
has been  completed,  each party shall sign an acceptance  agreement in the form
attached  to the Lease,  as Exhibit  "D",  which shall (i) include a list of all
"punch  list" items which the parties  agree are to be corrected by Landlord and
(ii) shall state the  Commencement  Date and the initial Base Monthly  Rent.  As
soon as such  inspection  has  been  completed  and  such  Acceptance  Agreement
executed,  Landlord shall deliver possession of the Premises to Tenant. Landlord
shall use reasonable  efforts to complete  and/or repair such "punch list" items
within thirty (30) days after executing the Acceptance Agreement. Landlord shall
have no  obligation  to deliver  possession of the Premises to Tenant until such
procedures  regarding the  preparation  of a punch list and the execution of the
Acceptance Agreement have been completed. Subject to the provisions of Paragraph
9 of this  Agreement,  Tenant's  taking  possession  of any part of the Premises
shall be deemed to be an acceptance by Tenant of Landlord's  work of improvement
in such part as complete  and in  accordance  with the terms of the Lease except
for the punch list items noted and latent defects that could not reasonable have
been  discovered  by Tenant during its  inspection of the Interior  Improvements
prior to completion of the acceptance agreement.  Tenant's  participation in and
execution of a "punch list",  execution of the Acceptance Agreement,  and taking
possession  of the  Premises  shall not in any way  affect  Landlord's  warranty
obligations  under this Agreement.  Notwithstanding  anything  contained herein,
Tenant's  obligation  to pay the Base  Monthly  Rent and  Additional  Rent shall
commence as provided in the Lease,  regardless of whether Tenant  completes such
inspection or executes such Acceptance Agreement.

         9. Standard of  Construction  and  Warranty:  Landlord  hereby warrants
that the Interior Improvements shall be constructed  substantially in accordance
with the Final Interior Plans (as modified by change orders approved by Landlord
and Tenant),  all Private  Restrictions  and all Laws, in a good and workmanlike
manner,  and all materials and equipment  furnished shall conform to such final,
plans and shall be new and  otherwise  of good  quality  and were  installed  in
accordance with all vendor's and manufacturer's specifications, instructions and
requirements. All construction,  product and equipment warranties and guarantees
obtained  by  Landlord  shall,  to the  extent  obtainable,  provide  that  such
warranties  and  guarantees  shall  also run to the  benefit  of Tenant  and its
successors and assigns.  The foregoing warranty shall be subject to, and limited
by, the following:

                  A. Once  Landlord  is notified in writing of any breach of the
above-described  warranty,  Landlord  shall  promptly  commence the cure of such
breach  and  complete  such  cure with  diligence  at  Landlord's  sole cost and
expense.

                  B.  Landlord's  liability  pursuant to such warranty  shall be
limited to the cost of correcting the defect or other matter in question.  In no
event shall Landlord be liable to Tenant' for any damages or liability  incurred
by  Tenant  as a result  of such  defect  or  other  matter,  including  without
limitation  damages  resulting  from any loss of  business  by  Tenant  or other
consequential damages.

                  C.  Except  for  Landlord's   obligations   under  the  Lease,
notwithstanding  anything  contained in this  Paragraph 9, Landlord shall not be
liable for any defect in design,  construction,  or equipment furnished which is
discovered  and of which  Landlord  receives  written  notice from Tenant  after
eighteen (18) months have passed since the later of (i) the  Commencement  Date,
and (ii)  recordation  of a notice  of  completion  for the work of  improvement
affected by the defect.

                  D.  With  respect  to  defects  for  which.  Landlord  is  not
responsible  pursuant to  subparagraph  9C, Tenant shall have the benefit of any
construction  or equipment  warranties  existing in favor of Landlord that would
assist Tenant in correcting.

                                       7
<PAGE>

EXHIBIT B

such  defect  and in  discharging  its  obligations  regarding  the  repair  and
maintenance  of the  Premises.  Upon  request by Tenant,  Landlord  shall inform
Tenant of all written construction and equipment warranties existing in favor of
Landlord which affect the Interior  Improvements.  Landlord shall cooperate with
Tenant  in  enforcing  such  warranties  and in  bringing  any suit  that may be
necessary to enforce  liability with regard  to any defect for which Landlord is
not  responsible  pursuant  to this  paragraph  so long as Tenant pays all costs
reasonably incurred by Landlord in so acting.

         E. Landlord makes no other express or implied  warranty with respect to
the design,  construction  or operation of the Interior  Improvements  except as
set  that forth in this  Paragraph.  Notwithstanding  anything  to the  contrary
contained in the Lease or this  Agreement,  Tenant's  acceptance of the Premises
shall not be deemed a waiver of the foregoing warranty. THE FOREGOING DISCLAIMER
INCLUDES A  DISCLAIMER  OF ALL  WARRANTIES  AI Th  REPRESENTATIONS,  EXPERESS OR
IMPLIED,  WITH RESPECT TO THE MATTERS  DESCRIBED  HEREIN,  INCLUDING ANY IMPLIED
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

         11. Effect of Agreement: In the event of any inconsistency between this
Improvement  Agreement and the Lease,  the terms of this  Improvement  Agreement
shall prevail.

          12. Delivery of Documents: Landlord shall deliver to Tenant (i) within
thirty  (30) days after the same is  obtained  by  Landlord,  any  temporary  or
permanent  certificates of  occupancy  issued with regard to the Premises;  (ii)
within sixty (60) days after  Tenant's  request (if such request is made  within
one year of the Effective Date), a complete "as-built" set of Mylar reproducible
building  plans  reflecting  all approved  changes to the work; and (iii) within
thirty  (30)  days  after  Substantial  Completion  of  the  Premises,  complete
maintenance and operating manuals for all the equipment,  fixtures,  and systems
that are part of the Building.

         13. Miscellaneous:  Paragraph 15.11 of the Lease is incorporated herein
and its provisions, as applicable, shall be a part hereof.

LANDLORD:                                TENANT:

ORCHARD JAY INVESTORS LLC                CYLINK CORPORATION
a California limited liability company   a California corporation

By:   /s/ David J. Brown                 By:   /s/ [ILLEGIBLE]
      --------------------------------         --------------------------------
          David J. Brown
          Managing Member                Its:  Chief Financial Officer
                                               --------------------------------
Dated: May 11, 1999
       -------------------------------   Dated: May 10, 1999
                                               --------------------------------

DAVID J. BROWN
                                         By:   /s/ [ILLEGIBLE]
                                               --------------------------------
By:   /s/ David J. Brown
      --------------------------------
          David J. Brown                 Its:  Corporate Secretary
                                               --------------------------------

Dated: May 11, 1999
      --------------------------------   Dated: May 10, 1999
                                               --------------------------------

                                       8
<PAGE>

                                   EXHIBIT C

                            APPROVED SPECIFICATIONS

                                (to be inserted)

<PAGE>

                                   EXHIBIT D

                              ACCEPTANCE AGREEMENT

         THIS ACCEPTANCE AGREEMENT is made as of _________________  1999, by and
between the parties  hereto with regard to that Lease dated May 10, 1999, by and
between ORCHARD JAY INVESTORS,  LLC, a California  limited liability company and
David J. Brown ("Landlord"), and Cylink Corporation, a California corporation as
Tenant ("Tenant"),  affecting those Premises commonly known as 3131 and 3151 Jay
Street, Santa Clara, California. The parties hereto agree as follows:

         1.  Possession of the Premises has been  delivered to Tenant and Tenant
has taken possession of the Premises (subject to any qualifications set forth in
the Lease).

         2. The Commencement  Date of the Lease Term is  __________________  and
the Lease  Term  shall  expire on  _________________  unless  sooner  terminated
according to the terms of the Lease or by mutual agreement.

         3. The Base  Monthly  Rent  initially  due pursuant to the Lease is One
Hundred Seventy-Four Thousand, Four Hundred Six and 96/100 Dollars ($174,406.96)
per month, subject to any subsequent adjustments required by the Lease.

         4.  Landlord  has  received a  Security  Deposit in the amount of Eight
Hundred  Twenty-Seven  Thousand,  Five  Hundred  Sixty-One  and  52/100  Dollars
($827,561.52)  which shall be held by Landlord  pursuant to Paragraph 3.5 of the
Lease and  Paragraph 3 of the First  Addendum to Lease and all other  applicable
terms of the Lease.  In  addition,  Tenant has prepaid rent in the amount of One
Hundred   Seventy-Four   Thousand,   Four   Hundred   Six  and  96/100   Dollars
($174,406.96),  which shall be applied to the first  installment of Base Monthly
Rent.

         5. The Lease is in full force and effect,  neither  party is in default
of its  obligations  under the  Lease,  and Tenant has no  setoffs,  claims,  or
defenses to the enforcement of the Lease.

LANDLORD:                                TENANT:

ORCHARD JAY INVESTORS LLC                CYLINK CORPORATION
a California limited liability company   a California corporation

By:                                      By:
      --------------------------------         --------------------------------
          David J. Brown
          Managing Member                Its:
                                               --------------------------------
Dated:
       -------------------------------   Dated:
                                               --------------------------------

DAVID J. BROWN
                                         By:
                                               --------------------------------
By:
      --------------------------------
          David J. Brown                 Its:
                                               --------------------------------

Dated:
      --------------------------------   Dated:
                                               --------------------------------

<PAGE>

                                   EXHIBIT E

                                     3633460                       BOOK 8565 539

                              INDEX TO DECLARATION

                                                                        Page No.
                                                                        --------

         PREAMBLE

  I.     DEFINITIONS                                                       1

 II.     PROPERTY SUBJECT TO THE SAN TOMAS INDUSTRIAL
         PARK RESTRICTIONS                                                 2

         Section 2.1       General Declaration Creating San Tomas
                           Industrial Park                                 2

         Section 2.2       Addition of Other Real Property by Grantor      3

               A.          Grantor's Power                                 3

               B.          Notice of Addition of Land                      3

III.     REGULATION OF IMPROVEMENTS                                        3

         Section 3.1       Approval of Plans                               3

               A.          Approval Required                               3

               B.          Basis for Approval                              4

               C.          Result of Inaction                              4

               D.          Proceeding With Work                            4

               E.          Completion of Work                              5

               F.          Estoppel Certificate                            5

               G.          Liability                                       ?

               H.          Review Fee                                      ?

         Section 3.2       Limitations on Improvements                     6

               A.          Minimum Setback Lines                           6

               B.          Exceptions to Setback Requirements              6

               C.          Landscaping                                     7

               D.          Signs                                           7

               E.          Parking Areas                                   7

               F.          Storage and Loading Areas                       8
<PAGE>

                                                                   BOOK 8565 540

                                                                        Page No.
                                                                        --------

IV.      REGULATION OF OPERATIONS AND USES                                 8

         Section 4.1       Permitted Uses                                  8

         Section 4.2       Restrictions and Prohibited Uses                9

               A.          Prohibited Uses                                 9

               B.          Nuisances                                       9

               C.          Repair of Buildings                            10

               D.          Right of Entry                                 10

         Section 4.3       Other Operations and Uses                      10

V.       DURATION; MODIFICATION AND REPEAL                                10

         Section 5.1       Duration of Restrictions                       10

         Section 5.2       Termination and Modification                   11

VI.      ENFORCEMENT                                                      11

         Section 6.1       Abatement and Suit                             11

         Section 6.2       Deemed to Constitute a Nuisance                12

         Section 6.3       Attorney's Fees                                12

         Section 6.4       Failure to Enforce Not a Waiver of Rights      12

VII.     MISCELLANEOUS PROVISIONS                                         12

         Section 7.1       Assignment of Rights and Duties                12

         Section 7.2       Constructive Notice and Acceptance             13

         Section 7.3       Waiver                                         13

         Section 7.4       Mutuality, Reciprocity; Runs With Land         13

         Section 7.5       Rights of Mortgages                            13

         Section 7.6       Paragraph Headings                             14

         Section 7.7       Effect of Invalidation                         14
<PAGE>

                                                                   BOOK 8565 541

                            DECLARATION OF COVENANTS,
                           CONDITIONS AND RESTRICTIONS
                                       FOR
                            SAN TOMAS INDUSTRIAL PARK

                                    PREAMBLE

         THIS  DECLARATION  is made on June 5,  1969,  by AETNA  LIFE  INSURANCE
COMPANY, a Connecticut Corporation, as owner of the real property in the City of
Santa Clara,  County of Santa Clara,  State of California,  described in Exhibit
"A" which is attached hereto and incorporated herein by this reference.

         The property  described  in Exhibit "A" is subject to this  DECLARATION
and will be known as SAN TOMAS INDUSTRIAL PARK.

         SAN TOMAS  INDUSTRIAL PARK is being  developed as a planned  industrial
complex  which will provide  employment  opportunities  for the residents of the
City of Santa Clara and the surrounding area. These DECLARATIONS are designed to
complement local government and municipal regulations and where conflicts occur,
the most rigid  requirements  shall  prevail.  It is  assumed  that the users of
industrial  sites in the SAN TOMAS INDUSTRIAL PARK will be motivated to preserve
these qualities through mutual  cooperation and by enforcing not only the letter
but the spirit of this DECLARATION.
<PAGE>

                                                                   BOOK 8565 542

                                    ARTICLE I

                                   DEFINITIONS

         Unless the context otherwise  specifies or requires,  the terms defined
in this Article I shall, for all purposes of this DECLARATION, have the meanings
herein specified.

         ARCHITECT  The  term   "Architect"   shall  mean  a  person  holding  a
certificate to practice  architecture in the State of California under authority
of Division 3, Chapter 3 of the Business  and  Professions  Code of the State of
California.

         BENEFICIARY  The term  "Beneficiary"  shall  mean a  mortgagee  under a
mortgage, as well as beneficiary under a deed of trust.

         DECLARATION The term "Declaration"  shall mean the SAN TOMAS INDUSTRIAL
PARK RESTRICTIONS.

         DEED OF TRUST The term  "Deed of Trust" or "Trust  Deed"  shall  mean a
mortgage as well as a deed of trust.

         FILE The term "File" shall mean, with reference to any subdivision map,
the  filing of said map in the  Office of the  Recorder  of the  County of Santa
Clara, State of California.

         GRANTOR The term "Grantor" shall mean the AETNA LIFE INSURANCE  COMPANY
and, to the extent provided in Section 7.1 below, its successors and assigns.

         IMPROVEMENTS   The  term   "Improvements"   shall  include   buildings,
outbuildings,  roads,  driveways,  parking areas,  fences,  screening  walls and
barriers, retaining walls, stairs, decks, hedges, windbreaks, plantings, planted
trees and  shrubs,  poles,  signs,  loading  areas and all other  structures  or
landscaping improvements of every type and kind.

         MORTGAGEE The term  "Mortgagee"  shall mean a beneficiary  under,  or a
holder of a deed of trust as well as a mortgagee.

         RECORD;  RECORDED  The term  "Record"  shall mean,  with respect to any
document,  the recordation of said document in the Office of the County Recorder
of the County of Santa Clara, State of California.

         SITE  The  term  "Site"  shall  mean  all  contiguous  land  under  one
ownership.

                                       -1-
<PAGE>

                                                                   BOOK 8565 543

         VISIBLE FROM  NEIGHBORING  PROPERTY The term "Visible From  Neighboring
Property" shall mean,  with respect to any given object,  that such object is or
would  be  visible  to a  person  six feet  tall,  standing  on any part of such
neighboring  property at an elevation no greater than the  elevation of the base
of the object being viewed.

         SAN TOMAS  INDUSTRIAL PARK The term "SAN TOMAS  INDUSTRIAL  PARK" shall
mean all of the real property now or hereafter made subject to this DECLARATION.

         SAN TOMAS  INDUSTRIAL PARK  RESTRICTIONS The term "SAN TOMAS INDUSTRIAL
PARK RESTRICTIONS"  shall mean the covenants,  conditions,  and restrictions set
forth  in  this  DECLARATION,  as it  may  from  time  to  time  be  amended  or
supplemented.

                                   ARTICLE II

         PROPERTY SUBJECT TO THE SAN TOMAS INDUSTRIAL PARK RESTRICTIONS

SECTION 2.1 GENERAL DECLARATION CREATING SAN TOMAS INDUSTRIAL PARK

         GRANTOR  hereby  declares that all of the real property  located in the
County of Santa  Clara,  State of  California,  described in Exhibit A, which is
attached  hereto and  incorporated  herein by this  reference,  is and shall be,
conveyed,  hypothecated,  encumbered,  leased, occupied, built upon or otherwise
used,  improved  or  transferred  in whole or in part  subject  to the SAN TOMAS
INDUSTRIAL PARK RESTRICTIONS, meaning the covenants, conditions and restrictions
set forth in this DECLARATION.  All of said restrictions are declared and agreed
to be in furtherance of a general plan for the subdivision, improvement and sale
of said real  property  and are  established  for the purpose of  enhancing  and
perfecting the value, desirability and attractiveness of said property and every
part thereof.  All of the SAN TOMAS INDUSTRIAL PARK RESTRICTIONS  shall run with
all of said real  property  for all purposes and shall be binding upon and inure
to the benefit of GRANTOR  and all owners,  lessees,  licensees,  occupants  and
their successors in interest as set forth in this DECLARATION.

                                       -2-
<PAGE>

                                                                   BOOK 8565 544

SECTION 2.2 ADDITION OF OTHER REAL PROPERTY BY GRANTOR

         A. GRANTOR'S  POWER Grantor may at any time during the pendency of this
DECLARATION  add all or a portion of any land now or hereafter  owned by GRANTOR
to the property  which is covered by this  DECLARATION,  and upon recording of a
notice of addition of real property containing at least the provisions set forth
in Section 2.2B of this Article II, the provisions of this DECLARATION specified
in said  notice  shall apply to such added land in the same manner as if it were
originally  covered  by  this  DECLARATION.   Thereafter,  to  the  extent  this
DECLARATION is made applicable thereto, the rights,  powers and responsibilities
of GRANTOR and the owners,  lessees,  licensees and occupants of parcels  within
such  added  land  shall be the same as in the  case of the  land  described  in
Exhibit "A".

         B. NOTICE OF  ADDITION OF LAND The notice of addition of real  property
referred  to in  Section  2.2A  above  shall  contain  at  least  the  following
provisions:

                  1. A  reference  to  this  DECLARATION  stating  the  date  of
         recording  hereof and the book or books of the  records of Santa  Clara
         County,  California,  and the page numbers  where this  DECLARATION  is
         recorded;

                  2. A statement  that the  provisions of this  DECLARATION,  or
         some specified part thereof, shall apply to such added real property;

                  3. An exact description of such added real property; and

                  4.  Such  other  or  different   covenants,   conditions   and
         restrictions as GRANTOR shall,  in its discretion,  specify to regulate
         and  control  the use,  occupancy  and  improvement  of such added real
         property.

                                   ARTICLE III

                           REGULATION OF IMPROVEMENTS

SECTION 3.1 APPROVAL OF PLANS

         A. APPROVAL REQUIRED No improvement shall be erected,  placed, altered,
maintained or permitted to remain on any land subject to this DECLARATION  until
final plans

                                       -3-
<PAGE>

                                                                   BOOK 8565 545

and  specifications  showing  the plot  layout,  all  exterior  elevations  with
materials and colors therefor,  signs and landscaping  shall have been submitted
to and approved in writing by GRANTOR. Such final plans and specifications shall
be submitted in writing in duplicate over the authorized signature of the owner,
lessee, licensee or other occupant of the site or his authorized agent. Under no
circumstances  shall the GRANTOR  approve  metal-clad  buildings  of any type or
design other than "curtain wall", or approve buildings  covering more the 55% of
the lot area.  Changes in approved plans which materially  affect building size,
placement or external  appearance must be similarly submitted to and approved by
GRANTOR.

         B. BASIS FOR APPROVAL  Approval shall be based,  among other things, on
adequacy of site  dimensions  (a minimum lot size of 20,000  square feet will be
required),   conformity  and  harmony  of  external   design  with   neighboring
structures,  effect of location and use of proposed  improvements on neighboring
sites,  the  nature  of  improvements  on  neighboring  sites  and the  types of
operations  and uses thereof,  relation of  topography,  grade and finish ground
elevation of the site being improved to that of neighboring sites, proper facing
of main  elevation  with  respect to nearby  streets,  adequacy of  screening of
mechanical air conditioning or other roof top  installations,  and conformity of
the plans and  specifications to the purpose and general plan and intent of this
DECLARATION.  No plans will be approved which do not provide for the underground
installation  of power lines from the lot line to  buildings.  GRANTOR shall not
arbitrarily   or   unreasonably   withhold   its  approval  of  such  plans  and
specifications.

         C. RESULT OF INACTION If GRANTOR  fails either to approve or disapprove
such plans and  specifications  within thirty (30) days after the same have been
submitted  to it, it shall be  conclusively  presumed  that GRANTOR has approved
said plans and  specifications;  provided,  however,  that if within said thirty
(30) day period,  GRANTOR  gives  written  notice of the fact that a  reasonable
additional period is required for the approval of such plans and specifications,
there shall be no presumption that the same are approved until the expiration of
the extended period set forth in said notice.

         D. PROCEEDING WITH WORK Upon receipt of approval from GRANTOR  pursuant
to this  section  the owner or lessee to whom the same is given shall as soon as
practicable,  satisfy all  conditions  thereof and  diligently  proceed with the
commencement   and  completion  of  all  approved   construction,   refinishing,
alterations  and  excavations.  In all cases work shall be commenced  within one
year from the date of such approval. If there is a failure to comply

                                       -4-
<PAGE>

                                                                   BOOK 8565 546

with this  paragraph,  then the approval given pursuant to this section shall be
deemed  revoked unless GRANTOR upon request made prior to the expiration of said
one year period extends the time for commencing work.

         E.  COMPLETION  OF WORK In any  event  reconstruction,  refinishing  or
alteration of any such improvement shall be completed within two years after the
commencement  thereof  except  for  so  long  as  such  completion  is  rendered
impossible  or would result in great  hardship due to strikes,  fires,  national
emergencies,  natural  calamities or other supervening forces beyond the control
of the owner, lessee, licensee or occupant or his agents. Failure to comply with
this  paragraph  shall  constitute  a breach  of the SAN TOMAS  INDUSTRIAL  PARK
RESTRICTIONS  and subject  the  defaulting  party or parties to all  enforcement
procedures set forth in this DECLARATION and any other remedies  provided by law
or in equity.

         F. ESTOPPEL CERTIFICATE Within thirty (30) days after written demand is
delivered  to the GRANTOR and upon  payment of a  reasonable  fee (not to exceed
$25.00) established by GRANTOR,  there shall be recorded an estoppel certificate
executed by GRANTOR and  certifying  that as of the date thereof  either (a) all
improvements  made or other work done on or within a site  complies with the SAN
TOMAS  INDUSTRIAL PARK  RESTRICTIONS or (b) such  improvements or work do not so
comply  in  which  event  the  certificate   shall  identify  the  non-complying
improvements  or work and set forth with  particularity  the cause or causes for
such  non-compliance.  Any lessee,  purchaser or  encumbrancer in good faith for
value shall be entitled to rely on said  certificate with respect to the matters
set forth therein,  such matters being conclusive as between the GRANTOR and all
such subsequent parties in interest.

         G.  LIABILITY  GRANTOR  shall not be  liable  for any  damage,  loss or
prejudice  suffered or claimed on account of (a) the approval or  disapproval of
any  plans,  drawings  and  specifications  whether  or not  defective;  (b) the
construction  or  performance  of any work  whether or not  pursuant to approved
plans,  drawings and specifications;  (c) the development of any property within
the SAN TOMAS  INDUSTRIAL  PARK;  or (d) the execution and filing of an estoppel
certificate pursuant to the preceding paragraph whether or not the facts therein
are correct, provided that GRANTOR has acted in good faith.

                                       -5-
<PAGE>

                                                                   BOOK 8565 547

         H. REVIEW FEE An  architectural  review fee shall be paid to GRANTOR at
such time as plans and  specifications  are submitted for approval  based on the
following schedule:

                  (a) When the plans submitted are prepared by an architect, the
                  architectural review fee shall be $100.00;

                  (b) In all other cases the  architectural  review fee shall be
                  $250.00

SECTION 3.2 LIMITATIONS ON IMPROVEMENTS

         A.  MINIMUM  SETBACK  LINES  No  structures  of any  kind,  and no part
thereof,  shall be placed  closer  then  permitted  by  GRANTOR  to an  interior
property  line, or closer than thirty (30) feet to a street  property line other
than Scott  Boulevard,  or closer than twenty-six (26) feet to the property line
of Scott Boulevard.

         B.  EXCEPTIONS TO SETBACK  REQUIREMENTS  The following  structures  and
improvements are specifically excluded from the foregoing setback requirements:

                  1. Roof overhang  subject to the specific  approval of GRANTOR
                  in writing, provided it does not extend more than six (6) feet
                  into the setback area.

                  2. Steps and walks,  provided the same do not extend more than
                  six (6) feet in the setback area.

                  3. Paving and associated curbing,  except that vehicle parking
                  area shall not be  permitted  within  thirty  (30) feet of the
                  street  property  line on which the building  fronts or within
                  ten (10) feet of any other street property line.

                  4.  Fences,  except that no fence  shall be placed  within the
                  street  setback  area  unless  specific  approval  is given by
                  GRANTOR in writing.

                  5. Landscaping.

                  6. Planters, not to exceed three feet in height.

                  7. Gas and service  stations  including  all  pertinent  uses,
                  subject to the specific approval of GRANTOR in writing

                  8. Displays identifying the owner, lessee or occupant, subject
                  to the specific approval of GRANTOR in writing.

                                       -6-
<PAGE>

                                                                   BOOK 8565 548

         C.  LANDSCAPING  Every site on which a building  shall have been placed
shall be landscaped in accordance with plans and specifications submitted to and
approved by GRANTOR  pursuant to Section 3.1 above.  Landscaping  as approved by
GRANTOR shall be installed  within ninety days of occupancy or completion of the
building,  whichever  occurs first,  unless GRANTOR  approves in writing another
completion  date.  After  completion such  landscaping  shall be maintained in a
sightly and well-kept condition. In general GRANTOR will not approve landscaping
plans which do not call for  landscaping the area between curb and property line
(excluding  driveways),  which  do not call for at  least  twelve  (12)  feet of
landscaped  area between street  property line and parking area,  which does not
provide for an  automatic  sprinkler  system or which does not call for at least
fifteen (15) feet of landscaped  areas between  buildings or parking area and an
adjoining expressway or freeway.

         D. SIGNS

                  1. No billboard or advertising  sign shall be permitted  other
than those  identifying  by name,  business  and  products of the person or firm
occupying  the premises  and those  offering the premises for sale or for lease.
The size and  style  of sale or lease  signs  must be  approved  by  GRANTOR  in
writing.

                  2. The  location  of signs  shall be  governed  by the setback
requirements  set  forth  in  ARTICLE  III  Section  3.2  unless  GRANTOR  gives
permissions for a non-conforming location.

                  3. Signs and  identifying  markings on  buildings  or building
sites shall only be of such size,  design and color as is specifically  approved
by GRANTOR in writing.

         E. PARKING AREAS

                  1.   Adequate   off-street   parking   shall  be  provided  to
accommodate all parking needs for employee,  visitor and company vehicles on the
site.  The intent of this  provision is to eliminate the needs for any on-street
parking.  If  parking  requirements  increase  as a result of a change in use or
number of employees,  additional off-street parking shall be provided to satisfy
the intent of this section.

                  2.  Parking  shall  not be  permitted  between  public  street
pavement  and a  property  line or  closer  than  twelve  (12)  feet to a street
property line.

                                       -7-
<PAGE>

                                                                   BOOK 8565 549

                  3. Any parking area  between a property  line and the front of
the building must be depressed or screened.

                  4. The parking  requirements  may be modified by GRANTOR as to
any particular site.

         F. STORAGE AND LOADING AREAS

                  1. Unless  specifically  approved  by GRANTOR in  writing,  no
materials,  supplies or equipment,  including  company-owned or operated trucks,
shall be stored in any area on a site except inside a closed building, or behind
a visual  barrier  screening  such areas so that they are not  visible  from the
neighboring properties or public streets.

                  2. Loading  areas shall not encroach into setback areas unless
specifically approved by GRANTOR in writing.

                  3.  Loading  docks shall be set back and  screened to minimize
the effect of their  appearance from the street and from  neighboring  property.
Docks shall not be closer than sixty-five (65) feet to the property line, unless
specifically approved by GRANTOR in writing.

         4. No railroad tracks shall be constructed  between any street property
line and the building.

                                   ARTICLE IV

                        REGULATION OF OPERATIONS AND USES

SECTION 4.1 PREMITTED USES

         Unless  otherwise   specifically   prohibited  herein,  any  industrial
operation  and use will be  permitted if it is performed or carried out entirely
within  a  building  that is so  designed  and  constructed  that  the  enclosed
operations and uses do not cause or produce a nuisance to adjacent sites such as
but  not  limited  to  vibration,  sound,  electro-mechanical  disturbances  and
radiation,  electro-magnetic  disturbances,  radiation,  air or water pollution,
dust,  emission or odorous,  toxic and non-toxic  matter.  All lighting is to be
shielded from adjacent sites.

                                       -8-
<PAGE>

                                                                   BOOK 8565 550

SECTION 4.2 RESTRICTIONS AND PROHIBITED USES

         A.  PROHIBITED  USES The  following  operations  and uses  shall not be
permitted on any property subject to these restrictions:

                  1. Residential

                  2. Trailer Courts

                  3. Labor Camps

                  4. Junk Yards

                  5.  Drilling  for  and/or  the  removal  of oil,  gas or other
         hydrocarbon  substances (except that this provision shall not be deemed
         to prohibit the entry of subject property below a depth of 500 feet for
         such purposes).

                  6.   Commercial   excavation   of  building  or   construction
         materials.

                  7. Distillation of bones.

                  8. Dumping,  disposal,  incineration  or reduction of garbage,
         sewage, offal, dead animals or refuse.

                  9. Fat Rendering.

                  10. Stockyard or Slaughter of Animals.

                  11. Refining of Petroleum or of its Products.

                  12. Smelting of Iron, Tin, Zinc or other Ores.

                  13. Cemeteries.

                  14. Jail or Honor Farms.

         B.  NUISANCES  No  rubbish  or  debris  of any kind  shall be placed or
permitted  to  accumulate  upon or adjacent  to any site,  and no odors shall be
permitted  to arise  therefrom  [ILLEGIBLE]  as to  render  any site or  portion
thereof unsanitary,  unsightly,  offensive or detrimental to any of the property
in the  vicinity  thereof or to the  occupants  thereof.  No  nuisance  shall be
permitted to exist or operate upon any site so as to be offensive or detrimental
to any property [ILLEGIBLE] the vicinity thereof or to its occupants.

                                       -9-
<PAGE>

                                                                   BOOK 8565 551

         C. REPAIR OF BUILDINGS No building or structure  upon any site shall be
permitted to fall into disrepair,  and each such building and structure shall at
all  times be kept in good  condition  and  repair  and  adequately  painted  or
otherwise finished.

         D. RIGHT OF ENTRY During  reasonable  hours,  and subject to reasonable
security requirements,  GRANTOR, or its authorized  representatives,  shall have
the  right to enter  upon and  inspect  any  building,  site or  parcel  and the
improvements thereon embraced for the purpose of ascertaining whether or not the
provisions of the SAN TOMAS INDUSTRIAL PARK  RESTRICTIONS have been or are being
complied  with and  shall not be deemed  guilty  to  trespass  by reason of such
entry.

SECTION 4.3 OTHER OPERATIONS AND USES

         Operations  and uses  which are  neither  specifically  prohibited  nor
specifically  authorized  by these  restrictions  may be permitted in a specific
case if operational  plans and  specifications  are submitted to and approved in
writing by  GRANTOR.  Approval  or  disapproval  of such  operational  plans and
specifications  shall be based  upon the  effect of such  operations  or uses on
other property subject to these restrictions or upon the occupants thereof,  but
shall be the sole discretion of GRANTOR.

                                    ARTICLE V

                        DURATION, MODIFICATION AND REPEAL

SECTION 5.1 DURATION OF RESTRICTIONS

         The SAN TOMAS INDUSTRIAL PARK RESTRICTIONS shall continue and remain in
full force and effect at all times with respect to all  property,  and each part
thereof,  now or hereafter made subject thereto (subject,  however, to the right
to amend and repeal as provided  for  herein)  until  January 1, 1990.  However,
unless  within one year prior to January 1, 1990,  there  shall be  recorded  an
instrument   directing  the  termination  of  the  SAN  TOMAS   INDUSTRIAL  PARK
RESTRICTIONS  signed by owners of not less than  two-thirds of the property then
subject to these  RESTRICTIONS,  based on the number of square  feet  subject to
these  RESTRICTIONS,  the SAN TOMAS INDUSTRIAL PARK  RESTRICTIONS,  as in effect
immediately  prior  to the  expiration  date  shall be  continued  automatically
without any further notice for an additional period of ten years

                                      -10-
<PAGE>

                                                                   BOOK 8565 552

and thereafter for successive  periods of ten years unless within one year prior
to the expiration of any such period the SAN TOMAS INDUSTRIAL PARKS RESTRICTIONS
are terminated as set forth above in this paragraph.

SECTION 5.2 TERMINATION AND MODIFICATION

         This DECLARATION, or any provisions thereof, or any covenant, condition
or  restriction  contained  herein,  may be  terminated,  extended,  modified or
amended,  as to the whole of said  property  or any  portion  thereof,  with the
written  consent of the owners of  seventy-five  (75%)  percent of the  property
subject  to these  restrictions,  based on the  number of square  feet  owned as
compared  to the total  number of square  feet  subject  to these  RESTRICTIONS,
provided,  however,  that so long as  GRANTOR  owns at least  twenty-five  (25%)
percent  of the  property  subject  to these  RESTRICTIONS,  or for a period  of
fifteen (15) years from the effective date hereof,  whichever  period is longer,
no such  termination,  extension,  modification  or amendment shall be effective
without the written approval of GRANTOR thereto. No such termination, extension,
modification  or  amendment  shall be  effective  until a proper  instrument  in
writing has been executed and  acknowledged and recorded in the County where the
land affected thereby is situated.

                                   ARTICLE VI

                                   ENFORCEMENT

SECTION 6.1 ABATEMENT AND SUIT

         Violation or breach of any restriction  herein  contained shall give to
GRANTOR the right to enter upon the property upon or at to which said  violation
or breach exists and to summarily  abate and remove at the expense of the owner,
lessee or occupant  thereof,  any  structure,  thing or condition that may be or
exist thereon contrary to the intent and meaning of the provisions hereof, or to
prosecute  a  proceeding  at law or in equity  against the person or persons who
have violated or are attempting to violate any of these  restrictions  to enjoin
or prevent  them from doing so, to cause said  violation  to be  remedied  or to
recover damages for said violation. In addition, every owner of property subject
to these  restrictions  shall have the right in the event of violation or breach
of any  restriction  herein  contained to prosecure a  proceeding  ??????  or in
equity against the person or persons who have violated or are attempting

                                      -11-

<PAGE>

                                                                   BOOK 8565 553

to violate any of these restrictions to enjoin or prevent them from doing so, to
cause said violation to be remedied or to recover damages for said violation.

SECTION 6.2 DEEMED TO CONSTITUTE A NUISANCE

         The result of every action or omission  whereby and restriction  herein
contained  is  violated  in whole  or in part is  hereby  declared  to be and to
constitute  a nuisance,  and every  remedy  allowed by law or equity  against an
owner,  either public or private,  shall be applicable against every such result
and may be exercised by GRANTOR or by any owner or lessee of property subject to
these RESTRICTIONS.

SECTION 6.3 ATTORNEY'S FEES

         In any legal or equitable proceeding for the enforcement or to restrain
the violation of this DECLARATION or any provision  hereof,  the losing party or
parties shall pay the  attorneys'  fees of the prevailing  party or parties,  in
such  amount  as may be fixed by the  Court in such  proceedings.  All  remedies
provided herein or at law or in equity shall be cumulative and not exclusive.

SECTION 6.4 FAILURE TO ENFORCE NOT A WAIVER OR RIGHTS

         The failure of GRANTOR or any property owner to enforce any restriction
herein  contained  shall in no event be deemed to be a waiver of the right to do
so thereafter nor or the right to enforce any other restriction.

                                   ARTICLE VII

                            MISCELLANEOUS PROVISIONS

SECTION 7.1 ASSIGNMENT OF RIGHTS AND DUTIES

         Any and all of the rights,  powers and  reservations  of GRANTOR herein
contained may be assigned to any person,  corporation or association  which will
assume the duties of GRANTOR  pertaining to the  particular  rights,  powers and
reservations  assigned,  and upon any such person,  corporation or association's
evidencing  its  consent in writing to accept  such  assignment  and assume such
duties,  he or it shall, to the extent of such assignment,  have the same rights
and powers and be subject to the same obligations and duties as are given to and
assumed by GRANTOR  herein.  The term  GRANTOR as used herein  includes all such
assignees and their heirs, successors and assigns. If at any time GRANTOR ceases
to  exist  and has not made  such an  assignment,  a  successor  GRANTOR  may be
appointed in the same manner as there RESTRICTIONS

                                      -12-
<PAGE>

                                                                   BOOK 8565 554

may be terminated, extended, modified or amended under Section 5.2 of Article V.
Any  assignment  or  appointment  made under this section shall be in recordable
form and shall be recorded in the County where the land affected is situated.

SECTION 7.2 CONSTRUCTION NOTICE AND ACCEPTANCE

         Every person or other entity who now or hereafter  owns or acquires any
right,  title or interest in or to any portion of the  property  made subject to
these  RESTRICTIONS  is and shall be  conclusively  deemed to have consented and
agreed to every covenant, condition and restriction contained herein, whether or
not any reference to this  DECLARATION  is contained in the  instrument by which
such person or entity acquired an interest in said property.

SECTION 7.3 WAIVER

         Neither  GRANTOR nor its  successors  or assigns shall be liable to any
owner,  lessee,  licensee,  or occupant of land subject to this  DECLARATION  by
reason of any mistake in judgment, negligence,  nonfeasance,  action or inaction
or for the enforcement or failure to enforce any provision of this  DECLARATION.
Every owner,  lessee,  licensee or occupant of any of said property by acquiring
his  interest  therein  agrees that he will not bring any action or suit against
GRANTOR to recover any such damages or to seek equitable relief.

SECTION 7.4 MUTUALITY, RECIPROCITY; RUNS WITH LAND

         All covenants, conditions, restrictions and agreements contained herein
are made for the direct,  mutual and  reciprocal  benefit of each and every part
and parcel of the property now or  hereafter  made subject to this  DECLARATION;
shall create  mutual,  equitable  servitudes  upon each parcel in favor of every
other  parcels;  shall  create  reciprocal  rights and  obligations  between the
respective  owners of all parcels and privity of contract and estate between all
grantees of said parcels,  their heir,  successors and assigns; and shall, as to
the  owner of each  parcel,  his  heirs,  successors  and  assigns,  operate  as
covenants running with the land, for the benefit of all other parcels.

SECTION 7.5 RIGHTS OF MORTGAGEES

         No breach of the  restrictions  and other  provisions  contained herein
shall defeat or render  invalid the lien of any mortgage or deed of trust now or
hereafter executed upon land

                                      -13-
<PAGE>

                                                                   BOOK 8565 555

subject to these restrictions;  provided,  however,  that if any portion of said
property is sold under a foreclosure  of any mortgage or under the provisions of
any deed of trust,  any  Purchaser at such sale and his  successors  and assigns
shall hold any and all property so purchased  subject to all of the restrictions
and other provisions of this DECLARATION.

SECTION 7.6 PARAGRAPH HEADINGS

         Paragraph  headings,  where used herein,  are inserted for  convenience
only  and are not  intended  to be a part of this  DECLARATION  or in any way to
define,  limit or describe the scope and intent of the particular  paragraphs to
which they refer.

SECTION 7.6 EFFECT OF INVALIDATION

         If any  provision  of this  DECLARATION  is held to be  invalid  by any
court,  the  invalidity of such  provision  shall not affect the validity of the
remaining provisions hereof.

         IN WITNESS  WHEREOF,  GRANTOR has executed this DECLARATION the day and
year first above written.

                                        AETNA LIFE INSURANCE COMPANY

                                        By: /s/ R. D. SWINEHART
                                            -------------------------------
                                            VICE PRESIDENT

                                        By: /s/ F. E. HEALY
                                            -------------------------------
                                            ASSISTANT SECRETARY   GRANTOR

STATE OF CONNECTICUT )
                     )      SS.
COUNTY OF HARTFORD   )

         On June 5, 1969 before me, the undersigned,  a Notary Public in and for
said  State,  personally  appeared R. D.  SWINEHART,  known to me to be the VICE
President,  and F.  E.  HEALY,  known  to me to be  ASSISTANT  Secretary  of the
corporation that executed the within  instrument,  known to me to be the persons
who executed the within  instrument on behalf of the corporation  therein named,
and  acknowledged  to me that such  corporation  executed the within  instrument
pursuant to its by-laws or a resolution of its board of directors.

WITNESS my hand and official seal.       Frank A. Kelly Jr., Notary Public
                                         Within and for the State of Connecticut
                                         My Commission Expires March 31, 1970.

Signature /s/ Frank A. Kelly Jr.
          ----------------------------

--------------------------------------
        Name (Typed or Printed)

                                      -14-
<PAGE>

                                                                   BOOK 8565 556

                                   EXHIBIT "A"

                                LEGAL DESCRIPTION

All that certain  real  property  situate in the City of Santa Clara,  County of
Santa  Clara,  State of  California  described  as follows:  all of lots 1 to 29
inclusive as shown upon that certain map entitled "Tract No. 2971" which map was
filed for record in the Office of the Recorder of the City of Santa Clara, State
of California on May 16, 1969 in Book 253 of Maps at Pages 28 and 29.

                                                                   3633460

                                                              BOOK 8565 539

                      ------------------------------------
                           RECORDED AT THE REQUEST OF
                       Title Insurance and Trust Company

                              JUN 12 1969 8:01 AM

                           GEORGE E. FOWLES, Rcorder
                      SANTA CLARA COUNTY, OFFICIAL RECORDS
                      ------------------------------------

<PAGE>

                                    EXHIBIT F

                                  SIGN CRITERIA

These criteria have been  established for the purpose of assuring an outstanding
business complex and for the mutual benefits of all tenants. Conformance will be
strictly  enforced and any installed  non-conforming or unapproved signs must be
brought into conformance at the expense of the Tenant.

A.       General Requirements:

         1.       The Tenant shall  submit a sketch of his  proposed  sign to be
                  Landlord for his approval.

         2.       The Project  Monument  Sign and Building  Tenant Sign base and
                  frame shall be constructed  by Landlord's  agent at Landlord's
                  expense.  The sign base shall be installed by Landlord's agent
                  at Landlord's  expense.  All tenant lettering shall be done by
                  Landlord's agent at Tenant's expense.

         3.       Tenant  shall  be  responsible  for  the  fulfillment  of  all
                  requirements of these criteria.

B.       General Specifications:

         1.       No electrical or audible signs will be permitted.

         2.       The  sign's   dimensions   will  be  in  accordance  with  the
                  established sign program for the Project and Building.

         3.       Sign copy will be restricted to company name only.

         4.       The style, color and size of the individual company's name may
                  vary.

         5.       Placement of the sign and method of  attachment to the Project
                  Monument Sign and Building Tenant Sign will be directed by the
                  Landlord.

         6.       Upon the  removal  of any  sign,  any  damage  to the  Project
                  Monument Sign or Building  Tenant Sign must be repaired by the
                  Tenant.

         7.       Those  tenants who do not wish an exterior sign may place gold
                  leaf lettering on the interior window area, not to exceed more
                  than 144 square inches  (gross  area).  The letters are not to
                  exceed 3 inches in height.

         8.       Except as provided herein, no advertising  placards,  banners,
                  pennants,  names,  insignia,  trademarks or other  descriptive
                  material  shall be affixed or maintained  upon the glass panes
                  or exterior walls of the Building.

<PAGE>

                                [GRAPHIC OMITTED]

                                    ORCHARD
                                    PROJECT
                                      845

<PAGE>

                                    EXHIBIT G

RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:

WELLS FARGO BANK, NATIONAL
ASSOCIATION
Real Estate Group (AU #AU NUMBER)
400 Capitol Mall, Suite 700
Sacramento, CA 95814

Attn: LOAN ADMINISTRATOR'S NAME
      HERE
Loan No. LOAN NUMBER

================================================================================

     SUBORDINATION AGREEMENT; ACKNOWLEDGMENT OF LEASE ASSIGNMENT, ESTOPPEL,
                    ATTORNMENT AND NON-DISTURBANCE AGREEMENT
                            (Lease To Deed of Trust)

NOTICE:  THIS SUBORDINATION  AGREEMENT RESULTS IN YOUR LEASE BECOMING SUBJECT TO
         AND OF LOWER  PRIORITY  THAN  THE  LIEN OF THE  DEED OF TRUST  (DEFINED
         BELOW).

THIS  SUBORDINATION  AGREEMENT;  ACKNOWLEDGMENT OF LEASE  ASSIGNMENT,  ESTOPPEL,
ATTORNMENT AND NON-DISTURBANCE AGREEMENT ("Agreement") is made DATE OF DOCUMENTS
by and between BORROWER NAME, a California general partnership  ("Owner"),  NAME
OF LESSEE HERE ("Lessee") and WELLS FARGO BANK, NATIONAL ASSOCIATION ("Lender").

                                    RECITALS

1.   Pursuant  to the terms and  provisions  of a lease dated DATE OF LEASE HERE
     ("Lease"),  Owner, as "Lessor," granted to Lessee a leasehold estate in and
     to a portion of the  poperty  described  on  Exhibit A attached  hereto and
     incorporated  herein by this reference (which  property,  together with all
     improvements  now or hereafter  located on the property,  is defined as the
     "Property").

2.   Said  Lease  contains  provisions  and terms  granting  Lessee an option to
     purchase the Property (the "Option To Purchase").

3.   Owner has executed,  or proposes to execute,  a deed of trust with absolute
     assignment  of leases and rents,  security  agreement  and  fixture  filing
     ("Deed of Trust") securing,  among other things, a promissory note ("Note")
     in the principal sum of LOAN AMOUNT AND NO/100THS  DOLLARS ($LOAN AMOUNT IN
     NUMBERS),  dated  DATE OF  DOCUMENTS,  in favor of  Lender,  which  Note is
     payable with interest and upon the terms and conditions  described  therein
     ("Loan"). The Deed of Trust is to be recorded concurrently herewith.

4.   As a  condition  to making the Loan  secured  by the Deed of Trust,  Lender
     requires that the Deed of Trust be unconditionally  and at all times remain
     a lien on the  Property,  prior and  superior  to all the  rights of Lessee
     under the Lease and the Option To Purchase and that the Lessee specifically
     and unconditionally subordinate the Lease and the Option To Purchase to the
     lien of the Deed of Trust.

                                   Page 1 of 9
<PAGE>

                                                            Loan No. LOAN NUMBER

5.   Owner and Lessee have  agreed to the  subordination,  attornment  and other
     agreements herein in favor of Lender.

NOW THEREFORE, for valuable consideration and to Induce Lender to make the Loan,
Owner and Lessee hereby agree for the benefit of Lender as follows:

6.   SUBORDINATION. Owner and Lessee hereby agree that:

     6.1      Prior  Lien.  The  Deed of  Trust  securing  the  Note in favor of
              Lender,  and any  modifications,  renewals or extensions  thereof,
              shall  unconditionally  be and at all  times  remain a lien on the
              Property  prior  and  superior  to the  Lease  and the  Option  To
              Purchase;

     6.2      Subordination.  Lender  would  not  make  the  Loan  without  this
              agreement to subordinate; and

     6.3      Whole  Agreement.  This Agreement shall be the whole agreement and
              only agreement with regard to the  subordination  of the Lease and
              the Option To  Purchase to the lien of the Deed of Trust and shall
              supersede  and  cancel,  but  only  insofar  as would  affect  the
              priority between the Deed of Trust and the Lease and the Option To
              Purchase,   any  prior   agreements  as  to  such   subordination,
              including, without limitation, those provisions, if any, contained
              in the Lease which prodvide for the subordination of the Lease and
              the  Option  To  Purchase  to a deed or  deeds  of  trust  or to a
              mortgage or mortgages.

AND FURTHER,  Lessee  individually  declares,  agrees and  acknowledges  for the
benefit of Lender, that:

     6.4      Use of Proceeds.  Lender, in making disbursements  pursuant to the
              Note, the Deed of Trust or any loan agreements with respect to the
              Property,  is  under no  obligation  or duty  to,  nor has  Lander
              represented  that it will, see to the application of such proceeds
              by the person or persons to whom Lender  disburses  such proceeds,
              and any  application  or use of such  proceeds for purposes  other
              than those provided for in such agreement or agreements  shall not
              defeat this agreement to subordinate in whole or in part;

     6.5      Waiver, Relinquishment and Subordination. Lessee intentionally and
              unconditionally  waives,  relinquishes  and  surobrinates  all  of
              Lessee's  right,  title and interest in and to the Property to the
              lien of the Deed of Trust and  undestands  that in reliance  upon,
              and  in  consideration   of,  this  waiver,   relinquishment   and
              subordination,  specific  loans and advances are being and will be
              made by Lender and, as part and parcel thereof,  specific monetary
              and other  oblitagions  are being and will be  entered  into which
              would not be made or entered into but for said  reliance upon this
              waiver, relinquishment and subordination.

7.   ASSIGNMENT. Lessee acknowledges and consents to the assignment of the Lease
     by Lessor in favor of Lender.

8.   ESTOPPEL. Lessee acknowledges and represents that:

     8.1      Lease Effective. The Lease has been duly executed and delivered by
              Lessee and, subject to the terms and conditions thereof, the Lease
              is in full force and effect,  the obligations of Lessee thereunder
              are valid and  binding  and there  have been no  modifications  or
              additions to the Lease, written or oral;

     8.2      No  Default.  To the best of  Lessee's  knowledge,  as of the date
              hereof: (i) there exists no breach, default, or event or condition
              which,  with the giving of notice or the  passage of time or both,
              would  constitute  a breach or default  under the Lease;  and (ii)
              there are no existing  claims,  defenses or offsets against rental
              due or to become due under the Lease;

                                   Page 2 of 9
<PAGE>

                                                            Loan No. LOAN NUMBER

     8.3      Entire  Agreement.  The Lease  constitutes  the  entire  agreement
              between  Lessor and Lessee with respect to the Property and Lessee
              claims no rights with  respect to the  Property  other than as set
              forth in the Lease; and

     8.4      No Prepaid Rent. No deposits or prepayments of rent have been made
              in connection with the Lease,  except as follows:  (if none, state
              "None") _________________________________________________________.

9.   ADDITIONAL  AGREEMENTS.  Lessee covenants and agrees that,  during all such
     times as Lender is the Beneficiary under the Deed of Trust:

     9.1      Modification,   Termination  and  Cancellation.  Lessee  will  not
              consent   to   any   modification,   amendment,   termination   or
              cancellation  of the Lease (in whole or in part) without  Lender's
              prior  written  consent and will not make any payment to Lessor in
              consideration of any modification,  termination or cancellation of
              the Lease (in whole or in part)  without  Lender's  prior  written
              consent;

     9.2      Notice  of  Default.   Lessee   will  notify   Lender  in  writing
              concurrently  with any  notice  given to Lessor of any  default by
              Lessor  under the Lease,  and Lessee  agrees  that  Lender has the
              right  (but not the  obligation)  to cure any  breach  or  default
              specified  in such notice  within the time periods set forth below
              and Lessee will not declare a default of the Lease,  as to Lender,
              if Lender  cures such  default  within  fifteen (15) days from and
              after the expiration of the time period  provided in the Lease for
              the  cure  thereof  by  Lessor;  provided,  however,  that if such
              default  cannot  with  diligence  be cured by Lender  within  such
              fifteen  (15) day  period,  the  commencement  of action by Lender
              within  such  fifteen  (15) day period to remedy the same shall be
              deemed  sufficient  so long  as  Lender  pursues  such  cure  with
              diligence;

     9.3      No Advance  Rents.  Lessee will make no payments or prepayments of
              rent more than one (1) month in  advance of the time when the same
              become due under the Lease; and

     9.4      Assignment of Rents. Upon receipt by Lessee of written notice from
              Lender that Lender has elected to terminate the license granted to
              Lessor to collect  rents,  as provided  in the Deed of Trust,  and
              directing  the payment of rents by Lessee to Lender,  Lessee shall
              comply  with such  direction  to pay and shall not be  required to
              determine  whether  Lessor is in default under the Loan and/or the
              Deed of Trust.

10.  ATTORNMENT.  Lessee  agrees for the benefit of Lender  (including  for this
     purpose any transferee of Lender or any transferee of Lessor's title in and
     to the Property by Lender's  exercise of the remedy of sale by  foreclosure
     under the Deed of Trust) as follows:

     10.1     Payment of Rent.  Lessee  shall pay to Lender all rental  payments
              required  to be made by Lessee  pursuant to the terms of the Lease
              for the duration of the term of the Lease;

     10.2     Continuation  of  Performance.  Lessee shall be bound to Lender in
              accordance with all of the provisions of the Lease for the balance
              of the term thereof,  and Lessee  hereby  attorns to Lender as its
              landlord,  such  attornment  to be  effective  and  self-operative
              without the execution of any further  instrument  immediately upon
              Lender  succeeding  to  Lessor's  interest in the Lease and giving
              written notice thereof to Lessee;

     10.3     No Offset.  Lender  shall not be liable  for,  nor subject to, any
              offsets or defenses  which Lessee may have by reason of any act or
              omission of Lessor under the Lease, nor for the return of any sums
              which  Lessee  may have paid to Lessor  under the Lease as and for
              security  deposits,  advance  rentals or otherwise,  except to the
              extent that such sums are actually  delivered by Lessor to Lender;
              and

                                   Page 3 of 9
<PAGE>

                                                            Loan No. LOAN NUMBER

     10.4     Subsequent Transfer.  If Lender, by succeeding to the interesst of
              Lessor  under the Lease,  should  become  obligated to perform the
              covenants of Lessor thereunder, then, upon any further transfer of
              Lessor's  interest  by  Lender,  all  of  such  obligations  shall
              terminate as to Lender.

11.  NON-DISTURBANCE.  In the event of a foreclosure under the Deed of Trust, so
     long as there shall then exist no breach,  default,  or event of default on
     the part of Lessee  under the  Lease,  Lender  agrees  for  itself  and its
     successors  and assigns  that the  leasehold  interest of Lessee  under the
     Lease  shall  not  be   extinguished   or  terminated  by  reason  of  such
     foreclosure,  but rather the Lease shall  continue in full force and effect
     and Lender  shall  recognize  and accept  Lessee as tenant  under the Lease
     subject to the terms and provisions of the Lease except as modified by this
     Agreement;  provided,  however,  that  Lessee  and  Lender  agree  that the
     following  provisions of the Lease (if any) shall not be binding on Lender:
     any option to purchase  with  respect to the  Property;  any right of first
     refusal with respect to the Property;  any  provision  regarding the use of
     insurance  proceeds or  condemnation  proceeds with respect to the Property
     which is inconsistent with the terms of the Deed of Trust.

12.  MISCELLANEOUS.

     12.1     Heirs, Successors,  Assigns and Transferees.  The covenants herein
              shall be binding  upon,  and inure to the  benefit  of, the heirs,
              successors and assigns of the parties hereto; and

     12.2     Notices. All notices or other communications required or permitted
              to be given  pursuant  to the  provisions  hereof  shall be deemed
              served  upon  delivery  or, if mailed,  upon the first to occur of
              receipt  or the  expiration  of three (3) days  after  deposit  in
              United States Postal Service,  certified mall, postage prepaid and
              addressed to the address of Lessee or Lender appearing below:

<TABLE>
<CAPTION>
                      "OWNER"                                                      "LENDER"

<S>                                                             <C>
BORROWER NAME, a California general partnership                 WELLS FARGO BANK,  NATIONAL  ASSOCIATION
BORROWER STREET ADDRESS                                         Real Estate Group (AU #AU NUMBER)
CITY, STATE ZIP                                                 400 Capitol Mall, Suite 700
                                                                Sacramento, CA 95814

                                                                Attn: LOAN ADMINISTRATOR'S NAME HERE
                                                                Loan No. LOAN NUMBER
</TABLE>

                                    "LESSEE"

NAME OF LESSEE HERE
LESSEE'S ADDRESS (STACKED) HERE

provided,  however,  any party  shall have the right to change its  address  for
notice  hereunder by the giving of written  notice thereof to the other party in
the manner set forth in this Agreement; and

     12.3     Counterparts.  This  Agreement  may be  executed  in  two or  more
              counterparts, each of which shall be deemed an original and all of
              which  together  shall  constitute and be construed as one and the
              same instrument; and

     12.4     Remedies Cumulative.  All rights of Lender herein to collect rents
              on behalf of Lessor under the Lease are cumulative and shall be in
              addition to any and all other rights and remedies  provided by law
              and by other agreements  between Lender and Lessor or others;  and

                                   Page 4 of 9
<PAGE>

                                                            Loan No. LOAN NUMBER

     12.5     Paragraph  Headings.  Paragraph headings in this Agreement are for
              convenience  only  and  are  not to be  construed  as part of this
              Agreement  or in any  way  limiting  or  applying  the  provisions
              hereof.

INCORPORATION.  Exhibit A and Lease Guarantor's  Consent are attached hereto and
incorporated herein by this reference.

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

NOTICE:  THIS  SUBORDINATION  AGREEMENT  CONTAINS A PROVISION  WHICH  ALLOWS THE
         OWNER TO  OBTAIN A LOAN,  THE  PROCEEDS  OF WHICH MAY BE  EXPENDED  FOR
         PURPOSES OTHER THAN THE IMPROVEMENT OF THE PROPERTY.

         IT IS RECOMMENDED  THAT, PRIOR TO THE EXECUTION OF THIS AGREEMENT,  THE
         PARTIES CONSULT WITH THEIR ATTORNEYS WITH RESPECT HERETO.

                                                        "OWNER"

                                        BORROWER NAME,
                                        a California general partnership

                                        By:
                                           -------------------------------------
                                                General Partner

                                        By:
                                           -------------------------------------
                                                General Partner

                 "LENDER"

WELLS FARGO BANK,
NATIONAL ASSOCIATION

By:
   ----------------------------------
        SIGNEE'S NAME

Its:    SIGNEE'S TITLE

                                   Page 5 of 9
<PAGE>

                                                            Loan No. LOAN NUMBER

                                                  "LESSEE"

                                    NAME OF LESSEE HERE

                                    LESSEE SIGNATURE BLOCK HERE

                      (ALL SIGNATURES MUST BE ACKNOWLEDGED)

                                   Page 6 of 9
<PAGE>

                                                            Loan No. LOAN NUMBER

                            LEASE GUARANTOR'S CONSENT

The  undersigned  ("Lease  Guarantor")  consents to the foregoing  Subordination
Agreement;   Acknowledgment  of  Lease  Assignment,   Estoppel,  Attornment  and
Non-Disturbance   Agreement  and  the  transactions   contemplated  thereby  and
reaffirms its obligations under the lease guaranty ("Lease Guaranty") dated DATE
OF LEASE GUARANTY HERE. Lease Guarantor  further  reaffirms that its obligations
under the Lease Guaranty are separate and distinct from Lessee's obligations.

AGREED:

Dated as of: DATE OF DOCUMENTS                        "LEASE GUARANTOR"

                                            LEASE GUARANTOR SIGNATURE BLOCK HERE

                                   Page 7 of 9
<PAGE>

                                                                       EXHIBIT A
                                                            Loan No. LOAN NUMBER

                             DESCRIPTION OF PROPERTY

EXHIBIT  A to  Subordination  Agreement;  Acknowledgment  of  Lease  Assignment,
Estoppel,   Attornment  and  Non-Disturbance  Agreement  dated  as  of  DATE  OF
DOCCUMENTS,  executed by BORROWER  NAME, a  California  general  partnership  as
"Owner,"  NAME OF LESSEE  HERE,  as  "Lessee,"  and WELLS FARGO  BANK,  NATIONAL
ASSOCIATION, as "Lender."

All that certain real property located in the County of PROPERTY  COUNTY,  State
of California, described as follows:

APN

                                   Page 8 of 9
<PAGE>

STATE OF CALIFORNIA
COUNTY OF _______________________ss.

On this _________ day of _________________,  19__, before me, __________________
a  Notary  Public  in and for  the  State  of  California,  personally  appeared
_______________  personally  known to me (or proved on the basis of satisfactory
evidence) to be the  person(s)  whose  name(s)  is/are  subscribed to the within
instrument  and  acknowledged  to me  that  he/she/they  executed  the  same  in
his/her/their authorized capacity(ies),  and that by his/her/their  signature(s)
on the  instrument  the  person(s),  or the  entity  upon  behalf  of which  the
person(s) acted, executed the instrument.

WITNESS my hand and official seal

Signature _____________________________________

My commission expires _________________________

                                   Page 9 of 9
<PAGE>

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

        Orchard Plaza
        2290 North Street, Suite 300                           [Graphic] Orchard
        San Jose, California 95131                                    Properties
        (408) 922-0400
        FAX (408) 922-0157

TO:            PROSPECTIVE TENANT

FROM:          ORCHARD PROPERTIES

SUBJECT:       HAZARDOUS MATERIALS QUESTIONNAIRE AS IT RELATES
               CALIFORNIA HEALTH AND SAFETY CODE
               SECTIONS 25503.5 AND 25503.6

California  Health and Safety Code Section  25503.5  requires any business which
handles Hazardous  Materials in excess of certain limits to establish a business
plans for  emergency  response to a release or  threatened  release of Hazardous
Materials.  Health and Safety Code Section  25503.6  specifies that any business
which is required  under  Section  25503.5 to establish and implement a business
plan and is  located  on leased  property  is  required  to notify  the owner in
writing that the business is subject to Section 25503.5 and to provide a copy of
the  business  plan to the owner  within  five  working  days after  receiving a
request from the owner or owner's agent for a copy.

The purpose of this letter is to request that you either verify that you are not
subject to Health and  Safety  Code  Sections  25503.5  and  25503.6 or that you
provide the information required to be provided by those Sections by:

     1.   Completing the attached acknowledgment;

     2.   Completing the attached questionnaire;

     3.   If you are a reporting  company,  attaching  a copy of your  hazardous
          materials management plan.

If you have questions as to your own specific  requirements,  Please contact the
local fire department to assess your use.

Very truly yours,

ORCHARD PROPERTIES, AMO(R)

/s/ Joe Lewis

Joe Lewis
President

JL:jlb

                                    EXHIBIT H

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

<PAGE>

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

                                 ACKNOWLEDGEMENT

THE UNDERSIGNED HEREBY ACKNOWLEDGES THAT IT (Mark One):

_____          Does not use any hazardous  materials other than minor amounts or
               reproduction  and janitorial  chemicals  consistent  with routine
               office  uses.
               (No  need to  fill  out the  Hazardous  Materials Questionnaire.)

__X__          Does not use  hazardous  materials  in a manner or in a  quantity
               requiring the preparation of a hazardous material management plan
               or any other  documents under  California  Health and Safety Code
               Section 25503.5.
               (Please fill out the attached Hazardous Material  Questionnaire.)

______         Uses   only   those   chemicals   identified   in   the  attached
               questionnaire  in accordance  with the provisions of the attached
               hazardous  materials  management plan, which has been approved by
               the Fire Department of the City of  _______________and is in full
               force  and  effect.
               (Please fill out the attached Hazardous  Materials  Questionnaire
               and attach copy of your Hazardous Materials Management Plan.)

THE UNDERSIGNED FURTHER ACKNOWLEDGES THAT IT HAS COMPLIED IN ALL RESPECTS TO THE
PROVISIONS  OF  LOCAL,  STATE  AND  FEDERAL  LAW  AND  THE  HAZARDOUS  MATERIALS
MANAGEMENT PLAN ATTACHED HERETO IN CONNECTION WITH ITS STORAGE, USE AND DISPOSAL
OF HAZARDOUS MATERIALS ONLY BY (1) DISCHARGE TO APPROPERIATELY  TREATED WASTE TO
A PUBLICLY OWNED TREATMENT WORK IN ACCORDANCE WITH A VALID AND ENFORCEABLE WASTE
DISCHARGE  PERMIT AND (2)  DELIVERY OF HAZARDOUS  WASTES TO A PROPERLY  LICENSED
WASTE DISPOSAL AGENT.

IN WITNESS WHEREOF, the undersigned, an authorized officer of the aforementioned
company has executed this acknowledgment as of the date written below.

Cylink Corporation
------------------------
(Company Name)

a California Corporation
------------------------
By: /s/ Robert B. Fougner
------------------------
Robert B. Fougner, Corporate Secretary
(Print Name and Title)

<PAGE>

                                         ---------------------------------------
                                         |For OP Use Only:________PM           |
                                         |______Project No.______Audit (Y/N)   |
                                         |______Unit No.   ______Database Entry|
                                         ---------------------------------------

                                ORCHARD PROPERTY
                        HAZADOUS MATERIALS QUESTIONNAIRE

General Instructions:  Please provide all requested information, based on review
of the Company's records and interviews with Company personnel likely to possess
the  information  requested.  If there is  insufficient  space to  response to a
question,  please attach a separate page referring to the question  number.  Use
"N/A" if the question is not applicable to your facility,  or write "Unknown" if
the  information is not available in the Company's files and is not known by the
person completing this questionnaire.

As used herein, the "Government  Agency" shall mean any local, state, or federal
governmental or quasi-governmental  agency,  authority,  entity,  subdivision or
court. The term "Hazardous Material" shall mean any chemical,  substance, vapor,
smoke,  radiation,  or material  which is listed as "hazardous" or "toxic" under
Law or which is  otherwise  regulated  or  prohibited  under any Law,  including
petroleum  hydrocarbon and substances  regulated under  Proposition 65. The term
"Law" shall mean any local, state, or federal regulation,  statute,  law, order,
or ordinance.

Tenant/Company Name: Cylink
                    ------------------------------------------------------------

Main Address of Facility/Leased Premises: ______________________________________
________________________________________________________________________________

(This  questionnaire  should  address  all  activities  conducted  at the Leased
Premises.  Please copy and separate  questionnaire  for operations  conducted in
multiple buildings leased by Tenant within the same Property.)

Years at Current Location: ____________
Facility SIC Code:         ____________    Facility EPA ID Number: _____________
Description  of  products   manufactured  and/or  activities  conducted  on  the
Property:
________________________________________________________________________________
________________________________________________________________________________

The  undersigned   acknowledges  that  the  information  contained  within  this
Hazardous  Materials  Questionnaire  is true and  correct to the best of his/her
knowledge and belief. The undersigned further  acknowledges that the Company has
complied in all respects to the  provisions of local,  state and federal law and
the Hazardous  Materials  Management Plan attached (if applicable) in connection
with its storage,  use, and disposal of hazardous  materials  discharged only by
(1) discharge of  appropriately  treated  waste in  accordance  with a valid and
enforceable  waste  discharge  permit and (2) delivery of hazardous  wastes to a
properly licensed waste disposal agent.

By: /s/ Bill Bush                          Bill Bush, Sr. Manufacturing Engineer
   -------------------------------         -------------------------------------
Signature of individual completing         Print Name & Title
Questionnaire

Date: 5/31/99                               Phone Number: 408-543-5602
     ----------------------------                         ----------------------

Address (if different from above):______________________________________________

                                                                          Page 1

<PAGE>

<TABLE>
<CAPTION>
Type of Business Activity(ies):                Hazardous Material Activities
-------------------------------                -----------------------------
(check all that apply)                         (check all that apply)
<S>        <C>                                 <C>
__________ machine shop                        __________ degreasing
__________ light assembly                      __________ chemical etching
__________ research and development            __________ wastewater treatment
__________ product service or repair           __________ painting
__________ photographic processing             __________ stripping
__________ vehicle maintenance or repair       __________ metal treatment or finishing
__________ auto/body                           __________ printing:
__________ engine/drive train                  __________ type:
____X_____ manufacturing:
           product: Electronic/Software        __________ analytical wet chemistry lab
__________ integrated circuit:                 __________ plating
__________ manufacturing                       __________ chemical mixing/synthesis
__________ assembly                            __________ lathe/mill machining
__________ chemical/pharmaceutical products    __________ printed circuit:
__________ manufacturing                       __________ manufacturing
__________ distribution                        __________ assembly

__________ other: __________________           __________ other: _________________
</TABLE>

2.  HAZARDOUS MATERIALS USAGE/STORAGE

What chemicals,  if any, are involved in your operations  (please list the types
of products, the maximum quantity stored on-site, and the annual quantity used)

--------------------------------------------------------------------------------
          MATERIAL                MAX.QUANITY ON-SITE           ANNUAL QTY. USED
--------------------------------------------------------------------------------
Isopropyl Alcohol                       7 gal                        20 gal
--------------------------------------------------------------------------------
Chemtronics FLUX-OFF II                 4 gal                        10 gal
--------------------------------------------------------------------------------
135 Rosin Soldering Flux Type R         1 gal                         1 gal
--------------------------------------------------------------------------------
951 Low Residue Soldering Flux          1 gal                         1 gal
--------------------------------------------------------------------------------
Polyurethane touch-up paint             1 gal                         1 gal
--------------------------------------------------------------------------------

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

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

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

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

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

If  this  table  provides   insufficient  space,  please  use  additional  pages
necessary.

                                                                          Page 2

<PAGE>

3. HAZARDOUS WASTE GENERATION

Does your facility generate and/or store waste on-site?  ______ Yes  ____X____No

If yes, how is it being handled? __________ on-site treatment or recovery
___________________________________________ discharge to sewer
___________________________________________ hauled off-site
___________________________________________ incineration

List waste streams that  constitute more than 5% of total annual waste stream or
routine wastes:

________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

Name(s) of hazardous waste hauler used:_________________________________________
________________________________________________________________________________
How often is hazardous waste hauled off-site? __________________________________

4. INDUSTRIAL WASTEWATER TREATMENT/DISCHARGE

Does your facility discharge industrial wastewater to:
________________________ sewer?
________________________ storm drain?
________________________ surface water?
___________X____________ no industrial discharge

5. UNDERGROUND STORAGE OF HAZARDOUS MATERIALS/WASTES

Are underground tanks or sumps being used for any of the following:

_____________________NO______________________hazardous waste storage
_____________________NO______________________chemical storage
_____________________NO______________________gasoline/diesel fuel storage
_____________________NO______________________waste treatment
_____________________NO______________________wastewater neutralization
_____________________NO______________________industrial wastewater treatment
_____________________________________________Other:_____________________________

                                                                          Page 3

<PAGE>

6.  HAZARDOUS SUBSTANCE SPILLS

To the best of your knowledge, have hazardous substances ever spilled:

________________________ into the sewer?
________________________ into the storm drain?
________________________ onto the property?
________________________ onto the property from adjacent propert(ies)?
___________X____________ no spills have occurred

7.  ENVIRONMENTAL PERMITS AND COMPLIANCE PROGRAMS

Please attach copies of environmental regulatory permits and agency reports that
are held for this facility (check those enclosed).

___________ City/County Hazardous Materials Inventory Statement, HMIS
___________ City/County Hazardous Materials Management/Business Plan, HMMP/HMBP
___________ Department  of  Toxic  Substances  Control  (DTSC)  Hazardous  Waste
            Generator Treatment Storage or Disposal Permit
___________ County Health Department hazardous waste generator storage permit
___________ State/Local  Fire  Department  Above  or  Underground  Storage  Tank
            Registration(s)
___________ Industrial Wastewater Discharge Permit
___________ Air Pollution Control District Air Emissions/Discharge Permit
___________ California  Air Resources  Control Board (CARB) Air Toxics Emissions
            Inventory (AB2588)
___________ National Pollution Discharge Elimination System (NPDES) Permit
___________ Other _____________________________________________________________
___________ Other _____________________________________________________________
___________ Other _____________________________________________________________

                                                                          Page 4

<PAGE>

                                    EXHIBIT I

Hazardous materials condition for Orchard Properties project at 3151 Jay Street,
Santa Clara (file A.3429) March 13, 1998

In approving the use of the adjacent property located at 3003 Scott Boulevard as
a private religious school,  pre-school, day care center and Islamic Mosque (the
"MCA  Project"),  the City Council  imposed  certain  mitigation  measures which
resulted in an unmitigated risk of exposing students (the "sensitive receptors")
engaging in activities  outside the building at 3003 Scott  Boulevard  (the "MCA
Building")  to  hazardous  materials  releases,  as discussed in the MCA Project
Environmental Impact Report (the "EIR").

The purpose of this condition of approval is to mitigate the aforementioned risk
to sensitive  receptors to a level of insignificance (as discussed and evaluated
in the MCA Project EIR).  This  condition  proposes to mitigate this risk by (i)
limiting the types or quantities of hazardous  chemicals  with the potential for
adverse health consequences to sensitive receptors outside the MCA Building,  or
by (ii)  insuring  that  adequate  measures  are in place to  protect  sensitive
receptors  outside of the MCA Building from exposure to such  chemicals.  At the
same time,  the objective of this  condition of approval is to provide the owner
of the property the widest  flexibility  and  latitude  for  allowable  uses and
chemicals.

1.   All  occupancies  other than the F and H occupancies as defined in the 1994
     Uniform  Building  Code  ("UBC")  are  permitted,  subject to  meeting  the
     requirements  of the UBC,  Uniform  Fire Code ("UFC") and the City of Santa
     Clara Zoning Ordinance.

2.   All F  occupancies  as  defined in the 1994 UBC are  permitted,  subject to
     meeting  the  requirements  of the UBC,  Uniform  Fire Code and the City of
     Santa Clara Zoning  Ordinance,  and subject to Fire Department  approval of
     chemicals, and quantities of such chemicals, with the potential for adverse
     health   consequences  to  sensitive  receptors  present  outside  the  MCA
     Building,  such as toxic gases, liquids which can form toxic gases, certain
     heavy metals and flammable materials.  Examples of common toxic gases which
     would be of concern are listed in the attached  matrix.  The  potential for
     such adverse off-site  consequences shall be determined by chemical's toxic
     or hazardous properties,  in light of the quantities of such chemical which
     will be used or stored  at the  site,  containment  methods  which  will be
     employed,  the location of the chemical on site and by proposed  mitigation
     measures.

The owner or potential  occupant of this  property  may submit to the  Hazardous
Materials  Division of the Fire  Department,  a list of chemicals and quantities
proposed  to be used.  Quantities  identified  should take into  account  likely
business  expansion that would increase the amounts on-site in the future.  Fire
Department  approval shall be based on a finding that the proposed  chemical(s),
quantities  and uses would not have the  potential to  significantly  impact the
sensitive receptor population present outside the

<PAGE>

MCA  Building.  It is  anticipated  that the  Fire  Department  review  would be
completed within a few days to one week at the latest.  Based on workload at the
time and  complexity of the  evaluation  required.  The applicant  will have the
right to address any issues or  questions  arising out of the Fire  Department's
review,  either in person or by telephone,  prior to the Fire Department  taking
action.  If the Fire Department  approves,  a letter of approval  similar to the
attached example would be issued by the Fire Department.

However,  if the Fire  Department  finds that the chemical  usage,  based on the
above review and criteria,  does have the potential to significantly  impact the
sensitive receptor population outside the MCA Building,  then the property owner
or prospective  tenant shall make  application to the City's Planning  Division.
Planning shall consult with the Fire Department to determine whether  additional
environmental  analysis,  such as a mitigated  negative  declaration  or an EIR,
would be required and what should be the appropriate approval process.

3.   All H occupancies as defined in the 1994 UBC prohibited except as follows:

If the property owner or prospective  tenant desires to create an H occupancy at
the subject  property,  the owner or tenant shall make application to the City's
Planning Division.  Planning shall consult with the Fire Department to determine
whether   additional   environmental   analysis,   such  as  mitigated  negative
declaration  or EIR,  would be  required  and  what  should  be the  appropriate
approval process.

The City's  evaluation and approval shall be based upon the same criteria as for
an F occupancy as stated in paragraph 2 above, and shall  specifically  evaluate
the potential for significant adverse health consequences to sensitive receptors
present outside the MCA Building.

In the event that the owner or  prospective  tenant  believes  that the type and
quantity  of  chemicals  used  will not  pose a  significant  risk to  sensitive
receptors as defined in paragraph 2 above,  prior to submitting the  application
to the  City's  Planning  Division,  the owner or tenant  may  obtain an initial
evaluation from the Fire Department in accordance with the process  described in
paragraph  2 above.  If the Fire  Department  concurs  and  issues its letter of
approval as described in paragraph 2 above, then no further environmental review
shall be required.

4.   If the use  permit  for a school on the  adjacent  property  at 3003  Scott
     Boulevard  lapsed  due to  abandonment  for one year,  due to an  agreement
     between  the  property  owner and the City of Santa  Clara or for any other
     reason,  this condition shall become null and void and the property at 3161
     Jay  Street  shall be subject  to the same  regulations  as other ML (Light
     Industrial) zoned property.

<PAGE>

<TABLE>
<CAPTION>
                                  COMMON TOXIC GASES AS DEFINED BY THE TOXIC GAS ORDINANCE AND CFC
                       For Use by All Jurisdictions, Cities and County, Within the Limits of Santa Clara County

------------------------------------------------------------------------------------------------------------------------------------
                             CAS No./         UBC/CFC         TGO                                               MAX
    GAS & FORMULA             UN No.          CLASS(1)       CLASS      IDLH(2)     LC(50)(3)        LOC         TQ        PEL(4)
------------------------------------------------------------------------------------------------------------------------------------
<S>                         <C>              <C>              <C>     <C>           <C>            <C>       <C>         <C>
Ammonia-NH(3)                7664-41-7       Corrosive(5,6)    II       300 ppm     4,000 ppm       30 ppm    7,500 lbs    50 ppm
(Old Dot Posin A)             UN1005          Flammable
------------------------------------------------------------------------------------------------------------------------------------
Arsine-AsH(3)                7784-42-1       Highly Toxic       I         3 ppm        20 ppm      0.3 ppm        N/A    0.05 ppm
                              UN2188          Flammable
------------------------------------------------------------------------------------------------------------------------------------
Boron Tribromide-BBr(3)     10294-33-4          Toxic          II        50 ppm       380 ppm        5 ppm   15,600 lbs     1 ppm(c)
                              UN2692            WR-2
------------------------------------------------------------------------------------------------------------------------------------
Boron Trichloride-BCI(3)    10294-34-5       Corrosive(5)      II        25 ppm(7)  2,541 ppm      2.5 ppm      635 lbs     5 ppm
                              UN1741
------------------------------------------------------------------------------------------------------------------------------------
Boron Trifluoride-BF(3)      7637-07-2          Toxic          II        25 ppm       806 ppm      2.5 ppm      625 lbs     1 ppm(c)
                              UN1008            WR-1
------------------------------------------------------------------------------------------------------------------------------------
Bromine-BR(2)                7726-95-6       Highly Toxic       I         3 ppm       113 ppm      0.3 ppm        N/A     0.1 ppm
                              UN1744          Corrosive
                                              Oxidizer
------------------------------------------------------------------------------------------------------------------------------------
Carbon Monoxide-CO            630-08-0       Flammable(5)     III     1,200 ppm     3,614 ppm      120 ppm   30,000 lbs    50 ppm
                              UN1016
------------------------------------------------------------------------------------------------------------------------------------
Chlorine-CI(2)               7782-50-5          Toxic           I        10 ppm       293 ppm        1 ppm        N/A       1 ppm(c)
                              UN1017
------------------------------------------------------------------------------------------------------------------------------------
Cholorine Dioxide-CIO(2)    10049-04-4        Toxic UR-3        I         5 ppm       250 ppm      0.5 ppm        N/A     0.1 ppm
                              NA9191         Oxidizer WR-1
------------------------------------------------------------------------------------------------------------------------------------
Chlorine Trifluoride         7790-91-2          Toxic           I        20 ppm       299 ppm        2 ppm        N/A     0.1 ppm(c)
CIF(3)                        UN1749         Oxidizer WR-3
------------------------------------------------------------------------------------------------------------------------------------

Notes:  1. Class as defined in CFC: 1.) Health  Hazards  per Article 2;  Highly Toxic = <200 LC(50) Toxic = 200 - 2,000 LC (50)  2.)
           Physical Hazards per UFC Standard 79-3.
        2. IDLH values published in 1994 by the National Institute for Occupational Safety and Health (NIOSH).
        3. LC(50) data: Lowest reported value, 1 hour adjusted, taken from nationally reognized standards.
        4. PEL values  published by  OSHA (29 CFR, part 1910.1000, Table Z-1) dated 7/1/95. OSHA values used if available, otherwise
           TLV from ACGIH or Cal OSHA values used. (C) = Ceiling Limit.
        5. Moderately toxic as adopted by the cities of San Jose, Santa Clara, and Milpitas: LC(50) = 2,000 - 3,000.
        6. When used as a refrigerant, UBC Class does  not apply. See TGO consensus guidelines for additional information regarding
           ammonia refrigeration systems.
        7. IDLH determined by 0.01 of LC(50).
        8. Cal OSHA PEL, Title 8, Section 5155, 9/1/95.
        9. Threshold Limit Values (TLV) from the American Conference of Governmental Industrial Hygienists (1994-1995).

UN-015                                                               Page 1 of 4                                       Rev. 04/30/98

</TABLE>

<PAGE>

<TABLE>
<CAPTION>
Common Toxic Gases As Defined By Toxic Gas Ordinance and CFC - Page 2 of 4                                             Rev. 04/30/98

------------------------------------------------------------------------------------------------------------------------------------
                             CAS No./         UBC/CFC         TGO                                               MAX
    GAS & FORMULA             UN No.          CLASS(1)       CLASS      IDLH(2)     LC(50)(3)        LOC         TQ        PEL(4)
------------------------------------------------------------------------------------------------------------------------------------
<S>                         <C>              <C>              <C>     <C>           <C>            <C>       <C>         <C>
Diborane-B(2)H(6)           19278-45-7       Higly Toxic        I        15 ppm        80 ppm      1.5 ppm        N/A     0.1 ppm
                              UN1911       Flammable WR-2
------------------------------------------------------------------------------------------------------------------------------------
Dichlorosilane-SIH(2)        4109-96-0          Toxic          II        50 ppm       314 ppm        5 ppm    1,250 lbs     5 ppm(c)
CI(2)(HCI)                    UN2189          Flammable
------------------------------------------------------------------------------------------------------------------------------------
Ethylene Oxide-C(2)H(4)0     75-21-8       Flammable WR-1      II       800 ppm     4,350 ppm       80 ppm   20,000 lbs     1 ppm
                              UN1040         Toxic UR-3
------------------------------------------------------------------------------------------------------------------------------------
Fluorine-F(2)                7782-41-4       Highly Toxic      II        25 ppm       185 ppm      2.5 ppm      625 lbs   0.1 ppm
                              UN1045          Oxidizer
------------------------------------------------------------------------------------------------------------------------------------
Germane-Gell(4)              7782-65-2        UR-3 Toxic        I         6 ppm(7)    622 ppm      0.6 ppm        N/A     0.2 ppm(8)
(Old DOT Poison A)            UN2192          Flammable
------------------------------------------------------------------------------------------------------------------------------------
Hydrogen Bromide-HBr        10035-10-6       Corrosive(5)      II        30 ppm     2,858 ppm        3 ppm      750 lbs     3 ppm
                              UN1048
------------------------------------------------------------------------------------------------------------------------------------
Hydrogen Cloride-HCI         7647-01-0       Corrosive(5)      II        30 ppm     2,810 ppm        5 ppm    1,250 lbs     5 ppm(c)
                              UN1050
------------------------------------------------------------------------------------------------------------------------------------
Hydrogen Cyanide-HCN         74-90-8        Highly Toxic        I        50 ppm       140 ppm        5 ppm        N/A      10 ppm
                              UN1051         Flammable
------------------------------------------------------------------------------------------------------------------------------------
Hydrogen Floride-HF          7664-39-3         Toxic           II        30 ppm     1,276 ppm        3 ppm      750 lbs     3 ppm
                              UN1052
------------------------------------------------------------------------------------------------------------------------------------
Hydrogen Selenide-H(2)Se     7783-07-5      Highly Toxic        I         1 ppm         2 ppm      0.1 ppm        N/A    0.05 ppm
(Old Dot Poison A)            UN1749         Flammable
------------------------------------------------------------------------------------------------------------------------------------
Hydrogen Sulfide-H(2)S       7783-06-4         Toxic           II       100 ppm       444 ppm       10 ppm    2,500 lbs    20 ppm
                              UN1053         Flammable
------------------------------------------------------------------------------------------------------------------------------------

Notes:  1. Class as defined in CFC: 1.) Health  Hazards  per Article 2;  Highly Toxic = <200 LC(50) Toxic = 200 - 2,000 LC (50)  2.)
           Physical Hazards per UFC Standard 79-3.
        2. IDLH values published in 1994 by the National Institute for Occupational Safety and Health (NIOSH).
        3. LC(50) data: Lowest reported value, 1 hour adjusted, taken from nationally reognized standards.
        4. PEL values  published by  OSHA (29 CFR, part 1910.1000, Table Z-1) dated 7/1/95. OSHA values used if available, otherwise
           TLV from ACGIH or Cal OSHA values used. (C) = Ceiling Limit.
        5. Moderately toxic as adopted by the cities of San Jose, Santa Clara, and Milpitas: LC(50) = 2,000 - 3,000.
        6. When used as a refrigerant, UBC Class does  not apply. See TGO consensus guidelines for additional information regarding
           ammonia refrigeration systems.
        7. IDLH determined by 0.01 of LC(50).
        8. Cal OSHA PEL, Title 8, Section 5155, 9/1/95.
        9. Threshold Limit Values (TLV) from the American Conference of Governmental Industrial Hygienists (1994-1995).
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
Common Toxic Gases As Defined By Toxic Gas Ordinance and CFC - Page 3 of 4                                             Rev. 04/30/98

------------------------------------------------------------------------------------------------------------------------------------
                             CAS No./         UBC/CFC         TGO                                               MAX
    GAS & FORMULA             UN No.          CLASS(1)       CLASS      IDLH(2)     LC(50)(3)        LOC         TQ        PEL(4)
------------------------------------------------------------------------------------------------------------------------------------
<S>                         <C>              <C>              <C>     <C>           <C>            <C>       <C>         <C>
Methyl Bromide-CH(3)Br       74-83-9            Toxic          II       250 ppm       854 ppm       25 ppm      625 lbs    20 ppm(c)
                              UN1062          Flammable
------------------------------------------------------------------------------------------------------------------------------------
Methylisocyanate-CH(3)       624-83-9        Highly Toxic       I         3 ppm        15 ppm      0.3 ppm        N/A    0.02 ppm
NCO                           UN2480       Flammable WR-2
------------------------------------------------------------------------------------------------------------------------------------
Methyl Mercaptan-CH(3)SH     74-93-1            Toxic          II       150 ppm       675 ppm       15 ppm    3,750 lbs    10 ppm(c)
                              UN1064          Flammable
------------------------------------------------------------------------------------------------------------------------------------
Methylamine-CH(3)NH(2)       74-89-5         Flammable(5)      II       100 ppm     7,010 ppm       10 ppm    2,500 lbs    10 ppm
                              UN1061          Corrosive
------------------------------------------------------------------------------------------------------------------------------------
Nickel Carbonyl-Ni(C0)(4)   13463-39-3       Highly Toxic       I         2 ppm        18 ppm      0.2 ppm        N/A   0.001 ppm
                              UN1259       Flammable WR-1
------------------------------------------------------------------------------------------------------------------------------------
Nitric Oxide-NO             10102-43-9       Highly Toxic       I       100 ppm       115 ppm       10 ppm        N/A      25 ppm
(Old DOT Poison A)            UN1660          Oxidizer
------------------------------------------------------------------------------------------------------------------------------------
Nitrogen Dioxide-NO(2)      10102-44-0       Highly Toxic       I        20 ppm       115 ppm        2 ppm        N/A       5 ppm(c)
(Old DOT Poison A)            UN1067        Oxidizer WR-1
------------------------------------------------------------------------------------------------------------------------------------
Nitrogen Trifluoride-NF(3)  7483-54-2        Oxidizer(5)       II     1,000 ppm     6,700 ppm      100 ppm   25,000 lbs    10 ppm
                              UN2451
------------------------------------------------------------------------------------------------------------------------------------
Phosgene-COCI(2)             75-44-5         Highly Toxic       I         2 ppm         5 ppm      0.2 ppm        N/A     0.1 ppm
(Old DOT Poison A)            UN1076            WR-1
------------------------------------------------------------------------------------------------------------------------------------
Phosphine-PH(3)             7803-51-2        Highly Toxic       I        50 ppm        22 ppm        5 ppm        N/A     0.3 ppm
(Old DOT Poison A)            UN2199         Pyrophoric
------------------------------------------------------------------------------------------------------------------------------------
Phosphorus Oxychloride     10025-87-3        Highly Toxic       I      0.96 ppm(7)     96 ppm    0.096 ppm    2,280 lbs 0.1 ppm(7,8)
POCI(3)                       UN1810            WR-2
------------------------------------------------------------------------------------------------------------------------------------

Notes:  1. Class as defined in CFC: 1.) Health  Hazards  per Article 2;  Highly Toxic = <200 LC(50) Toxic = 200 - 2,000 LC (50)  2.)
           Physical Hazards per UFC Standard 79-3.
        2. IDLH values published in 1994 by the National Institute for Occupational Safety and Health (NIOSH).
        3. LC(50) data: Lowest reported value, 1 hour adjusted, taken from nationally reognized standards.
        4. PEL values  published by  OSHA (29 CFR, part 1910.1000, Table Z-1) dated 7/1/95. OSHA values used if available, otherwise
           TLV from ACGIH or Cal OSHA values used. (C) = Ceiling Limit.
        5. Moderately toxic as adopted by the cities of San Jose, Santa Clara, and Milpitas: LC(50) = 2,000 - 3,000.
        6. When used as a refrigerant, UBC Class does  not apply. See TGO consensus guidelines for additional information regarding
           ammonia refrigeration systems.
        7. IDLH determined by 0.01 of LC(50).
        8. Cal OSHA PEL, Title 8, Section 5155, 9/1/95.
        9. Threshold Limit Values (TLV) from the American Conference of Governmental Industrial Hygienists (1994-1995).
</TABLE>

<PAGE>

<TABLE>
<CAPTION>

Common Toxic Gases As Defined By Toxic Gas Ordinance and CFC - Page 4 of 4                                             Rev. 04/30/98

------------------------------------------------------------------------------------------------------------------------------------
                             CAS No./         UBC/CFC         TGO                                               MAX
    GAS & FORMULA             UN No.          CLASS(1)       CLASS      IDLH(2)     LC(50)(3)        LOC         TQ        PEL(4)
------------------------------------------------------------------------------------------------------------------------------------
<S>                         <C>              <C>              <C>     <C>          <C>            <C>        <C>         <C>
Phosphorus Pentafluoride    7647-19-0           Toxic           I       2.6 ppm(7)    260 ppm     0.26 ppm        N/A       3 ppm
PF(5)                         UN2198        Oxdizer WR-1
------------------------------------------------------------------------------------------------------------------------------------
Phosphorus Trichoride       7719-12-2         Toxic UR2        II        25 ppm       208 ppm      2.5 ppm    3,518 lbs   0.5 ppm
PCI(3)                        UN1809        WR-2 Oxidizer
------------------------------------------------------------------------------------------------------------------------------------
Selenium Hexafluoride       7783-79-1        Highly Toxic       I         2 ppm        50 ppm      0.2 ppm        N/A     0.05 ppm
SeF(6)                        UN2194                                                                                       (as Se)
------------------------------------------------------------------------------------------------------------------------------------
Silicon Tetachloride       10026-04-7         Corrosive        II        50 ppm    16,000 ppm        5 ppm    4,835 lbs     5 ppm(c)
SiCI(4)(HCI)                  UN1818
------------------------------------------------------------------------------------------------------------------------------------
Silicon Tetrafluoride       7783-61-1           Toxic          II        30 ppm       450 ppm        3 ppm      750 lbs   0.1 ppm
SiF(4)(HF)                    UN1859            WR-2
------------------------------------------------------------------------------------------------------------------------------------
Stibine-SbH(3)              7803-52-3        Highly Toxic      II         5 ppm        20 ppm       0.5 ppm        N/A     0.1 ppm
                              UN2676          Flammable
------------------------------------------------------------------------------------------------------------------------------------
Sulfur Dioxide-SO(2)        7446-09-5        Corrosive(5)      II       100 ppm     2,520 ppm       10 ppm    2,500 lbs     5 ppm
                              UN1079
------------------------------------------------------------------------------------------------------------------------------------
Sulfur Pentafluroide        5714-22-7        Highly Toxic       I         1 ppm        79 ppm      0.1 ppm        N/A   0.025 ppm
SF(10)                                        Oxidizer
------------------------------------------------------------------------------------------------------------------------------------
Sulfuryl Fluoride           2699-79-8        Corrosive(5)     III       200 ppm     3,020 ppm       20 ppm   50,000 lbs     5 ppm
SO(2)F(2)                     UN2191
------------------------------------------------------------------------------------------------------------------------------------
Tellurium Hexafluoride      7783-80-4        Highly Toxic       I         1 ppm        25 ppm      0.1 ppm        N/A    0.02 ppm
TeF(6)                        UN2195                                                                                       (aste)
------------------------------------------------------------------------------------------------------------------------------------
Titanium Tetrachloride      7550-45-0        Highly Toxic      II       1.3 ppm        66 ppm     0.13 ppm    2,470 lbs
TiCI(4)                       UN1838        Water Reactive                                                                    -
------------------------------------------------------------------------------------------------------------------------------------
Tungsten Hexafluoride       7783-82-6           Toxic          II        30 ppm       217 ppm        3 ppm      750 lbs   0.1 ppm
WF(6)(HF)                     UN2196
------------------------------------------------------------------------------------------------------------------------------------

Notes:  1. Class as defined in CFC: 1.) Health  Hazards  per Article 2;  Highly Toxic = <200 LC(50) Toxic = 200 - 2,000 LC (50)  2.)
           Physical Hazards per UFC Standard 79-3.
        2. IDLH values published in 1994 by the National Institute for Occupational Safety and Health (NIOSH).
        3. LC(50) data: Lowest reported value, 1 hour adjusted, taken from nationally reognized standards.
        4. PEL values  published by  OSHA (29 CFR, part 1910.1000, Table Z-1) dated 7/1/95. OSHA values used if available, otherwise
           TLV from ACGIH or Cal OSHA values used. (C) = Ceiling Limit.
        5. Moderately toxic as adopted by the cities of San Jose, Santa Clara, and Milpitas: LC(50) = 2,000 - 3,000.
        6. When used as a refrigerant, UBC Class does  not apply. See TGO consensus guidelines for additional information regarding
           ammonia refrigeration systems.
        7. IDLH determined by 0.01 of LC(50).
        8. Cal OSHA PEL, Title 8, Section 5155, 9/1/95.
        9. Threshold Limit Values (TLV) from the American Conference of Governmental Industrial Hygienists (1994-1995).
</TABLE>

<PAGE>

DRAFT LETTER OF APPROVAL-HAZARDOUS MATERIALS DIVISION
                         CITY OF SANTA CLARA FIRE DEPARTMENT

We have reviewed the attached  (insert chemical  inventory,  HMMP or appropriate
document  title)  dated  _____ and  submitted  by (insert  landlord  prospective
tenant)  in  accordance  with the terms of the  Condition  of  Approval  for the
Orchard Properties Jay Street project.

Based on our review of the documents submitted,  we approve this proposed use at
the  premises  at _______ Jay Street,  based on our  finding  that the  proposed
chemicals, quantities and uses do not have the potential to significantly impact
the sensitive receptors outside the MCA building.

(signed)
HAZARDOUS MATERIALS DIVISION
CITY OF SANTA CLARA FIRE DEPARTMENTCYLINK CORPORATION

                        CYLINK/ARL 1997 STOCK OPTION PLAN

1. Establishment, Purpose, and Definitions.

         a. There is hereby adopted the  Cylink/ARL  1997 Stock Option Plan (the
"Plan") of Cylink Corporation (the "Company").

         b. The  purpose  of the Plan is to  provide  a means  whereby  eligible
individuals  (as  defined  in  paragraph  4,  below) can  acquire  shares of the
Company's  Common  Stock,  $.01 par  value  per share  (the  "Stock").  The Plan
provides  employees,  independent  contractors,  and  consultants of Algorithmic
Research  Ltd., a company  organized and existing under the laws of the State of
Israel ("ARL"),  and of its subsidiaries,  whether  currently  existing or which
become such after  adoption of the Plan,  but  excluding  any such person who is
also an executive  officer of the Company or member of the Board of Directors of
the Company,  an  opportunity  to purchase  shares of Stock  pursuant to options
which are not  described in Section 422 or 423 of the  Internal  Revenue Code of
1986, as amended (the "Code") (referred to as "nonqualified stock options").

         c.  The  term  "Affiliates"  as  used  in the  Plan  means  parent  and
subsidiary corporations of the Company, as defined in Sections 424(e) and (f) of
the Code (but substituting the "Company" for "employer corporation"),  including
parents or subsidiaries which become such after adoption of the Plan.

2. Administration of the Plan.

         a. The Plan  shall be  administered  by the Board of  Directors  of the
Company  (the  "Board").   The  Board  may  delegate  the   responsibility   for
administering  the Plan to a committee,  under such terms and  conditions as the
Board shall determine (the "Committee"). Members of the Committee shall serve at
the  pleasure of the Board.  The  Committee  shall  select one of its members as
chairman,  and shall hold meetings at such times and places as it may determine.
A majority of the Committee shall  constitute a quorum and acts of the Committee
at which a quorum is present,  or acts  reduced to or approved in writing by all
the members of the Committee,  shall be the valid acts of the Committee.  If the
Board does not delegate  administration of the Plan to the Committee,  then each
reference  in this Plan to "the  Committee"  shall be  construed to refer to the
Board.

         b. Subject to Section 1(b) above,  the Committee  shall determine which
eligible individuals (as defined in paragraph 4, below) shall be granted options
under the Plan,  the timing of such grants,  the terms  thereof  (including  any
restrictions  on the Stock),  and the number of shares of Stock  subject to such
options.

         c. The Committee may amend the terms of any outstanding  option granted
under this Plan, but any amendment  which would  adversely  affect an optionee's
rights under an  outstanding  option  shall not be made  without the  optionee's
written consent. The Committee may, with the

<PAGE>

optionee's  written consent,  cancel any outstanding  stock option or accept any
outstanding stock option in exchange for a new option.

         d.  The  Committee  shall  have  the sole  authority,  in its  absolute
discretion,  to adopt,  amend and rescind such rules and  regulations as, in its
opinion,  may be advisable for the  administration  of the Plan, to construe and
interpret the Plan, the rules and the regulations and the instruments evidencing
options  granted  under  the Plan and to make all  other  determinations  deemed
necessary  or  advisable  for the  administration  of the Plan.  All  decisions,
determinations,  and  interpretations  of the Committee  shall be binding on all
participants.

3. Stock Subject to the Plan.

         a. An aggregate of 410,000  shares of Stock shall be available  for the
grant of stock options and the issuance of Stock under the Plan. If an option is
surrendered  (except  surrender  for  shares of  Stock) or for any other  reason
ceases to be  exercisable  in whole or in part, the shares which were subject to
such option but as to which the option had not been exercised  shall continue to
be  available  under the Plan.  Any Stock which is retained by the Company  upon
exercise of an option in order to satisfy the exercise  price for such option or
any withholding  taxes due with respect to such option exercise shall be treated
as issued to the optionee and will thereafter not be available under the Plan.

         b. If there is any change in the Stock subject to either the Plan or an
option  agreement   pursuant  to  the  Plan,   through  merger,   consolidation,
reorganization, recapitalization,  reincorporation, stock split, stock dividend,
or  other  change  in  the  corporate  structure  of  the  Company,  appropriate
adjustments  shall be made by the  Committee  in order  to  preserve  but not to
increase the benefits to the individual,  including adjustments to the aggregate
number,  kind of  shares,  and price per share  subject to either the Plan or an
option agreement.

4. Eligible Individuals.

         Individuals  who shall be eligible to have  granted to them the options
provided for by the Plan shall be such  employees,  independent  contractors and
consultants of ARL and of its subsidiaries, but excluding executive officers and
directors of the Company,  whether currently existing or which become such after
adoption of the Plan as the Committee,  in its discretion,  shall designate from
time to time.  If an eligible  individual  is granted an option under this Plan,
and later is  transferred  to the Company or an Affiliate  of the Company,  such
individual  shall continue to be eligible to  participate  under the Plan to the
extent of such previously granted options.

                                       2.

<PAGE>

5. The Option Price.

         The  purchase  price of the Stock  covered by each  nonqualified  stock
option  shall be the  price as  established  by the Board or the  Committee,  as
applicable.  The exercise  price of an option shall be subject to  adjustment to
the extent provided in paragraph 3(b), above.

6. Terms and Conditions of Options.

         a. Each  option  granted  pursuant to the Plan will be  evidenced  by a
written  stock option  agreement  executed by the Company and the person to whom
such option is granted.

         b. The Committee  shall determine the term of each option granted under
the Plan;  provided,  however,  that the terms of all options  granted under the
Plan shall not be for more than ten (10) years.

         c. An optionee's  stock option  agreement may contain such other terms,
provisions and conditions  consistent with this Plan as may be determined by the
Committee.

7. Use of Proceeds.

         Cash proceeds  realized from the issuance of Stock under the Plan shall
constitute general funds of the Company.

8. Amendment, Suspension, or Termination of the Plan.

         a. The Board may at any time amend, suspend or terminate the Plan as it
deems  advisable;  provided  that  such  amendment,  suspension  or  termination
complies with all applicable requirements of state and federal law.

         b. No option may be granted  under the Plan  during any  suspension  or
after the  termination of the Plan, and no amendment,  suspension or termination
of the Plan shall without the affected individual's consent, alter or impair any
rights or obligations under any option previously granted under the Plan.

9. Assignability.

         Unless otherwise  provided in a specific option agreement,  each option
granted  pursuant  to  this  Plan  shall,  during  an  optionee's  lifetime,  be
exercisable  only by  such  optionee,  and  neither  the  option  nor any  right
hereunder  shall  be  transferable  by  such  optionee  by  operation  of law or
otherwise other than by will or the laws of descent and distribution.

                                       3.

<PAGE>

10. Payment Upon Exercise of Options.

         Payment of the purchase  price of Stock to be received upon exercise of
any option granted under this Plan shall be made in cash or in such other manner
as the Committee may approve.

                                       4.

<PAGE>

                               CYLINK CORPORATION

                 CYLINK/ARL 1997 NONQUALIFIED STOCK OPTION PLAN

                       NONQUALIFIED STOCK OPTION AGREEMENT

         THIS  NONQUALIFIED  STOCK OPTION AGREEMENT  ("Agreement") is made as of
September 8, 1997,  between CYLINK  CORPORATION,  a California  corporation (the
"Company"), and A ("Optionee").

                                   WITNESSETH:

         WHEREAS,  the Company has adopted the Cylink/ARL 1997 Stock Option Plan
(the "Plan"), which Plan is incorporated in this Agreement by reference and made
a part hereof; and

         WHEREAS,  the  Company  regards  Optionee  as a  valuable  employee  or
director  of, or service  provider  to,  Algorithmic  Research  Ltd.,  a company
organized and existing under the laws of the state of Israel ("ARL"),  or one of
ARL's subsidiaries,  and has determined that it would be to the advantage and in
the interests of the Company and its  shareholders  to grant the option provided
for in this Agreement to Optionee;

         NOW,  THEREFORE,  in consideration of the mutual covenants  hereinafter
set forth, the parties to this Agreement hereby agree as follows:

1. Option Grant.

         The Company  hereby grants to Optionee the right and option to purchase
from the Company on the terms and conditions  hereinafter set forth,  all or any
part of an aggregate of <<B>> shares of the Company's  Common  Stock,  $0.01 par
value per share (the  "Stock").  This  option is not  intended  to  satisfy  the
requirements  of Section 422 of the Internal  Revenue  Code of 1986,  as amended
(the "Code"), and is not intended to qualify as an incentive stock option.

2. Option Price.

         The per share  purchase price of the Stock subject to this option shall
be U.S.$0.01.  The term "Option Price" as used in this  Agreement  refers to the
per share purchase price of the Stock subject to this option.

3. Option Period.

         This option  shall be  exercisable  only  during the Option  Period (as
defined below), and during such Option Period, the exercisability of this option
shall be subject to the vesting  provisions

<PAGE>

of paragraph 4 hereof.  The "Option  Period" shall commence on September 8, 1997
and shall terminate on September 8, 2007 (the "Termination Date").

4. Vesting of Right to Exercise Options.

         The Optionee shall have the right to exercise this option in accordance
with the following schedule:

                  Exercisable as of March 1, 1998:       C
                  Exercisable as of September 1, 1998:   D
                  Exercisable as of September 1, 1999:   E

         Any portion of this option that is not exercised  shall  accumulate and
may be exercised at any time during the Option  Period prior to the  Termination
Date. In no event shall the Company be required to issue fractional  shares.  In
lieu of any fractional  share  otherwise  required to be issued upon exercise of
this option,  the  fraction of a share shall be rounded up to the nearest  whole
share.

         Notwithstanding  anything to the contrary  contained in this Agreement,
the entire unvested portion of this option shall become immediately  exercisable
upon  the  first  to  occur  of any of the  following  events:  (a) the  date of
commencement  of a tender  or  exchange  offer  relating  to at least 50% of the
outstanding  shares of Stock;  (b) the date on which a Change in  Control of the
Company occurs; (c) the date on which a Change in Control of ARL occurs; (d) the
date of  execution  of any  binding  letter of intent,  contract,  agreement  or
understanding  contemplating  or  otherwise  relating  to an  event  of the type
referred to in clause "(b)" of this sentence;  (e) the date of occurrence of any
material breach or default by the Company with respect to any of its obligations
under  Article 5 of that certain  Option Grant  Agreement of even date  herewith
between the Company and  Optionee,  which  breach or default is not cured within
twenty (20) days after notice  thereof is given to the Company;  or (f) the date
on which Optionee shall die or become disabled.

         For  purposes of this  Agreement,  the  following  terms shall have the
following respective meanings:

                  A "Change in Control of the  Company"  shall be deemed to have
occurred  if: (a) any  person or entity  (other  than  Pittway  Corporation)  or
"group"  (within the meaning of Rule 13d-3 under the Securities  Exchange Act of
1934, as amended (the "Exchange  Act")) becomes the  "beneficial  owner" (within
the meaning of Rule 13d-3 under the Exchange  Act) of at least 50% of the voting
securities of the Company;  (b) a merger,  consolidation or similar  transaction
involving  the  Company or any  affiliate  of the Company is  effected,  and the
shareholders of the Company  immediately prior to such transaction own less than
60% of the voting  securities of the surviving  corporation in such transaction;
(c) assets  representing  more than 50% of the  aggregate  net book value of the
Company's assets (exclusive of its wireless communications division) are sold or
otherwise  transferred  to any person (or persons) or entity (or entities) (in a
single transaction or a series of transactions);  or (d) the individuals who, as
of the date of this Agreement, are members of

                                       2

<PAGE>

the Board of  Directors  of the Company (the  "Incumbent  Board")  cease for any
reason  to  constitute  at least  two-thirds  of the Board of  Directors  of the
Company (provided,  however, that if the election, or nomination for election by
the  Company's  shareholders,  of any new  director was approved by a vote of at
least two-thirds of the Incumbent  Board,  such new director shall, for purposes
of this Agreement, be considered as a member of the Incumbent Board).

                  A "Change in Control of ARL" shall be deemed to have  occurred
if: (a) a person or entity  (other than the  Company)  becomes  the  "beneficial
owner" (within the meaning of Rule 13d-3 under the Exchange Act) of at least 50%
of the voting  securities  of ARL  (other  than in  connection  with a Change in
Control of the Company);  (b) ARL ceases to own more than 50% of the outstanding
shares of ARL; or (c) assets  representing  more than 50% of the  aggregate  net
book value of ARL's assets are sold or otherwise  transferred  to any person (or
persons)  or  entity  (or  entities)  (in a single  transaction  or a series  of
transactions).

5. Method of Exercise.

         Optionee  may  exercise  this option with respect to all or any part of
the shares of Stock then subject to such exercise by giving the Company  written
notice of such  exercise,  specifying  the number of such  shares of Stock as to
which this option is exercised.  Such notice shall be  accompanied  by an amount
equal to the Option Price of such shares,  in the form of any one or combination
of the following: cash, a certified check, bank draft or postal or express money
order payable to the order of the Company in lawful money of the United  States.
As soon as practicable after receipt of the notice required in this paragraph 5,
the Company shall,  without  transfer or issue tax and without other  incidental
expense to Optionee,  issue in the name of Optionee,  and deliver to Optionee, a
certificate or certificates of such shares of Stock.

6. Corporate Transactions.

         (a) If there  should be any change in a class of stock  subject to this
option,  through  merger,   consolidation,   reorganization,   recapitalization,
reincorporation,  stock split,  stock  dividend or other change in the corporate
structure of the Company,  the Company  shall make  appropriate  adjustments  in
order to  preserve,  but not to increase,  the  benefits to Optionee,  including
adjustments  in the number of shares of such stock subject to this option and in
the per share  purchase  price  thereof.  Any  adjustment  made pursuant to this
paragraph  6 as a  consequence  of a change in the  corporate  structure  of the
Company  shall not entitle  Optionee to acquire a number of shares of such stock
of the  Company or shares of stock of any  successor  company  greater  than the
number of shares  Optionee would receive if, prior to such change,  Optionee had
actually  held a number of shares of such  stock  equal to the  number of shares
subject to this option.

         (b) For purposes of this paragraph 6, a "Corporate  Transaction"  shall
include  any of the  following  shareholder-approved  transactions  to which the
Company is a party:

                                       3

<PAGE>

                  (i) a merger or  consolidation in which the Company is not the
surviving entity,  except for a transaction the principal purpose of which is to
change the state of the Company's incorporation;

                  (ii)  the  sale,  transfer  or  other  disposition  of  all or
substantially  all of the assets of the Company in liquidation or dissolution of
the Company; or

                  (iii) any reverse merger in which the Company is the surviving
entity but in which  securities  possessing more than fifty percent (50%) of the
total  combined  voting  power  of  the  Company's  outstanding  securities  are
transferred to a holder or holders different from those who held such securities
immediately prior to such merger.

         In the event of any Corporate Transaction, this option shall be assumed
in full by the  successor  corporation  or its  parent  company,  or  substitute
options  shall be  issued  to  Optionee,  in either  case  having  substantially
equivalent  provisions as the option granted pursuant to this Agreement  (except
that (i) following such Corporate Transaction,  this option shall be exercisable
only for the  securities  or other  property  issued  or paid in such  Corporate
Transaction to holders of an equal number of shares of Stock as are then subject
to this option, and (ii) if such Corporate Transaction  constitutes a "Change in
Control of the Company" (as defined above), this option shall become immediately
exercisable on the date on which such Corporate Transaction occurs).

7. Limitations on Transfer.

         This option shall, during Optionee's  lifetime,  be exercisable only by
Optionee,  and neither this option nor any right hereunder shall be transferable
by Optionee by operation  of law or otherwise  other than by will or the laws of
descent and  distribution.  In the event of any attempt by Optionee to alienate,
assign, pledge, hypothecate, or otherwise dispose of this option or of any right
hereunder, except as provided for in this Agreement, or in the event of the levy
of any  attachment,  execution,  or similar  process upon the rights or interest
hereby  conferred,  the Company at its  election  may  terminate  this option by
notice to Optionee and this option shall thereupon become null and void.

8. No Shareholder Rights.

         Neither Optionee nor any person entitled to exercise  Optionee's rights
in the event of his death  shall  have any of the rights of a  shareholder  with
respect to the shares of Stock  subject to this option except to the extent such
shares shall have been issued upon the exercise of this option.

                                       4

<PAGE>

9. No Effect On Terms Of Employment.

         SUBJECT  TO  THE  TERMS  OF  ANY  WRITTEN  EMPLOYMENT  CONTRACT  TO THE
CONTRARY,  ANY MEMBER OF THE CYLINK/ARL  GROUP WHICH EMPLOYS OPTIONEE SHALL HAVE
THE RIGHT TO TERMINATE OR CHANGE THE TERMS OF EMPLOYMENT OF OPTIONEE AT ANY TIME
AND FOR ANY REASON WHATSOEVER, WITH OR WITHOUT CAUSE.

10. Notice.

         Any notice required to be given under the terms of this Agreement shall
be  addressed  to the  Company  in care of its  Secretary  at the  Office of the
Company at 910 Hermosa Court,  Sunnyvale,  California 94086, USA, and any notice
to be given to Optionee  shall be addressed to Optionee at the address  given by
Optionee beneath Optionee's  signature to this Agreement,  or such other address
as either  party to this  Agreement  may  hereafter  designate in writing to the
other.  Any such  notice  shall be  deemed  to have  been  duly  given  (a) when
delivered in person,  (b) three  business days after  delivery to an "overnight"
courier, or (c) 24 hours after delivery by facsimile transmission (if receipt of
such  facsimile  is  evidenced  by a  transmission  report  or other  reasonable
evidence  of  the  successful  and  accurate  transmission  of  such  notice  or
communication).

11. Committee Decisions Conclusive.

         All  decisions  of the Board of Directors of the Company of a Committee
designated  by it upon  any  question  arising  under  the  Plan or  under  this
Agreement shall be conclusive.

12. Successors.

         This  Agreement  shall be binding  upon and inure to the benefit of any
successor or successors of the Company.  Where the context requires,  "Optionee"
as  used  in  this  Agreement  shall  include   Optionee's   spouse,   executor,
administrator  or other  legal  representative  or the person or persons to whom
Optionee's   rights  pass  by  will  or  the  applicable  laws  of  descent  and
distribution.

13. Governing Law; Venue.

         The interpretation, performance and enforcement of this Agreement shall
be governed by the laws of the State of California.  Any dispute  arising out of
or relating to this  Agreement  shall be resolved  through  binding  arbitration
under the Rules of Conciliation and Arbitration of the International  Chamber of
Commerce.  The  venue  for such  arbitration  proceedings  shall  be in  London,
England.  The resolution of a dispute by the arbitrator  shall be conclusive and
binding upon the parties hereto and judgment may be entered thereon in any court
having jurisdiction  thereof. The arbitrator shall have the authority to make an
award of actual  compensatory  damages  incurred by a party in connection with a
dispute, but shall have no right to grant special, punitive or

                                       5

<PAGE>

exemplary  damages or indirect or consequential  damages or to grant any form of
equitable relief (except that the arbitrator may, as part of his award,  require
the Company to perform its obligations under this Agreement).

         IN WITNESS  WHEREOF,  the  Company  and  Optionee  have  executed  this
Agreement as of the day and year first above written.

                                 THE COMPANY:

                                 CYLINK CORPORATION

                                 By ____________________________________________
                                 Its ___________________________________________

                                 OPTIONEE

                                 _______________________________________________
                                 A

                                 Address:

                                 _______________________________________________

                                 _______________________________________________

                                 _______________________________________________

                                       6

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00044-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00044-of-00352.parquet"}]]