Document:

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EXHIBIT 10.2

Building Lease Agreement

Page 82

                                      LEASE

                                 BY AND BETWEEN

                              SHORELINE PARK, LLC,
                      a Delaware limited liability company
                                   as Landlord

                                       and

                         DREXLER TECHNOLOGY CORPORATION
                                    as Tenant

                             For Premises located at

                              1395 Charleston Road
                            Mountain View, California

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                                TABLE OF CONTENTS

SUMMARY OF BASIC LEASE TERMS...................................................1

ARTICLE 1 DEFINITIONS..........................................................3

ARTICLE 2 DEMISE, CONSTRUCTION, AND ACCEPTANCE.................................5

ARTICLE 3 RENT.................................................................9

ARTICLE 4 USE OF PREMISES.....................................................10

ARTICLE 5 TRADE FIXTURES AND ALTERATIONS......................................12

ARTICLE 6 REPAIR AND MAINTENANCE..............................................14

ARTICLE 7 WASTE DISPOSAL AND UTILITIES........................................16

ARTICLE 8 COMMON OPERATING EXPENSES...........................................19

ARTICLE 9 INSURANCE...........................................................23

ARTICLE 10 LIMITATION ON LANDLORD'S LIABILITY AND INDEMNITY...................25

ARTICLE 11 DAMAGE TO PREMISES.................................................26

ARTICLE 12 CONDEMNATION.......................................................27

ARTICLE 13 DEFAULT AND REMEDIES...............................................28

ARTICLE 14 ASSIGNMENT AND SUBLETTING..........................................31

ARTICLE 15 GENERAL PROVISIONS.................................................34

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                                      LEASE

        This Lease is dated as of the lease reference date specified in SECTION
A of the Summary of Basic Lease Terms 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.

                          SUMMARY OF BASIC LEASE TERMS

SECTION                                                       TERMS
(LEASE REFERENCE)

        A.      LEASE REFERENCE DATE:     January 28, 2004
(Introduction)

        B.      LANDLORD:                 SHORELINE PARK, LLC
(Introduction)                            a Delaware limited liability company

        C.      TENANT:                   DREXLER TECHNOLOGY CORPORATION
(Introduction)                            a Delaware corporation

        D.      PREMISES:                 That area consisting of approximately
(ss. 1.20)                                42,853 square feet of gross leasable
                                          area, the address of which is 1395
                                          Charleston Road, Mountain View,
                                          California, and which is located
                                          within the Building as shown on
                                          EXHIBIT A. The square footage of the
                                          Premises includes a load factor for a
                                          common area equipment room in the
                                          Building.

        E.      PROJECT:                  The land and improvements shown on
(ss.1.21)                                 EXHIBIT A.

        F.      BUILDING:                 The building in which the Premises are
(ss. 1.7)                                 located having an  address of 1395
                                          Charleston Road, Mountain View,
                                          California, and containinG 64,034
                                          square feet of gross leasable area.
                                          The gross leasable area of the
                                          Building referred to above shall be
                                          deemed the actual gross leasable area
                                          in the Building.

        G.      TENANT'S SHARE:           66.92% of the Building (i.e., 42,853
(ss. 1.28)                                square feet of space in the Premises
                                          divided by 64,034 square feet of space
                                          in the Building).

        H.      TENANT'S ALLOCATED PARKING STALLS: 129 parking stalls based on
(ss.4.5)                                  the ratio of 3 parking stalls for each
                                          1,000 square feet of leasable area in
                                          the Premises.

        I.      SCHEDULED COMMENCEMENT DATE: April 1, 2004. Tenant may have
(ss. 1.24)                                early access to the Premises as
                                          provided in  Section 2.5 of this
                                          Lease.

        J.      LEASE TERM:               120 calendar months (plus the partial
(ss.1.17)                                 month following the Commencement Date
                                          if such date is not the first day of a
                                          month).

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        K.      BASE MONTHLY RENT:
(ss. 3.1)       MONTHS
                FROM THE COMMENCEMENT DATE  MONTHLY AMOUNT  MONTHLY PER SQ. FOOT
                --------------------------  --------------  --------------------
                1 - 60                      $32,139.75      $0.75
                61 - 120                    $74,135.69      $1.73

                Pursuant to Section 2.5 of this Lease, Tenant may have early
                occupancy of the Premises prior to the Commencement Date and
                during this period, Tenant will pay Base Monthly Rent and
                Tenant's Share of Additional Rent as provided in Section 2.5 of
                this Lease.

        L.      PREPAID RENT:             $32,139.75, plus an amount equal to
(ss. 3.3)                                 Tenant's Share of estimated amount of
                                          Tenant's Share of Common Operating
                                          Expenses.

        M.      SECURITY DEPOSIT:         -0-
(ss. 3.5)

        N.      PERMITTED USE:            The Premises shall be used solely for
(ss. 4.1)                                 general office, research and
                                          development, design, light
                                          manufacturing, assembly, warehousing
                                          and any other legal use incidental
                                          thereto, but for no other purpose.

        O.      PERMITTED TENANT'S ALTERATIONS LIMIT:  $50,000
(ss.5.2)

        P.      TENANT'S LIABILITY INSURANCE MINIMUM:  $3,000,000.00
(ss.9.1)

        Q.      LANDLORD'S ADDRESS:       Divco West Group, LLC
(ss.1.3)                                  100 Park Center Plaza, Suite 425
                                          San Jose, California 95113
                                          Attn.: Property Manager

                With a copy to:           Divco West Group, LLC
                                          400 Hamilton Avenue, Fourth Floor
                                          Palo Alto, CA 94301
                                          Attn.: Asset Manager

        R.      TENANT'S ADDRESS:         2644 Bayshore Parkway
(ss. 1.3)                                 Mountain View, CA 94043
                                          Attn.: Steve Larson

        S.     RETAINED REAL ESTATE BROKERS: Colliers International representing
(ss.15.13)                                Landlord and Cushman & Wakefield of
                                          California, Inc. representing Tenant.

        T.      LEASE:                    This Lease includes the summary of the
(ss. 1.16)                                Basic Lease  Terms, the Lease, and the
                                          following exhibits and addenda:

                                          Exhibit A - Project Site Plan and
                                                      Outline of the Premises
                                                      and Remaining Premises
                                          Exhibit B - Work Letter for Tenant
                                                      Improvements
                                          Exhibit C - Acceptance Agreement

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                                          Exhibit D - Hazardous Material
                                                      Certificate
                                          Exhibit E - Landlord's Personal
                                                      Property
                                          Exhibit F - List of Deferred
                                                      Maintenance Work
                                          Exhibit G - Utility Allocation
                                                      Formula

        The foregoing Summary is hereby incorporated into and made a part of
this Lease. Each reference in this Lease to any term of the Summary shall mean
the respective information set forth above and 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.

                              ARTICLE 1 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
Section 3.2.

        1.3     ADDRESS FOR NOTICES: The term "Address for Notices" means 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" means the following: (i) with respect
to Landlord, the employees and agents of Landlord; and (ii) with respect to
Tenant, the employees, contractors, agents and invitees of Tenant and Tenant's
subtenants and their respective agents, employees, contractors, and invitees.

        1.5     AGREED INTEREST RATE: The term "Agreed Interest Rate" means that
interest rate determined as of the time it is to be applied that is equal to the
lesser of (i) 3% 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" means the fixed
monthly rent payable by Tenant pursuant to Section 3.1 which is specified in
SECTION K of the Summary.

        1.7     BUILDING: The term "Building" means the building in which the
Premises are located which Building is identified in SECTION F of the Summary.

1.8 COMMENCEMENT DATE: The term "Commencement Date" means the date that is the
later of April 1, 2004, or the date Landlord has delivered possession of the
Premises to Tenant.

        1.9     COMMON AREA: The term "Common Area" means 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.

        1.10    COMMON OPERATING EXPENSES: The term "Common Operating Expenses"
is defined in Section 8.2.

        1.11    EFFECTIVE DATE: The term "Effective Date" means 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.

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        1.12    EVENT OF TENANT'S DEFAULT: The term "Event of Tenant's Default"
is defined in Section 13.1.

        1.13    HAZARDOUS MATERIALS: The terms "Hazardous Materials" and
"Hazardous Materials Laws" are defined in Section 7.2F.

        1.14    INSURED AND UNINSURED PERIL: The terms "Insured Peril" and
"Uninsured Peril" are defined inP. 11.2E.

        1.15    LAW: The term "Law" means 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, including, without limitation, any Hazardous Material Law (as
defined in Section 7.2F) and the Americans with Disabilities Act, 42
U.S.C.ss.ss.12101 ET. SEQ. and any rules, regulations, restrictions, guidelines,
requirements or publications promulgated or published pursuant thereto.

        1.16    LEASE: The term "Lease" means 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.

        1.17    LEASE TERM: The term "Lease Term" or "Term" means the term of
this Lease which shall commence on the Commencement Date and continue for the
period specified in SECTION J of the Summary.

        1.18    LENDER: The term "Lender" means any beneficiary, mortgagee,
secured party, lessor, or other holder of any Security Instrument.

        1.19    PERMITTED USE: The term "Permitted Use" means the uses specified
in SECTION N of the Summary.

        1.20    PREMISES: The term "Premises" means that building area described
in SECTION D of the Summary that is within the Building.

        1.21    PROJECT: The term "Project" means that real property and the
improvements thereon which are specified in SECTION E of the Summary. Landlord
reserves the right, in its sole and absolute discretion, to include such other
buildings in the Project, to sell, transfer, assign or otherwise dispose of any
building or parcel in the Project and elect to remove such building and/or
parcel from the Project.

        1.22    PRIVATE RESTRICTIONS: The term "Private Restrictions" means 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.

        1.23    REAL PROPERTY TAXES: The term "Real Property Taxes" is defined
in Section 8.3.

        1.24    SCHEDULED COMMENCEMENT DATE: The term "Scheduled Commencement
Date" means the date specified in SECTION I of the Summary.

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

        1.26    SUMMARY: The term "Summary" means the Summary of Basic Lease
Terms that immediately precedes Article I of this Lease.

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        1.27    TENANT'S ALTERATIONS: The term "Tenant's Alterations" or
"Tenant's Alteration" or "Tenant Alteration" means all improvements, additions,
alterations, and fixtures installed in the Premises by Tenant.

        1.28    TENANT'S SHARE: The term "Tenant's Share" means the percentage
obtained by dividing Tenant's gross leasable area in the Premises (as set forth
D of the Summary, but subject to measurement as provided in Section 2.6 of this
Lease) by the gross leasable area in the Building (as set forth in Section F of
the Summary).

        1.29    TRADE FIXTURES: The term "Trade Fixtures" means (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 Section 4.5), and (ii) the non-exclusive right to use the Common Area
for ingress to and egress from the Premises. 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 Lease Term commences on the Commencement
Date as defined in Section 1.8 of this Lease.

        2.3     CONSTRUCTION OF IMPROVEMENTS: Landlord is not obligated to
construct any improvements or grant any allowances for the construction of the
Tenant Improvements other than as set forth in Section 2.8 of this Lease and in
EXHIBIT B including, without limitation, the grant of Landlord's Allowance and
payment for Landlord's Work (as defined in EXHIBIT B to this Lease). Tenant may
construct the Tenant Improvements as provided in EXHIBIT B to this Lease.

        2.4     DELIVERY AND ACCEPTANCE OF POSSESSION: If this Lease provides
that Landlord must deliver possession of the Premises to Tenant on a certain
date, and if Landlord is unable to deliver possession of the Premises to Tenant
on or before such date for any reason whatsoever, then this Lease shall not be
void or voidable except as provided in this paragraph, and Landlord shall not be
liable to Tenant for any loss or damage resulting therefrom. If the delay in
delivery is due to any act or omission of Tenant or its employees, agents or
contractors (including without limitation the failure to timely deliver plans,
insurance certificates or other items as required by this Lease), then the
delivery date shall be deemed the date the Premises would have been delivered
but for such delays by Tenant.

                Notwithstanding the foregoing, if Landlord does not deliver
possession of the Premises to Tenant within 180 days after the date this Lease
has been fully executed by the parties, then Tenant (if the delay was not due to
a Tenant Delay or otherwise due to the acts or omissions of Tenant or its
employees, agents or contractors as provided above), shall have the right to
terminate this Lease upon written notice to the Landlord at any time prior to
the date Landlord delivers possession of the Premises to Tenant, whereupon any
monies previously paid by Tenant to Landlord shall be reimbursed to Tenant.
Tenant's election to terminate shall be Tenant's sole and exclusive remedy for a
delay in delivery of possession of the Premises, unless the Premises have been
vacated and possession surrendered by the existing tenant in such space and
Landlord intentionally delays delivery of possession. Tenant shall accept
possession of the Premises when delivered by Landlord.

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                Except as otherwise specifically provided in this Lease, Tenant
agrees to accept possession of the Premises in its then existing condition,
"AS-IS", including all patent and latent defects. Landlord represents and
warrants to its actual knowledge as of the date hereof that:

                (i)     Landlord does not have notice of a violation of any
        applicable Law regarding the physical condition of the Premises, the
        Building and the Project based on the current condition of the Premises,
        Building and Project and the applicable Laws in existence and as applied
        by the local governmental authority as of the date hereof;

                (ii)    As of the Early Access Date (as defined in Section 2.5
        below), the Premises will be in good and clean operating condition and
        repair and the electrical, mechanical, HVAC, plumbing, sewer, systems
        serving the Premises and the Building will be in good operating
        condition and repair; and

                (iii)   As of the Early Access Date, the roof of the Building
        will be in good condition and water tight.

                Notwithstanding the foregoing, Landlord agrees that it will make
all repairs to remedy a defective condition (as opposed to repairs and
maintenance required due to ordinary wear and tear and other normal and
customary service) with respect to the HVAC system serving the Premises for a
period of twelve (12) months following the Early Access Date; provided that such
repair work is not required due to any negligence, misuse, willful misconduct or
fault of Tenant or any of Tenant's Agents or due to any alterations, fixturing
or other work done by Tenant or any of its Agents. In addition, if there is a
breach of the representation and warranty provided in paragraph (ii) above and
Tenant notifies Landlord of such breach within thirty (30) days after the Early
Access Date and any work necessary to remedy such breach is not due to any
negligence, misuse, willful misconduct or fault of Tenant or any of Tenant's
Agents or due to any alterations, fixturing or other work done by Tenant or any
of its Agents, then Landlord, at its expense, agrees to undertake the work to
remedy such breach as soon as is commercially reasonable.

                Tenant's acceptance of the Premises shall not be deemed a waiver
of Tenant's right to have defects in the structural portions of the Premises
repaired at no cost to Tenant. Within five (5) business days after request by
Landlord, Tenant shall execute an acceptance agreement substantially in the form
attached as EXHIBIT C, appropriately completed. The failure of Landlord to
request such acceptance agreement or the failure of Tenant to execute such
agreement shall not delay the Commencement Date or the date by which Tenant must
commence paying any rent under this Lease.

        2.5     EARLY OCCUPANCY: The parties estimate that Tenant may have, and
Tenant shall have the right to, access to the Premises on within three (3) days
after the complete execution of this Lease by Landlord and Tenant ("Early Access
Date"), in order to move and arrange certain cubicles for Tenant's occupancy
under this Lease and construct the Tenant Improvements; provided, however, that
Tenant and its Agents shall use its best efforts not to unreasonably interfere
with the business or occupancy of the other space in the Building by the
existing tenant, other than the reasonable and customary noise generated by
construction of the Tenant Improvements in the Premises. In addition, Tenant may
occupy and use approximately 15,000 square feet of gross leasable area in the
portion of the Premises outlined in EXHIBIT A as the "Office Area" and conduct
its business therein prior to the actual Commencement Date, but not earlier than
February 15, 2004. Tenant agrees to comply with all of the terms and provisions
of this Lease during access and/or occupancy of the Premises prior to the
Commencement Date, except that in the event Tenant occupies the Office Area and
commences the operation of its business therein, then (a) Tenant shall pay Base
Monthly Rent in the amount equal to $1.00 per square foot, per month, of gross
leasable area in the Office Area, and (b) Tenant shall pay Tenant's Share of the
Office Area of Additional Rent for Common Operating Expenses, Taxes and all
other charges under this Lease. Such Base Monthly Rent and Additional Rent and
other charges shall be paid in advance for this period in

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lawful money of the United States, without any abatement, deduction or offset
whatsoever (except as specifically provided in Section 11.4 and Section 12.3),
and without any prior demand therefor.

        2.6     OPTION TO EXTEND AND RENT DURING THE EXTENDED PERIOD. Tenant
shall have two (2) options to extend (the "Extension Option") the Lease Term for
a period of five (5) years each (each 5 year period shall be referred to as the
"Extension Period") by giving written notice of exercise of such option
("Extension Option Notice") at least two hundred seventy (270) days, but not
more than three hundred sixty-five (365) days, prior to the expiration of the
initial Lease Term or the extension term, as the case may be. The Extension
Period shall commence, if at all, immediately following the expiration of the
initial Lease Term or extension term, as the case may be. If Tenant is in
default in the payment of any rent (after notice and the expirations of the
applicable cure period) under any term or provision of this Lease on the date of
giving an Extension Option Notice, or if Tenant is in default in the payment of
any rent (after notice and the expiration of the applicable cure period) under
any term or provision of this Lease on the date of the Extension Period is to
commence, the Extension Period at the option of Landlord shall not commence and
the Lease Term shall expire at the end of initial Term or extension term, as the
case may be. Each Extension Period shall be upon all of the terms and provisions
of this Lease, except that (i) the Base Monthly Rent during such Extension
Period shall be one hundred percent (100%) of then Fair Market Rent, (ii) Tenant
shall not have any right or option to extend the Lease Term beyond the two (2)
Extension Periods, (iii) any work, allowances, free or reduced rent or
concession provided, granted or available to Tenant at or in connection with the
commencement of the initial Lease Term will not apply. The foregoing option to
extend is personal to the original Tenant signing this Lease, but not be
assigned or transferred by any assignee, sublessee or transferee under a
Transfer (except a Permitted Transfer).

                A.      FAIR MARKET RENT. The term "Fair Market Rent" for
purposes of determining Base Monthly Rent during the Extension Period shall mean
the base monthly rent generally applicable to similar leases in like buildings
for space of comparable size, age, quality of the Premises in Mountain View,
California projected as of the first day of the Extension Period by giving due
consideration for the quality of the Building and improvements therein
(including the quality of the then existing improvements in the Premises but
excluding any alterations or improvements, other than the initial Tenant
Improvements and Landlord's Work, installed in the Premises at Tenant's
expense), for a term comparable to the Extension Period at the time the
commencement of the Extension Period is scheduled to commence, without any
deduction for amortization or cost of tenant improvements or commissions
incurred by Landlord, and otherwise subject to the terms and conditions of this
Lease that will be applicable during the Extension Period.

                B.      PROCEDURE TO DETERMINE FAIR MARKET RENT. Landlord shall
notify Tenant in writing of Landlord's determination of the Fair Market Rent
("Landlord's FMR") after receipt of the Extension Option Notice. Within thirty
(30) days after receipt of such written notice of Landlord's FMR, Tenant shall
have the right either to: (i) accept Landlord's FMR, or (ii) elect to have the
Fair Market Rent determined in accordance with the appraisal procedure set forth
below. The failure of Tenant to provide written notice of its election under the
preceding sentence shall be deemed a rejection of Landlord's FMR.

                C.      APPRAISERS. If Tenant has elected to have the Fair
Market Rent determined by an appraisal, then within ten (10) days after receipt
of Tenant's written notice of such an election, each party, by giving written
notice to the other party, shall appoint an appraiser to render a written
opinion of the Fair Market Rent for the Extension Period. Each appraiser must be
a member of the Appraisal Institute of America (MAI) for at least five years and
with at least five years experience in the appraisal of rental rates of office
buildings in the area in which the Building is located and otherwise
unaffiliated with either Landlord or Tenant. The two appraisers shall render
their written opinion of the Fair Market Rent for the Extension Period to
Landlord and Tenant within thirty (30) days after the appointment of the second
appraiser. If the Fair Market Rent of each appraiser is within five percent (5%)
of each other, then the average of the two appraisals of Fair Market Rent shall
be the Base Monthly Rent for the Extension Period. If one party does not appoint
its appraiser as provided

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above, then the one appointed shall determine the Fair Market Rent. The Fair
Market Rent so determined under this section shall be binding on Landlord and
Tenant.

                C       THIRD APPRAISER. If the Fair Market Rent determined by
the appraisers is more than five percent (5%) apart, then the two appraisers
shall pick a third appraiser within ten (10) days after the two appraisers have
rendered their opinions of Fair Market Rent as provided above. If the two
appraisers are unable to agree on the third appraiser within said ten (10) day
period, Landlord and Tenant shall mutually agree on the third appraiser within
ten (10) days thereafter and if the parties fail to agree within said time
period, then at the request of either Landlord or Tenant, such third appraiser
shall be promptly appointed by the then Presiding Judge of the Superior Court of
the State of California for the County where the Premises are located.. The
third appraiser shall be a person who has not previously acted in any capacity
for either party and must meet the qualifications stated above.

                D.      IMPARTIAL APPRAISAL. Within thirty (30) days after its
appointment, the third appraiser shall render its written opinion of the Fair
Market Rent for the Extension Period ("Third Opinion"). If the fair market rent
set forth in the Third Opinion is equidistant from the fair market rent
determination of Landlord's and Tenant's appraiser, then the fair market rent
contained in the Third Opinion shall be the Base Monthly Rent during the
Extension Period. If the fair market rent of the Third Opinion is not
equidistant from the fair market rent made by Landlord's and Tenant's appraiser,
then the two closest fair market determinations made by Landlord's appraiser,
Tenant's appraiser and the Third Opinion shall be average and such average shall
be the Base Monthly Rent during the Extension Period. The fair market rent
determined in accordance with the foregoing procedure shall be binding on the
parties

                E.      APPRAISAL COSTS. Each party shall bear the cost of its
own appraiser and one-half (1/2) the cost of the third appraiser.

                F.      ACKNOWLEDGMENT OF RENT. After the Fair Market Rent for
the Extension Period has been established in accordance with the foregoing
procedure, Landlord and Tenant shall promptly execute an amendment to this Lease
to reflect the Base Monthly Rent for the Extension Period.

        2.7     EXISTING FURNITURE. The furniture and personal property referred
to in EXHIBIT E ("Landlord's Personal Property") attached hereto is currently
located in the Premises and Tenant may use such Landlord's Personal Property
during the Lease Term while Tenant is leasing and occupying the Premises, at no
extra charge. Tenant shall have the right to remove any or all of Landlord's
Personal Property from the Premises at any time during the Term of the Lease
and, at Tenant's election, either return the same to Landlord (or dispose of
such property if requested by Landlord) and forfeit the right to thereafter use
the returned items of Landlord's Personal Property or, at Tenant's cost, store
such Landlord's Personal Property and retain the right to use it (and take title
to it) at any later time during the Term of the Lease, provided Tenant is not
then in default of this Lease. At the expiration or sooner termination of the
Lease and provided that Tenant has performed all of its obligations under this
Lease, Landlord shall transfer all of its right, title and interest in
Landlord's Personal Property to Tenant (other than any returned portion of
Landlord's Personal Property) and Landlord's Personal Property shall become the
property of Tenant. In connection therewith, Landlord shall execute a quit claim
bill of sale without any warranty (other than a limited warranty that Landlord
has title to the Personal Property) and otherwise in a form reasonably
acceptable to Landlord and Tenant to effectuate such transfer of its right,
title and interest. In connection with such transfer, Tenant agrees to be solely
responsible for the payment of any sales tax with respect to such personal
property and to indemnify, defend and hold harmless Landlord in connection with
any claim for payment of sales tax for such personal property.

                In addition, Tenant shall have the right to elect to have
Landlord transfer its right, title and interest to Landlord's Personal Property
prior to the expiration or earlier termination of the Lease, provided Tenant is
not in default of this Lease, in the event Tenant desires to use Landlord's
Personal Property in premises other than the Premises. In such case, Tenant
shall provide Landlord with written notice of such

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election and Landlord shall thereafter promptly execute a quit claim bill of
sale without any warranty (other than a limited warranty that Landlord has title
to the Personal Property) and otherwise in a form reasonably acceptable to
Landlord and Tenant to effectuate such transfer.

                Landlord makes no representation or warranty whatsoever with
respect to the condition of Landlord's Personal Property or its suitability for
Tenant's use, such use to be on an "AS-IS" basis. If the Lease Term is
terminated due to a default by Tenant, a casualty or condemnation, Tenant shall
have no right to any of Landlord's Personal Property. As long as Tenant is using
Landlord's Personal Property, Tenant shall be responsible for any damage to
Landlord's Personal Property subject to reasonable wear and tear, casualty and
Hazardous Materials (except to the extent emitted by Tenant), except if caused
by Landlord or any of its Agents. Landlord shall not be obligated to repair or
replace Landlord's Personal Property, or any part thereof, whether any such
Landlord's Personal Property is damaged by any casualty or is lost or stolen.

        2.8     DEFERRED MAINTENANCE. Landlord acknowledges and agrees that some
deferred maintenance exists at the Project. Landlord agrees to repair, at
Landlord's sole cost and expense, the items of deferred maintenance listed on
EXHIBIT F as soon as is commercially reasonable with commencement of such work
based on the schedule for such work in EXHIBIT F.

        2.9     OPTION TO EXPAND. Landlord and Tenant acknowledge that another
tenant (the "Existing Tenant") leases from Landlord the remaining premises in
the Building (the "Remaining Premises"), which contain 21,163 gross leasable
square feet and are outlined on EXHIBIT A, pursuant to a lease between Landlord
and the Existing Tenant (the "Existing Tenant Lease"). Tenant shall have the
option to lease the Remaining Premises at the expiration of the term of the
Existing Tenant Lease, the expiration of which is currently scheduled to occur
on January 31, 2007 ("Existing Lease Expiration Date"), which option must be
exercised by written notice to Landlord no later than 270 days prior to the
Existing Lease Expiration Date. If Tenant elects to lease the Remaining
Premises, such Remaining Premises shall be subject shall be at the same monthly
per square foot Base Monthly Rent rates that are applicable to the Premises, as
such rates change from time to time, and on the other terms and conditions as
contained in the Lease, except that there will not be any concession, allowance,
including without limitation, Landlord Allowance, or work required of Landlord
in connection therewith. The lease of the Remaining Premises will be in its then
AS IS condition. Tenant will commence paying all rent for the Remaining Premises
as of the date Landlord delivers possession of the Remaining Premises to Tenant.
If Tenant elects to lease the Remaining Premises, the parties shall thereafter
execute an amendment to this Lease adding the Remaining Premises to the Lease.
In the event the Existing Tenant Lease terminates prior to the scheduled
expiration date, Landlord shall provide Tenant with notice of such termination
and Tenant shall have ten (10) days to decide whether or not to exercise its
right to lease the Remaining Premises. The failure of Tenant to provide its
written notice to lease the Remaining Premises within the applicable time period
provided above shall be deemed an election not to lease the Remaining Premises.
If Tenant elects (or is deemed to have elected) not to lease the Remaining
Premises, any right to lease the Remaining Premises shall be null and void and
of no further force or effect. Tenant's rights under this Section 2.8 are
personal to the original party signing this Lease as Tenant and its transferee
under a Permitted Transfer.

                                 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 Section 3.4; (ii) Tenant's Share of Common Operating
Expenses as provided in Section 8.1; (iii) Landlord's share of any Subrent
received by Tenant upon certain assignments and sublettings as required by
Section 14.1; (iv) any legal fees and costs due Landlord pursuant to Section
15.9; and (v) any other charges due Landlord pursuant to this Lease.

<PAGE>

        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. The term "Rent" or "rent" shall mean Base Monthly Rent,
Additional Rent and other sums required to be paid by Tenant under this Lease.
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. All rent shall be
paid in lawful money of the United States, without any abatement, deduction or
offset whatsoever (except as specifically provided in Section 11.4 and Section
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, INTEREST AND QUARTERLY PAYMENTS:

                (a)     LATE CHARGE. Tenant acknowledges that the late payment
by Tenant of any installment of rent, or any other sum of money required to be
paid by Tenant under this Lease, will cause Landlord to incur certain costs and
expenses not contemplated under this Lease, the exact amount of such costs being
extremely difficult and impractical to fix. Such costs and expenses will
include, without limitation, attorneys' fees, administrative and collection
costs, and processing and accounting expenses and other costs and expenses
necessary and incidental thereto. If any Base Monthly Rent or Additional Rent is
not received by Landlord from Tenant when such payment is due, 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; provided,
however, that Landlord agrees that Tenant shall not have to pay such late charge
if it makes its payment in full within five (5) days after receipt of written
notice from Landlord, except that this notice and cure period shall only be
applicable for the first two times each calendar year that Tenant fails to pay
any Rent. If Landlord has provided two notices of a late payment or default
during a calendar year, Landlord shall not be obligated to provide any notice
thereafter for the remainder of such calendar year and such late charge shall be
due if payment is not made when due without any grace period or notice. 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 Section 13.2B.

                (b)     INTEREST. If any rent remains delinquent for a period in
excess of five (5) days after written notice from Landlord that such payment is
due 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.

                            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. There shall not be any
change in use without the prior written consent of Landlord which will not be
unreasonably withheld. 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

<PAGE>

of the load limits for which such items are designed. 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 in
violation of applicable Laws, (ii) damage the Premises in violation of the
Lease, 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 a neat, 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.

                The Building has been leased by an existing tenant, which will
continue to lease the portion of the premises in the Building not included in
the Premises leased to Tenant under this Lease. Tenant agrees that it will not
undertake any improvements, alterations or other work or take any steps that
will cause an interruption in any utility system serving the Building that could
affect any portion of the Building leased to another tenant in the Building
without the prior written consent of Landlord, which shall not be unreasonably
withheld. If such work is required, Tenant shall provide at least 10 days prior
written notice to Landlord detailing the work, when it would start and be
completed and when any utility service would need to be interrupted, all of
which will be subject to the reasonable approval of Landlord. Tenant agrees to
cooperate with Landlord and any other tenant in the Building to ensure that
utility service is not interrupted. Landlord will have the right to require that
any such work be performed outside of normal business hours and/or to require
Tenant to provide supplemental or alternative utility service at sufficient
levels for all other tenants in the Building to continue to operate during any
periods of interruption.

        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 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
then in effect and shall be installed at the expense of Tenant. Tenant shall
maintain such signs in good condition and repair. Notwithstanding the foregoing,
Tenant, at its expense, shall have the right to install a monument sign on
Shoreline Parkway to identify its business and a back-lit sign on the Building
above the Shoreline Parkway lobby entrance, the exact location, size, design and
other details of which shall be subject to Landlord's further reasonable
approval, provided that Tenant obtains all necessary governmental approvals for
such signs. At its expense, Tenant shall be responsible for the repair and
maintenance of such signs. At its expense, Tenant shall remove such signs and
the restoration of any damaged area by the expiration or earlier termination of
the Term of this Lease.

<PAGE>

        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 the 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 written
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.

        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 upon delivery of a copy thereof to Tenant, and Tenant agrees
to abide by such rules and regulations. 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 , any Trade Fixtures required in the conduct of
its business in the Premises, except to the extent (a) any Trade Fixture will
use, generate, store or dispose of any Hazardous Material in which case the
prior written consent of Landlord in its reasonable discretion shall be required
before such Trade Fixture may be installed, except for a cabinet where Tenant
will store chemicals used in the normal and customary conduct of its business at
the Premsises, or (b) any Trade Fixture will constitute a Tenant Alteration, in
which case it shall be subject to the requirements set forth below for the
construction of a Tenant Alteration, including, without limitation, the prior
written consent of Landlord. All Alterations and Trade Fixtures shall remain
Tenant's property. Except for Alterations which cannot be removed without
structural injury to the Premises, at any time Tenant may remove the Trade
Fixtures from the Premises, provided that Tenant repairs all damage caused by
such removal. Landlord shall have no lien or other interest in any item of the
Trade Fixtures.

        5.2     TENANT'S ALTERATIONS: Construction by Tenant of a Tenant
Alteration shall be governed by the following:

                A.      CONSENT REQUIRED. Tenant shall not construct any
Tenant's Alterations or otherwise alter the Premises without Landlord's prior
written approval, which will not be unreasonably withheld unless such Tenant
Alteration affects areas outside of the Premises or the exterior of the Building
or the structural parts of the Building, in which case Landlord may withhold its
consent in its reasonable discretion. Notwithstanding the foregoing, Landlord's
consent shall not be required for any Alteration to the interior of the Premises
that complies with the following requirements: (a) does not affect the roof or
any area outside of the Premises or require work inside the walls or above the
ceiling of the Premises; (c) does not affect the structural parts of the
Building or the electrical, plumbing, HVAC or sprinkler or life safety systems;
and (d) costs less than the Permitted Tenant Alterations Limit specified in
Section O of the Summary per work of improvement

<PAGE>

(herein referred to as "Minor Alteration"). Tenant shall provide Landlord with
written notice of any Minor Alteration for which Tenant obtains a building
permit. In the event Landlord's approval for any Tenant's Alterations is
required, Tenant shall not construct the Tenant Alteration until Landlord has
approved in writing the plans and specifications therefor, and such Tenant's
Alterations shall be constructed substantially in compliance with such 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 materials of good quality.

                B.      OTHER REQUIREMENTS. Tenant shall not commence
construction of any Tenant's Alterations until (i) all required governmental
approvals and permits have been obtained (to the extent such approvals and
permits are required to commence such Alterations, so long as any required
governmental approval and permits are obtained in connection with the completion
of the Alterations), (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.      RESTORATION. 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 to 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 Tenant Alteration in
question; and (ii) at the time Landlord granted its approval, it informed Tenant
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 (other than the Permitted 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 Section 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: (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 Commencement Date; (ii) modification of existing or
construction of additional capital improvements or building service equipment
for the purpose of reducing the consumption of utility services or Common
Operating Expenses of the Project; and (iii) replacement of capital improvements
or building service equipment existing as of the Effective Date when required
because of normal wear and tear. The amount of Additional Rent Tenant is to pay
with respect to each such capital improvement shall be determined as follows:

                A.      AMORTIZATION PERIOD. 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 property management practices taking into
account Landlord's obligation to repair and maintain the Project to a certain
minimum standard as required under this Lease) with interest on the unamortized
balance at the then prevailing market rate Landlord would

<PAGE>

pay if it borrowed funds to 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.

                B.      PAYMENT. 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 to 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.

        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 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 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
Section 6.2, Section 11.1, and Section 12.3, Tenant shall be responsible for the
following during the Lease Term:

                A.      GENERAL. 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 which serve only the Premises; (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) which serve only the Premises; and (v) any automatic fire extinguisher
equipment in the Premises.

                B.      UTILITIES AND GLASS. 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.

                C.      WINDOWS. 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 to the extent the same is not covered by Landlord's insurance
required under this Lease or otherwise carried by Landlord. Tenant shall
maintain continuously throughout the Lease Term a service contract for the
washing of all windows (both interior and exterior surfaces) in the Premises
with a contractor approved by Landlord, which contract provides for the periodic
washing of all such windows at least once every 120 days during the Lease Term.
Tenant shall furnish Landlord with copies of all such service contracts, which
shall provide that they may not be canceled or changed without at least 30 days'
prior written notice to Landlord.

                D.      HVAC. 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 furnish
Landlord with copies of all such service contracts, which shall provide that
they may not be canceled or changed without at least 30 days' prior written
notice to Landlord.

                E.      STANDARDS. 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.

        6.2     LANDLORD'S OBLIGATION TO MAINTAIN: Landlord shall repair,
maintain and operate the Common Area and repair and maintain the roof, exterior
and structural parts of the building(s), and any item not covered in Section
6.1, 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 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, passageways, doors and doorways, elevators, stairs, restrooms, exits,
parking spaces, parking areas, sidewalks or the direction of the flow of traffic
and the site of the Common Area; and/or (vi) remove unauthorized persons from
the Project. 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 the Common
Area, (i) Landlord shall make a reasonable 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 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. Landlord shall not exercise any rights under
this Section 6.3, if such exercise would unreasonably interfere with Tenant's
use of or access to the

<PAGE>

Premises or materially increase the obligations or materially decrease the
rights of Tenant under the Lease, except when required in an emergency or when
making repairs. Landlord shall use its commercially reasonable efforts to
minimize any disruption to Tenant.

                     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.      HAZARDOUS MATERIALS DISCLOSURE CERTIFICATE. Prior to
executing this Lease, Tenant has delivered to Landlord Tenant's executed initial
Hazardous Materials Disclosure Certificate, in the form attached hereto as
EXHIBIT D (the "Initial Hazardous Materials Certificate"). Tenant covenants,
represents and warrants to Landlord that the information in the Initial
Hazardous Materials Certificate is true and correct and accurately describes the
use(s) of Hazardous Materials which will be made and/or used on the Premises by
Tenant. Tenant shall, commencing with the date which is one year from the
Commencement Date and continuing every year thereafter, deliver to Landlord, an
executed and updated Hazardous Materials Disclosure Certificate, substantially
in the form attached hereto as EXHIBIT D (the "Annual Hazardous Materials
Certificate") describing Tenant's then present use of Hazardous Materials on the
Premises, and any other reasonably necessary documents as requested by Landlord.

                B.      HAZARDOUS MATERIAL USAGE. Tenant shall not be entitled
to use, store, generate, transport or dispose of any Hazardous Materials (herein
referred to as "Hazardous Materials Usage") on, in, or about any portion of the
Premises and the Project without, in each instance, obtaining Landlord's prior
written consent thereto in its sole and absolute discretion. If Landlord, in its
reasonable discretion, consents in writing to any such Hazardous Material Usage,
then Tenant shall be permitted to use only those Hazardous Materials that are
necessary for Tenant's business and to the extent disclosed in the Hazardous
Material Disclosure Certificate and as expressly approved by Landlord in
writing. Any such Hazardous Materials Usage may only be to the extent of the
quantities of Hazardous Materials as specified in the then applicable Hazardous
Material Disclosure Certificate as expressly approved by Landlord. Any Hazardous
Material Usage of Hazardous Materials by Tenant and Tenant's Agents after the
Effective Date in or about the Project shall strictly comply with all applicable
laws, including all Hazardous Materials Laws now or hereinafter enacted. Tenant
agrees that any changes to the type and/or quantities of Hazardous Materials
specified in the most recent approved Hazardous Material Disclosure Certificate
may be implemented only with the prior written consent of Landlord, which
consent may be given or withheld in Landlord's sole and absolute discretion.
Tenant shall not be entitled nor permitted to install any tanks under, on or
about the Premises or Project for the storage of Hazardous Materials without the
express written consent of Landlord, which may be given or withheld in
Landlord's sole and absolute discretion. Notwithstanding anything to the
contrary herein, Landlord hereby consents to Tenant's use of the Hazardous
Materials listed on the Initial Hazardous Materials Disclosure Certificate
provided by Tenant pursuant to Section 7.2A above, which Landlord agrees Tenant
may use throughout the term of this Lease, and Landlord shall not unreasonably
withhold its consent to Tenant's use of any additional Hazardous Materials
necessary for the operation of Tenant's business in the Premises.

                C.      TESTS AND INSPECTIONS. Landlord shall have the right at
all times during the Term of this Lease to (i) inspect the Premises, (ii)
conduct tests and investigations to determine whether Tenant is in compliance
with the provisions of this Section 7.2 or to determine if Hazardous Materials
are present in, on or about the Project, and (iii) request lists of all
Hazardous Materials used, stored or otherwise located on, under

<PAGE>

or about any portion of the Premises and/or the Common Areas. The cost of all
such inspections, tests and investigations shall be borne by Tenant, if Landlord
reasonably determines that Tenant or any of Tenant's Agents are directly or
indirectly responsible in any manner for any contamination revealed by such
inspections, tests and investigations. The aforementioned rights granted herein
to Landlord and its representatives shall not create (a) a duty on Landlord's
part to inspect, test, investigate, monitor or otherwise observe the Premises or
the activities of Tenant and Tenant's Agents with respect to Hazardous
Materials, including without limitation, Tenant's operation, use and any
remediation related thereto, or (b) liability on the part of Landlord and its
representatives for Tenant's use, storage, disposal or remediation of Hazardous
Materials, it being understood that Tenant shall be solely responsible for all
liability in connection therewith.

                D.      NOTICE. Tenant shall give to Landlord immediate verbal
and follow-up written notice of any spills, releases, discharges, disposals,
emissions, migrations, removals or transportation of Hazardous Materials on,
under or about any portion of the Premises, Common Areas or Project; provided
that Tenant has actual knowledge of such event(s). Tenant, at its sole cost and
expense, covenants and warrants to promptly investigate, clean up, remove,
restore and otherwise remediate (including, without limitation, preparation of
any feasibility studies or reports and the performance of any and all closures)
any spill, release, discharge, disposal, emission, migration or transportation
or other Hazardous Material Usage of Hazardous Materials arising from or related
to the acts or omissions of Tenant or Tenant's Agents in violation of applicable
Laws or in breach of the applicable provisions of this Lease such that the
affected portions of the Project and any adjacent property are returned to the
condition existing prior to the appearance of such Hazardous Materials. Any such
investigation, clean up, removal, restoration and other remediation shall only
be performed after Tenant has obtained Landlord's prior written consent in its
sole and absolute discretion. Notwithstanding the foregoing, Tenant shall be
entitled to respond immediately to an emergency without first obtaining
Landlord's prior written consent. Tenant, at its sole cost and expense, shall
conduct and perform, or cause to be conducted and performed, all closures as
required by any Hazardous Materials Laws or any agencies or other governmental
authorities having jurisdiction thereof. If Tenant fails to so promptly
investigate, clean up, remove, restore, provide closure or otherwise so
remediate, Landlord may, but without obligation to do so, after written notice
to Tenant except in an emergency, take any and all steps necessary to rectify
the same and Tenant shall promptly reimburse Landlord, upon demand, for all
costs and expenses to Landlord of performing investigation, clean up, removal,
restoration, closure and remediation work.

                E.      INDEMNITY. Tenant shall indemnify, hold harmless, and,
at Landlord's option (with such attorneys as Landlord may approve in advance and
in writing), defend Landlord and Landlord's officers, directors, shareholders,
partners, members, managers, employees, contractors, property managers, agents
and mortgagees and other lien holders, from and against any and all "Losses"
(hereinafter defined) arising from or related to: (a) any violation by Tenant or
any of Tenant's Agents of any of the Laws, including, without limitation, the
Hazardous Materials Laws; (b) any breach of the provisions of this Section 7.2
or any subsection thereof by Tenant or any of Tenant's Agents beyond applicable
notice and cure periods; or (c) any Hazardous Materials Usage on, about or from
the Premises of any Hazardous Material approved by Landlord under this Lease.
The term "Losses" shall mean all claims, demands, expenses, actions, judgments,
damages (whether consequential, direct or indirect, known or unknown, foreseen
or unforeseen), penalties, fines, liabilities, losses of every kind and nature
(including, without limitation, property damage, diminution in value of
Landlord's interest in the Premises or the Project, damages for the loss or
restriction on use of any space or amenity within the Building or the Project,
damages arising from any adverse impact on marketing space in the Project, sums
paid in settlement of claims and any costs and expenses associated with injury,
illness or death to or of any person), suits, administrative proceedings, costs
and fees, including, but not limited to, attorneys' and consultants' fees and
expenses, and the costs of cleanup, remediation, removal and restoration, that
are in any way related to any matter covered by the foregoing indemnity.
Tenant's indemnity under this Section will not be applicable for any Losses due
to (i) a release of any Hazardous Material by Landlord or its Agents, or (ii) a
release of any Hazardous Material by any other party other than Tenant or its
Agents, except if the release is caused by another party other than Landlord and
its Agents and the release is of a Hazardous Material used, stored or generated
by Tenant in connection with the operation of its business.

<PAGE>

                F.      HAZARDOUS MATERIAL. 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 or under any Hazardous Material Law. 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.

                G.      LANDLORD'S REPRESENTATIONS. Landlord represents and
warrants to Tenant to the actual knowledge of Landlord as of the date hereof,
without independent investigation other than a review of the Environmental
Report (hereinafter defined), that (a) no Hazardous Material is located in the
Premises in violation of any applicable Hazardous Material Law, except as may be
disclosed in the Environmental Report, (b) no underground storage tanks are
present on the Project, except as may be disclosed in the Environmental Report,
and (c) no action, proceeding or claim is pending or threatened against Landlord
regarding the Building or the Project concerning any Hazardous Material or
pursuant to any Hazardous Material Law. The term "Environmental Report" means
that certain Phase I Environmental Site Assessment dated June 30, 2000, prepared
by ARCADIS Geraghty & Miller, Inc. Landlord has delivered to Tenant a copy of
the Environmental Report and has complied with all environmental disclosure
obligations imposed upon Landlord by applicable Law with respect to this
transaction.

                H.      SURVIVAL. The obligations of Landlord and Tenant under
this Section 7.2 shall survive the expiration or earlier termination of the
Lease Term. The rights and obligations of Landlord and Tenant with respect to
issues relating to Hazardous Materials are exclusively established by this
Section 7.2. In the event of any inconsistency between any other part of this
Lease and this Section 7.2, the terms of this Section 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
caused by Tenant or Tenant's agents. The Premises are not separately metered for
water, sewer, gas, or electricity. Therefore, Tenant shall pay its pro rata
share of the cost of such utility services with all others served by the service
not separately metered in accordance with the allocation formula attached hereto
as EXHIBIT G; unless Landlord installs a separate meter, submeter or other
measuring devise to estimate usage of any utility. However, if Landlord
determines that Tenant is using a disproportionate amount of any utility service
not separately metered, then Landlord at its election may 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.

                Landlord will arrange to test the existing level of noise on the
electrical power lines in the Building (the "Base Line Level") as soon as
reasonably possible after the date of this Lease. After Tenant has occupied
substantially all of the Premises, Landlord will arrange to test the existing
level of noise on the electrical power lines in the Building (the "Test Level")
to ascertain if Tenant's equipment or use is causing a disproportionate level of
noise or interference. If Tenant's equipment or usage of electrical lines, as
evidenced by a comparison of the Test Level to the Base Line Level, is causing
excess noise over the Base Line Level or

<PAGE>

unreasonably interference with any existing tenant's use of electrical power,
Tenant shall be required to install power filters, which work shall be subject
to the prior written approval of Landlord. Tenant shall not be responsible for
such excess noise or interference if such problem is not due to Tenant's
equipment or usage of electricity (such as by way of example, quality problems
caused by PG&E or a defective transformer at the Building). Tenant shall pay for
Tenant's Share of the cost of such work and Landlord will be responsible for the
balance of the cost of such work. Landlord also reserves the right to undertake
Test Level from time to time during the Term of the Lease and cause Tenant to
comply with the foregoing requirements. Tenant agrees to cooperate with Landlord
in connection with the performance of such tests. Such tests will be scheduled
so as not to unreasonably interfere with the normal operation of Tenant's
business at 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. 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 180 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 (the "Annual Reconciliation Statement") 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
Rent, 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. The failure of Landlord to delivery such annual reconciliation
statement within said 180-day period under clause (iii) above shall not
constitute a waiver or otherwise release a party from its obligation to make a
payment or credit when such reconciliation is actually done; provided, however,
notwithstanding anything to the contrary herein, Tenant shall have no obligation
to pay for any Common Operating Expense incurred in a particular year and
submitted to Tenant for payment more than twelve (12) months after the end of
the year in which such expense was incurred by Landlord (other than for
amortized costs as provided in Section 5.4 hereof).

                Notwithstanding anything to the contrary in this Lease, since
the Project consists of multiple buildings, certain Common Operating Expenses
may pertain to a particular building(s) and other Common Operating Expenses to
the Project as a whole. Landlord reserves the right in its sole discretion to
allocate any such costs applicable to any particular building within the Project
to the building in question whose tenants shall be responsible for payment of
their respective proportionate shares in the pertinent building and other such
costs applicable to the Project to each building in the Project (including the
Building) with the tenants in each such building being responsible for paying
their respective proportionate shares in such building of such costs to the
extent required under the applicable leases. Landlord shall in good faith
attempt to allocate such costs to the

<PAGE>

buildings (including the Building) in a reasonable, non-discriminatory manner
and such allocation shall be binding on Tenant.

        8.2     COMMON OPERATING EXPENSES DEFINED: The term "Common Operating
Expenses" shall mean the total amounts paid or payable, whether by Landlord or
others on behalf of Landlord, in connection with the ownership, maintenance,
repair, and operations of the Building, the Common Areas and the Project,
including without limitation, the 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 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, property damage, and other insurance
covering the Project carried by Landlord pursuant to Section 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, re-striping 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 (provided, however, that Landlord
shall not be obligated to provide security and if it does, Landlord may
discontinue such service at any time and in any event Landlord shall not be
responsible for any act or omission of any security personnel); and (ix) capital
improvements as provided in Section 5.4 hereof;

                B.      The following costs: (i) Real Property Taxes as defined
in Section 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 involved in the performance of the work
described by Section 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 5% of the 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:

                        (1)     interest, charges and fees, or other payments on
        any loans, other debt or ground leases affecting the Project;

                        (2)     depreciation of any buildings or any major
        systems of building service equipment within the Project;

                        (3)     leasing commissions;

<PAGE>

                        (4)     the cost of tenant improvements installed for
        the exclusive use of other tenants of the Project, or the cost of any
        renovations, improvements or redecorating of any portion of the interior
        of the Building not made available to Tenant's use or benefit;

                        (5)     costs to correct any construction defect in the
        structural parts of the Premises, the Building or the Project;

                        (6)     costs incurred in connection with negotiations
        or disputes with any other tenant or occupant of the Project;

                        (7)     the cost of special services, goods or materials
        provided to any tenant and not offered or made available to Tenant;

                        (8)     advertising or promotional costs;

                        (9)     any costs or expenses representing any amount
        paid for services and materials to a (personal or business) related
        person, firm, or entity to the extent such amount exceeds the amount
        that would have been paid for such service or materials at the then
        existing market rates in the absence of such relationship;

                        (10)    amounts reimbursed or costs covered pursuant to
        contractor's or manufacturer's warranties or guarantees; provided that
        any charges for obtaining or maintaining such warranties or guarantees
        or enforcing warranty or guarantee claims shall be included in Common
        Operating Expenses, but Landlord shall not be obligated to commence any
        suit or arbitration proceeding to enforce or collect any such warranty
        or guarantee claims and if Landlord determines it is not reasonably
        prudent to pursue enforcement of such warranties or guaranties, Landlord
        will not be obligated to pursue such enforcement;

                        (11)    costs occasioned by the act, omission or
        violation of any Law by Landlord, any other occupant of the Project, or
        their respective agents, employees or contractors;

                        (12)    costs occasioned by fire, acts of God, or other
        casualties or by the exercise of the power of eminent domain;

                        (13)    costs to comply with any Laws as applicable to
        the Premises, the Building or the Project in effect and as interpreted
        and applied by the local governmental authority as of the on the Early
        Access Date, prior to construction of the Tenant Improvements;

                        (14)    costs for the violation by Landlord or any
        occupant of the Project (other than Tenant) of the terms and conditions
        of any lease or other agreement;

                        (15)    costs incurred in connection with the presence
        of any Hazardous Material, except to the extent caused by the release or
        emission of the Hazardous Material in question by Tenant;

                        (16)    costs in the nature of amortization other than
        as permitted under Section 5.4, or reserves for Common Operating
        Expenses for a period of more than one year.

                        (17)    costs to repair, replace, restore or maintain
        the structural portions of the Building (including roof structure).

                        (18)    lease payments for capital equipment, such as
        air conditioners;

<PAGE>

                        (19)    costs which should properly be capitalized under
        generally accepted property management practices, except to the extent
        amortized over the useful life of the capital item in question together
        with interest as provided in Section 5.4;

                        (20)    deductibles or co-insurance payments by Landlord
        (i.e., payments by Landlord to satisfy any co-insurance requirements
        under a policy for which Landlord must pay a portion of a claim due to
        the co-insurance requirements in the applicable policy); and

                        (21)    compensation for any officer of Landlord or for
        any employee to the extent such officer or employee in not working or
        providing services to or for the benefit of the Project, or any property
        management fee for management of the Project in excess of the reasonable
        property management fee which would be charged by an unaffiliated
        professional management service for operation of comparable office
        projects in the vicinity, plus the cost of all personnel to implement
        such services as permitted under this Lease. Tenant agrees that the
        property management fee in Section 8.2D hereof is reasonable.

                Common Operating Expenses for any calendar year shall be
calculated on the basis of the greater of (i) actual Common Operating Expenses;
or (ii) as if the Building were at least one percent (100%) leased and occupied
for the whole year, in order for there to be a proper adjustment to consider
variable costs included within Common Operating Expenses that fluctuate with
occupancy.

        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 the 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 the
federal or state net income tax imposed on Landlord's income from all sources,
or any tax or assessment expense or any increase therein (i) in excess of the
amount which would be payable if such tax or assessment expense were paid in
installments over the longest possible term; and (ii) imposed on land and
improvements other than the Project.

        8.4     ADJUSTMENTS. Notwithstanding the foregoing provisions, Tenant's
Share as to certain expenses included in Common Operating Expenses may be
calculated differently to yield a higher percentage share for Tenant as to those
expenses if Landlord permits other tenants or occupants in the Project to incur
such expenses directly rather than have Landlord incur the expense in common for
the Project. In such case, Tenant's Share of

<PAGE>

the applicable expense shall be calculated as having as its denominator the sum
of the gross leasable areas of all premises in the Project less the gross
leasable areas of tenants who have incurred such expense directly. Nothing
herein shall imply that Landlord will permit Tenant or any other tenant of the
Project to incur Common Area Costs. Any such permission shall be in the sole
discretion of Landlord. Common Operating Expenses for any calendar year shall be
calculated on the basis of the greater of (i) actual Common Operating Expenses;
or (ii) as if the Building were at least one hundred percent (100%) leased and
occupied for the whole year, in order for there to be a proper adjustment to
consider variable costs included within Common Operating Expenses that fluctuate
with occupancy

        8.5     INSPECTION. Tenant shall have the right at its own expense to
inspect the books and records of Landlord pertaining to Common Operating
Expenses, once in any calendar year by any employee of Tenant or by a certified
public accountant mutually acceptable to Landlord and Tenant (provided such
certified public accountant charges for its service on an hourly basis and not
based on a percentage of any recovery or similar incentive method) at reasonable
times, and upon reasonable written notice to Landlord. Within ninety (90) days
after receipt of Landlord's applicable Annual Reconciliation Statement, Tenant
shall have the right, after at least thirty (30) days prior written notice to
Landlord, to inspect at the offices of Landlord or its property manager, the
books and records of Landlord pertaining solely to the Common Operating Expenses
for the immediately preceding calendar year covered in such Annual
Reconciliation Statement. All expenses of the inspection shall be borne by
Tenant and must be completed within fifteen (15) days after commencement of the
inspection. If Tenant's inspection reveals a discrepancy in the Annual
Reconciliation Statement, Tenant shall deliver a copy of the inspection report
and supporting calculations to Landlord within thirty (30) days after completion
of the inspection. If Tenant and Landlord are unable to resolve the discrepancy
within thirty (30) days after Landlord's receipt of the inspection report,
either party may upon written notice to the other have the matter decided by an
inspection by an independent certified public accounting firm approved by Tenant
and Landlord (the "CPA Firm"), which approval shall not be unreasonably withheld
or delayed. If the inspection by the CPA Firm shows that the actual amount of
Common Operating Expenses payable by Tenant is greater than the amount
previously paid by Tenant for such accounting period, Tenant shall pay Landlord
the difference within thirty (30) days. If the inspection by the CPA Firm shows
that the actual amount is less than the amount paid by Tenant, then the
difference shall be refunded to Tenant or applied in payment of the next
estimated monthly installments of Common Operating Expenses owing by Tenant.
Tenant shall pay for the cost of the inspection by the CPA Firm, unless such
inspection shows that Landlord overstated Common Operating Expenses by more than
five percent (5%), in which case Landlord shall pay for the cost of the
inspection by the CAM CPA Firm.

                               ARTICLE 9 INSURANCE

        9.1     TENANT'S INSURANCE: Tenant shall maintain insurance complying
with all of the following:

                A.      TYPES. 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 Section 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)     Business interruption insurance with limits of
liability representing at least approximately six months of income, business
auto liability covering owned, non-owned and hired vehicles

<PAGE>

with a limit of not less than $1,000,000 per accident, insurance protecting
against liability under workers' compensation laws with limits at least as
required by statute, insurance for all plate glass in the Premises, and such
other insurance that is required by any Lender. The original party signing this
Lease as Tenant, and its affiliates but not any other transferee under a
Transfer, may elect not to carry business interruption insurance and to self
insure for risks covered by business interruption insurance; however, no such
self-insurance shall diminish the rights and privileges to which Landlord would
otherwise have been entitled under the terms of the Lease had there been a third
party insurer, including, without limitation, the waiver of subrogation.

                B.      REQUIREMENTS. Where applicable and required by Landlord,
each policy of insurance required to be carried by Tenant pursuant to this
Section 9.1: (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 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, or lapse 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 an amount
reasonably approved by Landlord, except that the original party signing this
Lease as Tenant may have a deductible consistent with its customary business
practices; (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 the 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 Section 9.1.

                C.      EVIDENCE. A copy of each paid-up policy evidencing the
insurance required to be carried by Tenant pursuant to this Section 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 Section 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 Section 9.1. If any Lender determines at any
time that the amount of coverage required for any policy of insurance Tenant is
to obtain pursuant to this Section 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.      PROPERTY DAMAGE. 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 for a period of not less than 12 months and from physical damage to the
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. Landlord shall have the right, but not the
obligation, in its sole and absolute discretion, to obtain insurance for such
additional perils as Landlord deems appropriate, including, without limitation,
coverage for damage by earthquake and/or flood. All such coverage shall contain
"deductibles" which Landlord deems appropriate, which in the case of earthquake
and flood insurance, may be up to 10% 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.

<PAGE>

                B.      OTHER. Landlord shall 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.

                C.      TENANT'S OBLIGATION TO REIMBURSE: If Landlord's
insurance rates for the Building are increased at any 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.

        9.3     RELEASE AND WAIVER OF SUBROGATION: Notwithstanding anything in
the Lease to the contrary, the parties hereto release each other, and their
respective agents, employees, successors, assignees and sublessees, from any
liability for injury to any person or damage to property that is caused by or
results from any risk which is actually insured against or which is required to
be insured against under the Lease, without regard to the negligence of the
person or entity so released; subject to the following limitations: (i) the
foregoing provision shall not apply to the commercial general liability
insurance described by subparagraphs Section 9.1A and Section 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 or Landlord,
respectively, to satisfy the requirements of Section 9.1 to the extent permitted
by this Lease. Each party shall 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 to the extent such separate waiver is
required under such policy. All of Landlord's and Tenant's repair and indemnity
obligations under this Lease shall be subject to the waiver and release
contained in this paragraph.

           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 herein), 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, Landlord shall not be released or indemnified from, and shall
indemnify, defend, protect and hold harmless Tenant from, all losses, damages,
liabilities, claims, attorneys' fees, costs and expenses arising from the
negligence or willful misconduct of Landlord or its employees, agents or
contractors in connection with Landlord repair and maintenance of the Common
Area or other parts of the Building that Landlord is obligated to maintain under
this Lease, Landlord's violation of any applicable Law, or Landlord's breach of
Landlord's obligations or representations under this Lease after notice and the
expiration of the applicable cure period

        10.2    LIMITATION ON TENANT'S RECOURSE: If Landlord is a corporation,
limited liability company, 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 (including any sale or insurance proceeds

<PAGE>

therefrom) 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: Subject to Section 10.1 and except
as otherwise expressly set forth in this Lease, 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 occurring 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 Section 10.3 shall survive the
expiration or sooner termination of this Lease.

                          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 Section 11.2 or by Tenant pursuant
to Section 11.3. All insurance proceeds available from the fire and property
damage insurance carried by Landlord pursuant to Section 9.2 shall be paid to
and become the property of Landlord. If this Lease is terminated pursuant to
either Section 11.2 or Section 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 necessary 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 may 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 Section 9.1A(2) shall be
used for such purpose if Tenant elects to so repair.

        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.      DAMAGE FROM INSURED PERIL. The Building is damaged by an
Insured peril to such an extent that the estimated cost to restore exceeds 33%
of he then actual replacement costs thereof;

                B.      DAMAGE FROM UNINSURED PERIL. Either the Project or the
Building is damaged by an Uninsured Peril to such an extent that the estimated
cost to restore exceeds 5% of the then actual replacement cost thereof;
provided, however, that Landlord may not terminate this Lease pursuant to this
Section 11.2B if one or more tenants of the Project agree in writing to pay the
amount by which the 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. Landlord will notify
Tenant within 30 days after the date of such damage whether the estimated cost
to restore due to the Uninsured Peril will exceed the amount described in this
paragraph;

                C.      DAMAGE NEAR END OF TERM. 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

<PAGE>

this Lease pursuant to this Section 11.2C 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 within 15 days following the date
of such damage; or

                D.      RESTRICTIONS ON RESTORATION. Either the Project or the
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, or (ii) cannot be used for the same use being
made thereof before such damage if restored as required by this Article.

                E.      DEFINED TERMS. As used herein, the following terms shall
have the following meanings: (i) the term "Insured Peril" shall mean a peril
actually insured against or which is required to be insured against under this
Lease, except for damage due to an earthquake; and (ii) the term "Uninsured
Peril" shall mean any peril which is not required to be insured against under
this Lease and for which Landlord does not have insurance, or damage due to an
earthquake where there will be insufficient proceeds to restore even if Landlord
has earthquake insurance.

        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 Section 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 right 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 twenty (20) business days after Tenant receives from Landlord
the estimate of the time needed to complete such restoration.

                A.      MAJOR DAMAGE. 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 225
days after the date of such damage; or

                B.      DAMAGE NEAR END OF TERM. 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
the Premises cannot be substantially completed within 90 days after the date of
such damage and such damage renders unusable more than 30% of the Premises.

        11.4    ABATEMENT OF RENT: In the event of damage to the Premises, the
Base Monthly Rent and the Additional Rent shall be abated during the period of
damage or 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 of the Premises is so taken,
(ii) more than 50% of the Building Leasable Area is so taken, or (iii) 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 (in no event to exceed 30 days
after receipt by Landlord of any condemnation notice), to be effective as of the
date possession is taken by the condemnor.

         12.2 TENANT'S TERMINATION RIGHT: Tenant shall have the right to
terminate this Lease if, as a result of any taking by means of the exercise of
the power of eminent domain (including any voluntary sale or transfer

<PAGE>

by Landlord to any condemnor under threat of condemnation), (i) 10% or more of
the Premises 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, in Tenant's reasonable
discretion, or (ii) there is a taking affecting the Common Area and, as a result
of such taking, Landlord cannot provide parking spaces within reasonable walking
distance of the Premises equal in number to at least 80% of the number of spaces
allocated to Tenant by Section 2.1, whether by rearrangement of the remaining
parking areas in the Common Area (including construction of multi-deck parking
structures or re-striping for compact cars where permitted by Law) or by
alternative parking facilities on other land. 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 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 (except as
provided in Section 12.3). 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: (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; (iv) for any temporary taking where this
Lease is not terminated as a result of such taking; and (v) the unamortized
value of any improvements or alterations that were made at Tenant's cost and are
owned by Tenant under this Lease. 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.      PAYMENT. 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;
or

                B.      GENERAL COVENANT. Tenant shall have failed to perform
any term, covenant, or condition of this Lease other than those referred to in
any other subsection of this Section 13.1, 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 10
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

<PAGE>

day period and thereafter continue with due diligence to prosecute such cure to
completion within such time period as is reasonably needed but not to exceed 90
days from the date of Landlord's notice; or

                C.      TRANSFER. A Transfer by Tenant in breach of the
requirements of Article 14 of this Lease; or

                D.      REQUIRED DOCUMENTS. 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.

        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.      CONTINUE. 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 rent 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 and specific performance to compel Tenant to perform its
obligations under this Lease. Notwithstanding anything contained in 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. 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.

                B.      Intentionally Deleted.

                C.      TERMINATE. 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
Section 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.      NO DEEMED TERMINATION. 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 Section 13.C, shall constitute a
termination of Tenant's right to possession unless Landlord gives Tenant written
notice of termination.

                E.      DAMAGES. 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

<PAGE>

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 to 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 the 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.      NON EXCLUSIVE REMEDIES. Nothing in this Section 13.2
shall limit Landlord's right to indemnification from Tenant as provided in
Section 7.2 and Section 10.3. To the extent required by applicable Law in
connection with a termination of this Lease due a default by Tenant, Landlord
shall use its commercially reasonable efforts to mitigate any damages resulting
from such default by Tenant and termination of this Lease.

        13.3    LANDLORD'S DEFAULT. In the event Landlord fails to perform any
of its obligations under the Lease and (except in case of emergency posing an
immediate threat to persons or property, in which case no prior notice shall be
required) fails to cure such default within thirty (30) days after written
notice from Tenant specifying the nature of such default where such default
could reasonably be cured within said thirty (30) day period, or fails to
commence such cure within said thirty (30) day period and thereafter with due
diligence prosecute such cure to completion where such default could not
reasonably be cured within said thirty (30) day period, then notwithstanding
anything in this Lease to the contrary, Tenant may, in addition to its other
remedies, cure any default of Landlord at Landlord's cost and Landlord will
reimburse Tenant for the reasonable cost to cure such default.

        13.4    WAIVER: One party's consent to or approval of any act by the
other party requiring the first 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 party 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.

        13.5    LIMITATION ON EXERCISE OF RIGHTS: At any time that an Event of
Tenant's Default has occurred and remains uncured with respect to the payment of
any Rent or other sum, (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, unless and until such Event of
Tenant's Default is cured by Tenant.

<PAGE>

        13.6    WAIVER BY TENANT OF CERTAIN REMEDIES: Tenant waives the
provisions of Sections 1932(1), 1941 and 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.

                      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 Section 14.1 as "Tenant"):

                A.      TRANSFER. Tenant shall not do any of the following
(collectively referred to herein as a "Transfer"), without the prior written
consent of Landlord, which consent shall not be unreasonably withheld,
conditioned 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, whether
or not Landlord's consent is granted, in an amount not to exceed $1,500.00.
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 used, stored, released, or disposed of by the potential
Subtenant or Assignee, and/or (ii) violations of Hazardous Materials Law 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 Section
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, after the expiration of any applicable notice and
cure period, 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 Section 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.      PROCEDURE. At least 30 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 seven (7) 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) 20 days of
receipt of such request together with the required accompanying documentation,
or (ii) 15 days after Landlord's

<PAGE>

receipt of all information which Landlord reasonably requests within seven days
after it receives Tenant's first notice regarding the Transfer in question. If
Landlord fails to respond in writing within said period, Tenant shall provide a
second written notice to Landlord requesting such consent and if Landlord fails
to respond within seven (7) days after receipt of such second notice, then
Landlord will be deemed to have consented to such Transfer. Tenant shall
immediately notify Landlord of any material modifications to the proposed terms
of such Transfer, which shall also be subject Landlord's consent in accordance
with the same process for obtaining Landlord's initial consent to such Transfer.

                C.      RECAPTURE. In the event that Tenant seeks to make a
Transfer that individually or in the aggregate of all other Transfer is for more
than 50% entire Premises for more than 90% of the remainder of the term of the
Lease, Landlord shall have the right to terminate this Lease. In the event
Landlord elects to so terminate this Lease, then the Lease shall so terminate in
its entirety no sooner than sixty (60) days after Landlord has notified Tenant
in writing of such election unless agreed to in advance by Tenant. 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 space proposed to be sublet in
the case of a proposed partial sublease. In the case of a partial termination of
the Lease, the Base Monthly Rent and Tenant's Share 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 to effect such termination.

                D.      OTHER REQUIREMENTS. 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 not 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 75% of all Subrent (as defined in Section
14.1D(5)) received by Tenant, after Tenant has deducted the reasonable costs it
incurred in connection with any such sublet including, without limitation,
brokerage fees and commissions, attorneys' fees, tenant improvement costs, free
rent and any other concessions provided to the assignee. 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 75% 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, after Tenant has deducted the costs it incurred in
connection with any such sublet including, without limitation, brokerage fees
and commissions, attorneys' fees, tenant improvement costs free rent and any
other concessions provided to the subtenant. 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.

                        (4)     Tenant's obligations under this Section 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 Section 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 the proposed transferee of
all Subrent and other amounts that are to be paid to Tenant in connection with
such Transfer.

<PAGE>

                        (5)     As used in this Section 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 the transferee (in excess of the book value thereof) for Tenant's assets,
fixtures, leasehold improvements, inventory, accounts, goodwill, equipment,
furniture, and general intangibles.

                E.      DEEMED TRANSFERS. 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 not 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 (or to 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, limited liability company or other
entity 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, member or other party owning 50% or more (cumulatively) of any
interest in the capital or profits of the partnership, limited liability company
or other entity or the dissolution of the partnership, limited liability company
or other entity, shall be deemed a voluntary assignment of Tenant's interest in
this Lease.

                F.      PERMITTED TRANSFERS. Notwithstanding anything contained
in Section 14.1, Tenant may sublease all or part of the Premises or assign its
interest in this Lease to (i) any subsidiary, affiliate, division or corporation
which controls, is controlled by, or is under common control with the original
Tenant to this Lease, (ii) a successor corporation related to Tenant by merger,
consolidation, or nonbankruptcy reorganization, where the successor corporation
has a tangible net worth greater than $35,000,000.00, or (iii) a purchaser of
substantially all of Tenant's assets where the purchaser has a tangible net
worth greater than $35,000,000.00 (a "Permitted Transfer") without Landlord's
prior written consent, and Landlord shall not be entitled to terminate the Lease
pursuant to Section 14.1C or to receive any part of any Subrent resulting
therefrom that would otherwise be due it pursuant to Section 14.1D. Neither the
sale or transfer of Tenant's capital stock through any public offering over a
national exchange, nor the pledge of or grant of a security interest in any of
the Tenant's capital stock shall be deemed an assignment, subletting or other
transfer of the Lease or the Premises.

                G.      REASONABLE STANDARDS. The consent of Landlord to a
Transfer may not be unreasonably withheld, provided that it is agreed to be
reasonable for Landlord to consider any of the following reasons, which list is
not exclusive, in electing to deny consent:

                        (1)     The financial strength, credit, character and
business or professional standing of the proposed transferee at the time of the
proposed Transfer is not sufficient to meet the financial obligations of the
Lease as they pertain to the portion of the Premises to be sublet or assigned;

                        (2)     A proposed transferee whose impact or affect on
the common facilities or the utility, efficiency or effectiveness of any utility
or telecommunication system serving the Building or the Project or the other
occupants of the Project would be adverse, disadvantageous or require
improvements or changes in any utility or telecommunication capacity currently
serving the Building or the Project;

                        (3)     A proposed transferee whose occupancy will
require a variation in the terms of this Lease (except a variation in the use
clause, which shall be subject to Landlord's reasonable approval);

                        (4)     The existence of any uncured default by Tenant
under any provision of this Lease;

                        (5)     A proposed transferee who is or is likely to be,
or whose business is or is likely to be, subject to compliance with additional
laws or other governmental requirements beyond those to which

<PAGE>

Tenant or Tenant's business is subject, and which will require the construction
of additional improvements at the Project;

                        (6)     the proposed Transferee is a governmental agency
or unit or a non-profit or charitable organization;

                        (7)     Landlord otherwise reasonably determines that
the proposed Transfer would have the effect of decreasing the value of the
Building or the Project, or increasing the expenses associated with operating,
maintaining and repairing the Building or the Project;

                        (8)     the proposed Transferee will use, store or
handle Hazardous Materials (defined above) in or about the Premises of a type,
nature or quantity not then acceptable to Landlord.

                H.      REASONABLE RESTRICTION. The restrictions on Transfer
described in this Lease are acknowledged by Tenant to be reasonable for all
purposes, including, without limitation, the provisions of California Civil Code
(the "Code") Section 1951.4(b)(2). Tenant expressly waives any rights which it
might otherwise be deemed to possess pursuant to applicable law, including,
without limitation, Section 1997.040 of the Code, to limit any remedy of
Landlord pursuant to Section 1951.2 or 1951.4 of the Code by means of proof that
enforcement of a restriction on use of the Premises would be unreasonable.

        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 transferor) 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 to the extent any such transferee assumes in writing
Landlord's obligations under this Lease that 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 at any reasonable time after giving at least one (1) business days'
prior notice to Tenant (and immediately in the case of emergency) for the
purpose of: (i) inspecting the same; (ii) posting notices of non-responsibility;
(iii) supplying any service to be provided by Landlord to Tenant; (iv) showing
the Premises to prospective purchasers, mortgagees or, during the last twelve
(12) months of the term of the Lease, to prospective 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. Any entry by Landlord and Landlord's agents shall not unreasonably
impair Tenant's operations more than reasonably necessary, and shall comply with
Tenant's reasonable security measures.

        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,
(iii) contamination by Hazardous Materials for which Tenant is not responsible
pursuant to Section 7.2A or Section 7.2B, (iv) the Landlord's Personal Property
which still remains in the Premises, and (v) alterations or other interior
improvements which Tenant is not required to remove at the termination of the
Lease. In this regard, normal wear and tear shall be construed to mean wear and
tear caused to the Premises by the natural aging

<PAGE>

process which occurs in spite of prudent application of reasonable standards for
maintenance, repair and janitorial practices, and does not include items of
neglected or deferred maintenance. If the Premises are not so surrendered at the
termination of this Lease, Tenant shall continue to be responsible for the
payment of Rent until the Premises are so surrendered in accordance with said
provisions and Tenant shall be liable to Landlord for all costs 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, without limitation, any claims made by any succeeding
tenant or losses to Landlord due to lost opportunities to lease to succeeding
tenants and losses and damages suffered by Landlord due to lost opportunities to
lease any portion of the Premises to any such succeeding tenant or prospective
tenant, together with, in each case, actual attorneys' fees and costs.

        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.      EXISTING SECURITY INSTRUMENTS. 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.      NEW SECURITY INSTRUMENTS. 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.      DOCUMENTS. 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 15 days after written demand therefor shall constitute an Event of
Tenant's Default.

                D.      TENANT'S RIGHTS. Notwithstanding anything herein to the
contrary, the subordination of Tenant's rights and interest under the Lease to
any mortgage or deed of trust shall be contingent upon Tenant's having received
from any such mortgagee or beneficiary of any deed of trust a commercially
reasonable subordination, attornment and non-disturbance agreement providing
that Tenant's rights and interest shall not be disturbed in the event of any
foreclosure of any such mortgage or deed of trust, provided Tenant is not in
default of this Lease and confirming that Tenant shall receive all of the rights
and services provided for under the Lease.

                        Landlord has informed Tenant that the Project is
currently encumbered by a Security Instrument. At Tenant's sole cost and
expense, Landlord shall request the beneficiary (or its servicer) of the
existing Security Instrument that encumbers the Project as of the date hereof to
issue a SNDA, pursuant to which such beneficiary agrees to recognize this Lease
in the event of default under such Security Instrument or

<PAGE>

sale under such Security Instrument, so long as Tenant is not in default
hereunder. Landlord's sole obligation under this section is to request and use
its good faith efforts to obtain such SNDA, however, Landlord will not be
obligated to pay any fee or charge (except as provided in the following
sentence) or to make any change in the loan terms or grant any other concession
to obtain such SNDA. Landlord will pay for the basic administrative fee and
costs for such Lender's attorney to prepare the SNDA, but Tenant shall be
responsible for paying all additional costs incurred to negotiate any changes in
the Lender's form of SNDA. Obtaining the SNDA is not a condition precedent or
subsequent to the Lease, nor a breach of Landlord's obligation. The failure of
such lender to issue its SNDA shall not relieve Tenant of any of its obligations
under the Lease.

        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
to any Lender whose name has been provided to Tenant and shall offer such Lender
the same opportunity to cure the default as provided to Landlord under this
Lease. 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.

        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 (but not more than once a
year) 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 the 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.

        15.7    CONSENT: Whenever the Lease requires an approval, consent,
designation, determination, selection or judgment by either Landlord or Tenant,
such approval, consent, designation, determination, selection or judgment and
any conditions imposed thereby shall be reasonable and shall not be unreasonably
withheld or delayed and, in exercising any right or remedy hereunder, unless a
different standard is expressly provided to the contrary in this Lease. Each
party shall at all times act reasonably and in good faith.

        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, by courier service, or by mail. A notice shall be deemed to have been
given (i) on the third business day after mailing 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 Section 15.8, provided, however, that
any address to which notices may be sent must be a California address.

        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

<PAGE>

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), Tenant represents and warrants that each individual executing this
Lease on behalf of Tenant 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). Tenant hereby covenants and warrants that it 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. 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 due 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 S of the Summary, and (ii)
agrees to indemnify, defend, and hold harmless the other party from any claim
for any such 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 pursuant to a separate
agreement between Landlord and the Retained Real Estate Brokers.

        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

<PAGE>

restrictions, regulations, controls, action or inaction, civil commotion, fire
or other acts of God, and other causes beyond the reasonable control of Landlord
or Tenant (except financial inability or the date by which Tenant must commence
paying rent) shall excuse the performance by Landlord and/or Tenant, for a
period equal to the period of any said prevention, delay or stoppage, of any
obligation hereunder.

        15.15   REASONABLE EXPENDITURES. Any expenditure by a party permitted or
required under this Lease, for which such party is entitled to demand and does
demand reimbursement from the other party, shall be limited to the fair market
value of the goods and services involved, shall be reasonably incurred, and
shall be substantiated by reasonable documentary evidence available for
inspection and review by the other party or its representative during normal
business hours, subject to the requirements and limitations set forth in Section
8.5 hereof with respect to the Tenant's inspection of Common Operating Expenses.

        15.16   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. There are no oral agreements
between Landlord and Tenant affecting this Lease, and this Lease supersedes 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.

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

LANDLORD:                                         TENANT:

SHORELINE PARK, LLC                               DREXLER TECHNOLOGY CORPORATION
a Delaware limited liability company              a Delaware corporation

By:   Divco West Group, LLC,
      a Delaware limited liability company
      Its Agent<PAGE>

EXHIBIT 10.8

License Agreement

Page 83

REDACTED COPY
Portions of this Exhibit 10.9 have been omitted pursuant to a confidential
treatment request. The omitted material has been filed with the Securities and
Exchange Commission.

              AMENDED AND RESTATED MASTER LICENSE AND MANUFACTURING
                                   AGREEMENT

THIS AMENDED AND RESTATED MASTER LICENSE AND MANUFACTURING AGREEMENT (this
"Agreement") is made and entered into as of April 3rd 2004, (the "Effective
Date") by and between DREXLER TECHNOLOGY CORPORATION, a Delaware corporation
with its principal office located in 2644 Bayshore Parkway, Mountain View,
California 94043, U.S.A. ("DTC") and GLOBAL INVESTMENTS GROUP, a corporation
organized under the laws of New Zealand with its principal office located in
level 27, Price Waterhouse Coopers Tower, 188 Quay Street, Auckland 1001, New
Zealand ("Licensee").

WHEREAS,

o   DTC is the owner of certain patents (listed in Attachment G hereto),
    proprietary technologies, and know-how used for the production of Optical
    Memory Cards or OMCs as defined below; and

o   Licensee desires to obtain from DTC an exclusive license to manufacture and
    market OMCs in certain Territories as defined below; and

o   Licensee desires, so long as Licensee achieves the performance goals in
    Attachment A, that each time before DTC offers to license a third party to
    construct a card manufacturing facility in Group 1, 2, and 3 Territories
    under Exhibit A, DTC offer Licensee on the same basic terms as offered to
    such third party the right to build another new card facility in such
    Territories under a separately to be negotiated and purchased Master License
    and Manufacturing Agreement if such proposed new third party facility would
    manufacture optical media using the Card Manufacturing Technology provided
    below, and

o   Licensee desires to purchase directly and exclusively from DTC all the
    production equipment and supplies necessary for the manufacture of OMCs
    hereunder, and Licensee desires to obtain DTC's assistance with production
    setup and startup training for the manufacture of OMCs; and

o   Licensee desires to receive ongoing production-technology monitoring and
    consulting from DTC at Licensee Facilities (as defined below) with respect
    to the manufacture of OMCs; and

o   Licensee and DTC agree that the foregoing provisions are indispensable and
    contribute to improving the production of the relevant goods; and

<PAGE>

o   DTC desires to grant such license, sell such production equipment and
    supplies, and provide such setup and startup services and assistance to
    Licensee, subject to the terms and conditions in this Agreement;

o   Licensee and DTC entered into an agreement on March 18, 2004, to be
    effective April 3, 2004, (the "Prior Agreement") concerning the subject
    matter of this Agreement which had not been reviewed by English counsel even
    though English law governed. Licensee and DTC are entering into this
    Agreement to restate the Prior Agreement to conform to English law and to
    implement some other minor changes.

NOW, THEREFORE, in consideration of the premises and the mutual covenants and
agreements hereinafter contained, the parties hereby agree as follows:

1.      DEFINITIONS

        1.1     "DTC" means Drexler Technology Corporation and its Subsidiaries.

        1.2     "Subsidiary," with respect to any party, means any corporation,
company, or other entity of which more than fifty percent (50%) of its
outstanding shares of capital stock (or other securities representing the right
to vote for the election of directors or other managing authority) are owned or
controlled directly or indirectly by such party.

        1.3     "DELA Standard" means the Drexler European Licensees Association
Standard.

        1.4     "Card Manufacturing Technology" means, collectively,
photographic emulsion technology for making the read/write media ultimately
encapsulated in the OMCs from photomasks and film using specialty process
chemistry and master loops, first and second pass lamination using ebeam roll
process (and not sheet process), die-cutting and edge-sealing card finishing
technology, and any and all other methods, processes, technology, know-how, data
and information and all Intellectual Property Rights, owned or controlled by
DTC, relating to all of the foregoing necessary or useful in the manufacture of
OMCs other than the know-how to design and make photomasks. The portion of the
Card Manufacturing Technology for making the media is referred to as "Media
Production Technology" and the portion of the Card Manufacturing Technology for
encapsulating the media into and finishing the OMC's is referred to as "Card
Assembly Technology". As used herein, Card Manufacturing Technology includes all
Card Manufacturing Improvements that may be provided to Licensee under this
Agreement.

        1.5     "Intellectual Property" or "Intellectual Property Rights" means
any and all registered and unregistered patents, patent rights, utility models,
designs, copyrights, compilations, databases, mask works, works of authorship
and trade secrets, and all registrations, applications, renewals or extensions
of all of the foregoing anywhere in the world, and any and all other
intellectual property and industrial property rights.

        1.6     "LaserCard Systems Corporation" or "LSC" shall mean a wholly

owned Subsidiary of DTC under the name of "LaserCard Systems Corporation."

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<PAGE>

        1.7     "Licensee" means Global Investments Group.

        1.8     "Optical Memory Cards" or "OMCs" means laser-recordable data
storage cards made utilizing photographic emulsion technology, in accordance
with (a) the DELA Standard and ISO/IEC Standard 11694, Part 4, Annex B or (b)
any other standards that DTC may adopt for its laser-recordable data storage
card after the Effective Date. For purposes of this Agreement, Optical Memory
Cards include finished cards and "chip-ready" optical memory cards and
specifically exclude Optichip cards which use a piece instead of a stripe of
media.

        1.9     "OMC Drive" means an OMC Read/Write Drive or an OMC Reader. "OMC
Read/Write Drive" means a unit of equipment, or drive, for reading and/or
writing DELA Standard OMCs made by DTC or Licensee or OMCs made by any of DTC's
third-party licensees that are functionally compatible with OMCs made by DTC.
"OMC Reader" means a unit of equipment, or drive, capable of reading from, but
not writing to, OMCs made by DTC or Licensee or OMCs made by any of DTC's
third-party licensees that are functionally compatible with OMCs made by DTC.

        1.10    "Territories" means, collectively, the Exclusive Territory and
the Non-Exclusive Territory.

        1.11    "Exclusive Territory" means the geographical territory comprised
of the countries listed in Attachment A as Group 1 Countries and Group 2
Countries.

        1.12    "Non-Exclusive Territory" means the geographical territory
comprised of the countries listed in Attachment A as Group 3 Countries.

        1.13    "Licensee Facilities" means the manufacturing facility owned or
controlled by Licensee, located in Slovenia or other additional licensed
countries; provided, however, there shall be only one Licensee Facility, which
shall be in Slovenia, where the Media Production Technology is employed.

        1.14    "Quality Standards" means the quality and performance standards
for OMCs set forth in DTC's testing parameters and QA specifications provided in
the "Card Quality Specifications" listed in Attachment D (as may be amended by
DTC from time to time).

2.      GRANT OF LICENSE; PROPRIETARY RIGHTS AND RESTRICTIONS.

        2.1     License Terms.

                (a)     LICENSE GRANT. Subject to the terms and conditions of
this Agreement, DTC hereby licenses to Licensee, subject to the reservation by
DTC of its ownership of all Intellectual Property Rights, a personal,
fee-bearing, royalty-bearing license (i) to use the Card Manufacturing
Technology solely to make and manufacture (and not have made or manufactured) at
the Licensee Facilities OMCs that meet the Quality Standards; (ii) to market,
offer for sale, sell, and distribute the OMCs (x) on a non-exclusive basis in
the Non-Exclusive Territory, and (y) on an exclusive basis in the Exclusive
Territory, subject to the conditions in Section 2.1(b) below. This license shall
be non-transferable except to an Affiliate in Slovenia, in which event Licensee
shall remain responsible for the obligations of such Affiliate. Although

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<PAGE>

this license may not be sublicensed, Licensee may subcontract use of the Card
Assembly Technology but not the Media Production Technology. "Affiliate" means a
corporation, company or other entity, controlling, controlled by, or under
common control with, Licensee, such control being exercised by the ownership or
control directly or indirectly of more than fifty percent (50%) of the
outstanding shares of capital stock (or other securities representing the right
to vote for the election of directors).

                (b)     CONDITIONS FOR EXCLUSIVITY.

                (A)     Licensee's exclusive rights in the Exclusive Territory
as provided in Section 2.1(a)(ii)(y) above shall last (i) in Group 1 Countries,
for a term of five (5) years from the Effective Date unless further extended as
provided for in Attachment A, unless this Agreement is earlier terminated, and
(ii) in Group 2 Countries, for successive 12 months periods from the Effective
Date during the term of this Agreement, so long as Licensee meets the
performance requirements set forth in Attachment A during the preceding 12
months. In addition, DTC may revoke Licensee's exclusive status in Group 2 (but
not Group 1) of the Exclusive Territory if the government(s) of the applicable
country/ies is/are not satisfied with the performance and quality of the OMCs
supplied by Licensee, or a competitive bid is requested by the government(s) of
the applicable country/ies, or is required by the applicable law of such
country/ies, in which case Licensee's license shall be non-exclusive as to such
country/ies.

                (B)     It is understood and agreed between the parties hereto
that DTC and its Subsidiaries, including LSC, have and shall continue to have
the right to make OMCs in the Territory and to sell OMCs and related products
and services directly to those end-user customers and value added reseller
("VARs") customers they have a relationship with as of the Effective Date in an
Exclusive Territory and to any end-user customers or VARs in the Non-Exclusive
Territory. Similarly, any card distribution licensee or VAR of DTC and its
Subsidiaries as of the Effective Date shall have the right to sell OMCs to
customers located in any country throughout the world where they have the right
to sell as of the Effective Date, including the Exclusive Territory. That is,
the exclusivity of Licensee is subject to prior-granted rights and customer
relationships. However, so long as Licensee has satisfied the conditions to
retain exclusivity in Group 1 and Group 2 countries, DTC agrees and shall cause
LSC to agree during the exclusivity period, not to (a) prohibit VARs in Group 1
and Group 2 countries from purchasing OMCs from Licensee, (b) sell any OMCs
directly in the Exclusive Territory to any customer with whom it does not have a
relationship as of the Effective Date, (c) grant any license to any third party
to use the Media Production Technology for the manufacture of OMCs in Slovenia,
or, without offering Licensee such right first, in the Group 1, Group 2, or
Group 3 countries, (d) grant rights or licenses to any additional card
distribution licensees or VARs to sell OMCs in the Exclusive Territory, or (e)
form a partnership, joint venture or any other entity to manufacture OMCs in
Slovenia or to sell OMCs in the Exclusive Territory. As to the subsection (c)
right of first offer, should DTC wish to grant a third party such a license, DTC
shall first offer, in writing, such a license to Licensee. Should Licensee not
accept such offer within fifteen (15) days, then DTC may grant such a license to
a third party during the next six months on terms no less favorable than those
DTC offered to Licensee. There is no restriction on DTCs grant of any license to
any third party to use the Card Assembly Technology for the manufacture of OMC's
anywhere in the world (such OMC's could not be sold in the Exclusive Territories

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<PAGE>

so long as Licensee has satisfied the conditions to retain exclusivity in Group
1 and Group 2 countries).

                (c)     LICENSE RESTRICTIONS.

                        (i)     The license and rights granted under this
Section 2 are not sublicensable without DTC's prior written agreement except
that DTC hereby consents to the sublicense of exclusive sales rights of OMCs in
Group 2 Countries upon notice to DTC, provided that such sublicense is subject
to termination by DTC if and when the exclusivity period terminates.

                        (ii)    The license granted under this Section 2 does
not include any rights or know-how to produce glass master photomasks to make
OMCs and Licensee agrees not to (1) procure photomasks other than from DTC, (2)
duplicate photomasks it procures from DTC, or (3) reverse engineer photomasks
supplied by DTC or to otherwise learn how to format a photomask so that it can
be used to make OMCs compatible with OMC Drives.

                        (iii)   The license granted under Section 2.1(a) shall
apply only to DELA format, and derivatives thereof, OMCs manufactured by
Licensee that function with DELA OMC Read/Write Drives sold by DTC or any DTC
authorized third-party source of DELA OMC Read/Write Drives.

                        (iv)    This Agreement does not grant any rights or
licenses to any OMC Drive, any Intellectual Property Rights contained in any OMC
Drive, any processes for the manufacture of any OMC Drive, or to any software
incorporated into any OMC Drive, including logical data formatting processes.

                        (v)     Licensee shall mark all OMCs with proper notice
of patent marking under 35 U.S.C. Section 287.

        2.2     OWNERSHIP. DTC owns all rights, title and interest in and to the
Card Manufacturing Technology, subject to the limited license granted to
Licensee pursuant to Section 2.1(a) above. All rights not expressly granted to
Licensee under Section 2.1(a) are reserved by DTC.

        2.3     IMPROVEMENTS BY LICENSEE. To the extent Licensee develops,
conceives or reduces to practice modifications, design changes, enhancements or
improvements to the Card Manufacturing Technology as part of its authorized use
of the Card Manufacturing Technology hereunder ("Licensee Improvements"), then
Licensee shall promptly disclose to DTC each such Licensee Improvement. Licensee
shall own all right, title and interest in and to such Licensee Improvement,
subject to DTC's underlying rights in the Card Manufacturing Technology and
subject to the license back to such improvements granted to DTC pursuant to this
Section. Licensee will, and hereby does grant to DTC, a non-exclusive,
royalty-free, irrevocable, perpetual, worldwide, transferable and sublicensable
license to make, have made, use, sell, offer to sell, distribute, transfer,
sublicense and import products and services incorporating or embodying such
Licensee Improvement, and to reproduce, modify, create derivative works of,
distribute, sublicense, transfer and otherwise exploit the Licensee Improvement,
including the right to sublicense any of the foregoing rights.

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<PAGE>

        2.4     NO RIGHT TO USE DTC'S MARKS. Licensee agrees not to use, without
DTC's prior written approval, as part of its product name(s), company name(s),
trade name(s), service mark(s), or trademark(s), any of the trademarks or trade
names owned by, or licensed to, DTC or any of its Subsidiaries, including,
without limitation: LaserCard, LaserCard Systems, LSC, Drexler, Drexler
Technology, DTC, Drexon, or any derivatives thereof. Licensee shall be able to
use the designation "A LaserCard(R) licensee partner"; however Licensee shall
not thereby acquire any company name, trade name, trademark or service mark
rights to such designation or to "LaserCard", all such use inuring to the
benefit of DTC. Should Licensee desire to use a trade name which includes the
words "Laser Optical Card", DTC agrees to permit Licensee to do so at no
additional charge pursuant to a trade name license agreement which protects
DTC's interest in the LaserCard trademark and trade name.

        2.5     CHANGE OF CONTROL. In the event that a third party company
acquires control of DTC or LSC, then the acquiring third party company
(including any successor entity to DTC and/or LSC) shall be bound by and subject
to all the terms and conditions of this Agreement. In the event of any such
acquisition or negotiations in respect thereof, at the acquiring third party's
request, Licensee will confer with such acquiring third party about any of its
concerns and Licensee's concerns regarding this Agreement.

3.      FURTHER RIGHTS AND OBLIGATIONS OF THE PARTIES

3.1     SALE OF EQUIPMENT AND RAW MATERIALS TO LICENSEE

                (a)     EQUIPMENT SALE. Licensee will purchase exclusively from
DTC all equipment listed on Attachment B necessary for Licensee to exercise the
manufacturing license granted in Section 2.1(a) above ("Equipment").
Concurrently with execution of this Agreement, the parties have entered into, or
will within 30 days of execution of this Agreement, enter into the Equipment
Sale Agreement attached hereto as Attachment B-1 for the sale of certain
lamination system equipment to Licensee. Licensee's purchase and DTC's sale of
Equipment shall be subject to the terms and conditions of a sale agreement
entered into between the parties covering the piece of Equipment purchased
(each, an "Equipment Sale Agreement"), which shall address issues similar to the
issues in the Equipment Sale Agreement attached hereto as Attachment B-1,
including, without limitation, acceptance, performance, payment and training.
Notwithstanding the foregoing, if authorized by DTC in writing, Licensee may
purchase spare parts for the Equipment from a DTC-approved third-party source.

        DTC and Licensee agree that they will diligently negotiate and enter
into two (2) additional Equipment Sale Agreements patterned after Exhibit B-1,
which shall be attached hereto as Attachments B-2 and B-3, for the remaining
equipment listed in Attachment B to this Agreement with a target date of June
13, 2004.

               (b)     RAW MATERIALS SOURCING. The parties acknowledge and
agree that Licensee shall purchase exclusively from DTC all equipment, film
media, adhesives, and other raw materials (collectively, "Raw Materials")
necessary for Licensee's manufacture of OMCs hereunder. DTC agrees to sell Raw
Materials to Licensee during the term of this Agreement for

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<PAGE>

as long as Licensee is not in breach of its obligations under this Agreement and
that Raw Materials are commercially available to DTC for purchase commercially
in the necessary quantity and quality. Notwithstanding the foregoing, if
authorized by DTC in writing, Licensee may purchase Raw Materials from a
DTC-approved third-party source. European based generic materials such as
plastic films but excluding photographic film are hereby authorized for such
direct purchase.

                (c)     PHOTOMASKS. DTC will design photomask masters from OMC
specifications provided by Licensee and shall make or have made such photomask
masters which DTC will then supply to Licensee.

                (d)     PRICE; TERMS AND CONDITIONS OF SALE. The sale by DTC to
Licensee of Raw Materials hereunder shall be at prices quoted by DTC at time of
order, shall be based on Licensee's quantity and delivery requirements, and
shall be in accordance with DTC's then-current Standard Terms and Conditions of
Sale (the current version of which is attached hereto as Attachment C), unless
otherwise agreed upon by the parties in writing.

                (e)     ORDERS, PAYMENTS AND DELIVERY. From and after the
Effective Date, Licensee will deliver to DTC, on a monthly basis within five (5)
days after the beginning of each calendar month a rolling, good-faith,
non-binding six-month forecast of Licensee's anticipated requirements for the
Raw Materials including the quantity and type of Raw Materials that Licensee
expects to purchase. At least thirty (30) days in advance of each calendar
quarter, Licensee shall submit to DTC via email or facsimile an order for Raw
Materials for such upcoming quarter, specifying the requested quantities of Raw
Materials by type, requested delivery date and delivery location. All purchase
orders are subject to DTC's acceptance and shall not be binding upon DTC until
the earlier of such acceptance or shipment of the Raw Materials ordered (to the
extent of such shipment). DTC will use commercially reasonable efforts to notify
Licensee of DTC's acceptance or rejection of Licensee's purchase order, and of
the expected delivery date for accepted purchase orders, within five business
days after DTC's receipt of such purchase order. DTC shall invoice Licensee
after the fifteenth day of each month for the shippable portion of the order.
Along with such order, Licensee shall remit to DTC an amount equal to fifty
percent (50%) of the total purchase price for such order. . Licensee shall remit
the remaining fifty percent (50) of the total purchase price within thirty (30)
days after the receipt of the entire quantity of products set forth in such
order subject to Licensees outstanding credit balance not exceeding Licensees
pre approved credit limit.

                (f)     RESTRICTION ON RESALE. Licensee shall have no right to
sell or otherwise distribute Equipment, Raw Materials or partially manufactured
OMCs, other than to its Slovenian Affiliate or subcontractors, as permitted
under Section 2.1(a), without the express written consent of DTC.

3.2     DESIGN ESTIMATES. DTC shall provide Licensee with a copy of DTC's
suggested production plant design and specifications, which Licensee may use as
a reference, but Licensee shall estimate its own (i) maximum throughput, minimum
throughput and production yields for OMCs and (ii) costs to build and operate
Licensee's plant (including the costs associated with performing quality
assurance and control). Upon Licensee's request, DTC shall provide Licensee a
written estimate for such production estimates and cost estimates, provided that
DTC will not and does not guarantee the accuracy of such estimates, except with
respect to the

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<PAGE>

estimate on minimum throughput. The Equipment provided by DTC to Licensee shall
have the minimum throughput set forth in the applicable Equipment Sale
Agreement.

3.3     TRAINING. Licensee understands that the manufacture of OMCs requires
some workers to have certain advanced technical skills. DTC, directly and
through its subcontractors, will provide training to Licensee's designated
personnel in the use of the purchased Equipment in accordance with the training
obligations set forth in the applicable Equipment Sale Agreement covering the
Equipment.

3.4     MANAGEMENT SUPPORT: TECHNOLOGY UPGRADES, MONITORING/CONSULTING, CARD
QUALITY ASSURANCE COMPLIANCE.

                (a)     GENERALLY. Subject to Licensee's payment of fees
provided in Section 4.1(b) below ("Management Support Fees"), one employee or
subcontractor of DTC will provide ongoing assistance to Licensee's personnel
("DTC On-Site Representative"), onsite at Licensee Facilities with respect to
the Card Manufacturing Technology and Licensee's exercise of its rights pursuant
to Section 2.1(a) ("Management Support"), including updates to the Card
Manufacturing Technology and monitoring of card quality to assure compliance
with the Card Quality Specifications in effect at such time, as further
described in this Section 3.4. Licensee shall be required to purchase Management
Support from DTC during the term of this Agreement such support is included in
the initial twelve million dollar fee for the first five years and thereafter
will be provided at total cost of one million dollars/year including all
personnel costs as provided in Section 4.1(b).

                (b)     IMPROVEMENTS TO CARD MANUFACTURING TECHNOLOGY. In the
event DTC develops or implements any significant modifications, design changes,
enhancements or improvements to the Card Manufacturing Technology (collectively,
"Card Manufacturing Improvements") at a time when Licensee is current in payment
of its Management Support Fees, DTC, through its DTC On-Site Representative,
shall promptly inform Licensee of all such Card Manufacturing Improvements and
such Card Manufacturing Improvements shall automatically be included within the
license granted to Licensee under Section 2.1(a) above without the payment of
any additional fees. If such Card Manufacturing Improvements require Licensee to
purchase additional equipment, DTC will provide Licensee with the specifications
for such additional equipment and cooperate and assist Licensee in procuring
such additional equipment, which if Licensee decides to acquire such equipment,
shall be purchased exclusively from DTC, subject to the terms of an Equipment
Sale Agreement covering such additional equipment. Licensee shall not be
required to implement any Card Manufacturing Improvements or purchase any new
equipment, and such purchases and implementations shall be in Licensee's sole
discretion.

                (c)     QUALITY CONTROL. Licensee agrees to abide by the Quality
Standards. Upon DTC's prior written request, Licensee agrees to make available
representative specimens of OMCs for inspection and testing by DTC or its
representatives for the sole purpose of confirming Licensee's compliance with
the Quality Standards. If DTC reasonably determines in good faith that any such
OMCs does not meet the Quality Standards, DTC will notify Licensee of such
determination in writing and the reasons therefor. Licensee agrees that, within
sixty (60) days after receipt of such notification, it will use commercially
reasonable and diligent

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efforts to rectify the problem. DTC agrees that it will reasonably cooperate
with and assist Licensee to identify and rectify the problem, subject to
Licensee's payment to DTC of a reasonable consulting fee to be agreed upon by
the parties in writing. Licensee shall in all material respects take the
corrective actions recommended by DTC. DTC's On-Site representative shall have
the authority to prohibit the shipment of products which do not conform to the
Card Quality Specification, this is in addition to any other rights available to
DTC under this Agreement.

                (d)     SECURITY. The On-Site representative shall have access
to the Licensee Facilities and records at all times in order to monitor the
quantity, quality, and security of all OMCs produced at Licensee Facilities. In
this manner, DTC will be able to assure the integrity to customers of DTC and
its licensees of OMC manufacturing worldwide using DTC technology.

3.5     OTHER RIGHTS AND OBLIGATIONS RELATING TO THE OPTICAL MEMORY CARDS

                (a)     DTC'S OBLIGATIONS TO LICENSEE'S CUSTOMERS. Licensee
shall be solely responsible for all interactions with customers purchasing OMCs
manufactured by Licensee from Licensee ("Customers") and all claims of Customers
with respect to such OMCs manufactured by Licensee, including, without
limitation, replacing any defective OMCs manufactured by Licensee delivered to
Licensee's customers, without any financial or other obligations on the part of
DTC.

                (b)     NO RIGHT TO SELL THROUGH OTHER VARS. Except as otherwise
expressly authorized by DTC in writing, Licensee shall have no right to sell
OMCs through authorized value-added resellers of LaserCard Systems Corporation
or through holders of DTC's card distribution licenses, as currently listed in
Attachment E, which list may be updated from time to time during the term of
this Agreement.

4.      FEE AND PAYMENT PROCEDURES

4.1     FEES. In consideration for the rights and licenses granted to Licensee
under this Agreement, Licensee hereby agrees to pay DTC the amount of
Twenty-Nine million U.S. Dollars ($29,000,000 US), which amount shall be paid as
follows (time being of the essence):

        (a)     LICENSE GRANT FEE: Within ten (10) calendar days following the
Effective Date, which shall be April 3rd 2004, Licensee shall pay DTC Two
million U.S. Dollars ($2,000,000 US).

        (b)     MANAGEMENT SUPPORT FEES:

                (i)     As consideration for the Management Support during the
term of this Agreement, Licensee shall pay DTC Twenty-Seven million U.S. Dollars
($27,000,000 US) as follows:

        o Licensee shall pay DTC Two million U.S. Dollars ($2,000,000 US)
between April 3rd and 9th, 2004

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<PAGE>

        o Licensee shall pay DTC [ ] * U.S. Dollars ($[ ]* US) no later
than [ ]*

        o Licensee shall pay DTC [ ]* U.S. Dollars ($[ ]* US) no later than [ ]*

        o Licensee shall pay DTC [ ]* U.S. Dollars ($[ ]* US) no later than [ ]*

        o Licensee shall pay DTC [ ]* U.S. Dollars ($[ ]* US) no later than [ ]*

        o Licensee shall pay DTC [ ]* U.S. Dollars ($[ ]* US) on each
anniversary date of the Effective Date of this Agreement starting on the [ ]*
anniversary of the Effective Date and ending on the [ ]* anniversary of the
Effective Date, each such payment to be made not later than one week after the
applicable anniversary date of this Agreement.

                (ii)    The first [ ]* payments in Section 4.1(b)(i) above are
as consideration for Management Support during each of the first [ ]* years of
the term of this Agreement while the payments described in the last paragraph of
Section 4.1(b)(i) above are as consideration for Management Support during each
of years [ ]* through twenty (20), inclusive of the term of this Agreement.

4.2     EQUIPMENT FEES: Payments for Licensee's purchase of Equipment shall be
as set forth in the Equipment Sales Agreement covering such Equipment.

4.3     ROYALTIES. In further consideration of the license and rights granted
under Section 2.1(a), Licensee shall pay to DTC a royalty on each OMC made by
Licensee AND sold or otherwise provided by Licensee to Customers. Such royalty
on each of the OMCs shall be computed as follows: Until such time as Licensee
Facilities have produced [ ]* million OMCs, Licensee shall pay DTC a royalty of
[ ]* per OMC sold or otherwise provided by Licensee to Customers, and thereafter
the royalty shall be [ ]* to [ ]* per OMC sold or otherwise provided by Licensee
to Customers. Licensee's royalty payment obligations shall continue as long as
Licensee sells or otherwise provides OMCs to Customers. The termination of this
Agreement pursuant to Section 7 shall not negate the royalty-payment obligations
incurred hereunder.

4.4     ROYALTY CALCULATION. Royalties due under Section 4.3 shall be earned on
the date of Licensee's invoice to Customers for such OMCs or, if earlier, the
date that Licensee transfers possession or otherwise provides the OMCs, for
example by shipping them to the customer or allowing the customer to pick up the
OMCs. All royalties due under Section 4.3 shall be paid by Licensee to DTC
within thirty (30) days after the end of the calendar quarter in which such
royalties have been earned, in accordance with the applicable per-card royalty
payment as outlined in Section 4.3. In the event this Agreement terminates or
expires, all earned royalties shall become due and payable within thirty (30)
days after such termination or expiration.

4.5     ROYALTY REPORTS. During the term of this Agreement, simultaneously with
each payment of royalties pursuant to Section 4.3, Licensee shall provide DTC a
written report substantially in

--------

* Material omitted pursuant to a confidential treatment request. The omitted
  material has been filed separately with the Securities and Exchange
  Commission.

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<PAGE>

the form attached hereto as Attachment F setting forth (a) the number of OMCs
made by Licensee which were sold, or otherwise provided to Customers during such
quarter; and (2) the amount of such royalty payment due for such quarter. In the
event that no running royalty is due for a quarter, Licensee's report shall so
state. Licensee shall send each royalty report via postage prepaid airmail,
courier or facsimile transmission followed by a confirmation copy by airmail or
courier, at Licensee's discretion, to the following address:

            Drexler Technology Corporation
            Attention: Vice President-Finance
            2644 Bayshore Parkway
            Mountain View, CA 94043 U.S.A.

4.6     PAYMENTS. All payments to DTC under this Agreement shall be made in U.S.
dollars for the full amount due (without offset for any local governmental
withholding tax or any other local governmental tax or fee) and are exclusive of
all taxes, duties and tariffs not based on DTC's net income, including, but not
limited to, sales, use, transfer, value-added, privilege or property taxes,
import and export duties and tariffs or amounts levied in lieu thereof
(collectively, "Taxes"). Licensee shall pay any and all Taxes, whether now or
hereafter imposed. Licensee shall comply with all laws and regulations related
to such Taxes, including without limitation, paying any interest or penalties
relating to such Taxes. All payments to DTC under Section 4 are non-refundable
and shall be made by wire transfer to the following account unless notified
otherwise by DTC:

            Bank of the West
            501 Castro Street
            Mountain View, California 94041 USA
            ABA No. 1211-00782
            Credit: Drexler Technology Corporation -- Account Number [ ]*
            Reference: Licensee's name, Effective Date, title of this
            license agreement
            For wire transfers originating outside the USA, use the
            "SWIFT" system.

Late payments up to sixty (60) days in arrears shall bear interest at 0.5% per
month, and after sixty (60) days at 1% per month, or, if less, the maximum rate
permitted by law, both before and after judgment, until paid in full.

4.7     BOOKS, RECORDS AND AUDITS. Licensee shall keep correct, clear and
complete records and books of accounting with respect to royalties due under
this Agreement. Upon reasonable prior written notice from DTC, Licensee shall
permit an independent certified public accountant, to have access to such
records as may be reasonably necessary to determine the correctness of
Licensee's royalty payments and reports hereunder. Such inspection may take
place only during Licensee's normal business hours no more than twice in any
twelve (12) month period. Such independent certified public accountant shall be
bound to hold all information in confidence except as necessary to disclose to
DTC any underpayment or overpayment of royalties under this

----------------------------
* Material omitted pursuant to a confidential treatment request. The omitted
  material has been filed separately with the Securities and Exchange
  Commission.

                                       11
<PAGE>

Agreement. Any royalty report or payment for which examination of records by
such independent certified public accountant is not requested by DTC within
three (3) years after the receipt by DTC of the report, shall be deemed
conclusive and accepted by DTC. Licensee shall make prompt adjustment to
compensate for any errors or omissions disclosed by such inspection and
certification of Licensee's records. If such inspection determines an
underpayment of royalties equal to ten percent (10%) or more, Licensee shall
reimburse DTC for the accountant's fees and expenses.

5.      FEES TO THIRD PARTIES

The license fees and royalties payable under this Agreement do not include any
amounts for payment of finder's fees or commissions, if any, payable to third
parties in connection with the grant of the rights and licenses under this
Agreement. As between the parties, DTC shall not be liable for any payments to
any third party claiming that it is entitled to receive such finder's fees or
commissions. Licensee shall indemnify and hold DTC harmless from and against all
expenses (including attorneys' fees) and liabilities based on any such claims
for payment of a finder's fee or commission.

6.      DTC'S RIGHT TO PURCHASE FINISHED CARDS

During the term of this Agreement, DTC shall have the right to purchase OMCs
manufactured and/or sold by Licensee, to the extent that Licensee has excess
capacity of the OMCs. In the event Licensee is able to supply DTC with such
OMCs, the parties agree to negotiate in good faith the terms and conditions of a
separate purchase agreement by which Licensee shall sell such OMCs to DTC.

DTC shall have rights to operate or have operated under DTC control, any and all
Equipment sold under this agreement in Licensee Facilities, as an emergency
backup or as an overflow capacity benefit to the DTC manufacturing operation,
provided that (i) not more than 20% of any month's total production capacity can
be so utilized by DTC, and (ii) DTC shall be willing to work, at Licensee's
request, on off-shifts or weekends to limit impact on Licensee's ongoing
business. Such use by DTC of the Equipment and Licensee Facility shall be
subject to a separate agreement between DTC and Licensee, including a fair price
for such use.

7.      TERM AND TERMINATION

7.1     TERM. This Agreement shall become effective on the Effective Date which
shall be April 3rd 2004 and shall continue for a term of twenty years following
the Effective Date, unless earlier terminated as provided in Section 7.2 below.

7.2     TERMINATION. In the event of a material default by a party, the other
party may terminate this Agreement upon sixty (60) days (thirty (30) days in the
event of a failure to pay) prior written notice given pursuant to Section 20.5,
unless the default is cured within such sixty (60) (thirty (30) in case of a
failure to pay) day period. If either DTC or Licensee shall go into
receivership, bankruptcy, or insolvency, or make an assignment for the benefit
of creditors, or go out of business, or undergoes a similar event, this
Agreement shall be immediately terminable by the other party by written notice,
but without prejudice to any right of the terminating party hereunder.

                                       12
<PAGE>

7.3     DISPOSITION OF OMCS UPON TERMINATION. Upon termination of this Agreement
other than by DTC pursuant to Section 7.2, Licensee has the right to, within a
period of one (1) year after the effective date of such termination ("Sell-Off
Period"), fulfill any purchase orders for OMCs that have been placed with
Licensee prior to such termination and dispose of all OMCs made or partially
made prior to such termination, provided that the sale of such OMCs shall be
subject to the terms of this Agreement, including, but not limited to, the
rendering of reports and payment of royalties required under this Agreement.

7.4     SURVIVAL. The following provisions shall survive any expiration or
termination of this Agreement: Sections 1, 2.2, 2.3, 2.4, 4, 5, 7.3, 7.4, 8,
9.3, 10, 11 and 13

8.      CONFIDENTIAL INFORMATION

8.1     As used herein, "Confidential Information" means any information
provided by a party that is designated as confidential or that ought to be
considered confidential by the party receiving such information, based on the
nature of the information or the circumstances of disclosure. The Card
Manufacturing Technology shall be deemed part of DTC's Confidential Information.
Each party shall protect and maintain all Confidential Information of the other
party in strictest confidence. Each party shall take all necessary and proper
actions to preserve the secrecy and prevent disclosure of such Confidential
Information of the other party to persons other than its employees, agents,
directors, officers or advisors who need to know the Confidential Information
and are bound by written obligations of confidentiality at least as restrictive
as those contained herein. The receiving party shall not disclose to any person
or entity or use or permit the use of any Confidential Information of the
disclosing party except as reasonably necessary to perform and exercise its
rights and obligations under this Agreement. The receiving party will use the
same degree of care to protect the Confidential Information from unauthorized
use or disclosure as it would use to protect its own information of a similar
nature, but in no event with less than reasonable care. Notwithstanding the
foregoing, with respect to DTC, information disclosed by Licensee shall not be
considered Confidential Information hereunder unless the receipt of such
information has been approved in writing by CEO or Co-CEO following disclosure
of a non-confidential summary of the information. Licensee shall have the same
right to request a non-confidential summary of information prior to receiving
confidential information if they so notify DTC in writing.

8.2     The confidentiality obligations shall not apply to any information that
(i) is already known to the receiving party without restriction on use or
disclosure prior to receipt of such information from the disclosing party; (ii)
is or becomes publicly known through no wrongful act or inaction of the
receiving party; (iii) has been rightfully received by the receiving party from
a third party authorized to make such communication, without restriction on use
or disclosure; or (iv) has been independently developed by the receiving party
without use of the Confidential Information.

8.3     If the receiving party is subject to judicial or governmental
proceedings requiring disclosure of particular Confidential Information, then,
prior to any such disclosure, the receiving party will provide the disclosing
party with reasonable prior notice and will obtain, or provide the disclosing
party with an opportunity to obtain, a protective order or confidential
treatment of the Confidential Information.

                                       13
<PAGE>

9.      REPRESENTATION, WARRANTIES, AND DISCLAIMERS

        9.1     REPRESENTATIONS AND WARRANTIES OF LICENSEE. (a) Neither
Licensee's execution and delivery of this Agreement nor Licensee's performance
hereunder will result in a breach of any agreement or contract to which Licensee
may be a party or violate any applicable law or regulation and (b) Licensee has
the full power and authority to execute and deliver this Agreement and perform
its obligations hereunder.

        9.2     REPRESENTATIONS AND WARRANTIES OF DTC. (a) Neither DTC's
execution and delivery of this Agreement nor DTC's performance hereunder will
result in a breach of any agreement or contract to which DTC may be a party or
violate any applicable law or regulation; (b) DTC has the full power and
authority to execute and deliver this Agreement and perform its obligations
hereunder.

        9.3     DISCLAIMER. EXCEPT FOR THE LIMITED WARRANTIES SET FORTH ABOVE IN
SECTION 9.2, DTC MAKES NO AND DISCLAIMS ALL REPRESENTATIONS, WARRANTIES,
CONDITIONS OR OTHER TERMS, EITHER EXPRESS OR IMPLIED, BY STATUTE, COLLATERALLY
OR OTHERWISE, INCLUDING ANY WARRANTIES OR OTHER TERMS OF MERCHANTABILITY,
SATISFACTORY QUALITY, FITNESS FOR A PARTICULAR PURPOSE OR AGAINST INFRINGEMENT
OF THIRD PARTY RIGHTS.

10.     LIMITATION OF LIABILITY.

        10.1    EXCEPT FOR EITHER PARTY'S BREACH OF CONFIDENTIALITY OBLIGATIONS
UNDER SECTION 8 AND EITHER PARTY'S INDEMNITY OBLIGATIONS UNDER SECTION 11, BOTH
PARTIES DISCLAIM ALL, AND NEITHER PARTY SHALL BE LIABLE IN CONTRACT, TORT
(INCLUDING NEGLIGENCE), STATUTORY DUTY, PRE-CONTRACT OR OTHER REPRESENTATIONS OR
OTHERWISE ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT FOR: (A)
CONSEQUENTIAL, INDIRECT OR SPECIAL LOSS OR DAMAGE; OR (B) ANY LOSS OF GOODWILL
OR REPUTATION; OR (C) ANY ECONOMIC LOSSES (INCLUDING LOSS OF REVENUES, PROFITS,
CONTRACTS, BUSINESS OR ANTICIPATED SAVINGS). IN EACH CASE WHETHER ADVISED OF THE
POSSIBILITY OF SUCH LOSS OR DAMAGE AND HOWSOEVER INCURRED. BOTH PARTIES AGREE
THAT THE MAXIMUM AGGREGATE LIABILITY OF DTC IN CONTRACT, TORT (INCLUDING
NEGLIGENCE), STATUTORY DUTY, PRE-CONTRACT OR OTHER REPRESENTATIONS (OTHER THAN
FRAUDULENT MISREPRESENTATIONS) OR OTHERWISE ARISING OUT OF OR IN CONNECTION WITH
THIS AGREEMENT, AND EACH PART THEREOF, INCLUDING ITS EXECUTION AND PERFORMANCE:
SHALL, IN RESPECT OF ANY ONE OR MORE EVENTS OR SERIES OF EVENTS (WHETHER
CONNECTED OR UNCONNECTED) TAKING PLACE WITHIN ANY TWELVE MONTH PERIOD, BE
LIMITED TO THE AMOUNT PAID TO DTC UNDER THIS AGREEMENT IN SUCH PERIOD.

                                       14
<PAGE>

        10.2    NOTHING IN THIS AGREEMENT SHALL EXCLUDE OR LIMIT LIABILITY FOR
FRAUD OR FOR DEATH OR PERSONAL INJURY RESULTING FROM THE NEGLIGENCE OF EITHER
PARTY OR THEIR SERVANTS, AGENTS OR EMPLOYEES ACTING IN THE COURSE OF THEIR
DUTIES.

11.     INDEMNIFICATION

11.1    INDEMNIFICATION BY DTC: Other than as to claims for which Licensee is
obligated to indemnity DTC pursuant to Section 11.2 below, DTC shall indemnify,
defend and hold harmless Licensee from any and all liability (including, without
limitation, reasonable attorneys' fees and costs) resulting from any claim
brought or made against Licensee alleging that Licensee's use of the Card
Manufacturing Technology provided by DTC and used by Licensee as authorized
hereunder infringes any third party copyright or involves a misappropriated
trade secret. Licensee will provide DTC with prompt written notice of any such
claim; DTC shall have sole control of the defense and any settlement of any such
claim although Licensee may participate at its own expense in such defense and
settlement with counsel of its own choice, and Licensee shall reasonably
cooperate and provide reasonable assistance in connection with the defense or
settlement of any such claim at DTC's expense. DTC shall not be responsible for
any settlement of the claim which it does not approve in writing. This
indemnification shall not, however, apply to any liability to the extent it
arises out of or is related to (i) any components, products, processes or
methods not supplied by DTC to Licensee or (ii) any modification, or combination
with other equipment, material, software or processes not supplied by DTC, which
are made by Licensee or a third party to the OMCs, (iii) failure to follow DTC's
instructions, (iv) use of the Card Manufacturing Technology other than as
allowed under this Agreement; or (v) manufacture or use of OMC Drives.

11.2    INDEMNIFICATION BY LICENSEE. Other than as to claims for which DTC is
obligated to indemnity Licensee pursuant to Section 11.1 above, Licensee shall
indemnify and hold harmless DTC from any and all liability (including, without
limitation, reasonable attorneys fees and costs) resulting from any claim
brought or made against DTC based on Licensee's activities under this Agreement,
including, without limitation, Licensee's manufacture, distribution, sale, use
or other disposition of OMCs. DTC shall provide Licensee with prompt written
notice of any such claim, Licensee shall have sole control of the defense and
any settlement of any such claim although DTC may participate at its own expense
in such defense and settlement with counsel of its own choice, and DTC shall
reasonably cooperate and provide reasonable assistance in connection with the
defense or settlement of any such claim at Licensee's expense. In no event will
Licensee enter into any settlement of such claim that gives rise to any
additional obligation on DTC or that does not completely and forever release and
discharge the claim without DTC's prior written consent.

12.     APPROVAL BY COMPETENT AUTHORITIES; EXPORT CONTROLS

12.1    MUTUAL COOPERATION. The parties shall cooperate to secure for this
Agreement the clearance and/or approval, if any, which may be required by the
government of the Republic of Slovenia or the U.S. Government, including,
without limitation, any export and import licenses and other related documents
necessary for the sale, distribution, shipment, export and import of products
sold hereunder. Each party shall be responsible for providing the required
documentation in their respective country. The time for delivery of the products
sold hereunder

                                       15
<PAGE>

shall be extended by any delays encountered in obtaining such licenses or
document that is not caused by DTC.

12.2    PROHIBITED COUNTRIES. To DTC's knowledge, United States government
regulations expressly prohibit exports or re-exports of products to the
following countries: Iran, Iraq, Laos, Libya, North Korea, Afghanistan, and
Cuba.

13.     MISCELLANEOUS

13.1    ENTIRE AGREEMENT. This Agreement and the Attachments hereto, including
the Equipment Sale Agreement(s) incorporated in this Agreement as if set forth
herein, constitute the entire understanding of the parties relating to the
subject matter hereof and supersedes all other prior or contemporaneous
agreements and understandings between the parties, whether written or oral, with
respect to the subject matter hereof, including without limitation the Prior
Agreement.

13.2    REFORMATION AND SEVERABILITY.

        (a)     REFORMATION. Each party intends that the object, means or
consequence of any restrictive provision of this agreement shall not infringe
applicable law. Each party shall keep the restrictions or limitations in this
agreement under review in light of the then current market conditions and other
factual circumstances and the then current requirements of antitrust and other
laws. From time to time should a party wish to undertake an action which is
prohibited or restricted by the agreement but which the party believes may not
prohibited or restricted under the then current circumstances and law, that
party shall notify the other party of such proposed action, make a proposal to
weaken or modify the allegedly problematic restriction or limitation in the
agreement, and explain its rationale. The other party shall promptly evaluate
whether the restrictions or limitations in the agreement need to be weakened or
modified in order to permit such action and shall notify the requesting party of
its conclusions. Should the parties disagree then they shall meet to resolve
their differences. To the extent the parties agree, they shall enter into a
waiver or amendment of problematic provisions of the agreement to weaken or
modify such restrictions or limitations under the circumstances to comply with
applicable law and to permit the desired action.

        (b)     SEVERABILITY. In the event that any provision of this Agreement
is held in any jurisdiction to be invalid, prohibited or unenforceable for any
reason, such provision, as to such jurisdiction, shall be ineffective, without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
Notwithstanding the foregoing, if such provision could be more narrowly drawn so
as not to be invalid, prohibited or unenforceable in such jurisdiction while, at
the same time, maintaining the intent of the parties, it shall, as to such
jurisdiction, be so narrowly drawn without invalidating the remaining provisions
of this Agreement or affecting the validity or enforceability of such provision
in any other jurisdiction.

13.3    AMENDMENTS AND WAIVERS. The failure of either party to enforce a
provision hereof or to insist upon compliance with any provision of this
Agreement shall not constitute a waiver of that provision or excuse a similar
subsequent failure to perform any such provision by the other party. This
Agreement may be amended and the observance of any provision of this Agreement

                                       16
<PAGE>

may be waived (either generally or in any particular instance and either
retroactively or prospectively) only with the signed written consent of both
parties.

13.4    BINDING EFFECT; ASSIGNMENT. Rights granted by this Agreement shall inure
to the benefit of and obligations under this Agreement shall be binding upon the
parties hereto and their respective permitted successors and assigns. Rights
granted by this Agreement may not be assigned, and obligations under this
Agreement may not be delegated, by either party without the prior written
consent of the other party, which shall not be unreasonably withheld and which
consent or refusal shall be given within ten days. Examples of reasons for
withholding consent would include but not be limited to DTC being concerned that
the assignee (i) will not produce quality OMCs in quantities at least equal to
those of Licensee, (ii) lacks financial wherewithal, or (iii) is a competitor of
DTC. For these purposes, an assignment will be deemed to occur if there is a
successor of all or substantially all of a party's assets, voting stock or
business to which this Agreement relates or a change of control of a party .

13.5    NOTICE. Notices hereunder shall be deemed to have been sufficiently
given when made via certified mail or courier delivery, and if given to DTC,
addressed to:

            Drexler Technology Corporation
            2644 Bayshore Parkway
            Mountain View, California 94043
            Attention: Chief Financial Officer

Or if given to Licensee, addressed to:

            Global Investments Group Ltd.
            Level 27 Price Waterhouse Coopers Tower
            188 Quay Street
            Auckland 1001, New Zealand
            Attention: President

In the event either party provides written notice of a change in the foregoing
address, the notice shall be addressed instead to the new address.

13.6    ENGLISH LANGUAGE. The original copies of this Agreement and all
communications under this Agreement shall be in the English language and shall
govern any interpretation of this Agreement.

13.7    RIGHTS OF THIRD PARTIES. Nothing in this Agreement shall create or
confer any rights or other benefits whether pursuant to the Contracts (Rights of
Third parties) Act 1999 or otherwise in favour of any person other than the
parties to this Agreement.

13.8    TIME OF THE ESSENCE. Any times, dates or periods specified in the
agreement may be extended or altered by agreement in writing between the
parties. However, time shall not be of the essence except where it is expressly
stated to apply.

13.9    RELATIONSHIP. Nothing in this Agreement shall be deemed to create a
partnership or joint venture or contract of employment of any kind between the
parties nor shall it be deemed to

                                       17
<PAGE>

grant any authority not expressly set out in this Agreement or create any agency
between the parties.

13.10   GOVERNING LAW. This Agreement and the performance thereof shall be
construed, interpreted, applied, and governed in all respects in accordance with
the laws of England without regard to the United Nations Convention on Contracts
for the International Sale of Goods.

13.11   ARBITRATION. Any dispute, controversy or claim concerning or relating to
this Agreement (a "Dispute") shall be resolved by final and binding arbitration
under the Rules of the London Court of International Arbitration in force as of
the Effective Date. The tribunal shall consist of one arbitrator who shall be
independent, neutral and impartial. If the parties do not agree on the
appointment of the Arbitrator, the London Court of International Arbitration
shall determine the arbitrator. The place of arbitration shall be London. The
language of the arbitration shall be English. Judgment on an arbitral award may
be entered by any court of competent jurisdiction, or application may be made to
such a court for judicial acceptance of the award and any appropriate order
including enforcement. The dispute resolution proceedings contemplated by this
provision shall be as confidential and private as permitted by law.
Notwithstanding any of the foregoing, either party may request injunctive and/or
equitable relief either from the arbitrator or from a court of competent
jurisdiction in order to protect the rights or property of the party, including
for breach of the confidentiality obligations under Section 8.

                  [Remainder of Page Left Intentionally Blank]

                                       18
<PAGE>

13.12   HEADINGS AND INTERPRETATION. Headings and captions are for convenience
only and are not to be used in the interpretation of this Agreement. The terms
"include" and "including" shall be construed as "without limitation" for
purposes of this Agreement.

        IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their duly authorized officers as of the date first
above written.

DREXLER TECHNOLOGY CORPORATION      LICENSEE
                                    GLOBAL INVESTMENTS GROUP

/s/ Richard M. Haddock              /s/ Anton Huhar
---------------------------------   --------------------------------------------
Signature                           Signature

Richard M. Haddock                  Anton Huhar
---------------------------------   --------------------------------------------
Printed Name                        Printed Name

CO-CEO
Drexler Technology Corporation      President of GIG
---------------------------------   --------------------------------------------
Title                               Title

Date Signed: May 26, 2004                         Date Signed: May 26, 2004

Effective Date: April 3, 2004

License Agreement reviewed by:

Joze KOZMUS

President

Prevent d.

                                       19
<PAGE>
                                  ATTACHMENT A

                                "COUNTRY LIST A"

GROUP 1 COUNTRIES
Five Year Exclusive Countries with No Performance
Goals
(Exclusivity after 5 years shall continue so long as a minimum
of [   ]* in cards sales annually are under contract)

Country                                                      Population
                                                             M
------------------------------------------------------------ -------------
[   ]*                                                       [   ]*
------------------------------------------------------------ -------------

GROUP 2 COUNTRIES
------------------------------------------------------------ -------------
Five Year Exclusive Countries with Performance Goals
------------------------------------------------------------ -------------
Country                                                      Population
                                                             M
------------------------------------------------------------ -------------
[   ]*                                                       [   ]*
------------------------------------------------------------ -------------
TOTAL GROUP POPULATION                                       [   ]*
------------------------------------------------------------ -------------

<TABLE>
<CAPTION>
<S>                                                                           <C>

GROUP 1 AND GROUP 2 COUNTRIES TOTAL POPULATION                  [ ]*             M

Performance Goals to Maintain Group 2 Country

                                                                Total cards     Percentage
                                                                sales in        Market
                                                                Group 2         Penetration
                                                                Countries       in Group 2
                                                                Unit Cards      Countries
                                                                Sold/Period
Within [ ]* calendar months of contract effective date          [ ]*            [ ]*

Between [ ]* calendar months of contract effective date         [ ]*            [ ]*

Between [ ]* calendar months of contract effective date         [ ]*            [ ]*

Between[ ]*calendar months of contract effective date           [ ]*            [ ]*

Between [ ]* calendar months of contract effective date         [ ]*            [ ]*

                  Every [ ]**month period thereafter            [ ]*            [ ]*

----------------------------------------------------------------------------------------------
</TABLE>

-----------------------------
* Material omitted pursuant to a confidential request. The omitted material has
  been filed separately with the Securities and Exchange Commission. Note:
  Group 1 and 2 countries are select Eastern European countries.

                                      A-1
<PAGE>

     Non-exclusive countries

--------------------------------------------------------------------------------
GROUP 3 COUNTRIES
--------------------------------------------------------------------------------
Non-Exclusive Right to-Sell Country List                  Population (M)
--------------------------------------------------------------------------------
[ ]*                                                      [ ]*
--------------------------------------------------------------------------------
TOTAL GROUP 3 COUNTRIES                                           [ ]*    M
--------------------------------------------------------------------------------

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

* Material omitted pursuant to a confidential request. The omitted material has
  been filed separately with the Securities and Exchange Commission. Note:
  Group 3 countries are select Western European countries.

                                      A-2

<PAGE>

NO SALES RIGHT COUNTRIES

    ----------------------------------------------------------------------------
    GROUP 4 COUNTRIES
    ----------------------------------------------------------------------------
    No Right-to-Sell is granted in the
    ----------------------------------------------------------------------------
    rest of worled countries not listed in Groups 1, 2 or 3 above,
    ----------------------------------------------------------------------------
    wihtout written authorization from LSC.
    ----------------------------------------------------------------------------

                                      A-3

<PAGE>

                                  ATTACHMENT B

                         PRODUCTION START UP AGREEMENTS

All equipment, training, inspection, and facilities requirements, including
payment and acceptance procedures, are contained in three (3) attached Equipment
Sales Agreements, as follows:

           1)  "Lamination System Equipment Sale Agreement"

                    Covers Process [ ] *

           2)  "Die Cut and Finish Equipment Sale Agreement"

                    Covers Process [ ]*

           3)  "Optical Media Equipment Sale Agreement"

                    Covers Process [ ]*

The equipment subject to all three Equipment Sale Agreements (Attachments B-1,
B-2, and B-3) functions together as a whole within the Licensee Facilities. The
target date for the delivery, installation, test, and Licensee acceptance for
all such equipment is May 1, 2005.

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

* Material omitted pursuant to a confidential treatment request. The omitted
  material has been filed separately with the Securities and Exchange
  Commission.

                                      B-1
<PAGE>

<TABLE>
<CAPTION>
<S>                                                                           <C>

Equip Sale                                Budgetary Numbers- subject to change
Agreement      Process Step                                                                Est Price       Est Installed

Media              [ ]*       [ ]*                                                    1  $    172,500      $     207,000

Media              [ ]*       [ ]*                                                    1  $     86,250      $     103,500

Media              [ ]*       [ ]*                                                    2  $    345,000      $     414,000

Media              [ ]*       [ ]*                                                    2  $    460,000      $     552,000

Media              [ ]*       [ ]*                                                    1  $    862,500      $   1,035,000

Media              [ ]*       [ ]*                                                    1  $    230,000      $     276,000

                                                  Total Equip Sale "Media" =             $  2,156,250      $   2,587,500

Laminator          [ ]*       [ ]*                                                    1  $  3,105,000      $   3,726,000

Die Cut/Seal       [ ]*       [ ]*                                                    1  $  1,725,000      $   2,070,000

Die Cut/Seal       [ ]*       [ ]*                                                    4  $    690,000      $     828,000

Die Cut/Seal       [ ]*       [ ]*                                                   20  $    230,000      $     276,000

Die Cut/Seal       [ ]*       [ ]*                                                    2  $    805,000      $     966,000

Die Cut/Seal       [ ]*       [ ]*                                                    1  $  1,150,000      $   1,380,000

Die Cut/Seal       [ ]*       [ ]*                                                    1  $    287,500      $     345,000

Die Cut/Seal       [ ]*       [ ]*                                                    1  $    230,000      $     276,000

                                              Total Equip Sale "Die Cut/Seal" =          $  5,117,500      $   6,141,000

                                                                                         $ 10,378,750      $  12,454,500
</TABLE>

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

* Material omitted pursuant to a confidential treatment request. The omitted
  material has been filed separately with the Securities and Exchange
  Commission.

                                      B-2
<PAGE>
<TABLE>
<CAPTION>
<S>                                                                             <C>

Diagram 1

Process Step Flow

                                                        [PICTURE]

     Step 0:                       Step 1:                                Step 2:                             Step 3:

    Incoming                  Media Production                       First Lamination                   Print card artwork
      Raw                                                                                                       on
    Materials         Conversion from Film to Optical          Conversion from Optical Media              First Pass Roll
                                   Media                      Tape to laminated media between
                                                            clear polycarbonate plastic in roll
      Film                                                        form using Electron Beam             (Using CETIS Flexo roll
    Plastics                    2000 M. rolls                                                            machine if possible)
   Adhesives
      Inks
Process Chemistry

     Step 7:                       Step 6:                                Step 5:                             Step 4:

    Quality                    Card Finishing                            Die Cut                      Second Pass Lamination
Control, Verify                                                     Second Pass into              to add white Polycarbonate to
 clean, secure                 Add card edge                              Cards                         printed First Pass
   packaging                    seal, serial                                                    brings card to ISO specifications
                                 numbering
                                    etc.                                                         (using combo coater/laminator)
</TABLE>

                                                           B-3
<PAGE>

                                 ATTACHMENT B-1

                            EQUIPMENT SALE AGREEMENT

        This EQUIPMENT SALE AGREEMENT (the "Agreement") is entered into as of
_________, 2004 ("Effective Date") by and between LaserCard Systems Corporation,
a Delaware corporation with principal offices at 2644 Bayshore Parkway, Mountain
View, CA 94043 ("LaserCard"), and Global Investments Group Ltd, a corporation
with principal offices at level 27, Price Waterhouse Coopers Tower, 188 Quay
Street, Auckland 1001, New Zealand ("GIG").

        1.      EQUIPMENT SALE. LaserCard agrees to sell to GIG, and GIG agrees
to purchase from LaserCard, on the terms and conditions set forth in this
Agreement, the coater/laminator system listed on Exhibit A (the "Equipment").
GIG acknowledges and agrees that LaserCard originally ordered the Equipment from
the manufacturer of the Equipment ("Manufacturer") for LaserCard's use as
LaserCard's next generation production system. Consequently, LaserCard needs to
order a replacement of the system ("Replacement System") from the Manufacturer,
with an estimated delivery date nine to eleven months following the date of
LaserCard's order. GIG acknowledges and agrees that LaserCard may use the
Equipment prior to LaserCard's receipt of the Replacement System. The Equipment
is scheduled to be delivered by Manufacturer to LaserCard in ________________,
2004. The parties anticipate that the Equipment will be shipped from LaserCard's
facilities in Mountain View, California, to GIG Facilities (as defined in
Section 2.3 below) within 10 months from LaserCard's receipt of the Second
Payment (as defined in Exhibit C).

        2.      INSTALLATION AND TRAINING AT LASERCARD FACILITIES.

                2.1     LaserCard will be responsible for installing the
Equipment at LaserCard's Mountain View facilities designated above ("LaserCard
Facilities") and for testing the Equipment so that, upon installation at the
LaserCard Facilities, the Equipment will meet the Acceptance Test described in
Exhibit B attached hereto ("Acceptance Test"). LaserCard will provide to GIG
written verification that the Equipment has met the Acceptance Test ("Initial
Proof of Performance"). LaserCard will use commercially reasonable efforts to
test the Equipment until the Equipment passes the Acceptance Test.

                2.2     GIG may designate up to three employees ("GIG
Employees") to participate in the installation and testing of the Equipment at
LaserCard Facilities and receive initial training with respect to the Equipment
("Initial Training"). GIG will be solely responsible for all out-of-pocket costs
and expenses associated with such participation, including, without limitation,
travel, lodging, meal and local transportation expenses. GIG shall require that
the GIG Employees, while on LaserCard's premises, observe LaserCard's rules and
policies relating to the security of, access to or use of such premises. The GIG
Employees shall not be permitted to remove any property of LaserCard or any
third party from LaserCard's premises without the prior written consent of
LaserCard. GIG will be responsible for all acts or omissions of the GIG
Employees while on LaserCard's premises, including, without limitation, acts or
omissions which result in damage to property, or injury or death to individuals.

                                      B-4
<PAGE>

                2.3     After the Equipment has successfully passed the
Acceptance Test and LaserCard receives the Replacement System from the
Manufacturer, LaserCard will disassemble, un-install, package and ship the
Equipment to GIG's facilities in Slovenia ("GIG Facilities"), subject to the
terms in Section 3 below. GIG will be solely responsible for all costs and
expenses incurred by LaserCard in the course of performing LaserCard's
obligations under this Section 2.3, and GIG will pay all such costs and expenses
invoiced by LaserCard pursuant to Section 5 below.

        3.      DELIVERY.

                3.1     LaserCard will deliver the Equipment to GIG Facilities,
FCA LaserCard Facilities (Incoterms 2000). GIG shall be responsible for all
costs of packaging, shipping and transportation by air, insurance, warehousing,
importing and other charges and costs associated with shipment of the Equipment
to GIG Facilities.

                3.2     In all cases, LaserCard's title to the Equipment
(excluding title to software and to intellectual property rights therein), and
the risk of loss or damage, shall pass to GIG upon delivery to GIG's freight
forwarder. LaserCard assumes no responsibility for any delay, breakage or damage
to the Equipment after such delivery. GIG shall obtain reasonable insurance
against loss or damage occurring after such delivery.

        4.      INSTALLATION AND TRAINING AT GIG FACILITIES.

                4.1     LaserCard's representatives will provide commercially
reasonable assistance to GIG with respect to GIG's installation of the Equipment
at the GIG Facilities ("Installation Support"). LaserCard will provide the
Installation Support to GIG's personnel responsible for installing and testing
the Equipment at GIG Facilities, for up to thirty (30) eight-hour days. GIG will
be solely responsible for ensuring that the GIG Facilities where the Equipment
will be installed conform in all material respects to LaserCard's
specifications, including, without limitation, with respect to environmental,
facility, and power requirements. LaserCard will provide to GIG written
verification that the Equipment installed at the GIG Facilities meets the
Acceptance Test ("Final Proof of Performance").

                4.2     LaserCard will provide commercially reasonable training
to GIG's technical personnel responsible for the operation and maintenance of
the Equipment, at GIG Facilities. LaserCard will provide the Training at the
time that LaserCard is at the GIG Facilities to provide the Installation
Support, for up to fifteen (15 ) eight- hour days.

                4.3     LaserCard will be solely responsible for all out-of
pocket expenses associated with the Installation Support and Final Training at
GIG Facilities, including, without limitation, travel, lodging, meal and local
transportation expenses.

                4.4     In no event under 4.1 and 4.2 above will LaserCard spend
more than thirty (30) working days at GIG Facilities for the Installation
Support and Final Training. Any additional support and training requested by GIG
are subject to LaserCard's approval, and LaserCard's then-current terms and
conditions for such support and training, including, without limitation, fees.
LaserCard's current fees for support and training are as follows: operator at

                                      B-5
<PAGE>

$500/day, technician at $700/day, engineer at $900/day, direct travel expenses
additional, at cost. The foregoing fees will be valid for 12 months following
the Effective Date and are inclusive of all taxes.

        5.      PURCHASE PRICE, FEES AND PAYMENT.

                5.1     Purchase Price. As consideration for the sale of the
Equipment and for LaserCard's Installation, Installation Support, Initial and
Final Training, GIG shall pay to LaserCard the sum of U.S. $_____________
("Purchase Price") pursuant to the payment schedule set forth in Exhibit C
("Payment Schedule").

                5.2     Taxes. All prices herein are inclusive of applicable
U.S. federal, state, and local US taxes only and are exclusive of all other
taxes, duties and tariffs not based on GIG's net income, including, but not
limited to, sales, use, transfer, value-added, privilege or property taxes,
import and export duties and tariffs or amounts levied in lieu thereof
(collectively, "Taxes"). GIG shall pay any and all Taxes, whether now or
hereafter imposed, not imposed by an entity of the United States of America. GIG
shall comply with all laws and regulations related to such Taxes, including
without limitation, paying any interest or penalties relating to such Taxes.

                5.3     Invoice and Payment. LaserCard shall invoice GIG for the
Purchase Price pursuant to the Payment Schedule and other charges due under this
Agreement pursuant to Section 2.3 and Section 3.1, and GIG shall pay all
invoiced amounts upon receipt of the invoice. All late payments shall bear
interest at the lesser of one and one half percent (1.5%) per month, compounded
monthly, or the highest rate permitted by law. All amounts due under this
Agreement are stated in, and GIG shall pay in, United States dollars. All
amounts paid by GIG to LaserCard under this Agreement are not refundable.

        6.      WARRANTIES; DISCLAIMER.

                6.1     LaserCard will provide the services contemplated under
this Agreement in a professional and workmanlike manner. LaserCard further
represents that the lamination equipment will be capable, at time of acceptance
by GIG, of producing product equal to or better than that produced on similar
equipment in LaserCard's plant.

                6.2     LaserCard will use commercially reasonable efforts to
transfer to GIG all applicable warranties and intellectual property indemnity
(if any) that LaserCard receives from the Manufacturer with respect to the
Equipment and that LaserCard is allowed to transfer ("Manufacturer Warranties").
Manufacturer Warranties (if any) will be described in Exhibit E attached hereto
no later than March 26, 2004. In the event that Manufacturers warranties cannot
be obtained, LaserCard will cover the costs of replacement parts and labor to
install, for one year from GIG's acceptance of the laminator system, up to a
maximum of 5% of the purchase price of the laminator system.

                6.3     EXCEPT AS SET FORTH IN THIS SECTION 6, THE EQUIPMENT AND
THE SERVICES ARE PROVIDED "AS IS," AND "AS AVAILABLE", AND LASERCARD MAKES, AND
GIG RECEIVES, NO ADDITIONAL WARRANTIES.

                                      B-6
<PAGE>

LASERCARD HEREBY EXPRESSLY DISCLAIMS ANY AND ALL OTHER WARRANTIES OF ANY KIND OR
NATURE CONCERNING THE EQUIPMENT AND SERVICES PROVIDED UNDER THIS AGREEMENT,
WHETHER EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR AGAINST INFRINGEMENT OF
THIRD PARTY RIGHTS.

        7.      CONFIDENTIALITY.

                7.1     During the term of this Agreement, each party (the
"Receiving Party") may be provided with or otherwise learn confidential and/or
proprietary information of the other party (the "Disclosing Party") (including
without limitation certain information and materials concerning the Disclosing
Party's business, plans, technology, and products) that is of substantial value
to the Disclosing Party, which is identified as confidential at the time of
disclosure or which ought in good faith to be considered confidential based on
the nature of the information or the circumstances surrounding disclosure
("Confidential Information"). Notwithstanding the foregoing, with respect to
LaserCard, information disclosed by GIG shall not be considered Confidential
Information hereunder unless the receipt of such information has been approved
in writing by Chris Dyball following disclosure of a non-confidential summary of
the information.

                7.2     All Confidential Information remains the property of the
Disclosing Party. The Receiving Party may disclose the Confidential Information
of the Disclosing Party only to its employees and contractors who need to know
the Confidential Information for purposes permitted under this Agreement and who
are bound by written confidentiality agreements with terms at least as
restrictive as those provided in this Agreement. The Receiving Party will not
use the Confidential Information without the Disclosing Party's prior written
consent except in exercising its rights or performing its obligations under this
Agreement. The Receiving Party will take measures to maintain the
confidentiality of the Confidential Information similar to those measures the
Receiving Party uses to maintain the confidentiality of its own confidential
information of like importance but in no event less than commercially reasonable
measures. The Receiving Party will give immediate notice to the Disclosing Party
of any unauthorized use or disclosure of the Confidential Information and agrees
to assist the Disclosing Party in remedying such unauthorized use or disclosure.

                7.3     The confidentiality obligations do not extend to
Confidential Information which (i) becomes publicly available without the fault
of the Receiving Party; (ii) is rightfully obtained by the Receiving Party from
a third party with the right to transfer such information without obligation of
confidentiality; (iii) is independently developed by the Receiving Party without
reference to or use of the Disclosing Party's Confidential Information; or (iv)
was lawfully in the possession of the Receiving Party at the time of disclosure,
without restriction on disclosure. The Receiving Party will have the burden of
proving the existence of any condition in this Section 7.3.

                                      B-7
<PAGE>

        8.      TERM AND TERMINATION.

                8.1     Term. The term of the Agreement will begin on the
Effective Date and unless terminated earlier in accordance with the terms of
this Agreement, will continue until completion of the Installation Support and
Training in the GIG Facilities.

                8.2     Termination for Cause. Either party may terminate this
Agreement immediately, upon written notice to the other party, (i) upon the
other party's material breach of this Agreement, not cured within 30 days (10
days in the event of failure to pay) following receipt of written notice from
the non-breaching party describing the breach; (ii) upon the institution by or
against the other party of insolvency, receivership or bankruptcy proceedings or
any other proceedings for the settlement of the other party's debts; (iii) upon
the other party's making an assignment for the benefit of creditors; or (iv)
upon the other's dissolution or ceasing to conduct business in the normal
course.

                8.3     Termination for Convenience. GIG may terminate this
Agreement for its convenience immediately upon written notice to LaserCard at
any time prior to making the Second Payment (as defined in Exhibit C) but not
more than ten days following the due date of the Second Payment. GIG may apply
the amount of the First Payment to the purchase of other LaserCard products or
services, provided that GIG purchases such other products or services within two
(2) years following the effective date of termination. If GIG fails to purchase
such other LaserCard products or services within such timeframe, or the amount
of LaserCard products or services purchased by GIG does not amount to the total
value of the First Payment, then the amount of the First Payment or any balance
thereof shall irrevocably revert to LaserCard.

                8.4     Effect of Termination. Upon any termination of this
Agreement, all amounts owed to LaserCard by GIG become immediately due and
payable within five (5) days of the effective date of termination.
Notwithstanding the foregoing, the parties agree that GIG shall not be obligated
to pay the Second Payment to LaserCard if GIG terminates the Agreement for its
convenience pursuant to Section 8.3 above, or LaserCard terminates this
Agreement for cause pursuant to Section 8.2 above based on GIG's failure to pay
the Second Payment as provided herein. The provisions of Sections 3, 5, 6, 7,
8.4, 9, 10 and 11 shall survive the expiration or termination of this Agreement
for any reason.

        9.      LIMITATION OF LIABILITY.

                9.1     EXCEPT FOR EITHER PARTY'S BREACH OF SECTION 7
(CONFIDENTIALITY) AND FOR GIG'S COVENANT IN THE LAST SENTENCE OF SECTION 2.2, IN
NO EVENT WILL EITHER PARTY BE LIABLE FOR ANY COSTS OF PROCUREMENT OF SUBSTITUTE
GOODS OR SERVICES OR FOR INDIRECT, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES
OF ANY KIND UNDER THIS AGREEMENT.

                9.2     IN NO EVENT WILL LASERCARD BE LIABLE UNDER THIS
AGREEMENT FOR DAMAGES EXCEEDING THE TOTAL AMOUNT PAID BY GIG TO LASERCARD UNDER
THIS AGREEMENT.

                                      B-8
<PAGE>

        10.     MANUFACTURING AND DISTRIBUTION AGREEMENT.

                10.1    Within Three (3) months following the Effective Date,
the parties agree to negotiate in good faith the terms of an agreement governing
the manufacture by GIG of LaserCard's optical memory cards and distribution of
such cards to certain markets, subject to mutually agreed upon terms and
conditions ("Manufacturing and Distribution Agreement"). The Manufacturing and
Distribution Agreement will provide, among other things, that GIG may only use
the Equipment to manufacture and supply optical memory cards to the mutually
agreed upon markets..

                10.2    GIG acknowledges and agrees that GIG shall not use the
Equipment to manufacture optical memory cards (i) at any time prior to the
parties' entering into the Manufacturing and Distribution Agreement, or (ii) if
the parties fail to enter into the Manufacturing and Distribution Agreement as
provided herein. In the event that the parties do not enter into the
Manufacturing and Distribution Agreement, GIG acknowledges and agrees that GIG
(or any purchaser of the Equipment) may not use the Equipment, directly or
indirectly, for any use other than the manufacture of non-optical memory cards.

        11.     GENERAL.

                11.1    Notices. Notices under this Agreement must be in writing
and will be deemed given when delivered personally, or by email or facsimile
(with confirmation of receipt) or by conventional mail (registered or certified,
postage prepaid with return receipt requested). Notices will be addressed at the
address set forth above, but each party may change the address by written notice
in accordance with this paragraph.

                11.2    Assignment. This Agreement will be binding upon and
inure to the benefit of the parties, their successors and permitted assigns. GIG
may not assign, transfer or delegate this Agreement, or any right or obligations
hereunder, without the prior written consent of LaserCard. Any attempted
assignment in violation of this Section will be void

                11.3    Force Majeure. LaserCard is not responsible for any
delays or failures to perform under this Agreement caused by or resulting from
any act, omission or condition beyond LaserCard's reasonable control, whether or
not foreseeable or identified, including without limitation acts of God,
strikes, lockouts, riots, acts of war, governmental regulations, fire, power
failure, earthquakes, severe weather, floods or other natural disaster or GIG's,
or any third party's actions, hardware, software or communications equipment or
facilities.

                11.4    Governing Law. This Agreement and the performance
thereof shall be construed, interpreted, applied, and governed in all respects
in accordance with the laws of England without regard to the United Nations
Convention on Contracts for the International Sale of Goods.

                11.5    Arbitration. Any dispute, controversy or claim
concerning or relating to this Agreement (a "Dispute") shall be resolved by
final and binding arbitration under the Rules of the London Court of
International Arbitration in force as of the Effective Date. The tribunal shall
consist of one arbitrator who shall be independent, neutral and impartial. If
the parties do

                                      B-9
<PAGE>

not agree on the appointment of the Arbitrator, the London Court of
International Arbitration shall determine the arbitrator. The place of
arbitration shall be London. The language of the arbitration shall be English.
Judgment on an arbitral award may be entered by any court of competent
jurisdiction, or application may be made to such a court for judicial acceptance
of the award and any appropriate order including enforcement. The dispute
resolution proceedings contemplated by this provision shall be as confidential
and private as permitted by law. Notwithstanding any of the foregoing, either
party may request injunctive and/or equitable relief either from the arbitrator
or from a court of competent jurisdiction in order to protect the rights or
property of the party, including for breach of the confidentiality obligations
under Section 8.

                11.6    Entire Agreement. This Agreement and its exhibits
constitute the entire agreement of the parties, and supersedes any and all prior
or contemporaneous agreements (whether oral or written) between the parties with
respect to the subject matter of this Agreement. Any different or additional
term on any purchase order or other correspondence provided by GIG will have no
force or effect and are not binding on LaserCard. Except as otherwise expressly
provided herein, this Agreement may be modified only in writing and signed by an
authorized representative of each party.

                11.7    General Provisions. If any provision of this Agreement
is held invalid, illegal or unenforceable, such provision will be reformed only
to the extent necessary and in such a manner to effect the original intention of
the parties; all remaining provisions continue in full force and effect. Any
failure by either party to strictly enforce any provision of this Agreement will
not operate as a waiver of that provision or any subsequent default or breach of
the same or a different kind. The parties are independent contractors. Nothing
contained in this Agreement is intended or is to be construed to create a
partnership, franchise, joint venture, agency or legal affiliate relationship
between LaserCard or GIG or any relationship other than independent contractors.

                                      B-10
<PAGE>

        IN WITNESS WHEREOF, the duly authorized representatives of each party
have executed this Agreement as of the Effective Date.

            By signing below, GIG acknowledges that it has reviewed, understands
and agrees with Section 10.2 above.

LASERCARD SYSTEMS CORPORATION                GLOBAL INVESTMENTS GROUP LTD.

By: /s/ Richard M. Haddock                   By: /s/ Anton Kuhar
    ----------------------------------           -------------------------------
    /s/ Christopher J. Dyball
    ----------------------------------

Print Name  Richard M. Haddock               Print Name  Anton Kuhar
            ----------------------------------           -----------------------
            Christopher J. Dyball
            ----------------------------------

Title  CO-CEO                                Title  President
       ----------------------------------           ----------------------------
       Drexler Technology Corporation

Date   March 18, 2004                        Date   March 18, 2004
       ----------------------------------           ----------------------------

                                      B-11
<PAGE>

                                    EXHIBIT A

                                    EQUIPMENT

                                      B-12
<PAGE>

                                    EXHIBIT B

                                 ACCEPTANCE TEST

                                      B-13
<PAGE>

                                    EXHIBIT C

                                 PURCHASE PRICE

GIG shall pay the Purchase Price to LaserCard, pursuant to the following payment
schedule:

----------------- --------------- ----------------------------------------------
     Payment           AMOUNT                    PAYMENT SCHEDULE
----------------- --------------- ----------------------------------------------

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

                                      B-14
<PAGE>

                                 ATTACHMENT B-2

    EQUIPMENT SALE AGREEMENT - "DIE CUT AND FINISH EQUIPMENT SALE AGREEMENT"

                                      B-15
<PAGE>

                                 ATTACHMENT B-3

       EQUIPMENT SALE AGREEMENT - "OPTICAL MEDIA EQUIPMENT SALE AGREEMENT"

                                      B-16
<PAGE>

                                  ATTACHMENT C
                      STANDARD TERMS AND CONDITIONS OF SALE

1. Controlling Document. The acceptance of Purchaser's order is expressly made
conditional on Purchaser's assent to the terms and conditions set forth herein,
and LaserCard Systems Corporation (Seller) agrees to furnish the goods covered
thereby only upon these terms and conditions. To the extent this order is
covered by a prior-written contract (the "Contract") between the parties, it is
accepted on the terms and conditions in that Contract if they conflict with
those below. The terms and conditions of this instrument shall apply where they
do not conflict with the Contract, where the Contract is silent as to the
subject matter, and to the extent this order is not covered by a prior written
contract between the parties. No term or condition of Purchaser's order
inconsistent with the terms and conditions hereof, and no term, condition,
statement or representation not contained herein, shall be binding on Seller as
a warranty or otherwise. Unless Purchaser shall notify Seller in writing to the
contrary as soon as practicable after receipt hereof, acceptance of the terms
and conditions hereof shall be indicated and, in the absence of such
notification, the sale and shipment by Seller of the goods shall be conclusively
deemed to be subject to the terms and conditions hereof. No waiver, alteration,
or modification of any of the provisions hereof shall be binding on Seller
unless made in writing signed by an officer of Seller.

2. Prices and Taxes. Prices shown are for delivery of goods F.O.B. Seller's
plant. Any manufacturer's tax, sales tax, use tax, excise tax, custom,
inspection or testing fee, or any other tax, fee or charge of any nature
whatsoever imposed by governmental authority, on or measured by the transaction
between Seller and Purchaser shall be paid by Purchaser in addition to the
prices quoted or invoiced. In the event Seller is required to pay any such tax,
fee, or charge, Purchaser shall within ten (10) business days reimburse Seller
therefor.

3. Terms and Methods of Payment. Payment shall be made in U.S. dollars by, at
Seller's election: Cash with Order (in whole or part), C.O.D., direct wire
transfer of funds to Seller's bank, Sight Draft, Irrevocable Letter of Credit,
with all costs of collection to be borne by Purchaser, or net thirty (30) days
from date of invoice. Delinquent payments shall be subject to a carrying charge
of 1.5 percent per month or such lesser amount permitted by law. Where Seller
has extended credit to Purchaser, such credit may be changed or withdrawn by
Seller at any time. Each shipment shall be considered a separate and independent
transaction and payment therefor will be made accordingly. If shipment is
delayed by Purchaser, Seller shall invoice Purchaser as of the date Seller is
prepared to make shipment, and Purchaser shall be liable for payment of such
invoice according to the payment terms in effect. If in the judgment of Seller,
the financial condition of Purchaser at any time does not justify continuance of
production or shipment upon the terms of payment specified, Seller may require
full or partial payment in advance, and, in the event of bankruptcy or
insolvency of Purchaser, or in the event any proceeding is brought by or against
Purchaser under the Bankruptcy or Insolvency Laws, Seller shall be entitled, but
not required to cancel any order of the Purchaser then outstanding and shall
receive reimbursement from the Purchaser for its cost of cancellation. Should
legal action be instituted to recover any sum due from Purchaser, Seller shall
be entitled to recover costs of such action including reasonable attorneys'
fees.

4. Security Interest. Seller shall retain a security interest in the goods (and
replacements) delivered hereunder and in the proceeds from the sale or
disposition thereof, until Purchaser has made payment in full for such goods.
Purchaser shall, upon request by Seller, execute all documents (such as
California's UCC-1 Financing Statement) necessary to perfect such security
interest. Seller has the right, upon demand, to repossess goods delivered
hereunder if Purchaser fails to make timely payment.

5. Delivery and Delay. Delivery of goods to a carrier at Seller's plant or other
loading point shall constitute delivery to Purchaser. All risk of loss or damage
of goods in transit is borne by Purchaser. Seller reserves the right to make
partial deliveries, and unless otherwise specifically agreed to, all such
partial deliveries shall be separately invoiced and paid for when due per
invoice without regard to following deliveries. Delay in delivery of any
installment shall not relieve Purchaser of his obligations to accept remaining
deliveries. Claims for shortages or errors in delivery must be made in writing
to Seller within fourteen (14) days after receipt of shipment. Failure to give
such notice shall constitute unqualified acceptance and a waiver of all such
claims by Purchaser. Seller shall not be liable for any loss or damage as a
result of any delay due to any cause beyond Seller's control: including, without
limitation, an Act of God, act of Purchaser, fire, theft, accident, flood,
earthquake, slowdown, strike, riot, embargo, governmental act, regulation or
request, delays of common carriers, inability to obtain necessary labor,
materials or manufacturing facilities, or other similar causes. When in the
opinion of Seller there is a period of shortages of supply of its products for
any reason, Seller may allocate its available supply among any or all of its
various customers upon such basis as it shall deem fair and practicable, with no
liability on its part for failure to deliver the quantity or any portion therein
specified. Seller shall not be liable for any special, contingent, indirect or
consequential damages (including anticipated profits) resulting from delay.

                                       C-1
<PAGE>

6. Inspection. Purchaser shall examine all goods promptly upon receipt thereof.
Within fourteen (14) days of such receipt, Purchaser shall notify Seller in
writing of all claimed shortages and defects and, if a rejection is intended, a
specification of the grounds therefor. Otherwise, the goods will be deemed
accepted as of the date of shipment.

7. Limited Warranty. Except as provided in any warranties applicable to
Purchaser on or in the package containing the goods and which apply to specific
elements of the goods (which warranties take precedence over the following
warranty), Seller warrants articles of its manufacture against defective
materials or workmanship for a period of three (3) months from date of shipment
to the Purchaser. The liability of Seller under this warranty is limited, at
Seller's option, solely to repair or replacement with equivalent articles, or an
appropriate credit adjustment not to exceed the sales price to Purchaser,
provided that (a) Seller is promptly notified in writing by Purchaser upon
discovery of defects, (b) Purchaser has obtained a Return Materials
Authorization Number from Seller which RMA Seller agrees to provide Purchaser
promptly upon request, (c) the defective articles are returned to Seller,
transportation charges prepaid by Purchaser, and (d) Seller's examination of
such article discloses to its satisfaction that defects were not caused by
negligence, misuse, improper installation, accident or unauthorized repair or
alteration. The original warranty period of any article that has been repaired
or replaced by Seller shall not thereby be extended. The warranty set forth in
this Section 7 constitutes the sole and exclusive remedy against Seller for the
furnishing of nonconforming or defective goods.

THIS WARRANTY IS EXPRESSED IN LIEU OF ALL OTHER WARRANTIES, EXPRESSED OR
IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR A
PARTICULAR PURPOSE, AND OF ALL OTHER OBLIGATIONS OR LIABILITIES ON SELLER'S
PART. SELLER NEITHER ASSUMES NOR AUTHORIZES ANY OTHER PERSON TO ASSUME FOR
SELLER ANY OTHER LIABILITIES.

8. Limitation of Liability. Seller shall in no event be liable for any special,
contingent, indirect, or consequential damages by reason of the fact that such
goods shall have been nonconforming or defective, including but not limited to
personal injury, property damage, anticipated profits, labor expended, delays
and loss of use of equipment.

9. Tooling and Designs. All tooling, molds, fixtures, specifications, drawings,
designs, data, information, methods, patterns, descriptions, programs, software,
ideas and/or inventions made, used, conceived, developed or acquired by Seller
incident to its performance hereunder and all patent, trade-secret, know-how,
copyright or other proprietary rights therein, shall be the exclusive property
of Seller and no part of the purchase price hereunder shall be deemed applicable
to the foregoing items.

10. Government Contracts. If any purchase order indicates that the purchase is
being made for use under a U.S. Government Contract, any terms and conditions of
such Government contract which are intended to be included herein must be set
forth in a separate written document signed by an officer of Seller in order to
be binding. Only those terms and conditions which Seller agrees to in writing
and are made mandatory by federal statute or regulation for inclusion in fixed
price supply subcontracts covering standard commercial proprietary items sold to
the public at commercial prices shall apply.

11. Export Regulations. Shipment of goods to Purchaser is contingent upon
compliance with U.S. Department of Commerce export control regulations. If a
U.S. government export license is required, Seller and/or Purchaser shall use
best efforts to obtain said license, and shipment date is contingent upon timely
receipt of same. Purchaser shall not knowingly export or re-export the goods
sold hereunder to any country, directly or indirectly, for which the U.S.
government or any agency thereof at the time of export or re-export requires an
export license or other government approval without first obtaining such license
or approval.

12. California Law. The rights and obligations under this Agreement will not be
governed by the United Nations Convention on Contracts for the International
Sale of Goods, the application of which is expressly excluded. Rather, the
parties expressly agree that such rights and obligations will instead be
governed by the laws of the State of California excluding the application of its
conflicts of law rules.

13. Arbitration. Any controversy or claim arising out of, in connection with, or
relating to the agreement hereunder shall be resolved by binding arbitration in
San Francisco, California, pursuant to the rules then pertaining of the American
Arbitration Association.

                                 C-1 (continued)
<PAGE>

                                  ATTACHMENT D

                           CARD QUALITY SPECIFICATIONS

1       ISO STANDARD TESTS

1.1     ISO/IEC 7810
        The card shall meet all of the specifications contained in ISO/IEC 7810
        as confirmed by the test methods contained in ISO/IEC 10373-1
1.2     ISO/IEC 11694 parts 1-4
        The card shall meet all of the specifications contained in ISO/IEC 11694
        parts 1-4 as confirmed by the test methods contained in ISO/IEC 10373-5

2       INDUSTRY SPECIFIC TESTS DEVELOPED BY DREXLER TECHNOLOGY CORPORATION
        (DTC)

2.1     OPTICAL PERFORMANCE
        These tests are made using a custom built optical card tester, using
        test methods and software developed by Lasercard Systems Corporation.

<TABLE>
<CAPTION>
<S>                                                      <C>
        2.1.1    Background reflectivity RB              <850millivolts
                                                         -
        2.1.2    Delta high frequency AHF                >=300millivolts
        2.1.3    Contrast                                >=40%
        2.1.4    Track crossing signal (TP9)             >=600millivolts
        2.1.5    Raw bit error rate                       <5.0x10-4
                                                          -
        2.1.6    Bit size                                13.5-17 ticks
        2.1.7    Track write errors                      <5
                                                         -
        2.1.8    Track read errors                       0

2.2     DEFECTS
        2.2.1    Optical media defects                      130U max 1/card
        2.2.2    Transparent layer defects        <50 microns 2/card, 50-250 microns  1/card
</TABLE>

2.3     COSMETIC SPECIFICATIONS
        The card shall meet cosmetic quality specifications as measured against
        limit samples supplied by DTC.

Note: Final card specifications are subject to modification as agreed upon by
DTC and Licensee.

                                      D-1
<PAGE>

                                  ATTACHMENT E

                       PRE-EXISTING LSC VARS AND LICENSEES
                              (AS OF OCTOBER 2002)

                        DTC CARD MANUFACTURING LICENSEES

COUNTRY                      COMPANY NAME

 Japan                       Canon, Inc.

 Japan                       Dai Nippon Printing (OMCBC)

                        DTC CARD DISTRIBUTION LICENSEES

 [ ] *                       [ ]*

                             Laser Card Europe, AG

                          DTC READ/WRITE DRIVE ASSEMBLY

 -----                       L.C. Sistemia S.p.A.

                                    LSC VARS

 [ ] *                       [ ]*

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

* Material omitted pursuant to a confidential request. The omitted material has
  been filed separately with the Securities and Exchange Commission. Note:
  Number of VAR rows is not shown.

                                      E-1
<PAGE>

                                  Attachment F

                               ROYALTY REPORT FORM

  For Optical Memory Cards made by or for Licensee or its sublicensee (if any)
   and sold or otherwise disposed of by Licensee or its sublicensee (if any)

Licensee Name:    __________________________

                          __________________________

                          __________________________

Title Of License: Full Card Manufacturing License

Reporting Period, (Quarterly):  from    _______________ to ________________

<TABLE>
<CAPTION>
<S>                                                                           <C>
--------------------------- ------------------------------- ----------------------------- -------------------------------
       Optical Card           Number of units subject to      Royalty rate per card unit    Total royalty due in period
     Format Produced               royalty in period                   sold
--------------------------- ------------------------------- ----------------------------- -------------------------------

  card
--------------------------- ------------------------------- ----------------------------- -------------------------------

--------------------------- ------------------------------- ----------------------------- -------------------------------
                                                              TOTAL DUE:
--------------------------- ------------------------------- ----------------------------- -------------------------------
</TABLE>

Certified by:  ________________________

Signature:     ________________________

Date:          ________________________

                                      F-1

<PAGE>

                                  ATTACHMENT G

                         DREXLER TECHNOLOGY CORPORATION
                        UNITED STATES AND FOREIGN PATENTS
                                 (As of 10/3/02)

UNITED STATES PATENTS
FOR: SCANNING OPTICAL CARD READER
U.S. Patent 4,796,242, granted 1/3/89
FOR: DATA SYSTEM CONTAINING A HIGH CAPACITY OPTICAL CONTRAST LASER RECORDABLE
WALLET-SIZE PLASTIC CARD
U.S. Patent 4,544,835, granted 10/1/85
FOR: METHOD FOR MAKING A LASER RECORDABLE WALLET-SIZE PLASTIC CARD
U.S. Patent 4,542,288, granted 9/17/85
FOR: THREE-BEAM OPTICAL SERVO TRACKING SYSTEM
WITH TWO-TRACK PARALLEL READOUT
U.S. Patent 4,598,393, granted 7/1/86
FOR: A SKEW DETECTION SYSTEM FOR OPTICALLY READ DATA
U.S. Patent 4,588,882, granted 5/13/86
FOR: DEBIT CARD
U.S. Patent 4,598,196, granted 7/10/86
FOR: METHOD FOR RECORDING MOTION PICTURE IMAGES AND LASER WRITTEN DATA
U.S. Patent 4,603,099, granted 7/29/86
FOR: REDUNDANT OPTICAL RECORDING OF INFORMATION IN DIFFERENT FORMATS
U.S. Patent 4,711,996, granted 12/8/87
FOR: UPDATABLE MICROGRAPHIC POCKET DATA CARD
U.S. Patent 4,680,459, granted 7/14/87
FOR: DUAL BEAM OPTICAL DATA SYSTEM
U.S. Patent 4,730,293, granted 3/8/88
DTC - U.S. Patents - 10/3/02 Page 2
FOR: READ-ONLY OPTICAL CARD AND SYSTEM
U.S. Patent 4,734,565, granted 3/29/88
For: TRANSMISSIVELY READ QUAD DENSITY OPTICAL DATA SYSTEM
U.S. Patent 4,786,792, granted 11/22/88
FOR: SYSTEM FOR OPTICALLY READING AND ANNOTATING TEXT ON A DATA CARD
U.S. Patent 4,656,346, granted 4/7/87
FOR: DATA SYSTEM EMPLOYING WALLET-SIZE OPTICAL CARD
U.S. Patent 4,680,456, granted 7/14/87
FOR: SYSTEM AND METHOD FOR MAKING RECORDABLE WALLET-SIZE OPTICAL CARD
U.S. Patent 4,680,460, granted 7/14/87
FOR: PRERECORDED DUAL STRIP DATA STORAGE CARD
U.S. Patent 4,609,812, granted 9/2/86
FOR: QUAD DENSITY OPTICAL DATA SYSTEM
U.S. Patent 4,634,850, granted 1/6/87
FOR: PERSONAL INFORMATION CARD SYSTEM
U.S. Patent 4,745,268, granted 5/17/88
FOR: DATA CARD CASSETTE
U.S. Patent 4,700,840, granted 10/20/87
FOR: PROTECTIVE ENVELOPE FOR OPTICAL DATA CARD
U.S. Patent 4,711,347, granted 12/8/87
FOR: METHOD AND APPARATUS FOR STEPPED IMAGING IN READING DATA
U.S. Patent 4,745,484, granted 5/17/88
FOR: OPTICAL RECORDING METHOD FOR DATA CARDS
U.S. Patent 4,910,725, granted 3/20/90
DTC - U.S. Patents - 10/3/02 Page 3
FOR: MULTIPLE CARD RECORDING SYSTEM
U.S. Patent 4,820,913, granted 4/11/89

                                      G-1

<PAGE>

FOR: METHOD FOR FORMING DATA CARDS WITH REGISTERED IMAGES
U.S. Patent 4,818,852, granted 4/4/89
FOR: READ/WRITE SYSTEM FOR PERSONAL INFORMATION CARD
U.S. Patent 4,835,376, granted 5/30/89
FOR: UPDATABLE MICROGRAPHIC POCKET DATA CARD
U.S. Patent 4,814,594, granted 3/21/89
FOR: ERASABLE OPTICAL WALLET-SIZE DATA CARD
U.S. Patent 4,810,868 granted 3/7/89
FOR: METHOD AND APPARATUS FOR READING DATA PAGES ON A DATA SURFACE
U.S. Patent 4,864,630, granted 9/5/89
FOR: A BOOK ON A POCKET CARD
U.S. Patent D313,428, granted 1/1/91
FOR: METHOD FOR MAKING AN OPTICAL DATA CARD
U.S. Patent 4,957,580, granted 9/18/90
FOR: DITHERING OPTICAL DATA LOGGER
U.S. Patent 4,972,397, granted 11/20/90
FOR: ERASABLE OPTICAL WALLET-SIZE DATA CARD
U.S. Patent 5,241,165, granted 8/31/93
FOR: METHOD OF READING AND WRITING FILES ON NONERASABLE STORAGE MEDIA
U.S. Patent 5,029,125, granted 7/2/91
FOR: HIGH DENSITY TRACK LAYOUT FOR STORAGE MEDIA
U.S. Patent 5,047,619, granted 9/10/91
DTC - U.S. Patents - 10/3/02 Page 4
FOR: TRANSMISSIVELY READ OPTICAL RECORDING MEDIUM
U.S. Patent 4,999,278, granted 3/21/91
FOR: READER/WRITER FOR FLEXIBLE DATA CARDS
U.S. Patent 5,089,693, granted 2/18/92
FOR: LASER IMAGED IDENTIFICATION CARD
U.S. Patent 5,421,619, granted 6/6/95
FOR: ANTI-FRAUD VERIFICATION SYSTEM USING A DATA CARD
U.S. Patent 5,457,747, granted 10/10/95
FOR: ANTI-FRAUD VOTER REGISTRATION AND VOTING SYSTEM USING A DATA CARD
U.S. Patent 5,412,727, granted 5/2/95
FOR: TWO STAGE READ-WRITE METHOD FOR TRANSACTION CARDS
U.S. Patent 5,559,885, granted 9/24/96
FOR: ANTI-COUNTERFEIT VALIDATION METHOD FOR ELECTRONIC CASH CARDS EMPLOYING AN
OPTICAL MEMORY STRIPE
U.S. Patent 5,932,865, granted 8/3/99
FOR: TAMPER RESISTANT IDENTIFICATION
U.S. Patent 5,992,891, granted 11/30/99
FOR: VALIDATION METHOD FOR ELECTRONIC CASH CARDS AND
DIGITAL IDENTITY CARDS UTILIZING OPTICAL DATA STORAGE
U.S. Patent 6,199,761, granted 3/13/01
FOR: METHOD AND SYSTEM FOR LASER WRITING MICROSCOPIC
DATA SPOTS ON CARDS AND LABELS READABLE WITH
A CCD ARRAY
U.S. Patent 6,145,742, granted 11/14/00
DTC - U.S. Patents - 10/3/02 Page 5
FOR: METHOD AND SYSTEM FOR LASER WRITING ON SMART/OPTICAL
CARDS DATA PIXELS IN E-COMMERCE TRANSACTIONS
U.S. Patent 6,318,633, granted 11/20/01
FOR: METHOD FOR LASER WRITING MULTIPLE UPDATABLE
MINIATURE 2-D BARCODE DATA BASES FOR ELECTRONIC
COMMERCE
U.S. Patent 6,338,433, granted 1/15/02
FOR: ANTI-COUNTERFEIT AUTHENTICATION METHOD FOR
OPTICAL MEMORY CARDS AND HYBRID SMART CARDS

                                      G-2
<PAGE>

U.S. Patent 6,290,130, granted 9/18/01
DTC - Foreign Patents 10/3/02 Page 6
DREXLER TECHNOLOGY CORPORATION
FOREIGN PATENTS
FOR: OPTICAL DATA RETRIEVAL SYSTEM FOR MULTICHARACTERISTIC
REFLECTIVE DATA STORAGE MEDIA
Canada: Patent 1,200,609, granted 2/11/86
FOR: REFLECTIVE OPTICAL DATA STORAGE AND LASER RECORDING
MEDIUM
Canada: Patent 1,197,923, granted 12/10/85
FOR: OPTICAL DATA RETRIEVAL SYSTEM USING MULTI-SPECTRAL
LIGHT SOURCES
Canada: Patent 1,215,175, granted 12/9/86
FOR: DATA SYSTEM CONTAINING A HIGH CAPACITY OPTICAL
CONTRAST LASER RECORDABLE WALLET-SIZE PLASTIC CARD
and/or:
METHOD FOR MAKING A LASER RECORDABLE WALLET-SIZE
PLASTIC CARD
Belgium: Patent 902,603, granted 6/6/85
Canada Patent 1,246,220, granted 12/6/88
Patent 1,231,780, granted 1/19/88
France: Patent 80-08573, granted 11/15/91
Germany: Patent DE 35 20 278C2
Israel: Patent 75678, granted 5/10/90
Japan: Patent 1994797, Reg 11/22/95
(Title - AN OPTICAL DATA CARD)
DTC - Foreign Patents 10/3/02 Page 7
S. Korea: Patent 057632
Patent 059920
Mexico: Patent 159318, granted 5/16/89
Spain: Patent 544,688, granted 5/12/86
U.K.: Patent 2167225, granted 4/1/88
Patent 2167595, granted 6/8/88
FOR: DATA CARD SYSTEM FOR INITIALIZING
SPOKEN-WORD RECOGNITION
Canada: Patent 1,258,317, granted 8/8/89
FOR: UPDATABLE MICROGRAPHIC POCKET DATA CARD
Canada: Patent 1,247,738, granted 12/28/88
FOR: PERSONAL INFORMATION CARD SYSTEM
Canada: Patent 1,272,776, granted 11/7/89
-----: Patent 1,228,253, granted 6/5/91
Japan: Patent 2122206
(Title - DATA CARD TRANSACTION SYSTEM)
U.K.: Patent 2,186,236, granted 11/28/90
(Title - DATA CARD TRANSACTION SYSTEM)
U.K. Div.: Patent 2228821, granted 11/28/90
(Title - METHOD OF FORMING DATA CARDS)
U.K. Div.: Patent 2228712, granted 11/28/90
(Title - DATA CARDS)
DTC - Foreign Patents 10/3/02 Page 8
FOR: METHOD AND APPARATUS FOR READING
DATA WITH CCD AREA ARRAYS
Japan: Patent 2931852, granted 5/28/99
Taiwan: Patent 29500, granted 11/15/88
FOR: READ-ONLY OPTICAL DATA CARD
Canada: Patent 1,294,706, granted 1/21/92
FOR: OPTICAL RECORDING METHOD FOR DATA CARDS
Canada: 1,298,405, granted 3/31/92
FOR: MULTIPLE CARD RECORDING SYSTEM
Canada: Patent 1,292,312, granted 11/19/91
U.K.: Patent 340 221
FOR: METHOD FOR READING DATA PAGES ON A DATA SURFACE
Canada: Patent 1,301,325, granted 5/19/92
FOR: DITHERING OPTICAL DATA LOGGER
Canada: Patent 2,003,784, expires 11/24/09

                                      G-3
<PAGE>

EPO: Patent 446 284, granted 12/20/94
Desig. - France, Germany, -----, U.K.
FOR: ERASABLE OPTICAL WALLET-SIZE DATA CARD
Canada: Patent 2,047,208, granted 12/30/97
DTC - Foreign Patents 10/3/02 Page 9
FOR: METHOD OF READING AND WRITING FILES
ON NONERASABLE STORAGE MEDIA
Canada: Patent 2,047,696, granted 11/24/98
EPO: Patent 0 462 2180, granted 9/24/87
Japan: Patent 3005645, granted 11/26/99
FOR: QUAD DENSITY OPTICAL DATA SYSTEM
EPO: Patent 0160008
Desig: France, Germany, Sweden, U.K.
Israel: Patent 73226, granted 1/31/89
Japan: Patent 2,719,549
Korea: Patent 91285
Mexico: Patent 157380, granted 11/18/88
Spain: Patent 536.738/7, granted 2/19/86
FOR: THREE-BEAM OPTICAL SERVO TRACKING SYSTEM
WITH TWO-TRACK PARALLEL READOUT
Canada: Patent 1,231,779, granted 1/19/88
France: Patent 85 05289, granted 12/14/87
Germany: Patent 35 10498 C2
U.K.: Patent 2,156,978, granted 10/28/87
FOR: A SKEW DETECTION SYSTEM FOR OPTICALLY READ DATA
Canada: Patent 1,239,475, granted 7/19/88
DTC - Foreign Patents 10/3/02 Page 10
FOR: SCANNING OPTICAL CARD READER
Canada: Patent 1,237,195, granted 5/24/88
U.K.: Patent 2,161,632, granted 2/3/88
FOR: DEBIT CARD
Canada: Patent 1,237,814, granted 6/7/88
FOR: TRANSMISSIVELY READ QUAD DENSITY
OPTICAL DATA SYSTEM
Japan: Patent 2,881,306, granted 2/5/99
FOR: READ-ONLY OPTICAL CARD AND SYSTEM
-----: Patent 1215595, granted 2/14/90
[END]

                                      G-4

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