855 Branham Lane East (San Jose, CA) Standard Form lease - Mission West Properties LP and LynuxWorks Inc.


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                              STANDARD FORM LEASE
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Parties: This Lease, executed in duplicate at Cupertino, California, on October
2, 2000, by and between Mission West Properties, L.P., a Delaware Limited
Partnership, and LynuxWorks, Inc., a California Corporation, hereinafter called
respectively Lessor and Lessee, without regard to number or gender.

Use: Witnesseth: That Lessor hereby leases to Lessee, and Lessee hires from
Lessor, the Premises for the purpose of conducting therein office, research and
development, light manufacturing, and warehouse activities, and any other legal
activity; and for no other purpose without obtaining the prior written consent
of Lessor.

Premises: The real property with appurtenances as shown on Exhibit A, (the
"Premises") situated in the City of San Jose, County of Santa Clara, State of
California, and more particularly described as follows:
     
     The Premises includes a 67,912 square feet of building, including all
     improvements thereto as shown on Exhibit A.1 with the exclusive right to
     use up to 238  unreserved parking spaces.  The address for the Premises is
     855 Branham Lane East, San Jose, California.

Term: The term shall be for sixty (60) months unless extended pursuant to
Section 35 of this Lease (the "Lease Term"), commencing on the Commencement Date
as defined in Section 1 and ending on the fifth anniversary of said Commencement
Date.

Base Rent: Subject to adjustment for changes in the TI Allowance as provided in
Section 2.1.2, below, base rent shall be payable in monthly installments as
follows:

                                  Replacements                            Total
               Monthly Rent
                                                     Estimated CAC**
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Month 1-12         $152,802*            $2,307             $17,659**    $172,768
 
 
 
     Monthly base rent to increase by 4% on the annual anniversary of the
     Commencement Date each year during the Lease Term over the prior year's
     rent. Base Monthly Rent shall be adjusted as provided in Section 2.1 to
     reflect any unused amount of the Lessor's TI Allowance and for any
     Additional TI Allowance. For the purposes of the foregoing, "Month 1" is
     the first full lease month after the Commencement Date. If the Commencement
     Date is not the first day of a month, then the first month shall be a
     partial month (prorated), and shall be added to the Lease Term. Base
     Monthly Rent for the partial month shall five thousand ninety three and
     00/100 dollars ($5,093.00) per day. Month 1 shall commence on the first day
     of the first full month of the Lease Term.

     **   CAC charges to be adjusted per Common Area Charges Section below.

Base rent and CAC shall be payable in advance on the first day of each calendar
month during the Lease Term. The term "Rent," as used herein shall be deemed to
be and to mean the base monthly rent and all other sums required to be paid by
Lessee pursuant to the terms of this Lease. Rent shall be paid in lawful money
of the United States of America, without offset or deduction, and

 
shall be paid to Lessor at such place or places as may be designated from time
to time by Lessor. Rent for any period less than a calendar month shall be a pro
rata portion of the monthly installment. Upon execution of this Lease, Lessee
shall deposit with Lessor the total first month's rent of One Hundred Seventy
Two Thousand Seven Hundred Sixty Eight Dollars ($172,768).

Security Deposit: Lessee shall deposit with Lessor the sum of One Hundred
Seventy Two Thousand Seven Hundred Sixty Eight Dollars ($172,768).] (the
"Security Deposit"). The Security Deposit shall be held by Lessor as security
for the faithful performance by Lessee of all of the terms, covenants, and
conditions of this Lease applicable to Lessee. If Lessee commits a default as
provided for herein, including but not limited to a default with respect to the
provisions contained herein relating to the condition of the Premises, Lessor
may (but shall not be required to) use, apply or retain all or any part of the
Security Deposit for the payment of any amount which Lessor may spend by reason
of default by Lessee. If any portion of the Security Deposit is so used or
applied, Lessee shall, within ten days after written demand therefor, deposit
cash with Lessor in an amount sufficient to restore the Security Deposit to its
original amount. Lessee's failure to do so shall be a default by Lessee. Any
attempt by Lessee to transfer or encumber its interest in the Security Deposit
shall be null and void. Upon execution of this Lease, Lessee shall deposit with
Lessor the Security Deposit. Notwithstanding the above, Lessor agrees to waive
the requirement for Lessee to make a security deposit provided Lessee's
shareholder's equity exceeds $50 million. If at any time during this Lease and
for so long as, Lessee's shareholder's equity is less than $50 million, Lessee
shall deposit with Lessor the Security Deposit referenced above within ten days
after the issuance of Lessee's financial statements indicating the reduction in
shareholder's equity below $50 million. If Lessee fails to make the Security
Deposit as required, Lessee shall be deemed to be in default per Section 14.1
(a) of this Lease.

Warrants: Lessor to receive a five year warrant to purchase 25,000 common shares
at fair market value upon execution of lease, on standard warrant terms
including a net exercise provision.

Common Area Charges: Lessee shall pay to Lessor, as additional Rent, an amount
equal to Lessee's pro-rate share of the total common area charges of the
Premises ("CAC"). Lessee shall pay to Lessor as Rent, on or before the first day
of each calendar month during the Lease Term, subject to adjustment and
reconciliation as provided herein below, the sum of Nineteen Thousand Nine
Hundred Sixty Six Dollars ($19,966), said sum representing Lessee's estimated
monthly payment of Lessee's percentage share of CAC. It is understood and agreed
that Lessee's obligation under this paragraph shall be prorated to reflect the
Commencement Date and the end of the Lease Term.

Lessee's estimated monthly payment of CAC payable by Lessee during the calendar
year in which the Lease commences is set forth above.  At or prior to the
commencement of each succeeding calendar year term (or as soon as practical
thereafter), Lessor shall provide Lessee with Lessee's estimated monthly payment
for CAC which Lessee shall pay to Lessor as Rent.  Within 120 days of the end of
the calendar year and the end of the Lease Term, Lessor shall provide Lessee a
statement of actual CAC incurred for the preceding year or other applicable
period in the case of a termination year.  If such statement shows that Lessee
has paid less than its actual percentage, then Lessee shall on demand pay to
Lessor the amount of such deficiency.   If such statement shows that Lessee has
paid more than its actual percentage, then Lessor shall, promptly refund such
excess to Lessee or credit the amount thereof to the Rent next becoming due from
Lessee.  Lessor reserves the right to revise the monthly estimate for CAC if the
actual or projected CAC show an increase or decrease in excess of 10% from an
earlier estimate for the same period.  In such event, Lessor shall provide a
revised estimate to Lessee, together with an explanation of the reasons
therefor, and Lessee shall revise its monthly payments accordingly.  Lessor's
and Lessee's obligation with respect to adjustments at the end of the Lease Term
or earlier expiration of this Lease shall survive the Lease Term or earlier
expiration.  As part of the CAC payment set forth in the preceding paragraph,
Lessee shall pay to Lessor $2,307 per month for HVAC, roof, and parking lot
replacement, which means new HVAC units, new roof, and new parking lot
("Replacements").

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As used in this Lease, CAC shall exclude the cost of Replacements and shall
include but is not limited to: (i) items as specified in Sections 5(b), 6, 16
and 31; (ii) all costs and expenses including but not limited to supplies,
materials, equipment and tools used or required in connection with the operation
and maintenance of the Premises; (iii) licenses, permits and inspection fees;
(iv) all other costs incurred by Lessor in maintaining and operating the
Premises; (v) Required Capital Repairs for the Premises; and (vi) an amount
equal to two percent (2%) of the aggregate of total rent including all CAC, as
compensation for Lessor's overhead, accounting and processing services in the
manner noted in Exhibit C. Lessee shall have the right to review the basis and
computation analysis, which shall be based on reasonable commercial standards in
the industry used to derive the CAC applicable to this Lease annually. Lessor's
monthly estimate of Lessee's CAC for the first twelve months of the Lease Term
is set forth on Exhibit C.

Notwithstanding anything to the contrary set forth in this Lease, in no event
shall Lessee have any obligation to perform or to pay directly, or to reimburse
Lessor for (as CAC or otherwise), all or any portion of the following repairs,
maintenance, improvements, replacements, premiums, claims, losses, fees,
charges, costs and expenses (collectively, "Costs"), nor shall any portion of
the TI Allowance or Additional TI Allowance be applied to, any of the following:

     A.   Losses Caused By Others:  Costs occasioned by the act, omission or
          -----------------------                                           
          violation of any law, rule, regulation, ordinance, covenant,
          condition, by any other occupant of the Premises, or their respective
          agents, employees or contractors, and Costs occasioned by the sole
          negligence, willful misconduct or breach of this Lease or applicable
          Law by Lessor or Lessor's Agents.

     B.   Casualties and Condemnations:  Except as expressly required by this
          ----------------------------                                       
          Lease to be paid by Lessee under another provision of this Lease.

     C.   Capital Improvements:  Except as expressly provided in Section 5(b),
          --------------------                                                
          below, Costs relating to repairs, alterations, improvements, equipment
          and tools which could properly be capitalized under generally accepted
          accounting principles, unless and except to the extent that  (i) such
          Costs reduce the expenses that would otherwise be incurred by Lessee
          under the Lease and (ii) Lessee's share of such Cost during any
          twelve-month period of the Lease is equitably determined and amortized
          over the useful life of the capital item in question.

     D.   Reimbursable Expenses:  Costs for which Lessor has a right of
          ---------------------                                        
          reimbursement from others.

     E.   Taxes:  Taxes, assessments, all other governmental levies, and any
          -----                                                             
          increases in the foregoing occasioned by or relating to (i) land and
          improvements not reserved for Lessee's exclusive or nonexclusive use,
          (ii) assessments and other fees for improvements and services which do
          not benefit the Premises, or (iii) construction of improvements for
          other occupants of the Premises, except as required under Section 16
          of this Lease.

     F.   Construction Defects:  Costs to correct any construction defect in the
          --------------------                                                  
          Premises, to comply with any law, rule, regulation, covenant,
          condition, or restrictions, applicable to the Premises on the
          Commencement Date, or to bring the Premises into compliance with
          Section 2.1.8 as of the Commencement Date.

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     G.   Utilities or Services: Costs (i) arising from the disproportionate use
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          of any utility or service supplied by Lessor to any other occupant of
          the Premises, or (ii) associated with utilities and services of a type
          not provided to Lessee, except as expressly required under this Lease.

     H.   Interior Improvements:  The cost of any renovation, improvement,
          ---------------------                                           
          painting or redecorating of any portion of the Premises not made
          available for Lessee's use.

     I.   Leasing Expenses:  Fees, commissions, attorneys' fees, Costs or other
          ----------------                                                     
          disbursements incurred in connection with negotiations, disputes with,
          or the breach of a lease by, any other occupant of the Premises.

     J.   Reserves:  Depreciation, amortization or other expense reserves,
          --------                                                        
          except for Replacements.

     K.   Mortgages:  Interest, charges and fees incurred on debt, payments on
          ---------                                                           
          mortgages and rent under ground leases.

     L.   Capital Leases:  Lease payments and Costs for capital machinery and
          -------------                                                      
          equipment, such as air conditioners, elevators, and the like, except
          as expressly required under this Lease.

     M.   Art:  Costs of sculptures, fountains, paintings and other art objects.
          ---                                                                   

     N.   Insurance:  Insurance Costs for coverage not required to be carried by
          ---------                                                             
          Lessor under this Lease, increases in insurance Costs caused by the
          activities of another occupant of the Premises, except as expressly
          provided under this Lease.

     O.   Management: Wages, salaries, compensation, and labor burden for any
          ----------  
          time when such employee is not actually working at the Premises or any
          fee, profit or compensation retained by Lessor or its affiliates for
          management and administration of the Premises in excess of the 2%
          management and accounting fee specified above.

     P.   Duplication:  Costs which Lessee pays directly to a third person.
          -----------                                                      

     Q.   Hazardous Materials: Costs related to the presence of Hazardous
          -------------------
          Materials on the Premises except to the extent released or emitted by
          Lessee.

Late Charges: Lessee hereby acknowledges that a late payment made by Lessee to
Lessor of Rent and other sums due hereunder will cause Lessor to incur costs not
contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited to, processing
and accounting charges, and late charges, which may be imposed on Lessor
according to the terms of any mortgage or trust deed covering the Premises.
Accordingly, if any installment of base monthly rent or monthly estimate of CAC
is not received by Lessor or Lessor's designee within five (5) days after such
amount is due or if any other Rent or other sum payable to Lessor is not
received by Lessor or Lessor's designee within ten (10) days after Lessor
delivers a written notice to Lessee, the Lessee shall pay to Lessor a late
charge equal to five (5%) percent of such overdue amount. The parties hereby
agree that such late charge represents a fair and reasonable estimate of the
costs Lessor will incur by reason of late payments made by Lessee. Acceptance of
such late charges by Lessor shall in no event constitute a waiver of

Page 4

 
Lessee's default with respect to such overdue amount, nor shall it prevent
Lessor from exercising any of the other rights and remedies granted hereunder.
Notwithstanding the above, Lessor agrees to waive one late charge per any twelve
month period if it is the result of a non-recurring unusual event such as an
accounting error.

Quiet Enjoyment: Lessor covenants and agrees with Lessee that upon Lessee paying
Rent and performing its covenants and conditions under this Lease, Lessee shall
and may peaceably and quietly have, hold and enjoy the Premises for the Lease
Term, subject, however, to the rights reserved by Lessor hereunder. Lessee' duty
to subordinate this Lease to any present or future lease of the Premises is
conditioned upon Lessor providing to Lessee, and Lessor shall provide Lessee
with, a Recognition and Non-Disturbance Agreement in a commercially reasonable
form acceptable to Lessee and a major national lender.

It Is Further Mutually Agreed Between The Parties As Follows:

1. Possession: Possession shall be deemed tendered and the term shall commence
upon the first to occur of the following (the "Commencement Date"): (i)The
Building Shell and the Lessee Interior Improvements are Substantially Complete
or (ii) Lessee occupies the Building and commences to conduct business
operations or (iii) if Lessor is prevented from or delayed in completing its
work under this Lease due to Lessee Delays, such work will be deemed
Substantially Complete as of the date on which it would have been Substantially
Complete had it not been for such Lessee Delays. Subject to the foregoing, it is
the intention of Lessee and Lessor that April 27, 2001 shall be the Substantial
Completion Date and the Commencement Date. "Substantially Complete" shall mean
that: (i) Lessor has tendered possession of the Premises to Lessee, (ii) Lessor
has met all legal requirements for occupancy of the Premises (including the
Lessee's Improvements to be constructed therein by Lessor) and Lessor has
obtained all related city and fire marshal approvals for such occupancy,
including a certificate of occupancy, (iii) The Lessee Interior Improvements
have been completed in accordance with the Lessee Improvement Plans (as defined
in Section 2) except for punchlist items which would not materially and
adversely affect Lessee's intended use of the Premises, and (iv) said interior
of the building is in a "broom clean" condition.

1.1 Commencement Date Memorandum: When the actual Commencement Date is
determined, the parties shall execute a Commencement Date Memorandum setting
forth the Commencement Date, the expiration date of the Lease Term, but failure
to do so shall not affect the continuing validity and enforceability of this
Lease, which shall remain in full force and effect. Lessee's execution of the
Commencement Date Memorandum and/or acceptance of the Premises on the
Commencement Date shall not be deemed a waiver of any of Lessor's obligations to
construct the Lessee Improvements in accordance with this Lease. Upon execution
of such memorandum, Lessor shall also be deemed to have assigned to Lessee all
warranties with respect to the Premises, which would reduce Lessee's maintenance
and surrender obligations hereunder and shall cooperate with Lessee to enforce
all such warranties.

2. Lessee's Improvements

2.1 Lessee's Improvements: The "Lessee Interior Improvements" shall be defined
as all items not part of the Building Shell (the "Building Shell" is defined on
attached Exhibit B, which shall be constructed by Lessor at its sole expense)
and shall be constructed by independent contractors to be employed by and under
the supervision of Lessor, in accordance with this Lease and the plans and
specifications prepared by Lessor for submission to the City of San Jose
("Lessee Improvement Plans"), complete with all mechanical and electrical
design, approved in writing by Lessee, and then to be attached hereto as Exhibit
D. Lessee and its designated representatives, shall at all times during the
construction of the Lessee Interior Improvements have access to the Premises to
monitor the progress of construction and Lessor's compliance with its obligation
hereunder; provided however, that such access shall not unreasonably interfere
with the activities of Lessor or its contractors. Lessor hereby approves 

Page 5

 
of Lessee's conceptual plan of the Lessee Interior Improvements attached hereto
as Exhibit D.1 and shall not withhold consent to the Lessee Improvement Plans to
the extent consistent therewith.

2.1.1 Budget: Before entering into any contract with a contractor furnishing
labor or materials in connection with the construction of the Lessee Interior
Improvements where the payment due under such contract is estimated by Lessor to
be in excess of Fifty Thousand Dollars ($50,000), Lessor shall request bids from
at least three (3) qualified contractors selected by Lessor and approved by
Lessee (which approval shall not be unreasonably withheld) for bidding. Unless
Lessor and Lessee mutually agree otherwise, Lessor will accept the lowest bid.
Lessee shall have the opportunity to review and approve the bidders list
prepared by Lessor, which approval shall not be unreasonable withheld, and may
select a bidder of their choice for the bid, provided the bidder, meets the
Lessor's reasonable requirements.

2.1.2 Lessor's TI Allowance: Lessor shall contribute up to One Million Six
Hundred Eighty Thousand Four Hundred Seventy Five Dollars ($1,680,475) towards
construction of the Lessee Interior Improvements (the "TI Allowance"), which
cost is reflected in the Base Monthly Rent. In addition, if Lessee so requests,
Lessor shall also contribute up to an additional Six Hundred Seventy Nine
Thousand One Hundred Twenty Dollars ($679,120) (the "Additional TI Allowance")
toward construction of the Lessee's Interior Improvements, in which case the
Additional TI Allowance expended by Lessor shall result in an increase in
monthly base rent for each month during the term of this Lease equal to $16.60
for each $1,000 of Additional TI Allowance so expended. If any portion of the TI
Allowance is not expended by Lessor, then the monthly base rent for each month
during the term of this Lease shall be reduced by $14 for each $1,000 of TI
Allowance not expended.

2.1.3 Cost Statement & Lessee's Contribution: Lessor has prepared and Lessee has
approved the cost statement substantially in the form attached as Exhibit F (the
"Cost Statement"), showing the expected construction cost and the actual items
to be constructed by Lessor of the Lessee Interior Improvements, the TI
Allowance, and the maximum cost Lessee must pay for construction of the Lessee
Interior Improvements. Lessor may include in the Cost Statement, a construction
management fee, covering all of its overhead, accounting, , profit, and other
similar costs not otherwise expressly indicated on the Cost Statement, equal to
six percent (6%) of the cost of the Lessee Interior Improvements . General
Condition expense shall be reflected in the Cost Statement. Lessee's Cost
Statement indicates that Lessee's share of the construction cost of Lessee
Interior Improvements will not exceed $339,560 (the "Lessee's Maximum
Contribution"). After the bids for construction of the Lessee's Improvements, as
specified above are obtained, the indicated amount of Lessee's share of the
construction cost of Lessee Interior Improvements based on such bids is more
than 5% in excess of the Lessee's Maximum Contribution as shown on the Lessee's
Cost Statement, then Lessee may either (a) proceed with the Lease and the
Lessee's Maximum Contribution shall be increased to the higher number
established by the bidding, or (b) Lessee shall have the right to modify the
Lessee's Improvement Plans or to remove items from such Plans, until the maximum
amount to be paid by Lessee is acceptable to Lessee. In all events, Lessor and
Lessee shall negotiate in good faith to reduce the total bid for construction of
the Lessee Interior Improvements for by modifying the plans or taking other
appropriate actions Lessor shall not exceed above without approval of Lessee.
Lessee shall pay its approved share of the cost for construction of the Lessee
Interior Improvements, up to an aggregate amount not exceeding the Lessee's
Maximum Contribution, within fifteen (15) days after the Commencement Date. All
costs payable by Lessee for construction of the Lessee Interior Improvements
shall be reasonably documented and subject to verification by Lessee.
Notwithstanding anything to the contrary in this Lease, in no event shall the
Lessee's Cost Statement including the TI Allowance (or Additional TI Allowance)
be used to pay, nor shall Lessee be required to pay, any of the following costs
in connection with the construction of Lessee Improvements: (a) the cost of
constructing the Building Shell or any other construction work which is not
described on the Lessee Improvement Plans attached hereto as Exhibit D.1, as the
same may be modified in accordance with this Lease, (b) the cost resulting from
the default by Lessor, or any architect, contractor or supplier in constructing
the Lessee Interior Improvements, the Premises in accordance with this Lease and
any agreement entered into by such parties in connection

Page 6

 
with the construction of the Lessee Interior Improvements, (c) costs that are
recoverable by the Lessor from a third party (e.g., insurers, warrantors,
tortfeasors), (d) costs for overtime or expediting not authorized by Lessee in
writing, (e) profit, overhead, and administrative expenses in excess of the fee
described herein, (f) the cost incurred to construct and complete the Building
Shell, and/or (g) any costs of a type not budgeted on the Cost Statement.

2.1.4 Change Orders: No change made to the plans for the Lessee Interior
Improvements and Cost Statement after the final approval by the parties thereof
shall be effective, unless such change is approved in writing by Lessor and
Lessee, which approval shall not be unreasonably withheld. In this regard,
Lessor shall not be required to approve any change(s) which will increase its
cost contribution above the TI Allowance (unless Lessee agrees to increase the
Lessee's Maximum Contribution by such increase), structurally impair the
Premises, or materially and adversely effect the outside appearance of the
subject building, and Lessee shall not be required to approve any change which
will increase its cost contribution above the Lessee's Maximum Contribution,
interfere with the conduct of Lessee's business, or materially detract from the
inside appearance of the Premises. Change orders shall be written and shall
describe the nature of the change and the reasonably determined increase or
decrease in each item of the Cost Statement (including the Lessor's management
fee) occasioned by the change. No increase in the Cost Statement shall be made
for any change caused by the default of Lessor or its architects, contractors,
and suppliers or any error in the plans for the Lessee Interior Improvements and
the actual increase in the cost of constructing the Lessee's Improvements shall
be the sole responsibility of the Lessor. If Lessee requests a change which will
delay the Substantial Completion of the Lessee Interior Improvements beyond the
Scheduled Completion Date (defined below), the maximum amount of Lessee delay
that can be attributed to the change shall also be specified in the change
order.

2.1.5 Inability to Obtain Materials: If Lessor notifies Lessee that any
fittings, finished or other materials specified by Lessee for the Lessee
Interior Improvements cannot be obtained within forty five (45) days after
placing an order therefore and Lessor reasonably determines that such extended
delivery time will prohibit Lessor from Substantially Completing the Lessee
Interior Improvements by the Scheduled Completion Date, and Lessor provides
Lessee with an estimate of such delay and the information that will permit
Lessee reasonably to select an alternative fitting, finish, or material,
including, without limitation any expected delays in the Scheduled Completion
Date associated with each alternative, then within three (3) business days,
Lessee shall either (i) execute a change order in accordance with the foregoing
requirements selecting an alternative presented by Lessor or developed by Lessee
and approved by Lessor, which approval shall not be unreasonably withheld, or
(ii) agree that any delay in the Substantial Completion of the Lessee Interior
Improvements as a consequence of the inability to obtain the item, up to the
maximum amount of delay estimated by Lessor in its notice, will be a Lessee
Delay.

2.1.6 Time Periods For Approval: Lessee shall approve or disapprove any
preliminary plan or change order on or before the fifth (5th) business day
following submission to Lessee of the plan and or change order to Lessee. Lessee
shall approve or disapprove on or before the fifth (5th) business day following
submission to Lessee of any final plans. If plans or change orders are
disapproved, Lessee shall state the reason for disapproval and Lessor and Lessee
shall act in good faith to resolve any issues.

2.1.7 Completion of the Work & Delay: Lessor shall use its best efforts to
Substantially Complete the Building Shell and the Lessee Interior Improvements
(collectively the "Improvements") on or before April 27, 2001 (the "Scheduled
Completion Date"). Lessor and Lessee agree that Substantial Completion of the
Lessee Interior Improvements after the Scheduled Completion Date, provided
Lessee meets the deadlines for providing Lessee information and approvals set
forth in Exhibit E will cause Lessee and Lessor to incur costs not contemplated
by this Lease, the exact amount of which will be extremely difficult to
ascertain. Accordingly, in addition to the Rent abatement provided herein until
the Commencement Date does occur, if the Lessee Interior Improvements are not
Substantially Completed on or before May 27, 2001, then Lessor agrees to reduce
the base monthly rental first payable by Lessee under this Lease by an
additional amount equal to Five Thousand Ninety Three

Page 7

 
Dollars($5,093) for each day of delay on and after May 27, 2001. The parties
agree that the abatement of base monthly rent and the right of termination in
the event of prolonged delay (as provided below) specified herein represents a
fair and reasonable settlement for both parties and neither party shall have
further liability to the other for any damages associated with delay in
Substantial Completion of the Lessee Interior Improvements. If the Lessee
Interior Improvements are not Substantially Completed on or before June 27,
2001, the ("Required Completion Date"), Lessee may as its sole option, by
delivery of written notice to Lessor at any time after the Required Completion
Date, until the Substantial Completion of the Lessee Interior Improvements,
terminate this Lease. Notwithstanding the foregoing, the Scheduled Completion
Date and the Required Completion Date shall be extended one date for each day
Lessor's Substantial Completion of the Improvements is actually delayed due to
(i) governmental action after receipt of the building permits for the Lessee
Interior Improvements (other than governmental refusal to approve work which
fails to comply with the approved Lessee Improvement Plans or applicable Law or
the building permit), (ii) acts of God, (iii) due to circumstances beyond
Lessor's control and (iv) "Lessee Delay" (which means an actual delay in
Substantial Completion of the Lessee Interior Improvements resulting from (a)
the Lessee's failure (through no fault of Lessor) to meet Lessee's deadlines for
approval of the plans for the Lessee Interior Improvements as set forth above,
(b) any change in the work requested by Lessee (up to the maximum delay
specified in the change order), and (c) any delay Lessee agrees in writing to
bear because of the inability to obtain any fitting, finish or material pursuant
to Subsection 2.1.5, above) up to the maximum such Lessee Delay specified in the
Change Order for such work. 

2.1.8 Standard of Performance: Lessor shall be responsible for ensuring that the
Building Shell and the Lessee Interior Improvements conform to all applicable
laws and the approved plans for the Lessee Interior Improvements. Neither
Lessee's approval of the plans for the Lessee Interior Improvements, the Cost
Estimate, or any contractor or architect, nor Lessee's recommendation of any
contractor or architect for the work, shall relieve Lessor of its obligations
under this Lease nor make Lessee liable to Lessor or any contractor or
architect, or their subcontractors with respect to the work.

2.1.9 Identification Of Lessee's Property: If Lessee pays a portion of the cost
for construction of the Lessee Interior Improvements, then as soon as reasonably
practicable after Substantial Completion of the Lessee Interior Improvements,
Lessor and Lessee shall designate as Lessee's property Lessee Interior
Improvements that have a cost approximately equal to the construction cost
amount paid by Lessee. Lessee shall be entitled to all investment tax credit,
depreciation and other tax and ownership attributes associated with the
improvements so designated as Lessee's property, including the right to remove
such items from the Premises at any time. Items designated as Lessee's property
shall not include any basic systems necessary for reasonable building operation.

Lessee shall be permitted during the installation of Lessee Improvements by
Lessor to install Lessee items such as telephone and security and other Lessee
related work provided it does not interfere with or delay Lessor's work or final
approvals ("Lessee's Work").

2.3 Acceptance And Covenants To Surrender: Lessor represents that the Lessee
Interior Improvements, and the Premises shall comply with the approved plans
therefor and shall be in good working order and repair, and shall comply with
all requirements for occupancy as of the Commencement Date. Lessee agrees on the
last day of the Lease Term, or upon any sooner termination of the Lease as a
consequence of Lessee's default to surrender the Premises to Lessor in Good
Condition and Repair except for insured casualties, condemnations, and Hazardous
Materials which are not the responsibility of the Lessee under Section 33, and
the Substitutions and other alterations and additions that Lessor has stated in
writing may be surrendered. Good Condition and Repair ("Good Condition and
Repair") shall not mean original condition, nor a condition as bad as would
exist, if ordinary wear and tear was not addressed by performance of
commercially reasonable maintenance. Instead, "Good Condition and Repair" shall
generally mean that the leased premises are in the condition that one would
expect such premises (as Substantially

Page 8

 
Completed by Lessor) to be in, if throughout the Lease Term Lessee uses and
maintains said premises in a commercially reasonable manner and in accordance
with the requirements of this Lease. "Required Repairs and Replacements" are the
repair or replacement to worn-out equipment, fixtures and improvements that a
commercially reasonable owner-user would make, which are not required to be
capitalized as provided in Section 5. All of the following are to be in Good
Condition and Repair; (i) the interior walls and floors of all offices and other
interior areas, (ii) all suspended ceilings and any carpeting are to be cleaned,
(iii) all glazing, windows, doors, door closures, and plate glass if not covered
by insurance or subject to the deductible and (iv) all electrical systems
including light fixtures and ballasts, plumbing and HVAC including temperature
control systems. Lessee, on or before the end of the Lease Term or sooner
termination of this Lease, shall remove all its personal property and trade
fixtures from the Premises, and all such property not so removed on or before
the last day of the Lease Term, upon any sooner termination of the Lease as a
consequence of Lessee's default shall be deemed to be abandoned by Lessee.
Lessee shall reimburse Lessor for all disposition costs incurred by Lessor
relative to Lessee's abandoned property. If the Premises are not surrendered at
the end of the Lease Term or earlier termination of this Lease, Lessee shall
indemnify Lessor against loss or liability resulting from any delay caused by
Lessee in surrendering the Premises including, without limitation, any claims
made by any succeeding Lessee founded on such delay.

3. Uses Prohibited: Lessee shall not commit, or suffer to be committed, any
waste upon the Premises, or any nuisance, or other act or thing which may
disturb the quiet enjoyment of any other Lessee in or around the Premises or
allow any sale by auction in, or allow the Premises to be used for any improper,
immoral, unlawful or objectionable purpose, or place any loads upon the floor,
walls, or ceiling which may endanger the structure, or use any machinery or
apparatus which will in any manner vibrate or shake the Premises, or place any
harmful liquids in the drainage system of the building. No waste materials or
refuse shall be dumped upon or permitted to remain upon any part of the
Premises, except as provided in the following sentence. No materials, supplies,
equipment, finished products or semi-finished products, raw materials or
articles of any nature shall be stored upon or permitted to remain on any
portion of the Premises outside of the building structure, except to the extent
approved by the local, state federal or other applicable governing authority.
Lessor consents to Lessee's use of materials which are incidental to the normal,
day-to-day operations of any office user, such as copier fluids, cleaning
materials, etc. and to the use of the other Hazardous Materials required for the
conduct of Lessee's business, but this does not relieve Lessee of any of its
obligations not to contaminate the Premises and related real property or violate
any Hazardous Materials Laws applicable to such use.

4. Alterations And Additions: Lessee shall not make, or suffer to be made, any
alteration or addition to said Premises, or any part thereof, without the
express, advance written consent of Lessor. All alterations and improvements
made to the Premises by Lessee shall be Lessee's property and Lessee may remove
such alterations and improvements, other than replacements or substitutions of
the improvements constructed at Lessor's expense (herein "Substitutions"), at
any time. Lessee shall be entitled to all investment tax credit, depreciation,
other tax attributes, insurance proceeds, and condemnation proceeds for the
alterations and improvements made by Lessee which are not Substitutions. Lessee
agrees that it will not proceed to make such alterations or additions until all
required government permits have been obtained and after having obtained consent
from Lessor to do so, until five (5) days from the receipt of such consent, so
that Lessor may post appropriate notices to avoid any liability to contractors
or material suppliers for payment for Lessee's improvements. Lessee shall at all
times permit such notices to be posted and to remain posted until the completion
of work. Subject to the requirements concerning the surrender condition of the
Premises pursuant to Section 2.3 of the Lease, at the end of the Lease Term or
earlier termination of this Lease, Lessee may be required by Lessor to remove
Lessee's equipment, trade fixtures, and furniture, and any additions or
alterations installed by Lessee at or during the Lease Term and Lessee shall
return the Premises to the condition that existed before the installation of
Lessee alterations and additions. Notwithstanding the above, Lessor agrees to
allow any reasonable alterations and improvements and will notify Lessee at the
time of approval if such improvements or alterations are to be removed at the
end of the Lease Term or earlier termination of this Lease. Lessee may make
nonstructural improvements up to $20,000 in any calendar

Page 9

 
year without approval of Lessor subject to other terms stated herein. Lessee may
install or furnish in and to the Premises all furniture, furnishings, fixtures,
trade fixtures, equipment, supplies, shelving, racking, bins and inventory which
it requires for its use , and all of same will remain Lessee's property and may
be removed by Lessee at any time before expiration of the term provided that
Lessee will repair any damage caused by such removal. Lessor shall have no lien
or other interest whatsoever in any of Lessee's alteration improvements or items
of personal property located in the Premises (other than the Substitutions), or
any portion thereof or interest therein, and Lessor hereby waives all such liens
and interests. Within ten (10) days following Lessee's request, Lessor shall
execute documents in the form attached as Exhibit G to evidence Lessor's waiver
of any right, title, lien or interest in Lessee's Property located on or in the
Premises.

5. Maintenance Of Premises:

(a)  Subject to Section 5(b), 9, 19, and 21 of this Lease, Lessee shall at its
     sole cost and expense keep, repair, and maintain the interior of the
     Premises, including, but not limited to, all electrical, lighting systems,
     HVAC, process piping, other special improvements, temperature control
     systems, and plumbing systems in Good Condition and Repair, including any
     required replacements which are not required to be capitalized for in
     accordance with general accounting principles. Lessee shall maintain all
     wall surfaces and floor coverings in Good Condition and Repair, free of
     holes, gouges, or defacements and provide interior and exterior window
     washing as needed.

(b) Subject to the "Common Area Charges" provision of this Lease, above, Lessor
shall keep, repair, and maintain in Good Condition and Repair including
replacements the following, which shall be included in the monthly CAC as
provided below:

           1. The exterior of the building, any appurtenances and every part
           thereof, including but not limited to, glazing, sidewalks, parking
           areas, roof membrane, and painting of exterior walls.
           2. The landscaping by a landscape contractor to water, maintain, trim
           and replace, when necessary, any shrubbery and landscaping at the 
           Premises.
           3. The roof membrane by a service contract with a licensed reputable
           roofing contractor which contract shall provide for a minimum of 
           semi-annual maintenance, cleaning of storm gutters, drains, removing
           of debris, and trimming overhanging trees, repair of the roof and
           application of a finish coat every five years to the Premises.
           4. Exterior pest control. 
           5. Fire monitoring services and on request, Lessor will provide
           Lessee with evidence of 24 hour monitoring.
           6. Parking lot sweeping.
           7. The HVAC is to be maintained by a service contract carried by
           Lessor or, at Lessee's option, by Lessee, with a licensed air
           conditioning and heating contractor, which contract shall provide for
           a minimum of quarterly maintenance of all air conditioning and
           heating equipment at the Premises, including HVAC repairs and
           Required Capital Repairs and Replacements which are either excluded
           from such service contract or any existing equipment warranties and
           are not Replacements.
           8. Elevator

Lessee shall reimburse Lessor for the reasonable cost incurred by Lessor in
performing the foregoing maintenance and repairs and in making any alterations,
repairs, or improvement to comply with applicable Law pursuant to Section 9,
below, or to comply with any insurance organization with respect to the Premises
pursuant to Section 6.A, below, as follows: Lessee shall reimburse Lessor (i)
its prorata portion of such cost, based on square footage or other equitable
means for work that benefits several tenant spaces, and (ii) the entire amount
of such cost which are directly related to Lessee's use of the Premises;
provided, however, that

Page 10

 
if the work performed by Lessor is a Required Repair or Replacement, and the
cost of an such item items of work exceeds for any lease year Fifteen Thousand
Dollars ($ 15, 000), then during the Lease Term the amount reimbursable by
Lessee to Lessor shall be amortized (calculated in terms of months) over the
estimated useful life of the repair, replacement, alteration or improvement
commencing when the work is substantially complete, at an interest rate equal to
Wells Fargo's prime rate on the date the same is completed plus 1% and Lessee
shall pay to Lessor the monthly amortized amount so derived as part of CAC
during the Lese Term.

(c) To the extent inconsistent with the terms of this Lease, Lessee hereby
waives any and all rights to make repairs at the expense of Lessor as provided
in Section 1942 of the Civil Code of the State of California, and all rights
provided for by Section 1941 of said Civil Code.

(d) Lessor, at its sole cost and expense, shall be responsible for the repair of
any structural defects in the Premises including the roof structure (not
membrane), exterior walls and foundation during the Lease Term.

6. Insurance:

A) Hazard Insurance: Lessee shall not use, or permit said Premises, or any part
thereof, to be used, for any purpose other than that for which the Premises is
hereby leased; and no use shall be made or permitted to be made of the Premises,
nor acts done, which may cause a cancellation of any insurance policy covering
the Premises, or any part thereof, nor shall Lessee sell or permit to be kept,
used or sold, in or about the Premises any article which may be prohibited by a
fire and extended coverage insurance policy. Lessee shall comply with any and
all reasonable requirements, pertaining to the Premises, of any insurance
organization or company, necessary for the maintenance of reasonable fire and
extended coverage insurance, covering the Premises, which relate to Lessee's
particular use and occupancy of the Premises. Lessor shall comply with all other
such insurance organization requirements applicable to the condition of the
Premises, subject to reimbursement by Lessee of the costs so incurred by Lessor
in accordance with Section 5, above. Lessor shall, at Lessee's sole cost and
expense, purchase and keep in force fire and extended coverage insurance,
covering loss or damage to the Premises in an amount equal to the full
replacement cost of the Premises, as determined by Lessor, with proceeds payable
to Lessor. In the event of a loss per the insurance provisions of this paragraph
to the Premises, Lessee shall be responsible for deductibles up to a maximum of
$5,000 per occurrence. Lessee acknowledges that the insurance referenced in this
paragraph does not include coverage for Lessee's personal property.

B) Loss of Rents Insurance: Lessor shall, at Lessee's sole cost and expense,
purchase and maintain in full force and effect, a policy of rental loss
insurance, in an amount equal to the amount of Rent payable by Lessee commencing
within sixty (60) days of date of loss (or on date of loss, if reasonably
available) for the next ensuing one (1) year, as reasonably determined by Lessor
with proceeds payable to Lessor ("Loss of Rents Insurance").

C) Liability and Property Damage Insurance: Lessee, as a material part of the
consideration to be rendered to Lessor, hereby waives all claims against Lessor
and Lessor's Agents for damages to goods, wares and merchandise, and all other
personal property in, upon, or about the Premises, and for injuries to persons
in, upon, or about the Premises, from any cause arising at any time, and Lessee
will hold Lessor and Lessor's Agents exempt and harmless from any damage or
injury to any person, or to the goods, wares, and merchandise and all other
personal property of any person, arising from the use or occupancy of the
Premises by Lessee (except to the extent due to the gross negligence or willful
misconduct of Lessor or Lessor's Agents), or from the failure of Lessee to keep
the Premises in Good Condition and Repair, as herein provided. Lessee shall, at
Lessee's sole cost and expense, purchase and keep in force a standard policy of
commercial general liability insurance and property damage liability policy for
the Premises, and for Lessee's and Lessee's Agents' use and occupancy of the
Premises, insuring the Lessee having a

Page 11

 
combined single limit for both bodily injury, death and property damage in an
amount not less than five million dollars ($5,000,000.00). The limits of said
insurance shall not, however, limit the liability of Lessee hereunder. Lessee
shall, at its sole cost and expense, comply with all of the legal insurance
requirements of all local, municipal, state and federal authorities now in
force, or which may hereafter be in force, pertaining to Lessee's use and
occupancy of the Premises.

D) Personal Property Insurance: Lessee shall obtain, at Lessee's sole cost and
expense, a policy of fire and extended coverage insurance including coverage for
direct physical loss special form, and a sprinkler leakage endorsement insuring
the personal property of Lessee.  The proceeds from any personal property damage
policy shall be payable to Lessee.

E) General Requirements:  All insurance policies required in 6 C) and 6 D) above
shall: (i) provide for a certificate of insurance evidencing the insurance
required herein, being deposited with Lessor ten (10) days prior to the
Commencement Date, and upon each renewal, such certificates shall be provided 30
days prior to the expiration date of such coverage, (ii) be in a form reasonably
satisfactory to Lessor and shall provide the coverage required of Lessee in this
Lease, (iii) be carried with companies with a Best Rating of A minimum, (iv)
specifically provide that such policies shall not be subject to cancellation,
reduction of coverage, or other change except after 30 days prior written notice
to Lessor, and (v) with respect to the policy required by Section 6 C), name
Lessor, Lessor's lender, and any other party with an insurable interest in the
Premises identified to Lessee in writing as additional insureds by endorsement
to said policy.

F) Lessee's Reimbursement:  Lessee agrees to pay to Lessor, as additional Rent,
on demand, the full cost of the insurance polices referenced in 6 A) and 6 B)
above as evidenced by insurance billings to Lessor which shall be included in
the CAC.  If Lessee does not occupy the entire property covered by any such
policy, the insurance premiums shall be allocated to the portion of the Premises
occupied by Lessee on a pro-rata square footage or other equitable basis, as
determined by Lessor and the liable party shall pay the deductible unless it
applies to all Lessee's.  It is agreed that Lessee's obligation under this
paragraph shall be prorated to reflect the Commencement Date and the end of the
Lease Term.

G) Waivers and Subrogation: Notwithstanding anything to the contrary in this
Lease Lessor and Lessee, hereby waive any rights each may have against the other
and their respective agents, employees, officers, directors, assigns, and
subtenant under this Lease, related to any loss or damage caused to Lessor or
Lessee as the case may be, or to the Premises or its contents, and which may
arise from any insured risk covered or to be covered by fire and extended
coverage insurance or Lessee's personal property coverage as required under this
Lease.  The parties shall provide that their respective insurance policies
insuring the property or the personal property include a waiver of any right of
subrogation, which said insurance company may have against Lessor or Lessee, as
the case may be.

7. Abandonment: Lessee shall not vacate or abandon the Premises at any time
during the Lease Term; and if Lessee shall abandon, vacate or surrender the
Premises, or be dispossessed by process of law, or otherwise, any personal
property belonging to Lessee and left on the Premises shall be deemed to be
abandoned, at the option of Lessor.  Notwithstanding the above, the Premises
shall not be considered vacated or abandoned if Lessee maintains the Premises in
Good Condition and Repair, provides security and is not in default.

8. Free From Liens: Lessee shall keep the subject Premises free from any and all
liens including but not limited to liens arising out of any work performed,
materials furnished, or obligations incurred by Lessee.  However, the Lessor
shall allow Lessee to contest a lien claim, so long as the claim is discharged
prior to any foreclosure proceeding being initiated against the property and
provided Lessee provides Lessor a bond if the lien exceeds $5,000.

Page 12

 
9. Compliance With Governmental Regulations: Lessee shall, at its sole cost and
expense, comply with all of the requirements of all local, municipal, state and
federal authorities which may be enacted after the Commencement Date, pertaining
to the Premises, and shall faithfully observe in the use and occupancy of the
Premises all local and municipal ordinances and state and federal statutes now
in force or which may hereafter be in force.  Notwithstanding the foregoing,
Lessee shall not be required to pay for the construction of any single
improvement required under this paragraph in excess of $15,000, unless such
improvement is required to comply with Lessee's particular use of the Premises;
if such improvement is not required due to Lessee's particular use of the
Premises and such improvement cost exceeds $15,000, such improvement cost shall
be amortized over the estimated useful life of the improvement at Wells Fargo
prime rate on the date such improvement is completed plus one percent (1%).
Lessee shall pay to Lessor the amortized costs of such improvement on a monthly
basis over the Lease Term as part of the CAC.

10. Intentionally Omitted.

11. Advertisements And Signs:   Subject to Lessor's approval of the
specifications therefor and Lessee's compliance with laws, Lessee shall be
entitled to install a monument sign on the Premises.  Lessee agrees to pay for
any sign monument Lessee desires to be installed on the Premises.  Lessee shall
not place or permit to be placed, in, upon or about the Premises any unusual or
extraordinary signs, or any signs not approved by the city, local, state,
federal or other applicable governing authority.  Subject to the first sentence
of this paragraph, Lessee shall not place, or permit to be placed upon the
Premises, any signs, advertisements or notices without the written consent of
the Lessor, and such consent shall not be unreasonably withheld.  A sign so
placed on the Premises shall be so placed upon the understanding and agreement
that Lessee will remove same at the end of the Lease Term or earlier termination
of this Lease and repair any damage or injury to the Premises caused thereby,
and if not so removed by Lessee, then Lessor may have the same removed at
Lessee's expense.

12. Utilities: Lessee shall pay for all water, gas, heat, light, power,
telephone and other utilities supplied to the Premises. Any charges for sewer
usage, PG&E and telephone site service or related fees shall be the obligation
of Lessee and paid for by Lessee.  If any such services are not separately
metered to Lessee, Lessee shall pay a reasonable proportion of all charges which
are jointly metered, the determination to be made by Lessor acting reasonably
and on any equitable basis.  Lessor and Lessee agree that Lessor shall not be
liable to Lessee for any disruption in any of the utility services to the
Premises.

13. Attorney's Fees: In case suit should be brought relating to the Premises,
for the recovery of any sum due hereunder, because of the breach of any other
covenant herein, or to enforce, protect, or establish any term, conditions, or
covenant of this Lease or the right of either party hereunder, the losing party
shall pay to the Prevailing Party reasonable attorney's fees which shall be
deemed to have accrued on the commencement of such action and shall be
enforceable whether or not such action is prosecuted to judgment.  The term
"Prevailing Party" shall mean the party that received substantially the relief
requested, whether by settlement, dismissal, summary judgment, judgment, or
otherwise.

14.  Default and Remedies:

14.1 Default: The occurrence of any of the following shall constitute a default
     and breach of this Lease by Lessee: a) Any failure by Lessee to pay Rent or
     to make any other payment required to be made by Lessee hereunder when due
     if not cured within ten (10) days after written notice thereof by Lessor to
     Lessee; b) The abandonment of the Premises by Lessee except as provided in
     Section 7; c) Failure by Lessee to observe or perform any other provision
     of this Lease to be observed or performed by Lessee, where such failure
     continues for thirty days after written notice thereof by Lessor to Lessee;
     provided, however, that if the nature of such default is such that the same
     cannot be reasonably cured within such thirty (30) day period, Lessee shall
     not be deemed to be in default if Lessee shall, within such period,
     commence such cure and thereafter diligently prosecute the same to
     completion; d) The making by Lessee of any general assignment for the
     benefit of creditors;

Page 13

 
     the filing by or against Lessee of a petition to have Lessee adjudged a
     bankrupt or of a petition for reorganization or arrangement under any law
     relating to bankruptcy which persists for more than 60 days; e) The
     appointment of a trustee or receiver to take possession of substantially
     all of Lessee's assets or Lessee's interest in this Lease, or the
     attachment, execution or other judicial seizure of substantially all of
     Lessee's assets located at the Premises or of Lessee's interest in this
     Lease. Failure by Lessor to observe or perform any provision of this Lease
     to be observed or performed by Lessor, where such failure continues for
     thirty days after written notice thereof by Lessee to Lessor, shall
     constitute a breach of this Lease by Lessor; provided, however, that if the
     nature of such default is such that the same cannot be reasonably cured
     within such thirty day period, Lessor shall not be deemed to be in default
     if Lessor shall, within such period, commence such cure and thereafter
     diligently prosecute the same to completion.

14.2 Default Surrender Of Lease: In the event of any such default by Lessee,
then in addition to any other remedies available to Lessor at law or in equity,
Lessor shall have the immediate option to terminate this Lease before the end of
the Lease Term and all rights of Lessee hereunder, by giving written notice of
such intention to terminate.  In the event that Lessor terminates this Lease due
to a default of Lessee, then Lessor may recover from Lessee: a) the worth at the
time of award of any unpaid Rent which had been earned at the time of such
termination; plus b) the worth at the time of award of unpaid Rent which would
have been earned after termination until the time of award exceeding the amount
of such rental loss that the Lessee proves could have been reasonably avoided;
plus c) the worth at the time of award of the amount by which the unpaid Rent
for the balance of the Lease Term after the time of award exceeds the amount of
such rental loss that the Lessee proves could have been reasonably avoided; plus
d) any other amount necessary to compensate Lessor for all the detriment
proximately caused by Lessee's failure to perform his obligations under this
Lease or which in the ordinary course of things would be likely to result
therefrom; and e) at Lessor's election, such other amounts in addition to or in
lieu of the foregoing as may be permitted from time to time by applicable
California law.  As used in (a) and (b) above, the "worth at the time of award"
is computed by allowing interest at the rate of Wells Fargo's prime rate plus
two percent (2%) per annum.  As used in (c) above, the "worth at the time of
award" is 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%).

14.3 Right of Entry and Removal: In the event of any such default by Lessee,
Lessor shall also have the right, with or without terminating this Lease, to re-
enter the Premises and remove all persons and property therefrom; such property
may be removed and stored in a public warehouse or elsewhere at the cost of and
for the account of Lessee.

14.4 Abandonment: In the event of the abandonment, except as provided in Section
7, of the Premises by Lessee or in the event that Lessor shall elect to re-enter
as provided in paragraph 14.3 above or shall take possession of the Premises
pursuant to legal proceeding or pursuant to any notice provided by law, and
Lessor does not elect to terminate this Lease as provided in Section 14.2 above,
then Lessor may from time to time, without terminating this Lease, either
recover all Rent as it becomes due or relet the Premises or any part thereof for
such term or terms and at such rental rates and upon such other terms and
conditions as Lessor, in its sole discretion, may deem advisable with the right
to make alterations and repairs to the Premises. In the event that Lessor elects
to relet the Premises, then any Rent received by Lessor from such reletting
shall be applied; first, to the payment of any indebtedness other than Rent due
hereunder from Lessee to Lessor; second, to the payment of any cost of such
reletting; third, to the payment of the cost of any alterations and repairs to
the Premises; fourth, to the payment of Rent due and unpaid hereunder; and the
residue, if any, shall be held by Lessor and applied to the payment of future
Rent as the same may become due and payable hereunder.  Should that portion of
such Rent received from such reletting during any month, which is applied by the
payment of Rent hereunder according to the application procedure outlined above,
be less than the Rent payable during that month by Lessee hereunder, then Lessee
shall pay such deficiency to Lessor immediately upon demand therefor by Lessor.
Such deficiency shall be calculated and paid monthly.  Lessee shall also pay to
Lessor, as soon as ascertained, any costs and expenses 

Page 14

 
incurred by Lessor in such reletting or in making such alterations and repairs
not covered by the rentals received from such reletting.

14.5 No Implied Termination: No re-entry or taking possession of the Premises by
Lessor pursuant to Section 14.3 or Section 14.4 of this Lease shall be construed
as an election to terminate this Lease unless a written notice of such intention
is given to Lessee or unless the termination thereof is decreed by a court of
competent jurisdiction.  Notwithstanding any reletting without termination by
Lessor because of any default by Lessee, Lessor may at any time after such
reletting elect to terminate this Lease for any such default.

14.6 Habitual Default: Lessor and Lessee agree that if Lessee shall have
defaulted in the payment of base monthly rent or estimated CAC for three or more
times during any twelve month period during the Lease Term, then such conduct
shall, at the option of the Lessor, represent a separate event of default which
cannot be cured by Lessee.  Lessee acknowledges that the purpose of this
provision is to prevent repetitive defaults by the Lessee under the Lease, which
constitute a hardship to the Lessor and deprive the Lessor of the timely
performance by the Lessee hereunder.

15. Surrender Of Lease: The voluntary or other surrender of this Lease by
Lessee, or a mutual cancellation thereof, shall not work a merger, and shall, at
the option of Lessor, terminate all or any existing subleases or sub tenancies,
or may, at the option of Lessor, operate as an assignment to him of any or all
such subleases or sub tenancies.

16. Taxes: Lessee shall pay and discharge punctually and when the same shall
become due and payable without penalty, its share (as herein provided) of all
real estate taxes, personal property taxes, taxes based on vehicles, consultant
and invitees utilizing parking areas in the Premises, taxes computed or based on
rental income (other than federal, state and municipal net income taxes),
Environmental Surcharges, privilege taxes, excise taxes, business and occupation
taxes, school fees or surcharges, gross receipts taxes, sales and/or use taxes,
employee taxes, occupational license taxes, water and sewer taxes, assessments
(including, but not limited to, assessments for public improvements or benefit),
assessments for local improvement and maintenance districts, and all other
governmental impositions and charges of every kind and nature whatsoever,
regardless of whether now customary or within the contemplation of the parties
hereto and regardless of whether resulting from increased rate and/or valuation,
or whether extraordinary or ordinary, general or special, unforeseen or
foreseen, or similar or dissimilar to any of the foregoing (all of the foregoing
being hereinafter collectively called "Tax" or "Taxes") which, at any time
during the Lease Term, shall be applicable to Lessee or which shall be a lien
against the Premises, or shall become due and payable and a lien or charge upon
the Premises under or by virtue of any present or future laws, statutes,
ordinances, regulations, or other requirements of any governmental authority
whatsoever.  Lessee shall only be responsible for the Taxes assessed against the
Premises.  All taxes shall be prorated to the term of the Lease and only sums
applicable to the term of the Lease shall be included therein.  Notwithstanding
anything to the contrary in this Lease, Lessee's obligation to pay or reimburse
Lessor for Taxes will not mean the following: fines, interest, penalties (except
as a result of actions of Lessee); franchise, estate, gift, inheritance,
successorship, capital levy, capital stock or transfer taxes: income, excess
profits, or other similar revenue tax, assessment, charge or levy on rent;
installments of taxes other than the then current installment; installments
which are not applicable to the term of the Lease; cost and expenses associated
with contesting Taxes (provided that Lessee's share of any refund as a result of
such contest may be reduced by Lessee's  share of Lessor's reasonable costs and
expenses of obtaining such refund), Taxes associated with the property or
vehicles of other tenants of the Premises or their respective employees,
contractors and invitees, and Taxes of the type described in the second sentence
hereafter, to the extent that such Taxes are attributable to any other occupant
of the Premises or their space or activities.  The term "Environmental
Surcharge" shall include any and all expenses, taxes, charges or penalties
imposed by the Federal Department of Energy, Federal Environmental Protection
Agency, the Federal Clean Air Act, or any regulations promulgated thereunder, or
any other local, state or federal governmental agency or entity now or hereafter
vested 

Page 15

 
with the power to impose taxes, assessments or other types of surcharges as a
means of controlling or abating environmental pollution or the use of energy in
regard to the use, operation or occupancy of the Premises, but will not include
costs directly related to investigation or remediation of environmental
conditions or Hazardous Materials, unless related to actions or omissions of
Lessee as provided in Section 33 or as a result of an area wide assessment not
related to a specific lessee. The term "Tax" shall include, without limitation,
all taxes, assessments, levies, fees, impositions or charges levied, imposed,
assessed, measured, or based in any manner whatsoever (i) in whole or in part on
the Rent payable by Lessee under this Lease, (ii) upon or with respect to the
use, possession, occupancy, leasing, operation or management of the Premises,
(iii) upon this transaction or any document to which Lessee is a party creating
or transferring an interest or an estate in the Premises, (iv) upon Lessee's
business operations conducted at the Premises, (v) upon, measured by or
reasonably attributable to the cost or value of Lessee's equipment, furniture,
fixtures and other personal property located on the Premises or the cost or
value of any leasehold improvements made in or to the Premises by or for Lessee,
regardless of whether title to such improvements shall be in Lessor or Lessee,
or (vi) in lieu of or equivalent to any Tax set forth in this Section 16. In the
event any such Taxes are payable by Lessor and it shall not be lawful for Lessee
to reimburse Lessor for such Taxes, then the Rent payable thereunder shall be
increased to net Lessor the same net rent after imposition of any such Tax upon
Lessor as would have been payable to Lessor prior to the imposition of any such
Tax. It is the intention of the parties that Lessor shall be free from all such
Taxes and all other governmental impositions and charges of every kind and
nature whatsoever. However, nothing contained in this Section 16 shall require
Lessee to pay any Federal or State income, franchise, estate, inheritance,
succession, transfer or excess profits tax imposed upon Lessor. If any general
or special assessment is levied and assessed against all or any portion of the
Premises, Lessor agrees to use its best reasonable efforts to cause the
assessment to become a lien on the Premises securing repayment of a bond sold to
finance the improvements to which the assessment relates which is payable in
installments of principal and interest over the maximum term allowed by law. It
is understood and agreed that Lessee's obligation under this paragraph will be
prorated to reflect the Commencement Date and the end of the Lease Term. It is
further understood that if Taxes cover more than the Premises and Lessee does
not occupy the entire property to which such taxes shall apply, the Taxes will
be allocated to the portion of the Premises occupied by Lessee based on a pro-
rata square footage or other equitable basis, as reasonably determined by
Lessor. All tax payment by Lessee required herein shall be paid as part of the
monthly CAC.

Subject to any limitations or restrictions imposed by any deeds of trust or
mortgages now covering or affecting the Premises, Lessee shall have the right to
contest or review the amount or validity of any Tax by appropriate legal
proceedings but which is not to be deemed or construed in any way as relieving,
modifying or extending Lessee's covenant to pay such Tax at the time and in the
manner as provided in this Section 16.  However, as a condition of Lessee's
right to contest, if such contested Tax is not paid before such contest and if
the legal proceedings shall not operate to prevent or stay the collection of the
Tax so contested, Lessee shall, before instituting any such proceeding, protect
the Premises and the interest of Lessor and of the beneficiary of a deed of
trust or the mortgagee of a mortgage affecting the Premises against any lien
upon the Premises by a surety bond, issued by an insurance company acceptable to
Lessor and in an amount equal to one and one-half (1 1/2) times the amount
contested or, at Lessor's option, the amount of the contested Tax and the
interest and penalties in connection therewith.  Any contest as to the validity
or amount of any Tax, whether before or after payment, shall be made by Lessee
in Lessee's own name, or if required by law, in the name of Lessor or both
Lessor and Lessee.  Lessee shall defend, indemnify and hold harmless Lessor from
and against any and all costs or expenses, including attorneys' fees, in
connection with any such proceedings brought by Lessee, whether in its own name
or not.   Lessee shall be entitled to retain any refund of any such contested
Tax and penalties or interest thereon, which have been paid by Lessee.  Nothing
contained herein shall be construed as affecting or limiting Lessor's right to
contest any Tax at Lessor's expense.

17. Notices: Unless otherwise provided for in this Lease, any and all written
notices or other communication (the "Communication") to be given in connection
with this Lease shall be given in writing and shall be given by personal
delivery, 

Page 16

 
facsimile transmission (for any notices other than default notices) or by
mailing by registered or certified mail with postage thereon or recognized
overnight courier, fully prepaid, in a sealed envelope addressed to the intended
recipient as follows:

(a)  to the Lessor at:  10050 Bandley Drive
                        Cupertino, California 95014            
                        Attention: Carl E. Berg    
                        Facsimile No.: 408.725.1626 
 
 
(b)  to the Lessee at:  855 Branham Lane East
                        San Jose, California      
                        Attention: C.F.O.         
                        Facsimile No. 408.879.3920 

or such other addresses, or individual as may be designated by a Communication
given by a party to the other parties as aforesaid.  Any Communication given by
personal delivery shall be conclusively deemed to have been given and received
on a date it is so delivered at such address provided that such date is a
business day, otherwise on the first business day following its receipt, and if
given by registered or certified mail, on the day on which delivery is made or
refused or if given by recognized overnight courier, on the first business day
following deposit with such overnight courier and if given by facsimile
transmission, on the day on which it was transmitted provided such day is a
business day, failing which, on the next business day thereafter.

18. Entry By Lessor: Lessee shall permit Lessor and its agents to enter into and
upon the Premises at all reasonable times using the minimum amount of
interference and inconvenience to Lessee and Lessee's business, subject to any
security regulations of Lessee, for the purpose of inspecting the same or for
the purpose of maintaining said building, or for the purpose of making repairs,
alterations or additions to any other portion of said building, including the
erection and maintenance of such scaffolding, canopies, fences and props as may
be required, without any rebate of Rent and without any liability to Lessee for
any loss of occupation or quiet enjoyment of the Premises; and shall permit
Lessor and his agents, at any time within ninety (90) days prior to the end of
the Lease Term, to place upon said Premises any usual or ordinary "For Sale" or
"For Lease" signs and exhibit the Premises to prospective lessees at reasonable
hours.

19. Destruction Of Premises: In the event of a destruction of the Premises
during the Lease Term from any cause which is required to be covered by Lessor's
property insurance, Lessor shall forthwith repair the same to the condition
existing immediately prior to the destruction, but such destruction shall in no
way annul or void this Lease, except that Lessee shall be entitled to a
proportionate reduction of Rent while such repairs are being made to the extent
of payments received by Lessor under its Loss of Rents Insurance coverage
(coverage shall last up to twelve (12) months after start).  With respect to any
destruction which Lessor is obligated to repair or may elect to repair under the
terms of this paragraph, the provision of Section 1932, Subdivision 2, and of
Section 1933, Subdivision 4, of the Civil Code of the State of California are
waived by Lessee. Notwithstanding the above, Lessor is only obligated to repair
or rebuild to the extent of the total of (i)  insurance proceeds which are
payable pursuant to the insurance Lessor is required to carry under the terms of
this Lease, plus (ii) any deductible amount which Lessee is required to pay
under the terms of this Lease, plus (iii) any other funds Lessee may elect in
its discretion to contribute.  Should Lessor determine that insufficient or no
insurance proceeds (together with the deductible and any other contributed
funds) are available for repair or reconstruction of the Premises (for any
reason other than Lessor's failure to carry the insurance required by Section
6), Lessor, at its sole option, may terminate the Lease.  Notwithstanding such
Lessor termination Lessee shall have the option of continuing this Lease by
agreeing to pay all repair costs to the Premises which are not 

Page 17

 
required to be covered by Lessor's insurance. If the Premises is so damaged or
made unusable by fire or casualty that same cannot be restored and made suitable
and safe within 180 days from such damage or destruction, or if the restoration
of the Premises is not substantially completed within said one hundred eighty
day (180) period, Lessee may terminate the Lease effective as of the date of
such fire or casualty by written notice given to Lessor, whereupon the Lease
will terminate and all rent and other charges then due under the lease will be
apportioned as of the date of such fire casualty, subject to a one day delay for
each day of delay due to (i) governmental action after receipt of the building
permits for the Lessee Interior Improvements (other than governmental refusal to
approve work which fails to comply with the approved Lessee Improvement Plans or
applicable Law or the building permit), (ii) acts of God, (iii) due to
circumstances beyond Lessor's reasonable control and (iv) Lessee Delay.

20. Assignment And Subletting: Lessee shall not assign this Lease, or any
interest therein, and shall not sublet the Premises or any part thereof, or any
right or privilege appurtenant thereto, or cause any other person or entity (a
bona fide successor in interest, subsidiary or affiliate of Lessee excepted) to
occupy or use the Premises, or any portion thereof, without the advance written
consent of Lessor, which consent shall not be unreasonably withheld or delayed.
Any such assignment or subletting without such consent shall be void, and shall,
at the option of the Lessor, terminate this Lease.  This Lease shall not, or
shall any interest therein, be assignable, as to the interest of Lessee, by
operation of law, without the written consent of Lessor; provided, however, the
sale of Lessee's stock through a public exchange shall not be deemed to be an
assignment by operation of law. Notwithstanding the foregoing, Lessee may sublet
or assign this Lease to a legal entity which controls, is controlled by, or is
under common control with Lessee, or to a successor in interest, whether by
merger or acquisition (each of the foregoing shall be referred to herein as an
"Excepted Party"), provided there is no substantial reduction in the net worth
of the resulting entity, or to the purchaser of substantially all of the Lessees
business conducted in the Premises. Whether or not Lessor's consent to a
sublease or assignment is required, in the event of any sublease or assignment,
Lessee shall be and shall remain primarily liable for the performance of all
conditions, covenants, and obligations of Lessee hereunder and, in the event of
a default by an assignee or sublessee, Lessor may proceed directly against the
original Lessee hereunder and/or any other predecessor of such assignee or
sublessee without the necessity of exhausting remedies against said assignee or
sublessee.  If Lessee desires to assign its rights under this Lease or to sublet
all or any part of the Premises for substantially the remainder of the Lease
Term to a party other than an Excepted Party, Lessee shall first notify Lessor
of the proposed terms and conditions of such assignment or subletting.  Lessor
shall have the right of first refusal to enter into a direct Lessor-lessee
relationship with such party under such proposed terms and conditions (by
delivering written notice thereof to Lessee within ten (10) business days of
Lessee's delivery of notice to Lessor), in which event Lessee shall be relieved
of its obligations hereunder to the extent of the Lessor-lessee relationship
entered into between Lessor and such third party.

21. Condemnation: If any part of the Premises shall be taken for any public or
quasi-public use, under any statute or by right of eminent domain or private
purchase in lieu thereof, and a part thereof remains which is susceptible of
occupation hereunder, this Lease shall as to the part so taken, terminate as of
the date title vests in the condemnor or purchaser, and the Rent payable
hereunder shall be adjusted so that the Lessee shall be required to pay for the
remainder of the Lease Term only that portion of Rent as the value of the part
remaining.  The rental adjustment resulting will be computed at the same base
monthly rental rate for the remaining part not taken.  If all of the Premises,
or such part thereof be taken so that there does not remain a portion
susceptible for occupation hereunder, this Lease shall thereupon terminate, for
the purposes hereof, a portion susceptible for occupancy shall mean a portion of
the Premises in excess of 85% thereof.  If a part or all of the Premises be
taken, all compensation awarded upon such taking shall be payable to the Lessor.
Lessee may file a separate claim and be entitled to any award granted to Lessee
for condemnation proceeds (whether by award or payment under threat of
condemnation) based on: (i) the value of the condemned improvements Lessee has
the right to remove from the Premises; (ii) Lessee's moving cost; (iii) loss to
Lessee's goodwill as a consequence of the condemnation; and (iv) Lessee's trade
fixtures.

Page 18

 
22. Effects Of Conveyance: The term "Lessor" as used in this Lease, means only
the owner for the time being of the land and buildings constituting the
Premises, so that, in the event of any sale of said land or building, or in the
event of a ground lease of said building, Lessor shall be and hereby is entirely
freed and relieved of all covenants and obligations of Lessor hereunder, and it
shall be deemed and construed, without further agreement between the parties and
the purchaser of any such sale, or the Lessor of the building, that the
purchaser or lessor of the building has assumed and agreed to carry out any and
all covenants and obligations of the Lessor hereunder.  If any security is given
by Lessee to secure the faithful performance of all or any of the covenants of
this Lease on the part of Lessee, Lessor shall transfer and deliver the
security, as such, to the purchaser at any such sale of the building, and
thereupon the Lessor shall be discharged from any further liability.

23. Subordination: This Lease, in the event Lessor notifies Lessee in writing,
shall be subordinate to any ground lease, deed of trust, or other hypothecation
for security now or hereafter placed upon the real property at which the
Premises is a part and to any and all advances made on the security thereof and
to renewals, modifications, replacements and extensions thereof. Lessee agrees
to promptly execute any commercially reasonable documents which may be required
to effectuate such subordination. Notwithstanding such subordination, if Lessee
is not in default and so long as Lessee shall pay the Rent and observe and
perform all of the provisions and covenants required under this Lease, Lessee's
right to quiet possession of the Premises and Lessee's right and remedies under
this Lease shall not be disturbed or effected by any subordination, and each
successor to Lessor's interest in the Lease (by foreclosure, deed-in-lieu of
foreclosure, or otherwise) shall be bound by and shall perform the obligations
of the Lessor to be performed after the date it acquires the Lessor's interest
in the Lease (except that the successor shall not be liable for any prior
defaults of the Lessor, the return of any security deposit not transferred to
the successor, nor for the cost of restoring the Premises following a peril or
condemnation in excess of the insurance and condemnation proceeds actually
received).  Prior to the Commencement Date, Lessor shall deliver to Lessee a
nondisturbance agreement on commercially reasonable terms from the holder of any
existing security instruments or ground leases.

24. Waiver: The waiver by Lessor or Lessee of any breach of any term, covenant
or condition, herein contained shall not be construed to be a waiver of such
term, covenant or condition or any subsequent breach of the same or any other
term, covenant or condition therein contained.  The subsequent acceptance of
Rent hereunder by Lessor shall not be deemed to be a waiver of Lessee's breach
of any term, covenant, or condition of the Lease.

25. Holding Over: Any holding over after the end of the Lease Term requires
Lessor's written approval prior to the end of the Lease Term, which,
notwithstanding any other provisions of this Lease, Lessor may withhold.  Such
holding over shall be construed to be a tenancy at sufferance from month to
month.  Lessee shall pay to Lessor monthly base rent equal to one and one-
quarter (1.25) times the monthly base rent installment due in the last month of
the Lease Term and all other additional rent and all other terms and conditions
of the Lease shall apply, so far as applicable.  Holding over by Lessee without
written approval of Lessor shall subject Lessee to the liabilities and
obligations provided for in this Lease and by law, including, but not limited to
those in Section 2 of this Lease.  Lessee shall indemnify and hold Lessor
harmless against any loss or liability resulting from any delay caused by Lessee
in surrendering the Premises, including without limitation, any claims made or
penalties incurred by any succeeding lessee or by Lessor.  No holding over shall
be deemed or construed to exercise any option to extend or renew this Lease in
lieu of full and timely exercise of any such option as required hereunder.

26. Lessor's Liability: If Lessee should recover a money judgment against Lessor
arising in connection with this Lease, the judgment shall be satisfied only out
of the Lessor's interest in the Premises and neither Lessor or any of its
partners shall be liable personally for any deficiency.

Page 19

 
27. Estoppel Certificates: Lessee or Lessor shall at any time during the Lease
Term, upon not less than ten (10) business days prior written notice, execute
and deliver a statement in writing certifying that, this Lease is unmodified and
in full force and effect (or, if modified, stating the nature of such
modification) and the dates to which the Rent and other charges have been paid
in advance, if any, and acknowledging that there are not, to their knowledge,
any uncured defaults on the part of Lessor hereunder or specifying such defaults
(if they are claimed).  Any such statement may be conclusively relied upon by
any prospective purchaser or encumbrancer of the Premises. Failure to deliver
such a statement within such time shall be conclusive upon the Lessee that (a)
this Lease is in full force and effect, without modification except as may be
represented in the certificate presented for execution; by Lessor, and (b) there
are no uncured defaults in performance.

28. Time: Time is of the essence of the Lease.

29. Captions: The headings on titles to the paragraphs of this Lease are not a
part of this Lease and shall have no effect upon the construction or
interpretation of any part thereof.  This instrument contains all of the
agreements and conditions made between the parties hereto and may not be
modified orally or in any other manner than by an agreement in writing signed by
all of the parties hereto or their respective successors in interest.

30. Party Names: Lessor and Lessee may be used in various places in this Lease
as a substitute for Lessor and Lessee respectively.

31. Earthquake Insurance: As a condition of Lessor agreeing to waive the
requirement for earthquake insurance, Lessee agrees that it will pay, as
additional Rent, which shall be included in the monthly CAC, an amount not to
exceed Twenty-Six Thousand Eight Hundred Dollars ($26,800) per year for
earthquake insurance if Lessor desires to obtain some form of earthquake
insurance in the future, if and when available, on terms acceptable to Lessor as
determined in the sole and absolute discretion of Lessor.

32. Intentionally Omitted.

33. Hazardous Materials

33.1 Definitions: As used in this Lease, the following terms shall have the
following meaning:

     a. The term "Hazardous Materials" shall mean (i) polychlorinated biphenyls;
     (ii) radioactive materials and (iii) any chemical, material or substance
     now or hereafter defined as or included in the definitions of "hazardous
     substance" "hazardous water", "hazardous material", "extremely hazardous
     waste", "restricted hazardous waste" under Section 25115, 25117 or 15122.7,
     or listed pursuant to Section 25140 of the California Health and Safety
     Code, Division 20, Chapter 6.5 (Hazardous Waste Control Law), (ii) defined
     as "hazardous substance" under Section 25316 of the California Health and
     Safety Code, Division 20, Chapter 6.8 (Carpenter-Presley-Tanner Hazardous
     Substances Account Act), (iii) defined as "hazardous material", "hazardous
     substance", or "hazardous waste" under Section 25501 of the California
     Health and Safety Code, Division 20, Chapter 6.95 (Hazardous Materials
     Release, Response, Plans and Inventory), (iv) defined as a "hazardous
     substance" under Section 25181 of the California Health and Safety Code,
     Division 20l, Chapter 6.7 (Underground Storage of Hazardous Substances),
     (v) petroleum, (vi) asbestos, (vii) listed under Article 9 or defined as
     "hazardous" or "extremely hazardous" pursuant to Article II of Title 22 of
     the California Administrative Code, Division 4, Chapter 20, (viii) defined
     as "hazardous substance" pursuant to Section 311 of the Federal Water
     Pollution Control Act, 33 U.S.C. 1251 et seq. or listed pursuant to Section
     1004 of the Federal Water Pollution Control Act (33 U.S.C. 1317), (ix)
     defined as a "hazardous waste", pursuant to Section 1004 of the Federal
     Resource Conservation and Recovery Act, 42 U.S.C. 6901 et seq., (x) defined
     as "hazardous substance" pursuant to 

Page 20

 
     Section 101 of the Comprehensive Environmental Responsibility
     Compensations, and Liability Act, 42 U.S.C. 9601 et seq., or (xi) regulated
     under the Toxic Substances Control Act, 156 U.S.C. 2601 et seq.

     b. The term "Hazardous Materials Laws" shall mean any local, state and
     federal laws, rules, regulations, or ordinances relating to the use,
     generation, transportation, analysis, manufacture, installation, release,
     discharge, storage or disposal of Hazardous Material.

     c. The term "Lessor's Agents" shall mean Lessor's agents, representatives,
     employees, contractors, subcontractors, directors, officers, partners,
     tenants, and invitees.

     d. The term "Lessee's Agents" shall mean Lessee's agents, representatives,
     employees, contractors, subcontractors, directors, officers, partners,
     former employees who have not been employed by any other occupant of the
     Premises, relatives of employees or such former employees, and invitees.

33.2 Lessee's Right to Investigate: Lessee shall be entitled to cause such
inspection, soils and ground water tests, and other evaluations to be made of
the Premises as Lessee deems necessary regarding (i) the presence and use of
Hazardous Materials in or about the Premises, and (ii) the potential for
exposure to Lessee's employees and other persons to any Hazardous Materials used
and stored by previous occupants in or about the Premises.  Lessee shall provide
Lessor with copies of all inspections, tests and evaluations.  Lessee shall
indemnify, defend and hold Lessor harmless from any cost, claim or expense
arising from such entry by Lessee or from the performance of any such
investigation by such Lessee.

33.3 Lessor's Representations: Lessor hereby represents and warrants to the best
of Lessor's knowledge that the Premises are, as of the date of this Lease, in
compliance with all Hazardous Material Laws.

33.4 Lessee's Obligation to Indemnify: Lessee, at its sole cost and expense,
shall indemnify, defend, protect and hold Lessor and Lessor's Agents harmless
from and against any and all cost or expenses, including those described under
subparagraphs i, ii and iii herein below set forth, to the extent arising from
or caused in whole or in part, directly or indirectly by:

     a. Lessee's or Lessee's Agents' use, analysis, storage, transportation,
     disposal, release, threatened release, discharge or generation of Hazardous
     Material to, in, on, under, about or from the Premises ("Hazardous
     Materials Activities") in violation of applicable Hazardous Material Laws;
     or

     b. Lessee's or Lessee's Agents failure to comply with Hazardous Material
     Laws applicable to their Hazardous Material Activities; or

The cost and expenses so indemnified against include, but are not limited to the
following:

     i.   Any and all claims, actions, suits, proceedings, losses, damages,
     liabilities, deficiencies, forfeitures, penalties, fines, punitive damages,
     cost or expenses;

     ii.  Any claim, action, suit or proceeding for personal injury (including
     sickness, disease, or death), tangible or intangible property damage,
     compensation for lost wages, business income, profits or other economic
     loss, damage to the natural resources of the environment, nuisance,
     pollution, contamination, leaks, spills, release or other adverse effects
     on the environment;

     iii. The cost of any repair, clean-up, treatment or detoxification of the
     Premises necessary to bring the Premises into compliance with all Hazardous
     Material Laws, including the preparation and implementation of any closure,
     disposal, remedial action, or other actions with regard to the Premises,
     and expenses (including, without limitation, reasonable attorney's fees and
     consultants fees, investigation and laboratory fees, court cost and
     litigation expenses) relating thereto.

Page 21

 
33.5 Lessee's Obligation to Remediate Contamination: Lessee shall, at its sole
cost and expense, promptly take any and all action necessary as required by
applicable Hazardous Materials Laws to remediate contamination of the Premises
by Hazardous Materials for which Lessee is responsible under Article 33.4.

33.6 Lessor's Waiver and Obligation to Remediate Contamination: If required by a
governmental agency having jurisdiction and after Lessor has exhausted all its
other legal remedies, Lessor shall, at its sole cost and expense, promptly take
any and all action necessary to remediate repair, clean-up, treatment or
detoxification of the Premises necessary to bring the Premises into compliance
with all Hazardous Material Laws,  other than remedial actions required to be
completed by Lessee pursuant to Section 33.4 & 33.5.

33.7 Obligation to Notify: Lessor and Lessee shall each give written notice to
the other as soon as reasonably practical of any contamination of the Premises
by Hazardous Materials which constitutes a violation of any Hazardous Material
Laws.

33.8 Survival: The obligations of Lessee under this Section 33 shall survive the
Lease Term or earlier termination of this Lease.

33.9 Certification and Closure: On or before the end of the Lease Term or
earlier termination of this Lease, Lessee shall deliver to Lessor a
certification executed by Lessee stating that, to the best of Lessee's
knowledge, there exists no violation of Hazardous Material Laws resulting from
Lessee's obligation in Paragraph 33.  If pursuant to local ordinance, state or
federal law, Lessee is required, at the expiration of the Lease Term, to submit
a closure plan for the Premises to a local, state or federal agency, then Lessee
shall, at its sole cost and expense, comply with all agency requirements
concerning such plan and furnish to Lessor a copy of such plan and proof of
compliance.

33.10 Prior Hazardous Materials: Notwithstanding anything to the contrary in
this Lease, and except for any Environmental Surcharges (as defined in Section
16), Lessee shall have no obligation to clean up or comply with any Hazardous
Materials Laws or to hold Lessor harmless or reimburse Lessor (as a CAC charge
or otherwise) with respect to any Hazardous Material or wastes discovered on the
Premises which were introduced into, in, on, about, from or under the Premises
prior or subsequent to the Lease Term or any Hazardous Materials originating
from any source off Premises or caused by any release or disposal of Hazardous
Material by Lessor, Lessor's Agents, any other occupant of the Premises or their
respective agents, employees, contractors or invitees; provided, however, that
the foregoing shall not release Lessee or Lessee's Agents from its obligations
under Section 33.4, above.

34. Brokers: Lessor and Lessee represent that they have not utilized or
contacted a real estate broker or finder with respect to this Lease  and Lessee
agrees to indemnify and hold Lessor harmless against any claim, cost, liability
or cause of action asserted by any broker or finder claiming through Lessee .
Lessor represents and warrants that it has not utilized or contacted a real
estate broker or finder with respect to this Lease and Lessor agrees to
indemnify and hold Lessee harmless against any claim, cost, liability or cause
of action asserted by any broker or finder claiming through Lessor.

35. Option to Extend: A. Option: Lessor hereby grants to Lessee one (1) option
                         -------                                              
to extend the Lease Term, each for a period of five (5) years, on the following
terms and conditions, which shall apply separately to each option to extend:

     (i) Lessee shall give Lessor written notice of its exercise of one of its
     options to extend no earlier than twenty-four (24) calendar months, nor
     later than six (6) calendar months before the Lease Term would end but for
     said exercise. Lessee must provide Lessor written notice of its exercise of
     its options as provided hereunder at least six (6) months before the Lease
     Term would end but for said exercise for purposes of negotiating rental
     terms.  Lessee may withdraw its notice of 

Page 22

 
     exercise of an extension option for any reason prior to six (6) months
     before the Lease Term would end but for said exercise. Lessor shall provide
     Lessee with Lessor's proposed base monthly rent for the option period
     within twenty (20) days of Lessee's request. Lessee may rescind its notice
     of exercise at any time, but only provided it delivers and rescission
     notice in writing to Lessor at least six (6) months before the Lease Term
     would end but for said exercise and, subject to the provisions of this
     Section 35, such notice shall operate to rescind Lessee's election to
     extend the Lease Term. Upon any extension of the Lease Term pursuant to
     this Section 35, the term "Lease Term" as used in this Lease shall
     thereafter include the then extended term. Time is of the essence.

     (ii)  Lessee may not extend the Lease Term pursuant to any option granted
     by this section 35 if Lessee is in default as of the date of the exercise
     of its option. If Lessee has committed a monetary or material non-monetary
     default as defined in Section 14 that has not been cured or waived by
     Lessor in writing by the date that any extended term is to commence, then
     Lessor may elect not to allow the Lease Term to be extended,
     notwithstanding any notice given by Lessee of an exercise of this option to
     extend by exercising its remedy to declare termination of this Lease on
     account of such default.

     (iii) Lessee must exercise each option consecutively, and if it fails to
     exercise any one option, it waives the right to exercise the subsequent
     option and the Lease Term shall not be extended further.

     (iv)  All terms and conditions of this Lease shall apply during each
     extended term, except that the base monthly rent and base month rent
     increases for each extended term shall be determined as provided in Section
     35 (B) below

     (v)   Upon any extension of the Lease Term pursuant to this Section 35, the
     term "Lease Term" as used in this Lease shall thereafter include the then
     extended term.

     (vi)  The option rights of LynuxWorks Inc. granted under this Section 35
     are granted for LynuxWorksInc. personal benefit and may not be assigned or
     transferred by LynuxWorks Inc. except to a permitted assignee of this Lease
     pursuant to Section 20. Option rights may not be exercised if LynuxWorks
     Inc. (or such permitted assignee) is not occupying the Premises at the time
     of exercise.

B. Extended Term Rent - Option Period: The monthly base Rent for the Premises
   -----------------------------------                                       
during the extended term shall equal (a) the fair market monthly base rent for
the Premises as of the commencement date of the extended term, including
periodic rental increases, if applicable, but in no case, less than (b) the base
monthly rent payable under this Lease during the last month of the prior Lease
term. Promptly upon Lessee's exercise of the option to extend, Lessee and Lessor
shall meet and attempt to agree on the fair market monthly base rent for the
Premises as of the commencement date of the extended term. In the event the
parties fail to agree upon the amount of the monthly base rent for the extended
term prior to commencement thereof, the monthly base rent for the extended term
shall be determined by appraisal in the manner hereafter set forth; provided,
however, that in no event shall the monthly base rent for the extended term be
less than in the immediate preceding period. In the event it becomes necessary
under this paragraph to determine the fair market monthly base Rent of the
Premises by appraisal, Lessor and Lessee each shall appoint a real estate
appraiser who shall be a member of the American Institute of Real Estate
Appraiser ("AIREA") and such appraisers shall each determine said fair market
monthly Rent taking into account the rental value of the Premises and the
amenities provided by the outside areas, the common areas, and the Premises, the
other terms and conditions of this Lease (as compared to the terms of the
comparable leases used for comparison), and prevailing comparable rentals in the
area. Such appraisers shall, within twenty (20) business days after their
appointment, complete their appraisals and submit their appraisal reports to
Lessor and Lessee. If the fair market monthly base rent established in the two
(2) appraisals varies by five percent

Page 23

 
(5%) or less of the higher appraisal, the average of the two shall be
controlling. If said fair market monthly base rent varies by more than five
percent (5%) of the higher appraisal, said appraisers, within ten (10) days
after submission of the last appraisal, shall appoint a third appraiser who
shall be a member of the AIREA and who shall also be experienced in the
appraisal of rent values and adjustment practices for commercial properties in
the vicinity of the Premises. Such third appraiser shall, within twenty (20)
business days after his appointment, determine by evaluating the first two
appraisals which more accurately reflects the fair market monthly base rent
taking into account the same factors referred to above, and submit his appraisal
report to Lessor and Lessee. If the two appraisers appointed by Lessor and
Lessee are unable to agree upon a third appraiser within the required period in
accordance with the foregoing, application shall be made within twenty (20) days
thereafter by either Lessor or Lessee to AIREA, which shall appoint a member of
said institute willing to serve as appraiser. The cost of all appraisals under
this subparagraph shall be borne equally be Lessor and Lessee. If rent is not
determined at least ten (10) days before the date which is six (6) months prior
to expiration of the Lease Term, the deadline for Lessee's right to rescind its
election to renew will be extended ten (10) days after the parties shall agree
upon the base rent for the renewal term or ten (10) days after Lessee receives
notice of determination of the third appraiser.

36.  Approvals & Reimbursement Requests: Whenever in this Lease the Lessor's or
Lessee's consent is required, such consent shall not be unreasonably or
arbitrarily withheld or delayed. In the event that the Lessor or Lessee does not
respond to a request for any consents which may be required of it in this Lease
within ten business days of the request of such consent in writing by the Lessee
or Lessor, such consent shall be deemed to have been given by the Lessor or
Lessee. Any expenditure by a party permitted or required under the 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
documentary evidence available for inspection and review by the other party or
its representative during normal business hours.

37.  Authority: Each party executing this Lease represents and warrants that he
or she is duly authorized to execute and deliver the Lease. If executed on
behalf of a corporation, that the Lease is executed in accordance with the by-
laws of said corporation (or a partnership that the Lease is executed in
accordance with the partnership agreement of such partnership), that no other
party's approval or consent to such execution and delivery is required, and that
the Lease is binding upon said individual, corporation (or partnership) as the
case may be in accordance with its terms.

38. Indemnification:

38.1 Of Lessor: Except to the extent caused by the sole negligence or willful
misconduct of Lessor or Lessor's Agents or Lessor's breach of this Lease or
applicable Law, Lessee shall defend, indemnify and hold Lessor harmless from and
against any and all obligations, losses, costs, expenses, claims, demands,
attorney's fees, investigation costs or liabilities on account of, or arising
out of the use or occupancy of the Premises, Lessee's or Lessee's Agents' use or
occupancy of the Premises, or any acts or omissions to act of Lessee or Lessee's
Agents, including, without limitation, any of the foregoing provisions arising
out of the use, generation, manufacture, installation, release, discharge,
storage, or disposal of Hazardous Materials by Lessee or Lessee's Agents in
violation of applicable Hazardous Material Laws. It is understood that Lessee is
and shall be in control and possession of the Premises and that Lessor shall in
no event be responsible or liable for any injury or damage or injury to any
person whatsoever, happening on, in, or in connection with the Premises, or for
any injury or damage to the Premises or any part thereof caused by Lessee's or
Lessee's Agents' use or occupancy thereof, except to the extent caused by the
sole negligence or willfulness conduct of Lessor or Lessor's Agents, and Lessee
releases and indemnifies Lessor from all other liability arising out of the
condition, use or occupancy of the Premises, and of Lessee's or Lessee's Agents'
use or occupancy of the Premises. This Lease is entered into on the express
condition that Lessor shall not be liable for, or suffer loss by reason of
injury to person or 

Page 24

 
property, from whatever cause, which in any way may be connected with the use,
condition or occupancy of the Premises or personal property located therein, or
Lessee's or Lessee's Agents' use or occupancy of the Premises, except to the
extent caused by the sole negligence or willfulness conduct of Lessor or
Lessor's Agents. Except to the extent caused by the sole negligence or willful
misconduct of Lessor or Lessor's Agents or Lessor's breach of this Lease or
applicable Law, Lessee releases and indemnifies Lessor from all other liability
arising out of the Lessee's use or occupancy of the Premises. The provisions of
this Lease permitting Lessor to enter and inspect the Premises are for the
purpose of enabling Lessor to become informed as to whether Lessee is complying
with the terms of this Lease and Lessor shall be under no duty to enter, inspect
or to perform any of Lessee's covenants set forth in this Lease. Lessee shall
further indemnify, defend and hold harmless Lessor from and against any and all
claims arising from any breach or default in the performance of any obligation
on Lessee's part to be performed under the terms of this Lease. The provisions
of Section 38.1 shall survive the Lease Term or earlier termination of this
Lease with respect to any damage, injury or death occurring during the Lease
Term.

38.2 Of Lessee: Lessor shall defend, indemnify and hold Lessee harmless from and
against any and all obligations, losses, costs, expenses, claim, demands,
attorney's fees, investigation costs or liabilities on account of, or arising
out of the sole negligence or willful misconduct of Lessor or Lessor's Agents or
an incurred breach by Lessor of its obligations as provided for under this
Lease. The provisions of Section 38.2 shall survive the Lease Term or earlier
termination of this Lease with respect to any damage, injury or death occurring
during the Lease Term.

39.  Successors And Assigns: The covenants and conditions herein contained
shall, subject to the provisions as to assignment, apply to and bind the heirs,
successors, executors, administrators and assigns of all of the parties hereto;
and all of the parties hereto shall be jointly and severally liable hereunder.

40.  Miscellaneous Provisions: All rights and remedies hereunder are cumulative
and not alternative to the extent permitted by law and is in addition to all
other rights or remedies in law and in equity.

41.  Choice of Law: This lease shall be construed and enforced in accordance
with the substantive laws of the State of California. The language of 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 Lessor or Lessee.

42.  Lease Cancellation: Lessee shall have option to cancel lease at anytime
during Lease Term if Lessee signs a new Lease with Lessor for 85,000 sq. ft. or
more.

43.  Entire Agreement: This Lease is the entire agreement between the parties,
and there are no agreements or representations between the parties except as
expressed herein. Except as otherwise provided for herein, no subsequent change
or addition to this Lease shall be binding unless in writing and signed by the
parties hereto.

                           [Signatures on Next Page]

Page 25

 
                                   Exhibit A

                                NNN DEFINITION


A Berg & Berg Net, Net, Net Lease generally includes the following:

A. Lessor has financial and actual responsibility for structural defects in the 
building foundation, bearing walls, and roof structure.


B. Lessee has financial and actual responsibilities for everything else, 
including but not limited to the following:

     1. Taxes - all real property and personal property taxes and or anything 
equivalent during term of lease, including assessments.

     2. Maintenance, repair and/or replacement of everything on the Premises 
except for structural defects in A above.

     3. Insurance - public liability, property damage and loss of rents, 
insurance plus all deductibles resulting from any and all claims (Lessee to be 
responsible for Earthquake insurance on commercially reasonable terms.)

     4. Compliance with law - Lessee, at Lessee's sole expense, shall promptly 
comply with all laws, ordinances, codes, rules, orders, directions, and 
regulations of any lawful governmental authority after commencement date of 
Lease, relating to or affecting the condition, use or occupancy of the Premises.

     5. Hazardous materials - Lessee shall not permit the illegal use, analysis,
storage, transportation, disposal, release, threatened release, discharge or 
generation of any Hazardous Material, and will indemnify Lessor regarding same.

     6. Indemnification - Lessee indemnifies Lessor from and against all claims 
now or hereafter arising from any act, work or things done or permitted to be 
done or otherwise suffered or any omission to act, in or about the Premises, 
other than those caused by the sole gross negligence or willful misconduct of 
the Lessor.

     7. Utilities - Utilities and services to the building are the sole 
responsibility of Lessee, except as a result of Lessor's sole gross negligence 
or willful misconduct.

Page 26

 
In Witness Whereof, Lessor and Lessee have executed this Lease effective, the
day and year first above written.

Lessor Lessee Mission West Properties, L.P. LynuxWorks, Inc. By: Mission West Properties, Inc. General Partner By: /s/ Carl E. Berg By: /s/ Bhupi Singh ----------------------------------------------- ----------------------------------------------- signature of authorized representative signature of authorized representative Carl E. Berg --------------------------------------------------- _____________________________________________________ printed name printed name: Bhupi Singh Pres --------------------------------------------------- _____________________________________________________ Title Title: Vice President Finance & CFO 2/Oct/2000 2 October 2000 --------------------------------------------------- ----------------------------------------------------- Date date
Page 26 Exhibit B BUILDING SHELL Mission West Properties ("Building Shell") includes the following items in customary quantities and quality. Final list to be attached. Exterior walls Foundations Floors Slabs Roof structures and membrane Glazing Exit doors Truck doors Landscaping Parking and paving Storm sewer line to building Sanitary sewer line to building Water line to building Paint of exterior walls Shell architecture and engineering (Mission West staff) All permits for the above items Page 27 Exhibit C Building Shell plans to be attached. Page 28 Exhibit D Lessee Interior Improvement Plans to be attached. Page 29 Exhibit E Lessee Approval Deadlines Lease signed 10/02/00 Approval of site plan Approved Approval of building elevation Approved Approval of restroom, stairs and underground plumbing Approved Approval of preliminary floor plan, single line 09/30/00 Approval of interior plans and specifications 10/20/00 Final selection of all material and interior finishes for construction such as Carpet, ceramic tile, paint, and any other lessee selected materials and finishes 10/30/00
The foregoing dates assume that Lessor provides Lessee all of the information for Lessee to take the required action not less than ten (10) business days prior to such dates. Lessee shall not unreasonably withhold approval of final shell or interior plans if they conform in general to the preliminary site plan, preliminary elevation, and floor plans. The Commencement Date shall be extended one day for each day Lessee does not meet each deadline set forth on this Exhibit E and Lessee shall pay Rent for any delays that effect the Substantial Completion Date which shall be considered a Lessee Delay. Page 30 Exhibit F Cost Statement to be attached Page 31 Exhibit G Form of Lien Waiver to be attached Page 32