BASIC LEASE INFORMATION
                                   OFFICE NET

<TABLE>
<S>                                               <C>
LEASE DATE:                                       May 20, 1998

TENANT:                                           VaxGen, Inc., a Delaware corporation

TENANT'S NOTICE ADDRESS:                          1000 Marina Blvd., Suite 200, Brisbane, CA
                                                  with copy to:
                                                  1420 5th Avenue, Suite 2200, Seattle, WA 98101

TENANT'S BILLING ADDRESS:                         1000 Marina Blvd., Suite 200, Brisbane, CA

TENANT CONTACT:                                   Marina Trumbull
                                                  PHONE NUMBER:      650-225-7000
                                                  FAX NUMBER:        650-225-7057

LANDLORD:                                         Spieker Properties, L.P., a California limited
                                                  partnership

LANDLORD'S NOTICE ADDRESS:                        Spieker Properties
                                                  1000 Marina Blvd., Suite 104
                                                  Brisbane, CA 94005

LANDLORD'S REMITTANCE ADDRESS:                    Spieker Properties
                                                  P.O. Box 45587
                                                  Department 11561
                                                  San Francisco, CA 94145-0587

PROJECT DESCRIPTION:                              Sierra Point 1000 Marina Blvd., Brisbane, CA

BUILDING DESCRIPTION:                             A six-story, multi-tenanted office building

PREMISES:                                         Approximately 16,483 rentable square feet known as
                                                  Suite 200; the entire second floor.

PERMITTED USE:                                    General sales; office and administration, light
                                                  laboratory

OCCUPANCY DENSITY:                                n/a

PARKING DENSITY:                                  4 spaces per 1000 usable square feet

PARKING AND PARKING CHARGE:                       66 non-exclusive spaces at $0 per space/per month

SCHEDULED TERM COMMENCEMENT DATE:                 August 1, 1998

SCHEDULED LENGTH OF TERM:                         Eighty four (84) months

SCHEDULED TERM EXPIRATION DATE:                   July 31, 2005

RENT:
      BASE RENT:                                  $32,966.00 per month
                                                  (subject to adjustment as provided in Paragraph 39,
                                                  hereof)

      ESTIMATED FIRST YEAR OPERATING EXPENSES:    $11,702.93 per month

SECURITY DEPOSIT:                                 $210,000.00  See Addendum #3

TENANT'S PROPORTIONATE SHARE:

      OF BUILDING:                                16.62%

      OF PROJECT:                                 16.62%
</TABLE>



                                       1

<PAGE>   2

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

LANDLORD                                    TENANT

Spieker Properties, L.P.,                   VaxGen, Inc., a Delaware corporation
a California limited partnership
                                            /s/  ROBERT F. PACQUER
                                            ------------------------------------
By: Spieker Properties, Inc.
    a Maryland corporation,                 By:  Robert F. Pacquer
    its general partner                     Its:  Chief Financial Officer

    /s/  PETER H. SCHNUGG
    -----------------------------
    By:  Peter H. Schnugg
    Its:  Senior Vice President



                                       2
<PAGE>   3
                                     LEASE

THIS LEASE is made as of the twentieth day of May, 1998, by and between Spieker
Properties, L.P., a California limited partnership (hereinafter called
"Landlord"), and VaxGen, Inc., a Delaware corporation (hereinafter called
"Tenant").

                                   1. PREMISES

        Landlord leases to Tenant and Tenant leases from Landlord, upon the
terms and conditions hereinafter set forth, those premises (the "Premises")
outlined in red on Exhibit B and described in the Basic Lease Information. The
Premises shall be all or part of a building (the "Building") and of a project
(the "Project"), which may consist of more than one building and additional
facilities, as described in the Basic Lease Information. The Building and
Project are outlined in blue and green respectively on Exhibit B. Landlord and
Tenant acknowledge that physical changes may occur from time to time in the
Premises, Building or Project, and that the number of buildings and additional
facilities which constitute the Project may change from time to time, which may
result in an adjustment in Tenant's Proportionate Share, as defined in the Basic
Lease Information, as provided in Paragraph 7.A.

                      2. POSSESSION AND LEASE COMMENCEMENT

A.

B. CONSTRUCTION OF IMPROVEMENTS. If this Lease pertains to a Building to be
constructed or improvements to be constructed within a Building, the provisions
of this Paragraph 2.B. shall apply in lieu of the provisions of Paragraph 2.A.
above and the term commencement date ("Term Commencement Date") shall be the
earlier of the date on which: (1) Tenant takes possession of some or all of the
Premises; or (2) the improvements to be constructed or performed in the Premises
by Landlord (if any) shall have been substantially completed in accordance with
the plans and specifications, if any, described on Exhibit C and Tenant's taking
of possession of the Premises or any part thereof shall constitute Tenant's
confirmation of substantial completion for all purposes hereof, whether or not
substantial completion of the Building or Project shall have occurred. If for
any reason Landlord cannot deliver possession of the Premises to Tenant on the
scheduled Term Commencement Date, Landlord shall not be subject to any liability
therefor, nor shall Landlord be in default hereunder except as provided in this
Paragraph 2.B. nor shall such failure affect the validity of this Lease, and
Tenant agrees to accept possession of the Premises at such time as such
improvements have been substantially completed, which date shall then be deemed
the Term Commencement Date. Tenant shall not be liable for any Rent for any
period prior to the Term Commencement Date (but without affecting any
obligations of Tenant

<PAGE>   4
under any improvement agreement appended to this Lease). In the event of any
dispute as to substantial completion of work performed or required to be
performed by Landlord, the certificate of Landlord's architect or general
contractor shall be conclusive. Substantial completion shall have occurred
notwithstanding Tenant's submission of a punchlist to Landlord, which Tenant
shall submit, if at all, with fourteen (14) business days after the Term
Commencement Date or otherwise in accordance with any improvement agreement
appended to this Lease. Upon Landlord's request, Tenant shall promptly execute
and return to Landlord a "Start-Up Letter" in which Tenant shall agree, among
other things, to acceptance of the Premises and to the determination of the Term
Commencement Date, in accordance with the terms of this Lease, but Tenant's
failure or refusal to do so shall not negate Tenant's acceptance of the Premises
or affect determination of the Term Commencement Date. The Commencement Date,
Rent and Tenant's other obligations shall be postponed to the extent Tenant is
unable to occupy the Premises because Landlord fails: (i) to substantially
complete any improvements to the Premises required to be performed by Landlord
under this Lease, or (ii) to deliver possession of the Premises for any other
reason, except to the extent that Tenant, it's contractors, agents or employees
have caused such failure. Any such delay in the Commencement Date shall not
subject Landlord to liability for loss or damage resulting therefrom, and
Tenant's sole recourse with respect thereto shall be the postponement of Rent
and other obligations. Notwithstanding the foregoing, in the event Landlord's
failures described above have caused the delay of the Commencement Date, without
Tenant delay or Force Majeure contributing to such delay, and the Commencement
Date is delayed for more than sixty (60) days past the date set forth in the
Basic Lease Information, then Landlord shall credit to Tenant, for each day of
delay after such sixty (60) day period until possession of the Premises is
delivered to Tenant, the amount of $1,488.96. For purposes of this Paragraph 2,
delays caused by the agents or contractors of a party shall be deemed to be
delays caused by that party.

                                     3. TERM

        The term of this Lease (the "Term") shall commence on the Term
Commencement Date and continue in full force and effect for the number of months
specified as the Length of Term in the Basic Lease Information or until this
Lease is terminated as otherwise provided herein. If the Term Commencement Date
is a date other than the first day of the calendar month, the Term shall be the
number of months of the Length of Term in addition to the remainder of the
calendar month following the Term Commencement Date.

                                     4. USE

A. GENERAL. Tenant shall use the Premises for the permitted use specified in the
Basic Lease Information ("Permitted Use") and for no other use or purpose.
Tenant shall control Tenant's employees, agents, customers, visitors, invitees,
licensees, contractors, assignees and subtenants (collectively, "Tenant's
Parties") in such a manner that Tenant and Tenant's Parties cumulatively do not
exceed the occupant density (the "Occupancy Density") or the parking density
(the "Parking Density") specified in the Basic Lease Information at any time.
Tenant shall pay the Parking Charge specified in the Basic Lease Information as
Additional Rent (as hereinafter defined) hereunder. So long as Tenant is
occupying the Premises, Tenant and Tenant's Parties shall have the nonexclusive
right to use, in common with other parties occupying the Building or Project,
the parking areas, driveways and other common areas of the Building and Project,
subject to the terms of this Lease and such rules and regulations as Landlord
may from time to time prescribe. Landlord reserves the right, without notice or
liability to Tenant, and without the same constituting an actual or constructive
eviction, to alter or modify the common areas from time to time, including the
location and configuration thereof, and the amenities and facilities which
Landlord may determine to provide from time to time, provided, however, that any
such changes shall not materially affect or impair Tenant's use of or access to
the Premises.

B. LIMITATIONS. Tenant shall not permit any odors, smoke, dust, gas, substances,
noise or vibrations to emanate from the Premises or from any portion of the
common areas as a result of Tenant's or any Tenant's Party's use thereof, nor
take any action which would constitute a nuisance or would disturb, obstruct or
endanger any other tenants or occupants of the Building or Project or elsewhere,
or interfere with their use of their respective premises or common areas.
Storage outside the Premises of materials,


                                      
<PAGE>   5
vehicles or any other items is prohibited. Tenant shall not use or allow the
Premises to be used for any immoral, improper or unlawful purpose, nor shall
Tenant cause or maintain or permit any nuisance in, on or about the Premises.
Tenant shall not commit or suffer the commission of any waste in, on or about
the Premises. Tenant shall not allow any sale by auction upon the Premises, or
place any loads upon the floors, walls or ceilings which could endanger the
structure, or place any harmful substances in the drainage system of the
Building or Project. No waste, materials or refuse shall be dumped upon or
permitted to remain outside the Premises. Landlord shall not be responsible to
Tenant for the non-compliance by any other tenant or occupant of the Building or
Project with any of the above-referenced rules or any other terms or provisions
of such tenant's or occupant's lease or other contract.

C. COMPLIANCE WITH REGULATIONS. By entering the Premises, Tenant accepts the
Premises in the condition existing as of the date of such entry. Tenant shall at
its sole cost and expense strictly comply with all existing or future applicable
municipal, state and federal and other governmental statutes, rules,
requirements, regulations, laws and ordinances, including zoning ordinances and
regulations, and covenants, easements and restrictions of record governing and
relating to the use, occupancy or possession of the Premises, to Tenant's use of
the common areas, or to the use, storage, generation or disposal of Hazardous
Materials (hereinafter defined) (collectively "Regulations"). Landlord warrants
that to Landlord's actual knowledge as of the Commencement Date, the Premises
comply with all Regulations, punchlist items excepted. Tenant shall at its sole
cost and expense obtain any and all licenses or permits necessary for Tenant's
use of the Premises. Tenant shall at its sole cost and expense promptly comply
with the requirements of any board of fire underwriters or other similar body
now or hereafter constituted. Tenant shall not do or permit anything to be done
in, on, under or about the Project or bring or keep anything which will in any
way increase the rate of any insurance upon the Premises, Building or Project or
upon any contents therein or cause a cancellation of said insurance or otherwise
affect said insurance in any manner. Tenant shall indemnify, defend (by counsel
reasonably acceptable to Landlord), protect and hold Landlord harmless from and
against any loss, cost, expense, damage, attorneys' fees or liability arising
out of the failure of Tenant to comply with any Regulation. Landlord shall
likewise indemnify, defend (by counsel reasonably acceptable to Tenant), protect
and hold Tenant harmless from and against any loss, cost, expense, damage,
attorneys' fees or liability arising out of Landlord's breach of warranty that
as of the Commencement Date the Premises comply with all applicable regulations.
Tenant's obligations pursuant to the foregoing indemnity shall survive the
expiration or earlier termination of this Lease.

D. HAZARDOUS MATERIALS. As used in this Lease, "Hazardous Materials" shall
include, but not be limited to, hazardous, toxic and radioactive materials and
those substances defined as "hazardous substances," "hazardous materials,"
"hazardous wastes," "toxic substances," or other similar designations in any
Regulation. Tenant shall not cause, or allow any of Tenant's Parties to cause,
any Hazardous Materials to be handled, used, generated, stored, released or
disposed of in, on, under or about the Premises, the Building or the Project or
surrounding land or environment in violation of any Regulations. Tenant must
obtain Landlord's written consent prior to the introduction of any Hazardous
Materials onto the Project. Notwithstanding the foregoing, Tenant may handle,
store, use and dispose of products containing small quantities of Hazardous
Materials for "general office purposes" (such as toner for copiers) to the
extent customary and necessary for the Permitted Use of the Premises; provided
that Tenant shall always handle, store, use, and dispose of any such Hazardous
Materials in a safe and lawful manner and never allow such Hazardous Materials
to contaminate the Premises, Building, or Project or surrounding land or
environment. Tenant shall immediately notify Landlord in writing of any
Hazardous Materials' contamination of any portion of the Project of which Tenant
becomes aware, whether or not caused by Tenant. Landlord shall have the right at
all reasonable times, upon at least two (2) hours advance notice, and during
regular normal business hours and without interfering with Tenant's business
operations, to inspect the Premises and to conduct tests and investigations to
determine whether Tenant is in compliance with the foregoing provisions, the
costs of all such inspections, tests and investigations to be borne by Tenant.
Tenant shall indemnify, defend (by counsel reasonably acceptable to Landlord),
protect and hold Landlord harmless from and against any and all claims,
liabilities, losses, costs, loss of rents, liens, damages, injuries or expenses
(including attorneys' and consultants' fees and court costs), demands, causes of
action, or judgments directly or indirectly arising out of or related to the
use, generation, storage, release, or disposal of Hazardous Materials by Tenant
or any of Tenant's Parties in,



                                      
<PAGE>   6
on, under or about the Premises, the Building or the Project or surrounding
land or environment, which indemnity shall include, without limitation, damages
for personal or bodily injury, property damage, damage to the environment or
natural resources occurring on or off the Premises, losses attributable to
diminution in value or adverse effects on marketability, the cost of any
investigation, monitoring, government oversight, repair, removal, remediation,
restoration, abatement, and disposal, and the preparation of any closure or
other required plans, whether such action is required or necessary prior to or
following the expiration or earlier termination of this Lease. Landlord shall
likewise indemnify, defend (by counsel reasonably acceptable to Tenant), protect
and hold Tenant harmless from and against any loss, cost, expense, damage,
attorneys' fees or liability arising from or relating to the existence of
Hazardous Materials at the Premises as of the Commencement Date and any
Hazardous Materials handled, used, generated, stored, released or disposed of in
the Premises in violation of any Regulations, by Landlord, it's employees,
agents, customers, invitees, licensees, contractors or assignees (collectively
"Landlord's Parties). Neither the consent by Landlord to the use, generation,
storage, release or disposal of Hazardous Materials nor the strict compliance by
Tenant with all laws pertaining to Hazardous Materials shall excuse Tenant from
Tenant's obligation of indemnification pursuant to this Paragraph 4.D. Tenant's
obligations pursuant to the foregoing indemnity shall survive the expiration or
earlier termination of this Lease.

                            5. RULES AND REGULATIONS

        Tenant shall faithfully observe and comply with the building rules and
regulations attached hereto as Exhibit A and any other rules and regulations and
any modifications or additions thereto which Landlord may reasonably from time
to time prescribe in writing for the purpose of maintaining the proper care,
cleanliness, safety, traffic flow and general order of the Premises or the
Building or Project. Tenant shall cause Tenant" Parties to comply with such
rules and regulations. Landlord shall not be responsible to Tenant for the
non-compliance by any other tenant or occupant of the Building or Project with
any of such rules and regulations, an other tenant's or occupant's lease or any
Regulations.

                                     6. RENT

A. BASE RENT. Tenant shall pay to Landlord and Landlord shall receive, without
notice or demand throughout the Term, Base Rent as specified in the Basic Lease
Information, payable in monthly installments in advance on or before the first
day of each calendar month, in lawful money of the United States, without
deduction or offset whatsoever, at the Remittance Address specified in the Basic
Lease Information or to such other place as Landlord may from time to time
designate in writing. Base Rent for the first full month of the Term shall be
paid by Tenant upon Tenant's execution of this Lease. If the obligation for
payment of Base Rent commences on a day other than the first day of a month,
then Base Rent shall be prorated and the prorated installment shall be paid on
the first day of the calendar month next succeeding the Term Commencement Date.
The Base Rent payable by Tenant hereunder is subject to adjustment as provided
elsewhere in this Lease, as applicable. As used herein, the term "Base Rent"
shall mean the Base Rent specified in the Basic Lease Information as it may be
so adjusted from time to time.

B. ADDITIONAL RENT. All monies other than Base Rent required to be paid by
Tenant hereunder, including, but not limited to, Tenant's Proportionate Share of
Operating Expenses, as specified in Paragraph 7 of this Lease, charges to be
paid by Tenant under Paragraph 15, the interest and late charge described in
Paragraphs 26.C. and D., and any monies spent by Landlord pursuant to Paragraph
30, shall be considered additional rent ("Additional Rent"). "Rent" shall mean
Base Rent and Additional Rent.

                              7. OPERATING EXPENSES

A. OPERATING EXPENSES. In addition to the Base Rent required to be paid
hereunder, Tenant shall pay as Additional Rent, Tenant's Proportionate Share of
the Building and/or Project (as applicable), as defined in the Basic Lease
Information, of Operating Expenses (defined below) in the manner set forth
below. Tenant shall pay the applicable Tenant's Proportionate Share of each such
Operating Expenses.



                                      
<PAGE>   7
Landlord and Tenant acknowledge that if the number of buildings which
constitute the Project increases or decreases, or if physical changes are made
to the Premises, Building or Project or the configuration of any thereof,
Landlord may at its discretion reasonably adjust Tenant's Proportionate Share of
the Building or Project to reflect the change. Landlord's determination of
Tenant's Proportionate Share of the Building and of the Project shall be
conclusive so long as it is reasonably and consistently applied. "Operating
Expenses" shall mean all expenses and costs of every kind and nature which
Landlord shall pay or become obligated to pay, because of or in connection with
the ownership, management, maintenance, repair, preservation, replacement and
operation of the Building or Project and its supporting facilities and such
additional facilities now and in subsequent years as may be determined by
Landlord to be necessary or desirable to the Building and/or Project (as
determined in a reasonable manner) other than those expenses and costs which are
specifically attributable to Tenant or which are expressly made the financial
responsibility of Landlord or specific tenants of the Building or Project
pursuant to this Lease. Operating Expenses shall include, but are not limited
to, the following:

        (1) TAXES. All real property taxes and assessments, possessory interest
        taxes, sales taxes, personal property taxes, business or license taxes
        or fees, gross receipts taxes, service payments in lieu of such taxes or
        fees, annual or periodic license or use fees, excises, transit charges,
        and other impositions, general and special, ordinary and extraordinary,
        unforeseen as well as foreseen, of any kind (including fees "in-lieu" of
        any such tax or assessment) which are now or hereafter assessed, levied,
        charged, confirmed, or imposed by any public authority upon the Building
        or Project, its operations or the Rent (or any portion or component
        thereof), or any tax, assessment or fee imposed in substitution,
        partially or totally, of any of the above. Operating Expenses shall also
        include any taxes, assessments, reassessments, or other fees or
        impositions with respect to the development, leasing, management,
        maintenance, alteration, repair, use or occupancy of the Premises,
        Building or Project or any portion thereof, including, without
        limitation, by or for Tenant, and all increases therein or reassessments
        thereof whether the increases or reassessments result from increased
        rate and/or valuation (whether upon a transfer of the Building or
        Project or any portion thereof or any interest therein or for any other
        reason). Operating Expenses shall not include inheritance or estate
        taxes imposed upon or assessed against the interest of any person in the
        Project, or taxes computed upon the basis of the net income of any
        owners of any interest in the Project. If it shall not be lawful for
        Tenant to reimburse Landlord for all or any part of such taxes, the
        monthly rental payable to Landlord under this Lease shall be revised to
        net Landlord the same net rental after imposition of any such taxes by
        Landlord as would have been payable to Landlord prior to the payment of
        any such taxes.

        (2) INSURANCE. All insurance premiums and costs, including, but not
        limited to, any deductible amounts, premiums and other costs of
        insurance incurred by Landlord, including for the insurance coverage set
        forth in Paragraph 8.A. herein.

        (3) COMMON AREA MAINTENANCE.

                        (a) Repairs, replacements, and general maintenance of
                and for the Building and Project and public and common areas and
                Facilities of and comprising the Building and Project,
                including, but not limited to, the roof and roof membrane,
                windows, elevators, restrooms, conference rooms, health club
                facilities, lobbies, mezzanines, balconies, mechanical rooms,
                building exteriors, alarm systems, pest extermination,
                landscaped areas, parking and service areas, driveways,
                sidewalks, loading areas, fire sprinkler systems, sanitary and
                storm sewer lines, utility services, heating/ventilation/air
                conditioning systems, electrical, mechanical or other systems,
                telephone equipment and wiring servicing, plumbing, lighting,
                and any other items or areas which affect the operation or
                appearance of the Building or Project, which determination shall
                be at Landlord's reasonable discretion, except for: those items
                expressly made the financial responsibility of Landlord pursuant
                to Paragraph 10 hereof; those items to the extent paid for by
                the proceeds of insurance; and those items attributable solely
                or jointly to specific tenants of the Building or Project.



                                      
<PAGE>   8
                        (b) Repairs, replacements, and general maintenance shall
                include the cost of any capital improvements made to or capital
                assets acquired for the Project or Building that in Landlord's
                discretion may reduce any other Operating Expenses, including
                present or future repair work, are reasonably necessary for the
                health and safety of the occupants of the Building or Project,
                or are required to comply with any Regulation, such costs or
                allocable portions thereof to be amortized over such reasonable
                period as Landlord shall determine, together with interest on
                the unamortized balance at the publicly announced "prime rate"
                charged by Wells Fargo Bank, N.A. (San Francisco) or its
                successor at the time such improvements or capital assets are
                constructed or acquired, plus two (2) percentage points, or in
                the absence of such prime rate, then at the U.S. Treasury
                six-month market note (or bond, if so designated) rate as
                published by any national financial publication selected by
                Landlord, plus four (4) percentage points, but in no event more
                than the maximum rate permitted by law.

                        (c) Payment under or for any easement, license, permit,
                operating agreement, declaration, restrictive covenant or
                instrument relating to the Building or Project.

                        (d) All expenses and rental related to services and
                costs of supplies, materials and equipment used in operating,
                managing and maintaining the Premises, Building and Project, the
                equipment therein and the adjacent sidewalks, driveways, parking
                and service areas, including, without limitation, expenses
                related to service agreements regarding security, fire and other
                alarm systems, janitorial services, window cleaning, elevator
                maintenance, Building exterior maintenance, landscaping and
                expenses related to the administration, management and operation
                of the Project, including without limitation salaries, wages and
                benefits and management office rent.

                        (e) The cost of supplying any services and utilities
                which benefit all or a portion of the Premises, Building or
                Project, including without limitation services and utilities
                provided pursuant to Paragraph 15 hereof.

                        (f) Legal expenses and the cost of audits by certified
                public accountants; provided, however, that legal expenses
                chargeable as Operating Expenses shall not include the cost of
                negotiating leases, collecting rents, evicting tenants nor shall
                it include costs incurred in legal proceedings with or against
                any tenant or to enforce the provisions of any lease.

                        (g) A management and accounting cost recovery fee equal
                to five percent (5%) of the sum of the Project's base rents and
                Operating Expenses (other than such management and accounting
                fee).

        If the rentable area of the Building and/or Project is not fully
occupied during any fiscal year of the Term as determined by Landlord, an
adjustment may be made in Landlord's discretion in computing the Operating
Expenses for such year so that Tenant pays an equitable portion of all variable
items (e.g., utilities, janitorial services and other component expenses that
are affected by variations in occupancy levels) of Operating Expenses, as
reasonably determined by Landlord; provided, however, that in no event shall
Landlord be entitled to collect in excess of one hundred percent (100%) of the
total Operating Expenses from all of the tenants in the Building or Project, as
the case may be.

        Operating Expenses shall not include the cost of providing tenant
improvements or other specific costs incurred for the account of, separately
billed to and paid by specific tenants of the Building or Project, the initial
construction cost of the Building, or debt service on any mortgage or deed of
trust recorded with respect to the Project other than pursuant to Paragraph
7.A.(3)(b) above. Notwithstanding anything herein to the contrary, in any
instance wherein Landlord, in Landlord's reasonable discretion, deems Tenant to
be responsible for any amounts greater than Tenant's Proportionate Share,
Landlord shall have the right to allocate costs in any manner Landlord
reasonably deems appropriate.



                                      
<PAGE>   9
        The above enumeration of services and facilities shall not be deemed to
impose an obligation on Landlord to make available or provide such services or
facilities except to the extent if any that Landlord has specifically agreed
elsewhere in this Lease to make the same available or provide the same. Without
limiting the generality of the foregoing, Tenant acknowledges and agrees that it
shall be responsible for providing adequate security for its use of the
Premises, the Building and the Project and that Landlord shall have no
obligation or liability with respect thereto, except to the extent if any that
Landlord has specifically agreed elsewhere in this Lease to provide the same.

B. PAYMENT OF ESTIMATED OPERATING EXPENSES. "Estimated Operating Expenses" for
any particular year shall mean Landlord's estimate of the Operating Expenses for
such fiscal year made with respect to such fiscal year as hereinafter provided.
Landlord shall have the right from time to time to revise its fiscal year and
interim accounting periods so long as the periods as so revised are reconciled
with prior periods in a reasonable manner. During the last month of each fiscal
year during the Term, or as soon thereafter as practicable, Landlord shall give
Tenant written notice of the Estimated Operating Expenses for the ensuing fiscal
year. Tenant shall pay Tenant's Proportionate Share of the Estimated Operating
Expenses with installments of Base Rent for the fiscal year to which the
Estimated Operating Expenses applies in monthly installments on the first day of
each calendar month during such year, in advance. Such payment shall be
construed to be Additional Rent for all purposes hereunder. If at any time
during the course of the fiscal year, Landlord determines that Operating
Expenses are projected to vary from the then Estimated Operating Expenses by
more than five percent (5%), Landlord may, by written notice to Tenant, revise
the Estimated Operating Expenses for the balance of such fiscal year, and
Tenant's monthly installments for the remainder of such year shall be adjusted
so that by the end of such fiscal year Tenant has paid to Landlord Tenant's
Proportionate Share of the revised Estimated Operating Expenses for such year,
such revised installment amounts to be Additional Rent for all purposes
hereunder.

C. COMPUTATION OF OPERATING EXPENSE ADJUSTMENT. "Operating Expense Adjustment"
shall mean the difference between Estimated Operating Expenses and actual
Operating Expenses for any fiscal year determined as hereinafter provided.
Within one hundred twenty (120) days after the end of each fiscal year, or as
soon thereafter as practicable, Landlord shall deliver to Tenant a statement of
actual Operating Expenses for the fiscal year just ended, accompanied by a
computation of Operating Expense Adjustment. If such statement shows that
Tenant's payment based upon Estimated Operating Expenses is less than Tenant's
Proportionate Share of Operating Expenses, then Tenant shall pay to Landlord the
difference within twenty (20) days after receipt of such statement, such payment
to constitute Additional Rent for all purposes hereunder. If such statement
shows that Tenant's payments of Estimated Operating Expenses exceed Tenant's
Proportionate Share of Operating Expenses, then (provided that Tenant is not in
default under this Lease) Landlord shall pay to Tenant the difference within
twenty (20) days after the date of delivery of the statement. Should this lease
commence or terminate at any time other than the first day of the fiscal year,
Tenant's Proportionate Share of the Operating Expense Adjustment shall be
prorated based on a month of 30 days and the number of calendar months during
such fiscal year that this Lease is in effect. Notwithstanding anything to the
contrary contained in Paragraph 7.A or 7.B, Landlord's failure to provide any
notices or statements within the time periods specified in those paragraphs
shall in no way excuse Tenant from its obligation to pay Tenant's Proportionate
Share of Operating Expenses.

D. NET LEASE. This shall be a triple net Lease and Base Rent shall be paid to
Landlord absolutely net of all costs and expenses, except as specifically
provided to the contrary in this Lease. The provisions for payment of Operating
Expenses and the Operating Expense Adjustment are intended to pass on to Tenant
and reimburse Landlord for all costs and expenses of the nature described in
Paragraph 7.A incurred in connection with the ownership, management,
maintenance, repair, preservation, replacement and operation of the Building
and/or Project and its supporting facilities and such additional facilities now
and in subsequent years as may be determined by Landlord to be necessary or
desirable to the Building and/or Project.

E. TENANT AUDIT. If Tenant shall dispute the amount set forth in any statement
provided by Landlord under Paragraph 7.B or 7.C above, Tenant shall have the
right, not later than forty-five (45) days following



                                      
<PAGE>   10
receipt of such statement and upon the condition that Tenant shall first
deposit with Landlord the full amount in dispute, to cause Landlord's books and
records with respect to Operating Expenses for such fiscal year to be audited by
certified public accountants selected by Tenant and subject to Landlord's
reasonable right of approval. The Operating Expense Adjustment shall be
appropriately adjusted on the basis of such audit. If such audit discloses a
liability for a refund in excess of ten percent (10%) of Tenant's Proportionate
Share of the Operating Expenses previously reported, the cost of such audit
shall be borne by Landlord; otherwise the cost of such audit shall be paid by
Tenant. If Tenant shall not request an audit in accordance with the provisions
of this Paragraph 7.E within twenty (20) days after receipt of Landlord's
statement provided pursuant to Paragraph 7.B or 7.C, such statement shall be
final and binding for all purposes hereof.

                        8. INSURANCE AND INDEMNIFICATION

A. LANDLORD'S INSURANCE. All insurance maintained by Landlord shall be for the
sole benefit of Landlord and under Landlord's sole control.

        (1) PROPERTY INSURANCE. Landlord agrees to maintain property insurance
        insuring the Building against damage or destruction due to risk
        including fire, vandalism, and malicious mischief in an amount not less
        than the replacement cost thereof, in the form and with deductibles and
        endorsements as selected by Landlord. At its election, Landlord may
        instead (but shall have no obligation to) obtain "All Risk" coverage,
        and may also obtain earthquake, pollution and/or flood insurance in
        amounts selected by Landlord.

        (2) OPTIONAL INSURANCE. Landlord, at Landlord's option, may also (but
        shall have no obligation to) carry insurance against loss of rent, in an
        amount equal to the amount of Base Rent and Additional rent that
        Landlord could be required to abate to all Building tenants in the event
        of condemnation or casualty damage for a period of twelve (12) months.
        Landlord may also (but shall have no obligation to) carry such other
        insurance as Landlord may deem prudent or advisable, including, without
        limitation, liability insurance in such amounts and on such terms as
        Landlord shall determine. Landlord shall not be obligated to insure, and
        shall have no responsibility whatsoever for any damage to, any
        furniture, machinery, goods, inventory or supplies, or other personal
        property or fixtures which Tenant may keep or maintain in the Premises,
        or any leasehold improvements, additions or alterations within the
        premises.

B. TENANT'S INSURANCE.

        (1) PROPERTY INSURANCE. Tenant shall procure at Tenant's sole cost and
        expense and keep in effect from the date of this Lease and at all times
        until the end of the Term, insurance on all personal property and
        fixtures of Tenant and all improvements, additions or alterations made
        by or for Tenant to the Premises on an "All Risk" basis, insuring such
        property for the full replacement value of such property.

        (2) LIABILITY INSURANCE. Tenant shall procure at Tenant's sole cost and
        expense and keep in effect from the date of this Lease and at all times
        until the end of the Term Commercial General Liability insurance
        covering bodily injury and property damage liability occurring in or
        about the Premises or arising out of the use and occupancy of the
        Premises and the Project, and any party of either, and any areas
        adjacent thereto, and the business operated by Tenant or by any other
        occupant of the Premises. Such insurance shall include contractual
        liability insurance coverage insuring all of Tenant's indemnity
        obligations under this Lease. Such coverage shall have a minimum
        combined single limit of liability of at least Two Million Dollars
        ($2,000,000.00), and a minimum general aggregate limit of Two Million
        Dollars ($2,000,000.00), with an "Additional Insured - Managers or
        Lessors of Premises Endorsement." All such policies shall be written to
        apply to all bodily injury (including death), property damage or loss,
        personal and advertising injury and other covered loss, however
        occasioned, occurring during the policy term, shall be endorsed to add
        Landlord and any party holding an interest to which this Lease may be
        subordinated as an additional insured, and shall provide that such
        coverage shall be "primary"



                                      
<PAGE>   11
        and non-contributing with any insurance maintained by Landlord, which
        shall be excess insurance only. Such coverage shall also contain
        endorsements including employees as additional insureds if not covered
        by Tenant's Commercial General Liability Insurance. All such insurance
        shall provide for the severability of interests of insureds; and shall
        be written on an "occurrence" basis, which shall afford coverage for all
        claims based on acts, omissions, injury and damage, which occurred or
        arose (or the onset of which occurred or arose) in whole or in part
        during the policy period.

        (3) WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY INSURANCE. Tenant
        shall carry Workers' Compensation Insurance as required by any
        Regulation, throughout the Term at Tenant's sole cost and expense.
        Tenant shall also carry Employers' Liability Insurance in amounts not
        less than One Million Dollars ($1,000,000) each accident for bodily
        injury by accident; One Million Dollars ($1,000,000) policy limit for
        bodily injury by disease; and One Million Dollars ($1,000,000) each
        employee for bodily injury by disease, throughout the Term at Tenant's
        sole cost and expense.

        (4) GENERAL INSURANCE REQUIREMENTS. All coverages described in this
        Paragraph 8.B. shall be endorsed to (i) provide Landlord with thirty
        (30) days' notice of cancellation or change in terms; and (ii) waive all
        rights of subrogation by the insurance carrier against Landlord. If at
        any time during the Term the amount or coverage of insurance which
        Tenant is required to carry under this Paragraph 8.B. is, in Landlord's
        reasonable judgment, materially less than the amount or type of
        insurance coverage typically carried by owners or tenants of properties
        located in the general area in which the Premises are located which are
        similar to and operated for similar purposes as the Premises or if
        Tenant's use of the Premises should change with or without Landlord's
        consent, Landlord shall have the right to require Tenant to increase the
        amount or change the types of insurance coverage required under this
        Paragraph 8.B. All insurance policies required to be carried by Tenant
        under this Lease shall be written companies rated A X or better in
        "Best's Insurance Guide" and authorized to do business in the State of
        California. In any event deductible amounts under all insurance policies
        required to be carried by Tenant under this Lease shall not exceed Five
        Thousand Dollars ($5,000.00) per occurrence. Tenant shall deliver to
        Landlord on or before the Term Commencement Date, and thereafter at
        least thirty (30) days before the expiration dates of the expired
        policies, certified copies of Tenant's insurance policies, or a
        certificate evidencing the same issued by the insurer thereunder; and,
        if Tenant shall fail to procure such insurance, or to deliver such
        policies or certificates, Landlord may, at Landlord's option and in
        addition to Landlord's other remedies in the event of a default by
        Tenant hereunder, procure the same for the account of Tenant, and cost
        thereof shall be paid to Landlord as Additional Rent.

C. INDEMNIFICATION. Tenant shall indemnify, defend by counsel reasonably
acceptable to Landlord, protect and hold Landlord harmless from and against any
and all claims, liabilities, loses, costs, lost of rents, liens, damages,
injuries or expenses, including reasonable attorneys' and consultants' fees and
court costs, demands, causes of action, or judgments, directly or indirectly
arising out of or related to: (1) claims of injury to or death of persons or
damage to property occurring or resulting directly or indirectly from the use or
occupancy of the Premises, Building or Project by Tenant or Tenant's Parties, or
from activities or failures to act of Tenant or Tenant's Parties; (2) claims
arising from work or labor performed, or for materials or supplies furnished to
or at the request or for the account of Tenant in connection with performance of
any work done for the account of Tenant within the Premises or Project; (3)
claims arising from any breach or default on the part of Tenant in the
performance of any covenant contained in this Lease; and (4) claims arising from
the negligence or intentional acts or omissions of Tenant or Tenant's Parties.
The foregoing indemnity by Tenant shall not be applicable to claims to the
extent arising from the gross negligence or willful misconduct of Landlord.
Landlord shall not be liable to Tenant and Tenant hereby waives all claims
against Landlord for any injury or damage to any person or property in or about
the Premises, Building or Project by or from any cause whatsoever (other than
Landlord's gross negligence or willful misconduct) and, without limiting the
generality of the foregoing, whether caused by water leakage of any character
form the roof, walls, basement or other portion of the Premises, Building



<PAGE>   12
or Project, or caused by gas, fire, oil or electricity in, on or about the
Premises, Building or Project. The provisions of this Paragraph shall survive
the expiration or earlier termination of this Lease.

                            9. WAIVER OF SUBROGATION

        To the extent permitted by law and without affecting the coverage
provided by insurance to be maintained hereunder or any other rights or
remedies, Landlord and Tenant each waive any right to recover against the other
for: (a) damages for injury to or death of persons; (b) damages to property,
including personal property; (c) damages to the Premises or any part thereof;
and (d) claims arising by reason of the foregoing due to hazards covered by
insurance maintained or required to be maintained pursuant to this Lease to the
extent of proceeds recovered therefrom, or proceeds which would have been
recoverable therefrom in the case of the failure of any party to maintain any
insurance coverage required to be maintained by such party pursuant to this
Lease. This provision is intended to waive fully, any rights and/or claims
arising by reason of the foregoing, but only to the extent that any of the
foregoing damages and/or claims referred to above are covered or would be
covered, and only to the extent of such coverage, by insurance actually carried
or required to be maintained pursuant to this Lease by either Landlord or
Tenant. This provision is also intended to waive fully, and for the benefit of
each party, any rights and/or claims which might give rise to a right of
subrogation on any insurance carrier. Subject to all qualifications of this
Paragraph 9, Landlord waives its rights as specified in this Paragraph 9 with
respect to any subtenant that it has approved pursuant to Paragraph 21 but only
in exchange for the written waiver of such rights to be given by such subtenant
to Landlord upon such subtenant taking possession of the Premises or a portion
thereof. Each party shall cause each insurance policy obtained by it to provide
that the insurance company waives all right of recovery by way of subrogation
against either party in connection with any damage covered by any policy.

                     10. LANDLORD'S REPAIRS AND MAINTENANCE

        Landlord shall at Landlord's sole expense maintain in good repair,
reasonable wear and tear excepted, the structural soundness of the roof,
foundations, and exterior walls of the Building. The term "exterior walls" as
used herein shall not include doors, special store fronts or office entries. Any
damage caused by or repairs necessitated by any negligence or act of Tenant or
Tenant's Parties may be repaired by Landlord at Landlord's option and Tenant's
expense. Tenant shall immediately give Landlord written notice of any defect or
need of repairs in such components of the Building for which Landlord is
responsible, after which Landlord shall have a reasonable opportunity and the
right to enter the Premises at all reasonable times upon at least two (2) hours
advance notice, and during regular business hours and without interfering with
Tenant's business operations to repair same. Landlord's liability with respect
to any defects, repairs, or maintenance for which Landlord is responsible under
any of the provisions of this Lease shall be limited to the cost of such repairs
or maintenance, and there shall be no abatement of rent and no liability of
Landlord by reason of any injury to or interference with Tenant's business
arising from the making of repairs, alterations or improvements in or to any
portion of the Premises, the Building or the Project or to fixtures,
appurtenances or equipment in the Building, except as provided in Paragraph 24
as of the Commencement Date, the Premises are in good order, condition and
repair. By taking possession of the Premises, Tenant accepts them "as is," as
being in good order, condition and repair and the condition in which Landlord is
obligated to deliver them and suitable for the Permitted Use and Tenant's
intended operations in the Premises.

                      11. TENANT'S REPAIRS AND MAINTENANCE

        Tenant shall at all times during the Term at Tenant's expense maintain
all parts of the Premises and such portions of the Building as are within the
exclusive control of Tenant in a first-class, good, clean and secure condition
and promptly make all necessary repairs and replacements, as determined by
Landlord, with materials and workmanship of the same character, kind and quality
as the original. Notwithstanding anything to the contrary contained herein,
Tenant shall, at its expense, promptly repair any damage to the Premises or the
Building or Project resulting from or caused by any negligence or act of Tenant
or Tenant's Parties.



<PAGE>   13
                                 12. ALTERATIONS

A. Tenant shall not make, or allow to be made, any alterations, physical
additions, improvements or partitions, including without limitation the
attachment of any fixtures or equipment, in, about or to the Premises
("ALTERATIONS") without obtaining the prior written consent of Landlord, which
consent shall not be unreasonably withheld with respect to proposed Alterations
which: (a) comply with all applicable Regulations; (b) are, in Landlord's
opinion, compatible with the Building or the Project and its mechanical,
plumbing, electrical, heating/ventilation/air conditioning systems, and will not
cause the Building or Project or such systems to be required to be modified to
comply with any Regulations (including, without limitation, the Americans With
Disabilities Act); and (c) will not interfere with the use and occupancy of any
other portion of the Building or Project by any other tenant or its invitees.
Specifically, but without limiting the generality of the foregoing, Landlord
shall have the right of written consent for all plans and specifications for the
proposed Alterations, construction means and methods, all appropriate permits
and licenses, any contractor or subcontractor to be employed on the work of
Alterations, and the time for performance of such work, and may impose rules and
regulations for contractors and subcontractors performing such work. Tenant
shall also supply to Landlord any documents and information reasonably requested
by Landlord in connection with Landlord's consideration of a request for
approval hereunder. Tenant shall cause all Alterations to be accomplished in a
first-class, good and workmanlike manner, and to comply with all applicable
Regulations and Paragraph 27 hereof. Tenant shall at Tenant's sole expense,
perform any additional work required under applicable Regulations due to the
Alterations hereunder. No review or consent by Landlord of or to any proposed
Alteration or additional work shall constitute a waiver of Tenant's obligations
under this Paragraph 12, nor constitute any warranty or representation that the
same complies with all applicable Regulations, for which Tenant shall at all
times be solely responsible. Tenant shall reimburse Landlord for all costs which
Landlord may reasonably incur in connection with granting approval to Tenant for
any such Alterations, including any costs or expenses which Landlord may incur
in electing to have outside architects and engineers review said plans and
specifications, and shall pay Landlord an administration fee of ten percent
(10%) of the cost of the Alterations as Additional Rent hereunder. All such
Alterations shall remain the property of Tenant until the expiration or earlier
termination of this Lease, at which time they shall be and become the property
of Landlord; provided, however, that Landlord may, at Landlord's option, require
that Tenant, at Tenant's expense, remove any or all Alterations made by Tenant
and restore the Premises by the expiration or earlier termination of this Lease,
to their condition existing prior to the construction of any such Alterations.
Notwithstanding the foregoing, unless Landlord notifies Tenant of its desire to
have the alterations removed at the time of it's approval of the project, then
Tenant may deem Landlord's right to require removal to have been waived. All
such removals and restoration shall be accomplished in a first-class and good
and workmanlike manner so as not to cause damage to the Premises or Project
whatsoever. If Tenant fails to remove such Alterations or Tenant's trade
fixtures or furniture or other personal property, Landlord may keep and use them
or remove any of them and cause them to be stored or sold in accordance with
applicable law, at Tenant's sole expense. In addition to and wholly apart from
Tenant's obligation to pay Tenant's Proportionate Share of Operating Expenses,
Tenant shall be responsible for and shall pay prior to delinquency any taxes or
governmental service fees, possessory interest taxes, fees or charges in lieu of
any such taxes, capital levies, or other charges imposed upon, levied with
respect to or assessed against its fixtures or personal property, on the value
of Alterations within the Premises, and on Tenant's interest pursuant to this
Leas, or any increase in any of the foregoing based on such Alterations. To the
extent that any such taxes are not separately assessed or billed to Tenant,
Tenant shall pay the amount thereof as invoiced to Tenant by Landlord.

        Notwithstanding the foregoing, at Landlord's option (but without
obligation), all or any portion of the Alterations shall be performed by
Landlord for Tenant's account and Tenant shall pay Landlord's estimate of the
cost thereof (including a reasonable charge for Landlord's overhead and profit)
prior to commencement of the work. In addition, at Landlord's election and
notwithstanding the foregoing, however, Tenant shall pay to Landlord the cost of
removing any such Alterations and restoring the Premises to their original
condition such cost to include a reasonable charge for Landlord's overhead and
profit as provided above, and such amount may be deducted from the Security
Deposit or any other sums or amounts held by Landlord under this Lease.



<PAGE>   14
B. In compliance with Paragraph 27 hereof, at least ten (10) business days
before beginning construction of any Alteration, Tenant shall give Landlord
written notice of the expected commencement date of that construction to permit
Landlord to post and record a notice of non-responsibility. Upon substantial
completion of construction, if the law so provides, Tenant shall cause a timely
notice of completion to be recorded in the office of the recorder of the county
in which the Building is located.

                                    13. SIGNS

        Tenant shall not place, install, affix, paint or maintain any signs,
notices, graphics or banners whatsoever or any window decor which is visible in
or from the public view or corridors, the common areas or the exterior of the
Premises or the Building, in or on any exterior window or window fronting upon
any common areas or service area without Landlord's prior written approval which
Landlord shall have the right to withhold in its absolute discretion; provided
that Tenant's name shall be included in any Building-standard door and directory
signage, if any, in accordance with Landlord's Building signage program,
including without limitation, payment by Tenant of any fee charged by Landlord
for maintaining such signage, which fee shall constitute Additional Rent
hereunder. Any installation of signs, notices, graphics or banners on or about
the Premises or Project approved by Landlord shall be subject to any Regulations
and to any other requirements imposed by Landlord. Tenant shall remove all such
signs or graphics by the expiration or any earlier termination of this Lease.
Such installations and removals shall be made in such manner as to avoid injury
to or defacement of the Premises, Building or Project and any other improvements
contained therein, and Tenant shall repair any injury or defacement including
without limitation discoloration caused by such installation or removal.

                         14. INSPECTION/POSTING NOTICES

        Upon at least twenty-four (24) hours advance notice, and during regular
business hours and without interfering with Tenant's business operations except
in emergencies where no such notice shall be required, Landlord and Landlord's
agents and representatives, shall have the right to enter the Premises to
inspect the same, to clean, to perform such work as may be permitted or required
hereunder, to make repairs, improvements or alterations to the Premises,
Building or Project or to other tenant spaces therein, to deal with emergencies,
to post such notices as may be permitted or required by law to prevent the
perfection of liens against Landlord's interest in the Project, or to exhibit
the Premises to prospective tenants, purchasers, encumbrancers or to others, or
for any other purpose as Landlord may deem necessary or desirable; provided,
however, that Landlord shall use reasonable efforts not to unreasonably
interfere with Tenant's business operations. Tenant shall not be entitled to any
abatement of Rent by reason of the exercise of any such right of entry. Tenant
waives any claim for damages for any injury or inconvenience to or interference
with Tenant's business, any loss of occupancy or quiet enjoyment of the
Premises, and any other loss occasioned thereby. Landlord shall at all times
have and retain a key with which to unlock all of the doors in, upon and about
the Premises, excluding Tenant's vaults and safes or special security areas
(designated in advance), and Landlord shall have the right to use any and all
means which Landlord may deem necessary or proper to open said doors in an
emergency, in order to obtain entry to any portion of the Premises, and any
entry to the Premises or portions thereof obtained by Landlord by any of said
means, or otherwise, shall not be construed to be a forcible or unlawful entry
into, or a detainer of, the Premises, or an eviction, actual or constructive, of
Tenant from the Premises or any portions thereof. At any time within six (6)
months prior to the expiration of the Term or following any earlier termination
of this Lease or agreement to terminate this Lease, Landlord shall have the
right to erect on the Premises, Building and/or Project a suitable sign
indicating that the Premises are available for lease.

                           15. SERVICES AND UTILITIES

A. Provided Tenant shall not be in default hereunder, and subject to the
provisions elsewhere herein contained and to the rules and regulations of the
Building, Landlord shall furnish to the Premises during ordinary business hours
of generally recognized business days, to be reasonably determined by Landlord
(but exclusive in any event, of Saturdays, Sundays and legal holidays), water
for lavatory and drinking purposes and electricity, heat and air conditioning as
usually furnished or supplied for use of the



<PAGE>   15
Premises for reasonable and normal office use as of the date Tenant takes
possession of the Premises as determined by Landlord (but not including
above-standard or continuous cooling for excessive heat-generating machines,
excess lighting or equipment), janitorial services during the times and in the
manner that such services are, in Landlord's judgment, customarily furnished in
comparable office buildings in the immediate market area, and elevator service,
which shall mean service either by nonattended automatic elevators with
attendants, or both, at the option of Landlord. Tenant acknowledges that Tenant
has inspected and accepts the water, electricity, heat and air conditioning and
other utilities and services being supplied or furnished to the Premises as of
the date Tenant takes possession of the Premises, as being sufficient for use of
the Premises for reasonable and normal office use in their present condition,
"as is," and suitable for the Permitted Use, and for Tenant's intended
operations in the Premises. Provided that Tenant is not in default under the
Lease, Landlord shall provide additional or after-hours electricity, heating or
air conditioning, but if Landlord provides such services at Tenant's request,
Tenant shall pay to Landlord a reasonable charge for such services as determined
by Landlord. Tenant agrees to keep and cause to be kept closed all window
covering when necessary because of the sun's position, and Tenant also agrees at
all times to cooperate fully with Landlord and to abide all of the regulations
and requirements which Landlord may prescribe for the proper functioning and
protection of electrical, heating, ventilating and air conditioning systems.
Wherever heat-generating machines, excess lighting or equipment are used in the
Premises which affect the temperature otherwise maintained by the air
conditioning system, Landlord reserves the right to install supplementary air
conditioning units in the Premises and the cost thereof, including the cost of
installation and the cost of operation and maintenance thereof, shall be paid by
Tenant to Landlord upon demand by Landlord.

B. Tenant shall not without reasonable written consent of Landlord use an
apparatus, equipment or device in the Premises, including, without limitation,
computers, electronic data processing machines, copying machines, and other
machines, using excess lighting or using electrical current, water, or any other
resource in excess of or which will in any way increase the amount of
electricity, water, or any other resource being furnished or supplied for the
use of the Premises for reasonable and normal office use, in each case as of the
date Tenant takes possession of the Premises as determined by Landlord, or which
will require additions or alterations to or interfere with the Building power
distribution systems; nor connect with electric current, except through existing
electrical outlets in the Premises or water pipes, any apparatus, equipment or
device for the purpose of using electrical current, water, or any other
resource,. If Tenant shall require water or electric current or any other
resource in excess of that being furnished or supplied for the use of the
Premises as of the date Tenant takes possession of the Premises as determined by
Landlord, Tenant shall first procure the written consent of Landlord which
Landlord may reasonably refuse, to the use thereof, and Landlord may cause a
special meter to be installed in the Premises so as to measure the amount of
water, electric current or other resource consumed for any such other use.
Tenant shall pay directly to Landlord as an addition to and separate from
payment of Operating Expenses the cost of all such additional resources, energy,
utility service and meters (and of installation, maintenance and repair thereof
and of any additional circuits or other equipment necessary to furnish such
additional resources, energy, utility or service). Landlord may add to the
separate metered charge a recovery of additional expense incurred in keeping
account of the excess water, electric current or other resource so consumed.
Landlord shall not be liable for any damages directly or indirectly resulting
from nor shall the Rent or any monies owed Landlord under this Lease herein
reserved by abated by reason of: (a) the installation, use or interruption of
use of any equipment used in connection with the furnishing of any such
utilities or services, or any change in the character or means of supplying or
providing any such utilities or services or any supplier thereof; (b) the
failure to furnish or delay in furnishing any such utilities or services when
such failure or delay is caused by acts of God or the elements, labor
disturbances of any character, or any other accidents or other conditions beyond
the reasonable control of Landlord or because of any interruption of service due
to Tenant's use of water, electric current or other resource in excess of that
being supplied or furnished for the use of the Premises as of the date Tenant
takes possession of the Premises; (c) the inadequacy, limitation, curtailment,
rationing or restriction on use of water, electricity, gas or any other form of
energy or any other service or utility whatsoever serving the Premises or
Project, whether by Regulation or otherwise; or (d) the partial or total
unavailability of any such utilities or services to the Premises or the
Building, whether by Regulation or otherwise; nor shall any such occurrence
constitute an actual or constructive eviction of



<PAGE>   16
Tenant. Landlord shall further have no obligation to protect or preserve any
apparatus, equipment or device installed by Tenant in the Premises, including
without limitation by providing additional or after-hours heating or air
conditioning. Landlord shall be entitled to cooperate voluntarily and in
reasonable manner with the efforts of national, state or local governmental
agencies or utility suppliers in reducing energy or other resource consumption.
The obligation to make services available hereunder shall be subject to the
limitations of any such voluntary, reasonable program. In addition, Landlord
reserves the right to change the supplier or provider of any such utility or
service from time to time. Tenant shall have not right to contract with or
otherwise obtain any electrical or other such service for or with respect to the
Premises or Tenant's operations therein from any supplier of any such service.
Tenant shall cooperate with Landlord and any supplier or provider of such
services designated by Landlord from time to time to facilitate the delivery of
such services to Tenant at the Premises and to the Building and Project,
including without limitation allowing Landlord and Landlord's suppliers or
providers, and their respective agents and contractors, reasonable access to the
Premises for the purpose of installing, maintaining, repairing, replacing or
upgrading such service or any equipment or machinery associated therewith.

C. Tenant shall pay, upon demand, for all utilities furnished to the Premises,
or if not separately billed to or metered to Tenant, Tenant's Proportionate
Share of all charges jointly serving the Project in accordance with Paragraph 7.
All sums payable under this Paragraph 15 shall constitute Additional Rent
hereunder.

                                16. SUBORDINATION

        Without the necessity of any additional document being executed by
Tenant for the purpose of effecting a subordination, the Lease shall be and is
hereby declared to be subject and subordinate at all times to: (a) all ground
leases or underlying leases which may now exist or hereafter be executed
affecting the Premises and/or the land upon which the Premises and Project are
situated, or both; and (b) any mortgage or deed of trust which may now exist or
be placed upon the Building, the Project and/or the land upon which the Premises
or the Project are situated, or said ground leases or underlying leases, or
Landlord's interest or estate in any of said items which is specified as
security, provided, however, that any such lender, mortgagee, beneficiary or
lessor execute an agreement to recognize the Lease and not disturb Tenant for so
long as Tenant has not defaulted under this Lease. Notwithstanding the
foregoing, Landlord shall have the right to subordinate or cause to be
subordinated any such ground leases or underlying leases or any such liens to
this Lease. If any ground lease or underlying lease terminates for any reason or
any mortgage or deed of trust is foreclosed or a conveyance in lieu of
foreclosure is made for any reason, Tenant shall, notwithstanding any
subordination, attorn to and become the Tenant of the successor in interest to
Landlord provided that Tenant shall not be disturbed in its possession under
this Lease by such successor in interest so long as Tenant is not in default
under this Lease. Within ten (10) business days after request by Landlord,
Tenant shall execute and deliver any additional documents evidencing Tenant's
attornment or the subordination of this Lease with respect to any such ground
leases or underlying leases or any such mortgage or deed of trust, in the form
requested by Landlord or by any ground landlord, mortgagee, or beneficiary under
a deed of trust, subject to such nondisturbance requirement. If requested in
writing by Tenant, Landlord shall use commercially reasonable efforts to obtain
a subordination, nondisturbance and attornment agreement for the benefit of
Tenant reflecting the foregoing from any ground landlord, mortgagee or
beneficiary, at Tenant's expense, subject to such other terms and conditions as
the ground landlord, mortgagee or beneficiary may require.

                            17. FINANCIAL STATEMENTS

        At the request of Landlord from time to time, Tenant shall provide to
Landlord Tenant's and any guarantor's current financial statements or other
information discussing financial worth of Tenant and any guarantor, which
Landlord shall use solely for purposes of this Lease and in connection with the
ownership, management, financing and disposition of the Project. Landlord shall
insure that all information remains confidential.



<PAGE>   17
                            18. ESTOPPEL CERTIFICATE

        Tenant agrees from time to time, within ten (10) days after request of
Landlord, to deliver to Landlord, or Landlord's designee, an estoppel
certificate stating that this Lease is in full force and effect, that this Lease
has not been modified (or stating all modifications, written or oral, to this
Lease), the date to which Rent has been paid, the unexpired portion of this
Lease, that there are no current defaults by Landlord or Tenant under this Lease
(or specifying any such defaults), that the leasehold estate granted by this
Lease is the sole interest of Tenant in the Premises and/or the land at which
the Premises are situated, and such other matters pertaining to this Lease as
may be reasonably requested by Landlord or any mortgagee, beneficiary, purchaser
or prospective purchaser of the Building or Project or any interest therein.
Failure by Tenant to execute and deliver such certificate shall constitute an
acceptance of the Premises and acknowledgement by Tenant that the statements
included are true and correct without exception. Tenant agrees that if Tenant
fails to execute and deliver such certificate within such ten (10) day period,
Landlord may execute and deliver such certificate on Tenant's behalf that such
certificate shall be binding on Tenant. Landlord and Tenant intend that any
statement delivered pursuant to this Paragraph may be relied upon by any
mortgagee, beneficiary, purchaser or prospective purchaser of the Building or
Project or any interest therein. The parties agree that Tenant's obligation to
furnish such estoppel certificates in a timely fashion is a material inducement
for Landlord's execution of the Lease, and shall be an event of default (without
any cure period that might be provided under Paragraph 26.A(3) of this Lease) if
Tenant fails to fully comply or makes any material misstatement in any such
certificate.

                              19. SECURITY DEPOSIT

        Tenant agrees to deposit with Landlord upon execution of this Lease, a
security deposit as stated in the Basic Lease Information (the "Security
Deposit"), which sum shall be held and owned by Landlord, without obligation to
pay interest, as security for the performance of Tenant's covenants and
obligations under this Lease. The Security Deposit is not an advance rental
deposit or a measure of damages incurred by Landlord in case of Tenant's
default. Upon the occurrence of any event of default by Tenant, Landlord may
from time to time, without prejudice to any other remedy provided herein or by
law, use such fund as a credit to the extent necessary to credit against any
arrears of Rent or other payments due to Landlord hereunder, and any other
damage, injury, expense or liability caused by such event of default, and Tenant
shall pay to Landlord, on demand, the amount so applied in order to restore the
Security Deposit to its original amount. Although the Security Deposit shall be
deemed the property of Landlord, any remaining balance of such deposit shall be
returned by Landlord to Tenant within thirty (30) days from the Lease
Termination Date after all of Tenant's obligations under this Lease have been
fulfilled, reduced by such amounts as may be reasonably required by Landlord to
remedy defaults on the part of Tenant in the payment of Rent or other
obligations of Tenant under this Lease, to repair damage to the Premises,
Building or Project caused by Tenant or any Tenant's Parties and to clean the
Premises. Landlord may use and commingle the Security Deposit with other funds
of Landlord. The provisions of Addendum #3 of this Lease are added to this
Paragraph 19.

                       20. LIMITATION OF TENANT'S REMEDIES

        The obligations and liability of Landlord to Tenant for any default by
Landlord under the terms of this Lease are not personal obligations of Landlord
or of the individual or other partners of Landlord or its or their partners,
directors, officers, or shareholders, and Tenant agrees to look solely to
Landlord's interest in the Project and the revenues and proceeds thereof for the
recovery of any amount from Landlord, and shall not look to other assets of
Landlord nor seek recourse against the assets of the individual or other
partners of Landlord or its or their partners, directors, officers or
shareholders. Any lien obtained to enforce any such judgment and any levy of
execution thereon shall be subject and subordinate to any lien, mortgage or deed
of trust on the Project. Under no circumstances shall Tenant have the right, to
offset against or recoup Rent or other payments due and to become due to
Landlord hereunder except as expressly provided in Paragraph 23.B. below, which
Rent and other payments shall be absolutely due and payable hereunder in
accordance with the terms hereof.



<PAGE>   18
                          21. ASSIGNMENT AND SUBLETTING

A.      (1) GENERAL. This Lease has been negotiated to be and is granted as an
        accommodation to Tenant. Accordingly, this Lease is personal to Tenant,
        and Tenant's rights granted hereunder do not include the right to assign
        this Lease or sublease the Premises, or to receive any excess, either in
        installments or lump sum, over the Rent which is expressly reserved by
        Landlord as hereinafter provided, except as otherwise expressly
        hereinafter provided. Except as provided herein, Tenant shall not assign
        or pledge this Lease or sublet the Premises or any part thereof, whether
        voluntarily or by operation of law, or permit the use or occupancy of
        the Premises or any part thereof by anyone other than Tenant, or suffer
        or permit any such assignment, pledge, subleasing or occupancy, without
        Landlord's prior written consent which shall not be unreasonably
        withheld except as provided herein. If Tenant desires to assign this
        Least or sublet any or all of the Premises, Tenant shall give Landlord
        written notice (the "Transfer Notice") at least sixty (60) days prior to
        the anticipated effective date of the proposed assignment or sublease,
        which shall contain all of the information reasonably requested by
        Landlord to address Landlord's decision criteria specified hereinafter.
        Landlord shall then have a period of twenty (20) days following receipt
        of the Transfer Notice to notify Tenant in writing that Landlord elects
        either: (i) to terminate this Lease as to the space so affected as of
        the date so requested by Tenant; or (ii) to consent to the proposed
        assignment or sublease, subject, however, to Landlord's prior written
        consent of the proposed assignee or subtenant and of any related
        documents or agreements associated with the assignment or sublease. If
        Landlord should fail to notify Tenant in writing of such election within
        said period, Landlord shall be deemed to have waived option (i) above,
        but written consent by Landlord of the proposed assignee or subtenant
        shall still be required. If Landlord does not exercise option (i) above,
        Landlord's consent to a proposed assignment or sublease shall not be
        unreasonably withheld. Consent to any assignment or subletting shall not
        constitute consent to any subsequent transaction to which this Paragraph
        21 applies. Notwithstanding the foregoing, Landlord shall not have the
        right to terminate this Lease following receipt of a Transfer Notice
        which relates to Tenant's proposed subleasing of not more than 35% of
        the Premises for a term less than the remaining term of this Lease.

        (2) CONDITIONS OF LANDLORD'S CONSENT. Without limiting the other
        instances in which it may be reasonable for Landlord to withhold
        Landlord's consent to an assignment or subletting, Landlord and Tenant
        acknowledge that it shall be reasonable for Landlord to withhold
        Landlord's consent in the following instances: if the proposed assignee
        does not agree to be bound by and assume the obligations of Tenant under
        this Lease in form and substance satisfactory to Landlord; the use of
        the Premises by such proposed assignee or subtenant would not be a
        Permitted Use or would violate any exclusivity or other arrangement
        which Landlord has with any other tenant or occupant or any Regulation
        or would increase the Occupancy Density or Parking Density of the
        Building or Project, or would otherwise result in an undesirable tenant
        mix for the Project as determined by Landlord; the proposed assignee or
        subtenant is not of sound financial condition as determined by Landlord
        in Landlord's reasonable discretion; the proposed assignee or subtenant
        is a governmental agency; the proposed assignee or subtenant does not
        have a good reputation as a tenant of property or a good business
        reputation; the proposed assignee or subtenant is a person with whom
        Landlord is negotiating to lease space in the Project or is a present
        tenant of the Project; the assignment or subletting would entail any
        Alterations which would lessen the value of the leasehold improvements
        in the Premises or use of any Hazardous Materials or other noxious use
        or use which may disturb other tenants of the Project; or Tenant is in
        default of any obligation of Tenant under this Lease, or Tenant has
        defaulted under this Lease on three (3) or more occasions during any
        twelve (12) months preceding the date that Tenant shall request consent.
        Failure by or refusal of Landlord to consent to a proposed assignee or
        subtenant shall not cause a termination of this Lease. Upon a
        termination under Paragraph 21.A.(1)(i), Landlord may lease the Premises
        to any party, including parties with whom Tenant has negotiated an
        assignment or sublease, without incurring any liability to Tenant. At
        the option of Landlord, a surrender and termination of this Lease shall
        operate as an assignment to Landlord of some or all subleases or
        subtenancies. Landlord shall exercise this option by giving notice of
        that assignment to such subtenants on or before the effective date of
        the surrender and



<PAGE>   19
        termination. In connection with each request for assignment or
        subletting, Tenant shall pay to Landlord Landlord's standard fee for
        approving such requests, as well as all costs incurred by Landlord or
        any mortgagee or ground lessor in approving each such request and
        effecting any such transfer, including, without limitation, reasonable
        attorneys' fees.

B. BONUS RENT. Any Rent or other consideration realized by Tenant under any such
sublease or assignment in excess of the Rent payable hereunder, after
amortization of a reasonable brokerage commission incurred by Tenant, shall be
divided and paid, ten percent (10%) to Tenant, ninety percent (90)%) to
Landlord. In any subletting or assignment undertaken by Tenant, Tenant shall
diligently seek to obtain the maximum rental amount available in the marketplace
for comparable space available for primary leasing.

C. CORPORATION. If Tenant is a corporation, a transfer of corporate shares by
sale, assignment, bequest, inheritance, operation of law or other disposition
(including such a transfer to or by a receiver or trustee in federal or state
bankruptcy, insolvency or other proceedings) resulting in a change in the
present control of such corporation or any of its parent corporations by the
person or persons owning a majority of said corporate shares, shall not
constitute an assignment for purposes of this Lease. A transfer of controlling
interest in the Tenant by way of merger, consolidation or sale of assets shall
not constitute an assignment for purposes of this Lease.

D. UNINCORPORATED ENTITY. If Tenant is a partnership, joint venture,
unincorporated limited liability company or other unincorporated business form,
a transfer of the interest of persons, firms or entities responsible for
managerial control of Tenant by sale, assignment, bequest, inheritance,
operation of law or other disposition, so as to result in a change in the
present control of said entity and/or of the underlying beneficial interests of
said entity and/or a change in the identity of the persons responsible for the
general credit obligations of said entity shall constitute an assignment for all
purposes of this Lease.

E. LIABILITY. No assignment or subletting by Tenant, permitted or otherwise,
shall relieve Tenant of any obligation under this Lease or alter the primary
liability of the Tenant named herein for the payment of Rent or for the
performance of any other obligations to be performed by Tenant, including
obligations contained in Paragraph 25 with respect to any assignee or subtenant.
Landlord may collect rent or other amounts or any portion thereof from any
assignee, subtenant, or other occupant of the Premises, permitted or otherwise,
and apply the net rent collected to the Rent payable hereunder, but no such
collection shall be deemed to be a waiver of this Paragraph 21, or the
acceptance of the assignee, subtenant or occupant as tenant, or a release of
Tenant from the further performance by Tenant of the obligations of Tenant under
this Lease. Any assignment or subletting which conflicts with the provisions
hereof shall be void.

                                  22. AUTHORITY

        Landlord represents and warrants that it has full right and authority to
enter into this Lease and to perform all of Landlord's obligations hereunder and
that all persons signing this Lease on its behalf are authorized to do so.
Tenant and the person or persons, if any, signing on behalf of Tenant, jointly
and severally represent and warrant that Tenant has full right and authority to
enter into this Lease, and to perform all of Tenant's obligations hereunder, and
that all persons signing this Lease on its behalf are authorized to do so.

                                23. CONDEMNATION

A. CONDEMNATION RESULTING IN TERMINATION. If the whole or any substantial part
of the Premises should be taken or condemned for any public use under any
Regulation, or by right of eminent domain, or by private purchase in lieu
thereof, and the taking would prevent or materially interfere with the Permitted
Use of the Premises, either party shall have the right to terminate this Lease
at its option. If any material portion of the Building or Project is taken or
condemned for any public use under any Regulation, or by right of eminent
domain, or by private purchase in lieu thereof, Landlord may terminate this
Lease at its



<PAGE>   20
option. In either of such events, the Rent shall be abated during the unexpired
portion of this Lease, effective when the physical taking of said Premises shall
have occurred.

B. CONDEMNATION NOT RESULTING IN TERMINATION. If a portion of the Project of
which the Premises are a part should be taken or condemnation for any public use
under any Regulation, or by right of eminent domain, or by private purchase in
lieu thereof, and the taking prevents or materially interferes with the
Permitted Use of the Premises, and this Lease is not terminated as provided in
Paragraph 23.A. above, the Rent payable hereunder during the unexpired portion
of the Lease shall be reduced, beginning on the date when the physical taking
shall have occurred, to such amount as may be fair and reasonable under all of
the circumstances, but only after giving Landlord' credit for all sums received
or to be received by Tenant by the condemning authority. Notwithstanding
anything to the contrary contained in this Paragraph, if the temporary use or
occupancy of any part of the Premises shall be taken or appropriated under power
of eminent domain during the Term, this Lease shall be and remain unaffected by
such taking or appropriation and Tenant shall continue to pay in full all Rent
payable hereunder by Tenant during the Term; in the event of any such temporary
appropriation or taking, Tenant shall be entitled to receive that portion of any
award which represents compensation for the use of or occupancy of the Premises
during the Term, and Landlord shall be entitled to receive that portion of any
award which represents the cost of restoration of the Premises and the use and
occupancy of the Premises.

C. AWARD. In the event of a permanent taking, Landlord shall be entitled to (and
Tenant shall assign to Landlord) any and all payment, income, rent, award or any
interest therein whatsoever which may be paid or made in connection with such
taking or conveyance and Tenant shall have no claim against Landlord or
otherwise for any sums paid by virtue of such proceedings, whether or not
attributable to the value of any unexpired portion of this Lease, except as
expressly provided in this Lease. Notwithstanding the foregoing, any
compensation specifically and separately awarded Tenant for Tenant's personal
property and moving costs, leasehold value and business interruption shall be
and remain the property of Tenant.

D. WAIVER OF CCP SECTION 1265.130. Each party waives the provisions of
California Civil Code Procedure Section 1265.130 allowing either party to
petition the superior court to terminate this Lease as a result of a partial
taking.

                               24. CASUALTY DAMAGE

A. GENERAL. If the Premises or Building should be damaged or destroyed by fire,
tornado, or other casualty (collectively, "Casualty"), Tenant shall give
immediate written notice thereof to Landlord. Within thirty (30) days after
Landlord's receipt of such notice, Landlord shall notify Tenant whether in
Landlord's estimation material restoration of the Premises can reasonably be
made within one hundred eighty (180) days from the date of such notice and
receipt of required permits for such restoration. Landlord's determination shall
be binding on Tenant.

B. WITHIN 180 DAYS. If the Premises or Building should be damaged by Casualty to
such extent that material restoration can in Landlord's estimation be reasonably
completed within one hundred eighty (180) days after the date of such notice and
receipt of required permits for such restoration, this Lease shall not
terminate. Provided that insurance proceeds are received by Landlord to fully
repair the damage, Landlord shall proceed to rebuild and repair the Premises in
the manner determined by Landlord, except that Landlord shall not be required to
rebuild, repair or replace any part of the Alterations which may have been
placed on or about the Premises by Tenant. If the Premises are untenantable in
whole or in part following such damage, the Rent payable hereunder during the
period in which they are untenantable shall be abated proportionately, but only
to the extent the Premises are unfit for occupancy.

C. GREATER THAN 180 DAYS. If the Premises or Building should be damaged by
Casualty to such extent that rebuilding or repairs cannot in Landlord's
estimation be reasonably completed within one hundred eighty (180) days after
the date of such notice and receipt of required permits for such rebuilding or
repair, then Landlord shall have the option of either: (1) terminating this
Lease effective upon the date of the occurrence of such damage, in which event
the Rent shall be abated during the unexpired portion of



<PAGE>   21
this Lease; or (2) electing to rebuild or repair the Premises diligently and in
the manner determined by Landlord. Landlord shall notify Tenant of its election
within thirty (30) days after Landlord's receipt of notice of the damage or
destruction. Notwithstanding the above, Landlord shall not be required to
rebuild, repair or replace any part of any Alterations which may have been
placed, on or about the Premises by Tenant. If the Premises are untenantable in
whole or in part following such damage, the Rent payable hereunder during the
period in which they are untenantable shall be abated proportionately, but only
to the extent of rental abatement insurance proceeds received by Landlord during
the time and to the extent the Premises are unfit for occupancy.

D. TENANT'S FAULT. Notwithstanding anything herein to the contrary, if the
Premises or any other portion of the Building are damaged by Casualty resulting
from the fault, negligence, or breach of this Lease by Tenant or any of Tenant's
Parties, Base Rent and Additional Rent shall not be diminished during the repair
of such damage and Tenant shall be liable to Landlord for the cost and expense
of the repair and restoration of the Building caused thereby to the extent such
cost and expense is not covered by insurance proceeds.

E. INSURANCE PROCEEDS. Notwithstanding anything herein to the contrary, if the
Premises or Building are damaged or destroyed and are not fully covered by the
insurance proceeds received by Landlord or if the holder of any indebtedness
secured by a mortgage or deed of trust covering the Premises requires that the
insurance proceeds be applied to such indebtedness, then in either case Landlord
shall have the right to terminate this Lease be delivering written notice of
termination to Tenant within thirty (30) days after the date of notice to
Landlord that said damage or destruction is not fully covered by insurance or
such requirement is made by any such holder, as the case may be, whereupon this
Lease shall terminate.

F. WAIVER. This Paragraph 24 shall be Tenant's sole and exclusive remedy in the
event of damage or destruction to the Premises or the Building. As a material
inducement to Landlord entering into this Lease, Tenant hereby waives any rights
it may have under Sections 1932, 1933(4), 1941 or 1942 of the Civil Code of
California with respect to any destruction of the Premises, Landlord's
obligation for tenantability of the Premises and Tenant's right to make repairs
and deduct expenses of such repairs, or under any similar law, statute or
ordinance now or hereinafter in effect.

G. TENANT'S PERSONAL PROPERTY. In the event of any damage or destruction of the
Premises or the Building, under no circumstances shall Landlord be required to
repair any injury or damage to, or make any repairs or replacements of, Tenant's
personal property.

                                25. HOLDING OVER

        Unless Landlord expressly consents in writing to Tenant's holding over,
Tenant shall be unlawfully and illegally in possession of the Premises, whether
or not Landlord accepts any rent from Tenant or any other person while Tenant
remains in possession of the Premises without Landlord's written consent. If
Tenant shall retain possession of the Premises or any portion thereof without
Landlord's consent following the expiration of this Lease or sooner termination
for any reason, then Tenant shall pay to Landlord for each day of such retention
double the amount of daily rental as of the last month prior to the date of
expiration or earlier termination. Tenant shall also indemnify, defense, protect
and hold Landlord harmless from any loss, liability or cost, including
consequential and incidental damages and reasonable attorneys' fees, incurred by
Landlord resulting from delay by Tenant in surrendering the Premises, including,
without limitation, any claims made by the succeeding tenant founded on such
delay. Acceptance of Rent by Landlord following expiration or earlier
termination of this Lease, or following demand by Landlord for possession of the
Premises, shall not constitute a renewal of this Lease, and nothing contained in
this Paragraph 25 shall waive Landlord's right of reentry or any other right.
Additionally, if upon expiration or earlier termination of this Lease, or
following demand by Landlord for possession of the Premises, Tenant has not
fulfilled its obligation with respect to repairs and cleanup of the Premises or
any other Tenant obligations as set forth in this Lease, the Landlord shall have
the right to perform any such obligations as it deems necessary at Tenant's sole
cost and expense, and any time required by Landlord to complete such obligations
shall be considered a period of holding over and



<PAGE>   22
the terms of this Paragraph 25 shall apply. The provisions of this Paragraph 25
shall survive any expiration or earlier termination of this Lease.

                                   26. DEFAULT

A. EVENTS OF DEFAULT. The occurrence of any of the following shall constitute an
event of default on the part of Tenant:

        (1) ABANDONMENT. Abandonment or vacation of the Premises for a
        continuous period in excess of thirty (30) days. Tenant waives any right
        to notice Tenant may have under Section 1951.3 of the Civil Code of the
        State of California, the terms of this Paragraph 26.A being deemed such
        notice to Tenant as required by such Section 1951.3.

        (2) NONPAYMENT OF RENT. Failure to pay any installment of Rent or any
        other amount due and payable hereunder upon the date when said payment
        is due, as to which time is of the essence.

        (3) OTHER OBLIGATIONS. Failure to perform any obligation, agreement or
        covenant under this Lease other than those matters specified in
        subparagraphs (1) and (2) of this Paragraph 26.A, such failure
        continuing for fifteen (15) days after written notice of such failure,
        as to which time is of the essence.

        (4) GENERAL ASSIGNMENT. A general assignment by Tenant for the benefit
        of creditors.

        (5) BANKRUPTCY. The filing of any voluntary petition in bankruptcy by
        Tenant, or the filing of an involuntary petition by Tenant's creditors,
        which involuntary petition remains undischarged for a period of ninety
        (90) days. If under applicable law, the trustee in bankruptcy or Tenant
        has the right to affirm this Lease and continue to perform the
        obligations of Tenant hereunder, such trustee or Tenant shall, in such
        time period as may be permitted by the bankruptcy court having
        jurisdiction, cure all defaults of Tenant hereunder outstanding as of
        the date of the affirmance of this Lease and provide to Landlord such
        adequate assurances as may be necessary to ensure Landlord of the
        continued performance of Tenant's obligations under this Lease.

        (6) RECEIVERSHIP. The employment of a receiver to take possession of
        substantially all of Tenant's assets or Tenant's leasehold of the
        Premises, if such appointment remains undismissed or undischarged for a
        period of ninety (90) days after the order therefor.

        (7) ATTACHMENT. The attachment, execution or other judicial seizure of
        all or substantially all of Tenant's assets or Tenant's leasehold of the
        Premises, if such attachment or other seizure remains undismissed or
        undischarged for a period of ninety (90) days after the levy thereof.

        (8) INSOLVENCY. The admission by Tenant in writing of its inability to
        pay its debts as they become due.

B.  REMEDIES UPON DEFAULT.

        (1) TERMINATION. In the event of the occurrence of any event of default,
        Landlord shall have the right to give a written termination notice to
        Tenant, and on the date specified in such notice, Tenant's right to
        possession shall terminate, and this Lease shall terminate unless on or
        before such date all Rent and all costs and expenses incurred by or on
        behalf of Landlord hereunder shall have been paid by Tenant and all
        other events of default of this Lease by Tenant at the time existing
        shall have been fully remedied to the satisfaction of Landlord. At any
        time after such termination, Landlord may recover possession of the
        Premises or any part thereof and expel and remove therefrom Tenant and
        any other person occupying the same, including any subtenant or
        subtenants notwithstanding Landlord's consent to any sublease, by any
        lawful means, and again repossess and enjoy the Premises without
        prejudice to any of the remedies that Landlord may



<PAGE>   23
        have under this Lease, or at law or equity by any reason of Tenant's
        default or of such termination. Landlord hereby reserves the right, but
        shall not have the obligation, to recognize the continued possession of
        any subtenant. The delivery or surrender to Landlord by or on behalf of
        Tenant of keys, entry codes, or other means to bypass security at the
        Premises shall not terminate this Lease.

        (2) CONTINUATION AFTER DEFAULT. Even though an event of default may have
        occurred, this Lease shall continue in effect for so long as Landlord
        does not terminate Tenant's right to possession under paragraph 26.B.(1)
        hereof, and Landlord may enforce all of Landlord's rights and remedies
        under this Lease and at law or in equity, including without limitation,
        the right to recover Rent as it becomes due, and Landlord, without
        terminating this Lease, may exercise all of the rights and remedies of a
        landlord under Section 1951.4 of the Civil Code of the State of
        California or any successor code section. Acts of maintenance,
        preservation or efforts to lease the Premises or the appointment of a
        receiver under application of Landlord to protect Landlord's interest
        under this Lease or other entry by Landlord upon the Premises shall not
        constitute an election to terminate Tenant's right to possession.

        (3) INCREASED SECURITY DEPOSIT. If Tenant is in default under Paragraph
        26.A.(2) hereof and such default remains uncured for ten (10) days after
        such occurrence or such default occurs more than three times in any
        twelve (12) months period Landlord may require that Tenant increase the
        security deposit to the amount of three times the current months rent at
        the time of the most recent default.

C. DAMAGES AFTER DEFAULT. Should Landlord terminate this Lease pursuant to the
provisions of Paragraph 26.B.(1) hereof, Landlord shall have the rights and
remedies of a Landlord provided by Section 1951.2 of the Civil Code of the State
of California, or any successor code sections. Upon such termination, in
addition to any other rights and remedies to which Landlord may be entitled
under applicable law or at equity, Landlord shall be entitled to recover from
Tenant: (1) the worth at the time of award of the unpaid Rent and other amounts
which had been earned at the time of termination, (2) the worth at the time of
award of the amount by which the unpaid Rent and other amounts that would have
been earned after the date of termination until the time of award exceeds the
amount of such Rent loss that the Tenant proves could be reasonably avoided; (3)
the worth at the time of award of the amount by which the unpaid Rent and other
amounts for the balance of the Term after the time of award exceeds the amount
of such Rent loss that the Tenant proves could be reasonably avoided; and (4)
any other amount and court costs necessary to compensate Landlord for all
detriment proximately caused by Tenant's failure to perform Tenant's obligations
under this Lease or which, in the ordinary course of things, would be likely to
result therefrom. The "worth at the time of award" as used in (1) and (2) above
shall be computed at the Applicable Interest Rate (defined below). The "worth at
the time of award" as used in (3) above shall be computed by discounting such
amount at the Federal Discount Rate of the Federal Reserve Bank of San Francisco
at the time of award plus one percent (1%). If this Lease provides for any
periods during the Term during which Tenant is not required to pay Base Rent or
if Tenant otherwise receives a Rent concession, then upon the occurrence of an
event of default, Tenant shall owe to Landlord the full amount of such Base Rent
or value of such Rent concession, plus interest at the Applicable Interest Rate,
calculated from the date that such Base Rent or Rent concession would have been
payable.

D. LATE CHARGE. In addition to its other remedies, Landlord shall have the right
without notice or demand to add to the amount of any payment required to be made
by Tenant hereunder, and which is not paid and received by Landlord on or before
the first day of each calendar month, an amount equal to ten percent (10%) of
the delinquency for each month or portion thereof that the delinquency remains
outstanding to compensate Landlord for the loss of the use of the amount not
paid and the administrative costs caused by the delinquency, the parties
agreeing that Landlord's damage by virtue of such delinquencies would be
extremely difficult and impracticable to compute and the amount stated herein
represents a reasonable estimate thereof. Any waiver by Landlord of any late
charges or failure to claim the same shall not constitute a waiver of other late
charges or any other remedies available to Landlord.

E. INTEREST. Interest shall accrue on all sums not paid when due hereunder at
the lesser of eighteen percent (18%) per annum or the maximum interest rate
allowed by law ("APPLICABLE INTEREST RATE") from the due date until paid.

F. REMEDIES CUMULATIVE. All rights, privileges and elections or remedies of the
parties are cumulative and not alternative, to the extent permitted by law and
except as otherwise provided herein.



<PAGE>   24
                                    27. LIENS

        Tenant shall at all times keep the Premises and the Project free from
liens arising out of or related to work or services performed, materials or
supplies furnished or obligations incurred by or on behalf of Tenant or in
connection with work made, suffered or done by or on behalf of Tenant in or on
the Premises or Project. If Tenant shall not, within the ten (10) days following
the imposition of any such lien, cause the same to be released of record by
payment or posting of a proper bond, Landlord shall have, in addition to all
other remedies provided herein and by law, the right, but not the obligation, to
cause the same to be released by such means as Landlord shall reasonably deem
proper, including payment of the claim giving rise to such lien. All sums paid
by Landlord on behalf of Tenant and all expenses incurred by Landlord in
connection therefor shall be payable to Landlord by Tenant on demand with
interest at the Applicable Interest Rate as Additional Rent. Landlord shall have
the right at all times to post and keep posed on the Premises any notices
permitted or required by law, or which Landlord shall deem proper, for the
protection of Landlord, the Premises, the Project and any other party having an
interest therein, from mechanics' and materialmen's liens, and Tenant shall give
Landlord not less than ten (10) business days prior written notice of the
commencement of any work in the Premises or Project which could lawfully give
rise to a claim for mechanics' or materialmen's liens to permit Landlord to post
and record a timely notice of non-responsibility, as Landlord may elect to
proceed or as the law may from time provide, for which purpose, if Landlord
shall so determine, Landlord may enter the Premises. Tenant shall not remove any
such notice posted by Landlord without Landlord's consent, and in any event not
before completion of the work which could lawfully give rise to a claim for
mechanics' or materialmen's liens.

                                28. SUBSTITUTION

                               [SECTION DELETED]

                            29. TRANSFERS BY LANDLORD

        In the event of a sale or conveyance by Landlord of the Building or a
foreclosure by any creditor of Landlord, the same shall operate to release
Landlord from any liability upon any of the covenants or conditions, express or
implied, herein contained in favor of Tenant, to the extent required to be
performed after the passing of title to Landlord's successor-in-interest. In
such event, Tenant agrees to look solely to the responsibility of the
successor-in-interest of Landlord under this Lease with respect to the
performance of the covenants and duties of "Landlord" to be performed after the
passing of title to Landlord's successor-in-interest. This Lease shall not be
affected by any such sale and Tenant agrees to attorn to the purchaser or
assignee. Landlord's successor(s)-in-interest shall not have liability to Tenant
with respect to the failure to perform any of the obligations of "Landlord," to
the extent required to be performed prior to the date such
successor(s)-in-interest became the owner of the Building.

               30. RIGHT OF LANDLORD TO PERFORM TENANT'S COVENANTS

        All covenants to be performed by Tenant under any of the terms of this
Lease shall be performed by Tenant at Tenant's sole cost and expense and without
any abatement of Rent. If Tenant shall fail to pay any sum of money, other than
Base Rent, required to be paid by Tenant hereunder or shall fail to


<PAGE>   25
perform any other act on Tenant's part to be performed hereunder, including
Tenant's obligations under Paragraph 11 hereof, and such failure shall continue
for twenty (20) days after notice thereof by Landlord, in addition to the other
rights and remedies of Landlord, Landlord may make any such payment and perform
any such act on Tenant's part. In the case of an emergency, no prior
notification by Landlord shall be required. Landlord may take such actions
without any obligation and without releasing Tenant from any of Tenant's
obligations. All sums so paid by Landlord and all incidental costs incurred by
Landlord and interest thereon at the Applicable Interest Rate, from the date of
payment by Landlord, shall be paid to Landlord on demand as Additional Rent.

                                   31. WAIVER

        If either Landlord or Tenant waives the performance of any term,
covenant or condition contained in this Lease, such waiver shall not be deemed
to be a waiver of any subsequent breach of the same or any other term, covenant
or condition contained herein, or constitute a course of dealing contrary to the
expressed terms of this Lease. The acceptance of Rent by Landlord shall not
constitute a waiver of any preceding breach by Tenant of any term, covenant or
condition of this Lease, regardless of Landlord's knowledge of such preceding
breach at the time Landlord accepted such Rent. Failure by Landlord to enforce
any of the terms, covenants or conditions of this Lease for any length of time
shall not be deemed to waive or decrease the right of Landlord to insist
thereafter upon strict performance by Tenant. Waiver by Landlord of any term,
covenant or condition contained in this Lease may only be made by a written
document signed by Landlord, based upon full knowledge of the circumstances.

                                   32. NOTICES

        Each provision of this Lease or of any applicable governmental laws,
ordinances, regulations and other requirements with reference to sending,
mailing, or delivery of any notice or the making of any payment by Landlord or
Tenant to the other shall be deemed to be complied with when and if the
following steps are taken:

A. RENT. All rent and other payments required to be made by Tenant to Landlord
hereunder shall be payable to Landlord at Landlord's Remittance Address set
forth in the Basic Lease Information, or at such other address as Landlord may
specify from time to time by written notice delivered in accordance herewith.
Tenant's obligations to pay Rent and any other amounts to Landlord under the
terms of this Lease shall not be deemed satisfied until such Rent and other
amounts have been actually received by Landlord.

B. OTHER. All notices, demands, consents and approvals which may or are required
to be given by either party to the other hereunder shall be in writing and
either personally delivered, sent by commercial overnight courier, mailed,
certified or registered, postage prepaid, and in each case addressed to the
party to be notified at the Notice Address for such party as specified in the
Basic Lease Information or to such other place as the party to be notified may
from time to time designate by at least fifteen (15) days notice to the
notifying party. Notices shall be deemed served upon receipt or refusal to
accept delivery. Tenant appoints as its agent to receive the service of all
default notices and notice of commencement of unlawful detainer proceedings the
person in charge of or apparently in charge of occupying the Premises at the
time, and, if there is no such person, then such service may be made by
attaching the same on the main entrance of the Premises.

C. REQUIRED NOTICES. Tenant shall immediately notify Landlord in writing of any
notice of a violation or a potential or alleged violation of any Regulation that
relates to the Premises or the Project, or of any inquiry, investigation,
enforcement or other action that is instituted or threatened by any governmental
or regulatory agency against Tenant or any other occupant of the Premises, or
any claim that is instituted or threatened by any third party that relates to
the Premises or the Project.



<PAGE>   26
                               33. ATTORNEYS' FEES

        If Landlord places the enforcement of this Lease, or any part thereof,
or the collection of any Rent due, or to become due hereunder, or recovery of
possession of the Premises in the hands of an attorney, Tenant shall pay to
Landlord, upon demand, Landlord's reasonable attorneys' fees and court costs,
whether incurred without trial, at trial, appeal or review. In any action which
Landlord or Tenant brings to enforce its respective rights hereunder, the
unsuccessful party shall pay all costs incurred by the prevailing party
including reasonable attorneys' fees, to be fixed the court, and said costs and
attorneys' fees shall be a part of the judgment in said action.

                           34. SUCCESSORS AND ASSIGNS

        This Lease shall be binding upon and inure to the benefit of Landlord,
its successors and assigns, and shall be binding upon and inure to the benefit
of Tenant, its successors, and to the extent assignment is approved by Landlord
as provided hereunder, Tenant's assigns.

                                35. FORCE MAJEURE

        If performance by a party of any portion of this Lease is made
impossible by any prevention, delay, or stoppage caused by strikes, lockouts,
labor disputes, acts of God, inability to obtain services, labor, or materials
or reasonable substitutes for those items, government actions, civil commotions,
fire or other casualty, or other causes beyond the reasonable control of the
party obligated to perform, performance by that party for a period equal to the
period of that prevention, delay, or stoppage is excused. Tenant's obligation to
pay Rent, however, is not excused by this Paragraph 35.

                            36. SURRENDER OF PREMISES

        Tenant shall, upon expiration or sooner termination of this Lease,
surrender the Premises to Landlord in the same condition as existed on the date
Tenant originally took possession thereof, including, but not limited to, all
interior walls cleaned, all interior painted surfaces repainted in the original
color, all holes in the walls repaired, all carpets shampooed and cleaned, and
all floors cleaned, waxed, and free of any Tenant-introduced marking or
painting, all to the reasonable satisfaction of Landlord, ordinary wear and tear
excepted. Tenant shall remove all of its debris from the Project. At or before
the time of surrender, Tenant shall comply with the terms of Paragraph 12.A.
hereof with respect to Alterations to the Premises and all other matters
addressed in such Paragraph. If the Premises are not so surrendered at the
expiration or sooner termination of this Lease, the provisions of Paragraph 25
hereof shall apply. All keys to the Premises or any part thereof shall be
surrendered to Landlord upon expiration or sooner termination of the Term.
Tenant shall give written notice to Landlord at least thirty (30) days prior to
vacating the Premises and shall meet with Landlord for a joint inspection of the
Premises at the time of vacating, but nothing contained herein shall be
construed as an extension of the Term or as a consent by Landlord to any holder
over by Tenant. In the event of Tenant's failure to give such notice or
participate in such joint inspection, Landlord's inspection at or after Tenant's
vacating the Premises shall conclusively be deemed correct for purposes of
determining Tenant's responsibility for repairs and restoration. Any delay
caused by Tenant's failure to carry out its obligations under this Paragraph 36
beyond the term hereof, shall constitute unlawful and illegal possession of the
Premises under Paragraph 25 hereof.

                                   37. PARKING

        So long as Tenant is occupying the Premises, Tenant and Tenant's Parties
shall have the right to use up to the number of parking spaces, if any,
specified in the Basic Lease Information on an unreserved, non-exclusive, first
come, first served basis, for passenger-size automobiles, in the parking areas
in the Project designated from time to time by Landlord for use in common by
tenants of the Building.



                                      
<PAGE>   27
        Tenant may request additional parking spaces from time to time and if
Landlord in its sole discretion agrees to make such additional spaces available
for use by Tenant, such spaces shall be provided on a month-to-month unreserved
and nonexclusive basis (unless otherwise agreed in writing by Landlord), and
subject to such parking charges as Landlord shall determine, and shall otherwise
be subject to such terms and conditions as Landlord may require.

        Tenant shall at all times comply and shall cause all Tenant's Parties
and visitors to comply with all Regulations and any rules and regulations
established from time to time by Landlord relating to parking at the Project,
including any keycard, sticker or other identification or entrance system, and
hours of operation, as applicable.

        Landlord shall have no liability for any damage to property or other
items located in the parking areas of the Project, nor for any personal injuries
or death arising out of the use of parking areas in the Project by Tenant or any
Tenant's Parties except arising from or caused by Landlord's parties gross
negligence, willful misconduct or criminal activity. Without limiting the
foregoing, if Landlord arranges for the parking areas to be operated by an
independent contractor not affiliated with Landlord, Tenant acknowledges that
Landlord shall have no liability for claims arising through the acts or
omissions of such independent contractor. In all events, Tenant agrees to look
first to its insurance carrier and to require that Tenant's Parties look first
to their respective insurance carriers for payment of any losses sustained in
connection with any use of the parking areas.

        Landlord reserves the right to assign specific spaces, and to reserve
spaces for visitors, small cars, disabled person or for other tenants or guests,
and Tenant shall not park and shall not allow Tenant's Parties to park in any
such assigned or reserved spaces. Tenant may validate visitor parking by such
method as Landlord may approve, at the validation rate from time to time
generally applicable to visitor parking. Landlord also reserves the right to
alter, modify, relocate or close all or any portion of the parking areas in
order to make repairs or perform maintenance service, or to restripe or renovate
the parking areas, or if required by casualty, condemnation, act of God,
Regulations or for any other reason deemed reasonable by Landlord.

        Tenant shall pay to Landlord (or Landlord's parking contractor, if so
directed in writing by Landlord), as Additional Rent hereunder, the monthly
charges established from time to time by Landlord for parking under the Building
should such spaces become available and should Landlord and Tenant agree that t
shall lease such spaces. Such parking charges shall be payable in advance
with Tenant's payment of Basic Rent. No deductions from the monthly parking
charge shall be made for days on which the Tenant does not use any of the
parking spaces entitled to be used by Tenant.

                                38. MISCELLANEOUS

A. GENERAL. The term "Tenant" or any pronoun used in place thereof shall
indicate and include the masculine or feminine, the singular or plural number,
individuals, firms or corporations, and their respective successors, executors,
administrators and permitted assigns, according to the context hereof.

B. TIME. Time is of the essence regarding this Lease and all of its provisions.

C. CHOICE OF LAW. This Lease shall in all respects be governed by the laws of
the State of California.

D. ENTIRE AGREEMENT. This Lease, together with its Exhibits, addenda and
attachments and the Basic Lease Information, contains all the agreements of the
parties hereto and supersedes any previous negotiations. There have been no
representations made by the Landlord or understandings made between the parties
other than those set forth in this Lease and its Exhibits, addenda and
attachments and the Basic Lease Information.



                                      
<PAGE>   28
E. MODIFICATION. This Lease may not be modified except by a written instrument
signed by the parties hereto. Tenant accepts the area of the Premises as
specified in the Basic Lease Information as the approximate area of the Premises
for all purposes under this Lease, and acknowledges and agrees that no other
definition of the area (rentable, usable or otherwise) of the Premises shall
apply. Tenant shall in no event be entitled to a recalculation of the square
footage of the Premises, rentable, usable or otherwise, and no recalculation, if
made, irrespective of its purpose, shall reduce Tenant's obligations under this
Lease in any manner, including without limitation the amount of Base Rent
payable by Tenant or Tenant's Proportionate Share of the Building and of the
Project.

F. SEVERABILITY. If, for any reason whatsover, any of the provisions hereof
shall be unenforceable or ineffective, all of the other provisions shall be an
remain in full force and effect.

G. RECORDATION. Tenant shall not record this Lease or a short form memorandum
hereof.

H. EXAMINATION OF LEASE. Submission of this Lease to Tenant does not constitute
an option or offer to lease and this Lease is not effective otherwise until
execution and delivery by both Landlord and Tenant.

I. ACCORD AND SATISFACTION. No payment by Tenant of a lesser amount than the
total Rent due nor any endorsement on any check or letter accompanying any check
or payment of Rent shall be deemed an accord and satisfaction of full payment of
Rent, and Landlord may accept such payment without prejudice to Landlord's right
to recover the balance of such Rent or to pursue other remedies. All offers by
or on behalf of Tenant of accord and satisfaction are hereby rejected in
advance.

J. EASEMENTS. Landlord may grant easements on the Project and dedicate for
public use portions of the Project without Tenant's consent; provided that no
such grant or dedication shall materially interfere with Tenant's Permitted Use
of the Premises. Upon Landlord's request, Tenant shall execute, acknowledge and
deliver to Landlord documents, instruments, maps, and plats necessary to
effectuate Tenant's covenants hereunder.

K. DRAFTING AND DETERMINATION PRESUMPTION. The parties acknowledge that this
Lease has been agreed to by both the parties, that both Landlord and Tenant have
consulted with attorneys with respect to the terms of this Lease and that no
presumption shall be created against Landlord because Landlord drafted this
Lease. Except as otherwise specifically set forth in this Lease, with respect to
any consent, determination or estimation of Landlord required or allowed in this
Lease or requested of Landlord, Landlord's consent, determination or estimation
shall not be unreasonably withheld by Landlord. If Landlord fails to respond to
any request for its consent within the time period, if any, specified in this
Lease, Landlord shall be deemed to have disapproved such request.

L. EXHIBITS. The Basic Lease Information, and the Exhibits, addenda and
attachments attached hereto are hereby incorporated herein by this reference and
made a part of this Lease as though fully set forth herein.

M. NO LIGHT, AIR OR VIEW EASEMENT. Any diminution or shutting off of light, air
or view by any structure which may be erected on lands adjacent to or in the
vicinity of the Building shall in no way affect this Lease or impose any
liability on Landlord.

N. NO THIRD PARTY BENEFIT. This Lease is a contract between Landlord and Tenant
and nothing herein is intended to create any third party benefit.

O. QUIET ENJOYMENT. Upon payment by Tenant of the Rent, and upon the observance
and performance of all of the other covenants, terms and conditions on Tenant's
part to be observed and performed, Tenant shall peaceably and quietly hold and
enjoy the Premises for the term hereby demised without hindrance or interruption
by Landlord or any other person or persons lawfully or equitably claiming by,
thorugh or under Landlord, subject, nevertheless, to all of the other terms and
conditions of this Lease.



                                      
<PAGE>   29
Landlord shall not be liable for any hindrance, interruption, interference or
disturbance by other tenants or third persons, nor shall Tenant be released from
any obligations under this Lease because of such hindrance, interruption,
interference or disturbance.

P. COUNTERPARTS. This Lease may be executed in any number of counterparts, each
of which shall be deemed an original.

Q. MULTIPLE PARTIES. If more than one person or entity is named herein as
Tenant, such multiple parties shall have joint and several responsibility to
comply with the terms of this Lease.

R. PRORATIONS. Any Rent or other amounts payable to Landlord by Tenant hereunder
for any fractional month shall be prorated based on a month of 30 days. As used
herein, the term "fiscal year" shall mean the calendar year or such other fiscal
year as Landlord may deem appropriate.

   39. ADDITIONAL PROVISIONS

ADDENDUM #1 - RENT
Notwithstanding anything to the contrary in the Basic Lease Information and
pursuant to and subject to the provisions of Paragraphs 6 and 7 of the Lease,
the Rent shall be as follows:

<TABLE>
<S>                             <C>
Months 1 - 12
Base Rent                       $32,966.00
Basic Operating Expenses       
(1998 estimate)                 $11,702.93
                                ----------
                                $44,668.93 per month
Months 13 - 24
Base Rent                       $34,614.30
Basic Operating Expenses       
(1998 estimate)                 $11,702.93
                                ----------
                                $47,317.23 per month
Months 25 - 36
Base Rent                       $36,262.60
Basic Operating Expenses       
(1998 estimate)                 $11,702.93
                                ----------
                                $47,965.53 per month
Months 37 - 48
Base Rent                       $37,910.90
Basic Operating Expenses       
(1998 estimate)                 $11,702.93
                                ----------
                                $49,613.83 per month
Months 49 - 60
Base Rent                       $39,559.20
Basic Operating Expenses       
(1998 estimate)                 $11,702.93
                                ----------
                                $51,262.13 per month
Months 61 - 72
Base Rent                       $41,207.50
Basic Operating Expenses       
(1998 estimate)                 $11,702.93
                                ----------
                                $52,910.43 per month
Months 73 - 84
Base Rent                       $42,885.80
Basic Operating Expenses       
(1998 estimate)                 $11,702.93
                                ----------
                                $54,558.73 per month
</TABLE>



                                      
<PAGE>   30
ADDENDUM #2 - OPTION TO EXTEND

Provided that Tenant is not, and has not been, in default of any of it's
obligations under this Lease, Tenant shall have an option to extend the Term
("Extended Term") in an "as-is" condition for a period of five (5) years
commencing at the expiration of the Term. The Base Rent for the Extended Term
shall be at the then-prevailing fair market value for comparable space in the
Brisbane area. However, in no event shall the Base Rent for the Extended Term be
less than the Base Rent for the last month of the Term.

Tenant shall give to Landlord written notice of it's intent to exercise this
Option to Extend no sooner than one hundred eighty (180) days prior to the
expiration of the Lease Term. Within fifteen (15) days from receipt of such
written notice to exercise by Tenant, Landlord will provide to Tenant the fair
market rent, as reasonably determined by Landlord, as well as terms and
conditions (collectively, the "Determination") for the Extended Term. Tenant
shall have fifteen (15) days from receipt of the Determination to accept
Landlord's Determination. If Landlord does not receive written acceptance from
Tenant of Landlord's Determination by the end of such fifteen (15) day period,
this Option to Extend shall be null and void and Landlord shall have no further
obligation to Tenant and Landlord may enter into a lease for the Premises with a
third party.

This Option to Extend is for the exclusive and sole benefit of Tenant and may
not be conveyed, made a par of a sublease, assigned or otherwise transferred.



ADDENDUM #3 - SECURITY DEPOSIT

A. DELIVERY OF LETTER OF CREDIT. In addition to providing the $50,000.00 cash
security deposit with Landlord, Tenant shall, no later than the Commencement
Date of this Lease, deliver to Landlord and cause to be in effect during the
initial thirty-six (36) months of the Leas term an unconditional, irrevocable
and automatically renewable letter of credit ("LC") in the amount of
$160,000.00, (the "LC Amount"). The LC shall be in a form acceptable to Landlord
and shall be issued by an LC bank selected by Tenant and acceptable to Landlord.
An LC bank is a bank that accepts deposits, maintains accounts, has a local
office that will negotiate a letter of credit, and the deposits of which are
insured by the Federal Deposit Insurance Corporation. Tenant shall pay all
expenses, points, or fees incurred by Tenant in obtaining the LC.

B. REPLACEMENT OF LETTER OF CREDIT. Tenant may, from time to time, replace any
existing LC with a new LC if the new LC (a) becomes effective at least thirty
(30) days before expiration of the LC that it replaces; (b) is in the required
amount; (c) is issued by an LC bank acceptable to Landlord; and (d) otherwise
complies with the requirements of this Paragraph 19.

C. LANDLORD'S RIGHT TO DRAW ON LETTER OF CREDIT. Landlord shall hold the LC as
security for the performance of Tenant's obligations under this Lease. If, after
notice and failure to cure within any applicable period provided in this Lease,
Tenant defaults on any provisions of this Lease, Landlord may, without prejudice
to any other remedy it has, draw on that portion of the LC necessary to (a) pay
Rent of other sum in default; (b) pay or reimburse Landlord for any amount that
Landlord may spend or become obligated to spend in exercising Landlord's rights
under Paragraph 30 (Right of Landlord to Perform Tenant's Covenant); and/or (c)
compensate Landlord for any expense, loss, or damage that Landlord may suffer
because of Tenant's default. If Tenant fails to renew or replace the LC at least
thirty (30) days before its expiration, Landlord may, without prejudice to any
other remedy it has, draw on the entire amount of the LC. Notwithstanding
anything to the contrary above, if Tenant shall have been in monetary default
more than two (2) times during the initial thirty-six (36) months of the initial
Lease Term, then such LC shall be required as a condition of the Lease for the
entire Lease Term.

D. RESTORATION OF LETTER OF CREDIT AND LC SECURITY DEPOSIT. If Landlord draws on
any portion of the LC and/or applies all or any portion of such draw, Tenant
shall, within five (5) business days after demand by Landlord, either (a)
deposit cash with Landlord in an amount that, when added to the amount remaining
under the LC and the amount of any LC Security Deposit, shall equal the LC
Amount then required under this Paragraph 19; or (b) reinstate the LC to the
full LC amount.



                                      
<PAGE>   31
ADDENDUM #4 - ADVANCED PAYMENT OF RENT

As a material consideration of this Lease, Tenant shall pay to Landlord, as
Advance Rent, the sum of Three hundred fifty seven thousand three hundred fifty
one and 44/100 dollars ($357,351.44) upon execution of this Lease which shall be
applied as Rent for the period July 1, 1998 through February 28, 1999. Upon
execution, Tenant shall deposit by check or cash the sum of forty four thousand
six hundred sixty eight and 93/100 dollars ($44,668.93) which shall represent
the payment of the first months Rent. The balance shall be provided in a letter
of credit pursuant to the following:

        (1) DELIVERY OF LETTER OF CREDIT. In addition to providing the
        $44,668.93 cash payment to the Landlord, Tenant shall, no later than the
        Commencement Date of this Lease, deliver to Landlord and cause to be in
        effect during the initial eight (8) months of the Lease Term an
        unconditional, irrevocable and automatically renewable letter of credit
        ("LC") in the amount of $312,682.51, (the "LC Amount"). The LC shall be
        in a form acceptable to the Landlord and shall be issued by an LC bank
        selected by Tenant and acceptable to Landlord. An LC bank is a bank that
        accepts deposits, maintains accounts, has a local office that will
        negotiate a letter of credit, and the deposits of which are insured by
        the Federal Deposit Insurance Corporation. Tenant shall pay all
        expenses, points, or fees incurred by Tenant in obtaining the LC.

        (2) REPLACEMENT OF LETTER OF CREDIT. Tenant may, from time to time,
        replace any existing LC with a new LC if the new LC (a) becomes
        effective at least thirty (30) days before the expiration of the LC that
        it replaces; (b) is in the required LC amount; (c) is issued by an LC
        bank acceptable to Landlord; and (d) otherwise complies with the
        requirements of this Addendum #4.

        (3) LANDLORD'S RIGHT TO DRAW ON LETTER OF CREDIT. Landlord shall hold
        the LC as security for the performance of Tenant's monetary obligations
        under this Lease. If, after the fifth (5th) day of any month the Rent is
        not received by Landlord, Landlord may, without prejudice to any other
        remedy it has, draw on that portion of the LC necessary to pay Rent.

                              40. JURY TRIAL WAIVER

        EACH PARTY HERETO (WHICH INCLUDES ANY ASSIGNEE, SUCCESSOR HEIR OR
PERSONAL REPRESENTATIVE OF A PARTY) SHALL NOT SEEK A JURY TRIAL, HEREBY WAIVES A
TRIAL BY JURY, AND HEREBY FURTHER WAIVES ANY OBJECTION TO VENUE IN THE COUNTY IN
WHICH THE BUILDING IS LOCATED, AND AGREES AND CONSENTS TO PERSONAL JURISDICTION
OF THE COURT OF THE STATE IN WHICH THE PROPERTY IS LOCATED, IN ANY ACTION OR
PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY HERETO AGAINST THE OTHER ON ANY
MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS LEASE, THE
RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S USE OR OCCUPANCY OF THE PREMISES,
OR ANY CLAIM OF INJURY OR DAMAGE, OR THE ENFORCEMENT OF ANY REMEDY UNDER ANY
STATUTE, EMERGENCY OR OTHERWISE, WHETHER ANY OF THE FOREGOING IS BASED ON THIS
LEASE OR ON TORT LAW. EACH PARTY REPRESENTS THAT IT HAS HAD THE OPPORTUNITY TO
CONSULT WITH LEGAL COUNSEL CONCERNING THE EFFECT OF THIS PARAGRAPH 40. THE
PROVISIONS OF THE PARAGRAPH 40 SHALL SURVIVE THE EXPIRATION OR EARLIER
TERMINATION OF THIS LEASE.



<PAGE>   32
        IN WITNESS WHEREOF, the parties hereto have executed this Lease as of
the day and the year first above written.

                                       LANDLORD

                                       Spieker Properties, L.P.,
                                       a California limited partnership

                                       By: Spieker Properties, Inc.
                                           a Maryland corporation,
                                           its general partner


                                           By: /s/ PETER H. SCHNUGG
                                              ----------------------------------
                                              Peter H. Schnugg
                                              Its:  Senior Vice President

                                       Date: 5-27-98
                                            ------------------------------------

                                       TENANT

                                       VaxGen, Inc.

                                       a Delaware corporation


                                       By: /s/ ROBERT F. PACQUER
                                          --------------------------------------
                                          Robert F. Pacquer
                                          Its:  Chief Financial Officer

                                       Date: 5-21-98
                                            ------------------------------------



                                      
<PAGE>   33
                                    EXHIBIT A
                              RULES AND REGULATIONS


1.   Sidewalks, halls, passages, exits, entrances, elevators, escalators and
     stairways shall not be obstructed by tenants or used by tenants for any
     purpose other than for ingress and egress from their respective premises.
     The halls, passages, exits, entrances, elevators and stairways are not for
     the use of the general public and Landlord shall in all cases retain the
     right to control and prevent access there by all person whose presence, in
     the judgment of Landlord, shall be prejudicial to the safety, character,
     reputation and interests of the Building, the Project and its tenants,
     provided that nothing herein contained shall be construed to prevent such
     access to persons with whom any tenant normally deals in the ordinary
     course of such tenant's business unless such persons are engaged in illegal
     activities. No tenant, and no employees of any tenant, shall go upon the
     roof of any Building, except as authorized by Landlord. No tenant, and no
     employees of any tenant shall move any common area furniture without
     Landlord's consent.

2.   No sign, placard, banner, picture, name, advertisement or notice, visible
     form the exterior of the Premises or the Building or the common areas of
     the Building shall be inscribed, painted, affixed, installed or otherwise
     displayed by Tenant either on its Premises or any part of the Building or
     Project without the prior written consent of Landlord in Landlord's sole
     and absolute discretion. Landlord shall have the right to remove any such
     sign, placard, banner, picture, name, advertisement, or notice without
     notice to and at the expense of the Tenant, which were installed or
     displayed in violation of this rule. If Landlord shall have given such
     consent to Tenant at anytime, whether before or after the execution of
     Tenant's lease, such consent shall in no way operate as a waiver or release
     of any of the provisions hereof or of the Lease, and shall be deemed to
     relate only to the particular sign, placard, banner, picture, name,
     advertisement or notice so consented to by Landlord and shall not be
     construed as dispensing with the necessity of obtaining the specific
     written consent of Landlord with respect to any other such sign, placard,
     banner, picture, name, advertisement or notice.

All approved signs or lettering on doors and walls shall be printed, affixed
     or inscribed at the expense of Tenant by a person or vendor approved by
     Landlord and shall be removed by Tenant at the time of vacancy at Tenant's
     expense.

3.   The directory of the Building will be provided exclusively for the display
     of the name and location of tenants only and Landlord reserves the right to
     charge for the use thereof and to exclude any other names therefrom.

4.   No curtains, draperies, blinds, shutters, shades, screens or other
     coverings, awnings, hangings or decorations shall be attached to, hung or
     placed in, or used in connection with, any window or door on the Premises
     without the prior written consent of Landlord. In any event with the prior
     written consent of Landlord, all such items shall be installed inboard of
     Landlord's standard window covering and shall in no way be visible from the
     exterior of the Building. All electrical ceiling fixtures hung in offices
     or spaces along the perimeter of the Building must be fluorescent or of a
     quality, type, design, and bulb color approved by Landlord. No articles
     shall be placed or kept on the window sills so as to be visible from the
     exterior of the Building. No articles shall be placed against glass
     partitions or doors which Landlord considers unsightly form outside
     Tenant's Premises.

5.   Landlord reserves the right to exclude from the Building and the Project,
     between the hours of 6 p.m. and 8 a.m. and at all hours on Saturdays,
     Sundays and legal holidays, all persons who are not tenants or their
     accompanied guests in the Building. Each tenant shall be responsible for
     all persons for whom it allows to enter the Building or the Project and
     shall be liable to Landlord for all acts of such persons.

Landlord and its agents shall not be liable for damages for any error concerning
     the admission to, or exclusion from, the Building or the Project of any
     person.



                                      
<PAGE>   34
During the continuance of any invasion, mob, riot, public excitement or other
     circumstance rendering such action advisable in Landlord's opinion,
     Landlord reserves the right (but shall not be obligated) to prevent access
     to the Building and the Project during the continuance of that event by any
     means it considers appropriate for the safety of tenants and protection of
     the Building, property in the Building and the Project.

6.   All cleaning and janitorial services for the Building and the Premises
     shall be provided exclusively through Landlord. Except with the written
     consent of Landlord, no person or persons other than those approved by
     Landlord shall be permitted to enter the Building for the purpose of
     cleaning the same. Tenant shall not cause any unnecessary labor by reason
     of Tenant's carelessness or indifference in the preservation of good order
     and cleanliness of its Premises. Landlord shall in no way be responsible to
     Tenant for any loss of property on the Premises, however occurring, or for
     any damage done to Tenant's property by the janitor or any other employee
     or any other person.

7.   Tenant shall see that all doors of its Premises are closed and securely
     locked and must observe strict care and caution that all water faucets or
     water apparatus, coffee pots or other heat-generating devices are entirely
     shut off before Tenant or its employees leave the Premises, and that all
     utilities shall likewise be carefully shut off, so as to prevent waste or
     damage. Tenant shall be responsible for any damage or injuries sustained by
     other tenants or occupants of the Building or Project by Landlord for
     noncompliance with this rule. On multiple-tenancy floors, all tenants shall
     keep the door or doors to the Building corridors closed at all times except
     for ingress and egress.

8.   Tenant shall not use any method of heating or air-conditioning other than
     that supplied by Landlord. As more specifically provided in the Tenant's
     lease of the Premises, Tenant shall not waste electricity, water or
     air-conditioning and agrees to cooperate fully with Landlord to assure the
     most effective operation of the Building's heating and air-conditioning,
     and shall refrain from attempting to adjust any controls other than room
     thermostats installed for Tenant's use.

9.   Landlord will furnish Tenant free of charge with two keys to each door in
     the Premises. Landlord may make a reasonable charge for any additional
     keys, and Tenant shall not make or have made additional keys. Tenant shall
     not alter any lock or access device or install a new or additional lock or
     access device or bolt on any door of its Premises, without the prior
     written consent of Landlord. If Landlord shall give its consent, Tenant
     shall in each case furnish Landlord with a key for any such lock. Tenant,
     upon the termination of its tenancy, shall deliver to Landlord the keys for
     all doors which have been furnished to Tenant, and in the event of loss of
     any keys so furnished, pay Landlord therefor.

10.  The restrooms, toilets, urinals, wash bowls and other apparatus shall not
     be used for any purpose other than that for which they were constructed and
     no foreign substance of any kind whatsoever shall be thrown into them. The
     expense of any breakage, stoppage, or damage resulting from violation of
     this rule shall be borne by the tenant who, or whose employees or invitees,
     shall have caused the breakage, stoppage, or damage.

11.  Tenant shall not use or keep in or on the Premises, the Building or the
     Project any kerosene, gasoline, or inflammable or combustible fluid or
     material.

12.  Tenant shall not use, keep or permit to be used or kept in its Premises any
     foul or noxious gas or substance. Tenant shall not allow the Premises to be
     occupied or used in a manner offensive or objectionable to Landlord or
     other occupants of the Building by reason of noise, odors and/or vibrations
     or interfere in any way with other tenants or those having business
     therein, nor shall any animals or birds be brought or kept in or about the
     Premises, the Building or the Project.

13.  No cooking shall be done or permitted by any tenant on the Premises, except
     that use by the tenant of Underwriter's Laboratory (UL) approved equipment,
     refrigerators and microwave ovens may be used in the Premises for the
     preparation of coffee, tea, hot chocolate and similar beverages, storing
     and heating food for tenants and their employees shall be permitted. All
     uses must be in



                                      
<PAGE>   35
     accordance with all applicable federal, state and city laws, codes,
     ordinances, rules and regulations and the Lease.

14.  Except with the prior written consent of Landlord, Tenant shall not sell,
     or permit the sale, at retail, of newspapers, magazines, periodicals,
     theater tickets or any other goods or merchandise in or on the Premises,
     nor shall Tenant carry on, or permit or allow any employee or other person
     to carry on, the business of stenography, typewriting or similar business
     in or from the Premises for the service or accommodation of occupants of
     any other portion of the Building, nor shall the Premises be used for the
     storage of merchandise or for manufacturing of any kind, or the business of
     a public barber shop, beauty parlor, nor shall the Premises be used for any
     illegal, improper, immoral or objectionable purpose, or any business or
     activity other than that specifically provided for in such Tenant's Lease.
     Tenant shall not accept hairstyling, barbering, shoeshine, nail, massage or
     similar services in the Premises or common areas except as authorized by
     Landlord.

15.  If Tenant requires telegraphic, telephonic, telecommunications, data
     processing, burglar alarm or similar services, it shall first obtain, and
     comply with, Landlord's instructions in their installation.

16.  Landlord will direct electricians where and how telephone, telegraph and
     electrical wires are to be introduced or installed. No boring or cutting
     for wires will be allowed without the prior written consent of Landlord.
     The location of burglar alarms, telephones, call boxes and other office
     equipment affixed to the Premises shall be subject to the written approval
     of Landlord.

17.  Tenant shall not install any radio or television antenna, satellite dish,
     loudspeaker or any other device on the exterior walls or the roof of the
     Building, without Landlord's consent. Tenant shall not interfere with radio
     or television broadcasting or reception form or in the Building, the
     Project or elsewhere.

18.  Tenant shall not mark, or drive nails, screws or drill into the partitions,
     woodwork or drywall or in any way deface the Premises or any part thereof
     without Landlord's consent. Tenant may install nails and screws in areas of
     the Premises that have been identified for those purposes to Landlord by
     Tenant at the time those walls or partitions were installed in the
     Premises. Tenant shall not lay linoleum, tile, carpet or any other floor
     covering so that the same shall be affixed to the floor of its Premises in
     any manner except as approved in writing by Landlord. The expense of
     repairing any damage resulting form a violation of this rule or the removal
     of any floor covering shall be borne by the tenant by whom, or by whose
     contractors, employees or invitees, the damage shall have been caused.

19.  No furniture, freight, equipment, materials, supplies, packages,
     merchandise or other property will be received in the Building or carried
     up or down the elevators except between such hours and in such elevators as
     shall be designated by Landlord.

Tenant shall not place a load upon any floor of its Premises which exceeds the
     load per square foot which such floor was designed to carry or which is
     allowed by law. Landlord shall have the right to prescribe the weight, size
     and position of all safes, furniture or other heavy equipment brought into
     the Building. Safes or other heavy objects shall, if considered necessary
     by Landlord, stand on wood strips of such thickness as determined by
     Landlord to be necessary to properly distribute the weight thereof.
     Landlord will not be responsible for loss of or damage to any such safe,
     equipment or property form any cause, and all damage done to the Building
     by moving or maintaining any such safe, equipment or other property shall
     be repaired a the expense of Tenant.

Business machines and mechanical equipment belonging to Tenant which cause noise
     or vibration that may be transmitted to the structure of the Building or to
     any space therein to such a degree as to be objectionable to Landlord or to
     any tenants in the Building shall be placed and maintained by Tenant, at
     Tenant's expense, on vibration eliminators or other devices sufficient to
     eliminate noise or vibration. The persons employed to move such equipment
     in or out of the Building must be acceptable to Landlord.



                                      
<PAGE>   36
20.  Tenant shall not install, maintain or operate upon it Premises any vending
     machine without the written consent of Landlord, such consent not be
     unreasonably withheld.

21.  There shall not be used in any space, or in the public areas of the Project
     either by Tenant or others, any hand trucks except hose equipped with
     rubber tires and side guards or such other material handling equipment as
     Landlord may approve. Tenants using hand trucks shall be required to use
     the freight elevator, or such elevator as Landlord shall designate. No
     other vehicles of any kind shall be brought by Tenant into or kept in or
     about its Premises.

22.  Each tenant shall store its trash and garbage within the interior of the
     Premises. Tenant shall not place in the trash boxes or receptacles any
     personal trash or any material that may not or cannot be disposed of in the
     ordinary and customary manner of removing and disposing of trash and
     garbage in the city, without violation of any law or ordinance governing
     such disposal. All trash, garbage and refuse disposal shall be made only
     through entry-ways and elevators provided for such purpose and at such
     times as Landlord shall designate. If the Building has implemented a
     building-wide recycling program for tenants, Tenant shall use good faith
     efforts to participate in said program.

23.  Canvassing, soliciting, distributing of handbills or any other written
     material and peddling in the Building and the Project are prohibited and
     each tenant shall cooperate to prevent the same. No tenant shall make
     room-to-room solicitation of business from other tenants in the Building or
     the Project, without the written consent of Landlord.

24.  Landlord shall have the right, exercisable without noticed and without
     liability to any tenant, to change the name and address of the Building and
     the Project.

25.  Landlord reserves the right to exclude or expel form the Project any person
     who, in Landlord's judgment, is under the influence of alcohol or drugs or
     who commits any act in violation of any of these Rules and Regulations.

26.  Without the prior written consent of Landlord, Tenant shall not use the
     name of the Building or the Project or any photograph or other likeness of
     the Building or the Project in connection with, or in promoting or
     advertising Tenant's business except that Tenant may include the Building's
     or Project's name in Tenant's address.

27.  Tenant shall comply with all safety, fire protection and evacuation
     procedures and regulations established by Landlord or any governmental
     agency.

28.  Tenant assumes any and all responsibility for protecting its Premises from
     theft, robbery and pilferage, which includes keeping doors locked and other
     means of entry to the Premises closed.

29.  The requirements of Tenant will be attended to only upon appropriate
     application at the office of the Building by an authorized individual.
     Employees of Landlord shall not perform any work or do anything outside of
     their regular duties unless under special instruction form Landlord, and no
     employees of Landlord will admit any person (tenant or otherwise) to any
     office without specific instructions from Landlord.

30.  Landlord reserves the right to designate the use of the parking spaces on
     the Project. Tenant or Tenant's guests shall park between designated
     parking lines only, and shall not occupy two parking spaces with one car.
     Parking spaces shall be for passenger vehicles only; no boats, trucks,
     trailers, recreational vehicles or other types of vehicles may be parked in
     the parking areas (except that trucks may be loaded and unloaded in
     designated loading areas). Vehicles in violation of the above shall be
     subject to tow-away, at vehicle owner's expense. Vehicles parked on the
     Project overnight without prior written consent of the Landlord shall be
     deemed abandoned and shall be subject to tow-away at vehicle owner's
     expense. No tenant of the Building shall park in visitor or reserved
     parking areas. Any tenant found parking in such designated visitor or
     reserved parking areas shall

<PAGE>   37
     be subject to tow-away at vehicle owner's expense. The parking areas shall
     not be used to provide car wash, oil changes, detailing, automotive repair
     or other services unless otherwise approved or furnished by Landlord.

31.  No smoking of any kind shall be permitted anywhere within the Building,
     including, without limitation, the Premises and those areas immediately
     adjacent to the entrances and exits to the Building, or any other area as
     Landlord elects. Smoking the Project is only permitted in smoking areas
     identified by Landlord, which may be relocated from time to time.

32.  If the Building furnishes common area conference rooms for tenant usage,
     Landlord shall have the right to control each tenant's usage of the
     conference rooms, including limiting tenant usage so that the rooms are
     equally available to all tenants in the Building. Any common area amenities
     or facilities shall be provided form time to time at Landlord's discretion.

33.  Tenant shall not swap or exchange building keys or cardkeys with other
     employees or tenants in the Building or the Project.

34.  Tenant shall be responsible for the observance of all of the foregoing
     Rules and Regulations by Tenant's employees, agents, clients, customers,
     invitees and guests.

35.  These Rules and Regulations are in addition to, and shall not be construed
     to in any way modify, alter or amend, in whole or in part, the terms,
     covenants, agreements and conditions of any lease of any premises in the
     Project.

36.  Landlord may waive any one or more of these Rules and Regulations for the
     benefit of any particular tenant or tenants, but no such waiver by Landlord
     shall be construed as a wavier of such Rules and Regulations in favor of
     any other tenant or tenants, nor prevent Landlord from thereafter enforcing
     any such Rules and Regulations against any or all tenants of the Building.

37.  Landlord reserves the right to make such other and reasonable rules and
     regulations as in its judgment may from time to time be needed for safety
     and security, for care and cleanliness of the Building and the Project and
     for the preservation of good order therein. Tenant agrees to abide by all
     such Rules and Regulations herein stated and any additional rules and
     regulations which are adopted.

<PAGE>   38
                                    EXHIBIT C

                       OFFICE LEASE IMPROVEMENT AGREEMENT

        This Office Lease Improvement Agreement ("IMPROVEMENT AGREEMENT") sets
forth the terms and conditions relating to construction of the initial tenant
improvements described in the Plans to be prepared and approved as provided
below (the "TENANT IMPROVEMENTS") in the Premises. Capitalized terms used but
not otherwise defined herein shall have the meanings set for the in the Lease
(the "LEASE") to which this Improvement Agreement is attached and forms a part.

1. Base Building Work. The "Base Building Work" described in SCHEDULE 1 to this
EXHIBIT C, if any, has been or will be performed by Landlord at Landlord's sole
cost and expense.

2.  Plans and Specifications.

    A. Landlord and Tenant shall retain the services of the space
planner/architect designated by Landlord and Tenant (the "SPACE PLANNER") to
prepare a detailed space plan (the "SPACE PLAN") mutually satisfactory to
Landlord and Tenant for the construction of the Tenant Improvements in the
Premises. Tenant shall approve or disapprove the Space Plan and any proposed
revisions there in writing no later than June 1, 1998 which approval shall not
be unreasonably withheld.

    B. Based on the approved Space Plan, Landlord shall cause the Space Planner
to prepare detailed plans, specifications and working drawings for the
construction of the Tenant Improvements (the "PLANS"). Landlord and Tenant shall
diligently pursue the preparation of the Plans. Tenant shall approve or
disapprove the Plans and any proposed revisions thereto, including the estimated
cost of the Tenant Improvements, in writing within three (3) business days after
receipt thereof. If Tenant fails to approve or disapprove the Space Plan or
Plans or any revisions thereto within the time limits specified herein, Tenant
shall be deemed to have approve the same. Landlord and Tenant shall use diligent
efforts to cause the final Plans and the cost estimate to be prepared and
approved no later than thirty (30) days after the execution of the Lease.

    C. Notwithstanding Landlord's preparation, review and approval of the Space
Plan and the Plans and any revisions thereto, Landlord shall have no
responsibility or liability whatsoever for any errors or omissions contained in
the Space Plan or Plans, or to verify the dimensions or conditions, or for the
quality, design or compliance with applicable Regulation of any improvements
described therein or constructed in accordance therewith. Landlord hereby
assigns to Tenant all warranties and guarantees by the Space Planner or the
contractor who constructs the Tenant Improvements relating to the Tenant
Improvements, and Tenant hereby waives all claims against Landlord relating to,
or arising out of the design or construction of, the Tenant Improvements.

3.  Specifications for Standard Tenant Improvements.

    A. Specifications and quantities of standard building components which will
comprise and be used in the construction of the Tenant Improvements
("STANDARDS") are set forth in SCHEDULE 2 to this EXHIBIT C. As used herein,
"STANDARDS" or "BUILDING STANDARDS" shall mean the standards for a particular
item selected from time to time by Landlord for the Building, including those
set forth on SCHEDULE 2 of this EXHIBIT C, or such other standards of equal or
better quality as may be mutually agreed between Landlord and Tenant in writing.

    B. No deviations form the Standards are permitted.

4.  Tenant Improvement Cost.


<PAGE>   39
    A. The cost of the Tenant Improvements shall be paid for by Tenant,
including, without limitation, the cost of: Standards; space plans and studies;
architectural and engineering fees; permits, approvals and other governmental
fees; labor, material, equipment and supplies; construction fees and other
amounts payable to contractors or subcontractors; taxes; off-site improvements;
remediation and preparation of the Premises for construction of the Tenant
Improvements; taxes; filing and recording fees; premiums for insurance and
bonds; attorneys' fees; financing costs; and all other costs expended or to be
expended in the construction of the Tenant Improvements, including those costs
incurred for construction of elements of the Tenant Improvements in the
Premises, which construction was performed by Landlord prior to the execution of
the lease or for materials comprising the Tenant Improvements which were
purchased by Landlord prior to the execution of the Lease; and an administration
fee of ten percent (10%) of the total cost of the Tenant Improvements.

    B. Provided t is not in default under the Lease, including this Improvement
Agreement, Landlord shall contribute a one-time tenant improvement allowance not
to exceed $130,000.00 ("TENANT IMPROVEMENT ALLOWANCE") to be credited by
Landlord toward the cost of the initial Tenant Improvements. If the cost of the
Tenant Improvements exceeds the Tenant Improvement Allowance, Tenant shall pay
Landlord such excess cost within three (3) business days after Landlord's notice
of Tenant of such excess cost. No credit shall be given to Tenant if the cost of
the Tenant Improvements is less than the Tenant Improvement Allowance.

    C. If the cost of the Tenant Improvements increases after the Tenant's
approval of the Plans due to the requirements of any governmental agency or
applicable Regulation or any other reason, Tenant shall pay Landlord the amount
of such increase within three (3) business days after notice from Landlord of
such increase.

    D. If Tenant requests any change(s) in the Plans after approval of the
estimate of the cost of the Tenant Improvements and any such requested changes
are approved by Landlord in writing in Landlord's sole discretion, Landlord
shall advise Tenant promptly of any cost increases and/or delays such approved
change(s) will cause in the construction of the Tenant Improvements. Tenant
shall approve or disapprove any or all such change(s) within three (3) business
days after notice form dl of such cost increases and/or delays. To the extent
Tenant disapproves any such cost increase and/or delay attributable thereto,
Landlord shall have the right, in its sole discretion, to disapprove Tenant's
request for any changes to the approved Plans. If the cost of the Tenant
Improvements increases due to any changes in the Plan(s) requested by Tenant,
Tenant shall pay Landlord the amount of such increase within three (3) business
days after notice from Landlord of such increase and Tenant's approval thereof
in accordance with this Paragraph 4.4.

5.  Construction of Tenant Improvements.

    A. Upon Tenant's approval of the Plans including the estimate of the cost of
the Tenant Improvements and Landlord's receipt of payment of any such estimated
cost exceeding the amount of the Tenant Improvement Allowance, landlord shall
cause its contractor to proceed to secure a building permit and commence
construction of the tenant Improvements provided that Tenant shall cooperate
with Landlord in executing permit applications and performing other actions
reasonably necessary to enable Landlord to obtain any required permits or
certificates of occupancy; and provided further that the Building has in
Landlord's discretion reached the stage of construction where it is appropriate
to commence construction of the Tenant Improvements in the Premises.

    B. Without limiting the provisions of Paragraph 35 of the Lease, Landlord
shall not be liable for any direct or indirect damages suffered by Tenant as a
result of delays in construction beyond Landlord's reasonable control,
including, but not limited to, delays due to strikes or unavailability of
materials or labor, or delays caused by Tenant (including delays by the Space
Planner, the contractor or anyone else performing services on behalf of Landlord
or Tenant).

    C. If any work is to be performed on the Premises by Tenant or Tenant's
contractor or agents:


<PAGE>   40


                (1) Such work shall proceed upon Landlord's written approval of
        Tenant's contractor, public liability and property damage insurance
        carried by Tenant's contractor, and detailed plans and specifications
        for such work, shall be at Tenant's sole cost and expense and shall
        further be subject to the provisions of Paragraphs 12 and 27 of the
        Lease.

                (2) All work shall be done in conformity with a valid building
        permit when required, a copy of which shall be furnished to Landlord
        before such work is commenced, and in any case, all such work shall be
        performed in accordance with all applicable Regulations. Notwithstanding
        any failure by Landlord to object to any such work, Landlord shall have
        no responsibility for Tenant's failure to comply with all applicable
        Regulations.

                (3) If required by landlord or any lender of Landlord, all work
        by Tenant or Tenant's contractor or agents shall be done with union
        labor in accordance with all union labor agreements applicable to the
        trades being employed.

                (4) All work by Tenant or Tenant's contractor or agents shall be
        scheduled through Landlord.

                (5) Tenant or Tenant's contractor or agents shall arrange for
        necessary utility, hoisting and elevator service with Landlord's
        contractor and shall pay such reasonable charges for such services as
        may be charged by Tenant's or Landlord's contractor.

                (6) Tenant's entry to the Premises for any purpose, including,
        without limitation, inspection or performance of Tenant construction by
        Tenant's agents, prior to the date Tenant's obligation to pay rent
        commences shall be subject to all the terms and conditions of the Lease
        except the payment of Rent. Tenant's entry shall mean entry by Tenant,
        its officers, contractors, licensees, agents, servants, employees,
        guests, invitees, or visitors.

                (7) Tenant shall promptly reimburse Landlord upon demand for any
        reasonable expense actually incurred by the Landlord by reason of faulty
        work done by Tenant or its contractors or by reason of any delays caused
        by such work, or by reason of inadequate clean-up.

6.  Completion and Rental Commencement Date

        A. Tenant's obligation to pay Rent under the Lease shall commence on the
applicable date described in Paragraph 2 of the Lease. However:

                (1) If Tenant delays in preparing or approving the Space Plans
        or the Plans, or fails to approve the estimate of the cost of the Tenant
        Improvements or any other matter requiring Tenant's approval, or to pay
        the excess cost of Tenant Improvements, in each case within the time
        limits specified herein; or

                (2) If the construction period is extended because Tenant
        requests any changes in construction, or modifies the approved Plans or
        if the same do not comply with applicable Regulations; or

                (3) If Landlord is otherwise delayed in the construction of the
        Tenant Improvements for any act or omission of or breach by Tenant or
        anyone performing services on behalf of Tenant or on account of any work
        performed on the Premises by Tenant or Tenant's contractors or agents,

        then the date described in Paragraph 2 of the Lease shall be deemed to
        be accelerated by the total number of days of Tenant delays described in
        (a) through (c) above (each, a "Tenant Delay"), calculated in accordance
        with the provisions of Paragraph 6.2 below.

        B. If the Term of the Lease has not already commenced pursuant to the
provisions of Paragraph 2 of the Lease and substantial completion of the Tenant
Improvements has been delayed on account of any Tenant Delays, then upon actual
substantial completion of the Tenant Improvements (as defined in



                                      
<PAGE>   41
Paragraph 2 of the Lease), Landlord shall notify Tenant in writing of the date
substantial completion of the Tenant Improvements would have occurred but for
such Tenant Delays, and such date shall thereafter be deemed to be the Term
Commencement Date for all purposes under the Lease. Tenant shall pay to
Landlord, within three (3) business days after receipt of such written notice
(which notice shall include a summary of Tenant Delays), the per diem Base Rent
times the number of days between the date the Term Commencement Date would have
otherwise occurred but for the Tenant Delays (as determined by the Space Planner
or Landlord's contractor), and the date of actual substantial completion of the
Tenant Improvements.

        C. Promptly after substantial completion of the Tenant Improvements,
Landlord shall give notice to Tenant and Tenant shall conduct an inspection of
the Premises with a representative of Landlord and develop with such
representative of Landlord a punchlist of items of the Tenant Improvements that
are not complete or that require corrections. Upon receipt of such punchlist,
Landlord shall proceed diligently to remedy such items at Landlord's cost and
expense provided such items are part of the Tenant Improvements to be
constructed by Landlord hereunder and are otherwise consistent with Landlord's
obligations under this Improvement Agreement and provided Tenant has fully paid
Landlord for the cost of the Tenant Improvements exceeding the Tenant
Improvement Allowance (with any dispute between Landlord and Tenant pertaining
thereto to be resolved by the Space Planner or Landlord's general contractor).
Substantial completion shall not be delayed notwithstanding delivery of any such
punchlist.

        D. A default under this Improvement Agreement shall constitute a default
under the Lease, and the parties shall be entitled to all rights and remedies
under the Lease in the event of a default hereunder by the other party
(notwithstanding that the Term thereof has not commenced).

        E. Without limiting the "as-is" provisions of the Lease, except for the
Tenant Improvements, if any, to be constructed by Landlord pursuant to this
Improvement Agreement, Tenant accepts the Premises in its "as-is" condition and
acknowledges that it has had an opportunity to inspect the Premises prior to
signing the Lease.



                                      
<PAGE>   42
                                   SCHEDULE 1

                                  TO EXHIBIT C

                               BASE BUILDING WORK

        Landlord, at Landlord's sole cost and expense shall perform the
        following:

        Replacement of ceiling in fire corridor on the second floor;

        Replacement of floor covering in fire corridor on the second floor;

        Replacement of lighting on the second floor, if floor necessary, in
        fire corridor;

        Upgrade of restrooms on the second floor.

<PAGE>   43
                                   SCHEDULE 2

                                  TO EXHIBIT C

                               BUILDING STANDARDS

        The following constitutes the Building Standard tenant improvements
("STANDARDS") in the quantities specified:

        (to be provided per construction drawings)

Source: OneCLE Business Contracts.