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Exhibit 10.38

OFFICE LEASE

THE WATER GARDEN

WATER GARDEN COMPANY L.L.C.,

a Delaware limited liability company,

as Landlord,

and

SPECIALTY LABORATORIES, INC.

a California corporation

as Tenant.

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THE WATER GARDEN

SUMMARY OF BASIC LEASE INFORMATION

        The undersigned hereby agree to the following terms of this Summary of
Basic Lease Information (the "Summary"). This Summary is hereby incorporated
into and made a part of the attached Office Lease (the "Office Lease") which
pertains to the "Project," as that term is defined in the Office Lease, commonly
known as "The Water Garden" located in Santa Monica, California. This Summary
and the Office Lease are collectively referred to herein as the "Lease". Each
reference in the Office Lease to any term of this Summary shall have the meaning
set forth in this Summary for such term. In the event of a conflict between the
terms of this Summary and the Office Lease, the terms of the Office Lease shall
prevail. Any capitalized terms used herein and not otherwise defined herein
shall have the meanings set forth in the Office Lease.

TERMS OF LEASE
(References are to
the Office Lease)

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  DESCRIPTION

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1.   Date:   January 12, 2004.
2.
 
Landlord:
 
WATER GARDEN COMPANY L.L.C., a Delaware limited liability company
3.
 
Tenant:
 
SPECIALTY LABORATORIES, INC., a California corporation
4.
 
Premises (Article 1).
 
 
4.1
 
Building Address:
 
1620 26th Street
Santa Monica, California 90404.
4.2
 
Premises:
 
Suite 500S, consisting of 28,607 rentable square feet of space located on the
fifth floor of the Building, as further set forth in Exhibit "A" to the Office
Lease.
5.
 
Lease Term (Article 2).
 
 
5.1
 
Length of Term:
 
Approximately seventeen (17) months.
5.2
 
Lease Commencement Date:
 
The Lease Commencement Date shall occur as set forth in Article 2 of the Office
Lease. The Lease Commencement Date is anticipated to be February 1, 2004.
5.3
 
Lease Expiration Date:
 
June 30, 2005.
6.
 
Base Rent (Article 3):
 
 
 
 
 
 
 

Lease Months

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  Annual Base Rent

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  Monthly Installment of Base Rent

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  Monthly Rental Rate per Rentable Square Foot

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1 through 12   $1,064,180.40   $88,681.70   $3.10 13 through 17   $1,098,508.80
  $91,542.40   $3.20              

S-1

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7.   Additional Rent (Article 4).    
 
 
7.1    Base Year:
 
The calendar year of 2004.
 
 
7.2    Tenant's Share:
 
Approximately 8.6%.
8.
 
Security Deposit (Article 21):
 
$91,542.40.
9.
 
Parking Pass Ratio (Article 28):
 
Tenant shall rent at prevailing rates a minimum of eighty (80) parking passes
(and may rent additional parking passes on a month-to-month basis), which may
include up to a maximum of nine (9) passes for reserved parking, in each case
subject to the terms of Article 28.
10.
 
Broker (Section 29.18):
 
Trammell Crow Services, Inc.
2425 Olympic Boulevard
Suite 520 East
Santa Monica, California 90404

PAR Commercial Brokerage
Arthur Peter
1250 6th Street, Suite 303
Santa Monica, California 90403
11.
 
Address of Tenant (Section 29.13):
 
Specialty Laboratories, Inc.
1620 26th Street
Suite 500S
Santa Monica, California 90404
Attention: Frank Spina/Chief Financial Officer
(Prior to Lease Commencement Date)

and

Specialty Laboratories, Inc.
1620 26th Street
Suite 500S
Santa Monica, California 90404
Attention: Frank Spina/Chief Financial Officer
(After Lease Commencement Date)
12.
 
Rentable Area of the Building (Section 4.2.6):
 
332,824

[Signature page follows]

S-2

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        The foregoing terms of this Summary are hereby agreed to by Landlord and
Tenant.

    "Landlord":
 
 
WATER GARDEN COMPANY L.L.C.,
a Delaware limited liability company
 
 
By:
 
/s/  HILARY SPANN      

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Hilary Spann
Vice President
 
 
"Tenant":
 
 
SPECIALTY LABORATORIES, INC.,
a California corporation
 
 
By:
 
/s/  DOUGLAS S. HARRINGTON      

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        Its: CEO

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By:
 
/s/  FRANK J. SPINA      

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        Its: CFO

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TABLE OF CONTENTS

 
  Page

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ARTICLE 1 PREMISES, BUILDING, PROJECT, AND COMMON AREAS   1 ARTICLE 2 LEASE TERM
  3 ARTICLE 3 BASE RENT   3 ARTICLE 4 ADDITIONAL RENT   4 ARTICLE 5 USE OF
PREMISES   10 ARTICLE 6 SERVICES AND UTILITIES   10 ARTICLE 7 REPAIRS   12
ARTICLE 8 ADDITIONS AND ALTERATIONS   12 ARTICLE 9 COVENANT AGAINST LIENS   14
ARTICLE 10 INSURANCE   14 ARTICLE 11 DAMAGE AND DESTRUCTION   17 ARTICLE 12
NONWAIVER   19 ARTICLE 13 CONDEMNATION   19 ARTICLE 14 ASSIGNMENT AND SUBLETTING
  20 ARTICLE 15 SURRENDER OF PREMISES; REMOVAL OF TRADE FIXTURES   22 ARTICLE 16
HOLDING OVER   23 ARTICLE 17 ESTOPPEL CERTIFICATES   23 ARTICLE 18 SUBORDINATION
  24 ARTICLE 19 DEFAULTS; REMEDIES   24 ARTICLE 20 ATTORNEYS' FEES   25 ARTICLE
21 SECURITY DEPOSIT   26 ARTICLE 22 INTENTIONALLY OMITTED   26 ARTICLE 23 SIGNS
  26 ARTICLE 24 COMPLIANCE WITH LAW   26 ARTICLE 25 LATE CHARGES   27 ARTICLE 26
LANDLORD'S RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT   27 ARTICLE 27 ENTRY BY
LANDLORD   27 ARTICLE 28 TENANT PARKING   28 ARTICLE 29 MISCELLANEOUS PROVISIONS
  29

EXHIBITS

"A"   OUTLINE OF PREMISES
"B"
 
FORM OF NOTICE OF LEASE TERM DATES
"C"
 
RULES AND REGULATIONS
"D"
 
FORM OF TENANT'S ESTOPPEL CERTIFICATE
"E"
 
INTENTIONALLY DELETED
"F"
 
EXISTING 10% PLANS REFERENCED IN SECTION 29.25 OF THE LEASE

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THE WATER GARDEN

OFFICE LEASE

        This Office Lease, which includes the preceding Summary of Basic Lease
Information (the "Summary") attached hereto and incorporated herein by this
reference (the Office Lease and Summary are sometimes collectively referred to
herein as the "Lease"), dated as of the date set forth in Section 1 of the
Summary is made by and between WATER GARDEN COMPANY L.L.C., a Delaware limited
liability company ("Landlord"), and SPECIALTY LABORATORIES, INC., a California
corporation ("Tenant").

ARTICLE 1
PREMISES, BUILDING, PROJECT, AND COMMON AREAS

        1.1    Premises, Building, Project and Common Areas.    

                1.1.1    The Premises.    Upon and subject to the terms
hereinafter set forth in this Lease, Landlord hereby leases to Tenant and Tenant
hereby leases from Landlord the premises set forth in Section 4.2 of the Summary
(the "Premises"), which Premises are located in the "Building," as that term is
defined in Section 1.1.2. The outline of the Premises is set forth in Exhibit
"A" attached hereto.

                1.1.2    The Building and The Project.    The Premises are a
part of the building set forth in Section 4.1 of the Summary (the "Building")
located in Santa Monica, California. The Building is part of an office project
known as "The Water Garden" which contains another office building (the
"Adjacent Building"). The term "Project," as used in this Lease, shall mean
(i) the Building, the Adjacent Building, and the "Common Areas," as that term is
defined in Section 1.1.3, (ii) the land (which is improved with landscaping,
subterranean parking facilities and other improvements) upon which the Building,
the Adjacent Building, and the Common Areas are located, and (iii) at Landlord's
discretion, any additional real property, areas, buildings or other improvements
added thereto pursuant to the terms of Section 1.1.4.

                1.1.3    Common Areas.    Tenant shall have the non-exclusive
right to use in common with other tenants in the Project, and subject to the
rules and regulations referred to in Article 5, those portions of the Project
which are provided, from time to time, for use in common by Landlord, Tenant and
any other tenants of the Project, whether or not those areas are open to the
general public (such areas, together with such other portions of the Project
designated by Landlord, in its discretion, including certain areas designated
for the exclusive use of certain tenants, or to be shared by Landlord and
certain tenants, such as balconies abutting tenants' premises, are collectively
referred to herein as the "Common Areas"). The Common Areas shall consist of the
"Project Common Areas" and the "Building Common Areas". The term "Project Common
Areas", as used in this Lease, shall mean the portion of the Project designated
as such by Landlord. "Building Common Areas," as used in this Lease, shall mean
the portions of the Common Areas located within the Building designated as such
by Landlord. The manner in which the Common Areas are maintained and operated
shall be at the sole discretion of Landlord, provided that Landlord shall
maintain and operate the same in a manner consistent with that of other
first-class, mid-rise office buildings (including the office buildings
constructed adjacent to the Project as "Phase II" of The Water Garden, hereafter
referred to as "Phase II") in the Santa Monica, California area, which are
comparable in terms of size, quality of construction, appearance, and services
and amenities (the "Comparable Buildings").

                1.1.4    Landlord's Use and Operation of the Building, Project,
and Common Areas.    Landlord reserves the right from time to time without
notice to Tenant (i) to close temporarily any of the Common Areas; (ii) to make
changes to the Common Areas, including, without limitation, changes in the
location, size, shape and number of street entrances, driveways, ramps,
entrances, exits, passages, stairways and other ingress and egress, direction of
traffic, landscaped areas, loading and unloading

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areas, and walkways; (iii) to expand the Building or the Adjacent Building;
(iv) to add additional buildings and improvements to the Common Areas; (v) to
designate land outside the Project to be part of the Project, and in connection
with the improvement of such land to add additional buildings and common areas
to the Project; provided that, notwithstanding anything to the contrary
contained in this Lease, the Project shall not be expanded to include more than
the land located in Santa Monica, California, which has Olympic Boulevard as its
southern boundary, Cloverfield Boulevard as its western boundary, Colorado
Avenue as its northern boundary, and 26th street as its eastern boundary;
(vi) to use the Common Areas while engaged in making additional improvements,
repairs or alterations to the Project or to any adjacent land, or any portion
thereof; and (vii) to do and perform such other acts and make such other changes
in, to or with respect to the Project, Common Areas and Building or the
expansion thereof as Landlord may, in the exercise of sound business judgment,
deem to be appropriate.

        1.2    Verification of Rentable Square Feet of Premises, Building, and
Project.    For purposes of this Lease, "rentable square feet" shall be
calculated pursuant to Standard Method for Measuring Floor Area in Office
Buildings, ANSI Z65.1 - 1996 ("BOMA"), provided that the rentable square footage
of the Building and the other buildings in the Project shall include all of (and
the rentable square footage of the Premises, therefore, shall include a portion
of) (i) the Building Common Areas and (ii) the occupied space of the portion of
the Project dedicated to the service of the Project. The rentable square feet of
the Premises, Building, and the Project are subject to verification from time to
time by Landlord's planner/designer and such verification shall be made in
accordance with the provisions of this Article 1. In the event that Landlord's
planner/designer determines that the amounts thereof are different from those
set forth in this Lease, all amounts, percentages and figures appearing or
referred to in this Lease based upon such incorrect amount (including, without
limitation, the amount of the "Rent" and any "Security Deposit," as those terms
are defined in Article 4 and Article 21, respectively) shall be modified in
accordance with such determination. If such determination is made, it will be
confirmed in writing by Landlord to Tenant.

        1.3    Base, Shell and Core Work in the Premises.    Except as
specifically set forth in this Lease, Landlord shall not be obligated to provide
or pay for any improvement work or services related to the improvement of the
Premises. Tenant also acknowledges that Landlord has made no representation or
warranty regarding the condition of the Premises or the Project except as
specifically set forth in this Lease.

        1.4    Balconies and Patios.    The balconies and/or patios, if any,
adjacent to and accessible from the Premises shall be common areas and shall not
be a part of the Rentable Area of the Premises; provided, however, that Tenant
shall have a license (together with other tenants whose premises are adjacent to
and accessible from such balconies and/or patios) to use any such balconies
and/or patios in a manner consistent with a first-class office complex
containing balconies and patios, on the terms and conditions set forth herein
and subject to all limitations and restrictions on use of the Premises in this
Lease. Tenant shall not make any improvements to the balconies. Tenant shall
seek Landlord's advance written consent to all proposed furniture, fixtures,
plants or other items of any kind whatsoever which Tenant desires to affix or to
place on the balconies and/or patios. Landlord may withhold its consent to
Tenant's proposed furniture, fixtures, plants or other items in Landlord's sole
discretion, including without limitation, on wholly aesthetic grounds (e.g., as
to size, color or design). Tenant shall not be permitted to display any
graphics, signs or insignias or the like on the balconies or patios. Landlord
shall have the right to make any improvements to the balconies and patios or
display any graphics, plants or other items from the balconies and patios which
it desires in its sole discretion in connection with overall Project graphics or
improvements. Tenant shall clean, maintain and repair the balconies and/or
patios in a manner consistent with the Premises. Tenant shall permit Landlord
and its agents access to the balconies and/or patios at reasonable times for
cleaning, general maintenance and plant

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maintenance. Tenant's license to use the balconies and/or patios shall be
revocable, at Landlord's option, upon any event of default.

        1.5    Acceptance of Premises.    Subject to the foregoing and except as
otherwise expressly set forth in this Lease, upon delivery of the Premises by
Landlord, Tenant shall accept the Premises in its "As-Is" condition and Landlord
has no obligation to improve, repair, restore or refurbish the Premises for
Tenant's occupancy, and neither Landlord, nor its agents or representatives,
have made or herein makes any representation, warranty or promise concerning the
Premises or the Building, or the suitability of the Premises for the particular
use or occupancy contemplated by Tenant.

ARTICLE 2
LEASE TERM

        The terms and provisions of this Lease shall be effective as of the date
of this Lease. The term of this Lease (the "Lease Term") shall be as set forth
in Section 5.1 of the Summary, shall commence on February 1, 2004 (the "Lease
Commencement Date"), and shall terminate on the date set forth in Section 5.3 of
the Summary (the "Lease Expiration Date") unless this Lease is sooner terminated
as hereinafter provided. For purposes of this Lease, the term "Lease Year" shall
mean each consecutive twelve (12) month period during the Lease Term; provided,
however, that the first Lease Year shall commence on the Lease Commencement Date
and end on the last day of the twelfth month thereafter and the second and each
succeeding Lease Year shall commence on the first day of the next calendar
month; and further provided that the last Lease Year shall end on the Lease
Expiration Date. At any time during the Lease Term, Landlord may deliver to
Tenant a notice (the "Notice of Lease Term Dates") in substantially the form as
set forth in Exhibit "B" attached hereto, which notice Tenant shall execute and
return to Landlord within five (5) days of receipt thereof, and thereafter the
dates set forth on such notice shall be conclusive and binding upon Tenant.
Failure of Tenant to timely execute and deliver the Notice of Lease Term Dates
shall constitute an acknowledgment by Tenant that the statements included in
such notice are true and correct, without exception.

        Tenant shall have a one-time option to terminate and cancel this Lease
("Termination Option"), effective as of September 1, 2004 (the "Early
Termination Date"). To exercise the Termination Option, Tenant must provide
Landlord with written notice of its intent to exercise the Termination Option,
which notice shall be irrevocable upon receipt by Landlord, no later June 1,
2004. If Tenant exercises the Termination Option, Tenant shall concurrently with
delivery of Tenant's notice pay a fee ("Termination Fee") in consideration of
Landlord's agreement to terminate the Lease before the Lease Expiration Date in
the amount of $88,681.70, in immediately available funds. A failure by Tenant to
exercise the Termination Option by 5:00 P.M. on June 1, 2004, or Tenant's
failure to pay the Termination Fee concurrently with its exercise of the
Termination Option, shall render the Termination Option null and void, and the
Lease shall continue in full force and effect as though no notice had been
delivered by Tenant under this Article 2.

ARTICLE 3
BASE RENT

        Tenant shall pay, without notice or demand, to Landlord or Landlord's
agent at the management office of the Project, or at such other place as
Landlord may from time to time designate in writing, in currency or a check for
currency which, at the time of payment, is legal tender for private or public
debts in the United States of America, base rent ("Base Rent") as set forth in
Section 6 of the Summary, payable in equal monthly installments as set forth in
Section 6 of the Summary in advance on or before the first day of each and every
month during the Lease Term, without any setoff or deduction whatsoever. The
Base Rent for the first full month of the Lease Term shall be paid at the time
of Tenant's execution of this Lease. If any Rent payment date (including the
Lease Commencement Date) falls on a day of the month other than the first day of
such month or if any payment of Rent is for a

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period which is shorter than one month, the Rent for any fractional month shall
accrue on a daily basis for the period from the date such payment is due to the
end of such calendar month or to the end of the Lease Term at a rate per day
which is equal to 1/365 of the Rent. All other payments or adjustments required
to be made under the terms of this Lease that require proration on a time basis
shall be prorated on the same basis.

ARTICLE 4
ADDITIONAL RENT

        4.1    General Terms.    As set forth in this Article 4, in addition to
paying the Base Rent specified in Article 3, Tenant shall pay "Tenant's Share"
of the annual "Project Expenses," as defined in Sections 4.2.6 and 4.2.4,
respectively, allocated to the tenants of the Building pursuant to the terms of
Section 4.3.1, to the extent such Project Expenses allocated to the tenants of
the Building are in excess of such Project Expenses applicable to the "Base
Year," as defined in Section 4.2.1. Such payments by Tenant, together with any
and all other amounts payable by Tenant to Landlord pursuant to the terms of
this Lease, are hereinafter collectively referred to as the "Additional Rent,"
and the Base Rent and the Additional Rent are sometimes herein collectively
referred to as "Rent." All amounts due under this Article 4 as Additional Rent
shall be payable for the same periods and in the same manner as the Base Rent.
Without limitation on other obligations of Tenant which survive the expiration
of the Lease Term, the obligations of Tenant to pay the Additional Rent provided
for in this Article 4 shall survive the expiration of the Lease Term.

        4.2    Definitions.    As used in this Article 4, the following terms
shall have the meanings hereinafter set forth:

                4.2.1    "Base Year" shall mean the period set forth in
Section 7.1 of the Summary.

                4.2.2    "Expense Year" shall mean each calendar year in which
any portion of the Lease Term falls, through and including the calendar year in
which the Lease Term expires.

                4.2.3    "Operating Expenses" shall mean all expenses, costs and
amounts of every kind and nature incurred in connection with the ownership,
management, maintenance, repair, replacement, restoration or operation of the
Project, including, without limitation, any amounts paid or incurred for (i) the
cost of supplying all utilities, the cost of operating, maintaining, repairing,
renovating, complying with conservation measures in connection with, and
managing the utility systems, mechanical systems, sanitary and storm drainage
systems, and elevator systems, and the cost of supplies and equipment,
maintenance, and service contracts in connection therewith; (ii) the cost of
licenses, certificates, permits and inspections and the cost of contesting the
validity or applicability of any governmental enactments which may affect
Operating Expenses, and the costs incurred in connection with the implementation
and operation of a transportation system management program or a municipal or
public shuttle service or parking program; (iii) the cost of all insurance
carried in connection with the Project, or any portion thereof; (iv) the cost of
landscaping, relamping, and all supplies, tools, equipment and materials used in
the operation, repair and maintenance of the Project, or any portion thereof;
(v) the cost of parking area repair, restoration, and maintenance, including,
but not limited to, resurfacing, repainting, restriping, and cleaning;
(vi) fees, charges and other costs, including consulting fees, legal fees and
accounting fees, of all contractors and consultants; (vii) payments under any
equipment rental agreements or management agreements (including the cost of any
management fee and the fair rental value of any office space provided
thereunder); (viii) wages, salaries and other compensation and benefits of all
persons engaged in the operation, maintenance, management, or security of the
Project, or any portion thereof, including employer's Social Security taxes,
unemployment taxes or insurance, and any other taxes which may be levied on such
wages, salaries, compensation and benefits; (ix) payments under any easement,
license, operating agreement, declaration, restrictive covenant, or instrument
pertaining to the sharing of costs by the Project, or any portion thereof;
(x) the cost of

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operation, repair, maintenance and replacement of all systems and equipment
which serve the Project in whole or part; (xi) the cost of janitorial services,
alarm and security service, window cleaning, trash removal, replacement of wall
and floor coverings, ceiling tiles and fixtures in lobbies, corridors, restrooms
and other common or public areas or facilities, maintenance and replacement of
curbs and walkways, repair to roofs and re-roofing; (xii) the cost of any
capital improvements made to the Project which are intended as a labor-saving
device or to effect other economies in the operation or maintenance of the
Project, or any portion thereof, or made to all or any portion of the Project,
or any portion thereof, after the Lease Commencement Date that are required
under any governmental law or regulation that was not applicable to the Project
at the time that permits for the construction of the Building were obtained;
provided, however, the same shall be amortized (including interest on the
unamortized cost) over the shorter of (A) the useful life, or (B) the cost
recovery period (i.e., the anticipated period to recover the full cost of such
capital item from cost savings achieved by such capital item), of the relevant
capital item as reasonably determined by Landlord; and (xiii) the cost of
operations, maintenance, repairs, and other expenditures (whether capital or
non-capital in nature) with respect to the "Child Care Facilities," as that term
is defined in Section 29.9, and their lease at the Project. Notwithstanding the
foregoing, for purposes of this Lease, Operating Expenses shall not, however,
include:

        (a)   costs, including marketing costs, legal fees, space planners'
fees, advertising and promotional expenses, and brokerage fees incurred in
connection with the original construction or development, or original or future
leasing of the Project, and costs, including permit, license and inspection
costs, incurred with respect to the installation of tenant improvements made for
new tenants initially occupying space in the Project after the Lease
Commencement Date or incurred in renovating or otherwise improving, decorating,
painting or redecorating vacant space for tenants or other occupants of the
Project (excluding, however, such costs relating to any common areas of the
Project or parking facilities);

        (b)   except as set forth in this Section 4.2.3, depreciation, interest
and principal payments on mortgages and other debt costs, if any, penalties and
interest, costs of capital repairs and alterations, and costs of capital
improvements and equipment;

        (c)   costs for which the Landlord is reimbursed by any tenant or
occupant of the Project or by insurance by its carrier or any tenant's carrier
or by anyone else, and electric power costs for which any tenant directly
contracts with the local public service company;

        (d)   any bad debt loss, rent loss, or reserves for bad debts or rent
loss;

        (e)   costs associated with the operation of the business of the
partnership or entity which constitutes the Landlord, as the same are
distinguished from the costs of operation of the Project (which shall
specifically include, but not be limited to, accounting costs associated with
the operation of the Project). Costs associated with the operation of the
business of the partnership or entity which constitutes the Landlord include
costs of partnership accounting and legal matters, costs of defending any
lawsuits with any mortgagee (except as the actions of the Tenant may be in
issue), costs of selling, syndicating, financing, mortgaging or hypothecating
any of the Landlord's interest in the Project, and costs incurred in connection
with any disputes between Landlord and its employees, between Landlord and
Project management, or between Landlord and other tenants or occupants, and
Landlord's general corporate overhead and general and administrative expenses;

        (f)    the wages and benefits of any employee who does not devote
substantially all of his or her employed time to the Project unless such wages
and benefits are prorated to reflect time spent on operating and managing the
Project vis-a-vis time spent on matters unrelated to operating and managing the
Project; provided, that in no event shall Operating Expenses for purposes of
this Lease include wages and/or benefits attributable to personnel above the
level of Project manager;

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        (g)   amount paid as ground rental for the Project by the Landlord;

        (h)   except for a Project management fee to the extent allowed pursuant
to item (m), below, overhead and profit increment paid to the Landlord or to
subsidiaries or affiliates of the Landlord for services in the Project to the
extent the same exceeds the costs of such services rendered by qualified,
first-class unaffiliated third parties on a competitive basis;

        (i)    any compensation paid to clerks, attendants or other persons in
commercial concessions operated by the Landlord, provided that any compensation
paid to any concierge at the Project shall be includable as an Operating
Expense;

        (j)    rentals and other related expenses incurred in leasing air
conditioning systems, elevators or other equipment which if purchased the cost
of which would be excluded from Operating Expenses as a capital cost, except
equipment not affixed to the Project which is used in providing janitorial or
similar services and, further excepting from this exclusion such equipment
rented or leased to remedy or ameliorate an emergency condition in the Project;

        (k)   all items and services for which Tenant or any other tenant in the
Project reimburses Landlord or which Landlord provides selectively to one or
more tenants (other than Tenant) without reimbursement;

        (l)    costs, other than those incurred in ordinary maintenance and
repair, for sculpture, paintings or other objects of art;

        (m)  fees payable by Landlord for management of the Project in excess of
three and one-half percent (3.5%) (the "Management Fee Cap") of Landlord's gross
rental revenues, adjusted and grossed up to reflect a one hundred percent (100%)
occupancy of the Building with all tenants paying rent, including base rent,
pass-throughs, and parking fees (but excluding the cost of after hours services
or utilities) from the Project for any calendar year or portion thereof;

        (n)   any costs expressly excluded from Operating Expenses elsewhere in
this Lease;

        (o)   rent for any office space occupied by Project management personnel
to the extent the size or rental rate of such office space exceeds the size or
fair market rental value of office space occupied by management personnel of the
Comparable Buildings in the vicinity of the Building, with adjustment where
appropriate for the size of the applicable project;

        (p)   costs arising from the gross negligence or willful misconduct of
Landlord or its agents, employees, vendors, contractors, or providers of
materials or services;

        (q)   costs incurred to comply with laws relating to the removal of
Hazardous Material (as defined in Section 29.23) which was in existence in the
Building or on the Project prior to the Lease Commencement Date, and was of such
a nature that a federal, State or municipal governmental authority, if it had
then had knowledge of the presence of such Hazardous Material, in the state, and
under the conditions that it then existed in the Building or on the Project,
would have then required the removal of such Hazardous Material or other
remedial or containment action with respect thereto; and costs incurred to
remove, remedy, contain, or treat Hazardous Material, which Hazardous Material
is brought into the Building or onto the Project after the date hereof by
Landlord or its agents or contractors or any other tenant of the Project and is
of such a nature, at that time, that a federal, State or municipal governmental
authority, if it had then had knowledge of the presence of such Hazardous
Material, in the state, and under the conditions, that it then exists in the
Building or on the Project, would have then required the removal of such
Hazardous Material or other remedial or containment action with respect thereto;

        (r)   costs arising from Landlord's charitable or political
contributions;

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        (s)   advertising and promotional expenditures (whether for existing
tenants or in order to attract new tenants), and costs of acquisition and
maintenance of signs in or on the Building to identify the owner of the Building
or other tenants;

        (t)    costs, including permit, license and inspection costs, incurred
with respect to the installation of tenants' or other occupants' improvements
made for tenants or other occupants in the Building or Project or incurred in
renovating or otherwise improving, decorating, painting or redecorating vacant
space for tenants or other occupants of the Building or Project;

        (u)   expenses in connection with services or other benefits for which
Tenant is charged directly; and

        (v)   costs (including in connection therewith all attorneys' fees and
costs of settlements, judgments and payments in lieu thereof) arising from
claims, disputes or potential disputes in connection with potential or actual
claims, litigation or arbitration pertaining to Landlord and/or the Building
and/or the Land.

        If the Project is not fully occupied during all or a portion of any
Expense Year, Landlord shall make an appropriate adjustment to the variable
components of Operating Expenses for such year employing sound accounting and
management principles, to determine the amount of Operating Expenses that would
have been paid had the Project been fully occupied; and the amount so determined
shall be deemed to have been the amount of Operating Expenses for such year. In
no event shall the components of Project Expenses for any Expense Year related
to costs for electricity, Project security or insurance be less than the
components of Project Expenses related to costs for electricity, Project
security or insurance, respectively, in the Base Year.

                4.2.4    "Project Expenses" shall mean the sum of "Operating
Expenses" and "Tax Expenses".

                4.2.5    "Tax Expenses" shall mean all federal, state, county,
or local governmental or municipal taxes, fees, charges or other impositions of
every kind and nature, whether general, special, ordinary or extraordinary
(including, without limitation, real estate taxes, general and special
assessments, transit taxes, leasehold taxes or taxes based upon the receipt of
rent, including gross receipts or sales taxes applicable to the receipt of rent,
unless required to be paid by Tenant, personal property taxes imposed upon the
fixtures, machinery, equipment, apparatus, systems and equipment, appurtenances,
furniture and other personal property used in connection with all or any portion
of the Project), which shall be paid during any Expense Year (without regard to
any different fiscal year used by such governmental or municipal authority)
because of or in connection with the ownership, leasing and operation of the
Project, or any portion thereof.

        (a)   Tax Expenses shall include, without limitation:

          (i)  Any assessment, tax, fee, levy or charge in addition to, or in
substitution, partially or totally, of any assessment, tax, fee, levy or charge
previously included within the definition of real property tax, it being
acknowledged by Tenant and Landlord that Proposition 13 was adopted by the
voters of the State of California in the June 1978 election ("Proposition 13")
and that assessments, taxes, fees, levies and charges may be imposed by
governmental agencies for such services as fire protection, street, sidewalk and
road maintenance, refuse removal and for other governmental services formerly
provided without charge to property owners or occupants, and, in further
recognition of the decrease in the level and quality of governmental services
and amenities as a result of Proposition 13, Tax Expenses shall also include any
governmental or private assessments or the Project's contribution towards a
governmental or private cost-sharing agreement for the purpose of augmenting or
improving the quality of services and amenities normally provided by
governmental agencies. It is the intention of Tenant and Landlord that all such
new and increased assessments, taxes, fees, levies, and

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charges and all similar assessments, taxes, fees, levies and charges be included
within the definition of Tax Expenses for the purposes of this Lease;

         (ii)  Any assessment, tax, fee, levy, or charge allocable to or
measured by the area of the Premises or the Rent payable hereunder, including,
without limitation, any gross income tax with respect to the receipt of such
rent, or upon or with respect to the possession, leasing, operating, management,
maintenance, alteration, repair, use or occupancy by Tenant of the Premises, or
any portion thereof;

        (iii)  Any assessment, tax, fee, levy or charge, upon this transaction
or any document to which Tenant is a party, creating or transferring an interest
or an estate in the Premises; and

        (iv)  Any possessory taxes charged or levied in lieu of real estate
taxes.

        (b)   Any expenses incurred in attempting to protest, reduce or minimize
Tax Expenses shall be included in Tax Expenses in the Expense Year such expenses
are paid.

        (c)   Tax refunds shall be credited against Tax Expenses and refunded to
Tenant regardless of when received, based on the Expense Year to which the
refund is applicable, provided that in no event shall the amount to be refunded
to Tenant for any such Expense Year exceed the total amount paid by Tenant as
Additional Rent under this Article 4 for such Expense Year.

        (d)   The amount of Tax Expenses for the Base Year attributable to the
valuation of the Project, inclusive of tenant improvements, shall be known as
"Base Taxes." If, in any comparison year subsequent to the Base Year, the amount
of Tax Expenses decreases, then for purposes of all subsequent comparison years,
including the comparison year in which such decrease in Tax Expenses occurs, the
Base Taxes shall be decreased by an amount equal to the decrease in Tax
Expenses.

                4.2.6    "Tenant's Share" shall mean the percentage set forth in
Section 7.2 of the Summary. Tenant's Share was calculated by multiplying the
number of rentable square feet of the Premises by 100, and dividing the product
by the total rentable square feet in the Building.

        4.3    Allocation and Calculation of Project Expenses.    

                4.3.1    Allocation of Project Expenses to Tenants of the
Building.    Project Expenses (i.e., Operating Expenses and Tax Expenses) are
determined annually for the Project as a whole. Since the Building is only one
of the buildings which constitute the Project, Project Expenses shall be
allocated by Landlord, in its reasonable discretion, to both the tenants of the
Building and the tenants of the other buildings in the Project. The portion of
Project Expenses allocated to the tenants of the Building shall consist of
(i) all Project Expenses attributable solely to the Building and (ii) an
equitable portion of Project Expenses attributable to the Project as a whole and
not attributable solely to the Building, the Adjacent Building or to any other
building of the Project. Additionally, in allocating Project Expenses to the
tenants of the Building, Landlord shall have the right, from time to time, to
equitably allocate some or all of the Project Expenses allocable to tenants of
the Building among different tenants of the Building (the "Cost Pools"). Such
Cost Pools may include, but shall not be limited to, the office space tenants of
the Building and the retail space tenants of the Building.

                4.3.2    Calculation of Project Expenses.    Notwithstanding
anything to the contrary set forth in this Article 4, when calculating the
Project Expenses for the Base Year, such Project Expenses shall not include any
increase in Tax Expenses attributable to special assessments, charges, costs, or
fees, or due to modifications or changes in governmental laws or regulations,
including but not limited to the institution of a split tax roll, and Operating
Expenses shall exclude market-wide increases due to extraordinary circumstances,
including, but not limited to, boycotts and strikes, and utility rate increases
due to extraordinary circumstances including, but not limited to, conservation
surcharges, boycotts, embargoes or other shortages and amortized costs relating
to capital improvements.

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        4.4    Calculation and Payment of Additional Rent.    

                4.4.1    Calculation of Excess.    For every Expense Year ending
or commencing within the Lease Term, Tenant shall pay to Landlord, in the manner
set forth in Section 4.4.2, and as Additional Rent, an amount equal to Tenant's
Share of Project Expenses for such Expense Year in excess of Tenant's Share of
Project Expenses for the Base Year (the "Excess").

                4.4.2    Statement of Actual Project Expenses and Payment by
Tenant.    Landlord shall endeavor to give to Tenant on or before the first day
of April following the end of each Expense Year, a statement (the "Statement")
which shall state the Project Expenses incurred or accrued for such preceding
Expense Year and the amount thereof allocated to the tenants of the Building,
and which shall indicate the amount, if any, of Tenant's Share of Project
Expenses in excess of Tenant's Share of Project Expenses for the Base Year. Upon
receipt of the Statement for each Expense Year ending during the Lease Term,
Tenant shall pay, with its next installment of Base Rent due, the full amount of
Tenant's Share of Project Expenses for such Expense Year in excess of Tenant's
Share of Project Expenses for the Base Year, less the amounts, if any, paid
during such Expense Year as "Estimated Additional Rent," as that term is defined
in Section 4.4.3. If the amount of Tenant's Share of Project Expenses for such
Expense Year in excess of Tenant's Share of Project Expenses for the Base Year
is less than the amount paid by Tenant as Estimated Additional Rent during the
applicable period of the Expense Year (but not including any period of the
Expense Year which occurs after the Lease has terminated), Landlord shall pay
the difference to Tenant together with the applicable Statement, even if the
Lease has terminated or expired. The failure of Landlord to timely furnish the
Statement for any Expense Year shall not prejudice Landlord or Tenant from
enforcing its rights under this Article 4. Even though the Lease Term has
expired and Tenant has vacated the Premises, when the final determination is
made of Tenant's Share of Project Expenses allocated to the tenants of the
Building for the Expense Year in which this Lease terminates, if Tenant's Share
of Project Expenses for such Expense Year is in excess of Tenant's Share of
Project Expenses for the Base Year, then Tenant shall immediately pay to
Landlord an amount as calculated pursuant to the provisions of Section 4.4.1.
The provisions of this Section 4.4.2 shall survive the expiration or earlier
termination of the Lease Term.

                4.4.3    Statement of Estimated Project Expenses.    In
addition, Landlord shall endeavor to give Tenant a yearly expense estimate
statement (the "Estimate Statement") which shall set forth Landlord's reasonable
estimate (the "Estimate") of what the total amount of Project Expenses for the
then-current Expense Year shall be, the amount thereof to be allocated to the
tenants of the Building, and the estimated amount of Tenant's Share of Project
Expenses in excess of Tenant's Share of the Project Expenses for the Base Year
(the "Estimated Additional Rent"). The failure of Landlord to timely furnish the
Estimate Statement for any Expense Year shall not preclude Landlord from
enforcing its rights to collect any Estimated Additional Rent under this
Article 4. If, pursuant to the Estimate Statement, Estimated Additional Rent is
calculated for the then-current Expense Year, Tenant shall pay, with its next
installment of Base Rent due, a fraction of the Estimated Additional Rent for
the then-current Expense Year (reduced by any amounts paid pursuant to the last
sentence of this Section 4.4.3). Such fraction shall have as its numerator the
number of months which have elapsed in such current Expense Year, including the
month of such payment, and twelve (12) as its denominator. Until a new Estimate
Statement is furnished (which Landlord shall have the right to deliver to Tenant
at any time), Tenant shall pay monthly, with the monthly Base Rent installments,
an amount equal to one-twelfth (1/12) of the total Estimated Additional Rent set
forth in the previous Estimate Statement delivered by Landlord to Tenant.

        4.5    Taxes and Other Charges for Which Tenant Is Directly
Responsible.    Tenant shall reimburse Landlord upon demand for any and all
taxes required to be paid by Landlord, excluding state, local and federal
personal or corporate income taxes measured by the net income of Landlord from
all

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sources and estate and inheritance taxes, whether or not now customary or within
the contemplation of the parties hereto, when:

                4.5.1    Said taxes are measured by or reasonably attributable
to the cost or value of Tenant's equipment, furniture, fixtures and other
personal property located in the Premises, or by the cost or value of any
leasehold improvements made in or to the Premises by or for Tenant, to the
extent the cost or value of such leasehold improvements exceeds the cost or
value of a building standard build-out as determined by Landlord regardless of
whether title to such improvements shall be vested in Tenant or Landlord;

                4.5.2    Said taxes are assessed upon or with respect to the
possession, leasing, operation, management, maintenance, alteration, repair, use
or occupancy by Tenant of the Premises or any portion of the Project (including
the Project parking facility); or

                4.5.3    Said taxes are assessed upon this transaction or any
document to which Tenant is a party creating or transferring an interest or an
estate in the Premises.

ARTICLE 5
USE OF PREMISES

        Tenant shall use the Premises solely for general office purposes
consistent with the character of the Project as a first-class office building
project, and Tenant shall not use or permit the Premises to be used for any
other purpose or purposes whatsoever without the prior written consent of
Landlord, which may be withheld in Landlord's sole discretion. Tenant further
covenants and agrees that Tenant shall not use, or suffer or permit any person
or persons to use, the Premises or any part thereof for any use or purpose
contrary to the provisions of the Rules and Regulations set forth in Exhibit "C"
attached hereto, or in violation of the laws of the United States of America,
the State of California, or the ordinances, regulations or requirements of the
local municipal or county governing body or other lawful authorities having
jurisdiction over the Project. Tenant shall comply with all recorded covenants,
conditions, and restrictions now or hereafter affecting the Project. Tenant
shall not use or allow another person or entity to use any part of the Premises
for the storage, use, treatment, manufacture or sale of "Hazardous Material," as
that term is defined in Section 29.23.

ARTICLE 6
SERVICES AND UTILITIES

        6.1    Standard Tenant Services.    Landlord shall provide the following
services on all days (unless otherwise stated below) during the Lease Term.

                6.1.1    Subject to all governmental rules, regulations and
guidelines applicable thereto, Landlord shall provide heating, ventilation and
air conditioning ("HVAC") when necessary for normal comfort for normal office
use in the Premises, from Monday through Friday, during the period from 8 A.M.
to 6 P.M. and on Saturday during the period from 9 A.M. to 1 P.M., except for
the date of observation of New Year's Day, Independence Day, Labor Day, Memorial
Day, Thanksgiving Day, Christmas Day and, at Landlord's discretion, other
locally or nationally recognized holidays (collectively, the "Holidays").

                6.1.2    Landlord shall provide adequate electrical wiring and
facilities and power for normal general office use as determined by Landlord.
Tenant shall bear the cost of replacement of lamps, starters and ballasts for
lighting fixtures within the Premises.

                6.1.3    Landlord shall provide city water from the regular
Building outlets for drinking, lavatory and toilet purposes.

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                6.1.4    Landlord shall provide janitorial services Monday
through Friday except the date of observation of the Holidays, in and about the
Premises and window washing services in a manner consistent with other
first-class office buildings in the Santa Monica, California area.

        6.2    Overstandard Tenant Use.    Tenant shall not, without Landlord's
prior written consent, use heat-generating machines, machines other than normal
fractional horsepower office machines, or equipment or lighting other than
Building standard lights in the Premises, which may affect the temperature
otherwise maintained by the air conditioning system or increase the water
normally furnished for the Premises by Landlord pursuant to the terms of
Section 6.1. If such consent is given, Landlord shall have the right to install
supplementary air conditioning units or other facilities in the Premises,
including supplementary or additional metering devices, and the cost thereof,
including the cost of installation, operation and maintenance, increased wear
and tear on existing equipment and other similar charges, shall be paid by
Tenant to Landlord upon billing by Landlord. If Tenant uses water, electricity,
heat or air conditioning in excess of that supplied by Landlord pursuant to
Section 6.1, Tenant shall pay to Landlord, upon billing, the cost of such excess
consumption, the cost of the installation, operation, and maintenance of
equipment which is installed in order to supply such excess consumption, and the
cost of the increased wear and tear on existing equipment caused by such excess
consumption; and Landlord may install devices to separately meter any increased
use and in such event Tenant shall pay the increased cost directly to Landlord,
on demand, including the cost of such additional metering devices. If Tenant
desires to use heat, ventilation or air conditioning during hours other than
those for which Landlord is obligated to supply such utilities pursuant to the
terms of Section 6.1, Tenant shall give Landlord such prior notice, as Landlord
shall from time to time establish as appropriate, of Tenant's desired use and
Landlord shall supply such utilities to Tenant at such hourly cost to Tenant as
Landlord shall from time to time establish. Amounts payable by Tenant to
Landlord for such use of additional utilities shall be deemed Additional Rent
hereunder and shall be billed on a monthly basis.

        6.3    Interruption of Use.    Tenant agrees that Landlord shall not be
liable for damages, by abatement of Rent or otherwise, for failure to furnish or
delay in furnishing any service (including telephone and telecommunication
services), or for any diminution in the quality or quantity thereof, when such
failure or delay or diminution is occasioned, in whole or in part, by repairs,
replacements, or improvements, by any strike, lockout or other labor trouble, by
inability to secure electricity, gas, water, or other fuel at the Building or
Project after reasonable effort to do so, by any accident or casualty
whatsoever, by act or default of Tenant or other parties, or by any other cause
beyond Landlord's reasonable control; and such failures or delays or diminution
shall never be deemed to constitute an eviction or disturbance of Tenant's use
and possession of the Premises or relieve Tenant from paying Rent or performing
any of its obligations under this Lease. Furthermore, Landlord shall not be
liable under any circumstances for a loss of, or injury to, property or for
injury to, or interference with, Tenant's business, including, without
limitation, loss of profits, however occurring, through or in connection with or
incidental to a failure to furnish any of the services or utilities as set forth
in this Article 6, including, but not limited to, a failure to provide
telecommunications, including telephone risers. Landlord may comply with
voluntary controls or guidelines promulgated by any governmental entity relating
to the use or conservation of energy, water, gas, light or electricity or the
reduction of automobile or other emissions without creating any liability of
Landlord to Tenant under this Lease, provided that the Premises are not thereby
rendered untenantable.

        6.4    Rent Abatement.    If Landlord fails to perform the obligations
required of Landlord under the terms of this Lease and such failure causes all
or a portion of the Premises to be untenantable and unusable by Tenant and such
failure relates to the non-functioning of the heat, ventilation, and air
conditioning system in the Premises, the electricity in the Premises, the
non-functioning of the elevator service to the Premises, or a failure to provide
access to the Premises, Tenant shall give Landlord notice (the "Initial
Notice"), specifying such failure to perform by Landlord (the "Landlord
Default").

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If Landlord has not cured such Landlord Default within five (5) business days
after the receipt of the Initial Notice (the "Eligibility Period"), Tenant may
deliver an additional notice to Landlord (the "Additional Notice"), specifying
such Landlord Default and Tenant's intention to abate the payment of Rent under
this Lease. If Landlord does not cure such Landlord Default within five
(5) business days of receipt of the Additional Notice, Tenant may, upon written
notice to Landlord, immediately abate Rent payable under this Lease for that
portion of the Premises rendered untenantable and not used by Tenant, for the
period beginning on the date five (5) business days after the Initial Notice to
the earlier of the date Landlord cures such Landlord Default or the date Tenant
recommences the use of such portion of the Premises. Such right to abate Rent
shall be Tenant's sole and exclusive remedy at law or in equity for a Landlord
Default. Except as provided in this Section 6.4, nothing contained herein shall
be interpreted to mean that Tenant is excused from paying Rent due hereunder.

ARTICLE 7
REPAIRS

        Tenant shall, at Tenant's own expense, keep or cause to be kept the
Premises, including all improvements, fixtures and furnishings therein, in good
order, repair and condition at all times during the Lease Term. In addition,
Tenant shall, at Tenant's own expense, but under the supervision and subject to
the prior approval of Landlord, and within any reasonable period of time
specified by Landlord, promptly and adequately repair all damage to the Premises
and replace or repair all damaged, broken, or worn fixtures and appurtenances;
provided however, that, at Landlord's option, or if Tenant fails to make such
repairs, Landlord may, but need not, make such repairs and replacements, and
Tenant shall pay Landlord the cost thereof, including a percentage of the cost
thereof (to be uniformly established for the Building and/or the Project)
sufficient to reimburse Landlord for all overhead, general conditions, fees and
other costs or expenses arising from Landlord's involvement with such repairs
and replacements forthwith upon being billed for same. Notwithstanding the
foregoing, Landlord shall be responsible for repairs to the exterior walls,
foundation and roof of the Building, the structural portions of the floors of
the Building, and the systems and equipment of the Building, except to the
extent that such repairs are required due to the negligence of Tenant; provided,
however, that if such repairs are due to the negligence of Tenant, Landlord
shall nevertheless make such repairs at Tenant's expense, or, if covered by
Landlord's insurance, Tenant shall only be obligated to pay any deductible in
connection therewith. Landlord may, but shall not be required to, enter the
Premises at all reasonable times to make such repairs, alterations, improvements
or additions to the Premises or to the Project or to any equipment located in
the Project as Landlord shall desire or deem necessary or as Landlord may be
required to do by governmental or quasi-governmental authority or court order or
decree. Tenant hereby waives and releases its right to make repairs at
Landlord's expense under Sections 1941 and 1942 of the California Civil Code or
under any similar law, statute, or ordinance now or hereafter in effect.

ARTICLE 8
ADDITIONS AND ALTERATIONS

        8.1    Landlord's Consent to Alterations.    Tenant may not make any
improvements, alterations, additions or changes to the Premises (collectively,
the "Alterations") without first procuring the prior written consent of Landlord
to such Alterations, which consent shall be requested by Tenant not less than
thirty (30) days prior to the commencement thereof, and which consent shall not
be unreasonably withheld by Landlord; provided however, that Tenant may make
strictly cosmetic changes to the finish work in the Premises, not requiring any
structural or other substantial modifications to the Premises, upon thirty
(30) days prior notice to Landlord.

        8.2    Manner of Construction.    Landlord may impose, as a condition of
its consent to any and all Alterations or repairs of the Premises or about the
Premises, such requirements as Landlord in its sole

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discretion may deem desirable, including, but not limited to, the requirement
that upon Landlord's request, Tenant shall, at Tenant's expense, remove such
Alterations upon the expiration or any early termination of the Lease Term,
and/or the requirement that Tenant utilize for such purposes only contractors,
materials, mechanics and material men selected by Landlord. Tenant shall
construct such Alterations and perform such repairs in conformance with any and
all applicable federal, state, county or municipal laws, rules and regulations
and pursuant to a valid building permit, issued by the City of Santa Monica, all
in conformance with Landlord's Construction Rules and Regulations. All work with
respect to any Alterations must be done in a good and workmanlike manner and
diligently prosecuted to completion to the end that the Premises shall at all
times be a complete unit except during the period of work. In performing the
work of any such Alterations, Tenant shall have the work performed in such
manner so as not to obstruct access to the Project or any portion thereof, by
any other tenant of the Project, and so as not to obstruct the business of
Landlord or other tenants in the Project, or interfere with the labor force
working in the Project. In addition to Tenant's obligations under Article 9,
upon completion of any Alterations, Tenant agrees to cause a Notice of
Completion to be recorded in the office of the Recorder of the County of Los
Angeles in accordance with Section 3093 of the Civil Code of the State of
California or any successor statute, and Tenant shall deliver to the Project
management office a reproducible copy of the "as built" drawings of the
Alterations.

        8.3    Payment for Improvements.    In the event Tenant orders any
Alterations or repair work directly from Landlord, or from the contractor
selected by Landlord, the charges for such work shall be deemed Additional Rent
under this Lease, payable within five (5) days of billing therefor, either
periodically during construction or upon the substantial completion of such
work, at Landlord's option. Upon completion of such work, Tenant shall deliver
to Landlord evidence of payment, contractors' affidavits and full and final
waivers of all liens for labor, services or materials. Tenant shall pay to
Landlord a percentage of the cost of such work sufficient to compensate Landlord
for all overhead, general conditions, fees and other costs and expenses arising
from Landlord's involvement with such work.

        8.4    Construction Insurance.    In the event that Tenant makes any
Alterations Tenant agrees to carry "Builder's All Risk" insurance in an amount
approved by Landlord covering the construction of such Alterations, and such
other insurance as Landlord may require, it being understood and agreed that all
of such Alterations shall be insured by Tenant pursuant to Article 10
immediately upon completion thereof. In addition, Landlord may, in its
discretion, require Tenant to obtain a lien and completion bond or some
alternate form of security satisfactory to Landlord in an amount sufficient to
ensure the lien-free completion of such Alterations and naming Landlord as a
co-obligee.

        8.5    Landlord's Property.    All Alterations, improvements, fixtures
and/or equipment which may be installed or placed in or about the Premises, and
all signs installed in, on or about the Premises, from time to time, shall be at
the sole cost of Tenant and shall be and become the property of Landlord, except
that Tenant may remove any Alterations, improvements, fixtures and/or equipment
which Tenant can substantiate to Landlord have not been paid for with any Tenant
improvement allowance funds provided to Tenant by Landlord, provided Tenant
repairs any damage to the Premises and Building caused by such removal.
Furthermore, if Landlord, as a condition to Landlord's consent to any
Alteration, requires that Tenant remove any Alteration upon the expiration or
early termination of the Lease Term, Landlord may, by written notice to Tenant
prior to the end of the Lease Term, or given following any earlier termination
of this Lease, require Tenant, at Tenant's expense, to remove such Alterations
and to repair any damage to the Premises and Building caused by such removal. If
Tenant fails to complete such removal and/or to repair any damage caused by the
removal of any Alterations, Landlord may do so and may charge the cost thereof
to Tenant.

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ARTICLE 9
COVENANT AGAINST LIENS

        Tenant has no authority or power to cause or permit any lien or
encumbrance of any kind whatsoever, whether created by act of Tenant, operation
of law or otherwise, to attach to or be placed upon the Project or Premises, and
any and all liens and encumbrances created by Tenant shall attach to Tenant's
interest only. Landlord shall have the right at all times to post and keep
posted on the Premises any notice which it deems necessary for protection from
such liens. Tenant covenants and agrees not to suffer or permit any lien of
mechanics or material men or others to be placed against the Project, the
Building or the Premises, or any portion thereof, with respect to work or
services claimed to have been performed for or materials claimed to have been
furnished to Tenant or the Premises, and, in case of any such lien attaching or
notice of any lien, Tenant covenants and agrees to cause it to be immediately
released and removed of record. Notwithstanding anything to the contrary set
forth in this Lease, in the event that such lien is not released and removed on
or before the date occurring five (5) days after notice of such lien is
delivered by Landlord to Tenant, Landlord, at its sole option, may immediately
take all action necessary to release and remove such lien, without any duty to
investigate the validity thereof, and all sums, costs and expenses, including
reasonable attorneys' fees and costs, incurred by Landlord in connection with
such lien shall be deemed Additional Rent under this Lease and shall immediately
be due and payable by Tenant.

ARTICLE 10
INSURANCE

        10.1    Indemnification and Waiver.    

                10.1.1    To the extent not prohibited by law, and except as
expressly set forth otherwise, Landlord, its members and their respective
partners, subpartners, officers, agents, servants and employees (collectively,
"Landlord Parties") shall not be liable for, any damage either to person or
property or resulting from the loss of use thereof, which damage is sustained by
Tenant. Tenant shall indemnify, defend, protect, and hold harmless Landlord
Parties from any and all loss, cost, damage, expense and liability (including
without limitation court costs and reasonable attorneys' fees) incurred in
connection with or arising from any cause in, on or about the Premises during
the Lease Term or arising from any act or omission of Tenant or its agents,
invitees or licensees, provided that the terms of the foregoing indemnity shall
not apply to the negligence or willful misconduct of any Landlord Party, and
Landlord shall indemnify and hold Tenant and Tenant Parties harmless from any
loss, cost, damage, expense and liability (including without limitation court
costs and reasonable attorneys' fees) arising from such negligence or willful
misconduct. Notwithstanding anything to the contrary contained in this Lease,
nothing in this Lease shall impose any obligations on Tenant or Landlord to be
responsible or liable for, and each hereby releases the other from all liability
for, consequential damages, other than those consequential damages incurred by
Landlord in connection with a holdover of the Premises by Tenant after the
expiration or earlier termination of this Lease, provided that Landlord has
provided Tenant with written notice stating that Landlord is negotiating or has
executed a new lease for the Premises and/or that a new tenant for the Premises
requires access to or is prepared to move into the Premises. Landlord agrees to
notify Tenant of any liability for which Tenant may be liable to Landlord
pursuant to the foregoing and Tenant shall have the right, but not the
obligation, to defend Landlord against any such liabilities with counsel
reasonably satisfactory to Landlord. Notwithstanding anything in this Lease to
the contrary, (i) Landlord shall not be released or indemnified from any breach
of Landlord's representations or obligations under this Lease and (ii) Landlord
shall not be released or indemnified from any losses, damages, liabilities,
claims, attorneys' fees, costs and expenses arising from the negligence or
willful misconduct of Landlord or its agents, contractors, licensees or
invitees, or Landlord's violation of any law, order or regulation. The

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provisions of this Section 10.1 shall survive the expiration or sooner
termination of this Lease with respect to any claims or liability occurring
prior to such expiration or termination.

                10.1.2    Notwithstanding anything to the contrary set forth in
this Lease, because Tenant compensates Landlord for insurance obtained by
Landlord as part of Tenant's Share of Operating Expenses, and because of the
existence of the waivers of subrogation set forth in Section 10.5, Tenant shall
be relieved of its indemnity obligation only with respect to any liabilities for
Landlord's property damage resulting from the negligent acts, omissions, or
willful misconduct of Tenant or those of its agents, contractors, servants,
employees or licensees, to the extent such liabilities are covered by insurance
carried by Landlord and paid for in part by Tenant as part of Operating
Expenses. Similarly, since Tenant is required to carry insurance pursuant to
Section 10.3 to cover its personal property within the Premises, Landlord shall
be relieved of its indemnity obligation with respect to any liabilities arising
in connection with any of Tenant's personal property within the Premises, to the
extent such liabilities are covered by insurance carried or required to be
carried by Tenant pursuant to Section 10.3, even if resulting from the negligent
acts, omissions or willful misconduct of Landlord or those of its agents,
contractors, servants, employees or licensees. The parties' agreement to
indemnify and hold each other harmless pursuant to this Article 10 is not
intended to and shall not relieve any insurance carrier of its obligations under
policies carried by Landlord of Tenant, respectively, to the extent that such
policies cover the result of such acts, omissions or willful misconduct. If
either party fails to carry insurance required to be carried by it pursuant to
this Lease, such failure shall automatically be deemed to be a covenant and
agreement by Landlord or Tenant, respectively, to self-insure to the full extent
of such required coverage, with full waiver of subrogation.

        10.2    Tenant's Compliance with Fire and Casualty Insurance.    Tenant
shall, at Tenant's expense, comply with all insurance company requirements
pertaining to the use of the Premises. If Tenant's conduct or use of the
Premises for other than general office uses consistent with a first class office
building causes any increase in the premium for such insurance policies then
Tenant shall reimburse Landlord for any such increase. Tenant, at Tenant's
expense, shall comply with all rules, orders, regulations or requirements of the
American Insurance Association (formerly the National Board of Fire
Underwriters) and with any similar body.

        10.3    Tenant's Insurance.    Tenant shall, at its own cost, procure
and maintain in effect the following coverages in the following amounts at all
times during the Lease Term (and prior to the Lease Commencement Date with
respect to any use or activity of Tenant hereunder at the Project).

                10.3.1    Commercial General Liability Insurance covering the
insured against claims of bodily injury, personal injury and property damage
arising out of Tenant's operations, assumed liabilities or use of the Premises,
including a Broad Form endorsement covering the insuring provisions of this
Lease and the performance by Tenant of the indemnity agreements set forth in
Section 10.1, for limits of liability not less than:

Bodily Injury and Property Damage Liability   $3,000,000 each occurrence
$3,000,000 annual aggregate
Personal Injury Liability
 
$3,000,000 each occurrence
$3,000,000 annual aggregate
0% Insured's participation

                10.3.2    Physical Damage Insurance covering (i) all office
furniture, trade fixtures, office equipment, merchandise and all other items of
Tenant's property on the Premises installed by, for, or at the expense of
Tenant, (ii) the tenant improvements which exist in the Premises as of the Lease
Commencement Date (excluding the "Base Building," as that term is defined herein
below), and (iii) all other improvements, alterations and additions to the
Premises. The term "Base Building," for

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purposes of this Lease, shall mean the structural portions of the Building, and
the public restrooms and the systems and equipment located in the internal core
of the Building on the floor or floors on which the Premises are located. Such
insurance shall be provide physical loss or damage protection against any peril
included within the classification "all risk coverage" or "causes of
loss—special form", for the full replacement cost value new without deduction
for depreciation of the covered items and in amounts that meet any co-insurance
clauses of the policies of insurance and shall include a vandalism and malicious
mischief endorsement, sprinkler leakage coverage and earthquake sprinkler
leakage coverage. Such insurance shall provide equivalent or greater coverage
than that provided by ISO Form CP 10 30. The proceeds of such insurance (other
than for trade fixtures, merchandise and other personal property of Tenant), so
long as this Lease is in effect, shall be used for the repair or replacement of
the tenant improvements and Alterations so insured to the extent necessary to
put the Premises in a usable condition generally consistent with the quality of
such improvements prior to the loss or casualty giving rise to the repair or
replacement. Upon a casualty giving rise to the termination of this Lease, the
proceeds of insurance shall be paid to Landlord and Tenant, as their interests
appear in the insured property. The full replacement value of the items to be
insured under this Section 10.3.2 shall be determined by Tenant and acknowledged
by the company issuing the insurance policy by the issuance of an agreed amount
endorsement to the policy at the time the policy is initially obtained, and
shall be increased from time to time in order to maintain the replacement value
coverage.

                10.3.3    Workers' Compensation Insurance in form and with
limits in accordance with the laws of the State of California, including
Occupational Disease Insurance, and Voluntary Compensation Insurance, and
Employer's Liability Insurance with limits not less than One Million Dollars
($1,000,000) per occurrence; per employee for disease; and in the aggregate for
disease.

                10.3.4    Loss of income or business interruption insurance in
such amounts as will reimburse Tenant for direct and indirect loss of earnings
attributable to all perils commonly insured against by prudent tenants or
attributable to prevention of access to the Premises or to the Building as a
result of such perils.

        10.4    Form of Policies.    The minimum limits of policies of insurance
required of Tenant under this Lease shall in no event limit the liability of
Tenant under this Lease. Such insurance shall (i) provide that Landlord,
Trammell Crow Services, Inc., and CIGNA and New York State Teachers Retirement
System (or any successor lender or lenders designated by Landlord to Tenant) are
each an additional insured; (ii) be written on an "occurrence" basis and have a
deductible which does not exceed the deductible amount(s) maintained by
similarly situated tenants in other Comparable Buildings; (iii) be issued by an
insurance company having a rating of not less than A-X in Best's Insurance Guide
or which is otherwise acceptable to Landlord and licensed to do business in the
State of California; (iv) be primary insurance as to all claims thereunder and
provide that any insurance carried by Landlord is excess and is non-contributing
with any insurance requirement of Tenant; (v) provide that said insurance shall
not be canceled or coverage changed unless thirty (30) days' prior written
notice shall have been given to Landlord and any mortgagee of Landlord; and
(vi) contain a cross-liability endorsement or severability of interest clause
acceptable to Landlord. Tenant shall deliver said policy or policies or
certificates thereof to Landlord on or before the Lease Commencement Date and at
least thirty (30) days before the expiration dates thereof. Each certificate of
insurance shall name Landlord as the certificate holder. Tenant shall either
provide Landlord with a blanket additional insured endorsement which evidences
the fact that each of the parties named above is covered as an additional
insured on the Commercial General Liability Insurance policy required under
Section 10.3.1 or originals of the endorsements to the Commercial General
Liability Insurance policy providing equivalent or greater coverage than that
provided by ISO Form CG 20 10 11 85 (form B), which include the following exact
wording:

It is agreed that Water Garden Company L.L.C., Trammell Crow Services, Inc,
CIGNA, New York State Teachers Retirement System [or any replacement lender],
and their respective members,

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managers, partners, officers, directors, affiliates, agents, employees,
successors and assigns are additional insureds. The coverage under this policy
is primary insurance with regard to work performed by or at the direction of
[Tenant].

Such endorsements must be separate from certificates of insurance. Unless Tenant
provides Landlord with a blanket additional insured endorsement which evidences
the fact that each of the parties listed above is covered as an additional
insured on the CGL policy required above, it is not acceptable to have the
above-referenced language typed or written on the certificates of insurance in
lieu of providing Landlord with the required endorsements. Each certificate of
insurance and endorsement required hereunder must have an original signature.
Rubber stamped signatures will not be accepted. Should Tenant at any time fail
to provide the insurance required by this Lease, or should such insurance be
cancelled, Landlord shall have the right (after giving Tenant five (5) days
notice, with opportunity to cure such failure or cancellation), but not the
duty, to procure the same and Tenant shall pay the cost thereof as Additional
Rent within ten days after Landlord's demand.

        10.5    Waiver of Subrogation.    Landlord and Tenant agree to have
their respective insurance companies issuing property damage insurance waive any
rights of subrogation that such companies may have against Landlord or Tenant,
as the case may be, so long as the insurance carried by Landlord and Tenant,
respectively, is not invalidated thereby. Landlord and Tenant hereby waive any
right that either may have against the other on account of any direct or
consequential loss or damage to their respective property to the extent such
loss or damage is insured under policies of insurance for fire and "all risk"
coverage or "causes of loss—special form" coverage, theft, or other similar
insurance maintained or required to be maintained by the waiving party, whether
or not such damage or loss is attributable to the negligence of either party or
their agents, invitees, contractors or employees.

        10.6    Additional Insurance Obligations.    Upon at least 30 days prior
written notice from Landlord, which notice may not be given more than once in
any twelve (12) month period during the Lease Term, Tenant shall carry and
maintain during the balance of the Lease Term, at Tenant's sole cost and
expense, increased amounts of the insurance required to be carried by Tenant
pursuant to this Article 10, and such other reasonable types of insurance
coverage and in such reasonable amounts covering the Premises and Tenant's
operations therein, as may be reasonably requested by Landlord, but in no event
in excess of the amounts and types of insurance then being required to be
maintained by major tenants by owners and managers of the Comparable Buildings.

ARTICLE 11
DAMAGE AND DESTRUCTION

        11.1    Repair of Damage to Premises by Landlord.    Tenant shall
promptly notify Landlord of any damage to the Premises resulting from fire or
any other casualty. If the Base Building or any Common Areas serving or
providing access to the Premises shall be damaged by fire or other casualty,
Landlord shall promptly and diligently, subject to reasonable delays for
insurance adjustment or other matters beyond Landlord's reasonable control, and
subject to all other terms of this Article 11, restore the Base Building and
such Common Areas. Such restoration shall be to substantially the same condition
of the Base Building and the Common Areas prior to the casualty, except for
modifications required by zoning and building codes and other laws or by the
holder of a mortgage on the Building or Project or any other modifications to
the Base Building or the Common Areas deemed desirable by Landlord, provided
that access to the Premises and any common restrooms serving the Premises shall
not be materially impaired. Tenant shall, at Tenant's sole cost and expense,
repair any injury or damage to the Premises which is not part of the Base
Building, in accordance with Article 8, above, and shall return the Premises to
their original condition. Landlord shall not be liable for any inconvenience or
annoyance to Tenant or its visitors, or injury to Tenant's business resulting in
any way from such damage or the repair of the Base Building or the Common Areas;
provided, however, that if such fire or other casualty shall have damaged the
Base Building or Common Areas necessary to Tenant's

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occupancy, and if such damage is not the result of the negligence or willful
misconduct of Tenant or Tenant's employees, contractors, licensees, or invitees,
Landlord shall allow Tenant a proportionate abatement of Rent to the extent
Landlord is reimbursed from the proceeds of rental interruption insurance
purchased by Landlord as part of Operating Expenses, during the time and to the
extent the Premises are unfit for occupancy for the purposes permitted under
this Lease as the sole result of the damage to the Base Building or the Common
Areas, and not occupied by Tenant as a result thereof.

        11.2    Landlord's Option to Repair.    Notwithstanding the terms of
Section 11.1, Landlord may elect not to rebuild and/or restore the Premises,
Building and/or Project; and instead terminate this Lease by notifying Tenant in
writing of such termination within sixty (60) days after the date of damage,
such notice to include a termination date giving Tenant ninety (90) days to
vacate the Premises, but Landlord may so elect only if the Building or Project
shall be damaged by fire or other casualty or cause, whether or not the Premises
are affected, and one or more of the following conditions is present:
(i) repairs to be made by Landlord cannot reasonably be completed within one
hundred twenty (120) days after the date of damage (when such repairs are made
without the payment of overtime or other premiums); (ii) the holder of any
mortgage on the Building or Project or ground lessor with respect to the
Building or Project shall require that the insurance proceeds or any portion
thereof be used to retire the mortgage debt, or shall terminate the ground
lease, as the case may be; (iii) the damage which is required to be repaired by
Landlord is not fully covered, except for deductible amounts, by Landlord's
insurance policies; or (iv) any owner of any other portion of the Project, other
than Landlord, does not intend to repair the damage to such portion of the
Project; provided, however, that if Landlord does not elect to terminate this
Lease pursuant to Landlord's termination right as provided above, and the
repairs cannot, in the reasonable opinion of Landlord, be completed within one
hundred eighty (180) days after being commenced, Tenant may elect, no earlier
than sixty (60) days after the date of the damage and not later than ninety
(90) days after the date of such damage, to terminate this Lease by written
notice to Landlord effective as of the date specified in the notice, which date
shall not be less than thirty (30) days nor more than sixty (60) days after the
date such notice is given by Tenant. Furthermore, if neither Landlord nor Tenant
has terminated this Lease, and the repairs are not actually completed within
such 180-day period, Tenant shall have the right to terminate this Lease during
the first five (5) business days of each calendar month following the end of
such period until such time as the repairs are complete, by notice to Landlord
(the "Damage Termination Notice"), effective as of a date set forth in the
Damage Termination Notice (the "Damage Termination Date"), which Damage
Termination Date shall not be less than ten (10) business days following the end
of each such month. Notwithstanding the foregoing, if Tenant delivers a Damage
Termination Notice to Landlord, then Landlord shall have the right to suspend
the occurrence of the Damage Termination Date for a period ending thirty
(30) days after the Damage Termination Date set forth in the Damage Termination
Notice by delivering to Tenant, within five (5) business days of Landlord's
receipt of the Damage Termination Notice, a certificate of Landlord's contractor
responsible for the repair of the damage certifying that it is such contractor's
good faith judgment that the repairs shall be substantially completed within
thirty (30) days after the Damage Termination Date. If repairs shall be
substantially completed prior to the expiration of such thirty-day period, then
the Damage Termination Notice shall be of no force or effect, but if the repairs
shall not be substantially completed within such thirty-day period, then this
Lease shall terminate upon the expiration of such thirty-day period. At any
time, from time to time, after the date occurring sixty (60) days after the date
of the damage, Tenant may request that Landlord inform Tenant of Landlord's
reasonable opinion of the date of completion of the repairs and Landlord shall
respond to such request within five (5) business days.

        11.3    Waiver of Statutory Provisions.    The provisions of this Lease,
including this Article 11, constitute an express agreement between Landlord and
Tenant with respect to any and all damage to, or destruction of, all or any part
of the Premises, the Building or the Project, and any statute or regulation of
the State of California, including, without limitation, Sections 1932(2) and
1933(4) of the California Civil Code, with respect to any rights or obligations
concerning damage or destruction in the

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absence of an express agreement between the parties, and any other statute or
regulation, now or hereafter in effect, shall have no application to this Lease
or any damage or destruction to all or any part of the Premises, the Building or
the Project.

        11.4    Damage Near End of Term.    In the event that the Premises, the
Building, or the Project is destroyed or damaged to any substantial extent
during the last eighteen (18) months of the Lease Term, then notwithstanding
anything contained in this Article 11, Landlord shall have the option to
terminate this Lease by giving written notice to Tenant of the exercise of such
option within thirty (30) days after such damage or destruction, in which event
this Lease shall cease and terminate as of the date of such notice, Tenant shall
pay the Base Rent and Additional Rent, properly apportioned up to such date of
damage, and both parties hereto shall thereafter be freed and discharged of all
further obligations hereunder, except as provided for in provisions of this
Lease which by their terms survive the expiration or earlier termination of the
Lease Term.

ARTICLE 12
NONWAIVER

        No waiver of any provision of this Lease shall be implied by any failure
of Landlord or of Tenant to enforce any remedy on account of the violation of
such provision, even if such violation shall continue or be repeated
subsequently, and any waiver by Landlord or by Tenant of any provision of this
Lease may only be in writing. Additionally, no express waiver shall affect any
provision other than the one specified in such waiver and then only for the time
and in the manner specifically stated. No receipt of monies by Landlord from
Tenant after the termination of this Lease shall in any way alter the length of
the Lease Term or of Tenant's right of possession hereunder, or after the giving
of any notice shall reinstate, continue or extend the Lease Term or affect any
notice given Tenant prior to the receipt of such monies, it being agreed that
after the service of notice or the commencement of a suit, or after final
judgment for possession of the Premises, Landlord may receive and collect any
Rent due, and the payment of said Rent shall not waive or affect said notice,
suit or judgment.

ARTICLE 13
CONDEMNATION

        If the whole or any part of the Premises, Building or Project shall be
taken by power of eminent domain or condemned by any competent authority for any
public or quasi-public use or purpose, or if Landlord shall grant a deed or
other instrument in lieu of such taking by eminent domain or condemnation,
Landlord shall have the option to terminate this Lease upon ninety (90) days'
notice, provided such notice is given no later than one hundred eighty
(180) days after the date of such taking, condemnation, reconfiguration,
vacation, deed or other instrument. If more than twenty-five percent (25%) of
the rentable square feet of the Premises is taken, or if access to the Premises
is substantially impaired, Tenant shall have the option to terminate this Lease
upon ninety (90) days' notice, provided such notice is given no later than one
hundred eighty (180) days after the date of such taking. Landlord shall be
entitled to the entire award or payment in connection therewith, except that
Tenant shall have the right to file any separate claim available to Tenant for
any taking of Tenant's personal property and fixtures belonging to Tenant and
removable by Tenant upon expiration of the Lease Term pursuant to the terms of
this Lease, and for moving expenses, so long as such claims do not diminish the
award available to Landlord, its ground lessor with respect to the Building or
Project or its mortgagee, and such claim is payable separately to Tenant. All
Rent shall be apportioned as of the date of such termination, or the date of
such taking, whichever shall first occur. If any part of the Premises shall be
taken, and this Lease shall not be so terminated, the Rent shall be
proportionately abated. Tenant hereby waives any and all rights it might
otherwise have pursuant to Section 1265.130 of The California Code of Civil
Procedure.

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ARTICLE 14
ASSIGNMENT AND SUBLETTING

        14.1    Transfers.    Tenant shall not, without the prior written
consent of Landlord, assign, mortgage, pledge, hypothecate, encumber, or permit
any lien to attach to, or otherwise transfer, this Lease or any interest
hereunder, permit any assignment, or other transfer of this Lease or any
interest hereunder by operation of law, sublet the Premises or any part thereof,
or permit the use of the Premises by any persons other than Tenant and its
employees (all of the foregoing are hereinafter sometimes referred to
collectively as "Transfers" and any person to whom any Transfer is made or
sought to be made is hereinafter sometimes referred to as a "Transferee"). If
Tenant desires Landlord's consent to any Transfer, Tenant shall notify Landlord
in writing, which notice (the "Transfer Notice") shall include (i) the proposed
effective date of the Transfer, which shall not be less than forty-five
(45) days nor more than one hundred eighty (180) days after the date of delivery
of the Transfer Notice, (ii) a description of the portion of the Premises to be
transferred (the "Subject Space"), (iii) all of the material terms of the
proposed Transfer and the consideration therefor (including calculation of the
"Transfer Premium," as defined in Section 14.3, in connection with such
Transfer), the name and address of the proposed Transferee, and a copy of all
existing executed and/or proposed documentation pertaining to the proposed
Transfer, including all existing operative documents to be executed to evidence
such Transfer or the agreements incidental or related to such Transfer, and
(iv) current financial statements of the proposed Transferee certified by an
officer, partner or owner thereof, and any other information reasonably required
by Landlord to determine the financial responsibility, character, and reputation
of the proposed Transferee, nature of such Transferee's business and proposed
use of the Subject Space, and such other information as Landlord may reasonably
require. Any Transfer made without Landlord's prior written consent shall, at
Landlord's option, be null, void and of no effect, and shall, at Landlord's
option, constitute a default by Tenant under this Lease. Whether or not Landlord
consents to any proposed Transfer, Tenant shall pay Landlord's review and
processing fees, as well as any reasonable legal fees incurred by Landlord,
within thirty (30) days after written request by Landlord. Notwithstanding
anything to the contrary herein, Tenant may assign this Lease in connection with
an acquisition, merger, or sale of substantially all its assets; provided that
the assignee agrees in writing to be bound by the terms of, and assume all
obligations of Tenant under, this Lease.

        14.2    Landlord's Consent.    Landlord shall not unreasonably withhold
its consent to any proposed Transfer of the Subject Space to the Transferee on
the terms specified in the Transfer Notice. Without limitation as to other
reasonable grounds for withholding consent, the parties hereby agree that it
shall be reasonable under this Lease and under any applicable law for Landlord
to withhold consent to any proposed Transfer where one or more of the following
apply:

                14.2.1    The Transferee is of a character or reputation or
engaged in a business which is not consistent with the quality of the Building
or the Project, or would be a significantly less prestigious occupant of the
Building than Tenant;

                14.2.2    The Transferee is either a governmental agency or
instrumentality thereof;

                14.2.3    The Transferee is not a party of reasonable financial
worth and/or financial stability in light of the responsibilities involved under
the Lease on the date consent is requested;

                14.2.4    The proposed Transfer would cause a violation of
another lease for space in the Project, or would give an occupant of the Project
a right to cancel its lease;

                14.2.5    The proposed Transfer would take effect within the
first two years of the Lease Term;

                14.2.6    The terms of the proposed Transfer will allow the
Transferee to exercise a right of renewal, right of expansion, right of first
offer, or other similar right held by Tenant (or will allow the Transferee to
occupy space leased by Tenant pursuant to any such right); or

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                14.2.7    Either the proposed Transferee, or any person or
entity which directly or indirectly, controls, is controlled by, or is under
common control with, the proposed Transferee, (i) occupies space in the Project
at the time of the request for consent, (ii) is negotiating with Landlord to
lease space in the Project at such time, or (iii) has negotiated with Landlord
during the twelve (12)-month period immediately preceding the Transfer Notice.

If Landlord consents to any Transfer pursuant to the terms of this Section 14.2
(and does not exercise any recapture rights Landlord may have under
Section 14.4), Tenant may within six (6) months after Landlord's consent, but
not later than the expiration of said six-month period, enter into such Transfer
of the Premises or portion thereof, upon substantially the same terms and
conditions as are set forth in the Transfer Notice furnished by Tenant to
Landlord pursuant to Section 14.1, provided that if there are any material
changes in the terms and conditions from those specified in the Transfer Notice
(i) such that Landlord would initially have been entitled to refuse its consent
to such Transfer under this Section 14.2, or (ii) which would cause the proposed
Transfer to be more favorable to the Transferee than the terms set forth in
Tenant's original Transfer Notice, Tenant shall again submit the Transfer to
Landlord for its approval and other action under this Article 14 (including
Landlord's right of recapture, if any, under Section 14.4). Notwithstanding
anything to the contrary in this Lease, if Tenant or any proposed Transferee
claims that Landlord has unreasonably withheld or delayed its consent under this
Section 14.2 or otherwise has breached or acted unreasonably under this
Article 14, their sole remedies shall be declaratory judgment and an injunction
for the relief sought without any monetary damages, and Tenant hereby waives all
other remedies on its own behalf and, to the extent permitted under all
applicable laws, on behalf of the proposed Transferee.

        14.3    Transfer Premium.    If Landlord consents to a Transfer, as a
condition thereto which the parties hereby agree is reasonable, Tenant shall pay
to Landlord fifty percent (50%) of any "Transfer Premium," as that term is
defined in this Section 14.3, received by Tenant from such Transferee. "Transfer
Premium" shall mean all rent, additional rent or other consideration payable by
such Transferee in excess of the Rent and Additional Rent payable by Tenant
under this Lease on a per rentable square foot basis if less than all of the
Premises is transferred. "Transfer Premium" shall also include, but not be
limited to, key money and bonus money paid by Transferee to Tenant in connection
with such Transfer, and any payment in excess of fair market value for services
rendered by Tenant to Transferee or for assets, fixtures, inventory, equipment,
or furniture transferred by Tenant to Transferee in connection with such
Transfer.

        14.4    Landlord's Option as to Subject Space.    Notwithstanding
anything to the contrary contained in this Article 14, in the event Tenant
contemplates a Transfer of all or a portion of the Premises (or in the event of
any other Transfer or Transfers entered into by Tenant as a subterfuge in order
to avoid the terms of this Section 14.4), Tenant shall give Landlord notice (the
"Intention to Transfer Notice") of such contemplated Transfer (whether or not
the contemplated Transferee or the terms of such contemplated Transfer have been
determined). The Intention to Transfer Notice shall specify the portion of and
amount of rentable square feet of the Premises which Tenant intends to Transfer
(the "Contemplated Transfer Space"), the contemplated date of commencement of
the Contemplated Transfer (the "Contemplated Effective Date"), and the
contemplated length of the term of such contemplated Transfer, and shall specify
that such Intention to Transfer Notice is delivered to Landlord pursuant to this
Section 14.4 in order to allow Landlord to elect to recapture the Contemplated
Transfer Space for the term set forth in the Intention to Transfer Notice.
Thereafter, Landlord shall have the option, by giving written notice to Tenant
within thirty (30) days after receipt of any Intention to Transfer Notice, to
recapture the Contemplated Transfer Space. In the event such option is exercised
by Landlord, this Lease shall be canceled and terminated with respect to such
Contemplated Transfer Space as of the Contemplated Effective Date until either
(i) the last day of the term of the contemplated Transfer as set forth in the
Intention to Transfer Notice or (ii) the last day of the Lease Term, as Landlord
may elect in its sole discretion. In the event of a recapture by Landlord, if
this

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Lease shall be canceled with respect to less than the entire Premises, the Rent
reserved herein shall be prorated on the basis of the number of rentable square
feet retained by Tenant in proportion to the number of rentable square feet
contained in the Premises, and this Lease as so amended shall continue
thereafter in full force and effect, and upon request of either party, the
parties shall execute written confirmation of the same. If Landlord declines, or
fails to timely elect to recapture such Contemplated Transfer Space under this
Section 14.4, then, subject to the other terms of this Article 14, for a period
of nine (9) months (the "Nine Month Period") commencing on the last day of such
thirty (30) day period, Landlord shall not have any right to recapture the
Contemplated Transfer Space with respect to any Transfer made during the Nine
Month Period, provided that any such Transfer is substantially on the terms set
forth in the Intention to Transfer Notice, and provided further that any such
Transfer shall be subject to the remaining terms of this Article 14. If such a
Transfer is not so consummated within the Nine Month Period (or if a Transfer is
so consummated, then upon the expiration of the term of any Transfer of such
Contemplated Transfer Space consummated within such Nine Month Period), Tenant
shall again be required to submit a new Intention to Transfer Notice to Landlord
with respect any contemplated Transfer, as provided above in this Section 14.4.
Notwithstanding anything to the contrary herein, in the event that Tenant
assigns this Lease in connection with an acquisition, merger, or sale of
substantially all its assets (in accordance with Section 14.1 hereof), the
provisions of this Section 14.4 shall not apply.

        14.5    Effect of Transfer.    If Landlord consents to a Transfer,
(i) the terms and conditions of this Lease shall in no way be deemed to have
been waived or modified, (ii) such consent shall not be deemed consent to any
further Transfer by either Tenant or a Transferee, (iii) Tenant shall deliver to
Landlord, promptly after execution, an original executed copy of all
documentation pertaining to the Transfer in form reasonably acceptable to
Landlord, (iv) Tenant shall furnish upon Landlord's request a complete
statement, certified by an independent certified public accountant, or Tenant's
chief financial officer, setting forth in detail the computation of any Transfer
Premium Tenant has derived and shall derive from such Transfer, and (v) no
Transfer relating to this Lease or agreement entered into with respect thereto,
whether with or without Landlord's consent, shall relieve Tenant or any
guarantor of the Lease from liability under this Lease.

        14.6    Additional Transfers.    For purposes of this Lease, the term
"Transfer" shall also include (i) if Tenant is a partnership, the withdrawal or
change, voluntary, involuntary or by operation of law, of twenty-five percent
(25%) or more of the partners, or transfer of twenty-five percent or more of
partnership interests, within a twelve (12)-month period, or the dissolution of
the partnership without immediate reconstitution thereof, and (ii) if Tenant is
a closely held corporation (i.e., whose stock is not publicly held and not
traded through an exchange or over the counter), (A) the dissolution, merger,
consolidation or other reorganization of Tenant or, (B) the sale or other
transfer of more than an aggregate of twenty-five percent (25%) of the voting
shares of Tenant (other than to immediate family members by reason of gift or
death) within a twelve (12)-month period, or (C) the sale, mortgage,
hypothecation or pledge of more than an aggregate of twenty-five percent (25%)
of the value of the unencumbered assets of Tenant within a twelve (12)-month
period.

ARTICLE 15
SURRENDER OF PREMISES; REMOVAL OF TRADE FIXTURES

        15.1    Surrender of Premises.    No act or thing done by Landlord or
any agent or employee of Landlord during the Lease Term shall be deemed to
constitute an acceptance by Landlord of a surrender of the Premises unless such
intent is specifically acknowledged in a writing signed by Landlord. The
delivery of keys to the Premises to Landlord or any agent or employee of
Landlord shall not constitute a surrender of the Premises or effect a
termination of this Lease, whether or not the keys are thereafter retained by
Landlord, and notwithstanding such delivery Tenant shall be entitled to the
return of such keys at any reasonable time upon request until this Lease shall
have been properly

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terminated. The voluntary or other surrender of this Lease by Tenant, whether
accepted by Landlord or not, or a mutual termination hereof, shall not work a
merger, and at the option of Landlord shall operate as an assignment to Landlord
of all subleases or subtenancies affecting the Premises.

        15.2    Removal of Tenant Property by Tenant.    Upon the expiration of
the Lease Term, or upon any earlier termination of this Lease, Tenant shall,
subject to the provisions of this Article 15, quit and surrender possession of
the Premises to Landlord in as good order and condition as when Tenant took
possession and as thereafter improved by Landlord and/or Tenant, reasonable wear
and tear and repairs which are specifically made the responsibility of Landlord
hereunder excepted. Upon such expiration or termination, Tenant shall, without
expense to Landlord, remove or cause to be removed from the Premises all debris
and rubbish, and such items of furniture, equipment, free-standing cabinet work,
and other articles of personal property owned by Tenant or installed or placed
by Tenant at its expense in the Premises, and such similar articles of any other
persons claiming under Tenant, as Landlord may, in its sole discretion, require
to be removed, and Tenant shall repair at its own expense all damage to the
Premises and Building resulting from such removal.

ARTICLE 16
HOLDING OVER

        If Tenant holds over after the expiration of the Lease Term hereof, with
or without the express or implied consent of Landlord, such tenancy shall be
from month-to-month only, and shall not constitute a renewal hereof or an
extension for any further term, and in such case Base Rent shall be payable at a
monthly rate equal to one hundred twenty-five percent (125%) of the Base Rent
applicable during the last rental period of the Lease Term under this Lease.
Such month-to-month tenancy shall be subject to every other applicable term,
covenant and agreement contained herein. Nothing contained in this Article 16
shall be construed as consent by Landlord to any holding over by Tenant, and
Landlord expressly reserves the right to require Tenant to surrender possession
of the Premises to Landlord as provided in this Lease upon the expiration or
other termination of this Lease. The provisions of this Article 16 shall not be
deemed to limit or constitute a waiver of any other rights or remedies of
Landlord provided herein or at law. If Tenant fails to surrender the Premises
upon the termination or expiration of this Lease, in addition to any other
liabilities to Landlord accruing therefrom, Tenant shall protect, defend,
indemnify and hold Landlord harmless from all loss, costs (including reasonable
attorneys' fees) and liability resulting from such failure, including, without
limiting the generality of the foregoing, any claims made by any succeeding
tenant founded upon such failure to surrender (including such tenant's lost
profits) and any lost profits to Landlord resulting therefrom.

ARTICLE 17
ESTOPPEL CERTIFICATES

        Within ten (10) days following a request in writing by Landlord, Tenant
shall execute and deliver to Landlord an estoppel certificate, which, as
submitted by Landlord, shall be substantially in the form of Exhibit "D",
attached hereto (or such other form as may be required by any prospective
mortgagee or purchaser of the Project, or any portion thereof), indicating
therein any exceptions thereto that may exist at that time, and shall also
contain any other information reasonably requested by Landlord or Landlord's
mortgagee or prospective mortgagee. Tenant shall execute and deliver whatever
other instruments may be reasonably required for such purposes. Failure of
Tenant to timely execute and deliver such estoppel certificate or other
instruments shall constitute an acceptance of the Premises and an acknowledgment
by Tenant that statements included in the estoppel certificate are true and
correct, without exception.

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ARTICLE 18
SUBORDINATION

        This Lease shall be subject and subordinate to all present and future
ground or underlying leases of the Building or Project and to the lien of any
first mortgage or trust deed, now or hereafter in force against the Building or
Project, if any, and to all renewals, extensions, modifications, consolidations
and replacements thereof, and to all advances made or hereafter to be made upon
the security of such mortgages or trust deeds, unless the holders of such
mortgages or trust deeds, or the lessors under such ground lease or underlying
leases, require in writing that this Lease be superior thereto. Tenant covenants
and agrees in the event any proceedings are brought for the foreclosure of any
such mortgage or deed in lieu thereof, to attorn, without any deductions or
set-offs whatsoever, to the purchaser or any successors thereto upon any such
foreclosure sale or deed in lieu thereof if so requested to do so by such
purchaser, and to recognize such purchaser as the lessor under this Lease.
Tenant shall, within five (5) days of request by Landlord, execute such further
instruments or assurances as Landlord may reasonably deem necessary to evidence
or confirm the subordination or superiority of this Lease to any such mortgages,
trust deeds, ground leases or underlying leases. Tenant waives the provisions of
any current or future statute, rule or law which may give or purport to give
Tenant any right or election to terminate or otherwise adversely affect this
Lease and the obligations hereunder in the event of any foreclosure proceeding
or sale.

ARTICLE 19
DEFAULTS; REMEDIES

        19.1    Defaults.    The occurrence of any of the following shall
constitute a default of this Lease by Tenant:

                19.1.1    Any failure by Tenant to pay any Rent or any other
charge required to be paid under this Lease, or any part thereof, when due,
which such failure continues for three (3) business days after notice of default
from Landlord to Tenant; or

                19.1.2    Any failure by Tenant to observe or perform any other
provision, covenant or condition of this Lease to be observed or performed by
Tenant where such failure continues for fifteen (15) days after written notice
thereof from Landlord to Tenant; or

                19.1.3    Abandonment of the Premises by Tenant; or

                19.1.4    To the extent permitted by law, a general assignment
by Tenant or any guarantor of the Lease for the benefit of creditors, or the
filing by or against Tenant or any guarantor of any proceeding under an
insolvency or bankruptcy law, unless in the case of a proceeding filed against
Tenant or any guarantor the same is dismissed within sixty (60) days, or the
appointment of a trustee or receiver to take possession of all or substantially
all of the assets of Tenant or any guarantor, unless possession is restored to
Tenant or such guarantor within thirty (30) days, or any execution or other
judicially authorized seizure of all or substantially all of Tenant's assets
located upon the Premises or of Tenant's interest in this Lease, unless such
seizure is discharged within thirty (30) days; or

                19.1.5    The hypothecation or assignment of this Lease or
subletting of the Premises, or attempts at such actions, in violation of
Article 14 hereof.

        19.2    Remedies Upon Default.    Upon the occurrence of any event of
default by Tenant, Landlord shall have, in addition to any other remedies
available to Landlord at law or in equity, the option to pursue any one or more
of the following remedies, each and all of which shall be cumulative and
nonexclusive, without any notice or demand whatsoever.

                19.2.1    Terminate this Lease, in which event Tenant shall
immediately surrender the Premises to Landlord, and if Tenant fails to do so,
Landlord may, without prejudice to any other remedy which it

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may have for possession or arrearages in rent, enter upon and take possession of
the Premises and expel or remove Tenant and any other person who may be
occupying the Premises or any part thereof, without being liable for prosecution
or any claim or damages therefor; and Landlord may recover from Tenant the
following:

          (i)  The worth at the time of award of any unpaid rent which has been
earned at the time of such termination; plus

         (ii)  The worth at the time of award of the amount by which the unpaid
rent which would have been earned after termination until the time of award
exceeds the amount of such rental loss that Tenant proves could have been
reasonably avoided; plus

        (iii)  The worth at the time of award of the amount by which the unpaid
rent for the balance of the Lease Term after the time of award exceeds the
amount of such rental loss that Tenant proves could have been reasonably
avoided; plus

        (iv)  Any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform its obligations
under this Lease or which in the ordinary course of things would be likely to
result therefrom, specifically including but not limited to, brokerage
commissions and advertising expenses incurred; and

         (v)  At Landlord's election, such other amounts in addition to or in
lieu of the foregoing as may be permitted from time to time by applicable law.

The term "rent" as used in this Section 19.2 shall be deemed to be and to mean
all sums of every nature required to be paid by Tenant pursuant to the terms of
this Lease, whether to Landlord or to others. As used in Paragraphs
19.2.1(i) and (ii), the "worth at the time of award" shall be computed by
allowing interest at the rate set forth in Article 25, but in no case greater
than the maximum amount of such interest permitted by law. As used in
Paragraph 19.2.1(iii), the "worth at the time of award" shall be computed by
discounting such amount at the discount rate of the Federal Reserve Bank of San
Francisco at the time of award plus one percent (1%).

                19.2.2    Landlord shall have the remedy described in California
Civil Code Section 1951.4 (lessor may continue lease in effect after lessee's
breach and abandonment and recover rent as it becomes due, if lessee has the
right to sublet or assign, subject only to reasonable limitations). Accordingly,
if Landlord does not elect to terminate this Lease on account of any default by
Tenant, Landlord may, from time to time, without terminating this Lease, enforce
all of its rights and remedies under this Lease, including the right to recover
all Rent as it becomes due.

        19.3    Sublessees of Tenant.    Whether or not Landlord elects to
terminate this Lease on account of any default by Tenant as set forth in this
Article 19, Landlord shall have the right to terminate any and all subleases,
licenses, concessions or other consensual arrangements for possession entered
into by Tenant and affecting the Premises or may, in Landlord's sole discretion,
succeed to Tenant's interest in such subleases, licenses, concessions or
arrangements. In the event of Landlord's election to succeed to Tenant's
interest in any such subleases, licenses, concessions or arrangements, Tenant
shall, as of the date of notice by Landlord of such election, have no further
right to or interest in the rent or other consideration receivable thereunder.

ARTICLE 20
ATTORNEYS' FEES

        If either party commences litigation against the other for the specific
performance of this Lease, for damages for the breach hereof or otherwise for
enforcement of any remedy hereunder, the parties hereto agree to and hereby do
waive any right to a trial by jury and, in the event of any such commencement of
litigation, the prevailing party shall be entitled to recover from the other
party such costs and reasonable attorneys' fees as may have been incurred.

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ARTICLE 21
SECURITY DEPOSIT

        Concurrently with Tenant's execution of this Lease, Tenant shall deposit
with Landlord by certified or cashier's check a security deposit (the "Security
Deposit") in the amount set forth in Section 8 of the Summary. The Security
Deposit shall be held by Landlord as security for the faithful performance by
Tenant of all the terms, covenants, and conditions of this Lease to be kept and
performed by Tenant during the Lease Term. If Tenant defaults with respect to
any provisions of this Lease, including, but not limited to, the provisions
relating to the payment of Rent, Landlord may, but shall not be required to,
use, apply or retain all or any part of the Security Deposit for the payment of
any Rent or any other sum in default, or for the payment of any amount that
Landlord may spend or become obligated to spend by reason of Tenant's default,
or to compensate Landlord for any other loss or damage that Landlord may suffer
by reason of Tenant's default. If any portion of the Security Deposit is so used
or applied, Tenant shall, within five (5) days after written demand therefor,
deposit cash with Landlord in an amount sufficient to restore the Security
Deposit to its original amount, and Tenant's failure to do so shall be a default
under this Lease. If Tenant shall fully and faithfully perform every provision
of this Lease to be performed by it, the Security Deposit, or any balance
thereof, shall be returned to Tenant, or, at Landlord's option, to the last
assignee of Tenant's interest hereunder, within sixty (60) days following the
expiration of the Lease Term. Tenant shall not be entitled to any interest on
the Security Deposit.

ARTICLE 22
INTENTIONALLY OMITTED

ARTICLE 23
SIGNS

        Tenant's identifying signage shall be provided by Landlord, at Tenant's
cost, and such signage shall be comparable to that used by Landlord for other
similar floors in the Building and shall comply with Landlord's Building
standard signage program. Any signs, notices, logos, pictures, names or
advertisements which are installed and that have not been separately approved by
Landlord may be removed without notice by Landlord at the sole expense of
Tenant. Tenant may not install any signs on the exterior or roof of the Project
or the Common Areas. Any signs, window coverings, or blinds (even if the same
are located behind the Landlord-approved window coverings for the Building), or
other items visible from the exterior of the Premises or Building, shall be
subject to the prior approval of Landlord, in its sole discretion. Tenant's
identifying entry on the building directory located in the lobby of the Building
shall be provided by Landlord, at Tenant's cost.

ARTICLE 24
COMPLIANCE WITH LAW

        Tenant shall not do anything or suffer anything to be done in or about
the Premises which will in any way conflict with any law, statute, ordinance or
other governmental rule, regulation or requirement now in force or which may
hereafter be enacted or promulgated. At its sole cost and expense, Tenant shall
promptly comply with all such governmental measures, other than the making of
structural changes or changes to the Building or Building systems. Should any
standard or regulation now or hereafter be imposed on Landlord or Tenant by a
state, federal or local governmental body charged with the establishment,
regulation and enforcement of occupational, health or safety standards for
employers, employees, landlords or tenants, then Tenant agrees, at its sole cost
and expense, to comply promptly with such standards or regulations. The judgment
of any court of competent jurisdiction or the admission of Tenant in any
judicial action, regardless of whether Landlord is a party thereto, that

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Tenant has violated any of said governmental measures, shall be conclusive of
that fact as between Landlord and Tenant.

ARTICLE 25
LATE CHARGES

        If any installment of Rent or any other sum due from Tenant shall not be
received by Landlord or Landlord's designee within five (5) days after said
amount is due, then Tenant shall pay to Landlord a late charge equal to five
percent (5%) of the overdue amount plus any attorneys' fees incurred by Landlord
by reason of Tenant's failure to pay Rent and/or other charges when due
hereunder. The late charge shall be deemed Additional Rent and the right to
require it shall be in addition to all of Landlord's other rights and remedies
hereunder or at law and shall not be construed as liquidated damages or as
limiting Landlord's remedies in any manner. In addition to the late charge
described above, any Rent or other amounts owing hereunder which are not paid
within five (5) days after the date they are due shall bear interest from the
date when due until paid at a rate per annum equal to the lesser of (i) eighteen
percent (18%) per annum or (ii) the highest rate permitted by applicable law.

ARTICLE 26
LANDLORD'S RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT

        26.1    Landlord's Cure.    All covenants and agreements to be kept or
performed by Tenant under this Lease shall be performed by Tenant at Tenant's
sole cost and expense and without any reduction of Rent. If Tenant shall fail to
perform any of its obligations under this Lease, within a reasonable time after
such performance is required by the terms of this Lease, Landlord may, but shall
not be obligated to, after reasonable prior notice to Tenant (except in the case
of an emergency), make any such payment or perform any such act on Tenant's part
without waiving its rights based upon any default of Tenant and without
releasing Tenant from any obligations hereunder.

        26.2    Tenant's Reimbursement.    Except as may be specifically
provided to the contrary in this Lease, Tenant shall pay to Landlord, within
fifteen (15) days after delivery by Landlord to Tenant of statements therefor:
(i) sums equal to expenditures reasonably made and obligations incurred by
Landlord in connection with the remedying by Landlord of Tenant's defaults
pursuant to the provisions of Section 26.1; (ii) sums equal to all losses,
costs, liabilities, damages and expenses referred to in Article 10; and
(iii) sums equal to all expenditures made and obligations incurred by Landlord
in collecting or attempting to collect the Rent or in enforcing or attempting to
enforce any rights of Landlord under this Lease or pursuant to law, including,
without limitation, all legal fees and other amounts so expended. Tenant's
obligations under this Section 26.2 shall survive the expiration or sooner
termination of the Lease Term.

ARTICLE 27
ENTRY BY LANDLORD

        Landlord reserves the right at all reasonable times and upon reasonable
notice to Tenant (except in the case of an emergency) to enter the Premises to
(i) inspect the Premises; (ii) show the Premises to prospective purchasers,
mortgagees or tenants, or to the ground or underlying lessors; (iii) post
notices of non-responsibility; or (iv) alter, improve or repair the Premises or
the Building if necessary to comply with current building codes or other
applicable laws, or for structural alterations, repairs or improvements to the
Building. Notwithstanding anything to the contrary contained in this Article 27,
Landlord may enter the Premises at any time to (A) perform services required of
Landlord; (B) take possession due to any breach of this Lease in the manner
provided herein; and (C) perform any covenants of Tenant which Tenant fails to
perform. Landlord may make any such entries without the abatement of Rent and
may take such reasonable steps as required to accomplish the stated purposes.
Tenant hereby waives any claims for damages or for any injuries or inconvenience
to or interference

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with Tenant's business, lost profits, any loss of occupancy or quiet enjoyment
of the Premises, and any other loss occasioned thereby. For each of the above
purposes, Landlord shall at all times have a key with which to unlock all the
doors in the Premises, excluding Tenant's vaults, safes and special security
areas designated in advance by Tenant. In an emergency, Landlord shall have the
right to use any means that Landlord may deem proper to open the doors in and to
the Premises. Any entry into the Premises by Landlord in the manner hereinbefore
described shall not be deemed to be a forcible or unlawful entry into, or a
detainer of, the Premises, or an actual or constructive eviction of Tenant from
any portion of the Premises.

ARTICLE 28
TENANT PARKING

        Commencing on the Lease Commencement Date, Landlord shall provide and
Tenant shall rent a minimum of eighty (80) parking passes on a monthly basis for
the entire Lease Term, for parking in the Project parking facility, with up to a
maximum of nine (9) of such passes being for reserved parking in the parking
facility. Subject to availability in the parking facility (taking into account
the parking pass rights of all tenants of the Project and Landlord's on-going
leasing and parking programs), Tenant may rent additional parking passes, on a
month-to-month basis, for unreserved parking in the Project parking facility.
Tenant shall provide Landlord with at least thirty (30) days' prior written
notice of the number of reserved parking passes (subject to the limitation
above) and/or additional parking passes, if any, that Tenant desires to rent,
and subject to availability as set forth above, Landlord will rent such
additional parking passes to Tenant, provided that at any time Landlord may
notify Tenant that all or a portion of such additional parking passes are no
longer available for Tenant's use. At least ten (10) days prior to the Lease
Commencement Date, Tenant shall give Landlord written notice of the exact number
of parking passes, within the parameters set forth above, that Tenant elects to
rent as of the Lease Commencement Date. All parking passes shall be rented at
Landlord's then prevailing rate for such parking passes, plus City of Santa
Monica Parking Tax. Landlord's parking rates (including City Parking Tax) for
parking passes are currently $146.00 per month for unreserved parking, and
$199.50 per month for reserved parking. Tenant shall pay to Landlord for such
automobile parking passes on a monthly basis the prevailing rate charged from
time to time for parking passes in the Project. At any time during the Lease
Term, Landlord shall have the right to convert up to 80% of the parking passes
for non-reserved parking rented by Tenant to passes to be used in valet-assisted
tandem parking spaces. Landlord shall have the right at any time and from time
to time during the Lease Term to use valet assisted parking in all or part of
the parking areas. Tenant's continued right to use the parking passes is
conditioned upon Tenant abiding by all reasonable rules and regulations which
are prescribed from time to time for the orderly operation and use of the
Project parking facility and upon Tenant's cooperation in using commercially
reasonable efforts to ensure that Tenant's employees and visitors also comply
with such reasonable rules and regulations. Landlord specifically reserves the
right to change the size, configuration, design, layout and all other aspects of
the Project parking facility at any time, provided that such changes shall not
materially adversely affect the parking rights of Tenant. Tenant acknowledges
and agrees that Landlord may, without incurring any liability to Tenant and
without any abatement of Rent under this Lease, from time to time, close-off or
restrict access to the Project parking facility for purposes of permitting or
facilitating any such construction, alteration or improvements. Landlord may
delegate its responsibilities hereunder to a parking operator in which case such
parking operator shall have all the rights of control attributed hereby to the
Landlord.

        Subject to reasonable rules and regulations for the Building parking
facility, including, without limitation, rules and regulations for the purpose
of increased security, implemented by Landlord or Landlord's parking operator,
Tenant's clients and visitors may park in the Building subterranean parking
facility at any time, twenty-four hours per day; provided, however, that after
10:00 P.M. each day, the parking attendants are no longer available and visitors
and clients must possess a validation to exit the parking facility. Tenant may
from time to time purchase parking validation booklets at

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Landlord's prevailing Building rate for validation booklets. Tenant shall
surrender any unused validation booklets (or portions thereof) upon the Lease
termination.

        The parking passes rented by Tenant pursuant to this Article 28 are
provided to Tenant solely for use by Tenant's own personnel, and except in
connection with a Permitted Transfer under this Lease such passes may not be
transferred, assigned, subleased or otherwise alienated by Tenant without
Landlord's prior approval.

ARTICLE 29
MISCELLANEOUS PROVISIONS

        29.1    Binding Effect.    Subject to all other provisions of this
Lease, each of the provisions of this Lease shall extend to and shall, as the
case may require, bind or inure to the benefit not only of Landlord and of
Tenant, but also of their respective successors or assigns, provided this clause
shall not permit any assignment by Tenant contrary to the provisions of
Article 14.

        29.2    Modification of Lease.    Should any current or prospective
mortgagee or ground lessor for the Building or Project require a modification or
modifications of this Lease, which modification or modifications will not cause
an increased cost or expense to Tenant or in any other way materially and
adversely change the rights and obligations of Tenant hereunder, then and in
such event, Tenant agrees that this Lease may be so modified and agrees to
execute whatever documents are reasonably required therefor and to deliver the
same to Landlord within ten (10) days following a request therefor. Should
Landlord or any such prospective mortgagee or ground lessor require execution of
a short form of Lease for recording, containing, among other customary
provisions, the names of the parties, a description of the Premises and the
Lease Term, Tenant agrees to execute and deliver such short form of Lease to
Landlord within ten (10) days following the request therefor.

        29.3    Transfer of Landlord's Interest.    Tenant acknowledges that
Landlord has the right to transfer all or any portion of its interest in the
Project or Building and in this Lease, and Tenant agrees that in the event of
any such transfer, Landlord shall automatically be released from all liability
under this Lease and Tenant agrees to look solely to such transferee for the
performance of Landlord's obligations hereunder after the date of transfer.
Tenant further acknowledges that Landlord may assign its interest in this Lease
to the holder of any mortgage or deed of trust as additional security, but
agrees that an assignment shall not release Landlord from its obligations
hereunder and Tenant shall continue to look to Landlord for the performance of
its obligations hereunder.

        29.4    Prohibition Against Recording.    Except as provided in
Section 29.2, neither this Lease, nor any memorandum, affidavit or other writing
with respect thereto, shall be recorded by Tenant or by anyone acting through,
under or on behalf of Tenant, and the recording thereof in violation of this
provision shall make this Lease null and void at Landlord's election.

        29.5    Captions.    The captions of Articles and Sections are for
convenience only and shall not be deemed to limit, construe, affect or alter the
meaning of such Articles and Sections.

        29.6    Time of Essence.    Time is of the essence of this Lease and
each of its provisions.

        29.7    Partial Invalidity.    If any term, provision or condition
contained in this Lease shall, to any extent, be invalid or unenforceable, the
remainder of this Lease, or the application of such term, provision or condition
to persons or circumstances other than those with respect to which it is invalid
or unenforceable, shall not be affected thereby, and each and every other term,
provision and condition of this Lease shall be valid and enforceable to the
fullest extent possible permitted by law.

        29.8    No Warranty.    In executing and delivering this Lease, Tenant
has not relied on any representations, including, but not limited to, any
representation as to the amount of any item comprising Additional Rent or the
amount of the Additional Rent in the aggregate or that Landlord is

29

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furnishing the same services to other tenants, at all, on the same level or on
the same basis, or any warranty or any statement of Landlord which is not set
forth herein or in one or more of the exhibits attached hereto.

        29.9    Child Care Facilities.    Tenant acknowledges that any child
care facilities located in the Project (the "Child Care Facilities") which are
available to Tenant and Tenant's employees are provided by a third party (the
"Child Care Provider") which is leasing space in the Project, and not by
Landlord. If Tenant or its employees choose to use the Child Care Facilities,
Tenant acknowledges that Tenant and Tenant's employees are not relying upon any
investigation which Landlord may have conducted concerning the Child Care
Provider or any warranties or representation with respect thereto, it being the
sole responsibility of Tenant and the individual user of the Child Care
Facilities to conduct any and all investigations of the Child Care Facilities
prior to making use thereof. Accordingly, Landlord shall have no responsibility
with respect to the quality or care provided by the Child Care Facilities, or
for any acts or omissions of the Child Care Provider. Furthermore, Tenant, for
Tenant and for Tenant's employees, hereby agrees that Landlord, its members and
their respective partners, subpartners, officers, agents, servants, employees,
and independent contractors shall not be liable for, and are hereby released
from any responsibility for any loss, cost, damage, expense or liability, either
to person or property, arising from the use of the Child Care Facilities by
Tenant or Tenant's employees. Tenant hereby covenants that Tenant shall inform
all of Tenant's employees of the provisions of this Section 29.9 prior to such
employees' use of the Child Care Facilities.

        29.10    Entire Agreement.    It is understood and acknowledged that
there are no oral agreements between the parties hereto affecting this Lease and
this Lease supersedes and cancels any and all previous negotiations,
arrangements, brochures, agreements and understandings, if any, between the
parties hereto or displayed by Landlord to Tenant with respect to the subject
matter thereof, and none thereof shall be used to interpret or construe this
Lease. This Lease and any side letter or separate agreement executed by Landlord
and Tenant in connection with this Lease and dated of even date herewith,
contain all of the terms, covenants, conditions, warranties and agreements of
the parties relating in any manner to the rental, use and occupancy of the
Premises and shall be considered to be the only agreements between the parties
hereto and their representatives and agents. None of the terms, covenants,
conditions or provisions of this Lease can be modified, deleted or added to
except in writing signed by the parties hereto.

        29.11    Right to Lease.    Landlord reserves the absolute right to
effect such other tenancies in the Project as Landlord in the exercise of its
sole business judgment shall determine to best promote the interests of the
Building or Project. Tenant does not rely on the fact, nor does Landlord
represent, that any specific tenant or type or number of tenants shall, during
the Lease Term, occupy any space in the Building or Project.

        29.12    Force Majeure.    Any prevention, delay or stoppage due to
strikes, lockouts, labor disputes, acts of God, inability to obtain services,
labor, or materials or reasonable substitutes therefor, governmental actions,
civil commotions, fire or other casualty, and other causes beyond the reasonable
control of the party obligated to perform, except with respect to the
obligations imposed with regard to Rent and other charges to be paid by Tenant
pursuant to this Lease (collectively, the "Force Majeure"), notwithstanding
anything to the contrary contained in this Lease, shall excuse the performance
of such party for a period equal to any such prevention, delay or stoppage and,
therefore, if this Lease specifies a time period for performance of an
obligation of either party, that time period shall be extended by the period of
any delay in such party's performance caused by a Force Majeure.

        29.13    Notices.    All notices, demands, statements, designations,
approvals or other communications (collectively, "Notices") given or required to
be given by either party to the other hereunder shall be in writing, shall be
sent by United States certified or registered mail, postage prepaid, return
receipt requested, by nationally recognized courier service, or delivered
personally (i) to

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Tenant at the appropriate address set forth in Section 11 of the Summary, or to
such other place as Tenant may from time to time designate in a Notice to
Landlord; or (ii) to Landlord at the following addresses, or to such other firm
or to such other place as Landlord may from time to time designate in a Notice
to Tenant:

J.P. Morgan Investment Management, Inc.
522 Fifth Avenue
9th Floor
New York, New York 10036
Attention: Ms. Hilary Spann, Vice-President

and

Trammell Crow Services, Inc.
2425 Olympic Boulevard
Suite 520-East
Santa Monica, California 90404
Attention: Building Manager

With a copy to:

Gilchrist & Rutter Professional Corporation
1299 Ocean Avenue
Suite 900
Santa Monica, California 90401
Attention: Paul S. Rutter, Esq.

Any Notice will be deemed given three (3) business days after it is mailed as
provided in this Section 29.13 or upon the date personal delivery is made or
upon the date of delivery by nationally recognized courier service. If Tenant is
notified of the identity and address of the holder of any deed of trust or
ground or underlying lessor, Tenant shall give to such mortgagee or ground or
underlying lessor written notice of any default by Landlord under the terms of
this Lease by registered or certified mail or by delivery by nationally
recognized courier service, and such mortgagee or ground or underlying lessor
shall be given a reasonable opportunity to cure such default prior to Tenant's
exercising any remedy available to Tenant.

        29.14    Joint and Several.    If there is more than one Tenant, the
obligations imposed upon Tenant under this Lease shall be joint and several.

        29.15    Authority.    If Tenant is a corporation or partnership, each
individual executing this Lease on behalf of Tenant hereby represents and
warrants that Tenant is a duly formed and existing entity qualified to do
business in California and that Tenant has full right and authority to execute
and deliver this Lease and that each person signing on behalf of Tenant is
authorized to do so.

        29.16    Governing Law.    This Lease shall be construed and enforced in
accordance with the laws of the State of California.

        29.17    Submission of Lease.    Submission of this instrument for
examination or signature by Tenant does not constitute a reservation of or an
option for lease, and it is not effective as a lease or otherwise until
execution and delivery by both Landlord and Tenant.

        29.18    Brokers.    Landlord and Tenant hereby warrant to each other
that they have had no dealings with any real estate broker or agent in
connection with the negotiation of this Lease, excepting only the real estate
brokers or agents specified in Section 10 of the Summary (the "Brokers"), whose
commissions shall be the responsibility of Landlord pursuant to a separate
written agreement, and that they know of no other real estate broker or agent
who is entitled to a commission in connection with

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this Lease. Each party agrees to indemnify and defend the other party against
and hold the other party harmless from any and all claims, demands, losses,
liabilities, lawsuits, judgments, and costs and expenses (including without
limitation reasonable attorneys' fees) with respect to any leasing commission or
equivalent compensation alleged to be owing on account of any dealings with any
real estate broker or agent, other than the Brokers, occurring by, through, or
under the indemnifying party.

        29.19    Independent Covenants.    This Lease shall be construed as
though the covenants herein between Landlord and Tenant are independent and not
dependent and Tenant hereby expressly waives the benefit of any statute to the
contrary and agrees that if Landlord fails to perform its obligations set forth
herein, Tenant shall not be entitled to make any repairs or perform any acts
hereunder at Landlord's expense or to any setoff of the Rent or other amounts
owing hereunder against Landlord; provided, however, that the foregoing shall in
no way impair the right of Tenant to commence a separate action against Landlord
for any violation by Landlord of the provisions hereof so long as notice is
first given to Landlord and any holder of a mortgage or deed of trust covering
the Building or Project or any portion thereof, whose address has theretofore
been given to Tenant, and an opportunity is granted to Landlord and such holder
to correct such violations as provided above.

        29.20    Project or Building Name and Signage.    Landlord shall have
the right at any time to change the name of the Project or Building and to
install, affix and maintain any and all signs on the exterior and on the
interior of the Project or Building as Landlord may, in Landlord's sole
discretion, desire. Tenant shall not use the name of the Project or Building or
use pictures or illustrations of the Project or Building in advertising or other
publicity, without the prior written consent of Landlord.

        29.21    Transportation Management.    Tenant shall fully comply with
all present or future programs intended to manage parking, transportation or
traffic in and around the Project or Building, and in connection therewith,
Tenant shall take responsible action for the transportation planning and
management of all employees located at the Premises by working directly with
Landlord, any governmental transportation management organization or any other
transportation-related committees or entities. Such programs may include,
without limitation: (i) restrictions on the number of peak-hour vehicle trips
generated by Tenant; (ii) increased vehicle occupancy; (iii) implementation of
an in-house ridesharing program and an employee transportation coordinator;
(iv) working with employees and any Project, Building or area-wide ridesharing
program manager; (v) instituting employer-sponsored incentives (financial or
in-kind) to encourage employees to rideshare; and (vi) utilizing flexible work
shifts for employees.

        29.22    No Discrimination.    Tenant covenants by and for itself, its
heirs, executors, administrators and assigns, and all persons claiming under or
through Tenant, and this Lease is made and accepted upon and subject to the
following conditions: that there shall be no discrimination against or
segregation of any person or group of persons, on account of race, color, creed,
sex, religion, marital status, ancestry or national origin in the leasing,
subleasing, transferring, use, or enjoyment of the Premises, nor shall Tenant
itself, or any person claiming under or through Tenant, establish or permit such
practice or practices of discrimination or segregation with reference to the
selection, location, number, use or occupancy, of tenants, lessees, sublessees,
subtenants or vendees in the Premises.

        29.23    Hazardous Material.    As used herein, the term "Hazardous
Material" means any hazardous or toxic substance, material or waste which is or
becomes regulated by, or is dealt with in, any local governmental authority, the
State of California or the United States Government. Tenant acknowledges that
Landlord may incur costs (A) for complying with laws, codes, regulations or
ordinances relating to Hazardous Material ("Environmental Laws"), or
(B) otherwise in connection with Hazardous Material including, without
limitation, the following: (i) Hazardous Material present in soil or ground
water; (ii) Hazardous Material that migrates, flows, percolates, diffuses or in
any way moves onto or under the Project; (iii) Hazardous Material present on or
under the Project as a result of any discharge, dumping or spilling (whether
accidental or otherwise) on the Project by other tenants of the Project or their

32

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agents, employees, contractors or invitees, or by others; and (iv) material
which becomes Hazardous Material due to a change in Environmental Laws. Tenant
agrees that the costs incurred by Landlord with respect to, or in connection
with, the Project for complying with Environmental Laws shall be an Operating
Expense, unless the cost of such compliance, as between Landlord and Tenant, is
made the responsibility of Tenant under this Lease. To the extent any such cost
that was allocated as an Operating Expense relating to Hazardous Material is
subsequently recovered or reimbursed through insurance, or recovery from
responsible third parties, or other action, Tenant shall be entitled to a
proportionate share of such Operating Expense paid by Tenant to which such
recovery or reimbursement relates.

        29.24    Development of the Project.    

                29.24.1    Subdivision.    Tenant acknowledges that the Project
has been subdivided. Landlord reserves the right to further subdivide all or a
portion of the buildings and Common Areas in the Project. Tenant agrees to
execute and deliver, upon demand by Landlord and in the form requested by
Landlord, any additional documents needed to conform this Lease to the
circumstances resulting from a subdivision and any all maps in connection
therewith. Notwithstanding anything to the contrary set forth in this Lease, the
separate ownership of any buildings and/or Common Areas of the Project by an
entity other than Landlord shall not affect the calculation of Project Expenses
or Tenant's payment of Tenant's Share of Project Expenses.

                29.24.2    The Other Improvements.    If portions of the Project
or property adjacent to the Project (collectively, the "Other Improvements") are
owned by an entity other than Landlord, Landlord, at its option, may enter into
an agreement with the owner or owners of any of the Other Improvements to
provide (i) for reciprocal rights of access, use and/or enjoyment of the Project
and the Other Improvements, (ii) for the common management, operation,
maintenance, improvement and/or repair of all or any portion of the Project and
all or any portion of the Other Improvements, (iii) for the allocation of a
portion of the Project Expenses to the Other Improvements and the allocation of
a portion of the operating expenses and taxes for the Other Improvements to the
Project, (iv) for the use or improvement of the Other Improvements and/or the
Project in connection with the improvement, construction, and/or excavation of
the Other Improvements and/or the Project, and (v) for any other matter which
Landlord deems necessary. Nothing contained herein shall be deemed or construed
to limit or otherwise affect Landlord's right to sell all or any portion of the
Project or any other of Landlord's rights described in this Lease.

                29.24.3    Construction of Project and Other
Improvements.    Tenant acknowledges that portions of the Project and/or the
Other Improvements may be under construction following Tenant's occupancy of the
Premises, and that such construction may result in levels of noise, dust,
obstruction of access, etc. which are in excess of that present in a fully
constructed project. Tenant hereby waives any and all rent offsets or claims of
constructive eviction which may arise in connection with such construction.

        29.25    ERISA Matters.    

                29.25.1    Tenant acknowledges that it has been advised that one
of the constituent shareholders, partners and/or members of Landlord is a
collective investment fund (the "Fund") which holds the assets of one or more
employee benefit plans or retirement arrangements which are subject to Title I
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and/or Section 4975 of the Internal Revenue Code of 1986, as amended (the
"Code") (each a "Plan"), and with respect to which JPMorgan Chase Bank ("JPMCB")
is the Trustee and that, as a result, Landlord may be prohibited by law from
engaging in certain transactions.

                29.25.2    Landlord hereby represents and warrants to Tenant
that, as of the date hereof, the only Plans whose assets are invested in the
Fund which, together with the interests of any other Plans maintained by the
same employer or employee organization, represent a collective interest in the
Fund

33

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in excess of ten percent (10%) of the total interests in the Fund (each, a "10%
Plan") are referenced in Exhibit "F" attached hereto (collectively, the
"Existing 10% Plans").

                29.25.3    Tenant represents and warrants that as of the date
hereof, and at all times while it is Tenant under this Lease, one of the
following statements is, and will continue to be, true; (1) Tenant is not a
"party in interest" (as defined in Section 3(14) of ERISA) or a "disqualified
person" (as defined on Section 4975 of the Code)(each a "Party in Interest")
with respect to the Existing 10% Plans or, (2) if Tenant is a Party in Interest,
that:

        (a)   neither Tenant nor its "affiliate" (as defined in Section V(c) of
PTCE 84-14, "Affiliate") has, or during the immediately preceding one (1) year
has, exercised the authority to either: (i) appoint or terminate JPMCB as the
qualified professional asset manager (as defined in Section V(a) of PTCE 84-14,
"QPAM") of any of the assets of the Existing 10% Plan with respect to which
Tenant or its Affiliate is a Party in Interest; or (ii) negotiate the terms of
the management agreement with JPMCB, including renewals or modifications
thereof, on behalf of the Existing 10% Plan; and

        (b)   neither Tenant nor any entity controlling or controlled by Tenant
owns a five percent (5%) or more interest (within the meaning of PTCE 84-14, "5%
Interest") in J.P. Morgan Chase & Co.

                29.25.4    In the event that Landlord or the Fund notifies
Tenant in writing that a Plan other than the Existing 10% Plans may become a 10%
Plan, Tenant will, within 10 days of such notification, inform the Fund in
writing as to whether it can make the same representations which it made in
Section 29.25.3 with respect to such prospective 10% Plan. Thereafter, if based
on such representations made by Tenant such Plan becomes a 10% Plan, Tenant
represents and warrants that, at all times during the period Tenant is a tenant
under this Lease, one of the statements set forth in Section 29.25.3 will be
true with respect to such 10% Plan.

                29.25.5    In the event that Tenant becomes aware that any
statement in Section 29.25.3 is no longer true with respect to a 10% Plan,
Tenant will immediately notify Landlord, and Tenant will cooperate with Landlord
and/or the Fund in its efforts to take whatever action is necessary under ERISA
to rectify the situation.

        29.26    Landlord Exculpation.    It is expressly understood and agreed
that notwithstanding anything in this Lease to the contrary, and notwithstanding
any applicable law to the contrary, the liability of Landlord hereunder
(including any successor landlord hereunder) and any recourse by Tenant against
Landlord shall be limited solely and exclusively to the interest of Landlord in
and to the Building. Neither Landlord, nor any of the Landlord Parties shall
have any personal liability therefor, and Tenant hereby expressly waives and
releases such personal liability on behalf of itself and all persons claiming
by, through or under Tenant. The limitations of liability contained in this
Section 29.26 shall inure to the benefit of Landlord's and the Landlord Parties'
present and future partners, beneficiaries, officers, directors, trustees,
shareholders, agents and employees, and their respective partners, heirs,
successors and assigns. Under no circumstances shall any present or future
partner or member of Landlord (if Landlord is a partnership or a limited
liability company), or trustee or beneficiary (if Landlord or any partner of
Landlord is a trust), have any liability for the performance of Landlord's
obligations under this Lease. Notwithstanding any contrary provision herein,
neither Landlord nor the Landlord Parties shall be liable under any
circumstances for injury or damage to, or interference with, Tenant's business,
including but not limited to, loss of profits, loss of rents or other revenues,
loss of business opportunity, loss of goodwill or loss of use, in each case,
however occurring.

        29.27    Covenant of Quiet Enjoyment.    Upon the paying of all Rent, as
and when due, hereunder and performing each of the other covenants, agreements
and conditions of this Lease required to be performed by Tenant, Tenant shall
lawfully and quietly hold, occupy and enjoy the Premises during the

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Lease Term without hindrance or molestation of anyone lawfully claiming by,
through or under Landlord, subject, however, to the provisions of this Lease and
to any underlying mortgage (to the extent that this Lease is subordinate or made
subordinate thereto, and subject to the terms of any non-disturbance agreement
regarding this Lease to which Tenant is a party).

        29.28    Communications and Computer Lines.    Tenant may install,
maintain, replace, remove or use any communications or computer wires and cables
serving the Premises (collectively, the "Lines"), provided that (i) Tenant shall
obtain Landlord's prior written consent, use an experienced and qualified
contractor approved in writing by Landlord, and comply with all of the other
provisions of Articles 7 and 8, (ii) an acceptable number of spare Lines and
space for additional Lines shall be maintained for existing and future occupants
of the Project, as determined in Landlord's reasonable opinion, (iii) the Lines
therefor (including riser cables) shall be appropriately insulated to prevent
excessive electromagnetic fields or radiation, shall be surrounded by a
protective conduit reasonably acceptable to Landlord, and shall be identified in
accordance with the "Identification Requirements," as that term is set forth
hereinbelow, (iv) any new or existing Lines servicing the Premises shall comply
with all applicable governmental laws and regulations, (v) as a condition to
permitting the installation of new Lines, Landlord may require that Tenant
remove existing Lines located in or serving the Premises and repair any damage
in connection with such removal, and (vi) Tenant shall pay all costs in
connection therewith. All Lines shall be clearly marked with adhesive plastic
labels (or plastic tags attached to such Lines with wire) to show Tenant's name,
suite number, telephone number and the name of the person to contact in the case
of an emergency (A) every four (4) feet outside the Premises (specifically
including, but not limited to, the electrical room risers and other Common
Areas), and (B) at the Lines' termination point(s) (collectively, the
"Identification Requirements"). Landlord reserves the right to require that
Tenant remove any Lines located in or serving the Premises which are installed
in violation of these provisions, or which are at any time in violation of any
laws or represent a dangerous or potentially dangerous condition.

[Signature page follows]

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        IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be
executed the day and date first above written.

    "Landlord":
 
 
WATER GARDEN COMPANY L.L.C.,
a Delaware limited liability company
 
 
By:
 
/s/  HILARY SPANN      

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Hilary Spann
Vice President
 
 
"Tenant":
 
 
SPECIALTY LABORATORIES, INC.,
a California corporation
 
 
By:
 
/s/  DOUGLAS S. HARRINGTON      

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        Its: CEO

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

 
 
By:
 
/s/  FRANK J. SPINA      

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        Its: CFO

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36

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EXHIBIT "A"

THE WATER GARDEN

OUTLINE OF PREMISES

         GRAPHIC [g990718.jpg]

A-1

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EXHIBIT "B"

THE WATER GARDEN

NOTICE OF LEASE TERM DATES

To:            

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Re:Office Lease dated January 12, 2004 between WATER GARDEN COMPANY L.L.C., a
Delaware limited liability company ("Landlord"), and SPECIALTY
LABORATORIES, INC., a California corporation ("Tenant") concerning Suite 500S on
the fifth floor of the office building located at 1620 26th Street, Santa
Monica, California.

Gentlemen:

        In accordance with the referenced Office Lease (the "Lease"), we wish to
advise you and/or confirm as follows:

        1.     The delivery by Landlord of the Premises has occurred, and the
Lease Term shall commence on or has commenced on                          for a
term of seventeen months ending on June 30, 2005.

        2.     Rent commenced to accrue on                         , in the
amount of                         .

        3.     If the Lease Commencement Date is other than the first day of the
month, the first billing will contain a pro rata adjustment. Each billing
thereafter, with the exception of the final billing, shall be for the full
amount of the monthly installment as provided for in the Lease.

        4.     Your rent checks should be made payable to
                         at                         .

        5.     The exact number of rentable square feet within the Premises is
28,607 rentable square feet.

        6.     Tenant's Share as adjusted based upon the exact number of
rentable square feet within the Premises is 8.6%.

        Pursuant to the terms of Article 2 of your Lease, you are required to
return an executed copy of this Notice to                          within five
(5) days following your receipt hereof, and thereafter the statements set forth
herein shall be conclusive and binding upon you. Your failure to timely execute

B-1

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and return this Notice shall constitute your acknowledgment that the statements
included herein are true and correct, without exception.

            "Landlord":
 
 
 
 
 
 
WATER GARDEN COMPANY L.L.C.,
a Delaware limited liability company
 
 
 
 
 
 
By:
 
 
 
                 

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                Its:                        

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Agreed to and Accepted as of ____________, 20__.            
"Tenant":
 
 
 
 
 
 
SPECIALTY LABORATORIES, INC.,
a California corporation
 
 
 
 
 
 
By:
 
 
 
 
 
 
 
 
 
     

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                Its:                        

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By:
 
 
 
 
 
 
 
 
 
     

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                Its:                        

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B-2

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EXHIBIT "C"

THE WATER GARDEN

RULES AND REGULATIONS

        Tenant shall faithfully observe and comply with the following Rules and
Regulations. Landlord shall not be responsible to Tenant for the nonperformance
of any of said Rules and Regulations by or otherwise with respect to the acts or
omissions of any other tenants or occupants of the Project.

        1.     Tenant shall not alter any lock or install any new or additional
locks or bolts on any doors or windows of the Premises without obtaining
Landlord's prior written consent. Tenant shall bear the cost of any lock changes
or repairs required by Tenant. Two keys will be furnished by Landlord for the
Premises, and any additional keys required by Tenant must be obtained from
Landlord at a reasonable cost to be established by Landlord.

        2.     All doors opening to public corridors shall be kept closed at all
times except for normal ingress and egress to the Premises.

        3.     Landlord reserves the right to close and keep locked all entrance
and exit doors of the Building during such hours as are customary for comparable
buildings in the greater Los Angeles area. Tenant, its employees and agents must
be sure that the doors to the Building are securely closed and locked when
leaving the Premises if it is after the normal hours of business for the
Building. Any tenant, its employees, agents or any other persons entering or
leaving the Building at any time when it is so locked, or any time when it is
considered to be after normal business hours for the Building, may be required
to sign the Building register. Access to the Building may be refused unless the
person seeking access has proper identification or has a previously arranged
pass for access to the Building. The Landlord and his agents shall in no case be
liable for damages for any error with regard to the admission to or exclusion
from the Building of any person. In case of invasion, mob, riot, public
excitement, or other commotion, Landlord reserves the right to prevent access to
the Building or the Project during the continuance thereof by any means it deems
appropriate for the safety and protection of life and property.

        4.     No furniture, freight or equipment of any kind shall be brought
into the Building without prior notice to Landlord. All moving activity into or
out of the Building shall be scheduled with Landlord and done only at such time
and in such manner as Landlord designates. No service deliveries (other than
messenger services) will be allowed between hours of 4:00 p.m. to 6:00 p.m.,
Monday through Friday. Landlord shall have the right to prescribe the weight,
size and position of all safes and other heavy property brought into the
Building and also the times and manner of moving the same in and out of the
Building. Safes and other heavy objects shall, if considered necessary by
Landlord, stand on supports of such thickness as is necessary to properly
distribute the weight. Landlord will not be responsible for loss of or damage to
any such safe or property in any case. Any damage to any part of the Building,
its contents, occupants or visitors by moving or maintaining any such safe or
other property shall be the sole responsibility and expense of Tenant.

        5.     No furniture, packages, supplies, equipment or merchandise will
be received in the Building or carried up or down in the elevators, except
between such hours and in such specific elevator as shall be designated by
Landlord.

        6.     Any requests of Tenant shall be directed to the management office
for the Project or at such office location designated by Landlord. Employees of
Landlord shall not perform any work or do anything outside their regular duties
unless under special instructions from Landlord.

        7.     Tenant shall not disturb, solicit, or canvass any occupant of the
Project and shall cooperate with Landlord and its agents to prevent such
activities.

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        8.     The toilet rooms, 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 therein. The expense
of any breakage, stoppage or damage resulting from the violation of this rule
shall be borne by the tenant who, or whose employees or agents, shall have
caused it.

        9.     Tenant shall not overload the floor of the Premises, nor mark,
drive nails or screws, or drill into the partitions, woodwork or plaster or in
any way deface the Premises or any part thereof without Landlord's consent first
had and obtained except in connection with the hanging of artwork or other
standard office-type decoration, as well as customary bulletin boards, white
boards and the like.

        10.   Except for vending machines intended for the sole use of Tenant's
employees and invitees, no vending machines other than fractional horsepower
office machines shall be installed, maintained or operated upon the Premises
without the written consent of Landlord.

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

        12.   Tenant shall not without the prior written consent of Landlord use
any method of heating or air conditioning other than that supplied by Landlord.

        13.   Tenant shall not use, keep or permit to be used or kept, any foul
or noxious gas or substance in or on the Premises, or permit or allow the
Premises to be occupied or used in a manner offensive or objectionable to
Landlord or other occupants of the Project by reason of noise, odors, or
vibrations, or interfere in any way with other tenants or those having business
therein.

        14.   Tenant shall not bring into or keep within the Project, the
Building or the Premises any animals, birds, bicycles or other vehicles.

        15.   No cooking shall be done or permitted on the Premises, nor shall
the Premises be used for the storage of merchandise, for lodging or for any
improper, objectionable or immoral purposes. Notwithstanding the foregoing,
Underwriters' laboratory-approved equipment and microwave ovens may be used in
the Premises for heating food and brewing coffee, tea, hot chocolate and similar
beverages for employees and visitors, provided that such use is in accordance
with all applicable federal, state and city laws, codes, ordinances, rules and
regulations.

        16.   Landlord will approve where and how telephone and telegraph wires
are to be introduced to the Premises. No boring or cutting for wires shall be
allowed without the consent of Landlord. The location of telephone, call boxes
and other office equipment affixed to the Premises shall be subject to the
approval of Landlord.

        17.   Landlord reserves the right to exclude or expel from the Project
any person who, in the judgment of Landlord, is intoxicated or under the
influence of liquor or drugs, or who shall in any manner do any act in violation
of any of these Rules and Regulations.

        18.   Tenant, its employees and agents shall not loiter in the entrances
or corridors, nor in any way obstruct the sidewalks, lobby, halls, stairways or
elevators, and shall use them only as a means of ingress and egress for the
Premises.

        19.   Tenant shall not waste electricity, water or air conditioning and
agrees to cooperate fully with Landlord to ensure the most effective operation
of the Building's heating and air conditioning system, and shall refrain from
attempting to adjust any controls.

        20.   Tenant shall store all its trash and garbage within the interior
of the Premises. No material shall be placed in the trash boxes or receptacles
if such material is of such nature that it may not be disposed of in the
ordinary and customary manner of removing and disposing of trash and garbage in
Santa Monica, California without violation of any law or ordinance governing
such disposal. All trash,

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garbage and refuse disposal shall be made only through entry-ways and elevators
provided for such purposes at such times as Landlord shall designate.

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

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

        23.   No awnings or other projection shall be attached to the outside
walls of the Building without the prior written consent of Landlord. No
curtains, blinds, shades or screens shall be attached to or hung in, or used in
connection with, any window or door of the Premises without the prior written
consent of Landlord. All electrical ceiling fixtures hung in offices or spaces
along the perimeter of the Building must be fluorescent and/or of a quality,
type, design and bulb color approved by Landlord. Tenant shall abide by
Landlord's regulations concerning the opening and closing of window coverings
which are attached to the windows in the Premises, if any, which have a view of
any interior portion of the Building or Building Common Areas.

        24.   The sashes, sash doors, skylights, windows, and doors that reflect
or admit light and air into the halls, passageways or other public places in the
Building shall not be covered or obstructed by Tenant, nor shall any bottles,
parcels or other articles be placed on the windowsills.

        25.   Tenant must comply with the State of California "No-Smoking" law
set forth in California Labor Code Section 6404.5, and any local "No-Smoking"
ordinance which may be in effect from time to time and which is not superseded
by such state law.

        Landlord reserves the right at any time to change or rescind any one or
more of these Rules and Regulations, or to make such other and further
reasonable Rules and Regulations as in Landlord's judgment may from time to time
be necessary for the management, safety, care and cleanliness of the Premises,
Building, the Common Areas and the Project, and for the preservation of good
order therein, as well as for the convenience of other occupants and tenants
therein. Tenant shall be deemed to have read these Rules and Regulations and to
have agreed to abide by them as a condition of its occupancy of the Premises.
Landlord may waive any one or more of these Rules and Regulations for the
benefit of any particular tenants, but no such waiver by Landlord shall be
construed as a waiver of such Rules and Regulations in favor of any other
tenant, nor prevent Landlord from thereafter enforcing any such Rules or
Regulations against any or all tenants of the Project.

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EXHIBIT "D"

THE WATER GARDEN

FORM OF TENANT'S ESTOPPEL CERTIFICATE

        The undersigned as Tenant under that certain Office Lease (the "Lease")
made and entered into as of January 12, 2004 by and between WATER GARDEN COMPANY
L.L.C. as Landlord, and the undersigned as Tenant, for Premises on the fifth
floor of the office building located at 1620 26th Street, Santa Monica,
California, certifies as follows:

        1.     Attached hereto as Exhibit "A" is a true and correct copy of the
Lease and all amendments and modifications thereto. The documents contained in
Exhibit "A" represent the entire agreement between the parties as to the
Premises.

        2.     The undersigned currently occupies the Premises described in the
Lease.

        3.     The Lease Term commenced on February 1, 2004, and the Lease Term
expires on June 30, 2005.

        4.     Base Rent became payable on February 1, 2004.

        5.     The Lease is in full force and effect and has not been modified,
supplemented or amended in any way except as provided in Exhibit "A".

        6.     Tenant has not transferred, assigned, or sublet any portion of
the Premises nor entered into any license or concession agreements with respect
thereto except as follows:                     

        7.     Tenant shall not modify the documents contained in Exhibit "A"
without the prior written consent of the holder of the first deed of trust on
the Premises.

        8.     All monthly installments of Base Rent, all Additional Rent and
all monthly installments of estimated Additional Rent have been paid when due
through                     . The current monthly installment of Base Rent is
$                    .

        9.     All conditions to be performed by Landlord necessary to the
enforceability of the Lease have been satisfied and Landlord is not in default
thereunder.

        10.   The current amount of the Security Deposit held by Landlord is
$                    .

        11.   No rental has been paid more than thirty (30) days in advance and
no security has been deposited with Landlord except as provided in the Lease.

        12.   As of the date hereof, there are no existing defenses or offsets
that the undersigned has against Landlord nor have any events occurred that with
the passage of time or the giving of notice, or both, would constitute a default
on the part of Landlord under the Lease.

        13.   The undersigned acknowledges that this Estoppel Certificate may be
delivered to Landlord or to a prospective mortgagee, or a prospective purchaser,
and acknowledges that said prospective mortgagee or prospective purchaser will
be relying upon the statements contained herein in making the loan or acquiring
the property of which the Premises are a part and that receipt by it of this
certificate is a condition of making of such loan or acquisition of such
property.

        14.   If Tenant is a corporation or partnership, each individual
executing this Estoppel Certificate on behalf of Tenant hereby represents and
warrants that Tenant is a duly formed and existing entity qualified to do
business in California and that Tenant has full right and authority to execute
and deliver this Estoppel Certificate and that each person signing on behalf of
Tenant is authorized to do so.

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        Executed at                      on the              day of
                    , 20    .

    "Tenant":
 
 
SPECIALTY LABORATORIES, INC.,
a California corporation
 
 
By:
 
 
         

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        Its:            

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By:
 
 
         

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        Its:            

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EXHIBIT "E"

INTENTIONALLY DELETED

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EXHIBIT "F"

THE WATER GARDEN

EXISTING 10% PLANS REFERENCED IN

SECTION 29.25 OF THE LEASE

        None.

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QuickLinks

THE WATER GARDEN SUMMARY OF BASIC LEASE INFORMATION
TABLE OF CONTENTS
THE WATER GARDEN OFFICE LEASE
EXHIBIT "A" THE WATER GARDEN OUTLINE OF PREMISES
EXHIBIT "B" THE WATER GARDEN NOTICE OF LEASE TERM DATES
EXHIBIT "C" THE WATER GARDEN RULES AND REGULATIONS
EXHIBIT "D" THE WATER GARDEN FORM OF TENANT'S ESTOPPEL CERTIFICATE
EXHIBIT "E" INTENTIONALLY DELETED
EXHIBIT "F" THE WATER GARDEN EXISTING 10% PLANS REFERENCED IN SECTION 29.25 OF
THE LEASE