<PAGE>   1


                                                                   EXHIBIT 10.15




                                      LEASE

                                     BETWEEN

                    BAKER HAMILTON PROPERTIES, LLC (LANDLORD)

                                       AND

                             ORGANIC, INC. (TENANT)

                           THE BAKER HAMILTON BUILDING

                               601 TOWNSEND STREET

                            SAN FRANCISCO, CALIFORNIA


<PAGE>   2

                                TABLE OF CONTENTS



<TABLE>
<CAPTION>
                                                                                                               PAGE
<S>                                                                                                            <C>
Article 1 BASIC LEASE PROVISIONS..................................................................................1

Article 2 PREMISES, TERM AND FAILURE TO GIVE POSSESSION...........................................................8

Article 3 RENT...................................................................................................11

Article 4 ADDITIONAL RENT........................................................................................11

Article 5 SECURITY DEPOSIT.......................................................................................13

Article 6 SERVICES...............................................................................................14

Article 7 POSSESSION, USE AND CONDITION OF PREMISES..............................................................17

Article 8 MAINTENANCE............................................................................................19

Article 9 ALTERATIONS AND IMPROVEMENTS...........................................................................20

Article 10 ASSIGNMENT AND SUBLETTING.............................................................................22

Article 11 DEFAULT AND REMEDIES..................................................................................26

Article 12 SURRENDER OF PREMISES.................................................................................30

Article 13 HOLDING OVER..........................................................................................31

Article 14 DAMAGE BY FIRE OR OTHER CASUALTY......................................................................31

Article 15 EMINENT DOMAIN........................................................................................33

Article 16 INSURANCE.............................................................................................33

Article 17 WAIVER OF CLAIMS AND INDEMNITY........................................................................35

Article 18 RULES AND REGULATIONS.................................................................................36

Article 19 LANDLORD'S RESERVED RIGHTS............................................................................37

Article 20 ESTOPPEL CERTIFICATE..................................................................................37

Article 21 REAL ESTATE BROKERS...................................................................................38

Article 22 MORTGAGEE PROTECTION..................................................................................38

Article 23 NOTICES...............................................................................................40
</TABLE>



                                       i


<PAGE>   3

<TABLE>
<S>                                                                                                              <C>
Article 24 MISCELLANEOUS.........................................................................................40

Article 25 LETTER OF CREDIT......................................................................................45

Article 26 RIGHT OF FIRST OFFER..................................................................................47

Article 27 ROOF RIGHTS...........................................................................................47

Article 28 SIGNAGE...............................................................................................49

Article 29 PARKING...............................................................................................51

Article 30 BASEMENT..............................................................................................52

Article 31 GENERATOR SPACE.......................................................................................52
</TABLE>



                                       ii

<PAGE>   4

                                  OFFICE LEASE

                                   ARTICLE 1

                             BASIC LEASE PROVISIONS

         1.1 BASIC LEASE PROVISIONS

         In the event of any conflict between these Basic Lease Provisions and
any other Lease provision, such other Lease provision shall control.

         (1)      BUILDING AND ADDRESS:

                  The Baker Hamilton Building
                  601 Townsend Street
                  San Francisco, California

         (2)      LANDLORD AND ADDRESS:

                  Notices to Landlord shall be addressed to:

                  Baker Hamilton Properties, LLC
                  c/o Ronaldo Cianciarulo
                  700 Seventh Street, #107
                  San Francisco, CA 94107

                  With a copy to:

                  Shartsis, Friese & Ginsburg LLP
                  One Maritime Plaza, 18th Floor
                  San Francisco, California 94901
                  Attention:  Adam Elsesser, Esq.

         (3)      TENANT AND CURRENT ADDRESS:

                  (a)      Name:   Organic, Inc.

                  (b)      State of incorporation:   Delaware

                  Notices to Tenant shall be addressed:

                  Organic, Inc.
                  601 Townsend Street
                  San Francisco, California
                  Attention:  Chief Financial Officer

                  With a copy to:

                  Coblentz, Patch, Duffy & Bass, LLP
                  222 Kearny Street



                                       1
<PAGE>   5

                  San Francisco, CA 94108-4510
                  Attention:  Barbara A. Milanovich, Esq.

         (4)      DATE OF LEASE:   as of November 8, 1999

         (5)      LEASE TERM:   Ten (10) years

         (6)      PROJECTED DELIVERY DATE:   June 1, 2000

         (7)      PROJECTED COMMENCEMENT DATE:   September 1, 2000

         (8)      PROJECTED EXPIRATION DATE:   120 months after the Commencement
                                               Date

         (9)      MONTHLY AND ANNUAL BASE RENT:


<TABLE>
<CAPTION>
                                                                    ANNUAL RATE/SF
PERIOD FROM/TO                    MONTHLY             ANNUAL        OF RENTABLE AREA
<S>                            <C>                <C>                    <C>
Commencement Date - 1st        $  705,106.66      $ 8,461,280.00         $40.00
Full 12 calendar months
Months 13-24                   $  733,310.93      $ 8,799,731.20         $41.60
Months 25-36                   $  762,572.85      $ 9,150,874.30         $43.26
Months 37-48                   $  793,245.00      $ 9,518,940.00         $45.00
Months 49-60                   $  824,798.51      $ 9,897,582.20         $46.79
Months 61-72                   $  857,938.50      $10,295,262.00         $48.67
Months 73-84                   $  892,136.16      $10,705,634.00         $50.61
Months 85-96                   $  927,920.33      $11,135,044.00         $52.64
Months 97-108                  $  964,939.41      $11,579,261.00         $54.74
Months 109-120                 $1,003,543.00      $12,042,516.00         $56.93
</TABLE>

<TABLE>
<S>                                                  <C>
         (10)     RENTABLE AREA OF THE PREMISES:     211,532 square feet

         (11)     RENTABLE AREA OF THE BUILDING:     211,532 square feet, subject to
                                                     adjustment pursuant to the Lease

         (12)     SECURITY DEPOSIT: $0 Cash
                                    $10,000,000 Letter of Credit

         (13)     TENANT'S USE OF PREMISES: General office use

         (14)     BROKERS:

                  Landlord's Broker:        CB Richard Ellis

                  Tenant's Broker:          Julien J. Studley, Inc.
</TABLE>



                                       2
<PAGE>   6

         1.2 ENUMERATION OF EXHIBITS, RIDER(S) AND ADDENDUM

         The Exhibits, Rider(s) and Addendum set forth below and attached to
this Lease are incorporated in this Lease by this reference:

EXHIBIT A    Plan of Premises
EXHIBIT B    Work Letter Agreement
EXHIBIT C    Rules and Regulations
EXHIBIT D    Signage
EXHIBIT E    Site Plan for Adjacent Building
RIDER 1      Commencement Date Agreement

         1.3 DEFINITIONS

         For purposes hereof, the following terms shall have the following
meanings:

         AFFILIATE: Any corporation or other business entity (i) in which Tenant
has more than a 50% ownership interest, or (ii) a successor to Tenant by merger,
consolidation or reorganization, or (iii) an entity which acquires all or
substantially all of the assets or stock of Tenant.

         ANNUAL BASE RENT: The annual rent specified in Section 1.1(9).

         BUILDING: The office building located at the address specified in
Section 1.1(1).

         COMMENCEMENT DATE: The date specified in Section 1.1(6) as the
Projected Commencement Date, unless changed by operation of Article Two.

         COMMON AREAS: All areas of the Project made available by Landlord from
time to time for the general common use or benefit of the tenants of the
Building, and their employees and invitees, or the public, as such areas
currently exist and as they may be reasonably changed from time to time;
provided Landlord provides advance notice to Tenant thereof.

         DECORATION: Tenant Alterations which do not require a building permit
and which do not involve any of the structural elements of the Building, or any
of the Building's systems, including its electrical, mechanical, plumbing,
security, heating, ventilating, air-conditioning, communication, and fire and
life safety systems.

         DEFAULT RATE: Two (2) percentage points above the rate then most
recently announced by Bank of America N.T.&S.A. at its San Francisco main office
as its base lending reference rate, from time to time announced, but in no event
higher than the maximum rate permitted by Law.

         DELIVERY DATE: The date that Landlord delivers the Premises to Tenant
with the portion of Landlord's Work Substantially Complete so as to enable
Tenant to commence full-time performance of Tenant's Work without interference.



                                       3
<PAGE>   7

         DIRECT EXPENSES: The following costs and expenses of maintaining and
operating the Premises which are paid to the utility provider or service
provider directly by Tenant. Direct Expenses shall be paid by Tenant from and
after the Commencement Date of the Lease. No Direct Expenses shall be included
in Operating Expenses.

         ENVIRONMENTAL LAWS: All Laws governing the use, storage, disposal or
generation of any Hazardous Material, including, without limitation, the
Comprehensive Environmental Response Compensation and Liability Act of 1980, as
amended, and the Resource Conservation and Recovery Act of 1976, as amended.

         EXPIRATION DATE: The date specified in Section 1.1(7) unless changed by
operation of Article Two.

         FORCE MAJEURE: Any accident, casualty, act of God, war or civil
commotion, strike or labor troubles, or any cause whatsoever beyond the
reasonable control of Landlord or Tenant, including water shortages, energy
shortages or governmental preemption in connection with an act of God, a
national emergency, or by reason of Law, or by reason of the conditions of
supply and demand which have been or are affected by act of God, war or other
emergency.

         HAZARDOUS MATERIAL: Such substances, material and wastes which are or
become regulated under any Environmental Law; or which are classified as
hazardous or toxic under any Environmental Law; and explosives and firearms,
radioactive material, asbestos, polychlorinated biphenyls, and petroleum
products.

         INDEMNITEES: Collectively, Landlord, any Mortgagee or ground lessor of
the Property, the property manager and the leasing manager for the Property and
their respective partners, members, directors, officers, agents and employees.

         LAND: The parcel(s) of real estate on which the Building and Project
are located.

         LANDLORD DELAY: Any event that actually delays the completion of Tenant
s Work that is caused by (i) Landlord's failure to approve plans and other
submittals within the time periods specified in the Work Letter, or (ii)
Landlord's failure to fund the Tenant Improvement Allowance as specified in the
Work Letter, or (iii) or any other act or omission of Landlord, its employees,
agents, or contractors; provided however, that with respect to clause (iii),
Tenant shall provide Landlord with written notice of any alleged Landlord Delay
and no Landlord Delay shall be deemed to have occurred if Landlord cures such
Landlord Delay within one (1) business day of receipt of Tenant's notice.

         LANDLORD WORK: The construction or installation of improvements to the
Premises, to be furnished by Landlord, specifically described in Schedule 1 of
the Work Letter.

         LAWS OR LAW: All laws, ordinances, rules, regulations, other
requirements, orders, rulings or decisions adopted or made by any governmental
body, agency, department or judicial authority having jurisdiction over the
Property, the Premises or Tenant's activities at the Premises and any covenants,
conditions or restrictions of record which affect the Property.



                                       4
<PAGE>   8

         LEASE YEAR: Each calendar year during the Term, provided the first
Lease Year shall be the partial year commencing on the Commencement Date and
ending on the first December 31st following the Commencement Date, and the last
Lease Year shall be the partial year commencing on the last January 1st of the
Term and ending on the Expiration Date.

         MONTHLY BASE RENT: The monthly rent specified in Section 1.1(9).

         MORTGAGEE: Any holder of a mortgage, deed of trust or other security
instrument encumbering the Property.

         NATIONAL HOLIDAYS: New Year's Day, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day and other holidays recognized by
the Landlord and the employees servicing the Building in accordance with their
contracts.

         OPERATING EXPENSES: All actual commercially reasonable costs, expenses
and disbursements of every kind and nature which Landlord shall pay or become
obligated to pay in connection with the ownership, management, operation,
maintenance, replacement and repair of the Building which are not Direct
Expenses. Operating Expenses shall include but not be limited to (i) wages,
salaries, benefits and fees of all personnel or entities engaged in the
operation, repair, maintenance, management, or safekeeping of the Building
prorated to reflect time spent working on the Building; the costs of all
supplies and materials (including work clothes and uniforms) used in the
operation, repair, maintenance and security; (ii) cost of performance by
Landlord's personnel of, or of all service agreements for, maintenance,
janitorial services, access control, alarm service, window cleaning, elevator
maintenance and landscaping (such cost shall include the rental of personal
property used by Landlord's personnel in the maintenance and repair); (iii) cost
of utilities, including water, sewer, power, electricity, gas, fuel, lighting
and all air-conditioning, heating and ventilating costs to the Building which
are not Direct Expenses; (iv) accounting costs and reasonable legal fees
actually incurred by Landlord or paid by Landlord to third parties (exclusive of
legal fees with respect to disputes with individual tenants, negotiations of
tenant leases, none of which shall be included as an Operating Expense), and all
association dues; (v) cost of repairs and general maintenance for any portion of
the Building; (vi) cost of improvements or equipment which are capital in nature
and which are for the purpose of reducing Operating Expenses (provided Landlord
makes a commercially reasonable determination the same are likely to reduce
Operating Expenses) or complying with applicable Laws enacted after the
Commencement Date, all such costs, including interest thereon, shall be
amortized on a straight-line basis over the useful life of the capital
investment items, as reasonably determined by Landlord; (vii) the Building
management office rent or rental value consistent with comparable buildings in
the area; (viii) the cost of premiums and commercially reasonable deductibles
for insurance obtained by Landlord in connection with this Building; (ix) a
fixed management fee of four percent (4%) of the Annual Base Rent (whether or
not Landlord engages a manager for the Building or manages the Building with
Landlord's personnel), such fee and all items reimbursable to the Building
manager, if any, pursuant to any management contract for the Building; (x)
amounts payable to any associations created under any conditions, covenants and
restriction governing the Building. Notwithstanding the foregoing, Operating
Expenses shall not include, (i) costs of alterations of the premises of tenants
of the Building, (ii) costs of capital improvements or capital repairs or
capital equipment to the Building (except for amortized portion of capital
improvements installed for the purpose of



                                       5
<PAGE>   9

reducing or controlling Operating Expenses or complying with applicable Laws),
(iii) depreciation charges, (iv) interest and principal payments on loans
(except for loans for capital improvements which Landlord is allowed to include
in Operating Expenses as provided above), (v) ground rental payments, (vi) real
estate brokerage and leasing commissions, (vii) advertising and marketing
expenses, (viii) costs of Landlord reimbursed by insurance proceeds or other
third parties, (ix) expenses incurred in negotiating leases of tenants in the
Building or enforcing lease obligations of tenants in the Building, (x)
Landlord's or Landlord's property manager's corporate general overhead or
corporate general administrative expenses, (xi) deductibles under any earthquake
policy in excess of the commercially reasonable deductible under Landlord's
casualty policy of insurance, (xii) costs of repairs resulting from any faulty
workmanship or defect in the design or construction of Landlord's Work, (xiii)
costs of traffic studies or environmental reports, or other costs associated
with converting the Building to office use, (xiv) costs, taxes and fees assessed
by or payable to public authorities in connection with the construction,
renovation, and/or, expansion of the Project, including, without limitation,
costs, taxes and fees for transit, housing, schools, child care and art work;
(xv) costs associated with providing parking, (xvi) costs arising from the
presence of Hazardous Materials existing on the Delivery Date, including,
without limitation, the presence of Hazardous Materials in the soil or
groundwater, (xvii) costs for sculpture, paintings or other objects of art;
(xviii) penalties, fines, late payment charges or interest incurred as a result
of Landlord's failure to make any payment when due, and (xix) costs associated
with the operation of the business of the limited liability company or other
entity which constitutes Landlord, as distinguished from the costs of operation
of the Building, including accounting and legal costs. If any Operating Expense,
though paid in one year, relates to more than one calendar year, at the option
of Landlord, such expense may be proportionately allocated among such related
calendar years.

         PREMISES: The space located in the Building on floors 1, 2 and 3 and
depicted on Exhibit A attached hereto.

         PROJECT or PROPERTY: The Project consists of the office building
located at the street address specified in Section 1.1.1(1) in San Francisco,
California, landscaping and improvements, together with the Land, any associated
interests in real property, and the personal property, fixtures, machinery,
equipment, systems and apparatus located thereon.

         REAL PROPERTY: The Property excluding any personal property.

         RENT: Collectively, Monthly Base Rent, Operating Expenses, Taxes and
Direct Expenses, and all other charges, payments, late fees or other amounts
required to be paid by Tenant under this Lease.

         ADDITIONAL RENT: Any amounts owed by Tenant for payment of Operating
Expenses or Taxes. The Additional Rent shall be determined and paid as provided
in Article Four.

         ADDITIONAL RENT DEPOSIT: An amount equal to Landlord's reasonable
estimate of the Additional Rent owed by Tenant for any Lease Year. As soon as
the budget for the first year of the Term is determined, Landlord shall submit
the same to Tenant for Tenant's review, and Landlord shall make available to
Tenant, within ten (10) days after request, the bids, contracts,



                                       6
<PAGE>   10

and other backup information used to prepare such budget. On or before the
beginning of each Lease Year or with Landlord's Statement (defined in Article
Four), Landlord may reasonably estimate and notify Tenant in writing of its
estimate of the (i) Taxes for such year and (ii) Operating Expenses for such
year. Prior to the first determination by Landlord of the actual amount of Taxes
and Operating Expenses, Landlord may reasonably estimate such amounts in the
foregoing calculation. The last estimate by Landlord shall remain in effect as
the applicable Additional Rent Deposit unless and until Landlord notifies Tenant
in writing of a change, which notice may be given by Landlord from time to time.
Within ten (10) days after request by Tenant, Landlord shall provide a written
explanation of the cause for any revision in Landlord's estimate of the
Additional Rent.

         RENTABLE AREA OF THE PREMISES: The amount of square footage set forth
in Section 1.1(10).

         RENTABLE AREA OF THE BUILDING: The amount of square footage set forth
in Section 1.1 (11) which represents the sum of the rentable area of all space
intended for office occupancy in the Project, as determined by Landlord from
time to time. Landlord shall notify Tenant of any adjustments in such rentable
area and any corresponding change in Tenant's Share.

         SECURITY DEPOSIT: The funds specified in Section 1.1(12), if any,
deposited by Tenant with Landlord as security for Tenant's performance of its
obligations under this Lease.

         STANDARD OPERATING HOURS: Monday through Friday from 8:00 A.M. to 6:00
P.M. and Saturdays from 9:00 A.M. to 1:00 P.M., excluding National Holidays.

         SUBSTANTIALLY COMPLETE: The completion of the Landlord Work or Tenant
Work, as the case may be, except for minor insubstantial details of
construction, decoration or mechanical adjustments which remain to be done.

         TAXES: All federal, state and local governmental taxes, assessments and
charges of every kind or nature, whether general, special, ordinary or
extraordinary, which Landlord shall pay or become obligated to pay because of or
in connection with the ownership, leasing, management, control or operation of
the Property or any of its components (including any personal property used in
connection therewith), which may also include any rental or similar taxes levied
in lieu of or in addition to general real and/or personal property taxes. For
purposes hereof, Taxes for any year shall be Taxes which are assessed for any
period of such year, whether or not such Taxes are billed and payable in a
subsequent calendar year. There shall be included in Taxes for any year the
amount of all fees, costs and expenses (including reasonable attorneys' fees)
paid by Landlord during such year in seeking or obtaining any refund or
reduction of Taxes. Taxes for any year shall be reduced by the net amount of any
tax refund received by Landlord attributable to such year. If a special
assessment payable in installments is levied against any part of the Property,
Taxes for any year shall include only the installment of such assessment and any
interest payable or paid during such year. Taxes shall not include any transfer
taxes, federal or state inheritance, general income, gift or estate taxes,
except that if a change occurs in the method of taxation resulting in whole or
in part in the substitution of any



                                       7
<PAGE>   11

such taxes, or any other assessment, for any Taxes as above defined, such
substituted taxes or assessments shall be included in the Taxes.

         TENANT ADDITIONS: Collectively, Tenant Work and Tenant Alterations.

         TENANT ALTERATIONS: Any alterations, improvements, additions,
installations or construction in or to the Premises or any Building systems
serving the Premises (excluding Landlord Work or Tenant Work); and any
supplementary air-conditioning systems installed by Landlord or by Tenant at
Landlord's request pursuant to Section 6.1(b).

         TENANT WORK: All work furnished to the Premises by Tenant under the
Work Letter.

         TENANT'S SHARE: The percentage that represents the ratio of the
Rentable Area of the Premises to the Rentable Area of the Office Portion of the
Project, as determined by Landlord from time to time.

         TERM: The term of this Lease commencing on the Commencement Date and
expiring on the Expiration Date.

         TERMINATION DATE: The Expiration Date or such earlier date as this
Lease terminates or Tenant's right to possession of the Premises terminates.

         WORK LETTER: The Agreement regarding the Landlord Work and Tenant Work
set forth on Exhibit B attached hereto.


                                   ARTICLE 2

                 PREMISES, TERM AND FAILURE TO GIVE POSSESSION

         2.1 LEASE OF PREMISES

         Landlord hereby leases to Tenant and Tenant hereby leases from Landlord
the Premises for the Term and upon the terms, covenants and conditions provided
in this Lease.

         2.2 TERM

             (a) The Commencement Date shall be the earlier of (i) Tenant's
Substantial Completion of Tenant's Work, or (ii) the date that is ninety (90)
days following the Delivery Date as the same may be extended due to Landlord
Delay.

             (b) Within thirty (30) days following the occurrence of the
Commencement Date, Landlord and Tenant shall enter into an agreement in the form
attached hereto as Rider I confirming the Commencement Date and the Expiration
Date. If Tenant fails to enter into such agreement, then the Commencement Date
and the Expiration Date shall be the dates designated by Landlord in such
agreement.

             (c) Landlord shall use diligent efforts to obtain financing
adequate to pay for the cost of Landlord's Work and the Tenant Improvement
Allowance on or before March 1, 2000. If Landlord fails to obtain such financing
or reasonable evidence of Landlord's ability to



                                       8
<PAGE>   12

pay for Landlord's Work and the Tenant Improvement Allowance on or before March
1, 2000, Tenant shall thereafter have the right to terminate this Lease upon
written notice to Landlord.

         2.3 FAILURE TO GIVE POSSESSION

         If despite its diligent efforts the Landlord shall be unable to give
possession of the Premises on the Projected Delivery Date by reason of the
following: (i) the portion of Landlord Work necessary to enable Tenant to
commence full-time performance of Tenant's Work is not Substantially Complete,
(ii) the holding over or retention of possession of any tenant, tenants or
occupants, or (iii) for any other reason, then Landlord shall not be subject to
any liability for the failure to give possession on said date. Under such
circumstances the rent reserved and covenanted to be paid herein shall not
commence until the Commencement Date as specified in Section 2.2(a). No such
failure to give possession on the Projected Delivery Date shall affect the
validity of this Lease or the obligations of the Tenant hereunder; provided,
however, this Lease shall be amended so that the Term shall be extended by the
period of time possession is delayed. In the event of any dispute as to whether
the Landlord Work is Substantially Complete, the decision of Landlord's
architect shall be final and binding on the parties. In the event that Landlord
fails to deliver possession of the Premises to Tenant by December 31, 2000,
Tenant shall have the right, which must be exercised no later than January 15,
2001, to terminate this Lease and upon receipt of such notice, this Lease shall
be terminated and of no further force and effect.

         2.4 CONDITION OF PREMISES

         Tenant shall notify Landlord in writing within thirty (30) days after
the later of Substantial Completion of the Landlord Work or when Tenant takes
possession of the Premises of any defects in the Premises claimed by Tenant or
in the materials or workmanship furnished by Landlord in completing the Landlord
Work. Except for defects stated in such notice, Tenant shall be conclusively
deemed to have accepted the Premises "AS IS" in the condition existing on the
date Tenant first takes possession, and to have waived all claims relating to
the condition of the Premises except for latent defects. Landlord shall proceed
diligently to correct the defects stated in such notice unless Landlord disputes
the existence of any such defects. In the event of any dispute as to the
existence of any such defects, the decision of Landlord's architect shall be
final and binding on the parties. No agreement of Landlord to alter, remodel,
decorate, clean or improve the Premises or the Real Property and no
representation regarding the condition of the Premises or the Real Property has
been made by or on behalf of Landlord to Tenant, except as may be specifically
stated in this Lease or in the Work Letter.

         2.5 OPTION TO EXTEND

             (a) Landlord hereby grants Tenant options to extend the term of the
Lease for two (2) additional periods of five (5) years each, the first of which
shall commence immediately after the expiration of the initial term and if the
first option term is properly exercised, the second of which shall commence
immediately after the expiration of the first option term, upon the same
material terms and conditions contained herein, except that (i) the Monthly Base
Rent for the Premises shall be equal to the fair market rent for the Premises
determined in the manner set forth in subparagraph (b) below, (ii) Tenant shall
accept the Premises in an "as is" condition



                                       9
<PAGE>   13

without any obligation of Landlord to repaint, remodel, repair, improve or alter
the Premises, and (iii) there shall be no further options to extend the term of
the Lease.

             (b) Tenant's election to exercise the option granted herein must be
given to Landlord in writing no less than 18 months prior to expiration of the
initial term and if Tenant properly exercises the first option, Tenant's
election to exercise the second option granted herein must be given to Landlord
in writing no less than 18 months prior to the expiration of the first option
term. If Tenant properly exercises the option granted herein, references in the
Lease to the term shall be deemed to mean the option term unless the context
clearly provides otherwise. Notwithstanding anything to the contrary contained,
herein, all option rights of Tenant pursuant to this Section 2.5 shall
automatically terminate without notice and shall be of no further force and
effect, whether or not Tenant has timely exercised the option granted herein, if
(i) a Default exists at the time of exercise of the option or at the time of
commencement of the option term, or (ii) Tenant has subleased 50% or more of the
Premises or has assigned the Lease other than to an Affiliate.

             (c) If Tenant properly exercises its option to extend the term of
the Lease, the Monthly Base Rent during such option term shall be determined in
the following manner. The Monthly Base Rent shall be increased to an amount
equal to the fair market rent for the Premises as of the commencement of the
option term for a term equal to the option term, as specified by Landlord by
notice to Tenant not less than ninety (90) days prior to commencement of the
option term, subject to Tenant's right of arbitration as set forth below. If
Tenant believes that the fair market rent specified by Landlord exceeds the
actual fair market rent for the Premises as of commencement of the option term,
then Tenant shall so notify Landlord within ten (10) business days following
receipt of Landlord's notice. If Tenant fails to so notify Landlord within said
ten (10) business days, Landlord's determination of the fair market rent for the
Premises shall be final and binding upon the parties.

             (d) If the parties are unable to agree upon the fair market rent
for the Premises within ten (10) days after Landlord's receipt of notice of
Tenant's objection, the amount of Monthly Base Rent as of commencement of the
option term shall be determined as follows:

                 (i) Within 20 days after receipt of Landlord's notice
         specifying fair market rent, Tenant, at its sole expense, shall obtain
         and deliver in writing to Landlord a determination of the fair market
         rent for the Premises for a term equal to the option term from a broker
         ("Tenant's Broker") licensed in the State of California and engaged in
         the office brokerage business in the south of Market Street area of San
         Francisco for at least the immediately preceding five (5) years
         ("Broker Qualifications"). If Landlord accepts such determination, the
         Monthly Base Rent for the option term shall be increased to an amount
         equal to of the amount determined by Tenant's broker.

                 (ii) If Landlord does not accept such determination, within 15
         days after receipt of the determination of Tenant's Broker, Landlord
         shall, at its sole expense, designate a broker ("Landlord's Broker")
         with the Broker Qualifications who shall deliver in writing to Tenant
         its determination of the fair market rent for the Premises for a term
         equal to the option term within twenty (20) days after appointment.



                                       10
<PAGE>   14

                 (iii) Landlord's Broker and Tenant's Broker shall name a third
         broker with the Broker Qualifications ("Third Broker"). The Third
         Broker shall choose one of the two estimates of fair market rent
         submitted by Landlord's Broker and Tenant's Broker, which must be the
         one that is closer to the fair market rent as determined by the third
         broker. The Third Broker's determination of fair market rent shall be
         binding upon Landlord and Tenant. If the Third Broker believes that
         expert advice would materially assist him/her, he/she may retain one or
         more qualified persons, including but not limited to legal counsel,
         brokers, architects or engineers, to provide such expert advice.

                 (iv) Landlord shall pay the costs and fees of Landlord's Broker
         in connection with any determination hereunder, and Tenant shall pay
         the costs and fees of Tenant's Broker in connection with such
         determination. The costs and fees of the Third Broker shall be paid
         one-half by Landlord and one-half by Tenant.

             (e) If the amount of the fair market rent is not known as of the
commencement of the option term, then Tenant shall continue to pay the Monthly
Base Rent in effect at the expiration of the initial Term until the amount of
the fair market basic rent is determined. When such determination is made,
Tenant shall pay any deficiency to Landlord upon demand.

             (f) Notwithstanding any provision of this Section 1, in no event
shall the Monthly Base Rent payable during either option term be less than the
Monthly Base Rent in effect immediately prior to the expiration of the initial
term or the first option term as the case may be.


                                   ARTICLE 3

                                      RENT

         Tenant agrees to pay to Landlord at the office specified in Section
1.1(2), or to such other persons, or at such other places designated by
Landlord, without any prior demand therefor in immediately available funds and
without any deduction or offset whatsoever, Rent, including Monthly Base Rent
and Additional Rent in accordance with Article Four, during the Term. Monthly
Base Rent shall be paid monthly in advance on the first day of each month of the
Term, except that the first installment of Monthly Base Rent shall be paid by
Tenant to Landlord concurrently with execution of this Lease.* Monthly Base Rent
shall be prorated for partial months within the Term. Unpaid Rent shall bear
interest at the Default Rate from the date due until paid. Tenant's covenant to
pay Rent shall be independent of every other covenant in this Lease.


                                   ARTICLE 4

                                ADDITIONAL RENT

         4.1 ADDITIONAL RENT

         Tenant shall pay to Landlord Additional Rent with respect to each Lease
Year as follows:


-------------
* If this Lease terminates prior to the Commencement Date for any reason,
Landlord shall return the first installment of Monthly Base Rent to Tenant
within ten (10) days after such termination.



                                       11
<PAGE>   15

                 (i) The Additional Rent Deposit representing Tenant's Share of
         Operating Expenses for the applicable Lease Year monthly during the
         Term with the payment of Monthly Base Rent; and

                 (ii) The Additional Rent Deposit representing Tenant's Share of
         Taxes for the applicable Lease Year monthly during the Term with the
         payment of Monthly Base Rent.

         4.2 STATEMENT OF LANDLORD

         As soon as feasible after the expiration of each Lease Year, Landlord
will furnish Tenant a statement ("Landlord's Statement") showing the following:

                 (i) Operating Expenses and Taxes for the applicable Lease Year;

                 (ii) The amount of Additional Rent due Landlord for the last
         Lease Year, less credit for Additional Rent Deposits paid, if any; and

                 (iii) Any change in the Rent Adjustment Deposit due monthly in
         the current Lease Year, including the amount or revised amount due for
         months preceding any such change pursuant to Landlord's Statement.

Tenant shall pay to Landlord within ten (10) days after receipt of such
statement any amounts for Additional Rent then due in accordance with Landlord's
Statement. Any amounts due from Landlord to Tenant pursuant to this Section
shall be credited to the Additional Rent Deposit next coming due, or refunded to
Tenant if the Term has already expired provided Tenant is not in default
hereunder. No interest or penalties shall accrue on any amounts that Landlord is
obligated to credit or refund to Tenant by reason of this Section 4.2.
Landlord's failure to deliver Landlord's Statement or to compute the amount of
the Rent Adjustments shall not constitute a waiver by Landlord of its right to
deliver such items nor constitute a waiver or release of Tenant's obligations to
pay such amounts. The Additional Rent Deposit shall be credited against
Additional Rent due for the applicable Lease Year. During the last complete
calendar year or during any partial calendar year in which the Lease terminates,
Landlord may include in the Additional Rent Deposit its estimate of Additional
Rent which may not be finally determined until after the termination of this
Lease. Tenant's obligation to pay Additional Rent and Landlord's obligation to
refund any overpayment of Additional Rent survives the expiration or termination
of the Lease.

         4.3 BOOKS AND RECORDS

         Landlord shall maintain books and records showing Operating Expenses
and Taxes in accordance with sound accounting and management practices,
consistently applied. The Tenant or its representative (which representative
shall be a certified public accountant licensed to do business in the state in
which the Property is located and whose primary business is certified public
accounting) shall have the right, for a period of thirty (30) days following the
date upon which Landlord's Statement is delivered to Tenant, to examine the
Landlord's books and records with respect to the items in the foregoing
statement of Operating Expenses and Taxes during normal business hours, upon
written notice, delivered at least three (3) business days in advance.



                                       12
<PAGE>   16

If Tenant does not object in writing to Landlord's Statement within sixty (60)
days of Tenant's receipt thereof, specifying the nature of the item in dispute
and the reasons therefor, then Landlord's Statement shall be considered final
and accepted by Tenant. Any amount due to the Landlord as shown on Landlord's
Statement, whether or not disputed by Tenant as provided herein shall be paid by
Tenant when due as provided above, without prejudice to any such written
exception.

         4.4 NET LEASE

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

         4.5 TENANT OR LEASE SPECIFIC TAXES

         In addition to Monthly Base Rent, Additional Rent and other charges to
be paid by Tenant, Tenant shall pay to Landlord, upon demand, any and all taxes
payable by Landlord (other than federal or state inheritance, general income,
gift or estate taxes) whether or not now customary or within the contemplation
of the parties hereto: (a) upon, allocable to, or measured by the Rent payable
hereunder, including any gross receipts tax or excise tax levied by any
governmental or taxing body with respect to the receipt of such rent; or (b)
upon or with respect to the possession, leasing, operation, management,
maintenance, alteration, repair, use or occupancy by Tenant of the Premises or
any portion thereof; (c) upon the measured value of Tenant's personal property
located in the Premises or in any storeroom or any other place in the Premises
or the Property, or the areas used in connection with the operation of the
Property, it being the intention of Landlord and Tenant that, to the extent
possible, such personal property taxes shall be billed to and paid directly by
Tenant; (d) resulting from Tenant Work or Tenant Alterations to the Premises,
whether title thereto is in Landlord or Tenant; or (e) upon this transaction.

         4.6 PROTEST OF TAXES

         In the event Tenant desires to contest with the applicable authorities
the amount of Taxes assessed against the Building and Landlord declines to
initiate such contest, Tenant, at its sole cost and expense, shall have the
right to contest such Taxes, and Landlord shall cooperate with Tenant in such
contest.


                                   ARTICLE 5

                                SECURITY DEPOSIT

         Tenant concurrently with the execution of this Lease shall pay to
Landlord in immediately available funds the Security Deposit. The Security
Deposit may be applied by



                                       13
<PAGE>   17

Landlord to cure, in whole or part, any Default of Tenant under this Lease, and
upon notice by Landlord of such application, Tenant shall replenish the Security
Deposit in full by paying to Landlord within ten (10) days of demand the amount
so applied. Landlord's application of the Security Deposit shall not constitute
a waiver of Tenant's default to the extent that the Security Deposit does not
fully compensate Landlord for all losses, damages, costs and expenses incurred
by Landlord in connection with such default and shall not prejudice any other
rights or remedies available to Landlord under this Lease or by Law. Landlord
shall not pay any interest on the Security Deposit. Landlord shall not be
required to keep the Security Deposit separate from its general accounts. The
Security Deposit shall not be deemed an advance payment of Rent or a measure of
damages for any default by Tenant under this Lease, nor shall it be a bar or
defense of any action that Landlord may at any time commence against Tenant. In
the absence of evidence satisfactory to Landlord of an assignment of the right
to receive the Security Deposit or the remaining balance thereof, Landlord may
return the Security Deposit to the original Tenant, regardless of one or more
assignments of this Lease. Upon the transfer of Landlord's interest under this
Lease, Landlord's obligation to Tenant with respect to the Security Deposit
shall terminate upon transfer to the transferee of the Security Deposit, or any
balance thereof. If Tenant shall fully and faithfully comply with all the terms,
provisions, covenants, and conditions of this Lease, the Security Deposit, or
any balance thereof, shall be returned to Tenant within thirty (30) days after
Landlord recovers possession of the Premises. Tenant hereby waives any and all
rights of Tenant under the provisions of Section 1950.7 of the California Civil
Code or other Law regarding security deposits.


                                   ARTICLE 6

                                    SERVICES

         6.1 LANDLORD'S GENERAL SERVICES

             (a) So long as the Lease is in full force and effect and Tenant has
paid all Rent then due, Landlord shall furnish the following services, the
quality of which shall be consistent with comparable buildings:

                 (i) heat, ventilation and air-conditioning ("HVAC") during
         Standard Operating Hours as necessary in Landlord's reasonable judgment
         for the comfortable occupancy of the Building under normal business
         office operations, subject to compliance with all applicable voluntary
         and mandatory regulations and Laws;

                 (ii) tempered and cold water for use in lavatories in common
         with other tenants from the regular supply of the Building;

                 (iii) customary cleaning and janitorial services five (5) days
         per week, excluding National Holidays;

                 (iv) washing of the outside windows in the Premises weather
         permitting at intervals determined by Landlord; and



                                       14
<PAGE>   18

                 (v) automatic passenger and swing/freight elevator service in
         common with other tenants of the Building. Freight elevator service
         will be subject to reasonable scheduling by Landlord.

             (b) Landlord shall not enter into any service contracts to provide
the foregoing services, the cost of which are above the market cost for
comparable services in comparable buildings.

             (c) If Tenant uses heat generating machines or equipment in the
Premises to an extent which adversely affects the temperature otherwise
maintained by the air-cooling system or whenever the occupancy or electrical
load adversely affects the temperature otherwise maintained by the air-cooling
system, Landlord reserves the right to install or to require Tenant to install
supplementary air-conditioning units in the Premises. Tenant shall bear all
costs and expenses related to the installation, maintenance and operation of
such units.

         6.2 ELECTRICAL SERVICES

         The Premises shall be separately metered for the provision of
electricity and Tenant shall pay such charges directly to the utility providing
such electricity, as Direct Expenses. Tenant's use of electric current shall at
no time exceed the capacity of the wiring, feeders and risers providing electric
current to the Premises or the Building. The consent of Landlord to the
installation of electric equipment shall not relieve Tenant from the obligation
to limit usage of electricity to no more than such capacity.

         6.3 TELEPHONE SERVICES

         All telegraph, telephone, and communication connections which Tenant
may desire shall be subject to Landlord's prior written approval, in Landlord's
reasonable discretion, and the location of all wires and the work in connection
therewith shall be performed by contractors approved by Landlord and shall be
subject to the direction of Landlord, except that such approval is not required
as to Tenant's telephone equipment (including cabling) within the Premises and
from the Premises in a route designated by Landlord to any telephone cabinet or
panel provided (as existing or as installed as part of Landlord's Work or
Tenant's Work) for Tenant's connection to the telephone cable serving the
Building so long as Tenant's equipment does not require connections different
than or additional to those to the telephone cabinet or panel provided. Tenant
shall be entitled to its equitable share of space within any such shared
telephone cabinet or panel. If Tenant fails to maintain all telephone cables and
communication wiring in the Premises and such failure affects or interferes with
the operation or maintenance of any other telephone cables or communication
wiring serving the Building, Landlord or any vendor hired by Landlord may enter
into and upon the Premises forthwith and perform such repairs, restorations or
alterations as Landlord deems necessary in order to eliminate any such
interference (and Landlord may recover from Tenant all of Landlord's costs in
connection therewith). If required by Landlord, no later than the Termination
Date Tenant shall remove all telephone cables and communication wiring installed
by Tenant for and during Tenant's occupancy. Tenant agrees that neither Landlord
nor any of its agents or employees shall be liable to Tenant, or any of Tenant's
employees, agents, customers or invitees or anyone claiming through, by or under
Tenant, for any damages, injuries, losses, expenses, claims or causes of



                                       15
<PAGE>   19

action because of any interruption, diminution, delay or discontinuance at any
time for any reason in the furnishing of any telephone or other communication
service to the Premises and the Building.

         6.4 DELAYS IN FURNISHING SERVICES

         Tenant agrees that Landlord shall not be in breach of this Lease nor be
liable to Tenant for damages or otherwise, for any failure to furnish, or a
delay in furnishing, or a change in the quantity or character of any service
when such failure, delay or change is occasioned, in whole or in part, by
repairs, improvements or mechanical breakdowns by the act or default of Tenant
or other parties or by an event of Force Majeure. No such failure, delay or
change shall be deemed to be an eviction or disturbance of Tenant's use and
possession of the Premises, or relieve Tenant from paying Rent or from
performing any other obligations of Tenant under this Lease, without any
deduction or offset. Failure to any extent to make available, or any slowdown,
stoppage, or interruption of, the specified utility services resulting from any
cause, including changes in service provider or Landlord's compliance with any
voluntary or similar governmental or business guidelines now or hereafter
published or any requirements now or hereafter established by any governmental
agency, board, or bureau having jurisdiction over the operation of the Property
shall not render Landlord liable in any respect for damages to either persons,
property, or business, nor be construed as an eviction of Tenant or work an
abatement of Rent, nor relieve Tenant of Tenant's obligations for fulfillment of
any covenant or agreement hereof. Should any equipment or machinery furnished by
Landlord break down or for any cause cease to function properly, Landlord shall
use reasonable diligence to repair same promptly, but Tenant shall have no claim
for abatement of Rent or damages on account of any interruption of service
occasioned thereby or resulting therefrom.

         6.5 CHOICE OF SERVICE PROVIDER

         Tenant acknowledges that Landlord may, at Landlord's sole option (after
consultation with Tenant), to the extent permitted by applicable law, elect to
change, from time to time, the company or companies which provide services
(including electrical service, gas service and water services) to the Building,
the Premises and/or its occupants. Notwithstanding anything to the contrary set
forth in this Lease, Tenant acknowledges that Landlord has not and does not make
any representations or warranties concerning the identity or identities of the
company or companies which provide services to the Building and the Premises or
its occupants and Tenant acknowledges that the choice of service providers and
matters concerning the engagement and termination thereof shall be solely that
of Landlord. The foregoing provision is not intended to modify, amend, change or
otherwise derogate any provision of this Lease concerning the nature or type of
service to be provided or any specific information concerning the amount thereof
to be provided. Tenant agrees to cooperate with Landlord and each of its service
providers in connection with any change in service or provider.



                                       16
<PAGE>   20

                                   ARTICLE 7

                   POSSESSION, USE AND CONDITION OF PREMISES

         7.1 POSSESSION AND USE OF PREMISES

             (a) Tenant shall occupy and use the Premises only for the Use
specified in Section 1.1(13) to conduct Tenant's business. Tenant hereby
acknowledges that Landlord is pursuing certification of the Building as a
National Historic Landmark and will fully cooperate with Landlord in that
process. Tenant further acknowledges that the Tenant Work, Tenant Alteration or
Decoration will not violate the Historic Guidelines attached as Schedule 2 to
the Work Letter. Landlord represents and warrants that it has obtained the
necessary approvals from the San Francisco Planning Department for using the
Premises as office space.

             (b) Tenant shall not occupy or use the Premises (or permit the use
or occupancy of the Premises) for any purpose or in any manner which: (1) is
unlawful or in violation of any Law or Environmental Law; (2) may be dangerous
to persons or property or which may increase the cost of, or invalidate, any
policy of insurance carried on the Building or covering its operations; (3) is
contrary to or prohibited by the terms and conditions of this Lease or the Rules
and Regulations; or (4) would create or continue a nuisance.

             (c) Tenant shall comply with all Environmental Laws pertaining to
Tenant's occupancy and use of the Premises and concerning the proper storage,
handling and disposal of any Hazardous Material introduced to the Premises, the
Building or the Property by Tenant or other occupants of the Premises, or their
employees, servants, agents, contractors, customers or invitees. Landlord shall
comply with all Environmental Laws applicable to the Property other than those
to be complied with by Tenant pursuant to the preceding sentence. Tenant shall
not generate, store, handle or dispose of any Hazardous Material in, on, or
about the Property without the prior written consent of Landlord, which may be
withheld in Landlord's sole discretion, except that such consent shall not be
required to the extent of Hazardous Material packaged and contained in office
products for consumer use in general business offices in quantities for ordinary
day to day use provided such use does not give rise to, or pose a risk of,
exposure to or release of Hazardous Material. In the event that Tenant is
notified of any investigation or violation of any Environmental Law arising from
Tenant's activities at the Premises, Tenant shall immediately deliver to
Landlord a copy of such notice. In such event or in the event Landlord
reasonably believes that a violation of Environmental Law exists, Landlord may
conduct such tests and studies relating to compliance by Tenant with
Environmental Laws or the alleged presence of Hazardous Materials upon the
Premises as Landlord deems desirable, all of which shall be completed at
Tenant's expense. Landlord's inspection and testing rights are for Landlord's
own protection only, and Landlord has not, and shall not be deemed to have
assumed any responsibility to Tenant or any other party for compliance with
Environmental Laws, as a result of the exercise, or non-exercise of such rights.
Tenant hereby indemnifies, and agrees to defend, protect and hold harmless, the
Indemnitees from any and all loss, claim, demand, action, expense, liability and
cost (including attorneys' fees and expenses) arising out of or in any way
related to the presence of any Hazardous Material introduced to the Premises
during the Lease Term by any party other than Landlord, or its employees or
agents. In case of any action or proceeding brought against the Indemnitees by
reason of any such claim, upon notice from Landlord, Tenant covenants to defend
such action or proceeding by counsel



                                       17
<PAGE>   21

reasonably approved by Landlord. Landlord reserves the right to settle,
compromise or dispose of any and all actions, claims and demands related to the
foregoing indemnity on commercially reasonable terms. If any Hazardous Material
is released, discharged or disposed of on or about the Property and such
release, discharge or disposal is not caused by Tenant or other occupants of the
Premises, or their employees, servants, agents, contractors customers or
invitees, such release, discharge or disposal shall be deemed casualty damage
under Article Fourteen to the extent that the Premises are affected thereby; in
such case, Landlord and Tenant shall have the obligations and rights respecting
such casualty damage provided under such Article.

             (d) Landlord and Tenant acknowledge that the Americans With
Disabilities Act of 1990 (42 U.S.C. Section 12101 et seq.) and regulations and
guidelines promulgated thereunder, as all of the same may be amended and
supplemented from time to time (collectively referred to herein as the "ADA")
establish requirements for business operations, accessibility and barrier
removal, and that such requirements may or may not apply to the Premises, the
Building and the Project depending on, among other things: (1) whether Tenant's
business is deemed a "public accommodation" or "commercial facility", (2)
whether such requirements are "readily achievable", and (3) whether a given
alteration affects a "primary function area" or triggers "path of travel"
requirements. The parties hereby agree that: (a) Landlord shall be responsible
for ADA Title III compliance in the Common Areas, except as provided below, (b)
Tenant shall be responsible for ADA Title III compliance in the Premises,
including any leasehold improvements or other work to be performed in the
Premises under or in connection with this Lease, (c) Landlord may perform, or
require that Tenant perform, and Tenant shall be responsible for the cost of,
ADA Title III "path of travel" requirements triggered by Tenant Additions in the
Premises, and (d) Landlord may perform, or require Tenant to perform, and Tenant
shall be responsible for the cost of, ADA Title III compliance in the Common
Areas necessitated by the Building being deemed to be a "public accommodation"
instead of a "commercial facility" as a result of Tenant's use of the Premises.
Tenant shall be solely responsible for requirements under Title I of the ADA
relating to Tenant's employees.

         7.2 LANDLORD ACCESS TO PREMISES, APPROVALS

             (a) Tenant shall permit Landlord to erect, use and maintain pipes,
ducts, wiring and conduits in and through the Premises, so long as Tenant's use,
layout or design of the Premises is not materially affected or altered. Subject
to notification as provided in Section 7.2(b) below, Landlord or Landlord's
agents shall have the right to enter upon the Premises in the event of an
emergency, or to inspect the Premises, to perform services, to conduct safety
and other testing in the Premises and to make such repairs, alterations,
improvements or additions to the Premises or the Building or other parts of the
Property as Landlord may deem necessary or desirable (including all alterations,
improvements and additions in connection with a change in service provider or
providers). Janitorial and cleaning services shall be performed after normal
business hours. Any entry or work by Landlord may be during normal business
hours and Landlord shall use reasonable efforts to ensure that any entry or work
shall not materially interfere with Tenant's occupancy of the Premises.

             (b) If Tenant shall not be personally present to permit an entry
into the Premises when for any reason an entry therein shall be necessary or
permissible, Landlord (or Landlord's agents), after giving Tenant reasonable
prior notice (unless Landlord believes an



                                       18
<PAGE>   22

emergency situation exists), may enter the Premises (accompanied by a
representative of Tenant if Tenant desires) without rendering Landlord or its
agents liable therefor, and without relieving Tenant of any obligations under
this Lease. Tenant shall have the right to restrict access to certain areas in
the Premises, which Landlord shall only have the right to enter in an emergency
or to perform its obligations under the Lease.

             (c) Subject to notification as provided in Section 7.2(b) above,
Landlord may enter the Premises for the purpose of conducting such inspections,
tests and studies as Landlord may deem desirable or necessary to confirm
Tenant's compliance with all Laws and Environmental Laws or for other purposes
necessary in Landlord's reasonable judgment to ensure the sound condition of the
Property and the systems serving the Property. Landlord's rights under this
Section 7.2(c) are for Landlord's own protection only, and Landlord has not, and
shall not be deemed to have assumed, any responsibility to Tenant or any other
party as a result of the exercise or non-exercise of such rights, for compliance
with Laws or Environmental Laws or for the accuracy or sufficiency of any item
or the quality or suitability of any item for its intended use.

             (d) Landlord may do any of the foregoing, or undertake any of the
inspection or work described in the preceding paragraphs without such action
constituting an actual or constructive eviction of Tenant, in whole or in part,
or giving rise to an abatement of Rent by reason of loss or interruption of
business of the Tenant, or otherwise.

             (e) The review, approval or consent of Landlord with respect to any
item required or permitted under this Lease is for Landlord's own protection
only, and Landlord has not, and shall not be deemed to have assumed, any
responsibility to Tenant or any other party, as a result of the exercise or
non-exercise of such rights, for compliance with Laws or Environmental Laws or
for the accuracy or sufficiency of any item or the quality or suitability of any
item for its intended use.

         7.3 QUIET ENJOYMENT

         Landlord covenants, in lieu of any implied covenant of quiet possession
or quiet enjoyment, that so long as Tenant is in compliance with the covenants
and conditions set forth in this Lease, Tenant shall have the right to quiet
enjoyment of the Premises without hindrance or interference from Landlord or
those claiming through Landlord, and subject to the covenants and conditions set
forth in the Lease and to the rights of any Mortgagee or ground lessor.


                                   ARTICLE 8

                                  MAINTENANCE

         8.1 LANDLORD'S MAINTENANCE

         Subject to the provisions of Articles Four and Fourteen, Landlord shall
maintain in good order, condition and repair and in accordance with all Laws and
Environmental Laws and make necessary repairs to the foundations, roofs,
exterior walls, doors, windows and the structural elements of the Building,
elevators, the electrical, plumbing, heating, ventilating, air-conditioning,
mechanical, communication, security and the fire and life safety systems of the



                                       19
<PAGE>   23

Building and those corridors, washrooms and lobbies which are Common Areas of
the Building, except that: (a) Landlord shall not be responsible for the
maintenance or repair of any floor or wall coverings in the Premises or any such
supplemental or special systems to the Building's standard systems and of any
corridors, washrooms and lobbies which are part of the Premises; and (b) the
cost of performing any of said maintenance or repairs whether to the Premises or
to the Building caused by the negligence of Tenant, its employees, agents,
servants, licensees, subtenants, contractors or invitees, shall be paid by
Tenant, subject to the waivers set forth in Section 16.4. Landlord shall not be
liable to Tenant for any expense, injury, loss or damage resulting from work
done in or upon, or in connection with the use of, any adjacent or nearby
building, land, street or alley.

         8.2 TENANT'S MAINTENANCE

         Subject to the provisions of Article Fourteen, Tenant, at its expense,
shall keep and maintain the Premises and all Tenant Additions in good order,
condition and repair and in accordance with all Laws and Environmental Laws.
Tenant shall not permit waste and shall promptly and adequately repair all
damages to the Premises and replace or repair all damaged or broken glass in the
interior of the Premises, fixtures or appurtenances. Any repairs or maintenance
shall be completed with materials of similar quality to the original materials.
Any such repairs or maintenance shall be performed only by contractors or
mechanics approved by Landlord, which approval shall not be unreasonably
withheld, and whose work will not cause or threaten to cause disharmony or
interference with Landlord or other tenants in the Building and their respective
agents and contractors performing work in or about the Building. If Tenant fails
to perform any of its obligations set forth in this Section 8.2, Landlord may,
in its sole discretion after ten (10) days written notice to Tenant (except
without notice in the case of emergencies), perform the same, and Tenant shall
pay to Landlord any costs or expenses incurred by Landlord upon demand.


                                   ARTICLE 9

                          ALTERATIONS AND IMPROVEMENTS

         9.1 TENANT ALTERATIONS

             (a) Except for completion of Tenant Work undertaken by Tenant
pursuant to the Work Letter, the following provisions shall apply to the
completion of any Tenant Alterations:

                 (i) Tenant shall not, except as provided herein, without the
         prior written consent of Landlord, which consent shall not be
         unreasonably withheld make or cause to be made any Tenant Alterations
         in or to the Premises. Notwithstanding the foregoing, Landlord shall
         have the right in its discretion to approve any Tenant Alterations that
         affect the structure of the Building or its systems. Prior to making
         any Tenant Alterations, Tenant shall give Landlord ten (10) days prior
         written notice (or such earlier notice as would be necessary pursuant
         to applicable Law) to permit Landlord sufficient time to post
         appropriate notices of nonresponsibility. Subject to all other
         requirements of this Article Nine, Tenant may undertake Decoration work
         without Landlord's prior written consent. Tenant shall furnish Landlord
         with the names and



                                       20
<PAGE>   24

         addresses of all contractors and subcontractors and copies of all
         contracts. All Tenant Alterations shall be completed at such time and
         in such manner as Landlord may from time to time designate, and only by
         contractors or mechanics approved by Landlord, which approval shall not
         be unreasonably withheld, provided, however, that Landlord may, in its
         sole discretion, specify the engineers and contractors to perform all
         work relating to the Building's systems (including the mechanical,
         heating, plumbing, security, ventilating, air-conditioning, electrical,
         communication and the fire and life safety systems in the Building).
         Tenant acknowledges that all contractors or mechanics must be union
         affiliated. The contractors, mechanics and engineers who may be used
         are further limited to those whose work will not cause or threaten to
         cause disharmony or interference with Landlord or other tenants in the
         Building and their respective agents and contractors performing work in
         or about the Building. Landlord may further condition its consent upon
         Landlord approving prior to the commencement of any work or delivery of
         materials to the Premises related to the Tenant Alterations such of the
         following as specified by Landlord: architectural plans and
         specifications, opinions from Landlord's engineers stating that the
         Tenant Alterations will not in any way adversely affect the Building's
         systems, necessary permits and licenses, certificates of insurance, and
         such other documents in such form reasonably requested by Landlord.
         Landlord may, in the exercise of reasonable judgment, request that
         Tenant provide Landlord with appropriate evidence of Tenant's ability
         to complete and pay for the completion of the Tenant Alterations such
         as a performance bond or letter of credit. Upon completion of the
         Tenant Alterations, Tenant shall deliver to Landlord an as-built mylar
         and digitized (if available) set of plans and specifications for the
         Tenant Alterations.

                 (ii) Tenant shall pay the cost of all Tenant Alterations and
         the cost of decorating the Premises and any work to the Property
         occasioned thereby. Upon completion of Tenant Alterations, Tenant shall
         furnish Landlord with contractors' affidavits and full and final
         waivers of lien and receipted bills covering all labor and materials
         expended and used in connection therewith and such other documentation
         reasonably requested by Landlord or Mortgagee. In addition, Tenant
         shall pay Landlord immediately following completion of the Tenant
         Alterations a supervisory fee of 5% of the total cost of the Tenant
         Alterations, except for Decoration work.

                 (iii) Tenant agrees to complete all Tenant Alterations (i) in
         accordance with all Laws, Environmental Laws, all requirements of
         applicable insurance companies and in accordance with Landlord's
         standard construction rules and regulations, and (ii) in a good and
         workmanlike manner with the use of good grades of materials. Tenant
         shall notify Landlord immediately if Tenant receives any notice of
         violation of any Law in connection with completion of any Tenant
         Alterations and shall immediately take such steps as are necessary to
         remedy such violation. In no event shall such supervision or right to
         supervise by Landlord nor shall any approvals given by Landlord under
         this Lease constitute any warranty by Landlord to Tenant of the
         adequacy of the design, workmanship or quality of such work or
         materials for Tenant's intended use or of compliance with the
         requirements of this Section or impose any liability upon Landlord in
         connection with the performance of such work.



                                       21
<PAGE>   25

             (b) All Tenant Additions whether installed by Landlord or Tenant,
shall without compensation or credit to Tenant, become part of the Premises and
the property of Landlord at the time of their installation and shall remain in
the Premises, unless pursuant to Article Twelve, Tenant may remove them or is
required to remove them at Landlord's request.

         9.2 LIENS

         Tenant shall not permit any lien or claim for lien of any mechanic,
laborer or supplier or any other lien to be filed against the Building, the
Land, the Premises, or any other part of the Property arising out of work
performed by, or at the direction of, or on behalf of Tenant. If any such lien
or claim for lien is filed, Tenant shall within ten (10) days of receiving
notice of such lien or claim (a) have such lien or claim for lien released of
record or (b) deliver to Landlord a bond in form, content, amount, and issued by
surety, satisfactory to Landlord, indemnifying, protecting, defending and
holding harmless the Indemnitees against all costs and liabilities resulting
from such lien or claim for lien and the foreclosure or attempted foreclosure
thereof. If Tenant fails to take any of these actions, Landlord, in addition to
its rights and remedies under Article Eleven, without investigating the validity
of such lien or claim for lien, may pay or discharge the same and Tenant shall,
as payment of additional Rent hereunder, reimburse Landlord upon demand for the
amount so paid by Landlord, including Landlord's expenses and attorneys' fees.


                                   ARTICLE 10

                           ASSIGNMENT AND SUBLETTING

         10.1 ASSIGNMENT AND SUBLETTING

              (a) Without the prior written consent of Landlord, which may be
granted or withheld in Landlord's reasonable discretion (and subject to
Landlord's right of Recapture under Section 10.2), Tenant may not sublease,
assign, mortgage, pledge, hypothecate or otherwise transfer or permit the
transfer of this Lease or the encumbering of Tenant's interest therein in whole
or in part, by operation of Law or otherwise or permit the use or occupancy of
the Premises, or any part thereof, by anyone other than Tenant. Tenant agrees
that the provisions governing sublease and assignment set forth in this Article
Ten shall be deemed to be reasonable. If Tenant desires to enter into any
sublease of the Premises or assignment of this Lease, Tenant shall deliver
written notice thereof to Landlord ("Tenant's Notice"), together with the
identity of the proposed subtenant or assignee and the proposed principal terms
thereof and financial and other information sufficient for Landlord to make an
informed judgment with respect to such proposed subtenant or assignee at least
thirty-five (35) days prior to the commencement date of the term of the proposed
sublease or assignment. If Tenant proposes to sublease less than all of the
Rentable Area of the Premises, the space proposed to be sublet and the space
retained by Tenant must each be a marketable unit as reasonably determined by
Landlord and otherwise in compliance with all Laws. Landlord shall notify Tenant
in writing of its approval or disapproval of the proposed sublease or assignment
or its decision to exercise its rights under Section 10.2 as soon as reasonably
possible and in any event within thirty (30) days after receipt of Tenant's
Notice (and all required information). Tenant shall submit for Landlord's
approval (which approval shall not be unreasonably withheld) any advertising
which Tenant or its agents intend to use with respect to the space proposed to
be sublet.



                                       22
<PAGE>   26

              (b) With respect to Landlord's consent to an assignment or
sublease, Landlord may take into consideration any factors that Landlord may
deem relevant, and the reasons for which Landlord's denial shall be deemed to be
reasonable shall include, without limitation, the following:

                  (i) the business reputation or creditworthiness of any
         proposed subtenant or assignee is not acceptable to Landlord; or

                  (ii) in Landlord's reasonable judgment the proposed assignee
         or sublessee would diminish the value or reputation of the Building or
         Landlord; or

                  (iii) any proposed assignee's or sublessee's use of the
         Premises would violate Section 7.1 of the Lease or would violate the
         provisions of any other leases of tenants in the Project; or

                  (iv) the proposed sublessee or assignee is an existing tenant
         of Landlord in the Building or a prospective tenant of Landlord in the
         Project as demonstrated by a written proposal dated within ninety (90)
         days prior to the date of Tenant's request, provided Landlord within
         five (5) days upon request of Tenant shall provide Tenant a list of all
         such existing or prospective tenants; or

                  (v) the proposed sublessee or assignee would materially
         increase the estimated pedestrian and vehicular traffic to and from the
         Premises and the Building;

                  (vi) the proposed assignee or subtenant is a governmental
         authority or agency, an organization or person enjoying sovereign or
         diplomatic immunity, a medical or dental practice or any user that will
         attract a volume, frequency or type of visitor or employee to the
         Building which is not, in Landlord's judgment, consistent with the
         standards of the Building;

                  (vii) in Landlord's reasonable judgment, the use of the
         Premises by the proposed assignee or subtenant would entail any
         alterations which would lessen the value of the leasehold improvements
         in the Premises or make the Premises more difficult to re-lease at the
         expiration of the Term;

                  (viii) Landlord (or any affiliate of Landlord) has experienced
         previous default by or is in litigation with the proposed assignee or
         subtenant;

                  (ix) Tenant is in default past any applicable notice and cure
         period of any obligation of Tenant under this Lease; or

                  (x) in the case of a subletting of less than the entire
         Premises, if the subletting would result in a division of the Premises
         into more than four (4) subparcels (in addition to the remaining
         balance of the Premises) or would require access to be provided through
         space leased or held for lease to another tenant or improvements to be
         made outside of the Premises.



                                       23
<PAGE>   27

         With respect to clause (iv) above, Landlord shall keep Tenant apprised
of any additions or deletions from the list. In addition, if Landlord falls to
successfully conclude negotiations with any existing or prospective tenants
within sixty (60) days after the name of such existing or prospective tenant
first appears on Landlord's list, Tenant shall thereafter have the right to
sublease the Premises or assign this Lease to any such persons.

              (c) Any sublease or assignment shall be expressly subject to the
terms and conditions of this Lease. Any subtenant or assignee shall execute such
documents as Landlord may reasonably require to evidence such subtenant or
assignee's assumption of the obligations and liabilities of Tenant under this
Lease. Tenant shall deliver to Landlord a copy of all agreements executed by
Tenant and the proposed subtenant and assignee with respect to the Premises.
Landlord's approval of a sublease, assignment, hypothecation, transfer or third
party use or occupancy shall not constitute a waiver of Tenant's obligation to
obtain Landlord's consent to further assignments or subleases, hypothecations,
transfers or third party use or occupancy.

              (d) If Tenant is a corporation, limited liability company,
partnership or similar entity, Landlord's consent shall not be required with
respect to an assignment or subletting of this Lease to an Affiliate of Tenant,
provided that (i) the assignee is a reputable entity of good character, (ii) a
duplicate original instrument of assignment or sublease agreement in form and
substance reasonably satisfactory to Landlord, duly executed by Tenant and such
assignee or subtenant, shall have been delivered to Landlord promptly following
the effective date of any such assignment or subletting, (iii) in the case of an
assignment, an instrument in form and substance satisfactory to Landlord, duly
executed by the assignee, in which such assignee assumes observance and
performance of, and agrees to be personally bound by, all of the terms,
covenants and conditions of this lease on Tenant's part to be performed and
observed shall have been delivered to Landlord promptly following the effective
date of such assignment, (iv) in the case of an assignment, such assignment is
for a legitimate business purpose and not principally for the purpose of
avoiding the restrictions on assignment otherwise applicable under this Article
8 and (v) in the case of an assignment, such assignee has a Net Worth (as
hereinafter defined), computed in accordance with generally accepted accounting
principles (excluding goodwill and intangible assets) at least equal to or
greater than the greater of (a) Tenant's Net Worth as of the date of this Lease
and (b) Tenant's Net Worth immediately preceding such assignment. "Net Worth" of
Tenant for purposes of this Article shall be the net worth of Tenant (excluding
any guarantors) established under generally accepted accounting principles
consistently applied. Transfers of stock in a corporation whose shares are sold
in an initial public offering or traded in the "over-the-counter" market or any
recognized national securities exchange shall not constitute an assignment for
purposes of this Lease, provided that the principal purpose of such transfer or
transfers is not to avoid the restrictions on assignment otherwise applicable
under this Article.

         10.2 RECAPTURE

         Landlord shall have the option to exclude from the Premises covered by
this Lease ("Recapture") the space proposed to be sublet or subject to the
assignment, effective as of the proposed commencement date of such sublease or
assignment. If Landlord elects to Recapture, Tenant shall surrender possession
of the space proposed to be subleased or subject to the



                                       24
<PAGE>   28

assignment to Landlord on the effective date of Recapture of such space from the
Premises, such date being the Termination Date for such space. Effective as of
the date of Recapture of any portion of the Premises pursuant to this section,
the Monthly Base Rent, Rentable Area of the Premises and Tenant's Share shall be
adjusted accordingly. Notwithstanding the foregoing, Landlord's right of
Recapture shall not apply to (i) Subleases for a term (together with any option
to extend) of four (4) years or less, or (ii) an assignment or sublease to an
Affiliate as defined under (ii) or (iii) in the definition of Affiliate in
Section 1.3.

         10.3 EXCESS RENT

         Tenant shall pay Landlord on the fifth day of each month during the
term of the sublease or assignment, fifty percent (50%) of the amount by which
the sum of all rent and other consideration (direct or indirect) received from
the subtenant or assignee for such month exceeds: (i) that portion of the
Monthly Base Rent and Additional Rent due under this Lease for said month which
is allocable to the space sublet or assigned; and (ii) the following costs and
expenses for the subletting or assignment of such space: (1) brokerage
commissions and attorneys' fees and expenses, (2) the actual costs paid in
making any improvements or substitutions in the Premises required by any
sublease or assignment, and (3) the actual costs of moving costs or other out of
pocket expenses paid to subtenant or assignee. All such costs and expenses shall
be amortized over the term of the sublease or assignment pursuant to sound
accounting principles.

         10.4 TENANT LIABILITY

         In the event of any sublease or assignment, whether or not with
Landlord's consent, Tenant shall not be released or discharged from any
liability, whether past, present or future, under this Lease, including any
liability arising from the exercise of any renewal or expansion option, to the
extent such exercise is expressly permitted by Landlord. Tenant's liability
shall remain primary, and in the event of default by any subtenant, assignee or
successor of Tenant in performance or observance of any of the covenants or
conditions of this Lease, Landlord may proceed directly against Tenant without
the necessity of exhausting remedies against said subtenant, assignee or
successor. After any assignment, Landlord may consent to subsequent assignments
or subletting of this Lease, or amendments or modifications of this Lease with
assignees of Tenant, without notifying Tenant, or any successor of Tenant, and
without obtaining its or their consent thereto, and such action shall not
relieve Tenant or any successor of Tenant of liability under this Lease. If
Landlord grants consent to such sublease or assignment, Tenant shall pay all
reasonable attorneys' fees and expenses incurred by Landlord with respect to
such assignment or sublease. In addition, if Tenant has any options to extend
the term of this Lease or to add other space to the Premises, such options shall
not be available to any subtenant or assignee, directly or indirectly without
Landlord's express written consent, which may be withheld in Landlord's sole
discretion.

         10.5 ASSUMPTION AND ATTORNMENT

         If Tenant shall assign this Lease, the assignee shall expressly assume
all of the obligations of Tenant in a written instrument satisfactory to
Landlord and furnished to Landlord prior to the effective date of the
assignment. If Tenant shall sublease the Premises as permitted



                                       25
<PAGE>   29

herein, Tenant shall, at Landlord's option, within fifteen (15) days following
any request by Landlord, obtain and furnish to Landlord the written agreement of
such subtenant on Landlord's standard form to the effect that the subtenant will
attorn to Landlord and will pay all subrent directly to Landlord upon a Default
by Tenant.


                                   ARTICLE 11

                              DEFAULT AND REMEDIES

         11.1 EVENTS OF DEFAULT

         The occurrence or existence of any one or more of the following shall
constitute a "Default" by Tenant under this Lease:

                  (i) Tenant fails to pay any installment or other payment of
         Rent including Additional Rent within five (5) days after written
         notice of such delinquency;

                  (ii) Tenant fails to observe or perform any of the other
         covenants, conditions or provisions of this Lease or the Work Letter
         and fails to cure such default within thirty (30) days after written
         notice thereof to Tenant (unless such cure reasonably requires
         additional time to cure and then only to the extent Tenant is
         diligently pursuing such cure), unless the default involves a hazardous
         condition, which shall be cured forthwith or unless the failure to
         perform is a Default for which this Lease specifies there is no cure or
         grace period;

                  (iii) the interest of Tenant in this Lease is levied upon
         under execution or other legal process;

                  (iv) a petition is filed by or against Tenant to declare
         Tenant bankrupt or seeking a plan of reorganization or arrangement
         under any Chapter of the Bankruptcy Act, or any amendment, replacement
         or substitution therefor, or to delay payment of, reduce or modify
         Tenant's debts, which in the case of an involuntary action is not
         discharged within thirty (30) days; or, Tenant is declared insolvent by
         Law or any assignment of Tenant's property is made for the benefit of
         creditors; or a receiver is appointed for Tenant or Tenant's property,
         which appointment is not discharged within thirty (30) days; or any
         action taken by or against Tenant to reorganize or modify Tenant's
         capital structure in a materially adverse way which in the case of an
         involuntary action is not discharged within thirty (30) days; or

                  (v) upon the dissolution of Tenant.

         11.2 LANDLORD'S REMEDIES

              (a) A Default shall constitute a breach of the Lease for which
Landlord shall have the rights and remedies set forth in this Section 11.2 and
all other rights and remedies set forth in this Lease or now or hereafter
allowed by Law, whether legal or equitable, and all rights and remedies of
Landlord shall be cumulative and none shall exclude any other right or remedy.



                                       26
<PAGE>   30

              (b) With respect to a Default, at any time Landlord may terminate
Tenant's right to possession by written notice to Tenant stating such election.
Any written notice required pursuant to Section 11.1 shall constitute notice of
unlawful detainer pursuant to California Code of Civil Procedure Section 1161
if, at Landlord's sole discretion, it states Landlord's election that Tenant's
right to possession is terminated after expiration of any period required by Law
or any longer period required by Section 11.1. Upon the expiration of the period
stated in Landlord's written notice of termination (and unless such notice
provides an option to cure within such period and Tenant cures the Default
within such period), Tenant's right to possession shall terminate and this Lease
shall terminate, and Tenant shall remain liable as hereinafter provided. Upon
such termination in writing of Tenant's right to possession, Landlord shall have
the right, subject to applicable Law, to reenter the Premises and dispossess
Tenant and the legal representatives of Tenant and all other occupants of the
Premises by unlawful detainer or other summary proceedings, or otherwise as
permitted by Law, regain possession of the Premises and remove their property
(including their trade fixtures, personal property and those Tenant Additions
which Tenant is required or permitted to remove under Article Twelve), but
Landlord shall not be obligated to effect such removal, and such property may,
at Landlord's option, be stored elsewhere, sold or otherwise dealt with as
permitted by Law, at the risk of, expense of and for the account of Tenant, and
the proceeds of any sale shall be applied pursuant to Law. Landlord shall in no
event be responsible for the value, preservation or safekeeping of any such
property. Tenant hereby waives all claims for damages that may be caused by
Landlord's removing or storing Tenant's personal property pursuant to this
Section or Section 12.1, and Tenant hereby indemnifies, and agrees to defend,
protect and hold harmless, the Indemnitees from any and all loss, claims,
demands, actions, expenses, liability and cost (including attorneys' fees and
expenses) arising out of or in any way related to such removal or storage. Upon
such written termination of Tenant's right to possession and this Lease,
Landlord shall have the right to recover damages for Tenant's Default as
provided herein or by Law, including the following damages provided by
California Civil Code Section 1951.2:

                  (i) the worth at the time of award of the unpaid Rent which
         had been earned at the time of termination;

                  (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 Rent loss that Tenant proves
         could reasonably have been avoided;

                  (iii) the worth at the time of award of the amount by which
         the unpaid Rent for the balance of the term of this Lease after the
         time of award exceeds the amount of such Rent loss that Tenant proves
         could be reasonably avoided; and

                  (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, including, without limitation,
         Landlord's unamortized costs of tenant improvements, leasing
         commissions and legal fees incurred in connection with entering into
         this Lease. The word "rent" as used in this Section 11.2 shall have the
         same meaning as the defined term Rent in this Lease. The "worth at the
         time of award" of the amount referred to in clauses (1) and (2) above
         is computed by allowing interest at the Default Rate. The



                                       27
<PAGE>   31

         worth at the time of award of the amount referred to in clause (3)
         above is computed by discounting such amount at the discount rate of
         the Federal Reserve Bank of San Francisco at the time of award plus one
         percent (1%). For the purpose of determining unpaid Rent under clause
         (3) above, the monthly Rent reserved in this Lease shall be deemed to
         be the sum of the Monthly Base Rent, monthly storage space rent, if
         any, parking charges, and the amounts last payable by Tenant as
         Additional Rent for the calendar year in which Landlord terminated this
         Lease as provided hereinabove.

              (c) Even if Tenant is in Default, this Lease shall continue in
effect for so long as Landlord does not terminate Tenant's right to possession
by written notice as provided in Section 11.2(b) above, and Landlord may enforce
all its rights and remedies under this Lease, including the right to recover
Rent as it becomes due under this Lease. In such event, Landlord shall have all
of the rights and remedies of a landlord under California Civil Code Section
1951.4 (lessor may continue Lease in effect after Tenant's Default and
abandonment and recover Rent as it becomes due, if Tenant has the right to
sublet or assign, subject only to reasonable limitations), or any successor
statute. During such time as Tenant is in Default, if Landlord has not
terminated this Lease by written notice and if Tenant requests Landlord's
consent to an assignment of this Lease or a sublease of the Premises, subject to
Landlord's option to recapture pursuant to Section 10.2, Landlord shall not
unreasonably withhold its consent to such assignment or sublease. Tenant
acknowledges and agrees that the provisions of Article Ten shall be deemed to
constitute reasonable limitations of Tenant's right to assign or sublet. Tenant
acknowledges and agrees that in the absence of written notice pursuant to
Section 11.2(b) above terminating Tenant's right to possession, no other act of
Landlord shall constitute a termination of Tenant's right to possession or an
acceptance of Tenant's surrender of the Premises, including acts of maintenance
or preservation or efforts to relet the Premises or the appointment of a
receiver upon initiative of Landlord to protect Landlord's interest under this
Lease or the withholding of consent to a subletting or assignment, or
terminating a subletting or assignment, if in accordance with other provisions
of this Lease.

              (d) Tenant hereby waives any and all rights to relief from
forfeiture, redemption or reinstatement granted by Law (including California
Civil Code of Procedure Sections 1174 and 1179) in the event of Tenant being
evicted or dispossessed or in the event of Landlord obtaining possession of the
Premises;

              (e) Notwithstanding any other provision of this Lease, a notice to
Tenant given under this Article or given pursuant to California Code of Civil
Procedure Section 1161, and any notice served by mail shall be deemed served,
and the requisite waiting period deemed to begin under said Code of Civil
Procedure Section upon mailing, without any additional waiting requirement under
Code of Civil Procedure Section 1011 et seq. or by other Law. For purposes of
Code of Civil Procedure Section 1162, Tenant's "place of residence", "usual
place of business", "the property" and "the place where the property is
situated" shall mean and be the Premises, whether or not Tenant has vacated same
at the time of service.

              (f) The voluntary or other surrender or termination of this Lease,
or a mutual termination or cancellation, shall not constitute a merger and shall
terminate all or any existing assignments or subleases, except if and as
otherwise specified in writing by Landlord.



                                       28
<PAGE>   32

              (g) No delay or omission in the exercise of any right or remedy of
Landlord upon any default by Tenant, and no exercise by Landlord of its rights
pursuant to Section 25.13 to perform any duty which Tenant fails timely to
perform, shall impair any right or remedy or be construed as a waiver, unless
such waiver is in writing signed by Landlord. The waiver by Landlord of any
breach of this Lease shall not be deemed a waiver of any subsequent breach of
the same or any other provision of this Lease.

         11.3 ATTORNEY'S FEES

         In the event any party brings any suit or other proceeding with respect
to the subject matter or enforcement of this Lease, the prevailing party (as
determined by the court, agency or other authority before which such suit or
proceeding is commenced) shall, in addition to such other relief as may be
awarded, be entitled to recover reasonable attorneys' fees, expenses and costs
of investigation, including court. costs, expert witness fees, costs and
expenses of investigation, and all attorneys' fees, costs and expenses in any
such suit or proceeding (including in any action or participation in or in
connection with any case or proceeding under the Bankruptcy Code, 11 United
States Code Section 101 et seq., or any successor statutes, in establishing or
enforcing the right to indemnification, in appellate proceedings, or in
connection with the enforcement or collection of any judgment obtained in any
such suit or proceeding).

         11.4 BANKRUPTCY

         The following provisions shall apply in the event of the bankruptcy or
insolvency of Tenant:

              (a) In connection with any proceeding under Chapter 7 of the
Bankruptcy Code where the trustee of Tenant elects to assume this Lease for the
purposes of assigning it, such election or assignment, may only be made upon
compliance with the provisions of this Article. In the event the trustee rejects
this Lease then Landlord shall immediately be entitled to possession of the
Premises without further obligation to Tenant or the trustee.

              (b) Any election to assume this Lease under Chapters 11 or 13 of
the Bankruptcy Code by Tenant as debtor-in-possession or by Tenant's trustee
(the "Electing Party") must provide for the Electing Party to cure or provide to
Landlord adequate assurance that it will cure all monetary defaults under this
Lease within fifteen (15) days from the date of assumption and it will cure all
nonmonetary defaults under this Lease within thirty (30) days from the date of
assumption. Landlord and Tenant acknowledge such condition to be commercially
reasonable.

              (c) If the Electing Party has assumed this Lease or elects to
assign Tenant's interest under this Lease to any other person, such interest may
be assigned only if the intended assignee has provided adequate assurance of
future performance (as herein defined), of all of the obligations imposed on
Tenant under this Lease. For the purposes hereof, "adequate assurance of future
performance" means that Landlord has ascertained that the following conditions
has been satisfied: (i) The assignee has submitted a current financial
statement, certified by its chief financial officer, which shows a net worth and
working capital in amounts sufficient to assure the future performance by the
assignee of Tenant's obligations under this Lease; and (ii) Landlord has
obtained consents or waivers from any third parties that may be required under a
lease,



                                       29
<PAGE>   33

mortgage, financing arrangement, or other agreement by which Landlord is bound,
to enable Landlord to permit such assignment.

              (d) Landlord's acceptance of rent or any other payment from any
trustee, receiver, or other entity will not be deemed a waiver of Landlord's
right to terminate this Lease for any transfer of Tenant's interest under this
Lease without its consent, or Landlord's claim for any amount of Rent due from
Tenant.

         11.5 LANDLORD'S DEFAULT

         Landlord shall be in default hereunder in the event Landlord has not
begun and pursued with reasonable diligence the cure of any failure of Landlord
to meet its obligations hereunder within thirty (30) days after the receipt by
Landlord of written notice from Tenant of the alleged failure to perform. In no
event shall Tenant have the right to terminate or rescind this Lease as a result
of Landlord's default as to any covenant or agreement contained in this Lease.
Tenant hereby waives such remedies of termination and rescission and hereby
agrees that Tenant's remedies for default hereunder and for breach of any
promise or inducement shall be limited to a suit for damages and/or injunction.


                                   ARTICLE 12

                             SURRENDER OF PREMISES

         12.1 IN GENERAL

         Upon the Termination Date, Tenant shall surrender and vacate the
Premises immediately and deliver possession thereof to Landlord in a clean, good
and tenantable condition, ordinary wear and tear, and damage caused by Landlord
excepted. Tenant shall deliver to Landlord all keys to the Premises. Tenant
shall remove from the Premises all movable personal property of Tenant and
Tenant's trade fixtures, including, subject to Section 6.4, cabling for any of
the foregoing. Tenant shall be entitled to remove such Tenant Alterations, which
at the time of their installation Landlord and Tenant agreed may be removed by
Tenant. Tenant shall also remove such other Tenant Alterations as required by
Landlord (provided Landlord notifies Tenant at the time Tenant requests
Landlord's approval that such Tenant Alterations must be removed), including any
Tenant Alterations containing Hazardous Materials. Tenant immediately shall
repair all damage resulting from removal of any of Tenant's property,
furnishings or Tenant Alterations installed or created by Tenant. If any of the
Tenant Alterations which were installed by Tenant involved the lowering of
ceilings or raising of floors, then Tenant shall also be obligated to return
such surfaces to their condition prior to the commencement of this Lease. In the
event Tenant shall fail to remove those items described above, Landlord may (but
shall not be obligated to), at Tenant's expense, remove any of such property and
store, sell or otherwise deal with such property as provided in Section 11.2(b).

         12.2 LANDLORD'S RIGHTS

         All property which may be removed from the Premises by Landlord shall
be conclusively presumed to have been abandoned by Tenant and Landlord may deal
with such property as provided in Section 11.2(b), including the waiver and
indemnity obligations provided in that



                                       30
<PAGE>   34

Section. Tenant shall also reimburse Landlord for all costs and expenses
incurred by Landlord in removing any of Tenant Additions and in restoring the
Premises to the condition required by this Lease at the Termination Date.


                                   ARTICLE 13

                                  HOLDING OVER

         In the event that Tenant holds over in possession of the Premises after
the Termination Date, Tenant shall pay Landlord two hundred percent (200%) of
the monthly Rent payable for the month immediately preceding the holding over
(including increases for Rent Adjustments which Landlord may reasonably
estimate. Tenant shall also pay all damages sustained by Landlord by reason of
such retention of possession. The provisions of this Article shall not
constitute a waiver by Landlord of any reentry rights of Landlord and Tenant's
continued occupancy of the Premises shall be as a tenancy in sufferance.


                                   ARTICLE 14

                        DAMAGE BY FIRE OR OTHER CASUALTY

         14.1 SUBSTANTIAL UNTENANTABILITY

              (a) If any fire or other casualty (whether insured or uninsured)
renders all or a substantial portion of the Premises or the Building
untenantable, Landlord shall, within sixty (60) days after the occurrence of
such damage, estimate the length of time that will be required to substantially
complete the repair and restoration and shall by notice advise Tenant of such
estimate ("Landlord's Notice"). If Landlord reasonably estimates that the amount
of time required to substantially complete such repair and restoration will
exceed one year from the date such damage occurred, then Landlord shall notify
Tenant and this Lease shall terminate as of the date of such damage.

              (b) Unless this Lease is terminated as provided in the preceding
subparagraph, Landlord shall proceed with reasonable promptness to repair and
restore the Building and Premises to its condition as existed prior to such
casualty, subject to reasonable delays for insurance adjustments and Force
Majeure delays, and also subject to zoning Laws and building codes then in
effect. Landlord shall have no liability to Tenant, and Tenant shall not be
entitled to terminate this Lease if such repairs and restoration are not in fact
completed within the time period estimated by Landlord so long as Landlord shall
proceed with reasonable diligence to complete such repairs and restoration.

              (c) Tenant acknowledges that Landlord shall be entitled to the
full proceeds of any insurance coverage, whether carried by Landlord or Tenant,
for damages to the Premises, except for those proceeds of Tenant's insurance of
its own personal property and equipment which would be removable by Tenant at
the Termination Date. All such insurance proceeds shall be payable to Landlord
whether or not the Premises are to be repaired and restored, provided, however,
if this Lease is not terminated and the parties proceed to repair and restore
Tenant Additions at Tenant's cost, to the extent Landlord received proceeds of
Tenant's insurance covering Tenant Additions, such proceeds shall be applied to
reimburse Tenant for its cost of repairing and restoring Tenant Additions.



                                       31
<PAGE>   35

              (d) Notwithstanding anything to the contrary herein set forth: (i)
Landlord shall have no duty pursuant to this Section to repair or restore any
portion of any Tenant Additions or to expend for any repair or restoration of
the Premises or Building amounts in excess of insurance proceeds paid to
Landlord and available for repair or restoration, except for the amount of the
deductible under Landlord's standard casualty policy of insurance (provided that
Tenant shall have the right to pay the difference between the deductible under
Landlord's earthquake insurance policy and the deductible under Landlord's
standard casualty policy of insurance and if paid, such amortized amount
(amortized on a straight line basis over the remaining Term together with
interest at the prime rate plus 1%) shall be credited against the Monthly Base
Rent; and (ii) Tenant shall not have the night to terminate this Lease pursuant
to this Section if any damage or destruction was caused by the act or negligence
of Tenant, its agent or employees. Whether or not the Lease is terminated
pursuant to this Article Fourteen, in no event shall Tenant be entitled to any
compensation or damages for loss of the use of the whole or any part of the
Premises or for any inconvenience or annoyance occasioned by any such damage,
destruction, rebuilding or restoration of the Premises or the Building.

              (e) Tenant shall perform any repair or restoration of the Premises
in accordance with the provisions of Article Nine.

         14.2 INSUBSTANTIAL UNTENANTABILITY

         If the Premises or the Building is damaged by a casualty but neither is
rendered substantially untenantable and Landlord estimates that the time to
substantially complete the repair or restoration will not exceed one year from
the date such damage occurred, then Landlord shall proceed to repair and restore
the Building or the Premises other than Tenant Additions, with reasonable
promptness, unless such damage is to the Premises and occurs during the last six
(6) months of the Term, in which event either Tenant or Landlord shall have the
right to terminate this Lease as of the date of such casualty by giving written
notice thereof to the other within thirty (30) days after the date of such
casualty. Notwithstanding the aforesaid, Landlord's obligation to repair shall
be limited in accordance with the provisions of Section 14.1 above.

         14.3 RENT ABATEMENT

         Except for the casualty caused by the negligence or willful act of
Tenant or its agents, employees, contractors or invitees which is not covered by
Landlord's rent interruption insurance, if all or any part of the Premises are
rendered untenantable by casualty and this Lease is not terminated, Monthly Base
Rent and Additional Rent shall abate for that part of the Premises which is
untenantable (and which Tenant does not occupy) on a per them basis from the
date of the casualty until the repair and restoration work in the Premises is
Substantially Complete.

         14.4 WAIVER OF STATUTORY REMEDIES

The  provisions of this Lease,  including this Article  Fourteen,  constitute an
express  agreement  between  Landlord  and Tenant with  respect to damage to, or
destruction of, the Premises or the Property or any part of either, and any Law,
including Sections 1932(2), 1933(4), 1941 and 1942 of the California Civil Code,
with respect to any rights or obligations concerning



                                       32
<PAGE>   36

damage or destruction shall have no application to this Lease or to any damage
to or destruction of the Premises or the Property, and are hereby waived.


                                   ARTICLE 15

                                 EMINENT DOMAIN

         15.1 TAKING OF WHOLE OR SUBSTANTIAL PART

         In the event the whole or any substantial part of the Building or of
the Premises is taken or condemned by any competent authority for any public use
or purpose (including a deed given in lieu of condemnation) and is thereby
rendered untenantable, this Lease shall terminate as of the date title or
possession vests in such authority, and Monthly Base Rent and Additional Rent
shall be apportioned as of the Termination Date. Notwithstanding anything to the
contrary herein set forth, in the event the taking is temporary (for less than
the remaining term of the Lease), Landlord may elect either (i) to terminate
this Lease or (ii) permit Tenant to receive the entire award attributable to the
Premises in which case Tenant shall continue to pay Rent and this Lease shall
not terminate.

         15.2 TAKING OF PART

         In the event a part of the Building or the Premises is taken or
condemned by any competent authority (or a deed is delivered in lieu of
condemnation) and this Lease is not terminated, the Lease shall be amended to
reduce or increase, as the case may be, the Monthly Base Rent and Tenant's
Proportionate Share to reflect the Rentable Area of the Premises or Building, as
the case may be, remaining after any such taking or condemnation. Landlord, upon
receipt and to the extent of the award in condemnation (or proceeds of sale)
shall make necessary repairs and restorations to the Premises (exclusive of
Tenant Additions) and to the Building to the extent necessary to constitute the
portion of the Building not so taken or condemned as a complete architectural
and economically efficient unit.

         15.3 COMPENSATION

Landlord  shall be entitled to receive the entire award (or sale  proceeds) from
any such taking,  condemnation or sale without any payment to Tenant, and Tenant
hereby assigns to Landlord Tenant's interest,  if any, in such award;  provided,
however, Tenant shall have the right separately to pursue against the condemning
authority a separate  award in respect of the loss, if any, to Tenant  Additions
paid for by Tenant  without  any credit or  allowance  from  Landlord so long as
there is no diminution of Landlord's award as a result.


                                   ARTICLE 16

                                   INSURANCE

         16.1 TENANT'S INSURANCE

         Tenant, at Tenant's expense, agrees to maintain in force, with a
company or companies acceptable to Landlord, during the Term: (a) Commercial
General Liability Insurance on a primary basis and without any right of
contribution from any insurance carried by Landlord covering the Premises on an
occurrence basis against all claims for personal injury, bodily injury,



                                       33
<PAGE>   37

death and property damage, including contractual liability covering the
indemnification provisions in this Lease, and such insurance shall be for such
limits that are reasonably required by Landlord from time to time but not less
than a combined single limit of Three Million and No/100 Dollars
($3,000,000.00); (b) Workers' Compensation and Employers' Liability Insurance to
the extent required by and in accordance with the Laws of the State of
California; (c) "All Risks" property insurance in an amount adequate to cover
the full replacement cost of all Tenant Additions, equipment, installations,
fixtures and contents of the Premises in the event of loss; (d) in the event a
motor vehicle is to be used by Tenant in connection with its business operation
from the Premises, Comprehensive Automobile Liability Insurance coverage with
limits of not less than One Million and No/100 Dollars ($1,000,000.00) combined
single limit coverage against bodily injury liability and property damage
liability arising out of the use by or on behalf of Tenant, its agents and
employees in connection with this Lease, of any owned, non-owned or hired motor
vehicles; and (e) such other insurance or coverages as Landlord reasonably
requires.

         16.2 FORM OF POLICIES

         Each policy referred to in 16.1 shall satisfy the following
requirements. Each policy shall (i) name Landlord and the Indemnitees as
additional insureds (except "All Risks" property insurance and Workers'
Compensation and Employers' Liability Insurance), (ii) be issued by one or more
responsible insurance companies licensed to do business in the State of
California reasonably satisfactory to Landlord, (iii) where applicable, provide
for deductible amounts satisfactory to Landlord and not permit coinsurance, (iv)
shall provide that such insurance may not be canceled or amended without thirty
(30) days' prior written notice to the Landlord, and (v) each policy of
"All-Risks" property insurance shall provide that the policy shall not be
invalidated should the insured waive in writing prior to a loss, any or all
rights of recovery against any other party for losses covered by such policies.
Tenant shall deliver to Landlord, certificates of insurance and at Landlord's
request, copies of all policies and renewals thereof to be maintained by Tenant
hereunder, not less than ten (10) days prior to the Commencement Date and not
less than ten (10) days prior to the expiration date of each policy.

         16.3 LANDLORD'S INSURANCE

         Landlord agrees to purchase and keep in full force and effect during
the Term hereof, including any extensions or renewals thereof, insurance under
policies issued by insurers of recognized responsibility, qualified to do
business in the State of California on the Building in amounts not less than the
then full replacement cost (without depreciation) of the Building (above
foundations and excluding Tenant Additions), against fire and such other risks
as may be included in standard forms of all risk coverage insurance reasonably
available from time to time together with twelve months rental interruption
insurance and insurance against earthquakes. At Tenant's election, at Tenant's
expense, Landlord's earthquake policy shall include coverage for Tenant
Additions. Landlord agrees to maintain in force during the Term Commercial
General Liability Insurance covering the Building on an occurrence basis against
all claims for personal injury, bodily injury, death, and property damage. Such
insurance shall be for a combined single limit of not less than Two Million and
No/100 Dollars ($2,000,000.00). Neither Landlord's obligation to carry such
insurance nor the carrying of such insurance shall be deemed to be an indemnity
by Landlord with respect to any claim, liability, loss, cost or expense due, in
whole or



                                       34
<PAGE>   38

in part, to Tenant's negligent acts or omissions or willful misconduct. Without
obligation to do so, Landlord may, in its sole discretion from time to time,
carry insurance in amounts greater and/or for coverage additional to the
coverage and amounts set forth above.

         16.4 WAIVER OF SUBROGATION

              (a) Each party agrees that, if obtainable at no, or minimal,
additional cost, and so long as the same is permitted under the laws of the
State of California, it will include in its "All Risks" policies required under
this Lease, appropriate clauses pursuant to which the insurance companies (i)
waive all right of subrogation against the other party with respect to losses
payable under such policies and/or (ii) agree that such policies shall not be
invalidated should the insured waive in writing prior to a loss any or all right
of recovery against any party for losses covered by such policies.

              (b) Provided that Landlord's right of full recovery under its
policy or policies aforesaid is not adversely affected or prejudiced thereby,
Landlord hereby waives any and all right of recovery which it might otherwise
have against Tenant, its servants, agents and employees, for loss or damage
occurring to the Real Property and the fixtures, appurtenances and equipment
therein, to the extent the same is covered by Landlord's insurance,
notwithstanding that such loss or damage may result from the negligence or fault
of Tenant, its servants, agents or employees. Provided that Tenant's right of
full recovery under its aforesaid policy or policies is not adversely affected
or prejudiced thereby, Tenant hereby waives any and all right of recovery which
it might otherwise have against Landlord, its servants, and employees and
against every other tenant of the Real Property who shall have executed a
similar waiver as set forth in this Section 16.4 for loss or damage to Tenant
Additions and to Tenant's furniture, furnishings, fixtures and other property of
Tenant to the extent the same is coverable by Tenant's insurance required under
this Lease, notwithstanding that such loss or damage may result from the
negligence or fault of Landlord, its servants, agents or employees, or such
other tenant and the servants, agents or employees thereof.

         16.5 NOTICE OF CASUALTY

         Tenant shall give Landlord notice in case of a fire or accident in the
Premises promptly after Tenant is aware of such event.


                                   ARTICLE 17

                         WAIVER OF CLAIMS AND INDEMNITY

         17.1 WAIVER OF CLAIMS

         To the extent permitted by Law, Tenant releases the Indemnitees from,
and waives all claims for, damage to person or property sustained by the Tenant
or any occupant of the Premises or the Property resulting directly or indirectly
from any existing or future condition, defect, matter or thing in and about the
Premises or the Property or any part of either or any equipment or appurtenance
therein, or resulting from any accident in or about the Premises or the
Property, or resulting directly or indirectly from any act or neglect of any
tenant or occupant of the Property or of any other person, including Landlord's
agents and servants, except to the



                                       35
<PAGE>   39

extent caused by the gross negligence or willful misconduct of any of the
Indemnitees. To the extent permitted by Law, Tenant hereby waives any
consequential damages, compensation or claims for inconvenience or loss of
business, rents, or profits as a result of such injury or damage.
Notwithstanding the foregoing, Tenant shall not be liable for any such damage
caused by its acts or neglect if Landlord or a tenant has recovered the full
amount of the damage from proceeds of insurance policies and the insurance
company has waived its right of subrogation against Tenant.

         17.2 INDEMNITY BY TENANT

         To the extent permitted by Law, Tenant hereby indemnifies, and agrees
to protect, defend and hold the Indemnitees harmless, against any and all
actions, claims, demands, liability, costs and expenses, including attorneys'
fees and expenses for the defense thereof, arising from Tenant's occupancy of
the Premises, from the undertaking of any Tenant Additions or repairs to the
Premises, from the conduct of Tenant's business on the Premises, or from any
breach or default on the part of Tenant in the performance of any covenant or
agreement on the part of Tenant to be performed pursuant to the terms of this
Lease, or from any willful act or negligence of Tenant, its agents, contractors,
servants, employees, customers or invitees, in or about the Premises or the
Property or any part of either. In case of any action or proceeding brought
against the Indemnitees by reason of any such claim, upon notice from Landlord,
Tenant covenants to defend such action or proceeding by counsel chosen by
Landlord, in Landlord's reasonable discretion. Landlord reserves the night to
settle, compromise or dispose of any and all actions, claims and demands related
to the foregoing indemnity. The foregoing indemnity shall not operate to relieve
Indemnitees of liability to the extent such liability is caused by their willful
or wrongful act. Further, the foregoing indemnity is subject to and shall not
diminish any waivers in effect in accordance with Section 16.4 by Landlord or
its insurers to the extent of amounts, if any, paid to Landlord under its
"All-Risks" property insurance.

         17.3 INDEMNITY BY LANDLORD

         To the extent permitted by Law, Landlord hereby indemnifies Tenant, and
agrees to protect, defend and hold Tenant harmless, against any and all actions,
claims, demands, liability, costs and expenses, including attorneys' fees and
expenses for the defense thereof, arising from any willful act or gross
negligence of Landlord, its agents, contractors, servants, employees, customers
or invitees, in or about the Building or from any breach or default on the part
of Landlord in the performance of any covenant or agreement on the part of
Landlord to be performed pursuant to the terms of this Lease.


                                   ARTICLE 18

                             RULES AND REGULATIONS

         18.1 RULES

         Tenant agrees for itself and for its subtenants, employees, agents, and
invitees to comply with the Rules and Regulations listed on Exhibit C attached
hereto and with all reasonable modifications and additions thereto which
Landlord may make from time to time.



                                       36
<PAGE>   40

         18.2 ENFORCEMENT

         Nothing in this Lease shall be construed to impose upon the Landlord
any duty or obligation to enforce the Rules and Regulations or as hereafter
adopted and Landlord shall not be liable to Tenant for violation of the same by
any other tenant, its servants, employees, agents, visitors or licensees.
Landlord shall use reasonable efforts to enforce the rules and regulations of
the Project in a uniform and nondiscriminatory manner.


                                   ARTICLE 19

                           LANDLORD'S RESERVED RIGHTS

         Landlord shall have the following rights exercisable without notice to
Tenant and without liability to Tenant for damage or injury to persons, property
or business and without giving rise to any claim for offset or abatement of
Rent: (1) to change the Building's name or street address upon thirty (30) days'
prior written notice to Tenant; (2) subject to the terms of Article 28 below, to
install and maintain all signs on the exterior and/or interior of the Building;
(3) to designate and/or approve prior to installation, all types of signs,
window shades, blinds, drapes, or other similar items, and all internal lighting
that may be visible from the exterior of the Premises; (4) upon reasonable
notice to Tenant, to display the Premises to prospective purchasers and lenders
at reasonable hours at any time during the Term and to prospective tenants at
reasonable hours during the last twelve (12) months of the Term; (5) to grant to
any party the exclusive right to conduct any business or render any service in
or to the Building, provided such exclusive right shall not operate to prohibit
Tenant's permitted use of the Premises; (6) to change the arrangement and/or
location of entrances or passageways, doors and doorways, corridors, elevators,
stairs, washrooms or public portions of the Building, provided that such action
shall first be discussed with Tenant and shall not materially and adversely
interfere with Tenant's access to the Premises or the Building; and (7) to close
the Building after Standard Operating Hours, except that Tenant and its
employees and invitees shall be entitled to admission at all times, under such
regulations as Landlord prescribes for security purposes.


                                   ARTICLE 20

                              ESTOPPEL CERTIFICATE

         20.1 IN GENERAL

              (a) Within ten (10) days after request therefor by Landlord,
Mortgagee or any prospective mortgagee or owner, Tenant agrees as directed in
such request to execute an Estoppel Certificate in recordable form, binding upon
Tenant, certifying (i) that this Lease is unmodified and in full force and
effect (or if there have been modifications, a description of such modifications
and that this Lease as modified is in full force and effect); (ii) the dates to
which Rent has been paid; (iii) that Tenant is in the possession of the Premises
if that is the case; (iv) to Tenant's knowledge that Landlord is not in default
under this Lease, or, if Tenant believes Landlord is in default, the nature
thereof in detail; (v) that Tenant has no offsets or defenses to the performance
of its obligations under this Lease (or if Tenant believes there are any offsets
or defenses, a full and complete explanation thereof); (vi) that the Premises
have been completed in accordance with the terms and provisions hereof or the
Work Letter, that Tenant has accepted the Premises and the condition thereof and
of all improvements thereto and has no claims against



                                       37
<PAGE>   41

Landlord or any other party with respect thereto; (vii) that if an assignment of
rents or leases has been served upon the Tenant by a Mortgagee, Tenant will
acknowledge receipt thereof and agree to be bound by the provisions thereof,
(viii) that Tenant will give to the Mortgagee copies of all notices required or
permitted to be given by Tenant to Landlord; and (ix) to any other information
reasonably requested.

              (b) Within ten (10) days after request therefor by Tenant,
Landlord agrees as directed in such request to execute an Estoppel Certificate
in recordable form, binding upon Landlord, certifying (i) that this Lease is
unmodified and in full force and effect (or if there, have been modifications, a
description of such modifications and that this Lease as modified is in full
force and effect); (ii) the dates to which Rent has been paid; (iii) that Tenant
is in the possession of the Premises if that is the case; (iv) to Landlord's
knowledge that Tenant is not in default under this Lease, or, if Landlord
believes Tenant is in default, the nature thereof in detail; and (v) that the
Premises have been completed in accordance with the terms and provisions hereof
or the Work Letter.

         20.2 ENFORCEMENT

         In the event that Tenant fails to deliver an Estoppel Certificate, then
such failure shall be a Default. In addition to any other remedy available to
Landlord, Landlord may impose a charge equal to $500.00 for each day that Tenant
fails to deliver an Estoppel Certificate and Tenant shall be deemed to have
irrevocably appointed Landlord as Tenant's attorney-in-fact to execute and
deliver such Estoppel Certificate.


                                   ARTICLE 21

                              REAL ESTATE BROKERS

         Tenant represents that, except for the broker(s) listed in Section
1.1(14), Tenant has not dealt with any real estate broker, sales person, or
finder in connection with this Lease, and no such person initiated or
participated in the negotiation of this Lease, or showed the Premises to Tenant.
Tenant hereby agrees to indemnify, protect, defend and hold Landlord and the
Indemnitees, harmless from and against any and all liabilities and claims for
commissions and fees arising out of a breach of the foregoing representation.

         Landlord agrees to pay any commission to which the broker(s) listed in
Section 1.1(14) is entitled in connection with this Lease pursuant to Landlord's
written agreement with such broker(s).


                                   ARTICLE 22

                              MORTGAGEE PROTECTION

         22.1 SUBORDINATION, NONDISTURBANCE AND ATTORNMENT

         Subject to Tenant's obtaining a nondisturbance agreement from future
lenders as provided below, this Lease is and shall be expressly subject and
subordinate at all times to (i) any ground or underlying lease of the Real
Property, now or hereafter existing, and all amendments, extensions, renewals
and modifications to any such lease, and (ii) the lien of any mortgage or



                                       38
<PAGE>   42

trust deed now or hereafter encumbering fee title to the Real Property and/or
the leasehold estate under any such lease, and all amendments, extensions,
renewals, replacements and modifications of such mortgage or trust deed and/or
the obligation secured thereby, unless such ground lease or ground lessor, or
mortgage, trust deed or Mortgagee, expressly provides or elects that the Lease
shall be superior to such lease or mortgage or trust deed. If any such mortgage
or trust deed is foreclosed (including any sale of the Real Property pursuant to
a power of sale), or if any such lease is terminated, upon request of the
Mortgagee or ground lessor, as the case may be, Tenant shall attorn to the
purchaser at the foreclosure sale or to the ground lessor under such lease, as
the case may be, and such purchaser or ground lessor shall recognize Tenant's
rights under this Lease, provided, however, that such purchaser or ground lessor
shall not be (i) bound by any payment of Rent for more than one month in advance
except payments in the nature of security for the performance by Tenant of its
obligations under this Lease; (ii) subject to any offset, defense or damages
arising out of a default of any obligations of any preceding Landlord; or (iii)
bound by any amendment or modification of this Lease made without the written
consent of the Mortgagee or ground lessor; or (iv) liable for any security
deposits not actually received in cash by such purchaser or ground lessor. With
respect to any future lender, Tenant shall execute promptly any reasonable
certificate or instrument that Landlord or any mortgagee may request to evidence
such subordination provided that such document provides that so long as an Event
of Default has not occurred with respect to Tenant, such mortgagee shall grant
Tenant nondisturbance and recognize Tenant's rights under this Lease. In
confirmation of such subordination and nondisturbance, however, Tenant shall
execute promptly any reasonable certificate or instrument that Landlord,
Mortgagee or ground lessor may request. Tenant hereby constitutes Landlord as
Tenant's attorney-in-fact to execute such certificate or instrument for and on
behalf of Tenant upon Tenant's failure to do so within fifteen (15) days of a
request to do so. Upon request by such successor in interest, Tenant shall
execute and deliver reasonable instruments confirming the attornment provided
for herein. Landlord shall use its commercially reasonable efforts to obtain a
non-disturbance agreement from its current lender.

         22.2 MORTGAGEE PROTECTION

         Tenant agrees to give any Mortgagee or ground lessor, by registered or
certified mail, a copy of any notice of default served upon the Landlord,
provided that prior to such notice Tenant has received notice (by way of service
on Tenant of a copy of an assignment of rents and leases, or otherwise) of the
address of such Mortgagee or ground lessor. Tenant further agrees that if
Landlord shall have failed to cure such default within the time provided for in
this Lease, then the Mortgagee or ground lessor shall have an additional thirty
(30) days after receipt of notice thereof within which to cure such default or
if such default cannot be cured within that time, then such additional notice
time as may be necessary, if, within such thirty (30) days, any Mortgagee or
ground lessor has commenced and is diligently pursuing the remedies necessary to
cure such default (including commencement of foreclosure proceedings or other
proceedings to acquire possession of the Real Property, if necessary to effect
such cure). Until the time allowed as aforesaid for Mortgagee or ground lessor
to cure such defaults has expired without cure, Tenant shall have no night to,
and shall not, terminate this Lease on account of default. This Lease may not be
modified or amended so as to reduce the Rent or shorten the Term, or so as to
adversely affect in any other respect to any material extent the rights of the
Landlord, nor shall this Lease be canceled or surrendered, without the prior
written consent, in each instance, of the ground lessor or the Mortgagee.



                                       39
<PAGE>   43

         22.3 MODIFICATION OF LEASE FOR BENEFIT OF MORTGAGEE

         If Mortgagee of Landlord requires a modification of this Lease which
shall not result in any increased cost or expense to Tenant or in any other
substantial and adverse change in the rights and obligations of Tenant
hereunder, then Tenant agrees that the Lease may be so modified.

         22.4 FINANCIALS

         At the reasonable request of Landlord from time to time, Tenant shall
provide to Landlord Tenant's financial statements or other information
discussing financial worth of Tenant which Landlord shall use solely for
purposes of this Lease and in connection with the ownership, management,
financing and disposition of the Building.


                                   ARTICLE 23

                                    NOTICES

              (a) All notices, demands or requests provided for or permitted to
be given pursuant to this Lease must be in writing and shall be personally
delivered, sent by Federal Express or other reputable overnight courier service,
or mailed by first class, registered or certified United States mail, return
receipt requested, postage prepaid, addressed to the parties hereto at their
respective addresses listed in Sections 1.1(2) and (3).

              (b) Notices, demands or requests sent by mail or overnight courier
service as described above shall be effective upon deposit in the mail or with
such courier service. However, the time period in which a response to any such
notice, demand or request must be given shall commence to ran from (i) in the
case of delivery by mail, the date of receipt on the return receipt of the
notice, demand or request by the addressee thereof, or (ii) in the case of
delivery by Federal Express or other overnight courier service, the date of
acceptance of delivery by an employee, officer, director or partner of Landlord
or Tenant. Rejection or other refusal to accept or the inability to deliver
because of changed address of which no notice was given, as indicated by advice
from Federal Express or other overnight courier service or by mail return
receipt, shall be deemed to be receipt of notice, demand or request sent.
Notices may also be served by personal service upon any officer, director or
partner of Landlord or Tenant, and shall be effective upon such service.

              (c) By giving to the other party at least thirty (30) days written
notice thereof, either party shall have the right from time to time during the
term of this Lease to change their respective addresses for notices, statements,
demands and requests, provided such new address shall be within the United
States of America.


                                   ARTICLE 24

                                 MISCELLANEOUS

         24.1 LATE CHARGES

              (a) All payments required hereunder (other than the Monthly Base
Rent and Additional Rent which shall be due as provided herein) to Landlord
shall be paid within thirty



                                       40
<PAGE>   44

(30) days after Landlord's demand therefor. All such amounts (including Monthly
Base Rent and Additional Rent) not paid when due shall bear interest from the
date due until the date paid at the Default Rate in effect on the date such
payment was due.

              (b) In the event Tenant is more than two (2) days late after
receipt of written notice of delinquency from Landlord in paying any installment
of Monthly Base Rent due under this Lease (provided after three (3) such notices
during any calendar year, no such notice shall be required), Tenant shall pay
Landlord a late charge equal to five percent (5%) of the delinquent installment
of Rent. The parties agree that (i) such delinquency will cause Landlord to
incur costs and expenses not contemplated herein, the exact amount of which will
be difficult to calculate, including the cost and expense that will be incurred
by Landlord in processing each delinquent payment of rent by Tenant, (ii) the
amount of such late charge represents a reasonable estimate of such costs and
expenses and that such late charge shall be paid to Landlord for each delinquent
payment in addition to all Rent otherwise due hereunder. The parties further
agree that the payment of late charges and the payment of interest provided for
in subparagraph (a) above are distinct and separate from one another in that the
payment of interest is to compensate Landlord for its inability to use the money
improperly withheld by Tenant, while the payment of late charges is to
compensate Landlord for its additional administrative expenses in handling and
processing delinquent payments.

              (c) Payment of interest at the, Default Rate and/or of late
charges shall not excuse or cure any default by Tenant under this Lease, nor
shall the foregoing provisions of this Article or any such payments prevent
Landlord from exercising any right or remedy available to Landlord upon Tenant's
failure to pay Rent when due, including the right to terminate this Lease.

         24.2 NO JURY TRIAL; VENUE, JURISDICTION

         Each party hereto (which includes any assignee, successor, heir or
personal representative of a party) shall not seek a jury trial, hereby waives
trial by jury, and hereby further waives any objection to venue in the County in
which the Project is located, and agrees and consents to personal jurisdiction
of the courts of the State of California, in any action or proceeding or
counterclaim brought by any party hereto against the other on any matter
whatsoever arising out of or in any way connected with this Lease, the
relationship of Landlord and Tenant, Tenant's use or occupancy of the Premises,
or any claim of injury or damage, or the enforcement of any remedy under any
statute, emergency or otherwise, whether any of -the foregoing is based on this
Lease or on tort law. No party will seek to consolidate any such action in which
a jury has been waived with any other action in which a jury trial cannot or has
not been waived. It is the intention of the parties that these provisions shall
be subject to no exceptions. By execution of this Lease the parties agree that
this provision may be filed by any party hereto with the clerk or judge before
whom any action is instituted, which filing shall constitute the written consent
to a waiver of jury trial pursuant to and in accordance with Section 631 of the
California Code of Civil Procedure. No party has in any way agreed with or
represented to any other party that the provisions of this Section will not be
fully enforced in all instances. The provisions of this Section shall survive
the expiration or earlier termination of this Lease.



                                       41
<PAGE>   45

         24.3 TENANT AUTHORITY

         Each party represents and warrants to the other, that it has full
authority and power to enter into and perform its obligations under this Lease,
that the person executing this Lease is fully empowered to do so, and that no
consent or authorization is necessary from any third party. Landlord may request
that Tenant provide Landlord evidence of Tenant's authority.

         24.4 ENTIRE AGREEMENT

              (a) This Lease, the Exhibits attached hereto and the Work Letter
contain the entire agreement between Landlord and Tenant concerning the Premises
and there are no other agreements, either oral or written, and no other
representations or statements, either oral or written, on which Tenant has
relied.

              (b) This Lease shall not be modified except by a writing executed
by Landlord and Tenant.

         24.5 EXCULPATION

              (a) Tenant agrees, on its behalf and on behalf of its successors
and assigns, that any liability or obligation under this Lease shall only be
enforced against Landlord's equity interest in the Property and all sales
proceeds, insurance proceeds, or condemnation awards and in no event against any
other assets of the Landlord, or Landlord's officers or directors or partners,
and that any liability of Landlord with respect to this Lease shall be so
limited and Tenant shall not be entitled to any judgment in excess of such
amount; provided that the foregoing limitation shall not apply in the event of
fraud on the part of Landlord.

              (b) In the event of any sale or other transfer of the Building,
Landlord shall be entirely freed and relieved of all agreements and obligations
of Landlord hereunder accruing or to be performed after the date of such sale or
transfer.

         24.6 ACCORD AND SATISFACTION

         No payment by Tenant or receipt by Landlord of a lesser amount than any
installment or payment of Rent due shall be deemed to be other than on account
of the amount due, and no endorsement or statement on any check or any letter
accompanying any check or payment of Rent shall be deemed an accord and
satisfaction. Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such installment or payment of Rent
or pursue any other remedies available to Landlord. No receipt of money by
Landlord from Tenant after the termination of this Lease or Tenant's right of
possession of the Premises shall reinstate, continue or extend the Term. Receipt
or acceptance of payment from anyone other than Tenant, including an assignee of
Tenant, is not a waiver of any breach of Article Ten, and Landlord may accept
such payment on account of the amount due without prejudice to Landlord's right
to pursue any remedies available to Landlord.



                                       42
<PAGE>   46

         24.7 BINDING EFFECT

         Subject to the provisions of Article Ten, this Lease shall be binding
upon and inure to the benefit of Landlord and Tenant and their respective heirs,
legal representatives, successors and permitted assigns.

         24.8 CAPTIONS

         The Article and Section captions in this Lease are inserted only as a
matter of convenience and in no way define, limit, construe, or describe the
scope or intent of such Articles and Sections.

         24.9 TIME, APPLICABLE LAW, CONSTRUCTION

         Time is of the essence of this Lease and each and all of its
provisions. This Lease shall be construed in accordance with the Laws of the
State of California. If more than one person signs this Lease as Tenant, the
obligations hereunder imposed shall be joint and several. If any term, covenant
or condition of this Lease or the application thereof to any person or
circumstance shall, to any extent, be invalid or unenforceable, the remainder of
this Lease, or the application of such term, covenant or condition to persons or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby and each item, covenant or condition of this Lease
shall be valid and be enforced to the fullest extent permitted by Law. Wherever
the term "including" or "includes" is used in this Lease, it shall have the same
meaning as if followed by the phrase "but not limited to". The language in all
parts of this Lease shall be construed according to its normal and usual meaning
and not strictly for or against either Landlord or Tenant.

         24.10 ABANDONMENT

         In the event Tenant vacates or abandons the Premises, Landlord shall
(i) have the right to enter into the Premises in order to show the space to
prospective tenants, (ii) have the right to reduce the services provided to
Tenant pursuant to the terms of this Lease to such levels as Landlord reasonably
determines to be adequate services for an unoccupied premises and (iii) during
the last six (6) months of the Term, have the right to prepare the Premises for
occupancy by another tenant upon the end of the Term. Tenant expressly
acknowledges that in the absence of written notice pursuant to Section 11.2(b)
or pursuant to California Civil Code Section 1951.3 terminating Tenant's right
to possession, none of the foregoing acts of Landlord or any other act of
Landlord shall constitute a termination of Tenant's right to possession or an
acceptance of Tenant's surrender of the Premises, and the Lease shall continue
in effect.

         24.11 LANDLORD'S RIGHT TO PERFORM TENANT'S DUTIES

         If Tenant fails timely to perform any of its duties under this Lease or
the Work Letter after notice and expiration of applicable cure period (except in
the case of an emergency), Landlord shall have the right (but not the
obligation), to perform such duty on behalf and at the expense of Tenant without
further notice to Tenant, and all sums expended or expenses incurred by Landlord
in performing such duty shall be deemed to be additional Rent under this Lease
and shall be due and payable upon demand by Landlord.



                                       43
<PAGE>   47

         24.12 SECURITY SYSTEM

         Landlord shall not be obligated to provide or maintain any security
patrol or security system. Landlord shall not be responsible for the quality of
any such patrol or system which may be provided hereunder or for damage or
injury to Tenant, its employees, invitees or others due to the failure, action
or inaction of such patrol or system. Tenant shall be entitled to install its
own card reader access system for the Premises; provided that if such system is
installed on the exterior doors of the Premises, Tenant shall make such system
available for use by Landlord and any other tenant of the Building, subject to
reasonable terms and conditions.

         24.13 NO LIGHT, AIR OR VIEW EASEMENTS

         Any diminution or shutting off of light, air or view by any structure
which may be erected on lands of or adjacent to the Project shall in no way
affect this Lease or impose any liability on Landlord.

         24.14 CONSENT

         Except as expressly provided to the contrary in the Lease, any time the
consent of Landlord or Tenant is required, such consent shall not be
unreasonably withheld, conditioned or delayed. Whenever the Lease grants
Landlord or Tenant the right to take action, exercise discretion, establish
rules and regulations or make allocations or other determinations, Landlord and
Tenant shall act reasonably and in good faith.

         24.15 SURVIVAL

         The waivers of the right of jury trial, the other waivers of claims or
rights, the releases and the indemnification obligations shall survive the
expiration or termination of this Lease, and so shall all other obligations or
agreements which by their terms survive expiration or termination of the Lease.

         24.16 MEMORANDUM OF LEASE

         Tenant shall have the right to have a Memorandum of Lease recorded in
the Official Records of the County of San Francisco.

         24.17 LIABILITY

         Notwithstanding anything to the contrary contained in this Lease,
Landlord shall be responsible for any damages, costs, liabilities or claims
caused by the gross negligence of Landlord, its employees, agents or
contractors.



                                       44
<PAGE>   48

                                   ARTICLE 25

                                LETTER OF CREDIT

         25.1 DELIVERY OF LETTER OF CREDIT

         In lieu of depositing a security deposit with Landlord, Tenant shall,
on execution of this Lease, deliver to Landlord and cause to be in effect during
the Lease Term an unconditional, irrevocable letter of credit ("LOC") in the
amount specified for the Letter of Credit in the Basic Lease Information, as it
may be increased as provided in this Lease (the "LOC Amount") for an initial
term of one (1) year and which shall thereafter renew automatically from year to
year, unless the LOC bank notifies Landlord at least thirty (30) days prior to
such expiration date of the LOC. The LOC shall be in a form reasonably
acceptable to Landlord and shall be issued by an LOC bank selected by Tenant and
acceptable to Landlord. An LOC bank is a bank that accepts deposits, maintains
accounts, has a local office that will negotiate a letter of credit, and the
deposits of which are insured by the Federal Deposit Insurance Corporation.
Tenant shall pay all expenses, points, or fees incurred by Tenant in obtaining
the LOC. The LOC shall not be mortgaged, assigned or encumbered in any manner
whatsoever by Tenant without the prior written consent of Landlord. Tenant
acknowledges that Landlord has the right to transfer or mortgage its interest in
the Project the Building and in this Lease and Tenant agrees that in the event
of any such transfer or mortgage, Landlord, at its cost, shall have the right to
transfer or assign the LOC and/or the LOC Security Deposit (as defined below) to
the transferee or mortgagee, and in the event of such transfer, Tenant shall
look solely to such transferee or mortgagee for the return of the LOC and/or the
LOC Security Deposit.*

         25.2 REPLACEMENT OF LETTER OF CREDIT

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

         25.3 LANDLORD'S RIGHT TO DRAW ON LETTER OF CREDIT

         Landlord shall hold the LOC as security for the performance of Tenant's
obligations under this Lease. If, after notice and failure to cure within any
applicable period provided in this Lease, Tenant defaults on any provision of
this Lease, Landlord may, without prejudice to any other remedy it has, draw on
that portion of the LOC necessary to (a) pay Rent or other sum in default; (b)
pay or reimburse Landlord for any amount that Landlord may spend or become
obligated to spend in exercising Landlord's rights under Paragraph 24.12 (Right
of Landlord to Perform Tenant's Covenant); and/or (c) compensate Landlord for
any expense, loss, or damage that Landlord may suffer because of Tenant's
default. If Tenant fails to renew or replace the LOC at least twenty (20) days
before its expiration, Landlord may, without prejudice to any other remedy it
has, draw on the entire amount of the LOC.


------------
* Upon termination of this Lease for any reason (other than a Default on the
part of Tenant), Landlord shall return the LOC to Tenant within ten (10) days
after such termination.



                                       45
<PAGE>   49

         25.4 LOC SECURITY DEPOSIT

         Any amount of the LOC that is drawn on by  Landlord  but not applied by
Landlord shall be held by Landlord as a security deposit (the "LOC Security
Deposit") in accordance  with  Paragraph 5 of this Lease.  Tenant shall
thereafter  have the right to replace the LOC Security Deposit with a LOC
meeting the requirements of this Article 25.

         25.5 RESTORATION OF LETTER OF CREDIT AND LOC SECURITY DEPOSIT

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

         25.6 REDUCTION OF LETTER OF CREDIT

              (a) At any time after the end of the 12th month of the Term
hereof, and only in the event Tenant satisfies each of the following conditions
to Landlord's reasonable satisfaction, the LOC Amount may be reduced to an
amount equal to $8,000,000: (i) Tenant is not and has not been in default under
the terms of this Lease beyond any applicable cure period; (ii) Tenant maintains
a tangible net worth in excess of $125,000,000 which amount shall be determined
by Landlord to its satisfaction prior to any reduction in the LOC Amount, and in
connection with such determination, Tenant shall deliver to Landlord for review
Tenant's financial statements prepared in accordance with generally accepted
accounting principles and audited by a nationally recognized public accounting
firm acceptable to Landlord, and any other financial information reasonably
requested by Landlord ("Tenant's Financial Information"); (iii) Tenant provides
to Landlord ten (10) days prior written notice of any such reduction; and (iv)
the LOC provides that the issuing bank shall notify Landlord in writing at least
five (5) business days prior to any such reduction. In the event that such
reduction to the LOC is made, and, subsequently, Tenant falls to meet any of the
above conditions for a period of thirty (30) days following delivery by Landlord
of written notice of any such failure, Tenant shall within forty-eight (48)
hours, increase the face amount of the LOC to an amount equal to $10,000,000.

              (b) At any time after the sixtieth (60th) month of the Term
hereof, and only in the event Tenant satisfies all of the following conditions
to Landlord's reasonable satisfaction, the LOC Amount may be reduced to an
amount equal to $6,000,000: (i) Tenant is not and has not been in default under
the terms of this Lease beyond any applicable cure period; (ii) Tenant maintains
a tangible net worth in excess of $200,000,000 which amount shall be determined
by Landlord to its satisfaction prior to any reduction in the LOC Amount, and in
connection with such determination, Tenant shall deliver to Landlord for review
Tenant's Financial Information; (iii) Tenant provides to Landlord ten (10) days
prior written notice of any such reduction; and (iv) the LOC provides that the
issuing bank shall notify Landlord in writing at least five (5) business days
prior to any such reduction. In the event that such reduction to the LOC is made
and, subsequently, Tenant fails to meet any of the above conditions for a period
of thirty (30) days following delivery by Landlord of written notice of any such
failure, Tenant shall within forty-eight (48) hours, increase the face amount of
the LOC to an amount equal to $7,000,000.



                                       46
<PAGE>   50

                                   ARTICLE 26

                              RIGHT OF FIRST OFFER

         Provided Tenant is not, and has not been, in default of any terms and
conditions of this Lease, Tenant shall have a one-time right of first offer to
lease or purchase the entire building or site of approximately 55,000 square
feet (the "Expansion Space") that is adjacent to the Building, as shown on
Exhibit E at such time as such Expansion Space is made available for lease or
purchase by Landlord. Upon notification by Landlord in writing of the
availability of the Expansion Space and the terms and conditions on which
Landlord is willing to lease such Expansion Space to Tenant, Tenant shall have
five (5) business days to notify Landlord in writing of Tenant's desire to
exercise Tenant's right of first offer on the terms and conditions. In the event
Tenant fails to give Landlord notice of Tenant's election to lease such
Expansion Space within such time period, Tenant shall have no further right,
title or interest in such Expansion Space and this right of first offer shall
terminate. If, on the other hand, Tenant exercises its right of first offer in
the manner prescribed, Tenant shall immediately deliver to Landlord payment for
the first month's rent for such Expansion Space (in the same manner as provided
for in this Lease), and the lease for such Expansion Space shall be consummated
without delay in accordance with the terms and conditions set forth in
Landlord's notice. Notwithstanding anything to the contrary herein contained,
Tenant's right to the Expansion Space shall be conditioned upon the following:
(i) at the time Tenant agrees to accept the Expansion Space and at the time of
the commencement of the term for the Expansion Space, Tenant or its Affiliates
shall be in possession of and occupying the primary premises for the conduct of
its business therein and the same shall not be occupied by any assignee,
subtenant or licensee and, provided further, that the option for additional
space shall be applicable hereunder only in the Expansion Space will actually be
occupied by Tenant and (ii) the agreement of acceptance shall constitute a
representation by Tenant to Landlord, effective as of the date of the agreement
of acceptance and as of the date of commencement of the lease for the Expansion
Space, that Tenant does not intend to assign the lease for the Expansion Space,
in whole or in part or sublet all or any portion of the Premises, the election
to expand being for the purpose of utilizing the Expansion Space for Tenant's
purposes in the conduct of Tenant's business therein.



                                   ARTICLE 27

                                  ROOF RIGHTS

              (a) During the Term, Tenant shall have the nonexclusive right to
install on the roof of the Building antennas, supplemental HVAC, microwaves,
satellites or DDS dishes in a area designated by Landlord that is not greater
than ten (10) feet in diameter and does not exceed two hundred (200) pounds
installed, which shall be enclosed by a screen and the nonexclusive right to run
connecting lines or cables thereto from the Premises (such satellite
dish/antennae and such connecting lines and related equipment herein referred to
collectively as the "Equipment"). Tenant shall not penetrate the roof in
connection with any installation or reinstallation of the Equipment without
Landlord's prior written consent, which may be withheld in Landlord's sole
discretion. The plans and specifications for all the Equipment shall be
delivered by Tenant to Landlord for Landlord's review and approval. Such plans
and specifications, including, without limitation, the location of the
Equipment, shall be approved by Landlord in writing prior to any installation.
In no event shall the Equipment or any portion thereof be visible from street
level. Prior to the commencement of any installation or other work performed on
or about the Building,



                                       47
<PAGE>   51

Landlord shall approve all contractors and subcontractors which shall perform
such work. Tenant shall be responsible for any damage to the roof, conduit
systems or other portions of the Building or Building systems as a result of
Tenant's installation, maintenance and/or removal of the Equipment.

              (b) Tenant, at Tenant's sole cost and expense, shall comply with
all Laws regarding the installation, construction, operation, maintenance and
removal of the Equipment and shall be solely responsible for obtaining and
maintaining in force all permits, licenses and approvals necessary for such
operations.

              (c) Tenant shall be responsible for and promptly shall pay all
taxes, assessments, charges, fees and other governmental impositions levied or
assessed on the Equipment or based on the operation thereof.

              (d) Landlord may require Tenant, at Landlord's sole cost and
expense, to relocate the Equipment during the Term to a location approved by
Tenant, which approval shall not be unreasonably withheld, conditioned or
delayed. Tenant shall not change the location of, or alter or install additional
Equipment or paint any of the other Equipment without Landlord's prior written
consent.

              (e) Operation of the Equipment shall not interfere in any manner
with equipment systems or utility systems of other tenants of the Project,
including without limitation, telephones, dictation equipment, lighting, heat
and air conditioning, computers, electrical systems and elevators. If operation
of the Equipment causes such interference, Tenant agrees to cooperate with such
other tenants to eliminate such interference.

              (f) Tenant shall maintain the Equipment in good condition and
repair, at Tenant's sole cost and expense. Landlord may from time to time
require that Tenant repaint the satellite dishes at Tenant's expense to keep the
same in an attractive condition. In the event that Tenant fails to repair and
maintain the Equipment in accordance with this Lease, Landlord may, but shall
not be obligated to, make any such repairs or perform any maintenance to the
Equipment and Tenant shall reimburse Landlord upon demand for all costs and
expenses incurred by Landlord in connection therewith, plus a reasonable
administrative fee.

              (g) Tenant may access the roof for repair and maintenance of the
Equipment, only during normal business hours, on not less than 24 hours prior
written notice to Landlord, except in emergency. Tenant shall designate in
writing to Landlord all persons whom Tenant authorizes to have access to the
roof for such purposes. Upon such designation and prior identification to
Landlord's building security personnel, such authorized persons shall be granted
access to the roof by Landlord's building engineer. Tenant shall be responsible
for all costs and expenses incurred by Landlord in connection with Tenant's
access to the roof pursuant to this Paragraph. Landlord or Landlord's agent may
accompany Tenant during such access.

              (h) Tenant shall indemnify, defend, protect and hold harmless
Landlord from and against any and all claims related to the Equipment or
operation of the same as if the Equipment were located wholly within the
Premises. Tenant shall provide evidence satisfactory to Landlord that Tenant's
property and liability insurance policies required under this Lease



                                       48
<PAGE>   52

include coverage for the Equipment and any claim, loss, damage, or liability
relating to the Equipment.

              (i) Landlord shall have no responsibility or liability whatsoever
relating to (i) maintenance or repair of the Equipment, (ii) damage to the
Equipment; (iii) damage to persons or property relating to the Equipment or the
operation thereof, or (iv) interference with use of the Equipment arising out of
utility interruption or any other cause, except for injury to persons or damage
to property caused solely by the active negligence or intentional misconduct of
Landlord, its agents or any other parties related to Landlord. In no event shall
Landlord be responsible for consequential damages. Upon installation of the
Equipment, Tenant shall accept the area where the Equipment is located in its
"as is" condition. Tenant acknowledges that the roof location of the Equipment
is suitable for Tenant's needs, and acknowledges that Landlord shall have no
obligation whatsoever to improve, maintain or repair the area in which the
Equipment will be installed.

              (j) Tenant shall use the Equipment solely for Tenant's operations
associated with the Permitted Use and within Tenant's Premises and shall not use
or allow use of the Equipment, for consideration or otherwise, for the benefit
of other tenants in the Building or any other person or entity.

Tenant  shall,  at Tenant's  sole cost and expense,  remove such portions of the
Equipment as Landlord may designate upon the  expiration or earlier  termination
of this Lease,  and  restore  the  affected  areas to their  condition  prior to
installation  of the  Equipment.  If Tenant  fails to so remove  the  Equipment,
Landlord  reserves  the right to do so,  and the  expense  of the same  shall be
immediately due and payable from Tenant to Landlord as additional rent, together
with  interest  and late  charges as provided in this Lease,  plus a  reasonable
administrative fee.


                                   ARTICLE 28

                                    SIGNAGE

         Tenant shall be entitled to the exterior signs to be located as shown
on Exhibit D attached hereto, which Tenant must exercise by May 1, 2000. Any
locations for exterior signs not elected by Tenant by May 1, 2000, shall be
available for Landlord for its own use, including, without limitation, leasing
to third parties. Such signage rights are subject to the following terms and
conditions:

              (a) Tenant shall submit plans and drawings for such signage to the
City of San Francisco and to any other public authorities having jurisdiction
and shall obtain written approval from each such jurisdiction prior to
installation, and shall fully comply with all applicable Laws (Tenant
acknowledges that as of the date of this Lease, Landlord does not have approval
for any signage).

              (b) Tenant shall, at Tenant's sole cost and expense, design,
construct and install such.

              (c) All signs shall be subject to Landlord's prior written
approval, which Landlord shall have the right to withhold in its absolute and
sole discretion.



                                       49
<PAGE>   53

              (d) Tenant shall maintain its signage in good condition and
repair, and all costs of maintenance and repair shall be borne by Tenant.
Maintenance shall include, without limitation, cleaning and, if such signage is
illuminated, relamping at reasonable intervals. Tenant shall be responsible for
any electrical energy used in connection with its signs.

              (e) Tenant's signage rights granted hereby shall be deemed revoked
and terminate upon occurrence of any of the following events:

                  (i) Tenant shall be in default and shall not have cured said
         default for a period of ninety (90) days after notice.

                  (ii) Except with respect to Affiliates, Tenant shall assign
         this Lease or sublet any portion of the Premises without Landlord's
         prior written consent in accordance with Article 10, or Tenant occupies
         less than fifty (50%) of the Premises.

                  (iii) This Lease shall terminate or otherwise no longer be in
         effect.

              (f) Upon the expiration or earlier termination of this Lease or at
such other time that Tenant's signage rights are terminated pursuant to the
terms hereof, Landlord shall cause Tenant's signage to be removed from the
Building and the Building to be repaired and restored to the condition which
existed prior to the installation of Tenant's signage (including, if necessary,
the replacement of any precast concrete panels), all at the sole cost and
expense of Tenant and otherwise in accordance with Article 9 of this Lease,
without further notice from Landlord notwithstanding anything to the contrary
contained in this Lease. Tenant shall pay all costs and expenses for such
removal and restoration within thirty (30) days following delivery of an invoice
therefor.

              (g) Tenant shall pay, on a monthly basis, the charges for each
such sign set forth in Exhibit D.

              (h) If Tenant shall fail to exercise the foregoing option by May
1, 2000, and exterior signage on the Building subsequently becomes available for
lease after the initial leasing thereof, prior to granting rights to such
exterior signage to a third party, Landlord shall notify Tenant of the
availability of such signage and the terms and conditions on which Landlord is
willing to offer such signage to third parties. Tenant shall have five (5)
business days to notify Landlord in writing of Tenant's desire to accept such
signage rights upon the terms and conditions set forth in Landlord's notice. If
Tenant fails to give such notice to Landlord within said five (5) business days,
Landlord shall thereafter have the right to offer such signage to third parties
on terms and conditions determined in Landlord's sole discretion, provided that
if signage becomes available again more than twenty-four (24) months after
Landlord's offer of such signage to Tenant, Landlord shall thereafter re-offer
signage rights to Tenant in accordance with this Article 28.


              (i) Landlord agrees that it will not enter into any agreement for
signage rights with Scient, Viant, or any of the top 20 ranked Interactive
Agencies as measured by Advertising Age for the preceding year (or if
Advertising Age shall no longer be published, as measured by an equivalent
publication). This restriction shall terminate if Tenant shall (except with
respect to Affiliates) assign this Lease or sublet any portion of the Premises
without Landlord's prior




                                       50
<PAGE>   54


written consent in accordance with Article 10, or Tenant occupies less than
fifty (50%) of the Premises.



                                   ARTICLE 29

                                    PARKING

         During the Term, Tenant shall lease 212 parking spaces on an
unreserved, nonexclusive, first come, first served basis, for passenger-size
automobiles, in the parking garage adjacent to the Building.

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

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

         Landlord reserves the night to assign specific spaces, and to reserve
spaces for visitors, small cars, disabled persons or for other tenants or
guests, and Tenant shall not park and shall not allow Tenant's Parties to park
in any such assigned or reserved spaces. Tenant may validate visitor parking by
such method as Landlord may approve, at the validation rate from time to time 60
generally applicable to visitor parking. Landlord may utilize a valet system of
parking in such garage and Tenant shall comply with such rules established
therefor. Landlord also reserves the right to alter, modify, relocate or close
all or any portion of the parking area in order to make repairs or perform
maintenance service, or to restripe or renovate the parking areas, or if
required by casualty, condemnation, act of God, Laws or for any other reason
deemed reasonable by Landlord.

         Tenant shall pay to Landlord (or Landlord's parking contractor, if so
directed in writing by Landlord), as Additional Rent hereunder, the monthly
charges established from time to time by Landlord for parking in such parking
garage, based on the prevailing market rate for covered standard parking in the
vicinity of the Building. Such parking charges shall be payable in advance with
Tenant's payment of Monthly Base Rent and are considered as a material part of
the rental received by Landlord hereunder. In the event the parking spaces are
unavailable for use for a period in excess of five (5) days, Tenant shall be
entitled to an abatement of rent for such spaces from and after the fifth day
until such time as the spaces are available. Tenant may sublease such spaces at
the same charge that Tenant is paying Landlord for the spaces. No deductions
from the monthly parking charge shall be made for days on which the Tenant does
not use any of the parking spaces entitled to be used by Tenant.



                                       51
<PAGE>   55

                                   ARTICLE 30

                                    BASEMENT

         Tenant acknowledges that Landlord may convert the storage space in the
basement of the Building to office space. Any such conversion shall be at no
cost to Tenant and shall be performed in a manner so as not to interrupt or
interfere with the conduct of Tenant's business. Further, any such conversion
shall not reduce the size of the Premises (except in an immaterial amount to
accommodate the entryway to the basement and ducts in locations reasonably
approved by Tenant), or interfere with or adversely affect Tenant's access to or
use of the Premises, or impair the security of the Premises. Without limiting
the generality of the foregoing, Tenant's cabling and the security of its server
and other equipment shall not be impaired. Landlord shall cause any such
additional tenants to pay their pro rata share of Operating Expenses, and
Tenant's Share shall be reduced accordingly.


                                   ARTICLE 31

                                GENERATOR SPACE

         31.1 GENERALLY

         During the Term, Tenant shall have the right, subject to applicable
codes, rules and regulations, to install a diesel-operated generator, together
with transformer and fuel tank, together with related wining, vents and
equipment as well as conduits (collectively, the "Generator"), to provide
emergency additional electrical capacity to the Premises. The Generator shall be
placed in a location reasonably designated by Landlord (the "Generator Space").

         31.2 INSTALLATION

         Prior to commencing the installation of the Generator and any related
equipment and materials located on the Generator Space or in other parts of the
Building, including, but not limited to all switch gear and wiring,
(collectively, the "Related Equipment"), Tenant shall submit plans and
specifications regarding the installation of the Generator and any Related
Equipment to Landlord for Landlord's review and approval, which will not be
unreasonably withheld, conditioned or delayed. Tenant's right to install the
Generator shall be subject to Landlord's prior written approval of the manner in
which the Generator is installed and the measures that will be taken to
eliminate interference with other tenants and any vibrations or sound
disturbances from the operation of the Generator. Landlord shall have the right
to require an acceptable enclosure (e.g. wood fencing and landscaping) to hide
or disguise the existence of the Generator and to minimize any adverse effect
that the installation of the Generator may have on the appearance of the
Building and Property. Tenant shall be solely responsible for obtaining all
necessary governmental and regulatory approvals of, and for the cost of
installing, operating, maintaining and removing, the Generator and all Related
Equipment. Tenant shall also be responsible for the cost of all utilities
consumed in the operation of the Generator.



                                       52
<PAGE>   56

         31.3 MAINTENANCE, REMOVAL

         The Generator and Related Equipment shall remain the personal property
of Tenant, and shall be removed by Tenant at its own expense at the termination
of this Lease. Tenant shall repair any damage caused by such removal, including
the patching of any holes to match, as closely as possible, the color
surrounding the area where the Generator and appurtenance were attached. Tenant
agrees to maintain the Generator, including without limitation, any enclosure
installed around the Generator, in good condition and repair, and any such
maintenance shall be performed in a manner to avoid any unreasonable
interference with any other tenants or Landlord.

         31.4 ACCESS

         Tenant, subject to the reasonable rules and regulations enacted by
Landlord, to Force Majeure and events of casualty, shall have access to the
Generator and its surrounding area for the purpose of installing, operating,
repairing, maintaining and removing the Generator and Related Equipment at all
times.

         31.5 USE

         Tenant agrees that it will not refuel the storage tank during Normal
Business Hours and will only run the Generator during emergency circumstances.
The Generator shall be tested only before or after Normal Business Hours, and
only upon at least 24 hours prior written notice to Landlord. Any spills or
leaks from the Generator or any use of the Generator which results in a release
of Hazardous Materials of any kind must be immediately reported to Landlord and
the costs for any such clean-up shall be borne solely by the Tenant. Landlord
shall not be liable in-any way for any claims, damages, fines, judgments,
penalties, costs, expenses, liabilities, or losses relating to any violation by
Tenant of any environmental laws incurred by or assessed against Landlord
arising in connection with the Generator.



                                       53
<PAGE>   57

         IN WITNESS WHEREOF, this Lease has been executed as of the date set
forth in Section 1.1(4) hereof.



TENANT:                                      LANDLORD:


ORGANIC, INC.                                BAKER HAMILTON PROPERTIES, LLC.
a Delaware corporation



By:________________________________          By:________________________________

Print Name:________________________          Print Name:________________________

Its:_______________________________          Its:_______________________________



By:________________________________

Print Name:________________________

Its:_______________________________



                                       54
<PAGE>   58

                                    EXHIBIT B

                              WORK LETTER AGREEMENT

         This Work Letter ("Work Letter") is made and entered into as of
November 8, 1999, by and between Baker Hamilton Properties, LLC ("Landlord"),
and Organic, Inc. ("Tenant").


                                    RECITALS

         A. Pursuant to the terms of that certain Lease of even date herewith
(the "Lease"), Landlord leased to Tenant, and Tenant hired from Landlord, those
certain premises consisting of approximately 213,000 square feet of space (the
"Premises"), located at 601 Townsend Street, San Francisco, California (the
"Building"), as more particularly described in the Lease.

         B. Subject to the terms and provisions hereof, Landlord has agreed that
Tenant may construct certain tenant improvements in the Premises. Accordingly,
Landlord and Tenant now desire to set forth the terms and conditions upon which
Tenant shall construct the tenant improvements in the Premises, as more
particularly set forth hereinbelow. Capitalized terms used but not defined
herein shall have the meaning ascribed to them in the Lease.

         NOW THEREFORE, the parties agree as follows:

         1. General Requirements for Construction

            1.1. Landlord's Work. Landlord shall diligently complete Landlord's
Work in a good and workmanlike manner, in compliance with all applicable Laws.

            1.2. Tenant's Obligation to Construct. Tenant shall construct and
install, in a good and workmanlike manner, first-class tenant improvements and
fixtures (the "Tenant Improvements") in accordance with the Final Plans (as
defined in Section 2.2 below) and otherwise in strict compliance with this Work
Letter. Tenant shall be solely responsible for all cost and expenses related to
the construction and installation of the Tenant Improvements, subject to
reimbursement by Landlord pursuant to Section 4 below.

            1.3. Tenant's Access to the Premises. Tenant shall coordinate with
the Landlord for access to the Premises and the scheduling of construction work
therein. Landlord agrees to permit Tenant and its contractor and subcontractors
access to the Premises as soon as reasonably possible prior to the Delivery
Date, so long as such access shall not interfere with the performance of
Landlord Work. Any damage to the Building caused by Tenant or its contractor or
subcontractors in connection with the construction of the Tenant Improvements
shall be immediately repaired at Tenant's sole cost and expense.

         2. Development of Plans

            2.1. Preliminary Plans. Prior to Tenant's commencement of the
construction and installation of the Tenant Improvements, Tenant shall prepare
and deliver to Landlord preliminary plans and specifications (the "Preliminary
Plans") setting forth the Tenant Improvements to be constructed in the Premises.
Within five (5) business days following



                               Exhibit B - Page 1
<PAGE>   59

delivery of the Preliminary Plans, Landlord shall approve the Preliminary Plans
or deliver to Tenant written notice of Landlord's disapproval of the Preliminary
Plans. Such notice shall specify all changes that must be made to the
Preliminary Plans as a condition of Landlord's approval thereof. Promptly
following receipt of Landlord's notice of disapproval, Tenant shall deliver a
revised set of Preliminary Plans to Landlord, which Preliminary Plans shall
incorporate all changes specified in Landlord's notice of disapproval. Landlord
shall reasonably approve or disapprove the revised Preliminary Plans within two
(2) business days after receipt thereof.

            2.2 Final Plans. As soon as the Preliminary Plans are approved by
Landlord, Tenant shall prepare final plans, specifications and working drawings
for the Tenant Improvements (the "Final Plans") that are consistent with and
logical evolutions of the approved Preliminary Plans and shall deliver the same
to Landlord for approval. Concurrently with the delivery of the Final Plans,
Tenant shall deliver to Landlord for Landlord's approval a schedule of values
("Schedule of Values") allocating costs to the various portions of the work
involved in the construction and installation of the Tenant Improvements and
setting forth Tenant's reasonable, good faith estimate of the timing of
Landlord's disbursements of the Tenant Improvement Allowance (as defined in
Section 4.1 below) and the amount of each such disbursement. If Landlord
disapproves the Final Plans and/or the Schedule of Values, Landlord shall
deliver to Tenant, as soon as reasonably possible but within five (5) business
days following receipt thereof, written notice of such disapproval. Such notice
shall specify all changes that must be made to the Final Plans and/or the
Schedule of Values as a condition of Landlord's approval thereof. Promptly
following receipt of Landlord's notice of disapproval, Tenant shall deliver a
revised set of Final Plans and/or Schedule of Values to Landlord, which Final
Plans and/or Schedule of Values shall incorporate all changes specified in
Landlord's notice of disapproval. Landlord shall approve or disapprove revised
Final Plans and/or the Schedule Values within two (2) business days after
receipt thereof. As soon as Landlord approves the Final Plans and the Schedule
of Values submitted by Tenant, Landlord and Tenant shall each sign the same.
Except as otherwise specifically provided in this Work Letter, the term "Final
Plans" as hereinafter used shall mean the final plans, specifications, working
drawings and Schedule of Values approved by Landlord for the construction of the
Tenant Improvements.

            2.3. Form of Final Plans, Approval of Architect. The Final Plans
shall include tracings and other reproducible drawings, shall be in a form
satisfactory for filing with appropriate governmental authorities and shall
conform to all applicable codes, rules, regulations and ordinances of all
governing authorities. All plans submitted by Tenant to Landlord shall be
prepared by an architect selected by Tenant and approved by Landlord. Landlord
hereby approves Gensler Architecture Design & Planning as Tenant's architect.
Landlord's approval of Tenant's architect shall not constitute Landlord's
warranty that said architect is professionally qualified.

            2.4. Landlord's Approval. If the Final Plans otherwise conform to
the Preliminary Plans and this Work Letter, Landlord's approval thereof shall
not be unreasonably withheld. If the Final Plans show work requiring a
modification or change to the shell of the Building, Landlord shall not be
deemed unreasonable if Landlord disapproves such Final Plans. Landlord may, at
Landlord's option, have the Preliminary Plans or the Final Plans reviewed by
Landlord's architect, engineer and/or construction manager; provided, however,
that any such review shall be performed within the time periods set forth above
for Landlord's review of the



                               Exhibit B - Page 2
<PAGE>   60

Preliminary Plans and the Final Plans. In no event shall the approval by
Landlord (or Landlord's architect, engineer or construction manager) of the
Preliminary Plans or the Final Plans constitute a representation or warranty by
Landlord (or Landlord's architect, engineer or construction manager) of (i) the
accuracy or completeness thereof, (ii) the absence of design defects or
construction flaws therein, or (ill) the compliance thereof with applicable
laws; and the parties agree that Landlord (and Landlord's architect, engineer
and construction manager) shall incur no liability by reason of such approval.

            2.5. Changes. There shall be no material changes to the Final Plans
without the prior written consent of Landlord. All change orders requested by
Tenant shall be made in writing and shall specify any added or reduced cost
resulting therefrom. Any change proposed by Tenant shall be approved or
disapproved by Landlord as soon as reasonably possible and `in any event within
two (2) business days following Landlord's receipt of plans and specifications
therefor. Landlord's failure to approve any proposed change within said two (2)
day period shall be deemed Landlord's approval thereof.

         3. Construction of Tenant Improvements

            3.1. Permits and Approvals. Tenant shall submit the Final Plans to
all appropriate governmental agencies for approval and shall not commence
construction or installation of the Tenant Improvements described therein unless
and until Tenant has obtained all necessary permits and approvals required for
the construction and installation of the same and has delivered a copy or copies
thereof to Landlord.

            3.2. Construction Documents. Prior to the commencement of
construction and installation of the Tenant Improvements, Tenant shall submit to
Landlord, for Landlord's approval, the following (collectively, the
"Construction Documents"): (a) the name of the proposed general contractor and a
copy of the proposed construction contract for the Tenant Improvements, which
shall be consistent with the terms hereof, (b) a written assignment of such
construction contract containing the written consent of Tenant's general
contractor to such assignment provided that Landlord assumes in writing all
obligations of Tenant under said contract, (c) a copy of the architect's
contract for the Tenant Improvements, which shall be consistent with the terms
hereof, (d) a written assignment of such architect's contract containing the
written consent of Tenant's architect to such assignment provided that Landlord
assumes in writing all obligations of Tenant under said contract, and (e) a list
of all subcontractors and materials suppliers proposed to be used by Tenant in
connection with the construction of the Tenant Improvements. Within five (5)
business days following the delivery of all of the Construction Documents,
Landlord shall approve such information or deliver to Tenant written notice of
Landlord's disapproval of all or any information contained therein, provided
Landlord shall not have approval rights over Tenant's architect's contract or
the general contractor's contract. If Landlord disapproves the general
contractor, any subcontractor or materials supplier, the parties shall negotiate
in good faith to select another contractor, subcontractor or materials supplier
mutually acceptable to the parties. Landlord shall be entitled to withhold its
approval of the general contractor, any subcontractor, or any materials
supplier, who, in Landlord's determination, is financially or otherwise
professionally unqualified to construct the Tenant Improvements. In addition,
Landlord may condition its approval of a general contractor upon Tenant
obtaining a performance bond and labor and materials payment bond, each in an
amount



                               Exhibit B - Page 3
<PAGE>   61

equal to one hundred percent (100%) of the estimated cost of the Tenant
Improvements and in a form acceptable to Landlord, in the event Landlord
reasonably determines that such bonds are necessary to ensure lien-free
completion of the Tenant Improvements. Landlord's failure to disapprove a
contractor, subcontractor or materials supplier shall not constitute Landlord's
warranty that any contractor, subcontractor or supplier not so disapproved is in
fact qualified. Following approval by Landlord, Tenant shall not materially
amend or consent to the material amendment of the construction contract or the
bonds, if the same are required, without Landlord's prior written approval.

            3.3. Commencement and Completion of Construction. Following Tenant's
satisfaction of all of the requirements of Section 2 above and this Section 3,
Tenant shall commence construction and installation of the Tenant Improvements
in accordance with the Final Plans and shall pursue the same diligently to
completion. Tenant covenants to give Landlord at least ten (10) days' prior
written notice of its commencement of construction or delivery of materials
related thereto to enable Landlord to post a notice of nonresponsibility
respecting the Tenant Improvements to be constructed in the Premises.

            All work done in connection with the Tenant Improvements shall be
performed in compliance with all applicable laws, ordinances, rules, orders and
regulations of all federal, state, county and municipal governments or agencies
now in force or that may be enacted hereafter, with the requirements and
standards of any insurance underwriting board, inspection bureau or insurance
carrier insuring the Premises pursuant to the terms of the Lease, and with all
directives, rules and regulations of the fire marshal, health officer, building
inspector, or other proper officers of any governmental agency now having or
hereafter acquiring jurisdiction.

            3.4. Building Systems. In no event shall Tenant interfere with the
provision of heating, plumbing, electrical or mechanical system services to the
Building, make any structural changes to the Building, make any changes to the
heating, plumbing, electrical or mechanical systems of the Building, or make any
changes to the Premises which would weaken or impair the structural integrity of
the Building, alter the aesthetic appearance of the Building exterior, or which
would affect any warranties applicable to the Building or any improvements
constructed or installed by Landlord therein, without Landlord's prior written
consent, which consent may be withheld in Landlord's sole discretion.

            3.5. Inspections. In addition to any right of Landlord under the
Lease and this Work Letter to enter the Premises for the purpose of posting
notices of nonresponsibility, Landlord and its officers, agents or employees
shall have the right at all reasonable times to enter upon the Premises and
inspect the Tenant Improvements and to determine that the same are in conformity
with the Final Plans and all of the requirements of this Work Letter. Landlord,
however, is under no obligation to supervise, inspect or inform Tenant of the
progress of construction and Tenant shall not rely upon Landlord therefor.
Neither the right herein granted to Landlord to make such inspections, nor the
making of such inspections by Landlord, shall operate as a waiver of any rights
of Landlord to require that the construction and installation of the Tenant
Improvements conform with the Final Plans and all the requirements of this Work
Letter.



                               Exhibit B - Page 4
<PAGE>   62

            3.6. Protection Against Lien Claims. Subject to timely payment of
the Tenant Improvement Allowance, Tenant agrees to fully pay and discharge all
claims for labor done and materials and services furnished in connection with
the construction of the Tenant Improvements, to diligently file or procure the
filing of a valid notice of completion within ten (10) days following completion
of construction of the Tenant Improvements, to diligently file or procure the
filing of a notice of cessation upon any cessation of labor on the Tenant
Improvements for a continuous period of thirty (30) days or more, and to take
all reasonable steps to forestall the assertion of claims of lien against the
Premises or the Project, or any part thereof, or any right or interest
appurtenant thereto. Upon the request of Landlord, Tenant shall provide Landlord
with satisfactory evidence of the release or removal (including removal by
appropriate surety bond) of all liens recorded against the Premises, the
Project, or any portion thereof, and all stop notices received by Tenant.

            3.7. Insurance

                 (a) At least five (5) days prior to the date Tenant commences
construction of the Tenant Improvements, Tenant shall submit to Landlord
evidence of the following insurance coverage: (i) general liability insurance as
required by Paragraph 19 of the Lease, which shall include contractor's
protective liability coverage; (ii) workers' compensation insurance as required
by Paragraph 19 of the Lease, with limits in accordance with the statutory
requirements of the State of California; and (iii) broad form "Builder's Risk"
property damage insurance with limits of not less than one hundred percent
(100%) of the estimated value of the Tenant Improvements (which insurance may be
carried by Tenant's contractor). All such policies shall provide that thirty
(30) days' written notice must be given to Landlord prior to termination or
cancellation. The insurance specified in (i) and (iii) above shall name Landlord
and Landlord's property manager as additional insureds and shall provide that
Landlord, although an additional insured, may recover for any loss suffered by
Landlord or Landlord's agents by reason of the negligence of Tenant or Tenant's
contractors, subcontractors and/or employees. Tenant hereby waives, and Tenant
shall use commercially reasonable efforts to cause each of its contractors and
subcontractors to waive, all rights to recover against Landlord and its agents,
contractors and employees for any loss or damage arising from a cause covered by
insurance required to be carried by Tenant hereunder to the extent of such
coverage and shall cause each property insurer to waive all rights of
subrogation against Landlord and its agents, contractors and employees in
connection therewith to the same extent.

                 (b) At least five (5) days prior to the date Tenant commences
construction of the Tenant Improvements, Tenant shall deliver to Landlord
certificates of insurance from the carrier(s) providing insurance to Tenant's
contractor(s) evidencing the following types of coverage in such amounts as are
reasonably determined by Landlord to be necessary: (i) commercial general
liability insurance; (ii) business automobile liability insurance; (iii)
workers' compensation insurance; and (iv) umbrella liability insurance. The
insurance specified in (i), (ii) and (iv) above shall name Landlord and
Landlord's property manager as additional insureds, and all such policies shall
provide that thirty (30) days' written notice must be given to Landlord prior to
termination or cancellation.

            3.8. Final Documents. Following completion of the Tenant
Improvements, Tenant shall comply with the following: (a) Tenant shall obtain
and deliver to Landlord a copy



                               Exhibit B - Page 5
<PAGE>   63

of the certificate of occupancy for the Tenant Improvements from the
governmental agency having jurisdiction thereof; (b) Tenant shall promptly cause
a notice of completion to be validly recorded for the Tenant Improvements; (c)
Tenant shall furnish Landlord with unconditional waivers of lien in statutory
form from all parties performing labor and/or supplying equipment and/or
materials in connection with the Tenant Improvements, including Tenant's
architect(s); (d) Tenant shall deliver to Landlord a certificate of Tenant's
architect(s) certifying completion of the Tenant Improvements in substantial
accordance with the Final Plans; (e) Tenant shall deliver to Landlord a
certificate of Tenant's contractor(s) certifying completion of the Tenant
Improvements in substantial accordance with the construction contract(s)
approved by Landlord; (f) Tenant shall deliver to Landlord a full set of
reproducible as-built drawings (signed and dated by the general contractor and
each responsible subcontractor) for the Tenant Improvements; and (g) Tenant
shall deliver to Landlord copies of all written construction and equipment
warranties and manuals related to the Tenant Improvements.

            3.9. Indemnification. Tenant shall, at Tenant's sole cost and
expense, defend, indemnify, save and hold Landlord harmless from and against any
and all claims, liabilities, demands, losses, expenses, damages or causes of
actions (whether legal or equitable in nature) asserted by any person, firm,
corporation, governmental body or agency or entity arising out of the
construction of the Tenant Improvements, except to the extent caused by the
gross negligence or willful misconduct of Landlord, its employees, agents,
contractors, subcontractors or material suppliers. Tenant shall pay to Landlord
upon demand all claims, judgments, damages, losses or expenses (including
attorneys' fees) incurred by Landlord as a result of any legal action arising
out of the construction of the Tenant Improvements, except to the extent caused
by the gross negligence or willful misconduct of Landlord, its employees,
agents, contractors, subcontractors or material suppliers.

         4. Tenant Improvement Allowance

            4.1. Amount of Allowance. Subject to the terms and conditions of
this Work Letter, Landlord shall pay to Tenant an amount not in excess of
$5,288,300 (the "Tenant Improvement Allowance") on account of all construction
costs, space planning and design fees, architecture and engineering fees, permit
fees and construction management fees (including Landlord's construction
management fee) incurred by Tenant in designing and constructing the Tenant
Improvements in the Premises. In no event shall Tenant be entitled to any cash
payment, credit, offset or other benefit whatsoever based on any excess of the
Tenant Improvement Allowance over the actual costs of the construction and
installation of the Tenant Improvements.

            4.2. Tenant's Cost. Any cost incurred in the design or construction
of the Tenant Improvements in excess of the Tenant Improvement Allowance shall
be borne by Tenant in accordance with the terms and conditions set forth below.
Prior to the construction of the Tenant Improvements, Tenant shall cause its
general contractor to submit an estimate of the total cost of constructing the
Tenant Improvements. In the event that the aggregate of the cost estimated by
Tenant's general contractor and the cost of designing the Tenant Improvements
(collectively, the "Improvements Cost") exceeds the Tenant Improvement
Allowance, Landlord and Tenant shall determine Landlord's share of the
Improvements Cost ("Landlord's Share") and Tenant's share of the Improvements
Cost ("Tenant's Share") as follows:



                               Exhibit B - Page 6
<PAGE>   64

                 (a) Landlord's Share shall be a fraction, the numerator of
which is the Tenant Improvement Allowance, and the denominator of which is the
Improvements Cost.

                 (b) Tenant's Share shall be a fraction, the numerator of which
is the portion of the Improvements Cost that exceeds the Tenant Improvement
Allowance, and the denominator of which is the Improvements Cost.

                 (c) If Tenant has not sold its shares in an initial public
offering prior to the commencement of construction of the Tenant Improvements,
Tenant shall deposit in a separate bank account ("Tenant's Construction
Account') funds equal to Tenant's Share of the Improvements Cost and shall
deliver to Landlord reasonable evidence of the establishment of Tenant's
Construction Account and the deposit therein of Tenant's Share of the
Improvements Cost. Tenant's Construction Account shall be used only for the
purpose of funding Tenant's Share of the Improvements Cost, and Tenant shall
instruct the bank maintaining Tenant's Construction Account to send to Landlord
duplicate statements of each disbursement or withdrawal from Tenant's
Construction Account. In the event of any change order or other event which
would increase the Improvements Cost, Tenant's Share shall be appropriately
adjusted to reflect the increase in the Improvements Cost, and Tenant shall
promptly deposit sufficient funds into Tenant's Construction Account to equal
the then outstanding unpaid amount of Tenant's Share of such increased
Improvements Cost.

            4.3. Procedure for Disbursement of the Tenant Improvement Allowance.
Landlord shall reimburse Tenant for architectural fees and other approved "soft"
costs within thirty-five (35) days of receipt of invoices. During the
construction of the Tenant Improvements, Landlord shall make progress payments
of the Tenant Improvement Allowance as follows: on or before the twenty-fifth
(25th) day of each calendar month during the construction of the Tenant
Improvements, but in no event more frequently than once every thirty (30) days,
Tenant shall deliver to Landlord: (i) an application for payment from Tenant's
contractor, which application shall be approved by Tenant's architect, showing
the schedule, by trade, of the percentage of completion of the Tenant
Improvements, and detailing the portion of the work completed and not completed;
(ii) invoices; and (iii) executed conditional mechanic's lien releases from
Tenant's contractor and all of its subcontractors and materialmen, which lien
releases shall comply with the appropriate provisions of California Civil Code
Section 3262(d). Tenant's submission of said documents shall be deemed to be
Tenant's payment request for the amount approved by Tenant's architect. Thirty
(30) days after receipt of the foregoing documents, Landlord shall deliver to
Tenant a check made payable to Tenant or the contractor directly in an amount
equal to the lesser of (a) Landlord's Share of the application for payment, and
(b) the balance of the Tenant Improvement Allowance, provided that Landlord does
not reasonably dispute any request for payment. If Landlord reasonably disputes
any request for payment, Landlord shall promptly notify Tenant in writing of the
grounds for such disapproval, and Landlord shall pay the undisputed portion of
the request for payment. Following substantial completion of the Tenant
Improvements and prior to Landlord's final disbursement of the Tenant
Improvement Allowance (which shall include a retention of ten percent (10%) of
the Tenant Improvement Allowance), Tenant shall comply with the requirements set
forth in Section 3.8 above, together with the following: (a) Tenant shall have
submitted to Landlord a cost breakdown of Tenant's final and total construction
costs incurred in connection with the Tenant Improvements, together with
receipted invoices showing evidence of full payment therefor; (b) Tenant shall
have completed



                               Exhibit B - Page 7
<PAGE>   65

Landlord's punchlist items, which list shall be provided by Landlord to Tenant
in accordance with Section 5 below; and (c) the Lease shall be in full force and
effect and there shall exist no event of default under the Lease or this Work
Letter, and no condition, event or act which, with the passage of time or the
giving of notice, or both, would constitute an event of default under the Lease
or this Work Letter. Landlord shall pay the final disbursement of the Tenant
Improvement Allowance within thirty (30) days after satisfaction of the
foregoing requirements.

            4.4 Construction Management. Landlord shall retain a third party to
supervise Tenant's construction of the Tenant Improvements (but not to provide
construction management services for such work), the cost of which shall be
payable in monthly installments out of the Tenant Improvement Allowance, not to
exceed $75,000. Tenant shall have the right to rely on the acts of such third
party as if such third party were the Landlord.

         5. Walk-Through of Tenant Improvements. Within two (2) business days
following the completion of the Tenant Improvements, Tenant shall notify
Landlord of the completion thereof and shall provide Landlord an opportunity to
inspect the Tenant Improvements. Within three (3) business days following
Tenant's notice, Landlord (or its representative) shall walk-through and inspect
Tenant's work on the Tenant Improvements and shall either approve Tenant's work
or advise Tenant in writing of any defects or uncompleted items. Tenant shall
promptly repair such defects or uncompleted items to Landlord's reasonable
satisfaction. Landlord's approval of the Tenant Improvements, or Landlord's
failure to advise Tenant of any defects or uncompleted items in the Tenant
Improvements, shall not relieve Tenant of responsibility for constructing and
installing the Tenant Improvements in accordance with the Final Plans and this
Work Letter, and in compliance with all applicable laws.

         6. Default. Each of the following events shall constitute an event of
default ("Default") under this Work Letter:

                 (a) Failure to comply with those conditions set forth in this
Work Letter which are required to be fulfilled by Tenant prior to the
commencement and installation of Tenant Improvements, which failure shall not be
cured within fifteen (15) days after Tenant's receipt of written notice thereof
from Landlord (or such longer period as may be reasonably required);

                 (b) Failure to commence and/or complete construction of the
Tenant Improvements in compliance with this Work Letter, which failure shall not
be cured within fifteen (15) days after Tenant's receipt of written notice
thereof from Landlord (or such longer period as may be reasonably required); and

                 (c) The default or breach by Tenant of any provision of the
Lease, which continues after Tenant's receipt of notice and expiration of the
applicable cure period set forth in the Lease.

         7. Remedies. In the event of a Default by Tenant hereunder, Landlord
shall thereafter have no further obligation to disburse any portion of the
Tenant Improvement Allowance unless and until such Default is cured. In
addition, upon the occurrence of a Default by Tenant hereunder, Landlord shall
have the right (but not the obligation), at Tenant's sole cost



                               Exhibit B - Page 8
<PAGE>   66

and expense, to enter upon the Premises and take over and complete construction
and installation only as to those areas where the construction or installation
of the Tenant Improvements has been commenced and such other areas to the extent
necessary to relet the Premises, and to make disbursements from the Tenant
Improvement Allowance toward completion of the Tenant Improvements. In
connection therewith, Landlord may discharge or replace the contractors or
subcontractors performing such work. In no event shall Landlord be required to
expend its own funds to complete the Tenant Improvements if the Tenant
Improvement Allowance is insufficient. Where substantial deviations from the
Final Plans have occurred which have not been approved by Landlord, or defective
or unworkmanlike labor or materials are being used in construction of the Tenant
Improvements, Landlord shall have the right to demand that such labor or
materials be corrected, and if the same are not so corrected, shall have the
right to immediately order the stoppage of all construction until such condition
is corrected. After issuance of such an order in writing, no further work shall
be done on the Tenant Improvements without the prior written consent of Landlord
unless and until said condition has been fully corrected.

         8. Miscellaneous. Time is of the essence of this Work Letter. The
invalidity or unenforceability of any one or more provisions of this Work Letter
will in no way affect the validity or enforceability of any other provision.
This Work Letter and the Lease to which this Work Letter is attached constitute
the entire agreement of the parties with respect to the subject matter hereof.
This Work Letter may not be modified or amended except by a written agreement
signed by Landlord and Tenant. The captions of the paragraphs of this Work
Letter are for convenience and reference only, and in no way modify, amplify or
interpret the provisions of this Work Letter.

         9. Attorneys' Fees. If any action or proceeding is commenced to enforce
the provisions of this Work Letter, the prevailing party in such action or
proceeding will have the right to recover from the other party its reasonable
attorneys' fees and costs and expenses of litigation.

         10. Conflict. In the event of any conflict between the terms of the
Lease and the terms of this Work Letter concerning the construction of the
Tenant Improvements, the terms of this Work Letter shall prevail.

         11. Consents. Any time that the consent or approval of Landlord is
required pursuant to this Work Letter, such consent or approval shall not be
unreasonably withheld, conditioned or delayed, unless such consent or approval
relates to matters affecting the Building structure or Building systems.
Landlord and Tenant agree to act reasonably and in good faith under this Work
Letter, so as to minimize any delays in the construction of Landlord Work and
the Tenant Improvements.

         12. Historical Significance . Any actual delay in the design and
construction of the Tenant Improvements resulting from Landlord's application
for certification of the Building as a National Historic Landmark shall
constitute a Landlord Delay; provided, however, that Tenant must comply with the
Historic Guidelines attached hereto as Schedule 2 and any delay caused by
Landlord requiring Tenant to comply with such guidelines shall not constitute a
Landlord Delay.



                               Exhibit B - Page 9
<PAGE>   67

Landlord, at its expense, shall be responsible for submitting all applications
and coordinating such certification.



                              Exhibit B - Page 10
<PAGE>   68

                                   SCHEDULE 1

                                 LANDLORD'S WORK

1.       Base building main sprinkler loop including sprinkler heads at a
         minimum density required by code. Tenant, at Tenant's expense, may
         elect to have Landlord install rapid response sprinkler heads.

2.       Fire alarms, smoke detectors, strobe lights, exit door lights, and
         supporting power panel requirements installed per code in the common
         areas.

3.       HVAC: Approximately six rooftop package units (totaling approximately
         630 tons or a minimum of one ton per 350 square feet) of cooling to the
         Premises. The system to be designed for VAV modulation utilizing
         variable speed drives. Supply air delivered to each floor shall be not
         less than 0.15 cfm per square foot.

4.       Subject to PG&E engineering, the building electrical power design
         provides approximately 3500 amp service, 480/277 volt, 3-phase, 4-wire
         service with provisions for an additional 3500 amp future service (if
         Tenant desires, at its expense). The main electrical room is located in
         the basement and conduits are provided from the main electrical room to
         the stacked core electrical rooms at each floor. The tenant will be
         responsible for all panels, feeders, boards, etc. The building is
         designed to easily accommodate up to three standby 400 KW
         rooftop-mounted generators should tenant(s) wish to provide and
         maintain them. There are six 4-inch conduits for PacBell service and
         eight 4-inch conduits for alternate service providers from separate
         boxes (one for PacBell and one for alternate service providers) outside
         the building connected to the main telephone room in the basement.
         Secondary raceways and distribution wiring for power and lighting shall
         be paid for by the tenant.

5.       New men's and women's restrooms on each floor of the leased Premises
         pursuant to the drawings listed as Exhibit A to Schedule 1, which shall
         be ADA compliant.

6.       Main ground floor lobby finished to building standard, or at Tenant's
         election, Tenant shall receive an allowance equal to Landlord's
         budgeted amount for such work. And drywall installation in the core
         shall be taped and textured and ready for Tenant' finishes.

7.       Finished fire stairs designed to meet current governmental codes
         pursuant to the drawings listed as Exhibit A to Schedule 1.

8.       Two new traction passenger elevators will be installed to service the
         office floors pursuant to the drawings listed as Exhibit A to Schedule
         1.

9.       Construction of a structured parking garage adjacent to the Building.

10.      The Building is required to conform to the 1994 seismic code. However,
         the Landlord intends to upgrade the Building to the 1997 seismic code.

11.      Existing floors to be sheathed in plywood.



                                     page 1
<PAGE>   69

12.      Windows and perimeter walls will be repaired, as necessary, sealed and
         finished to a water-tight condition (to the extent possible consistent
         with the Historic Guidelines).

13.      All finishes shall be consistent with a first-class office building.

         The final plans for Landlord's Work are being completed as of the date
of this Lease and therefore the exact plans together with specific
specifications and plans are subject to changes based upon all governmental
requirements and physical limitations.



                                     page 2
<PAGE>   70

                            Tanner Leddy Maytum Stacy

                  Drawings for the Baker & Hamilton Development


<TABLE>
<CAPTION>
<S>          <C>                                             <C>
BH A2.1      Basement Floor Plan dated 5 November 1999       Issued for Lease

BH A2.2      First Floor Plan dated 5 November 1999          Issued for Lease

BH A2.3      Second Floor Plan dated 5 November 1999         Issued for Lease

BH A2.4      Third Floor Plan dated 5 November 1999          Issued for Lease

BH A2.5      Roof Plan dated 5 November 1999                 Issued for Lease

BH A3.1      Elevations dated 5 November 1999                Issued for Lease

BH A3.2      Elevations dated 5 November 1999                Issued for Lease
</TABLE>



                                     page 3
<PAGE>   71

                                   SCHEDULE 2

                          THE BAKER & HAMILTON BUILDING

                       TENANT IMPROVEMENTS DESIGN CRITERIA

         The building owner has established the following special criteria as a
guide to the tenant for the design and construction of tenant improvements in
the historic Baker & Hamilton Building.

         The Baker & Hamilton Building has been designated Landmark Structure
No. 193 in the Planning Code of the City and County of San Francisco. Certain
tenant improvements may require special review and approval for a Certificate of
Appropriateness by the San Francisco Landmark Preservation Advisory Board.

         As an official city landmark, the building is a "qualified historic
building", as defined by the State Historic Building Code. All tenant
improvements are required to comply with the State Historic Building Code, in
conjunction with the current editions of the San Francisco Building Codes. The
building is classified as Type IV Heavy Timber construction in the San Francisco
Building Code.

         The building owner has applied for certification of the historic
building and its rehabilitation by the State Historic Preservation Office and
the National Park Service. Once certified, the rehabilitation will qualify for
preservation tax incentives for the owner. To preserve these tax incentives, any
modifications including tenant improvements made within a five year period after
occupancy of the rehabilitated building must comply with the Secretary of
Interior Standards for Rehabilitation. Design and construction documents for
tenant improvements will be reviewed by the State Historic Preservation Office
and the National Park Service for certification compliance. All tenant
improvements will be required to comply with these certification requirements
including the Secret airy of Interior Standards for Rehabilitation.

         In addition, the building owner has established the following general
design criteria for tenant improvements:

1.       The historic timber structural components (columns, beams, trusses,
         decking) shall remain unpainted and exposed to view. Suspended ceilings
         and furring of columns are discouraged.

2.       The historic masonry walls shall remain unpainted and exposed to view.
         Furring of masonry walls is discouraged.

3.       The uninterrupted quality of the interior spaces shall be maintained.
         New interior partitions shall be kept to a reasonable minimum. Where
         necessary, partitions shall be designed to minimize view obstruction of
         the ceiling structure and preserve natural light reaching interior
         spaces.

4.       Historic construction shall be maintained and preserved. Penetrations
         and attachments to historic construction shall be minimized and shall
         be designed to be reversible without significant damage.



<PAGE>   72

5.       New partitions and ceilings shall not subdivide or cross directly
         behind historic windows so as to be visible from the exterior.

6.       New mechanical and electrical systems shall be carefully designed and
         exposed to view where possible. Exposed wiring, conduit, piping and
         ducts shall be designed and installed in neatly organized layouts using
         attractive components.

7.       Window shading systems are discouraged. Where allowed, shading systems
         shall be compatible with the historic windows.

8.       Impact sound attenuating flooring materials such as carpet and pad
         shall be used where the tenant is located over another tenant's space.
         Where hard flooring materials are required, impact sound dampening
         underlayments shall be used.



<PAGE>   73

                                    EXHIBIT C

                              RULES AND REGULATIONS

         1. No sidewalks, entrance, passages, courts, elevators, vestibules,
stairways, corridors or halls shall be obstructed or encumbered by Tenant or
used for any purpose other than ingress and egress to and from the Premises.

         2. No awning or other projection shall be attached to the outside walls
or windows of the Project without the prior written consent of Landlord. No
curtains, blinds, shades, drapes or screens visible from outside the Building
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. Such awnings,
projections, curtains, blinds, shades, drapes, screens and other fixtures must
be of a quality, type, design, color, material and general appearance approved
by Landlord, and shall be attached in the manner approved by Landlord. All
lighting fixtures visible from outside the Building hung in offices or spaces
along the perimeter of the Premises must be of a quality, type, design, bulb
color, size and general appearance approved by Landlord.

         3. No sign, advertisement, notice, lettering, decoration or other thing
shall be exhibited, inscribed, painted or affixed by Tenant on any part of the
outside or inside of the Premises or of the Project visible from outside the
Building, without the prior written consent of Landlord. In the event of the
violation of the foregoing by Tenant, Landlord may remove same without any
liability, and may charge the expense incurred by such removal to Tenant.

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

         5. No showcases or other articles shall be put in front of or affixed
to any part of the exterior of the Project, nor placed in public portions
thereof without the prior written consent of Landlord.

         6. The water and wash closets and other plumbing fixtures shall not be
used for any purposes other than those for which they were constructed, and no
sweepings, rubbish, rags or other substances shall be thrown therein. All
damages resulting from any misuse of the fixtures shall be borne by Tenant to
the extent that Tenant or Tenant's agents, servants, employees, contractors,
visitors or licensees shall have caused the same.

         7. Tenant shall not mark, paint, drill into (except in connection with
the hanging of art work or similar items) or in any way deface any part of the
Premises or the Project. No boring, cutting or stringing of wires shall be
permitted, except with the prior written consent of Landlord, and as Landlord
may direct.

         8. Prior to leaving the Premises for the day, Tenant shall extinguish
all lights.

         9. Tenant shall not make, or permit to be made, any unseemly or
disturbing noises or disturb or interfere with occupants of the Project, or
neighboring buildings or premises, or those



                               Exhibit C - Page 1
<PAGE>   74

having business with them. Tenant shall not throw anything out of the doors,
windows or skylights or down the passageways.

         10. Except as expressly permitted in the Lease, neither Tenant nor any
of Tenant's agents, servants, employees, contractors, visitors or licensees
shall at any time bring or keep upon the Premises any flammable, combustible or
explosive fluid, chemical or substance.

         11. No additional locks, bolts or mail slots of any kind shall be
placed upon any of the doors or windows by Tenant, nor shall any change be made
in existing locks or the mechanism thereof. Tenant must, upon the termination of
the tenancy, restore to Landlord all keys of stores, offices and toilet rooms,
either furnished to, or otherwise procured by Tenant.

         12. All removals, or the carrying in or out of any safes, freight,
furniture, construction material, bulky matter or heavy equipment of any
description must take place during the hours which Landlord or its agent may
reasonably determine from time to time. Landlord reserves the right to prescribe
the weight and position of all safes, which must be placed upon two-inch thick
plank strips to distribute the weight. The moving of safes, freight, furniture,
fixtures, bulky matter or heavy equipment of any kind must be made upon previous
notice to the Building Manager and in a manner and at times reasonably
prescribed by him, and the persons employed by Tenant for such work are subject
to Landlord's prior reasonable approval. Landlord reserves the right to inspect
all safes, freight or other bulky articles to be brought into the Project and to
exclude from the Project all safes, freight or other bulky articles which
violate any of these Rules and Regulations or the Lease of which these Rules and
Regulations are a part.

         13. Tenant shall not purchase spring water, towels, janitorial or
maintenance or other like service from any company or persons not approved by
Landlord. Landlord shall approve a sufficient number of sources of such services
to provide Tenant with a reasonable selection, but only in such instances and to
such extent as Landlord in its reasonable judgment shall consider consistent
with security and proper operation of the Project.

         14. Landlord shall have the night to prohibit any advertising or
business conducted by Tenant referring to the Project which, in Landlord's
reasonable opinion, tends to impair the reputation of the Project or its
desirability as a first class building for offices and/or commercial services
and upon notice from Landlord, Tenant shall refrain from or discontinue such
advertising.

         15. Landlord reserves the right to exclude from the Project between the
hours of 6:00 p.m. and 8:00 a.m. Monday through Friday, after 1:00 p.m. on
Saturdays and at all hours Sundays and legal holidays, all persons who do not
present a pass to the Project issued by Landlord. Landlord may furnish passes to
Tenant so that Tenant may validate and issue same. Tenant shall safeguard said
passes and shall be responsible for all acts of persons in or about the Project
who possess a pass issued to Tenant.

         16. Tenant's contractors shall, while in the Premises or elsewhere in
the Project, be subject to and under the control and direction of the Building
Manager (but not as agent or servant of said Building Manager or of Landlord).



                               Exhibit C - Page 2
<PAGE>   75

         17. If the Premises is or becomes infested with vermin as a result of
the use or any misuse or neglect of the Premises by Tenant, its agents,
servants, employees, contractors, visitors or licensees, Tenant shall forthwith
at Tenant's expense cause the same to be exterminated from time to time to the
satisfaction of Landlord and shall employ such licensed exterminators as shall
be approved in writing in advance by Landlord.

         18. The requirements of Tenant will be attended to only upon
application at the office of the Project. Project personnel shall not perform
any work or do anything outside of their regular duties unless under special
instructions from the office of the Landlord.

         19. Canvassing, soliciting and peddling in the Project are prohibited
and Tenant shall cooperate to prevent the same.

         20. No air conditioning unit or system or other apparatus shall be
installed or used by Tenant without the written consent of Landlord.

         21. There shall not be used in any premises, or in the public halls,
plaza areas, lobbies, or elsewhere in the Project, either by Tenant or by
jobbers or others, in the delivery or receipt of merchandise, any hand trucks or
doilies, except those equipped with rubber tires and sideguards.

         22. If required by applicable laws, Tenant shall install and maintain,
at Tenant's sole cost and expense, an adequate visibly marked (at all times
properly operational) fire extinguisher next to any duplicating or photocopying
machine or similar heat producing equipment, which may or may not contain
combustible material, in the Premises.

         23. Tenant shall not use the name of the Project for any purpose other
than as the address of the business to be conducted by Tenant in the Premises,
nor shall Tenant use any picture of the Project in its advertising, stationery
or in any other manner without the prior written permission of Landlord.
Landlord expressly reserves the right at any time to change said name without in
any manner being liable to Tenant therefor.

         24. Tenant shall not prepare any food nor do any cooking, operate or
conduct any restaurant, luncheonette or cafeteria for the sale or service of
food or beverages to its employees or to others, except that food and beverage
preparation by Tenant's employees using microwave ovens or coffee makers shall
be permitted provided no odors of cooking or other processes emanate from the
Premises. Tenant shall not install or permit the installation or use of any
vending machine or permit the delivery of any food or beverage to the Premises
except by such persons and in such manner as are reasonably approved in advance
in writing by Landlord.

         25. The Premises shall not be used as an employment agency, a public
stenographer or typist, a labor union office, a physician's or dentist's office,
a dance or music studio, a school, a beauty salon, or barber shop, the business
of photographic, multilith or multigraph reproductions or offset printing (not
precluding using any part of the Premises for photographic, multilith or
multigraph reproductions solely in connection with Tenant's own business and/or
activities), a restaurant or bar, an establishment for the sale of
confectionery, soda, beverages, sandwiches, ice cream or baked goods, an
establishment for preparing, dispensing or consumption of food or beverages of
any kind in any manner whatsoever, or news or cigar stand,



                               Exhibit C - Page 3
<PAGE>   76

or a radio, television or recording studio, theatre or exhibition hall, or
manufacturing, or the storage or sale of merchandise, goods, services or
property of any kind at wholesale, retail or auction, or for lodging, sleeping
or for any immoral purposes.

         26. Business machines and mechanical equipment shall be placed and
maintained by Tenant at Tenant's expense in settings sufficient in Landlord's
judgment to absorb and prevent vibration, noise and annoyance. Tenant shall not
install any machine or equipment which causes noise, heat, cold or vibration to
be transmitted to the structure of the building in which the Premises are
located without Landlord's prior written consent, which consent may be
conditioned on such terms as Landlord may require. Tenant shall not place a load
upon any floor of the Premises exceeding the floor load per square foot that
such floor was designed to carry and which is allowed by Law.

         27. Smoking is prohibited in the Premises, the Building and all
enclosed Common Areas of the Project, including all lobbies, all hallways, all
elevators and all lavatories.

         28. In the event of any conflict between the provisions of the Lease
and the Rules and Regulations, the Lease shall govern.



                               Exhibit C - Page 4
<PAGE>   77

                                     RIDER 1

                           COMMENCEMENT DATE AGREEMENT

         Baker Hamilton Properties, LLC ("Landlord"), and Organic, Inc., a
_____________ corporation ("Tenant"), have entered into a certain Lease, dated
as of November _, 1999 (the "Lease").

         WHEREAS, Landlord and Tenant wish to confirm and memorialize the
Commencement Date and Expiration Date of the Lease as provided for in Section
2.2(b) of the Lease;

         NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants contained herein and in the Lease, Landlord and Tenant agree as
follows:

         1. Unless otherwise defined herein, all capitalized terms shall have
the same meaning ascribed to them in the Lease.

         2. The Commencement Date (as defined in the Lease) of the Lease is
_______________.

         3. The Expiration Date (as defined in the Lease) of the Lease is
_________________.

         4. Tenant hereby confirms the following:

            (a)  That it has accepted possession of the premises pursuant to the
                 terms of the Lease;

            (b)  That the Landlord Work is Substantially Complete; and

            (c)  That the Lease is in full force and effect.

         5. Except as expressly modified hereby, all terms and provisions of the
Lease are hereby ratified and confirmed and shall remain in full force and
effect and binding on the parties hereto.

         6. The Lease and this Commencement Date Agreement contain all of the
terms, covenants, conditions and agreements between the Landlord and the Tenant
relating to the subject matter herein. No prior other agreements or
understandings pertaining to such matters are valid or of any force and effect.



                               Exhibit C - Page 5
<PAGE>   78

TENANT:                                      LANDLORD:


ORGANIC, INC.                                BAKER HAMILTON PROPERTIES, LLC.
a Delaware corporation



By:________________________________          By:________________________________

Print Name_________________________          Print Name:________________________

Its:_______________________________          Its:_______________________________



By:________________________________

Print Name_________________________

Its:_______________________________