<PAGE>   1
                                                                   EXHIBIT 10.16



                         STANDARD INDUSTRIAL NET LEASE



CENTER NAME:        JBC Sorrento West

LANDLORD:           JBC Sorrento West

TENANT:             Applied Molecular Evolution, Inc.

<PAGE>   2
<TABLE>
<S>       <C>                                                                            <C>
 1.       BASIC LEASE TERMS.............................................................. 1
          1.1        Address for Notice.................................................. 1
          1.2        Description of Premises............................................. 1
          1.3        Commencement Date................................................... 1
          1.4        Lease Term.......................................................... 1
          1.5        Minimum Monthly Rent................................................ 1
          1.6        Security Deposit.................................................... 1
          1.7        Tenant's Pro Rata Share of Operating Costs.......................... 1
          1.8        Permitted Use....................................................... 1
          1.9        Tenant's Guarantor.................................................. 1
          1.10       Tenant's Parking Spaces............................................. 1
          1.11       Landlord's Broker/Tenant's Broker................................... 1
          1.12       Additional Provisions............................................... 1
          1.13       Exhibits............................................................ 1

 2.       LEASE OF PREMISES.............................................................. 1

 3.       LEASE TERM..................................................................... 1
          3.1        Commencement........................................................ 1
          3.2        Delay in Commencement............................................... 2
          3.3        Early Occupancy..................................................... 2

 4.       RENT........................................................................... 2
          4.1        Minimum Monthly Rent.................................................2
          4.2        Lease Year.......................................................... 2
          4.3        Additional Rent..................................................... 2
          4.4        Impounds............................................................ 2

 5.       SECURITY DEPOSIT............................................................... 2

 6.       OPERATING COSTS................................................................ 2
          6.1        Payment of Operating Costs by Tenant................................ 2
          6.2        Pro Rata Share of Operating Costs................................... 2
          6.3        Operating Costs..................................................... 2
          6.4        Common Facilities................................................... 2

 7.       MAINTENANCE AND REPAIRS........................................................ 3
          7.1        Tenant's Obligations................................................ 3
          7.2        Landlord's Obligations.............................................. 3
          7.3        Performance By Landlord............................................. 3

 8.       REAL PROPERTY TAXES............................................................ 3
          8.1        Payment of Real Property Taxes by Tenant............................ 3
          8.2        Real Property Taxes Defined......................................... 3
          8.3        Personal Property Taxes............................................. 3

 9.       INSURANCE...................................................................... 3
          9.1        All Risk Coverage................................................... 3
          9.2        Tenant's Personal Property and Fixtures............................. 3
          9.3        Tenant's Liability Insurance........................................ 3
          9.4        Payment of Insurance Costs.......................................... 4
          9.5        Waiver of Subrogation............................................... 4
          9.6        Tenant's Use Not to Increase Premium................................ 4
          9.7        Boiler and Machinery Coverage....................................... 4

10.       UTILITIES...................................................................... 4

11.       USE............................................................................ 4
          11.1       Permitted Use....................................................... 4
          11.2       Compliance with Law and Other Requirements.......................... 4
          11.3       Waste, Quiet Conduct................................................ 4
          11.4       Rules and Regulations............................................... 4
          11.5       Signs............................................................... 4
          11.6       Parking............................................................. 5
          11.7       Entry by Landlord................................................... 5

12.       ACCEPTANCE OF PREMISES; NON-LIABILITY OF LANDLORD; DISCLAIMER.................. 5
          12.1       Acceptance of Premises.............................................. 5
          12.2       Landlord's Exemption From Liability................................. 5
          12.3       No Warranties or Representations.................................... 5
          12.4       Keys................................................................ 5

13.       INDEMNIFICATION................................................................ 5

14.       HAZARDOUS MATERIALS............................................................ 6
          14.1       Definitions......................................................... 6
          14.2       Use of Hazardous Materials.......................................... 6
          14.3       Compliance With Laws; Handling Hazardous Materials.................. 6
          14.4       Notice; Reporting................................................... 6
          14.5       Indemnity........................................................... 6
          14.6       Entry and Inspection; Cure.......................................... 6
          14.7       Termination/Expiration.............................................. 6
          14.8       Exit Assessment..................................................... 6
          14.9       Event of Default.................................................... 7

15.       ALTERATIONS; LIENS............................................................. 7
          15.1       Alterations by Tenant............................................... 7
          15.2       Permits and Governmental Requirements............................... 7
          15.3       Liens............................................................... 7

16.       DAMAGE AND DESTRUCTION......................................................... 7
          16.1       Partial Insured Damage.............................................. 7
          16.2       Insurance Deductible................................................ 7
          16.3       Uninsured Damage.................................................... 7
          16.4       Total Destruction................................................... 7
          16.5       Partial Destruction of Center....................................... 7
          16.6       Tenant's Obligations................................................ 7
          16.7       Rent Abatement...................................................... 7
          16.8       Waiver of Inconsistent Statutes..................................... 8

17.       CONDEMNATION................................................................... 8
          17.1       Condemnation of Premises............................................ 8
          17.2       Condemnation of Parking Area........................................ 8
          17.3       Condemnation Award.................................................. 8

18.       ASSIGNMENT AND SUBLETTING...................................................... 8
          18.1       Landlord's Consent Required......................................... 8
          18.2       Landlord's Election................................................. 8
          18.3       Costs; Transfer Fee................................................. 8
          18.4       Assumption; No Release of Tenant.................................... 8
          18.5       No Merger........................................................... 8
          18.6       Reasonable Restriction.............................................. 8

19.       SUBORDINATION; ATTORNMENT; ESTOPPEL CERTIFICATE................................ 8
          19.1       Subordination....................................................... 8
          19.2       Attornment.......................................................... 9
          19.3       Estoppel Certificates............................................... 9

20.       SURRENDER OF PREMISES.......................................................... 9
          20.1       Condition of Premises............................................... 9
          20.2       Removal of Certain Alterations, Fixtures and
                          Equipment Prohibited........................................... 9
          20.3       Holding Over........................................................ 9

21.       DEFAULT BY TENANT.............................................................. 9

22.       REMEDIES....................................................................... 9
          22.1       Termination of Lease................................................ 9
          22.2       Continuation of Lease.............................................. 10
          22.3       Performance By Landlord............................................ 10
          22.4       Late Charge; Interest on Overdue Payments.......................... 10
          22.5       Landlord's Right to Require Advance Payment of Rent;
                          Cashier's Checks.............................................. 10

23.       DEFAULT BY LANDLORD........................................................... 10
          23.1       Notice to Landlord................................................. 10
          23.2       Notice to Mortgagees............................................... 10
          23.3       Limitations on Remedies Against Landlord........................... 10

24.       GENERAL PROVISIONS............................................................ 10
          24.1       Action or Defense by Tenant........................................ 10
          24.2       Arbitration and Mediation Waiver of Jury Trial..................... 11
          24.3       Attorneys' Fees.................................................... 11
          24.4       Authority of Tenant................................................ 11
          24.5       Binding Effect..................................................... 11
          24.6       Brokers............................................................ 11
          24.7       Construction....................................................... 11
          24.8       Counterparts....................................................... 11
          24.9       Covenants and Conditions........................................... 11
          24.10      Entire Agreement................................................... 11
          24.11      Exhibits........................................................... 11
          24.12      Financial Statements............................................... 11
          24.13      Force Majeure...................................................... 11
          24.14      Governing Law...................................................... 11
          24.15      Joint and Several Liability........................................ 11
          24.16      Modification....................................................... 11
          24.17      Modification for Lender............................................ 11
          24.18      Nondiscrimination.................................................. 11
          24.19      Notice............................................................. 11
          24.20      Partial Invalidity................................................. 11
          24.21      Quiet Enjoyment.................................................... 11
          24.22      Recording.......................................................... 11
          24.23      Relationship of the Parties........................................ 12
          24.24      Relocation of Tenant............................................... 12
          24.25      Rights of Redemption Waived........................................ 12
          24.26      Time of Essence.................................................... 12
          24.27      Transfer of Landlord's Interest.................................... 12
          24.28      Waiver............................................................. 12

          Exhibit "A" - Description of Premises
          Exhibit "B" - Rules and Regulations
          Exhibit "C" - Sign Criteria
</TABLE>




<PAGE>   3
                         STANDARD INDUSTRIAL NET LEASE

This STANDARD INDUSTRIAL NET LEASE ("Lease"), dated for reference purposes only
November 20, 2000, is entered into by JBC Sorrento West, LLC, a California
Limited Liability ("Landlord"), and Applied Molecular Evolution, Inc., a
Delaware Corporation Company ("Tenant").

1.   BASIC LEASE TERMS.

     The basic terms of the Lease set forth in this Article 1 shall be read in
conjunction with the other Articles of this Lease, which define and explain the
basic terms.

     1.1  ADDRESS FOR NOTICE (see Section 24.19):

          Landlord:      11750 Sorrento Valley Road, Suite 209
                         San Diego, California 92121
                         Attention: [Center Name] Property Management

          Tenant:        At the Premises, or
                         Address for Tenant other than at the Premises
                         (required):
                         3520 Dunhill Street
                         San Diego, CA 92121

     1.2  DESCRIPTION OF PREMISES:

          Center Name:   Sorrento West
          Address:       11095 Flintkote Avenue
                         San Diego, CA 92121

          Suite/Unit     A - D

          Approximate Rentable Square Footage (see Exhibit "A"): 15,593
          (Subject to Tenant's field measurement within sixty (60) days of the
          date hereof).

     1.3  COMMENCEMENT DATE: January 1, 2001 (*early occupancy allowed
          11/1/2000 or as soon as existing Tenant vacates premises).

     1.4  LEASE TERM (see Article 3): Approximately three (3) years and -0-
          months, beginning on the Commencement Date and ending on the last day
          of the calendar month of December, 2003 (the "Expiration Date").

     1.5  MINIMUM MONTHLY RENT: $20,271.00 per month for the first Lease Year,
          as provided in Article 4. The Minimum Monthly Rent shall be increased
          on the first day of the second (2nd) Lease Year and each first day of
          each succeeding Lease Year by four percent (4%) of the Minimum Monthly
          Rent in effect immediately prior to the date of such adjustment.

               1/1/2002-12/31/2002-$21,082 per month;
               1/1/2003-12/31/2003-$21,925 per month

     1.6  SECURITY DEPOSIT: $20,000.00 (see Article 5).

     1.7  TENANT'S PRO RATA SHARE OF OPERATING COSTS (see Article 6): 9.6%.

     1.8  PERMITTED USE (see Article 11): legal office and science related uses
          related to a life science company, and for no other use.

     1.9  TENANT'S GUARANTOR (if none, so state): none

     1.10 TENANT'S PARKING SPACES (Unassigned) (see Section 11.6): forty-five
          (45)

     1.11 LANDLORD'S BROKER (if none, so state): Asset Management Group
          TENANT'S BROKER (if none, so state): Shaun Burnett, Irving Hughes
          Group

     1.12 ADDITIONAL PROVISIONS: The following additional provisions are
          attached to and made a part of this Lease (if none, so state): First
          Addendum -- tenant improvements

     1.13 EXHIBITS: The following Exhibits are attached to and made a part of
          this Lease:

               EXHIBIT "A" -- Description of Premises
               EXHIBIT "B" -- Rules and Regulations
               EXHIBIT "C" -- Sign Criteria


<PAGE>   4

2.   LEASE OF PREMISES.

     Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord,
the premises (the "Premises") described in Section 1.2, which are indicated on
the site/floor plan attached as Exhibit "A". The Premises are part of the office
or industrial center identified in Section 1.2 (the "Center"). The approximate
Rentable Square Footage identified in Section 1.2 is a measurement of the net
leasable floor area of the Premises, as determined by Landlord and applied on a
consistent basis throughout the Center.

3.   LEASE TERM.

     3.1  Commencement. The term of this Lease (the "Lease Term") shall commence
on the Commencement Date stated in Section 1.3 and shall continue for the period
stated in Section 1.4, unless sooner terminated pursuant to any provision of
this Lease.

     3.2  Delay in Commencement. If Landlord cannot deliver possession of the
Premises to Tenant on the Commencement Date specified in Section 1.3 for any
reason, Landlord shall not be subject to any liability therefor. Such
non-delivery shall not affect the validity of this Lease nor the obligations of
Tenant hereunder. However: (a) Tenant shall not be obligated to pay rent until
possession of the Premises is delivered to Tenant, (b) if possession of the
Premises is not delivered to Tenant within thirty (30) days of the Commencement
Date, the last day of the Lease Term shall be extended by the total number of
days that possession is so delayed, plus the minimum number of additional days
necessary to make the Expiration Date the last day of a calendar month, and (c)
if Landlord has not delivered possession of the Premises within sixty (60) days
after the Commencement Date, (and such delay is not caused by Tenant or Tenant's
contractors). Tenant may elect to terminate this Lease by delivering written
notice to Landlord within thirty (30) days thereafter, in which event the
parties shall be discharged from all further obligations hereunder.

     3.3  Early Occupancy. If Tenant occupies the Premises prior to the
Commencement Date, such occupancy shall be subject to all provisions of this
Lease. Such occupancy shall not advance the Expiration Date. Unless such
occupancy is solely for the purpose of installing fixtures and equipment, Tenant
shall pay Minimum Monthly Rent at the rate in effect for the first Lease Year.
Additional Rent and all other charges required hereunder for such early
occupancy period.

4.   RENT.

     4.1  Minimum Monthly Rent. Tenant shall pay minimum monthly rent ("Minimum
Monthly Rent") in the initial amount stated in Section 1.5. The Minimum Monthly
Rent shall be increased as set forth in Section 1.5 and/or elsewhere in this
Lease. Tenant shall pay the Minimum Monthly Rent on or before the first day of
each calendar month, in advance, at the office of Landlord or at such other
place designated by Landlord, without deduction, offset or prior demand, except
as otherwise provided herein. If the Commencement Date is not the first day of a
calendar month, the rent for the partial month at the beginning of the Lease
Term shall be prorated on a per diem basis and shall be due on the first day of
such partial month. Upon execution of this Lease, Tenant shall pay the first
month's Minimum Monthly Rent to Landlord.

     4.2  Lease Year. As used in this Lease, the term "Lease Year" means (i) the
first period of twelve (12) full calendar months following the Commencement Date
(including, if the Commencement Date is not the first day of a calendar month,
the period between the Commencement Date and the next first day of the month),
(ii) each period of twelve (12) full calendar months thereafter, and (iii) any
remaining period at the end of the Lease Term of less than twelve (12) full
calendar months.

     4.3  Additional Rent. All charges payable by Tenant in addition to Minimum
Monthly Rent shall constitute Additional Rent to Landlord. All remedies
available to Landlord for nonpayment of rent shall be available for nonpayment
of any such Additional Rent. Unless this Lease provides otherwise, all
Additional Rent shall be paid by Tenant, without limitation or offset, within
fifteen (15) days after Tenant's receipt of a statement from Landlord.
Additional Rent includes, without limitation, Operating Costs (see Article 6),
Maintenance and Repairs (see Article 7), Real Property Taxes (see Article 8),
Insurance costs (see Article 9), Utilities (see Article 10), and attorneys' fees
and costs (see Section 24.3). If any Minimum Monthly Rent is abated or waived
pursuant to another specific term of this Lease or in any separate agreement, it
is understood that such abatement or waiver shall apply only to the Minimum
Monthly Rent, and Tenant shall be obligated to pay all components of Additional
Rent (including the applicable impounds thereof) during the periods of abatement
or waiver of Minimum Monthly Rent and throughout the Lease Term. Minimum Monthly
Rent, Additional Rent, and all other charges and monetary amounts due Landlord
from Tenant hereunder shall constitute "rent."

     4.4  Impounds. Landlord shall have the right, but not the obligation, to
collect and impound, in advance, any or all components of Operating Costs, Real
Property Taxes and Insurance costs based upon Landlord's reasonable estimate of
Tenant's future liability for such amounts under this Lease. Landlord shall
initially establish the monthly amount of such Impound ("Monthly Impound
Payments"), based upon its estimate of one-twelfth of Tenant's annual liability
therefor. Landlord shall have the right, at any time during the Lease Term, to
adjust the amount of the Monthly Impound Payment upon notice to Tenant. The
Monthly Impound Payment shall be due and payable on the first day of each month
throughout the Lease Term. Any failure to pay the Monthly Impound Payment when
due shall be an Event of Default under this Lease and shall entitle Landlord to
exercise any or all of its remedies available in the same manner as for the
failure to pay rent, including the imposition of late charges and interest, and
the right of Landlord to require that future payment of the Monthly Impound
Payments be made by cashier's check. Upon the occurrence of any Event of Default
by Tenant hereunder, Landlord shall have the right to apply all unapplied
amounts of Monthly Impound Payments to Tenant's default. Within ninety (90) days
after the end of each calendar year, Landlord shall deliver to Tenant an
accounting of Tenant's actual Pro Rata Share of Operating Costs and the
estimated amounts paid by Tenant. Any overpayment by Tenant shall be credited
against next Monthly Impound Payments due hereunder, or, at Landlord's option,
shall be remitted to Tenant. Tenant shall pay the amount of any underpayment
within fifteen (15) days after receipt of the accounting. Tenant acknowledges
that the Monthly Impound Payments are estimates only and not a representation of
the amount of Tenant's ultimate liability for Operating Costs, Real Property
Taxes and Insurance costs.

5.   SECURITY DEPOSIT.

     Upon execution of this Lease, Tenant shall deposit with Landlord the amount
specified in Section 1.6 (the "Security Deposit"), to be held by Landlord,
without liability for interest, as security for Tenant's performance of its
obligations under this Lease. Landlord shall not be required to keep the
Security Deposit separate from its other accounts. Landlord may apply all or a
part of the Security Deposit to any unpaid rent (including unpaid Additional
Rent or Monthly Impound Payments) or other monetary payments due from Tenant or
to cure any other default of Tenant hereunder and to compensate Landlord for all
damage and expense sustained as a result of such default. If all or any portion
of the Security Deposit is so applied, Tenant shall deposit cash sufficient to
restore the Security Deposit to its original amount within fifteen (15) days
after receipt of Landlord's written demand. If Tenant fully and faithfully
performs each of its obligations under this Lease, the Security Deposit or any
balance thereof shall be returned to Tenant within fifteen (15) days of the
later of the expiration or earlier termination of this Lease or the vacation of
the Premises by Tenant. At Landlord's request, Tenant shall accompany Landlord
or Landlord's representative on a "walk-through" of the Premises prior to
Landlord's return of the Security Deposit.

6.   OPERATING COSTS.

     6.1  Payment of Operating Costs by Tenant. Tenant shall pay its pro rata
share of Operating Costs for the Center, as defined in Section 1.7. Tenant's pro
rata share shall be computed by Landlord on a monthly or other periodic basis
reasonably selected by Landlord. Tenant shall pay the amount of such pro rata
share to Landlord, to the extent such obligation exceeds any amount thereof
impounded under Section 4.4, within fifteen (15) days after receipt of a
statement from Landlord.

     6.2  Pro Rata Share of Operating Costs. Tenant's pro rata share of
Operating Costs is stated in Section 1.7 and represents the ratio of the
Rentable Square Footage of the Premises (identified in Section 1.2) to the total
Rentable Square Footage of the Center, as determined by Landlord from time to
time. Changes in Rentable Square Footage shall be effective on the first day of
the first calendar month following the change. Tenant's share of Real Property
Taxes, Insurance costs and other components of Additional Rent shall be computed
on the same basis as Tenant's Pro Rata Share of Operating Costs, unless Landlord
reasonably determines that some other basis would be equitable.

     6.3  Operating Costs. "Operating Costs" includes all costs of operating,
managing, repairing and maintaining the Common Facilities, including without
limitation: gardening and landscaping; the cost of public liability and property
damage insurance; Real Property Taxes, as defined in Section 8.2 but applicable
to the Common Facilities; utilities; line painting and parking lot repairs; roof
repairs; lighting; trash and refuse removal; supplies; equipment; exterior
painting; amortized cost of capital improvements (including without limitation
the costs of roof, parking lot and underground utilities replacements);
reasonable reserves for repairs and replacements; the amortized costs of
altering, improving, renovating, upgrading or retrofitting any portion of the
Common Facilities to comply with all laws, regulations and governmental
requirements applicable to the Center (including without limitation those
related to disabled persons, hazardous materials, lighting upgrades, sprinkler
and energy-saving retrofits arising from any revisions or replacements to such
laws, regulations or governmental requirements in effect after the Commencement
Date); security service; property management costs and administrative fees;
bookkeeping services; labor; and the cost of personnel to implement such
services and to direct parking. In lieu of including the entire amount of any
such expense in Operating Costs in any one period, Landlord, at its election,
may spread the inclusion of, or may amortize, any such expenses or a reasonable
reserve for anticipated expenses, in Operating Costs over such multiple periods
as Landlord shall reasonably determine. See Addendum.
<PAGE>   5
     6.4  COMMON FACILITIES. "Common Facilities" means all areas, facilities,
utilities, equipment and services provided by Landlord for the common use or
benefit of the occupants of the Center and their employees, agents, customers
and other invitees, including without limitation: building lobbies, common
corridors and hallways, restrooms, pedestrian walkways, driveways and access
roads, access facilities for disabled persons (including elevators), truck
serviceways, loading docks, garages, driveways, parking lots, landscaped areas,
stairways, elevators, retaining walls, all areas required to be maintained under
the conditions of governmental approvals for the Center, and other generally
understood public or common areas. Landlord reserves the right to relocate,
alter, improve, or adjust the size and location of any Common Facilities from
time to time without liability to Tenant so long as it does not adversely
Tenant's business and operations.

7.   MAINTENANCE AND REPAIRS.

     7.1  TENANT'S OBLIGATIONS. Except as provided in Section 7.2, Tenant shall
keep the Premises in good order, condition and repair during the Lease Term,
including without limitation: all nonstructural, interior, all heating,
ventilation and air conditioning systems and equipment; all glass, glazing,
windows, window moldings, partitions, doors and door hardware; all interior
painting; all fixtures and appurtenances in the Premises or exclusively serving
the Premises including electrical, lighting and plumbing fixtures; and all other
portions of the Premises seen or unseen. Tenant shall promptly replace at its
sole cost and expense any of the systems, equipment and other portions of the
Premises for which it is responsible hereunder during the Lease Term if and when
necessary, regardless of whether the benefit of such replacement extends beyond
the Lease Term. It is the intention of Landlord and Tenant that Tenant shall
maintain the Premises, at all times during the Lease Term, in a fully operative
condition, at Tenant's expense. If any heating and air conditioning system or
equipment exclusively serves the Premises, Tenant shall additionally obtain and
keep in force a preventive maintenance contract providing for the regular (at
least quarterly) inspection and maintenance of the heating and air conditioning
system (including leaks around ducts, pipes, vents, and other parts of the air
conditioning) by a reputable licensed heating and air conditioning contractor
acceptable to Landlord, approval of which will not unreasonably be withheld.
Prior to April 1 of each calendar year, Tenant shall deliver Landlord written
confirmation from such contractor verifying that such a contract has been
entered into and that the required service will be provided. Notwithstanding the
foregoing, Landlord shall have the right, upon written notice to Tenant, to
undertake the responsibility for preventive maintenance and repair of the
heating and air conditioning system, at Tenant's sole cost and expense.

     7.2  LANDLORD'S OBLIGATIONS. Landlord shall repair and maintain the Common
Facilities, subject to Tenant's obligation to pay its Pro Rata Share of
Operating Costs, as provided in Article 6. Landlord shall maintain the roof, the
foundations and structural portions of the Premises and any building of which
the Premises are a part, but Tenant shall pay the full amount of any
maintenance and repairs necessitated by any act, omission, conduct or activity
of, or breach of this lease by, Tenant or any of Tenant's officers, agents,
customers or invitees (plus fifteen percent (15%) of the cost thereof for
Landlord's overhead); and any maintenance and repairs necessitated by
breaking and entering of the Premises. Tenant shall pay its share of such
maintenance and repair costs incurred by Landlord, to the extent such obligation
exceeds any amount thereof impounded under Section 4.4, within fifteen (15) days
after receipt of a statement from Landlord. There shall be no abatement of rent,
and no liability of Landlord, by reason of any injury to or interference with
Tenant's business arising from the making of any repairs, alterations, or
improvements to any portion of the Premises or the Center. Except as provided in
Article 16 (Damage and Destruction) and Article 17 (Condemnation), Landlord
shall have absolutely no other responsibility to repair, maintain or replace any
portion of the Premises at any time. Tenant waives the right to make repairs at
Landlord's expense under California Civil Code Section 1942, or under any other
law, statute or ordinance now or hereafter in effect. Landlord's obligations
under this Section are not intended to alter or modify in any way the provisions
of Article 12. Landlord shall use reasonable efforts not to interfere with
Tenant's business and operations.

     7.3  PERFORMANCE BY LANDLORD. If Tenant refuses or neglects to perform its
maintenance obligations hereunder to the reasonable satisfaction of Landlord,
Landlord shall have the right (but not the obligation), upon three (3) days'
prior notice to Tenant, to enter the Premises and perform such repairs and
maintenance on behalf of Tenant. Landlord shall also have the right (but not the
obligation), without prior notice to Tenant, to correct or remove any dangerous
or hazardous condition, to repair the heating, ventilation, air conditioning or
plumbing systems, to correct, repair or bring into legal compliance any fire or
other life safety systems of the Premises, and to repair or replace any broken
glass or glazing, if Tenant fails to correct or repair the same within
twenty-four (24) hours after receipt of notice from Landlord. Landlord shall not
be liable to Tenant for any loss or damage to Tenant's merchandise, fixtures, or
other property or to Tenant's business in connection with Landlord's performance
hereunder, and Tenant shall pay Landlord's costs plus fifteen percent (15%) of
such amount for overhead, upon presentation of a statement therefor, as
Additional Rent. Tenant shall also pay interest at the rate provided in Section
22.4 from the date of completion of repairs by Landlord to the date paid by
Tenant. Landlord shall use reasonable efforts not to interfere with Tenant's
business and operations.

8.   REAL PROPERTY TAXES.

     8.1  PAYMENT OF REAL PROPERTY TAXES BY TENANT. Tenant shall pay all Real
Property Taxes applicable to the Premises during the Lease Term. If the Premises
are not separately assessed, a share of the tax bill that includes the Premises
shall be allocated to the Premises. Such share shall be reasonably and equitably
determined by Landlord based upon the Rentable Square Footage of the Premises
compared to the total Rentable Square Footage covered by the tax bill, the
respective valuations assigned in the assessor's worksheet, or other reasonably
available information. Tenant shall pay its share of Real Property Taxes to
Landlord, to the extent such obligation exceeds any amount thereof impounded
under Section 4.4, within fifteen (15) days after receipt of a statement from
Landlord.

     8.2  REAL PROPERTY TAXES DEFINED. "Real Property Taxes" means all taxes,
assessments, levies, fees and other governmental charges levied on or
attributable to the Premises or any part thereof, including without limitation:
(a) real property taxes and assessments levied with respect to all or a portion
of the Premises, (b) assessments, charges and fees charged by governmental
agencies or districts for services or facilities provided to the Premises, (c)
transfer, transaction, rental, gross receipts, license or similar taxes or
charges measured by rent received by Landlord, excluding any federal or state
income, franchise, estate or inheritance taxes of Landlord, (d) taxes based upon
a reassessment of the Premises due to a transfer or change of ownership, and (e)
any assessment, charge or fee that is a substitute in whole or in part for any
tax now or previously included within the definition of Real Property Taxes. If
Landlord elects to contest an assessment of any Real Property Taxes, Landlord
shall have the right to recover its actual costs of such contest (including
attorneys' fees and costs) as part of Real Property Taxes, but only to the
extent such contest has resulted in a reduction of Real Property Taxes. Tenant
shall not be entitled to the benefit of any reduction, refund, rebate or credit
accruing or payable to Landlord prior to the commencement of or after the
expiration or other termination of the Lease Term.

     8.3  PERSONAL PROPERTY TAXES. Tenant shall pay prior to delinquency all
taxes charged against trade fixtures, furnishings, equipment or any other
personal property belonging to Tenant. Tenant shall attempt to have such
personal property taxed separately from the Premises. If any such taxes on
Tenant's personal property are levied against Landlord or the Premises, or if
the assessed value of the Premises is increased by inclusion of a value placed
upon such personal property of Tenant, then: (a) Landlord, after written notice
to Tenant, shall have the right to pay the taxes levied against Landlord, or the
taxes based upon such increased valuation, but under protest if so requested by
Tenant in writing, and (b) Tenant shall pay to Landlord the taxes levied against
Landlord, or the taxes resulting from such increased valuation, within fifteen
(15) days after Tenant's receipt of a written statement from Landlord.

9.   INSURANCE

     9.1  ALL RISK COVERAGE. During the Lease Term, Landlord shall maintain, at
Tenant's expense, insurance covering loss or damage to the Premises (excluding
Tenant's Alterations, fixtures, equipment and personal property), insuring
against any or all risks of physical loss (and including, at Landlord's option,
flood and earthquake coverage), with the scope and amounts of such coverage as
reasonably determined by Landlord. Said insurance shall provide for payment of
loss thereunder to Landlord or to the holder of a first mortgage or deed of
trust on the Premises. Landlord may also maintain during the Lease Term, at
Tenant's expense, a policy of rental income insurance covering a period of one
(1) year, with loss payable to Landlord.

     9.2  TENANT'S PERSONAL PROPERTY AND FIXTURES. Tenant shall at all times, at
Tenant's sole cost and expense, maintain insurance against any or all risks of
physical loss in an amount adequate to cover the cost of replacement of all of
Tenant's Alterations, trade fixtures, equipment and personal property. Such
policy shall be issued by an insurance company approved by Landlord, which
approval shall not be unreasonably withheld shall name Landlord and Landlord's
lender as additional insureds, and shall provide that no cancellation or
reduction in coverage shall be effective until thirty (30) days after written
notice to Landlord and Landlord's lender. Tenant shall deliver a certificate
evidencing such insurance to Landlord and a renewal or binder at least twenty
(20) days prior to expiration. Tenant acknowledges that Landlord's insurance is
not intended to cover Tenant's Alterations, trade fixtures, equipment, and
personal property.

<PAGE>   6
     9.3  TENANT'S LIABILITY INSURANCE. Tenant shall, at Tenant's sole cost and
expense, provide comprehensive general liability insurance, fully covering and
indemnifying Landlord and Landlord's officers, directors, shareholders,
partners, principals, employees, agents, representatives, and other related
entities and individuals (together with, at Landlord's election, Landlord's
lender), as additional insureds, against any and all claims arising from
personal injury, death, and/or property damage occurring in or about the
Premises or the Center during the period of Tenant's possession (actual and/or
constructive) at the Premises. The initial limits of such insurance shall be at
least $2,000,000 combined single liability limit if the Rentable Square Footage
of the Premises (as indicated in Section 1.2) exceeds 3,000 square feet, or
$1,000,000 combined single liability limit if such Rentable Square Footage is
3,000 square feet or less. Such liability insurance limits shall be subject to
periodic increase, at Landlord's election, based upon inflation, increased
liability awards, lender requirements, the recommendations of Landlord's
professional insurance advisors, and other reasonable and relevant factors.
Tenant shall also, at its sole cost and expense, obtain workers' compensation
insurance for the protection of its employees such as will relieve Landlord of
all liability to such employees for any and all accidents that may arise on or
about the Premises or the Center. All insurance required to be carried by Tenant
shall be primary and noncontributory to any insurance carried by Landlord,
regardless of the absence of negligence or other fault of Tenant for alleged
injury, death and/or property damage. Each policy of insurance required to be
carried by Tenant hereunder shall: (a) contain cross-liability and contractual
liability endorsements, (b) provide that no cancellation or reduction in
coverage shall be effective until thirty (30) days after written notice to
Landlord and Landlord's lender, (c) be issued by an insurer licensed in
California and reasonably approved by Landlord, and (d) shall insure Tenant's
performance of the indemnity provision of Article 13, but the amount of such
insurance shall not limit Tenant's liability nor relieve Tenant of any
obligation hereunder. No later than five (5) business days after Tenant's
occupancy, Tenant shall deliver a certificate evidencing all such insurance to
Landlord. Tenant shall deliver a renewal or binder of such policy at least
thirty (30) days prior to expiration thereof. Tenant shall, at Tenant's expense,
maintain such other liability insurance as Tenant deems necessary to protect
Tenant. Tenant shall be in material breach of this Lease if Tenant fails to
obtain the insurance required under this Section, or if Tenant obtains insurance
with terms, conditions and/or exclusions that are inconsistent with the
requirements and terms of this Lease.

     9.4  PAYMENT OF INSURANCE COSTS. Tenant shall pay directly all premiums for
its liability insurance required under Section 9.3, for its personal property
insurance to be carried by Tenant as required under this Article, and for all
other insurance Tenant elects to carry. Tenant shall pay the insurance premiums,
or, where applicable, its share thereof as reasonably and equitably determined
by Landlord, for the insurance policies carried or obtained by Landlord as
described in this Article. If the Lease Term expires before the expiration of
any such insurance policy, Tenant's liability for premiums shall be prorated on
an annual basis. Tenant shall pay such insurance costs to Landlord, to the
extent such obligation exceeds any amount thereof impounded under Section 4.4,
within fifteen (15) days after receipt of a statement from Landlord. If any
insurance policy maintained by Landlord covers improvements or real property
other than the Premises, Landlord shall reasonably determine the portion of the
premiums applicable to the Premises, and Tenant shall pay its share thereof as
so determined. In addition, Tenant shall pay the full amount of any deductible
amount under Landlord's insurance policies, or where applicable its share
thereof as equitably determined by Landlord, within fifteen (15) days after
receipt of a statement from Landlord.

     9.5  WAIVER OF SUBROGATION. Each party waives all rights of recovery
against the other party and its officers, employees, agents and representatives
for any claims for loss or damage to person or property caused by or resulting
from fire or any other risks insured against under any insurance policy in force
at the time of such loss or damage. Each party shall cause each insurance policy
obtained by it to provide that the insurer waives all rights of recovery by way
of subrogation against the other party in connection with any damage covered by
such policy.


     9.6  TENANT'S USE NOT TO INCREASE PREMIUM. Tenant shall not keep, use,
manufacture, assemble, sell or offer for sale in or upon the Premises any
article that may be prohibited by, or that might invalidate, in whole or in
part, the coverage afforded by, a standard form of fire or all risk insurance
policy. Tenant shall pay the entire amount of any increase in premiums that may
be charged during the Lease Term for the insurance that may be maintained by
Landlord on the Premises or the Center resulting from the type of materials or
products stored, manufactured, assembled or sold by Tenant in the Premises,
whether or not Landlord has consented to the same. In determining whether
increased premiums are the result of Tenant's use of the Premises, a schedule
issued by the entity making the insurance rate on the Premises showing the
various components of such rate shall be conclusive evidence of the items and
charges that make up the fire insurance rate on the Premises.

     9.7  BOILER AND MACHINERY COVERAGE. At Landlord's option, Landlord may
maintain, at Tenant's expense, boiler broad form insurance, if applicable, in
the amount of One Hundred Fifty Thousand Dollars ($150,000) in the name of
Landlord. Tenant shall pay the premium therefor, or its share thereof equitably
determined by Landlord if the Premises are a part of a multi-tenant building.

10.  UTILITIES.

Tenant shall pay the cost of all water, gas, heat, light, power, sewer,
telephone, refuse disposal, and all other utilities and services supplied to the
Premises. Tenant shall make payments for all separately metered utilities, when
due, directly to the appropriate supplier. If any utilities or services are not
separately metered or monitored with respect to the Premises, Landlord shall
determine Tenant's equitable share thereof, based on rentable square footage,
intensity of use of any Utility, hours of operation, and such other factors as
Landlord reasonably deems relevant. Tenant shall pay its equitable share of such
utilities to Landlord, to the extent such obligation exceeds any amount thereof
impounded under Section 4.5, within fifteen (15) days after receipt of a
statement from Landlord. If at any time during the Lease Term, electrical power
or any other utility is available to the Premises from multiple sources,
Landlord shall have the right at any time and from time to time to contract for
service from any company or companies providing electrical, telecommunication,
or other utility service to the Building, Tenant shall cooperate with Landlord
and all providers of electrical, telecommunication, or other utility service
and, as reasonably necessary, allow Landlord and such providers reasonable
access to the Premises and to the electric lines, feeders, risers, wiring and
any other machinery or equipment within the Premises. Landlord shall use
reasonable efforts not to interfere with Tenant business and operations.
Landlord shall in no way be liable or responsible for any loss, damage or
expense that Tenant may sustain or incur by reason of any change, failure,
interruption, interference or defect in the supply or character of the
electricity or other utilities supplied to the Premises. Landlord makes no
representation or warranty as the suitability of the utility service for
Tenant's requirements, and no such change, failure, defect, unavailability or
unsuitability shall constitute any actual or constructive eviction, in whole or
in part, or entitle Tenant to any abatement or diminution of rent, or relieve
Tenant of any of its obligations under the Lease. Landlord shall not be liable
in damages or otherwise for any failure or interruption of any utility service,
and no such failure or interruption shall entitle Tenant to terminate this Lease
or abate the rent due hereunder.

11.  USE.

     11.1 PERMITTED USE. The Premises shall be used and occupied only for the
permitted uses specified in Section 1.8. The Premises shall not be used or
occupied for any other purposes without the prior written consent of Landlord,
which consent shall not unreasonably be withheld. Tenant shall provide such
information about such proposed use as may be reasonably requested by Landlord.
Landlord shall not unreasonably withhold its consent to any requested change of
use, and shall have the right to impose reasonable restrictions on such other
use. Factors that Landlord may take into account in granting or withholding its
consent shall include, without limitation: (a) whether the proposed use is
compatible with the character and tenant mix of the Center, (b) whether the
proposed use poses any increased risk to Landlord or any other occupant of the
Center, (c) whether any proposed Alterations to accommodate such proposed use
might decrease the rental or sale value of the Premises or the Center, and (d)
whether Tenant has the requisite expertise and financial ability to successfully
operate in the Premises with the proposed use.

     11.2 COMPLIANCE WITH LAW AND OTHER REQUIREMENTS. Tenant shall not do or
permit anything to be done in or about the Premises in conflict with all laws,
ordinances, rules, regulations orders, requirements, and recorded covenants and
restrictions applicable to the Premises, whether now in force or hereafter in
effect, including any requirement to make alterations or to install additional
facilities required by Tenant's occupancy or the conduct of Tenant's business,
and Tenant shall promptly comply with the same at its sole expense.

     11.3 WASTE, QUIET CONDUCT. Tenant shall not use or permit the use of the
Premises in any manner that tends to create waste or a nuisance, that will cause
objectionable noise or odors, or that may disturb the quiet enjoyment of any
other tenant in the Center.

     11.4 RULES AND REGULATIONS. Tenant shall comply with the Rules and
Regulations for the Center attached as Exhibit "B", as the same may be amended
by Landlord from time to time, upon notice to Tenant no less than ten (10) days
prior to the effective date of such amendments.

     11.5 SIGNS. Tenant agrees, at Tenant's sole cost, to install a sign in
strict conformance with Landlord's sign criteria, attached hereto as Exhibit
"C", within fifteen (15) days after first occupying the Premises. Tenant shall
maintain all approved signs and other items described herein in good condition
and repair at all times. All signs must be fabricated by a contractor reasonably
selected by Landlord. Prior to construction of any such sign, a detailed drawing
of the proposed sign shall be prepared by the Landlord's contractor, at the sole
expense of Tenant, and submitted to Landlord and Tenant for written approval,
which approval shall not unreasonably be withheld. No sign, placard, pennant,
flag, awning, canopy, or advertising matter of any kind shall be placed or
maintained on any exterior door, wall or window of the Premises or in any area
outside the Premises, and no decoration lettering or
<PAGE>   7
advertising matter shall be placed or maintained on the glass of any window or
door, or that can be seen through the glass, of the Premises without first
obtaining Landlord's written approval. If Tenant fails to comply with this
Section and Landlord serves upon Tenant a Notice to Perform Covenant or Quit
(or similar notice), any breach of the covenants of this Section occurring
thereafter shall be deemed to be noncurable. Landlord shall have the right
from time to time to revise the sign criteria, and within sixty (60) days after
Tenant's receipt of written notice of any new sign criteria, Tenant shall, at
Tenant's expense, remove all existing signs and replace the same with new signs
conforming to the new sign criteria.

     11.6  PARKING.  Tenant shall have the nonexclusive right, in common with
others, to use the parking areas of the Center; provided, however, that Tenant
shall not use more than the number of parking spaces designated in Section
1.10, or if no number of such spaces is so indicated, Tenant shall not use more
than its reasonable share of parking spaces, as Landlord reasonably shall
determine. Landlord reserves the right, without liability to Tenant, to modify
the parking areas, to designate the specific location of the parking for Tenant
and Tenant's customers and employees, and to adopt reasonable rules and
regulations for use of the parking areas so long as Tenant's access is not
materially impeded.

     11.7  ENTRY BY LANDLORD.  Tenant shall permit Landlord and Landlord's
agents with forty-eight (48) hours' prior written notice to enter the Premises
at all reasonable times for any of the following purposes: (a) to inspect the
Premises, (b) to supply any services or to perform any maintenance obligations
of Landlord, including the erection and maintenance of such scaffolding,
canopies, fences, and props as may be required, (c) to make such improvements,
replacements or additions to the Premises or the Center as Landlord reasonably
deems necessary or desirable, (d) to post notices of nonresponsibility, (e) to
place any usual or ordinary "for sale" signs, or (f) within six (6) months prior
to the expiration of this Lease, to place any usual or ordinary. Landlord shall
give forty-eight (48) hours' written notice to Tenant prior to any entry except
in an emergency or unless Tenant consents at the time of entry. If Tenant is
not personally present to open and permit an entry into the Premises, at any
time when for any reason an entry therein shall be necessary or permissible,
Landlord or Landlord's agents may enter the same by a master key, or may
forcibly enter the same without rendering Landlord or such agents liable
therefor, and without in any manner affecting the obligations and covenants of
this Lease. Landlord shall use reasonable efforts not to interrupt Tenant's
business or operation and reasonable care.

12.  ACCEPTANCE OF PREMISES; NONLIABILITY OF LANDLORD; DISCLAIMER.

     12.1  ACCEPTANCE OF PREMISES. By taking possession hereunder, Tenant
acknowledges that it has examined the Premises and accepts the condition
thereof. Tenant acknowledges and agrees that Landlord has no obligation to
improve the Premises other than as set forth specifically in this Lease, if at
all. In particular, Tenant acknowledges that any additional improvements or
Alterations needed to accommodate Tenant's intended use shall be made solely at
Tenant's cost and expense, and strictly in accordance with the requirements of
this Lease (including the requirement to obtain Landlord's reasonable consent
thereto), unless such improvements and alterations are specifically required of
Landlord. Landlord shall have no responsibility to do any work required under
any building codes or other governmental requirements not in effect or
applicable at the time the Premises were constructed, including without
limitation any requirements related to sprinkler retrofitting, seismic
structural requirements, accommodation of disabled persons, or hazardous
materials. Landlord shall be under no obligation to provide utility, telephone
or other service or access beyond that which exists at the Premises as of the
date of this Lease, unless Landlord specifically agrees in writing to provide
the same. If it is anticipated that Tenant will be doing any Alterations or
installations prior to taking occupancy, any delays encountered by Tenant in
accomplishing such work or obtaining any required permits therefor shall not
delay the Commencement Date or the date that Tenant becomes liable to pay rent,
or the date that Landlord may effectively deliver possession of the Premises
to Tenant. By taking possession hereunder, Tenant acknowledges that it accepts
the square footage of the Premises as delivered and as stated in this Lease. No
discovery or alleged discovery after such acceptance of any variance in such
square footage as set forth in this Lease (or in any proposal, advertisement or
other description thereof) shall be grounds for any adjustment in any element
of the rent payable hereunder, unless such adjustment is initialed by and
implemented by Landlord in writing.

     12.2  LANDLORD'S EXEMPTION FROM LIABILITY. Landlord shall not be liable
for injury to Tenant's business or loss of income therefrom, or for personal
injury or property damage that may be sustained by Tenant or any subtenant of
Tenant, or their respective employees, invitees, customers, agents or
contractors or any other person in or about the Premises, caused by or
resulting from fire, flood, earthquake or other natural disaster, or from
steam, electricity, gas, water or rain, that may leak or flow from or into any
part of the Premises, or from the breakage, leakage, obstruction or other
defects of pipes, sprinklers, wires, appliances, plumbing, air-conditioning,
lighting fixture or computer equipment or software, whether such damage or
injury results from conditions arising upon the Premises or upon other portions
of the building of which the Premises are a part, or from other sources, and
regardless of whether the cause of such damage or injury or the means of
repairing the same is inaccessible to Tenant. Landlord shall not be liable for
any damages to property or for personal injury or loss of life arising from
any use, act or failure to act of any third parties (including other occupants
of the Center) occurring in, or about the Premises or in or about the Center
(including without limitation the criminal acts of any third parties). All
property of Tenant kept or stored on the Premises shall be so kept or stored at
the risk of Tenant only, and Tenant shall indemnify, defend and hold Landlord
and Landlord's officers, directors, shareholders, partners, principals,
employees and agents, and their respective successors and assigns, harmless
from and against any claims arising out of damage to the same, including
subrogation claims by Tenant's insurance carriers. Provided, however, that the
indemnifications and waivers of Tenant set forth in this Section shall not
apply to damage and liability caused (i) by the gross negligence or willful
misconduct of Landlord, and (ii) through no fault of Tenant, its assignees or
subtenants, or their respective agents, contractors, employees, customers,
invitees or licensees.

     12.3  NO WARRANTIES OR REPRESENTATIONS.

               (a)  Neither Landlord nor Landlord's agents make any warranty or
representation with respect to the suitability or fitness of the space for the
conduct of Tenant's business, or for any other purpose.

          (b)  Neither Landlord nor Landlord's agents make any warranty or
representation with respect to any other tenants or users that may or may not
construct improvements, occupy space or conduct business within the Center,
and Tenant hereby acknowledges and agrees that it is not relying on any
warranty or representation relating thereto in entering into this Lease.

          (c)  Landlord specifically disavows any oral representations made by
or on behalf of its employees, agents and independent contractors, and Tenant
hereby acknowledges and agrees that it is not relying  and has not relied on any
oral representations in entering into this Lease.

          (d)  Landlord has not made any promises or representations, expressed
or implied, that it will renew, extend or modify this Lease in favor of Tenant
or any permitted transferee of Tenant, except as may be specifically set forth
herein or in a written instrument signed by both parties amending this Lease in
the future.

          (e)  Notwithstanding that the rent payable to Landlord hereunder may
at times include the cost of guard service or other security measures, it is
specifically understood that Landlord does not represent, guarantees or assume
responsibility that Tenant will be secure from any damage, injury or loss of
life because of such guard service. Landlord shall have no obligation to hire,
maintain or provide such services, which may be withdrawn or changed at any
time with or without notice to Tenant or any other person and without liability
to Landlord. To induce Landlord to provide such service if Landlord elects in
its sole discretion to do so, Tenant agrees that (i) Landlord shall not be
liable for any damage, injury or loss of life related to the provision or
nonprovision of such service, and (ii) Landlord shall have no responsibility to
protect Tenant, or its employees or agents, from the acts of any third parties
(including other occupants of the Center) occurring in or about the Premises or
in or about the Center (including without limitation the criminal acts of any
third parties), whether or not the same could have been prevented by any such
guard service or other security measures.

     12.4  KEYS. Tenant hereby acknowledges that various persons have had access
to the keys to the Premises as keyed prior to Tenant's possession, and that
Landlord disclaims all liability and responsibility for any unauthorized
distribution or possession of such prior keys.

13.  INDEMNIFICATION.

     Tenant shall indemnify, defend and hold Landlord and Landlord's officers,
directors, shareholders, partners, principals, employees, agents,
representatives, and other related entities and individuals (collectively,
"Landlord's Related Entities"), harmless from and against any and all claims,
actions, damages, liability, costs, and expenses, including attorneys' fees and
costs, arising from personal injury, death, and/or property damage and arising
from: (a) Tenant's use or occupation of the Premises or any work or activity
done or permitted by Tenant in or about the Premises (including without
limitation any storage or display of materials or [MISSING COPY] in the Common
Facilities, (b) any activity, condition or occurrence in the Premises or other
areas under the control of Tenant, (c) any breach or failure to perform any


<PAGE>   8
obligation imposed on Tenant under this Lease, or (d) any other act or omission
of Tenant or its assignees or subtenants or their respective agents,
contractors, employees, customers, invitees or licensees. Tenant's obligation to
defend and indemnify shall include, but not be limited to, claims based on
duties, obligations, or liabilities imposed on Landlord or Landlord's Related
Entities by statute, ordinance, regulation, or other law, such as claims based
on theories of peculiar risk and nondelegable duty, and to any and all other
claims based on the negligent act or omission of Landlord or Landlord's Related
Entities. The parties intend that this provision be interpreted as the broadest
Type I indemnity provision as defined in McDonald & Kruse, Inc. v. San Jose
Steel Co., 29 Cal.App. 3rd 413 (1972) and as allowed by law between a landlord
and a tenant. Upon notice from Landlord, Tenant shall, at Tenant's sole expense
and by counsel reasonably satisfactory to Landlord, defend any action or
proceeding brought against Landlord or Landlord's Related Entities by reason of
any such claim. If Landlord or any of Landlord's Related Entities is made a
party to any litigation commenced by or against Tenant, then Tenant shall
indemnify, defend and hold Landlord and Landlord's Related Entities harmless
from, and shall pay all costs, expenses and attorneys' fees and costs incurred
or paid in connection with, such litigation. Tenant, as a material part of the
consideration to Landlord hereunder, assumes all risk of, and waives all claims
against Landlord for, personal injury or property damage in, upon or about the
Premises, from any cause whatsoever. Provided, however, that the
indemnifications and waivers of Tenant set forth in this Section shall not apply
to damage and liability caused (i) by the gross negligence or willful misconduct
of Landlord, and (ii) through no fault of Tenant, its assignees or subtenants,
or their respective agents, contractors, employees, customers, invitees or
licensees.

14.  HAZARDOUS MATERIALS.

     14.1  DEFINITIONS. "Hazardous Materials Laws" means any and all federal,
state or local laws, ordinances, rules, decrees, orders, regulations or court
decisions relating to hazardous substances, hazardous materials, hazardous
waste, toxic substances, environmental conditions on, under or about the
Premises, or soil and ground water conditions, including, but not limited to,
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, 42 U.S.C. Section 9601, et seq., the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901, et seq., the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801, et seq., the California Hazardous
Waste Control Act, Cal. Health and Safety Code Section 25100, et seq., the
Carpenter-Presley-Tanner Hazardous Substances Account Act, Cal. Health and
Safety Code Section 25300, et seq., the Safe Drinking Water and Toxic
Enforcement Act, Cal. Health and Safety Code Section 25249.5, et seq., the
Porter-Cologne Water Quality Control Act, Cal. Water Code Section 13000, et
seq., any amendments to the foregoing, and any similar federal, state or local
laws, ordinances, rules, decrees, orders or regulations. "Hazardous Materials"
means any chemical, compound, material, substance or other matter than: (a) is
defined as a hazardous substance, hazardous material, hazardous waste or toxic
substance under any Hazardous Materials Law, (b) is controlled or governed by
any Hazardous Materials Law or gives rise to any reporting, notice or
publication requirements hereunder, or gives rise to any liability,
responsibility or duty on the part of Tenant or Landlord with respect to any
third person hereunder; or (c) is flammable or explosive material, oil,
asbestos, urea formaldehyde, radioactive material, nuclear medicine material,
drug, vaccine, bacteria, virus, hazardous waste, toxic substance, or related
injurious or potentially injurious material (by itself or in combination with
other materials).

     14.2  USE OF HAZARDOUS MATERIALS. Tenant shall not allow any Hazardous
Material to be used, generated, manufactured, released, stored or disposed of
on, under or about, or transported from, the Premises, unless: (a) such use is
specifically disclosed to and approved by Landlord in writing prior to such use,
and (b) such use is conducted in compliance with the provisions of this Article.
Landlord's consent may be withheld in Landlord's sole discretion and, if
granted, may be revoked at any time. Landlord may approve such use subject to
reasonable conditions to protect the Premises and Landlord's interests. Landlord
may withhold approval if Landlord determines that such proposed use involves a
material risk of a release or discharge of Hazardous Materials or a violation of
any Hazardous Materials Laws or that Tenant has not provided reasonably
sufficient assurances of its ability to remedy such a violation and fulfill its
obligations under this Article. Notwithstanding the foregoing, Landlord hereby
consents to Tenant's use, storage or disposal of products containing small
quantities of Hazardous Materials that are of a type customarily found in
offices and households (such as aerosol cans containing insecticides, toner for
copies, paints, paint remover and the like) provided that Tenant shall handle,
use, store and dispose of such Hazardous Materials in a safe and lawful manner
and shall not allow such Hazardous Materials to contaminate the Premises.

     14.3  COMPLIANCE WITH LAWS; HANDLING HAZARDOUS MATERIALS. Tenant shall
strictly comply with, and shall maintain the Premises in compliance with, all
Hazardous Materials Laws. Tenant shall obtain, maintain in effect and comply
with the conditions of all permits, licenses and other governmental approvals
required for Tenant's operations on the Premises under any Hazardous Materials
Laws, including, but not limited to, the discharge of appropriately treated
Hazardous Materials into or through any sanitary sewer serving the Premises. At
Landlord's request, Tenant shall deliver copies of, or allow Landlord to
inspect, all such permits, licenses and approvals. All Hazardous Materials
removed from the Premises shall be removed and transported by duly licensed
haulers to duly licensed disposal facilities, in compliance with all Hazardous
Materials Laws. Tenant shall perform any monitoring, testing, investigation,
clean-up, removal, detoxification, preparation of closure or other required
plans and any other remedial work required by any governmental agency or lender,
or recommended by Landlord's environmental consultants, as a result of any
release or discharge or potential release or discharge of Hazardous Materials
affecting the Premises or the Center by Tenant or any violation or potential
violation of Hazardous Materials Laws by Tenant or any assignee or subtenant of
Tenant or their respective agents, contractors, employees, licensees or invitees
(collectively, "Remedial Work"). Landlord shall have the right to intervene in
any governmental action or proceeding involving any Remedial Work, and to
approve performance of the work, in order to protect Landlord's interests.
Tenant shall not enter into any settlement agreement, consent decree or other
compromise with respect to any claims relating to Hazardous Materials without
notifying Landlord and providing ample opportunity for Landlord to intervene.
Tenant shall additionally comply with the recommendations of Landlord's and
Tenant's insurers based upon National Fire Protection Association standards or
other applicable guidelines regarding the management and handling of Hazardous
Materials. If any present or future law imposes any requirement of reporting,
survey, investigation or other compliance upon Landlord, Tenant, or the
Premises, and if such requirement is precipitated by a transaction involving the
Lease (other than the natural expiration hereof at the end of the lease term),
including without limitation the assignment or sublease, in whole or in part of
Tenant's interest in the Lease, or the change in the ownership of Tenant, then
Tenant shall fully comply with and pay all costs of compliance with such
requirement, including Landlord's attorneys' fees and costs.

     14.4 NOTICE; REPORTING. Tenant shall notify Landlord in writing, within
three (3) days after any of the following: (a) Tenant has knowledge, or has
reasonable cause to believe, that any Hazardous Material has been released,
discharged or is located on, under or about the Premises, whether or not the
release or discharge is in quantities that would otherwise be reportable to a
public agency, (b) Tenant receives any order of a governmental agency requiring
any Remedial Work pursuant to any Hazardous Material Laws, (c) Tenant receives
any warning, notice of inspection, notice of violation or alleged violation or
Tenant receives notice or knowledge of any proceeding, investigation or
enforcement action, pursuant to any Hazardous Materials Laws; or (d) Tenant
receives notice or knowledge of any claims made or threatened by any third party
against Tenant or the Premises relating to any loss or injury resulting from
Hazardous Materials. If the potential risk of any of the foregoing events is
material, Tenant shall deliver immediate verbal notice to Landlord, in addition
to written notice as set forth above, Tenant shall deliver to Landlord copies of
all test results, reports and business or management plans required to be filed
with any governmental agency pursuant to any Hazardous Materials Laws.

     14.5  INDEMNITY. Tenant shall indemnify, defend and hold Landlord (and its
partners and their respective officers, directors, employees and agents)
harmless from and against any and all liabilities, claims, suits, judgments,
actions, investigations, proceedings, costs and expenses (including attorneys'
fees and costs) arising out of or in connection with any breach of any provision
of this Article or directly or indirectly arising out of the use, generation,
storage, release, disposal or transportation of Hazardous Materials by Tenant,
or any assignee or subtenant of Tenant, or their respective agents, contractors,
employees, licensees, or invitees, on, under or about the Premises during the
Lease Term or any other period of Tenant's actual or constructive occupancy of
the Premises, including, but not limited to, all foreseeable and unforeseeable
consequential damages and the cost of any Remedial Work. Any defense of Tenant
pursuant to this Section shall be by counsel acceptable to Landlord. Neither the
consent by Landlord to the use, generation, storage, release, disposal or
transportation of Hazardous Materials nor the strict compliance with all
Hazardous Materials Laws shall excuse Tenant from Tenant's indemnification
obligations pursuant to this Article. The foregoing indemnity shall be in
addition to and not a limitation of the indemnification provisions of Article 13
of this Lease. Tenant's obligations pursuant to this Article shall survive the
termination or expiration of this Lease.

     14.6  ENTRY AND INSPECTION; CURE. Landlord and its agents, employees and
contractors, shall have the right (but not the obligation) to enter the Premises
upon forty-eight (48) hours written notice at all reasonable times to inspect
the Premises and Tenant's compliance with the terms and conditions of this
Article, or to conduct investigations and tests. No prior notice to Tenant shall
be required in the event of an emergency, or if Landlord has reasonable cause to
believe that violations of this Article have occurred, or if Tenant consents at
the time of entry. In all other cases, Landlord shall give at least forty-eight
(48) hours prior notice to Tenant. Landlord shall have the right (but not the
obligation) to remedy any violation by Tenant of the provisions of this Article
pursuant to Section 22.3 of this Lease or to perform any Remedial Work. Tenant
shall pay, upon demand, all
<PAGE>   9
reasonable costs incurred by Landlord in investigating any such violations or
potential violations or performing Remedial Work, plus interest thereon at the
rate specified in this Lease from the date of demand until the date paid by
Tenant.

      14.7  TERMINATION/EXPIRATION. Upon termination or expiration of this
Lease, Tenant shall, at Tenant's cost, remove any equipment, improvements or
storage facilities utilized in connection with any Hazardous Materials and shall
clean up, detoxify, repair and otherwise restore the Premises to a condition
free of Hazardous Materials, to the extent such condition is caused by Tenant or
any assignee or subtenant of Tenant or their respective agents, contractors,
employees, licensees or invitees.

      14.8  EXIT ASSESSMENT. No later than ten (10) days after the expiration or
earlier termination of this Lease, Tenant shall cause to be performed, at its
sole expense, an environmental assessment (the "Exit Assessment") of the
Premises. Landlord agrees to allow Tenant access to the Premises for such
purpose. The Exit Assessment must be performed by a qualified environmental
consultant acceptable to Landlord, approval of which will not be unreasonably
withheld and shall include without limitation the following, as applicable to
the Premises and Tenant's activities: (a) inspection of all floors, walls,
ceiling tiles, benches, cabinet interiors, sinks, the roof and other surfaces
for signs of contamination and/or deterioration related to Hazardous Materials,
(b) inspection of any and all ducts, hoods and exhaust systems for signs of
contamination, deterioration and/or leakage related or potentially related to
Hazardous Materials, (c) inspection of all readily accessible drain lines and
other discharge piping for signs of deterioration, loss of integrity and leakage
related to Hazardous Materials, (d) Tenant interviews and review of appropriate
Tenant records to determine the uses to which Tenant has put the Premises that
involve or may have involved Hazardous Materials, and to determine if any known
discharges to the Premises or ground or soils from Tenant's activities have
occurred, (e) documentation in detail of all observations, including dated
photographs, (f) if applicable a certification that all areas inspected are
clean and free of any Hazardous Materials and that the investigation conducted
by the consultant does indicate that any release of any Hazardous Materials has
occurred in the Premises or the Center as a result of Tenant's activities, (g)
if applicable, a detailed description of Hazardous Materials remaining in the
Premises and of any contamination, deterioration and/or leakage observed,
together with detailed recommendations for the removal, repair or abatement of
the same, and (h) if applicable, a detailed description of evidence of possible
or past releases of Hazardous Materials, together with detailed recommendations
for the prevention of the same in the future. Landlord shall have the right to
require reasonable additional evaluations or work in connection with the Exit
Assessment based upon Tenant's use of the Premises, any actual or suspected
Hazardous Materials issues, or other reasonable factors. The original of the
Exit Assessment shall be addressed to Landlord and shall be provided to the
Landlord within twenty (20) days of the expiration or earlier termination of the
Lease. In addition to Tenant's obligations under Section 14.7, Tenant agrees to
fully implement and address all recommended actions contained in the Exit
Assessment, at its sole cost, within thirty (30) days of the date thereof.

      14.9  EVENT OF DEFAULT. The release or discharge of any Hazardous Material
or the violation of any Hazardous Materials Law by Tenant or any assignee or
subtenant of Tenant without curing after applicable notice and opportunity to
cure shall be a material Event of Default by Tenant under this Lease. In
addition to or in lieu of the remedies available under this Lease as a result of
such Event of Default, Landlord shall have the right, without terminating this
Lease, to require Tenant to suspend its operations and activities on the
Premises until Landlord is reasonably satisfied that appropriate Remedial Work
has been or is being adequately performed; Landlord's election of this remedy
shall not constitute a waiver of Landlord's right thereafter to declare an Event
of Default and pursue any other available remedy.

15.   ALTERATIONS; LIENS.

      15.1  ALTERATIONS BY TENANT. Tenant shall not make any alterations,
additions or improvements ("Alterations") to the Premises without Landlord's
prior written consent, except for nonstructural Alterations that cost $15,000 or
less and are not materially visible from the exterior of the Premises. All
Alterations installed by Tenant shall be new or completely reconditioned.
Landlord shall have the right to reasonably approve the contractor, the method
of payment of the contractor, and the plans and specifications for all proposed
Alterations. Tenant shall obtain Landlord's consent to all proposed Alterations
requiring Landlord's reasonable consent prior to the commencement of any such
Alterations. Tenant's request for consent shall be accompanied by information
identifying the contractor and method of payment and two (2) copies of the
proposed plans and specifications. All Alterations of whatever kind and nature
shall become at once a part of the realty and shall be surrendered with the
Premises upon expiration or earlier termination of the Lease Term, unless
Landlord requires Tenant to remove the same as provided in Article 20. If Tenant
demolishes or removes any then-existing tenant improvements or other portions of
the Premises or the Building (including without limitation any
previously-installed Alterations), Tenant shall promptly commence and diligently
pursue to completion the Alterations then underway or shall otherwise restore
the Premises and the Building to its condition and slate of improvement prior to
such demolition or removal. During the Lease Term, Tenant agrees to provide, at
Tenant's expense, a policy of insurance covering loss or damage to Alterations
made by Tenant, in an amount adequate to repair or replace the same, naming
Landlord as an additional insured. Provided, however, Tenant may install movable
furniture, trade fixtures, machinery or equipment, computers, art, in
conformance with applicable governmental rules or ordinances and remove the same
upon expiration or earlier termination of this Lease as provided in Article 20.

      15.2  PERMITS AND GOVERNMENTAL REQUIREMENTS. Tenant shall obtain, at
Tenant's sole cost and expense, all building permits and other permits of every
kind and nature required by any governmental agency having jurisdiction in
connection with the Alterations. Tenant shall indemnify, defend and hold
Landlord and Landlord's officers, directors, shareholders, partners, principals,
employees and agents, and their respective successors and assigns, harmless from
and against any and all claims, actions, damages, liability, costs, and
expenses, including attorneys' fees and costs, arising out of any failure by
Tenant or Tenant's contractor or agents to obtain all required permits,
regardless of when such failure is discovered. Tenant shall do any and all
additional construction, alterations, improvements and retrofittings required to
be made to the Premises and/or the Center, or any other property of Landlord as
a result of, or as may be triggered by, Tenant's Alterations. Landlord shall
have the right to do such construction itself; but in all instances Tenant shall
pay all costs directly or indirectly related to such work and shall indemnify,
defend and hold Landlord and Landlord's officers, directors, shareholders,
partners, principals, employees and agents; and their respective successors and
assigns, harmless from and against any and all claims, actions, damages,
liability, costs, and expenses, including attorneys' fees and costs, arising out
of any such additionally required work. All payment and indemnification
obligations under this Section shall survive the expiration or earlier
termination of the Lease Term.

      15.3  LIENS. Tenant shall pay when due all claims for any work performed,
materials furnished or obligations incurred by or for Tenant, and Tenant shall
keep the Premises free from any liens arising with respect thereto. If Tenant
fails to cause any such lien to be released within fifteen (15) days after
imposition, by payment or posting of a proper bond, Landlord shall have the
right (but not the obligation) to cause such release by such means as Landlord
reasonably deems proper. Tenant shall pay Landlord upon demand for all costs
incurred by Landlord in connection therewith (including attorneys' fees and
costs), with interest at the rate specified in Section 22.4 from the date of
payment by Landlord to the date of payment by Tenant. Tenant will notify
Landlord in writing thirty (30) days prior to commencing any alterations,
additions, improvements or repairs in order to allow Landlord time to file a
notice of nonresponsibility.

16.   DAMAGE AND DESTRUCTION.

      16.1  PARTIAL INSURED DAMAGE. If the Premises or any building in which the
Premises are located are partially damaged or destroyed during the Lease Term,
Landlord shall make the necessary repairs, provided such repairs can reasonably
be completed within sixty (60) days after the date of the damage or destruction
in accordance with applicable laws and regulations and provided that Landlord
receives sufficient insurance proceeds to pay the cost of such repairs. In such
event, this Lease shall continue in full force and effect. If such repairs
cannot reasonably be completed within sixty (60) days after the date of the
damage or destruction or if Landlord does not receive sufficient insurance
proceeds, then Landlord may, at its option, elect within forty-five (45) days of
the date of the damage or destruction to proceed with the necessary repairs, in
which event this Lease shall continue in full force and effect and Landlord
shall complete the same within a reasonable time. If Landlord does not so elect
to make such repairs or if such repairs cannot be made under applicable laws and
regulations, this Lease may be terminated at the option of either party within
ninety (90) days of the occurrence of such damage or destruction.

      16.2  INSURANCE DEDUCTIBLE. If Landlord elects to repair any damage caused
by an insured casually as provided in Section 16.1, Tenant shall, within fifteen
(15) days after receipt of written notice from Landlord, pay the amount of any
deductible (or its share thereof) under any insurance policy covering such
damage or destruction, in accordance with Section 9.4 above.

      16.3  UNINSURED DAMAGE. In the event of any damage or destruction of the
Premises or any building in which the Premises are located by an uninsured
casually, Landlord shall have the right to elect either to repair such damage or
to terminate this Lease. Such election shall be exercised by written notice to
Tenant within forty-five (45) days of such damage or destruction.

      16.4  TOTAL DESTRUCTION. A total destruction (including any destruction
required by any authorized public authority) of either the Premises or any
building in which the Premises are located shall terminate this Lease.

      16.5  PARTIAL DESTRUCTION OF CENTER. If fifty percent (50%) or more of the
rentable area of the Center is damaged or destroyed by fire or other cause,
notwithstanding that the Premises may be unaffected, Landlord shall have the
right, to be exercised by notice in writing delivered to Tenant within ninety
(90) days after said occurrence, to elect to terminate this Lease, but only so
long as Landlord terminates all other leases in the Center.
<PAGE>   10
     16.6  TENANT'S OBLIGATIONS. Landlord shall not be required to repair any
injury or damage by fire or other cause, or to make any restoration of
replacement of any Alterations, trade fixtures, equipment or personal property
placed or installed in the Premises by or on behalf of Tenant. Unless this
Lease is terminated pursuant to this Article, Tenant shall promptly repair,
restore or replace the same in the event of damage. Nothing contained in this
Article shall be construed as a limitation on Tenant's liability or any damage
or destruction if such liability otherwise exists.

     16.7  RENT ABATEMENT. If Landlord repairs the Premises or the building
after damage or destruction as described in this Article 16, Minimum Monthly
Rent payable by Tenant hereunder from the date of damage until the repairs are
completed shall be equitably reduced, based upon the extent to which such
repairs interfere with the business carried on by Tenant in the Premises, but
only to the extent Landlord receives proceeds from rental income insurance paid
for by Tenant. Landlord agrees to take reasonable steps to make a claim for and
collect any rental income insurance proceeds that might be available.

     16.8  WAIVER OF INCONSISTENT STATUTES. The parties' rights and obligations
in the event of damage or destruction shall be governed by the provisions of
this Lease; accordingly, Tenant waives the provisions of California Civil Code
Sections 1932(2) and 1933(4), and any other statute, code or judicial decisions
that grants a tenant a right to terminate a lease in the event of damage or
destruction of a leased premises.

17.  CONDEMNATION.

     17.1  CONDEMNATION OF PREMISES. If any portion of the Premises is taken or
condemned for a public or quasi-public use ("Condemnation"), and a portion
remains that is susceptible of occupation, then this Lease shall terminate as
to the portion so taken as of the date title vests in the condemnor, but shall
remain in full force and effect as to the remaining Premises. Landlord shall,
within a reasonable period of time, restore the remaining Premises as nearly as
practicable to the condition existing prior to the condemnation; provided,
however, that if Landlord receives insufficient funds from the condemnor for
such purpose, Landlord may elect to terminate this Lease. If this Lease
continues in effect, the Minimum Monthly Rent shall be equitably adjusted,
based upon the value of the Premises remaining after the Condemnation compared
to the value of the Premises prior to the Condemnation. Provided, however, in
the event of any such partial condemnation, Landlord or Tenant shall have the
option to terminate this Lease entirely as of the date title vests in the
condemnor. If all the Premises are condemned, or such portion so that there
does not remain a portion that is susceptible of occupation, or if such a
substantial portion of the Center is condemned that it is no longer
economically appropriate to lease the Premises on the terms and conditions of
this Lease, then at the election of Landlord or Tenant this Lease shall
terminate as of the date title vests in the condemnor.

     17.2  CONDEMNATION OF PARKING AREA. If all or any portion of the parking
area in the Center is condemned such that the ratio of the total square footage
of parking and other Common Facilities compared to the total rentable building
square footage of the Center is reduced to a ratio below two to one, then at
the election of Landlord or Tenant this Lease shall terminate as of the date
title vests in the condemnor.

     17.3  CONDEMNATION AWARD. All compensation awarded upon any such partial or
total Condemnation shall be paid to Landlord and Tenant shall have no claim
thereto, and Tenant hereby irrevocably assigns and transfers to Landlord any
right to compensation or damages by reason of any such condemnation. Provided,
however, that Tenant shall have the right to claim and recover from the
condemning authority, but not from Landlord, such compensation as may be
separately awarded or recoverable by Tenant in Tenant's own right on account of
any damage to Tenant's business by reason of the Condemnation and on account of
any cost that Tenant may incur in removing Tenant's merchandise, furniture,
fixtures, leasehold improvements and equipment. If this Lease is terminated, in
whole or in part, in accordance with this Article as a result of a Condemnation,
Tenant shall have no claim for the value of any unexpired term of this Lease.

18.  ASSIGNMENT AND SUBLETTING.

     18.1  LANDLORD'S CONSENT REQUIRED. Tenant shall not voluntarily or
involuntarily assign, sublease, mortgage, encumber, or otherwise transfer all
or any portion of the Premises or its interest in this Lease (collectively,
"Transfer") without Landlord's prior written consent, which consent Landlord
shall not unreasonably withhold. Landlord may withhold its consent until Tenant
has complied with the provisions of Sections 18.2 and 18.3. Any attempted
Transfer without Landlord's written consent shall be void and shall constitute
an Event of Default under this Lease. If Tenant is a corporation, any cumulative
Transfer of more than fifty percent (50%) of the voting stock of such
corporation shall constitute a Transfer requiring Landlord's consent hereunder;
provided, however that this sentence shall not apply to any corporation whose
stock is publicly traded. If Tenant is a partnership, limited liability
company, trust or other entity, any cumulative Transfer of more than fifty
percent (50%) of the partnership, membership, beneficial or other ownership
interests therein shall constitute a Transfer requiring Landlord's consent
hereunder. Tenant shall not have the right to consummate a Transfer or to
request Landlord's consent to any Transfer if any Event of Default has occurred
and is continuing or if Tenant or any affiliate or Tenant is in default under
any lease of any other real property owned or managed (in whole or in part) by
Landlord or any affiliate of Landlord.

     18.2  LANDLORD'S ELECTION. Tenant's request for consent to any Transfer
shall be accompanied by a written statement setting forth the details of the
proposed Transfer, including the name, business and financial condition of the
prospective Transferee, financial details of the proposed Transfer (e.g., the
term and the rent and security deposit payable), and any other related
information that Landlord may reasonably require. Landlord shall have the right:
(a) to withhold consent to the Transfer, if reasonable, (b) to grant consent,
(c) to terminate this Lease as to the portion of the Premises affected by any
proposed Transfer, in which event Landlord may enter into a lease directly with
the proposed Transferee, or (d) to consent on the condition that Landlord be
paid, as Additional Rent hereunder, fifty percent (50%) of all subrent or other
consideration to be paid to Tenant under the terms of the Transfer in excess of
the total rent due hereunder (including, if such Transfer is an assignment or if
such Transfer is to occur directly or indirectly in connection with the sale of
any assets of Tenant, fifty percent (50%) of the amount of the consideration
attributable to the Transfer of the Lease, as reasonably determined by
Landlord). The grounds on which Landlord may reasonably withhold its consent to
any requested Transfer include, without limitation, that: (i) the proposed
Transferee's contemplated use of the Premises following the proposed Transfer is
not reasonably similar to the use of the Premises permitted hereunder, (ii) in
Landlord's reasonable business judgment, the proposed Transfer lacks sufficient
business reputation or experience to operate a successful business of the type
and quality permitted under this Lease, (iii) in Landlord's reasonable business
judgment, the proposed Transferee lacks sufficient business net worth, working
capital, anticipated cash flow and other indicators of financial strength to
meet all of its obligations under this Lease, (iv) the proposed Transfer would
breach any covenant of Landlord respecting a radius restriction, location, use
or exclusivity in any other lease, financing agreement, or other agreement
relating to the Center, and (v) in Landlord's reasonable business judgment, the
possibility of a release of Hazardous Materials is materially increased as a
result of the Transfer or if Landlord does not receive sufficient assurances
that the proposed Transferee has the experience and financial ability to remedy
a violation of Hazardous Materials and to fulfill its obligations under Articles
13 and 14. In connection with any such Transfer, Landlord shall have the right
to require Tenant, at Tenant's sole cost, to cause environmental testing meeting
the requirements of an Exit Assessment described in Section 14.8 to be
performed. Landlord need only respond to any request by Tenant hereunder within
a reasonable time of not less than ten (10) business days after receipt of all
information and other submission required in connection with such request.

     18.3  COSTS; TRANSFER FEE. Tenant shall pay all costs and expenses in
connection with any permitted Transfer, including any real estate brokerage
commissions due with respect to the Transfer. Tenant shall pay all attorneys'
fees and costs incurred by Landlord and a fee of $500 to reimburse Landlord for
reasonable costs and expenses incurred in connection with any request by Tenant
for Landlord's consent to a Transfer. Such fee shall be delivered to Landlord
concurrently with Tenant's request for consent.

     18.4  ASSUMPTION; NO RELEASE OF TENANT. Any permitted transferee shall
assume in writing all obligations of Tenant under this Lease, utilizing a form
of assumption agreement provided or approved by Landlord, and an executed copy
of such assumption agreement shall be delivered to Landlord within fifteen
(15) days after the effective date of the Transfer. The taking of possession of
all or any part of the Premises by any such permitted assignee or subtenant
shall constitute an agreement by such person or entity to assume without
limitation or qualification all of the obligations of Tenant under this Lease,
notwithstanding any failure by such person to execute the assumption agreement
required in the immediately preceding sentence. No permitted Transfer shall
release or change Tenant's primary liability to pay the rent and to perform all
other obligations of Tenant under this Lease. Landlord's acceptance of rent
from any other person is not a waiver of any provision of this Article or a
consent to Transfer. Consent to one Transfer shall not constitute a consent to
any subsequent Transfer. If any transferee defaults under this Lease, Landlord
may proceed directly against Tenant without pursuing remedies against the
transferee. Landlord may consent to subsequent Transfers or modifications of
this Lease by Tenant's transferee, without notifying Tenant or obtaining its
consent, and such action shall not relieve Tenant of its liability under this
Lease.

     18.5  NO MERGER. No merger shall result from any Transfer pursuant to this
Article, any surrender by Tenant of its interest under this Lease, or any
termination hereof in any other manner. In any such event, Landlord may either
terminate any or all subleases or succeed to the interest of Tenant thereunder.

<PAGE>   11
     18.6 REASONABLE RESTRICTION. Tenant acknowledges that the restrictions on
Transfer contained herein are reasonable restrictions for purposes of Section
22.2 of this Lease and California Civil Code Section 1951.4.

19.  SUBORDINATION; ATTORNMENT; ESTOPPEL CERTIFICATE

     19.1 SUBORDINATION. This Lease is junior and subordinate to all ground
leases, mortgages, deeds of trust, and other security instruments now or
hereafter affecting the real property of which the Premises are a part, and to
all advances made on the security thereof, and to all renewals, modifications,
consolidations, replacements and extensions thereof. If any mortgagee,
beneficiary under deed of trust or ground lessor shall elect to have this Lease
prior to the lien of its mortgage, deed of trust or ground lease, and gives
written notice thereof to Tenant, this Lease shall be deemed prior thereto.
Tenant agrees to execute any reasonable documents required to effectuate such
subordination or to make this Lease prior to the lien of any such mortgage, deed
of trust or ground lease, as the case may be.

     19.2 ATTORNMENT. If Landlord sells, transfers, or conveys its interest in
the Premises or this Lease, or if the same is foreclosed judicially or
nonjudicially, or is otherwise acquired, by a mortgagee, beneficiary under deed
of trust or ground lessor, upon the request and at the sole election of
Landlord's lawful successor, Tenant shall attorn to said successor, provided
said successor accepts the Premises subject to this Lease. Tenant shall, upon
request of Landlord or any such mortgagee, beneficiary under deed of trust or
ground lessor, execute an attornment agreement confirming the same, in form and
substance acceptable to Landlord. Such agreement shall provide, among other
things, that said successor shall not be bound by (a) any prepayment of more
than one (1) month's rent (except any Security Deposit) or (b) any material
amendment of this Lease made after the later of the initial effective date of
this Lease, or the date that such successor's lien or interest first arose,
unless said successor shall have consented to such amendment.

     19.3 ESTOPPEL CERTIFICATES. Within fifteen (15) days after written request
from Landlord, Tenant at Tenant's sole cost shall execute, acknowledge and
deliver to Landlord a written statement certifying: (a) that this Lease is
unmodified and in full force and effect (or, if modified, stating the nature of
such modifications and certifying that this Lease is in full force and effect
as so modified), (b) the amount of any rent paid in advance, and (c) that, to
Tenant's knowledge, there are no uncured defaults on the part of Landlord, or
specifying the nature of such defaults if any are claimed. Any such statement
may be conclusively relied upon by any prospective purchaser of or lender on
the Premises. Tenant's failure to deliver such statement within said 15-day
period shall constitute a conclusive acknowledgment by Tenant: (i) that this
Lease is in full force and effect without modification except as may be
represented by landlord, (ii) that not more than one (1) month's rent has been
paid in advance, and (iii) that there are no uncured defaults in Landlord's
performance.

20.  SURRENDER OF PREMISES.

     20.1 CONDITION OF PREMISES. Upon the expiration or earlier termination of
this Lease, Tenant shall surrender the Premises to Landlord, broom clean and in
the same condition and state of repair as at the commencement of the Lease Term,
except for ordinary wear and tear that Tenant is not otherwise obligated to
remedy under the provisions of this Lease. Tenant shall deliver all keys to the
Premises and the building of which the Premises are a part to Landlord. Upon
Tenant's vacation of the Premises, Tenant shall remove all portable furniture,
trade fixtures, machinery, equipment, signs and other items of personal property
(unless prohibited from doing the same under Section 20.2), and shall remove any
Alterations (whether or not made with Landlord's consent) that Landlord may
require Tenant to remove. Tenant shall repair all damage to the Premises caused
by such removal, all at Tenant's expense. Such repairs shall be performed in a
manner satisfactory to Landlord and shall include, but are not limited to, the
following: capping all plumbing, capping all electrical wiring, repairing all
holes in walls, restoring damaged floor and/or ceiling tiles, and thorough
cleaning of the Premises. If Tenant fails to remove any items that Tenant has an
obligation to remove under this Section when required by Landlord or otherwise,
such items shall, at Landlord's option, become the property of Landlord and
Landlord shall have the right to remove and retain or dispose of the same in any
manner, without any obligation to account to Tenant for the proceeds thereof.
Tenant waives all claims against Landlord for any damages to Tenant resulting
from Landlord's retention or disposition of such Alterations or personal
property. Tenant shall be liable to Landlord for Landlord's costs of removing,
storing and disposing of such items.

     20.2 REMOVAL OF CERTAIN ALTERATIONS, FIXTURES AND EQUIPMENT PROHIBITED.
All Alterations, fixtures (whether or not trade fixtures), machinery,
equipment, signs and other items of personal property that Landlord has not
required Tenant to remove under Section 20.1 shall become Landlord's property
and shall be surrendered to Landlord with the Premises, regardless of who paid
for the same. In particular and without limiting the foregoing, Tenant shall
not remove any of the following materials or equipment without Landlord's prior
written consent, regardless of who paid for the same and regardless of whether
the same are permanently attached to the Premises: power wiring and power
panels; piping for industrial gasses or liquids; laboratory benches, sinks,
cabinets and casework; fume hoods or specialized air-handling and evacuation
systems; drains or other equipment for the handling of waste water or hazardous
materials; computer, telephone and telecommunications wiring, panels and
equipment; lighting and lighting fixtures; wall coverings, drapes, blinds and
other window coverings; carpets and other floor coverings; heaters, air
conditioners and other heating or air conditioning equipment; fencing; security
gates and systems; and other building operating equipment and decorations.

     20.3 HOLDING OVER. Tenant shall vacate the Premises upon the expiration or
earlier termination of this Lease, and Tenant shall indemnify Landlord against
all liabilities, damages and expenses incurred by Landlord as a result of any
delay by Tenant in vacating the Premises. If Tenant remains in possession of the
Premises or any part thereof after the expiration of the Lease Term with
Landlord's written permission, Tenant's occupancy shall be a tenancy from
month-to-month only, and not a renewal or extension hereof. All provisions of
this Lease (other than those relating to the term) shall apply to such
month-to-month tenancy, except that the Minimum Monthly Rent shall be increased
to 50% of the Minimum Monthly Rent in effect during the last month of the Lease
Term. No acceptance of rent, negotiation of rent checks or other act or omission
of Landlord or its agents shall extend the Expiration Date of this Lease other
than a writing executed by Landlord giving Tenant permission to remain in
occupancy beyond the Expiration Date under the terms of the immediately
preceding sentence.

21.  DEFAULT BY TENANT.

     The occurrence of any of the following shall constitute an "Event of
Default" under this Lease by Tenant and such failure continues for a period of
ten (10) days after written notice from Landlord:

          (a) Failure to pay when due the rent or any other monetary sums
required hereunder.

          (b) Failure to perform any other agreement or obligation of Tenant
hereunder, if such failure continues for fifteen (15) days after written notice
by Landlord to Tenant, except as to those Events of Default that are noncurable,
in which case no such grace period shall apply. If the nature of the failure is
such that more than thirty (30) days are reasonably required for such cure,
Tenant shall not be deemed to be in default if Tenant commences to cure within
such thirty (30) day period, and thereafter diligently pursues the cure to
Landlord's notice described in subsection (a) and (b) is intended to satisfy,
and is not in addition to, any and all legal notices required prior to
commencement of an unlawful detainer action, including without limitation the
notice requirements of California Code of Civil Procedure Sections 1161 et seq.

          (c) Abandonment or vacation of the Premises by Tenant, or failure to
occupy the Premises for a period of ten (10) consecutive days.

          (d) If any of the following occurs: (i) a petition is filed for an
order of relief under the federal Bankruptcy Code or for an order of decree of
insolvency or reorganization or rearrangement under any state or federal law,
and such petition is not dismissed within thirty (30) days after the filing
thereof; (ii) Tenant makes an general assignment for the benefit of creditors;
(iii) a receiver or trustee is appointed to take possession of any substantial
part of Tenant's assets, unless such appointment is vacated within thirty (30)
days after the date thereof; (iv) Tenant consents to or suffers an attachment,
execution or other judicial seizure of any substantial part of its assets or
its interest under this Lease, unless such process is released or satisfied
within thirty (30) days after the occurrence thereof; below Tenant's net worth
as of the date of execution of this Lease. If a court of competent jurisdiction
determines that any of the foregoing events is not a default under this Lease,
and a trustee is appointed to take possession (or if Tenant remains a debtor in
possession), and such trustee or Tenant transfers Tenant's interest hereunder,
then Landlord shall receive, as Additional Rent, the difference between the
rent (or other consideration) paid in connection with such transfer and the
rent payable by Tenant hereunder. Any assignee pursuant to the provisions of
any bankruptcy law shall be deemed without further act to have assumed all of
the obligations of the Tenant hereunder arising on or after the date of such
assignment. Any such assignee shall, upon demand, execute and deliver to
Landlord an instrument confirming such assumption.

          (e) The occurrence of any other event that is deemed to be an Event
of Default under any other provision of this Lease.

<PAGE>   12
22.  REMEDIES.

     Upon the occurrence of any Event of Default by Tenant, Landlord shall have
the following remedies, each of which shall be cumulative and in addition to
any other remedies now or hereafter available at law or in equity:

     22.1 TERMINATION OF LEASE. Landlord can terminate this Lease and Tenant's
right to possession of the Premises by giving written notice of termination,
and then re-enter the Premises and take possession thereof. No act by Landlord
other than giving written notice to Tenant of such termination shall terminate
this Lease. Upon termination, Landlord has the right to recover all damages
incurred by Landlord as a result of Tenant's default, including:

          (a)  The worth at the time of award of any unpaid rent that had been
earned at the time of such termination; plus

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

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

          (d)  Any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's default, including, but not limited to
(i) expenses for cleaning, repairing or restoring the Premises, (ii) expenses
for altering, remodeling or otherwise improving the Premises for the purpose of
reletting, (iii) brokers' fees and commissions, advertising costs and other
expenses of reletting the Premises, (iv) costs of carrying the Premises, such
as taxes, insurance premiums, utilities and security precautions, (v) expenses
in retaking possession of the Premises, (vi) attorneys' fees and costs, (vii)
any unearned brokerage commissions paid in connection with this Lease, and
(viii) payment of any previously waived or abated Minimum Monthly Rent and/or
Additional Rent; plus

          (e)  At Landlord's election, such other amounts in addition to or in
lieu of the foregoing as may be permitted from time to time under applicable
law. As used in paragraphs (a) and (b) above, the "worth at the time of award"
shall be computed by allowing interest at the maximum permissible legal rate. As
used in paragraph (c) above, the "worth at the time of award" shall be computed
by discounting such amount at the discount rate of the Federal Reserve Bank of
San Francisco at the time of award plus one percent (1%).

     22.2 CONTINUATION OF LEASE. Landlord has the remedy described in
California Civil Code Section 1951.4 (Landlord may continue the lease in effect
after Tenant's breach and abandonment and recover rent as it becomes due, if
Tenant has the right to sublet or assign, subject only to reasonable
limitations), as follows:

          (a)  Landlord can continue this Lease in full force and effect
without terminating Tenant's right of possession, and Landlord shall have the
right to collect rent and other monetary charges when due and to enforce all
other obligations of Tenant hereunder. Landlord shall have the right to enter
the Premises to do acts of maintenance and preservation of the Premises, to
make alterations and repairs in order to relet the Premises, and/or to
undertake other efforts to relet the Premises. Landlord may also remove
personal property from the Premises and store the same in a public warehouse at
Tenant's expense and risk. No act by Landlord permitted under this paragraph
shall terminate this Lease unless a written notice of termination is given by
Landlord to Tenant or unless the termination is decreed by a court of competent
jurisdiction.

          (b)  In furtherance of the remedy set forth in this Section, Landlord
may relet the Premises or any part thereof for Tenant's account, for such term
(which may extend beyond the Lease Term), at such rent, and on such other terms
and conditions as Landlord may deem advisable in its sole discretion. Tenant
shall be liable immediately to Landlord for all costs Landlord incurs in
reletting the Premises. Any rents received by Landlord from such reletting
shall be applied to the payment of: (i) any indebtedness other than rent due
hereunder from Tenant to Landlord, (ii) the costs of such reletting, including
brokerage and attorneys' fees and costs, and the cost of any alterations and
repairs to the Premises, and (iii) the payment of rent due and unpaid
hereunder, including any previously waived or abated rent. Any remainder shall
be held by Landlord and applied in payment of future amounts as the same become
due and payable hereunder. In no event shall Tenant be entitled to any excess
rent received by Landlord after an Event of Default by Tenant and the exercise
of Landlord's remedies hereunder. If the rent from such reletting during any
month is less than the rent payable hereunder, Tenant shall pay such deficiency
to Landlord upon demand.

          (c)  Landlord shall not, by any re-entry or other act, be deemed to
have accepted any surrender by Tenant of the Premises or Tenant's interest
therein, or be deemed to have terminated this Lease or Tenant's right to
possession of the Premises or the liability of Tenant to pay rent accruing
thereafter or Tenant's liability for damages under any of the provisions
hereof, unless Landlord shall have given Tenant notice in writing that it has
so elected to terminate this Lease.

          (d)  Tenant acknowledges and agrees that the restrictions on the
Transfer of the Lease set forth in Article 18 of this Lease constitute
reasonable restrictions on such transfer for purposes of this Section and
California Civil Code Section 1951.4.

     22.3 PERFORMANCE BY LANDLORD. If Tenant fails to pay any sum of money or
perform any other act to be performed by Tenant hereunder, and such failure
continues for fifteen (15) days (for monetary obligations), and thirty (30) days
(for non-monetary obligations) after notice by Landlord, Landlord shall have the
right (but not the obligation) to make such payment or perform such other act
without waiving or releasing Tenant from its obligations. All sums so paid by
Landlord and all necessary incidental costs, together with interest thereon at
the rate specified in Section 22.4, shall be payable to Landlord within five (5)
days of demand. Landlord shall have the same rights and remedies in the event of
nonpayment by Tenant as in the case of default by Tenant in the payment of the
rent.

     22.4 LATE CHARGE; INTEREST ON OVERDUE PAYMENTS. The parties acknowledge
that late payment by Tenant of Minimum Monthly Rent or any Additional Rent will
cause Landlord to incur costs not contemplated by this Lease, the exact amount
of which will be extremely difficult and impractical to determine, including,
but not limited to, processing and account charges, administrative expenses, and
additional interest expenses of late charges that Landlord may be required to
pay as a result of late payment on Landlord's obligations. Therefore, if any
installment of Minimum Monthly Rent or Additional Rent is not received by
Landlord on the due date, and without regard to whether Landlord gives Tenant
notice of such failure or exercises any of its remedies upon an Event of
Default, Tenant shall pay a late charge equal to the greater of six percent (6%)
of the overdue amount or One Hundred Dollars ($100), as Additional Rent
hereunder. The parties hereby agree that such late charge represents a fair and
reasonable estimate of the damages Landlord will incur by reason of late payment
by Tenant. In addition, any amount due from Tenant that is not paid after
notice by Landlord of Tenant's failure to pay rent and shall bear interest at a
rate equal to two percent (2%) over the then current Bank of America prime or
reference rate or ten percent (10%) per annum, whichever is greater, but not in
excess of the maximum permissible legal rate, from the date such payment is due
until the date paid by Tenant. Landlord's acceptance of any interest or late
charge shall not constitute a waiver of Tenant's default or prevent Landlord
from exercising any other rights or remedies available to Landlord.

23.  DEFAULT BY LANDLORD.

     23.1 NOTICE TO LANDLORD. Landlord shall not be in default under this Lease
unless Landlord fails to perform an obligation required of Landlord within a
reasonable time, but in no event later than thirty (30) days after written
notice by Tenant to Landlord and to each Mortgagee as provided in Section 23.2,
specifying the nature of the alleged default; provided, however, that if the
nature of the obligation is such that more than thirty (30) business days are
required for performance, then Landlord shall not be in default if Landlord
commences performance within such 30-day period and thereafter diligently
prosecutes the same to completion.

     23.2 NOTICE TO MORTGAGEES. Tenant agrees to give each mortgagee or trust
deed holder on the Premises or the Center ("Mortgagee"), by registered mail, a
copy of any notice of default served upon Landlord, provided that Tenant has
been previously notified in writing of the address of such Mortgagee. Tenant
further agrees that if Landlord fails to cure such default within the time
provided for in this Lease, then the Mortgagees shall have an additional thirty
(30) days within which to cure such default, or if such default cannot
reasonably be cured within that time, then such additional time as may be
necessary if, within said 30-day period, any Mortgagee has commenced and is
diligently pursuing the remedies necessary to cure the default (including but
not limited to commencement of foreclosure proceedings if necessary to affect
such cure), in which event this Lease shall not be terminated while such
remedies are being so diligently pursued.

     23.3 LIMITATIONS ON REMEDIES AGAINST LANDLORD. In the event Tenant has any
claim or cause of action against Landlord: (a) Tenant's sole and exclusive
remedy shall be against Landlord's interest in the building of which the
Premises are a part, and neither Landlord nor any partner of Landlord nor any
other property of Landlord shall be liable for any deficit, (b) no partner of
Landlord shall be sued or named  as a party in any suit or action (except as may
be necessary to secure jurisdiction over Landlord), no service of process shall
be made against



<PAGE>   13

any partner of Landlord (except as may be necessary to secure jurisdiction
over the partnership), and no such partner shall be required to answer or
otherwise plead to any service of process, (c) no judgment shall be taken
against any partner of Landlord and any judgment taken against any partner of
Landlord may be vacated and set aside at any time, and (d) no writ of execution
will ever be levied against the assets of any partner of Landlord. The
covenants and agreements set forth in this Section shall be enforceable by
Landlord and/or by any partner of Landlord. If Landlord fails to give any
consent that a court later holds Landlord was required to give under the terms
of this Lease, Tenant shall be entitled solely to specific performance and such
other remedies as may be specifically reserved to Tenant under this Lease, but
in no event shall Landlord be responsible for monetary damages (including
incidental and consequential damages) for such failure to give consent.

24.   GENERAL PROVISIONS

      24.3  ATTORNEYS' FEES. If either party brings any legal action or
proceeding, declaratory or otherwise, arising out of this Lease, including any
suit by Landlord to recover rent or possession of the Premises or to otherwise
enforce this Lease, the losing party shall pay the prevailing party's costs and
attorneys' fees and costs incurred in such proceeding. If Landlord issues
notice(s) to pay rent, notice(s) to perform covenant, notice(s) of abandonment,
or comparable documents as a result of Tenant's default under this Lease, and
if Tenant cures such default, Tenant shall pay to Landlord the reasonable costs
incurred by Landlord, including Landlord's attorneys' fees and costs, of
preparation and delivery of same.

      24.4  AUTHORITY OF TENANT. Tenant represents and warrants that it has
full power and authority to execute and fully perform its obligations under
this Lease pursuant to its governing instruments, without the need for any
further action, and that the person(s) executing this Agreement on behalf of
Tenant are the duly designated agents of Tenant and are authorized to do so.
Prior to execution of this Lease, Tenant shall supply Landlord with such
evidence as Landlord may request regarding the authority of Tenant to enter
into this Lease. Any actual or constructive taking of possession of the
Premises by Tenant shall constitute a ratification of this Lease by Tenant.

      24.5  BINDING EFFECT. Subject to the provisions of Article 18 restricting
transfers by Tenant and subject to Section 24.27 regarding transfer of
Landlord's interest, all of the provisions of this Lease shall bind and inure to
the benefit of the parties hereto and their respective heirs, legal
representatives, successors and assigns.

      24.6  BROKERS. Tenant and Landlord warrants that it has had no dealings
with any real estate broker or agent in connection with the negotiation of this
transaction other than the broker(s) described in the Basic Lease Provisions
(if any), and it knows of no other real estate broker or agent who are entitled
to a commission in connection with this transaction. Each party agrees to
indemnify, defend and hold the other harmless from and against any obligation
or liability to pay any commission or compensation to any other party arising
from the act or agreement of the other.

      24.7  CONSTRUCTION. The headings and captions used in this Lease are for
convenience only and are not a part of the terms and provisions of this Lease.
In any provision relating to the conduct, acts or omissions of Tenant, the term
"Tenant" shall include Tenant, its subtenants and assigns and their respective
agents, employees, contractors, and invitees, and any others using the Premises
with Tenant's express or implied permission. Any use in this Lease, or in any
addendum, amendment or other document related hereto, of the terms "lessor" or
"lessee" to refer to a party to this Lease shall be deemed to be references to
Landlord and Tenant, respectively.

      24.8  COUNTERPARTS. This Lease may be executed in multiple copies, each
of which shall be deemed an original, but all of which shall constitute one
Lease binding on all parties after all parties have signed such a counterpart.

      24.9  COVENANTS AND CONDITIONS. Each provision to be performed by Tenant
and Landlord shall be deemed to be both a covenant and a condition.

      24.10 ENTIRE AGREEMENT. This Lease, together with all exhibits and
addenda, if any, attached hereto, constitutes the entire agreement between the
parties with respect to the subject matter hereof. There are no oral or written
agreements or representations between the parties hereto affecting this Lease,
and this Lease supersedes, cancels, and merges any and all previous verbal or
written negotiations, arrangements, representations, brochures, displays,
models, photographs, renderings, floor plans, elevations, projections,
estimates, agreements and understandings if any, made by or between Landlord
and Tenant and their agents, with respect to the subject matter, and none
thereof shall be used to interpret, construe, supplement or contradict this
Lease. This Lease, and all amendments thereto, is and shall be considered to be
the only agreement between the parties hereto and their representatives and
agents. There are no other representations or warranties between the parties,
and all reliance with respect to representations is solely based upon the
representations and agreements contained in this Lease.


      24.11 EXHIBITS. All exhibits, addenda and riders attached or referred to
herein are hereby incorporated herein by reference.

      24.12 FINANCIAL STATEMENTS. Unless Tenant is a publicly-traded company,
within ten (10) days after written request from Landlord, Tenant shall deliver
to Landlord such financial statements as are reasonably requested by Landlord
to verify the net worth of Tenant, or any assignee, subtenant, or guarantor of
Tenant. In addition, Tenant shall deliver to any proposed or actual lender or
purchaser of the Premises designated by Landlord any financial statements
required by such party to facilitate the sale, financing or refinancing of the
Premises, including the past three (3) years' financial statements. Tenant
represents and warrants to Landlord that: (a) each such financial statement is
a true and accurate statement as of the date of such  statement; and (b) at all
times during the Lease Term or any extension thereof, Tenant's net worth shall
not be materially reduced below Tenant's net worth as of the date of execution
of this Lease. Landlord shall take reasonable precautions to protect the
confidentiality of such financial statements. Tenant hereby irrevocably
authorizes Landlord to conduct credit checks and other investigations into
Tenant's financial affairs.

      24.13 FORCE MAJEURE. If Landlord is delayed in performing any of its
obligations hereunder due to strikes; labor problems; inability to procure
utilities; materials; equipment or transportation; governmental regulations;
weather conditions; riots, insurrection, or war; or other events beyond
Landlord's control; then the time for performance of such obligation shall be
extended to the extent reasonably necessary as a result of such event.
Notwithstanding the foregoing, Tenant shall have the right to terminate this
lease if any such delay exceeds six (6) months.

      24.14 GOVERNING LAW. This Lease shall be governed, construed and enforced
in accordance with the laws of the State of California.

      24.15 JOINT AND SEVERAL LIABILITY. If more than one person or entity
executes this Lease as Tenant, each of them is jointly and severally liable for
all of the obligations of Tenant hereunder.

      24.16 MODIFICATION. The provisions of this Lease may not be modified or
amended, except by a written instrument signed by all parties.

      24.17 MODIFICATION FOR LENDER. If, in connection with obtaining financing
or refinancing for the Premises or the Center, Landlord's lender requests
reasonable modifications to this Lease, Tenant will not unreasonably withhold
or delay its consent thereto, provided that such modifications do not increase
the obligations or costs of Tenant hereunder or materially and adversely
affect Tenant's rights hereunder.

      24.18 NONDISCRIMINATION. Tenant for itself and its officers, directors,
shareholders, partners, principals, employees, agents, representatives, and
other related entities and individuals, agrees to comply fully with any and all
laws and other requirements prohibiting discrimination against any person or
group of persons on account of race, color, religion, creed, sex, marital
status, sexual orientation, national origin, ancestry, age, physical handicap or
medical condition, in the use occupancy or patronage of the Premises and/or of
Tenant's business. Tenant shall indemnify, defend and hold Landlord and
Landlord's officers, directors, shareholders, partners, principals, employees
and agents, and their respective successors and assigns, harmless from and
against all damage and liability incurred by Landlord and in the event of any

<PAGE>   14
violation of the foregoing covenant or because of any event of or practice of
discrimination against any such persons or group of persons by Tenant or its
officers, directors, shareholders, partners, principals, employees, agents,
representatives, and other related entitles and individuals in accordance with
the indemnification provisions of Article 13.

     24.19 NOTICE. Any and all notices to either party shall be personally
delivered or sent by regular mail, postage prepaid, addressed to the party to
be notified at the address specified in Section 1.1, or at such other address
as such party may from time to time designate in writing. Notice shall be
deemed delivered on the date of personal delivery or three (3) business days
after deposit in the U.S. Mail, certified, return receipt requested.

     24.20 PARTIAL INVALIDITY. If any provision of this Lease is determined by
a count of competent jurisdiction to be invalid or unenforceable, the remainder
of this Lease shall not be affected thereby. Each provision shall be valid and
enforceable to the fullest extent permitted by law.

     24.21 QUIET ENJOYMENT. Landlord agrees that Tenant, upon paying the rent
and performing the terms, covenants and conditions of this Lease, may quietly
have, hold and enjoy the Premises from and after Landlord's delivery of the
Premises to Tenant and until the end of the Lease Term; subject, however, to
the lien and provisions of any mortgage or deed of trust to which this Lease is
or becomes subordinate.

     24.22 RECORDING. Tenant shall not record this Lease or any memorandum
hereof without Landlord's prior written consent.

     24.23 RELATIONSHIP OF THE PARTIES. Nothing contained in this Lease shall
be deemed or construed as creating a partnership, joint venture,
principal-agent, or employer-employee relationship between Landlord and any
other person or entity (including, without limitation, Tenant) or as causing
Landlord to be responsible in any way for the debts or obligations of such
other person or entity.

     24.25 RIGHTS OF REDEMPTION WAIVED. Tenant hereby expressly waives any and
all rights of redemption under any present or future laws in the event Tenant
is evicted or dispossessed for any cause, or in the event Landlord obtains
possession of the Premises by reason of Tenant's violation of any of the
covenants and conditions of this Lease or otherwise.

     24.26 TIME OF ESSENCE. Time is of the essence of each and every provision
of this Lease.

     24.27 TRANSFER OF LANDLORD'S INTEREST. In the event of a sale, assignment,
exchange or other disposition of Landlord's interest in the Premises, other
than a transfer for security purposes only, Landlord shall be relieved of all
obligations and liabilities accruing hereunder after the effective date of said
sale, assignment, exchange or other disposition, provided that any Security
Deposit or other funds then held by Landlord in which Tenant has an interest
are delivered to Landlord's successor. The obligations to be performed by
Landlord hereunder shall be binding on Landlord's successors and assigns only
during their respective periods of ownership.

     24.28 WAIVER. No provision of this Lease or the breach thereof shall be
deemed waived, except by written consent of the party against whom the waiver
is claimed. A waiver of any such breach shall not be deemed a waiver of any
preceding or succeeding breach of the same or any other provision. No delay or
omission by Landlord in exercising any of its remedies shall impair or be
construed as a waiver thereof, unless such waiver is expressly set forth in a
written instrument signed by Landlord. The subsequent acceptance of rent
hereunder by Landlord shall not be deemed to be a waiver of any preceding
breach by Tenant, other than the failure of Tenant to pay the particular rental
so accepted, regardless of Landlord's knowledge of such preceding breach at the
time of acceptance of such rent.

          THE SUBMISSION OF THIS LEASE FOR EXAMINATION AND/OR SIGNATURE BY
          TENANT IS NOT A COMMITMENT BY LANDLORD OR ITS AGENTS TO RESERVE THE
          PREMISES OR TO LEASE THE PREMISES TO TENANT. THIS LEASE SHALL BECOME
          EFFECTIVE AND LEGALLY BINDING ONLY UPON FULL EXECUTION AND DELIVERY BY
          BOTH LANDLORD AND TENANT. UNTIL LANDLORD DELIVERS A FULLY EXECUTED
          COUNTERPART HEREOF TO TENANT, LANDLORD HAS THE RIGHT TO OFFER AND TO
          LEASE THE PREMISES TO ANY OTHER PERSON TO THE EXCLUSION OF TENANT.

EXECUTED, by Landlord and Tenant as of the date first written above.

TENANT:                                 LANDLORD:
                                        JBC SORRENTO WEST, LLC, a California
APPLIED MOLECULAR EVOLUTION, INC.,      limited liability company
----------------------------------      ------------------------------------
a Delaware corporation                  By: John B. Clark and Suzanne V. Clark
----------------------------------      ------------------------------------
                                            Family Trust UTD 3/18/2000

By: /s/ William D. Huse                 By:
   -------------------------------         ---------------------------------
Title: CEO                                       John B. Clark, Trustee
      ----------------------------       Title:
By: William D. Huse                            ------------------------------
   -------------------------------       By: /s/ Robert Peterson
Title: President / CEO                      ---------------------------------
      ----------------------------       Title: President AMG
Tenant's Information:                          ------------------------------
Driver's Lic. No.
                 -----------------
SSN/EIN
       ---------------------------
<PAGE>   15
                   ADDENDUM TO STANDARD INDUSTRIAL NET LEASE
          (Applied Molecular Evolution, Inc. - 11095 Flintkote Avenue)

          This ADDENDUM TO STANDARD INDUSTRIAL NET LEASE ("Addendum") is
attached to and made a part of that certain Standard Industrial Net Lease dated
November 20, 2000 (the "Lease"), between JBC SORRENTO WEST, LLC, a California
limited liability company ("Landlord"), and APPLIED MOLECULAR EVOLUTION, INC., a
Delaware corporation ("Tenant") concerning premises located at 11095 Flintkote
Avenue, California (the "Premises"). Landlord and Tenant hereby agree that
notwithstanding anything contained in the Lease to the contrary, the provisions
set forth below shall be deemed to be a part of the Lease and shall supersede,
to the extent appropriate, any contrary provision of the Lease. All references
to the Lease in this Addendum shall be construed to mean the Lease and exhibits
thereto, as amended and supplemented by this Addendum. All defined terms used in
this Addendum, unless specifically defined in this Addendum, shall have the same
meaning as such terms have in the Lease.

          25.  TENANT IMPROVEMENTS. Landlord agrees to reimburse Tenant up to
Fifteen Thousand Dollars ($15,000) for the cost of laying communication conduit,
on Landlord's property, to connect with Tenant's facility located at 3520
Dunhill, San Diego, California. Landlord shall not be responsible for any cost
of the installation of the conduit not located on Landlord's property. Tenant
shall request reimbursement of said amount in writing and provide receipts
evidencing the completion thereof, together with lien releases and any other
documentation reasonably required by Landlord.

          26.  OPERATING COSTS. Operating Costs shall not include the following
items: amounts relating to the original construction of the Premises, leasing
commissions, finders' fees, brokerage fees and commissions, legal fees, and
costs incurred with the marketing or promoting of the Premises or negotiation
and/or enforcement of leases; costs and expenses for the sale of all or any
portion of the Premises, including, but not limited to, brokerage commissions,
consultants', attorneys' and accountants' fees, closing costs, title insurance
premiums, transfer taxes and interest charges; any costs from the original
construction of the Premises; any costs incurred to correct defects from the
original construction of the Premises; costs of any "tap fees" or one-time lump
sum sewer or water connection fees for the Premises payable in connection with
the original construction of the Premises; costs of repairs or replacements
arising from Landlord's gross negligence; costs incurred (less costs of
recovery) for any item to the extent paid for by a manufacturer's,
materialman's, vendor's or contractor's warranty and paid by such manufacturer,
materialman, vendor or contractor; non-cash items such as deduction for the
depreciation and amortization of the Premises and the systems and equipment used
in operating the Premises; costs associated with the operation of the business
of the entity which constitutes Landlord including costs of company accounting
and legal matters; costs of defending any lawsuits with any mortgagee (except as
otherwise provided herein); costs incurred in connection with any disputes
between Landlord and its employees or the Premises management; rentals and other
related expenses incurred in leasing air conditioning systems, elevators or
other equipment, which if purchased the cost of which would be excluded from
Operating Costs as a capital costs, except equipment not affixed to the Premises
which is used in providing janitorial or similar services and, further excepting
from this exclusion such equipment rented or leased to remedy or ameliorate an
emergency condition in the Premises, or during periods when the systems or
equipment is being repaired; permits, licenses and inspection costs and
allowances and other concessions, incurred with respect to the original
construction of the Premises, or the renovation, improvement, decoration or
redecoration of rentable space for other tenants or occupants in the Premises;
any cost reimbursed by insurance proceeds or condemnation award or from a third
party; costs or repairs or replacements incurred by reason of fire or other
casualty or condemnation in excess of the insurance deductible; exactions paid
to governmental bodies, including, without limitation, infrastructure, traffic
improvements, curb cuts, roadway improvements, transit; holiday decorations or
gifts; charitable or political contributions; ground rent; mortgage interest,
principal, depreciation, points and fees on debt or amortization or for any
mortgage(s) encumbering the Premises, or any part thereof, and all principal,
escrow deposits and other sums paid on or in respect to any indebtedness
(whether or not secured by a mortgage lien) and any equity participations of
lender or lessor, and all costs incurred in connection with any financing,
refinancing or syndication of the Premises, or any part thereof, including, but
not limited to, brokerage commissions, consultants', attorneys' and accountants'
fees, closing costs, title insurance premiums, transfer taxes and interest
charges; build-out of tenant space; any costs incurred by Landlord with respect
to repairs, goods and services (including utilities sold and supplied to tenants
and occupants of the Premises) to the extent not provided to all tenants or for
which Landlord is


                                       i
<PAGE>   16
entitled to reimbursement for such costs from tenants; rental for any space on
the Premises set aside for conference, storage or exercise facilities; amounts
of payment by Landlord or to its affiliates for goods and services in excess of
a competitive rate; income, franchise, transfer, inheritance, capital stock,
capital levy, estate, profit, gift, gross receipts or succession taxes; costs
caused by acts or omissions of other tenants; any bad debt loss, rent loss, or
reserves for bad debts or rent loss; fines and penalties; costs incurred from
any matter constituting a breach of a covenant, representation, or warranty by
Landlord or any tenant under any lease; costs of testing for, handling,
remediating, or abating asbestos and other hazardous materials (except as
otherwise specifically provided herein); and any costs expressly excluded from
Operating Costs elsewhere in this Lease.

     27.  AUDIT RIGHTS.

          (a)  Tenant shall be entitled to review supporting documentation of
Operating Costs as Tenant shall reasonably request. Tenant may, at Tenant's
sole cost and expense, audit Landlord's books and records pertaining to
Operating Costs in order to verify the accuracy of such expenses; provided,
however, that:

               (i)   Tenant notifies Landlord in writing, within sixty (60)
days after receipt of Landlord's cost statement, of its intent to audit such
Operating Costs and completes the audit and provides Landlord with the audit
results within one hundred eighty (180) days of such notification;

               (ii)  Such audit shall be conducted only during regular business
hours at the office where Landlord maintains Operating Costs records and only
after Tenant gives Landlord at least thirty (30) days' prior written notice;

               (iii) Such audit shall be conducted by an independent,
nationally-recognized certified public accountant firm that is not being
compensated by Tenant on a contingency fee basis; and

               (iv)  Tenant shall reimburse Landlord for the cost of
reproducing any records requested by Tenant or its auditors.

          (b)  No such audit shall be conducted if any other tenant has
conducted an audit for the time period Tenant intends to audit, and Landlord,
at its sole option, furnishes to Tenant a copy of the results of such audit,
which shall be the basis on which any reimbursements are made by Landlord. No
audit shall be conducted at any time when Tenant is in material uncured default
of any of the terms of this Lease, and no subtenant shall have any right to
conduct an audit. No assignee of Tenant shall be entitled to conduct any audit
for any period during which such assignee was not in possession of the
Premises. In the event Tenant shall request an audit of any such Operating
Costs, then pending resolution of such audit, Tenant shall nevertheless
continue to make payments as required by Landlord.

          (c)  Notwithstanding the foregoing, if Tenant's audit discloses an
overcharge of more than three percent (3%) of Tenant's Share, Landlord shall
pay the cost of such audit. Landlord shall within ten (10) days' written notice
of an overcharge reimburse Tenant for the amount of the overcharge. If any
other tenant's audit discloses a discrepancy, Landlord shall give Tenant the
benefit of any resulting adjustment to Operating Costs, whether or not such
benefit is requested by Tenant.

     28.  ASSIGNMENT AND SUBLETTING. Notwithstanding Lease Section 18 to the
contrary, Tenant may, without Landlord's prior written consent, sublet the
Premises or assign this Lease to (i) a subsidiary, affiliate, division or
corporation controlling, controlled or under common control with Tenant, (ii) a
successor corporation by merger, consolidation, or non-bankruptcy
reorganization, or (iii) a purchaser of substantially all of Tenant's assets
(collectively, "Permitted Transfers"), provided that the owners of Tenant own
at least 51% of the sublessee or assignee. Landlord's right to excess rents
shall not extend to Permitted Transfers. The original issuance of shares of
voting stock to Tenant and/or the transfer of voting shares between
shareholders or to immediate family members, including by reason of gift or
death, shall not require the prior consent of Landlord.


                                       ii
<PAGE>   17


     29.  NONDISTURBANCE. The following provisions are hereby added to Section
19.1:

     Provided, however, that Tenant shall not be required to execute any such
subordination to any future financing, mortgage or deed of trust affecting the
Premises unless and until Landlord obtains from the lender a non-disturbance
agreement in recordable form which provides that in the event of a termination
or any foreclosure or transfer in lieu of foreclosure (i) Tenant's use,
possession and enjoyment of the Premises shall not be disturbed and this Lease
shall continue in full force and effect so long as Tenant is not in material
default hereunder, and (ii) this Lease shall automatically and unconditionally
become a direct lease between Landlord's successor-in-interest, as landlord, and
Tenant as if such successor-in-interest were the Landlord originally named
hereunder.

     30.  NO OTHER CHANGE. Except as specifically set forth in this Addendum,
all of the terms and conditions of the Lease shall remain unchanged and in full
force and effect.

     IN WITNESS WHEREOF, Landlord and Tenant have executed this Addendum to
Lease as of the date of the Lease.

                                        LANDLORD:


                                        JBC SORRENTO WEST, LLC,
                                        a California limited liability company

                                        By: John B. Clark and Suzanne V. Clark
                                            Family Trust UTD 3/18/2000

                                            By: /s/ Robert Peterson
                                               -------------------------------
                                                for  John B. Clark, Trustee

                                        TENANT:

                                        APPLIED MOLECULAR EVOLUTION, INC.,
                                        a Delaware corporation

                                        By: /s/ William D. Huse
                                           ------------------------------
                                        Name:  William D. Huse
                                             ----------------------------
                                        Title:  CEO
                                              ---------------------------

                                        By:
                                           ------------------------------
                                        Name:
                                             ----------------------------
                                        Title:
                                              ---------------------------




                                      iii












<PAGE>   18
                                   EXHIBIT A


                                   SITE PLAN


                         SORRENTO WEST INDUSTRIAL PARK
                             San Diego, California





                                [MAP GOES HERE]




1    -    11180 Roselle St.
2    -    11175 Flintkote Ave.
3    -    11100 Roselle St.
4    -    11120 Roselle St.
5    -    11125 Flintkote Ave.
6    -    11111 Flintkote Ave.
7    -    11080 Roselle St.
8    -    11095 Flintkote Ave.
9    -    11055 Flintkote Ave.


<PAGE>   19
                                  EXHIBIT "B"
                             RULES AND REGULATIONS

The following Rules and Regulations shall apply to the Center. Tenant agrees to
comply with the same and to require its agents, employees, contractors,
customers and invitees to comply with the same. Landlord shall have the right
from time to time to amend or supplement these Rules and Regulations, and
Tenant agrees to comply, and to require its agents, employees, contractors,
customers and invitees to comply, with such amended or supplemented Rules and
Regulations, provided that (a) notice of such amended or supplemental Rules and
Regulations is given to Tenant, and (b) such amended or supplemental Rules and
Regulations apply uniformly to all tenants of the Center. If Tenant or its
subtenants, employees, agents, or invitees violate any of these Rules and
Regulations, resulting in any damage to the Center or increased costs of
maintenance of the Center, or causing Landlord to incur expenses to enforce the
Rules and Regulations, Tenant shall pay all such costs to Landlord as
Additional Rent. In the event of any conflict between the Lease and these or
any amended or supplemental Rules and Regulations, the provisions of the Lease
shall control.

1.   Tenant shall be responsible at its sole cost for the removal of all of
     Tenant's refuse or rubbish. All garbage and refuse shall be disposed of
     outside of the Premises, shall be placed in the kind of container specified
     by Landlord, and shall be prepared for collection in the manner and at the
     times and places specified by Landlord. If Landlord provides or designates
     a service for picking up refuse and garbage, Tenant shall use the same at
     Tenant's sole cost. Tenant shall not burn any trash or garbage of any kind
     in or about the Premises. If Landlord supplies janitorial services to the
     Premises, Tenant shall not, without Landlord's prior written consent,
     employ any person or persons other than Landlord's janitorial service to
     clean the Premises.

2.   No aerial, satellite dish, transceiver, or other electronic communication
     equipment shall be erected on the roof or exterior walls of the Premises,
     or in any other part of the Center, without Landlord's prior written
     consent. Any aerial, satellite dish, transceiver, or other electronic
     communication equipment so installed without Landlord's prior written
     consent shall be subject to removal by Landlord without notice at any time
     and without liability to Landlord.

3.   No loudspeakers, televisions, phonographs, radios, or other devices shall
     be used in a manner so as to be heard or seen outside of the Premises
     without Landlord's prior written consent. Tenant shall conduct its
     business in a quiet and orderly manner so as not to create unnecessary or
     unreasonable noise. Tenant shall not cause or permit any obnoxious or foul
     odors that disturb the public or other occupants of the Center. If Tenant
     operates any machinery or mechanical equipment that causes noise or
     vibration that is transmitted to the structure of the building in which
     the Premises are located, or to other parts of the Center, to such a
     degree as to be objectionable to Landlord or to any other occupant of the
     Center, Tenant shall install and maintain, at Tenant's expense, such
     vibration eliminators or other devices sufficient to eliminate the
     objectionable noise or vibration.

4.   Tenant shall keep the outside areas immediately adjoining the Premises
     clean and free from dirt, rubbish, pallets and other debris to the
     satisfaction of Landlord. If Tenant fails to cause such outside areas to
     be maintained as required within twelve (12) hours after verbal notice
     that the same do not so comply, Tenant shall pay a fee equal to the
     greater of Fifty Dollars ($50.00) or the costs incurred by Landlord to
     clean up such outside areas.

5.   Tenant shall not store any merchandise, inventory, equipment, supplies,
     finished or semi-finished products, raw materials, or other articles of
     any nature outside the Premises (or the building constructed thereon if
     the Premises includes any outside areas) without Landlord's prior written
     consent.

6.   Tenant and Tenant's subtenants, employees, agents, or invitees shall park
     only the number of cars allowed under the Lease and only in those portions
     of the parking area designated for that purpose by Landlord. Upon request
     by Landlord, Tenant shall provide the license plate numbers of the cars of
     Tenant and Tenant's employees in order to facilitate enforcement of this
     regulation. Tenant and Tenant's employees shall not store vehicles or
     equipment in the parking areas, or park in such a manner as to block any
     of the accessways serving the Center and its occupants.

7.   The Premises shall not be used for lodging, sleeping, cooking, or for any
     immoral or illegal purposes, or for any purpose that will damage the
     Premises or the reputation thereof. Landlord reserves the right to expel
     from the Center any person who is intoxicated or under the influence of
     liquor or drugs or who shall act in violation of any of these Rules and
     Regulations. Tenant shall not conduct or permit any sale by auction on
     the Premises. No video, pinball, or similar electronic game machines of
     any description shall be installed, maintained or operated upon the
     Premises without the prior written consent of Landlord.

8.   Neither Tenant nor Tenant's employees or agents shall disturb, solicit,
     or canvas any occupant of the Center, and Tenant shall take reasonable
     steps to discourage others from doing the same.

9.   Tenant shall not keep in, or allow to be brought into, the Premises or
     Center any pet, bird or other animal, other than "seeing-eye" dogs or
     other animals under the control of and specifically assisting any disabled
     person.

10.  The plumbing facilities shall not be used for any other purpose than that
     for which they are constructed, and no foreign substance of any kind shall
     be disposed of therein. The expense of any breakage, stoppage, or damage
     resulting from a violation of this provision shall be borne by Tenant.
     Tenant shall not waste or use any excessive or unusual amount of water.

11.  Tenant shall use, at Tenant's cost, such pest extermination contractor as
     Landlord may direct and at such intervals as Landlord may require.

12.  Tenant will protect the carpeting from undue wear by providing carpet
     protectors under chairs with casters, and by providing protective covering
     in carpeted areas where spillage or excessive wear may occur.

13.  Tenant shall be responsible for repair of any damage caused by the moving
     of freight, furniture or other objects into, within, or out of the
     Premises or the Center. No heavy objects (such as safes, furniture,
     equipment, freight, etc.) shall be placed upon any floor without
     Landlord's prior written approval as to the adequacy of the allowable
     floor loading at the point where the objects are intended to be moved or
     stored. Landlord may specify the time of moving to minimize any
     inconvenience to other occupants of the Center. If the building in which
     the Premises are located is equipped with a freight elevator, all
     deliveries to and from the Premises shall be made using the freight
     elevator during the time periods specified by Landlord, subject to such
     reasonable scheduling as Landlord in its discretion shall deem appropriate.

14.  Without Landlord's prior written consent, no drapes or sunscreens of any
     nature shall be installed in the Premises and the sash doors, sashes,
     windows, glass doors; lights and skylights that reflect or admit light
     into the building shall not be covered or obstructed. Landlord shall have
     the right to specify the type of window coverings that may be installed,
     at Tenant's expense. Tenant shall not mark, drive nails, screw or drill
     into, paint, or in any way deface any surface or part of the building.
     Notwithstanding the foregoing, Tenant may hang pictures, blackboards, or
     similar objects, provided Tenant repairs and repaints any nail or screw
     holes, and otherwise returns the premises to the condition required under
     the Lease and the expiration or earlier termination of the Lease Term.
     The expense of repairing any breakage, sloppage, or damage resulting from
     a violation of this rule shall be borne by Tenant.



<PAGE>   20
15.  No electrical wiring, electrical apparatus, or additional electrical
     outlets shall be installed in the Premises without Landlord's prior
     written approval. Any such installation not so approved by Landlord may be
     removed by Landlord at Tenant's expense. Tenant may not alter any existing
     electrical outlets or overburden them beyond their designed capacity.
     Landlord reserves the right to enter the Premises, with reasonable notice
     to Tenant, for the purpose of installing additional electrical wiring and
     other utilities for the benefit of Tenant or adjoining tenants. Landlord
     will direct electricians as to where and how telephone and affixed wires
     are to be installed in the Premises. The location of telephones, call
     boxes, and other equipment affixed to the Premises shall be subject to the
     prior written approval of Landlord.

16.  If Tenant's use of the Premises involves the sale and/or preparation of
     food, Tenant shall at all times maintain a health department rating of "A"
     (or such other highest health department or similar rating as is
     available). Any failure by Tenant to maintain such "A" rating twice in any
     twelve (12) month period shall, at the election of Landlord, constitute a
     noncurable Event of Default under the Lease.

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

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

19.  If Tenant occupies any air-conditioned space, Tenant shall keep entry
     doors opening onto corridors, lobby or courtyard closed at all times. All
     truck and loading doors shall be closed at all times when not in use.

20.  Tenant shall not paint any floor of the Premises without Landlord's
     written consent. Prior to surrendering the Premises upon expiration or
     termination of the Lease, Tenant shall remove any paint or sealer
     therefrom (whether or not previously permitted by Landlord) and restore
     the floor to its original condition as of the Commencement Date,
     reasonable wear and tear excepted. Tenant shall not affix any floor
     covering to the floor of the Premises in any manner except as approved by
     Landlord.




<PAGE>   21
                                  EXHIBIT "C"
                                 SIGN CRITERIA




Tenant to obtain approval of Landlord for its signage.