<PAGE>   1

                                                                   EXHIBIT 10.4

                              - 111 SUTTER STREET -

                            - OFFICE BUILDING LEASE -

                             BASIC LEASE INFORMATION


DATE OF LEASE:               August 5, 1999


LANDLORD:                    CEP INVESTORS XII LLC


LANDLORD'S ADDRESS:          c/o Ellis Partners, Inc.
                             433 California Street, Sixth Floor
                             San Francisco, California 94104
                             Attn: Mr. James F. Ellis


TENANT:                      FORT POINT PARTNERS, INC.


TENANT'S ADDRESS:            111 Sutter Street
                             San Francisco, California 94104
                             Attn: Mr. Kelly Green


BUILDING:                    111 Sutter Street, San Francisco, California


LEASED PREMISES:             Approximately 27,899 square feet consisting of the
                             entire 20th (approximately 9,514 rentable square
                             feet), 21st (approximately 9,561 rentable square
                             feet), and 22nd (approximately 8,824 rentable
                             square feet) floors of the Building


RENTABLE AREA:               Approximately 27,899 rentable square feet


TERM COMMENCEMENT DATE:      The date the Tenant Improvements for the 20th floor
                             are Substantially Complete (estimated to be October
                             15, 1999)


TERM EXPIRATION DATE:        The last day of the ninety-sixth (96th) full
                             calendar month after the Term Commencement Date


OPTION TO EXTEND:

        Number of Extension Periods: One (1)
        Years per Extension Period: Five (5)


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BASE RENT:                   Months 1 to 36 = $43.00 per rentable square foot of
                             Rentable Area per annum (notwithstanding the
                             foregoing, Tenant shall not pay Base Rent for the
                             21st floor or 22nd floor until the Tenant
                             Improvements for the 21st floor and 22nd (delivered
                             together) are Substantially Complete, estimated to
                             be December 1, 1999 for both the 21st and 22nd
                             floors).

                             Months 37 to 60 = $46.00 per rentable square foot
                             of Rentable Area per annum

                             Months 61 to 96 = $49.00 per rentable square foot
                             of Rentable Area per annum


BASE YEAR:                   2000


TENANT'S PROPORTIONATE SHARE (BUILDING): approximately 10.69%


SECURITY DEPOSIT:            $1,660,100.00


GUARANTOR:                   None


LANDLORD'S BROKER:           The CAC Group


TENANT'S BROKER:             Cushman & Wakefield


     [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE TO FOLLOW.]


<PAGE>   3


        The foregoing BASIC LEASE INFORMATION is incorporated herein and made a
part of the LEASE to which it is attached. If there is any conflict between the
BASIC LEASE INFORMATION and the LEASE, the BASIC LEASE INFORMATION shall
control.

                                      "LANDLORD":

                                      CEP INVESTORS XII LLC,
                                      a Delaware limited liability company

                                      By: EPI Investors XII LLC,
                                          a California limited liability company
                                          Its Manager

                                             By: Ellis Partners, Inc.,
                                                 a California corporation,
                                                 Its Manager


                                                 By: /s/ JAMES F. ELLIS
                                                    -------------------------
                                                 Typed Name: James F. Ellis
                                                            -----------------
                                                 Title:  Vice President
                                                       ----------------------


                                      "TENANT":

                                      FORT POINT PARTNERS, INC.
                                      a California corporation


                                      By:  /s/ MATTHEW ROCHE
                                         ---------------------------------
                                      Typed Name:  Matthew Roche
                                                 -------------------------
                                      Title:   President
                                            ------------------------------


                                      By:   /s/  JAMES T. ROCHE
                                         ---------------------------------
                                      Typed Name:  James Roche
                                                 -------------------------
                                      Title:   CEO
                                            ------------------------------


                                      iii

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                              OFFICE BUILDING LEASE


        THIS LEASE, made as of the date specified in the BASIC LEASE INFORMATION
sheet, by and between the landlord specified in the BASIC LEASE INFORMATION
sheet ("Landlord") and the tenant specified in the BASIC LEASE INFORMATION sheet
("Tenant").



                                   ARTICLE 1.
                                   DEFINITIONS

        1.1 DEFINITIONS: Terms used herein shall have the following meanings:

        1.2 "ADDITIONAL RENT" shall mean all monetary obligations of Tenant
under this Lease other than the obligation for payment of Gross Rent.

        1.3 "BASE EXPENSES" [intentionally deleted]

        1.4 "BASE RENT" shall mean the sums due from time to time as rental for
the Leased Premises.

        1.5 "BASE YEAR" shall mean the calendar year specified on the Basic
Lease Information sheet.

        1.6 "BASIC OPERATING COST" shall have the meaning given in Section 3.05.

        1.7 "BUILDING" shall mean the building and other improvements associated
therewith identified on the Basic Lease Information sheet.

        1.8 "BUILDING STANDARD IMPROVEMENTS" shall mean the standard materials
ordinarily used by Landlord in the improvement of the Leased Premises.

        1.9 "COMMON AREAS" shall mean (a) the areas on individual floors of the
Building devoted to non-exclusive uses such as common corridors, lobbies, fire
vestibules, elevator foyers, stairways, elevators, electric and telephone
closets, restrooms, mechanical closets, janitor closets and other similar
facilities for the benefit of all tenants (and invitees) on the particular floor
and other floors and (b) other areas of the Project available for the use and
benefit of all tenants (and invitees).

        1.10 "COMPUTATION YEAR" shall mean a fiscal year consisting of the
calendar year commencing January 1st of each year during the Term, commencing in
the Base Year and continuing through the Term, with a short or stub fiscal year
in any partial fiscal year in which the Lease expires or is terminated for the
period between January 1 of such year and the date of lease termination or
expiration.

        1.11 "GROSS RENT" shall mean the total of Base Rent and Tenant's
Proportionate Share of Increased Basic Operating Cost.

        1.12 "LANDLORD'S BROKER" shall mean the individual or corporate broker
identified on the Basic Lease Information sheet as the broker for Landlord.

        1.13 "LANDLORD'S CONTRIBUTION" shall have the meaning given in EXHIBIT
B.

        1.14 "LANDLORD'S IMPROVEMENTS" shall have the meaning given in EXHIBIT
B.

        1.15 "LEASED PREMISES" shall mean the floor area more particularly shown
on the floor plan attached hereto as EXHIBIT A, containing the Rentable Area (as
such term is defined in Section 1.18 below) specified on the Basic Lease
Information sheet.


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        1.16 "PERMITTED USE" shall mean general office, and any other related
lawful use; provided, however, that Permitted Use shall not include (a) offices
or agencies of any foreign government or political subdivision thereof; (b)
offices of any agency or bureau of any state, county or city government; (c)
offices of any health care professionals; (d) schools or other training
facilities which are not ancillary to corporate, executive or professional
office use; or (e) retail or restaurant uses.

        1.17 "PROJECT" shall mean the Building and common areas affiliated
therewith, and the real property on which the Building and common areas are
located.

        1.18 "RENT" shall mean Gross Rent plus Additional Rent.

        1.19 "RENTABLE AREA" shall mean the area or areas of space in the
Building determined in accordance with the Standard Method for Measuring Floor
Area in Office Buildings published by the Building Owners and Managers
Association International (ANSI-Z65.1-1996) and including a proportionate
allocation of the square footage of the Building's elevator and mechanical
equipment areas, telephone and electrical rooms, loading dock, janitorial
service areas, public lobbies and corridors. The Rentable Area of the Leased
Premises has been calculated on the basis of the foregoing definition and is
agreed for all purposes of this Lease to be the amount stated on the Basic Lease
Information sheet, subject to remeasurement by Landlord within sixty (60) days
of the date of this Lease. Such remeasurement, if any, shall be made by
Landlord's architect in accordance with this Section 1.19. Tenant's architect
may consult with Landlord's architect regarding such remeasurement.

        1.20 "SECURITY DEPOSIT" shall mean the amount specified on the Basic
Lease Information sheet to be paid by Tenant to Landlord and held and applied
pursuant to Section 5.14.

        1.21 "SUBSTANTIAL COMPLETION" shall mean (and the Leased Premises shall
be deemed "Substantially Complete") when (i) installation of the Tenant
Improvements and the Landlord's Improvements (as defined in EXHIBIT B) by the
Contractor has occurred; (ii) Tenant has direct access from the street to the
elevator lobby on the floor (or floors) where the Leased Premises are located;
(iii) basic services (as described in Section 4.01) are available to the Leased
Premises; (iv) Tenant's architect has issued a certificate of Substantial
Completion with respect to the Leased Premises; and (v) a certificate of
occupancy or its equivalent for the Leased Premises has been issued by
appropriate governmental authorities. Substantial Completion shall be deemed to
have occurred notwithstanding a requirement to complete "punchlist" items or
similar corrective work.

        1.22 [intentionally deleted.]

        1.23 "TENANT IMPROVEMENTS" shall have the meaning given in EXHIBIT B.

        1.24 "TENANT'S BROKER" shall mean the individual or corporate broker
identified on the Basic Lease Information sheet as the broker for Tenant.

        1.25 "TENANT'S PHYSICAL POSSESSION DATE" shall mean October 1, 1999 for
the 20th floor and November 15, 1999 for the 21st and 22nd floors.

        1.26 "TENANT'S PROPORTIONATE SHARE" is specified on the Basic Lease
Information sheet and is based on the percentage which the Rentable Area of the
Leased Premises bears to the total Rentable Area of the Project, subject to
adjustment in the event of the remeasurement of the Building or the Project as
permitted under Section 1.19 above.

        1.27 "TERM" shall mean the period commencing with the Term Commencement
Date and ending at midnight on the Term Expiration Date.

        1.28 "TERM COMMENCEMENT DATE" shall be the date set forth on the Basic
Lease Information sheet.


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        1.29 "TERM EXPIRATION DATE" shall be the date set forth on the Basic
Lease Information sheet, unless sooner terminated pursuant to the terms of this
Lease or unless extended pursuant to the provisions of Section 8.01.

        1.30 OTHER TERMS. Other terms used in this Lease and on the Basic Lease
Information sheet shall have the meanings given to them herein and thereon.


                                   ARTICLE 2.
                                 LEASED PREMISES

        2.1 LEASE. Landlord hereby leases to Tenant and Tenant hereby leases
from Landlord the Leased Premises upon all of the terms, covenants and
conditions set forth in this Lease.

        2.2 ACCEPTANCE OF LEASED PREMISES. Tenant acknowledges that: (a) it has
been advised by Landlord, Landlord's Broker and Tenant's Broker, if any, to
satisfy itself with respect to the condition of the Leased Premises (including,
without limitation, the heating, ventilation, electrical, plumbing and other
mechanical installations, fire sprinkler systems, security, environmental
aspects, and compliance with applicable laws, ordinances, rules and regulations)
and the present and future suitability of the Leased Premises for Tenant's
intended use; (b) Tenant has made such inspection and investigation as it deems
necessary with reference to such matters and assumes all responsibility therefor
as the same relate to Tenant's occupancy of the Leased Premises and the term of
this Lease; and (c) neither Landlord nor Landlord's Broker nor any of Landlord's
agents has made any oral or written representations or warranties with respect
to the condition, suitability or fitness of the Leased Premises other than as
may be specifically set forth in this Lease. Subject to completion of the
Landlord's Improvements and the Tenant Improvements set forth in EXHIBIT B
attached hereto, Tenant accepts the Leased Premises in its AS IS condition
existing on the date Tenant executes this Lease, subject to all matters of
record and applicable laws, ordinances, rules and regulations. Tenant
acknowledges that neither Landlord nor Landlord's Broker nor any of Landlord's
agents has agreed to undertake any alterations or additions or to perform any
maintenance or repair of the Leased Premises except for the routine maintenance
and janitorial work specified herein and except as may be expressly set forth in
EXHIBIT B.

        2.3 RIGHT TO RELOCATE LEASED PREMISES. [intentionally Deleted].

        2.4 RESERVATION OF RIGHTS. Landlord reserves the right from time to
time, so long as reasonable access and basic services to the Leased Premises
remain available, to install, use, maintain, repair, relocate and/or replace
pipes, conduits, wires and equipment within and around the Building and to do
and perform such other acts and make such other changes in, to or with respect
to the Building or the Project (including without limitation with respect to the
driveways, parking areas (if any), walkways and entrances to the Project) as
Landlord may, in the exercise of sound business judgment, deem to be
appropriate. In connection therewith, Landlord shall have the right to close
temporarily any of the Common Areas so long as reasonable access to the Leased
Premises remains available. If any construction, installation, repair,
replacement, relocation, remodeling or other activity is performed in or around
the Building by Landlord (or by other tenants of the Building acting with
Landlord's consent), Landlord shall undertake such activities (or cause them to
be undertaken, if done by others) so as to prevent unreasonable interference
with Tenant's business at the Leased Premises.


                                   ARTICLE 3.
                               TERM, USE AND RENT


        3.1 TERM. Except as otherwise provided in this Lease, the Term shall
commence upon the Term Commencement Date, and shall continue in full force for
the Term. Tenant shall be given access to the


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Leased Premises starting on the Tenant's Physical Possession Date in order for
Tenant and other consultants and/or Tenant's contractors to install, if any,
furniture, telephone networks, and computer networks as long as such work does
not interfere with the construction of the Tenant Improvements and the
Landlord's Improvements. From the date Tenant has access to the Leased Premises
through the Term Commencement Date, Tenant shall be subject to all of the
covenants in this Lease, except that Tenant's obligation to pay Rent shall
commence in accordance with Section 3.03 below. When the Term Commencement Date
and the Term Expiration Date have been ascertained, the parties shall promptly
execute a Confirmation of Term of Lease substantially in the form attached as
EXHIBIT C.

        3.2 USE. Tenant shall use the Leased Premises solely for the Permitted
Use and for no other use or purpose, except as permitted by Landlord pursuant to
Landlord's written consent, which consent will not be unreasonably withheld,
conditioned or delayed. It shall not be deemed unreasonable for Landlord to
withhold its consent to a proposed change of use if the proposed use is one set
forth in Section 1.16 (a) through (e).

        3.3 BASE RENT.

                (a) Tenant shall pay the Base Rent to Landlord in accordance
with the schedule set forth on the Basic Lease Information sheet and in the
manner described below. Tenant shall pay the Base Rent for the first month of
the Term upon execution of this Lease. Commencing with the first day of the
second full calendar month of the Term, Tenant shall pay the Gross Rent
(consisting of Base Rent plus, when applicable in accordance with Section 3.04
below, Tenant's Proportionate Share of Increased Basic Operating Cost) in
monthly installments on or before the first day of each calendar month during
the Term and any extensions or renewals thereof, in advance without demand and
without any reduction, abatement, counterclaim or setoff, except as otherwise
provided herein, in lawful money of the United States at Landlord's address
specified on the Basic Lease Information sheet or at such other address as may
be designated by Landlord in the manner provided for giving notice under Section
9.11 hereof.

                (b) If the Term commences on other than the first day of a
month, then the Base Rent provided for such partial month shall be prorated
based upon a thirty (30)-day month and the prorated installment shall be paid on
the first day of the calendar month next succeeding the Term Commencement Date
together with the other amounts payable on that day. If the Term terminates on
other than the last day of a calendar month, then the Gross Rent provided for
such partial month shall be prorated based upon a thirty (30)-day month and the
prorated installment shall be paid on the first day of the calendar month in
which the date of termination occurs.

        3.4 TENANT'S PROPORTIONATE SHARE OF INCREASED BASIC OPERATING COST.

                (a) Commencing in the 2001 Computation Year and continuing
through the remainder of the Term, Tenant shall pay to Landlord Tenant's
Proportionate Share of the total dollar increase, if any, in Basic Operating
Cost attributable to each Computation Year over Base Year expenses.

                (b) During the 2001 Computation Year, on or before the first day
of each month during such year, Tenant shall pay to Landlord one-twelfth
(1/12th) of Landlord's estimate of the amount payable by Tenant under Section
3.04(a) as set forth in Landlord's written notice to Tenant delivered on or
before the Term Commencement Date. Commencing in the 2000 Computation Year and
continuing thereafter through the remainder of the Term, during the last month
of each Computation Year (or as soon thereafter as practicable), Landlord shall
give Tenant notice of Landlord's estimate of the amount payable (as well as
reasonable documentation of its estimate) by Tenant under Section 3.04(a) for
the following Computation Year. On or before the first day of each month during
the following Computation Year, Tenant shall pay to Landlord one-twelfth (1/12)
of such estimated amount, provided that if Landlord fails to give such notice in
the last month of the prior year, then Tenant shall continue to pay on the basis
of the prior year's estimate until the first day of the calendar month next
succeeding the date such notice is given by Landlord; and from the first day of
the calendar month following the date such notice is given, Tenant's payments
shall be adjusted so that the estimated amount for that Computation Year will be
fully paid by the end of that Computation Year. If at any time or times Landlord
determines that the amount payable under


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Section 3.04(a) for the current Computation Year will vary from its estimate
given to Tenant, Landlord, by not less than ten (10) business days' notice to
Tenant, may revise its estimate for such Computation Year, and subsequent
payments by Tenant for such Computation Year shall be based upon such revised
estimate.

                (c) Following the end of each Computation Year (beginning with
the 2001 Computation Year), Landlord shall deliver to Tenant a statement of
amounts payable under Section 3.04(a) for such Computation Year prepared by
Landlord's agent. If such statement shows an amount owing by Tenant that is less
than the payments for such Computation Year previously made by Tenant, and if no
event of default (as defined below) is outstanding at the time such statement is
delivered, Landlord shall credit such amount to the next payment(s) of Gross
Rent falling due under this Lease, or if an event of default is outstanding,
Landlord shall apply such amount against any amounts owed by Tenant. If such
statement shows an amount owing by Tenant that is more than the estimated
payments for such Computation Year previously made by Tenant, Tenant shall pay
the deficiency to Landlord within ten (10) business days after delivery of such
statement. If, within one hundred twenty (120) days of Tenant's receipt of
Landlord's statement, Tenant notifies Landlord that Tenant desires to audit or
review Landlord's statement, Landlord shall cooperate with Tenant to permit such
audit or review during normal business hours. Landlord shall make available in
the San Francisco Bay Area at Landlord's, or at Landlord's election at
Landlord's property manager's, place of business, such books and records as are
reasonably necessary for Tenant to conduct and complete such audit. Tenant shall
have the right to make copies of such books and records at Tenant's sole cost
and expense. Tenant shall bear all other costs and expenses associated with
Tenant's audit (including fees of Tenant's auditor). Within five (5) business
days of completion of the audit, if Tenant desires to challenge Landlord's
statement, then Tenant shall provide Landlord with a copy of Tenant's auditor's
report. Within thirty (30) days of Landlord's receipt of Tenant's auditor's
report, Landlord shall notify Tenant as to whether Landlord agrees or disagrees
with the conclusions reached in Tenant's auditor's report. Landlord's failure to
respond shall be deemed to constitute a disagreement with the Tenant's auditor's
report. After Landlord's notice, Landlord and Tenant shall endeavor to resolve
any disagreements regarding Tenant's auditor's report. If Landlord and Tenant
are unable to resolve such disagreement regarding Tenant's auditor's report
within twenty (20) business days of the completion of such audit, then Landlord
and Tenant shall submit the matter to an independent audit conducted by an
independent nationally recognized accounting firm or a nationally recognized
real estate management or consulting firm that has been mutually selected by
Tenant and Landlord. The results of such independent audit shall be conclusive
and binding upon Landlord and Tenant. In the event such audit reveals a
discrepancy in Tenant's favor, and/or Landlord agrees with the conclusions of
Tenant's auditor, then Landlord shall credit the amount of such discrepancy to
the next payment(s) of Gross Rent falling due under this Lease. In the event
such audit reveals a discrepancy in Landlord's favor, Tenant shall pay the
amount of the discrepancy to Landlord within ten (10) business days of
completion of the audit. The failure of Tenant to notify Landlord that Tenant
desires an audit within one hundred twenty (120) days of Tenant's receipt of
Landlord's statement under this Section 3.04(c) shall constitute an acceptance
by Tenant of Landlord's statement and a waiver by Tenant of its right to audit
for such Computation Year. If Tenant commences an audit in accordance with this
Section 3.04(c), then such audit and the Tenant's auditor's report must be
completed within sixty (60) days of Tenant's notice to Landlord of Tenant's
desire to audit. Failure of Tenant to complete the audit within such sixty (60)
day period shall constitute an acceptance by Tenant of Landlord's statement for
such Computation Year. The respective obligations of Landlord and Tenant under
this Section 3.04(c) shall survive the Term Expiration Date, and, if the Term
Expiration Date is a day other than the last day of a Computation Year, the
adjustment in Tenant's Proportionate Share of Increased Basic Operating Cost
pursuant to this Section 3.04(c) for the Computation Year in which the Term
Expiration Date occurs shall be prorated in the proportion that the number of
days in such Computation Year preceding the Term Expiration Date bears to three
hundred sixty-five (365).

                (d) Landlord shall have the same remedies for a default in the
payment of Tenant's Proportionate Share of Increased Basic Operating Cost as for
a default in the payment of Base Rent.

        3.5 BASIC OPERATING COST.

                (a) Basic Operating Cost shall mean all expenses and costs (but
not specific costs which are separately billed to and paid by particular tenants
of the Building) of every kind and nature which Landlord

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shall pay or become obligated to pay because of or in connection with the
management, ownership, maintenance, repair, preservation and operation of the
Project and its supporting facilities directly servicing the Project (determined
in accordance with generally accepted accounting principles, consistently
applied) including, but not limited to, the following:

                        (1) Wages, salaries and related expenses and benefits of
all on-site and off-site employees and personnel engaged in the operation,
maintenance, repair and security of the Project, to the extent such charges are
directly allocable to services rendered by the employees and personnel for the
benefit of the Project.

                        (2) Costs of Landlord's office located in the Building
(including the property management office) and office operation in the Project,
as well as the costs of operation of a room for delivery and distribution of
mail to tenants of the Building.

                        (3) All supplies, materials, equipment and equipment
rental used in the operation, maintenance, repair and preservation of the
Project.

                        (4) Utilities, including water, sewer and power,
telephone, communication and cable television facilities, lighting, heating and
ventilating the entire Project.

                        (5) All maintenance, janitorial and service agreements
for the Project and the equipment therein, including, without limitation, alarm
and/or security service, window cleaning, elevator maintenance, sidewalks,
landscaping, Building exterior and service areas.

                        (6) A property management fee in an amount not to exceed
five percent (5%) of all Rent (excluding such management cost recovery) derived
from the Building; provided, however, such property management fee shall not
exceed the current "market" rate during a particular Computation Year.

                        (7) Legal and accounting services for the Project,
including the costs of audits by certified public accountants; provided,
however, that legal expenses shall not include the cost of lease negotiations,
termination of leases, extension of leases or legal costs incurred in
proceedings by or against any specific tenant.

                        (8) All insurance costs, including, but not limited to,
the cost of all risk property and liability coverage and rental income and
earthquake insurance (for earthquake insurance, only increases in premiums over
the Base Year shall be included; if earthquake insurance is not carried in the
Base Year, then only increases in premiums over the first year earthquake
insurance is carried shall be included) applicable to the Project and Landlord's
personal property used in connection therewith, as well as commercially
reasonable deductible amounts applicable to such insurance; provided, however,
that Landlord may, but shall not be obligated to, carry earthquake insurance.

                        (9) Repairs, replacements and general maintenance
(except for repairs paid by proceeds of insurance or by Tenant or other tenants
of the Building or third parties, and alterations attributable solely to tenants
of the Project other than Tenant).

                        (10) All real estate or personal property taxes,
possessory interest taxes, business or license taxes or fees, service payments
in lieu of such taxes or fees, annual or periodic license or use fees, excises,
transit charges, housing fund assessments, open space charges, assessments,
bonds, levies, fees or charges, general and special, ordinary and extraordinary,
unforeseen as well as foreseen, of any kind which are assessed, levied, charged,
confirmed or imposed by any public authority upon the Project (or any portion or
component thereof), its operations, this Lease, or the Rent due hereunder (or
any portion or component thereof), except: (i) inheritance or estate taxes
imposed upon or assessed against the Project, or any part thereof or interest
therein, and (ii) Landlord's personal or corporate income, gift or franchise
taxes.

                        (11) Amortization (together with reasonable financing
charges) of capital


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<PAGE>   10

improvements made to the Project subsequent to the Term Commencement Date which
are designed to improve the operating efficiency of the Project, or which may be
required by governmental authorities, including those improvements required for
energy conservation and for the benefit of individuals with disabilities ("ADA
Improvements"), in relation to new laws or changes in existing laws, applicable
to the Building, which arise or take affect after the date of this Lease;
provided, however, that no new expense shall be included as a Basic Operating
Cost during Tenant's last twelve (12) months of the Term (if Tenant does not
exercise its option to renew) or the Option Term (as defined in Section 8.01),
as the case may be.

                (b) In the event any of the Basic Operating Costs are not
allocable solely to the Building or are not provided on a uniform basis,
Landlord shall make an appropriate and equitable adjustment, in Landlord's sole
and absolute discretion, to the relevant cost allocations to the Building and
Tenant shall pay its proportionate share of such Basic Operating Costs allocable
solely to the Building and 100% of such Basic Operating Costs allocable solely
to the Leased Premises.

                (c) Notwithstanding any other provision of this Lease to the
contrary, in the event that the Project is not fully occupied during any year of
the Term, an adjustment shall be made in computing Basic Operating Cost for such
year (including the Base Year) so that Basic Operating Cost shall be computed as
though the Building had been 95% occupied during such year.

                (d) The following items shall be excluded from Basic Operating
Costs: (i) depreciation on the Building and the Project; (ii) debt service;
(iii) rental under any ground or underlying lease; (iv) attorneys' fees and
expenses incurred in connection with lease negotiations with prospective Project
tenants or alleged defaults with other Project tenants; (v) the cost of any
improvements or equipment which would be properly classified as capital
expenditures (except for any capital expenditures expressly included in Section
3.05(a), including, without limitation, Section 3.05(a)(11)); the cost of
decorating, improving for tenant occupancy, painting or redecorating portions of
the Building to be demised to tenants; (vii) advertising expenses relating to
vacant space; (viii) real estate brokers' or other leasing commissions; (ix)
interest or penalties due as a result of Landlord's late payment of any of the
costs included within Basic Operating Costs; (x) fees paid to any affiliates of
Landlord to the extent such fees exceed market rates charged for such service
provided; (xi) any costs for making the Building comply with federal, state and
local laws, regulations and directives applicable to the Building as of the date
of this Lease, including any costs, penalties or fines imposed upon Landlord by
any governmental authority as a result of the violation of any such laws,
regulations and directives by Landlord, or its employees, agents, contractors or
assigns; and (xii) except as otherwise provided in ARTICLE 6 of this Lease, the
cost of any hazardous materials cleanup, detoxification, or similar action
undertaken by Landlord, whether or not required by any governmental or
quasi-governmental agency, including, without limitation asbestos removal from
the Premises or any other area of the Building.


                                   ARTICLE 4.
                              LANDLORD'S COVENANTS

        4.1 BASIC SERVICES. Landlord shall operate the Project to a standard of
quality consistent with that of other similar-class office projects in the
immediate geographical area, and shall:

                (a) Administer improvement of the Leased Premises in accordance
with EXHIBIT B (if any).

                (b) Furnish Tenant during Tenant's occupancy of the Leased
Premises the following basic services:

                     (i) Hot and cold water at those points of supply provided
        for general use of other tenants in the Project; steam heating and
        ventilating during the Building hours of operation specified in the
        rules and regulations for the Project adopted pursuant to Section 5.17
        and at such temperatures, during such seasons, and in such amounts as
        are standard for the comfortable use and occupancy of similar Class A
        office buildings and the Leased Premises or, in all events, as may be


                                       7
<PAGE>   11

        permitted or controlled by applicable laws, ordinances, rules and
        regulations. Notwithstanding the foregoing, the Building does not have
        central air conditioning; however, a condenser water loop serves each
        floor of the Building for access to condensed water for Tenant's air
        conditioning needs (Tenant, at its sole cost, shall be responsible for
        the installation, operation and maintenance of such air conditioning
        units, if needed).

                     (ii) Structural and exterior maintenance (including
        exterior glass and glazing) and routine maintenance, repairs and
        electric lighting service for all public areas and service areas of the
        Project.

                     (iii) Janitorial service on a five (5) day per week basis,
        excluding holidays.

                     (iv) Electric lighting service throughout the Leased
        Premises and electrical facilities to provide sufficient power for
        typewriters, standard size personal computers and other standard office
        machines of similar low electrical consumption twenty-four (24) hours
        per day, seven (7) days per week, but not including electricity required
        for electronic data processing equipment, special lighting in excess of
        Building Standard Improvements, and any other item of electrical
        equipment which consumes electricity in amounts in excess of standard
        office equipment.

                     (v) Building Standard lamps, bulbs, starters and ballasts
        used in the Leased Premises.

                     (vi) Public elevator service serving the floors on which
        the Leased Premises are situated twenty-four (24) hours per day, seven
        (7) days per week, including freight elevator service when prearranged
        with Landlord, subject to such rules and regulations as Landlord shall
        promulgate from time to time.

                (c) Landlord shall not be liable for damages to either person or
property, nor shall Landlord be deemed to have evicted Tenant, nor shall there
be any abatement of Rent, nor shall Tenant be relieved from performance of any
covenant on its part to be performed under this Lease by reason of any (i)
deficiency in the provision of basic services; (ii) breakdown of equipment or
machinery utilized in supplying services; or (iii) curtailment or cessation of
services due to causes or circumstances beyond the reasonable control of
Landlord or by the making of the necessary repairs or improvements, unless such
deficiency, breakdown, curtailment or cessation is due to the negligence or
willful misconduct of Landlord. Landlord shall use reasonable diligence to make
such repairs as may be required to machinery or equipment within the Project to
provide restoration of services and, where the cessation or interruption of
service has occurred due to circumstances or conditions beyond Project
boundaries, to cause the same to be restored, by diligent application or request
to the provider thereof. In no event shall any mortgagee or the beneficiary
under any deed of trust referred to in Section 5.12 be or become liable for any
default of Landlord under this Section 4.01(c).

        4.2 EXTRA SERVICES. Landlord shall provide to Tenant at Tenant's sole
cost and expense (and subject to the limitations hereinafter set forth) the
following extra services:

                (a) Such extra cleaning and janitorial services if requested by
Tenant;

                (b) Additional ventilating capacity required by reason of any
electrical, data processing or other equipment, facilities or services required
to support the same, in excess of that which would be required for Building
Standard Improvements, when prearranged with Landlord;

                (c) Heating, ventilation, or extra electrical service (for
electrical equipment which consumes electricity in excess of the standard
amounts set forth in Section 4.01(b)(iv) above), provided by Landlord to Tenant
(i) during hours other than the Building hours of operation specified in the
rules and regulations for the Project adopted pursuant to Section 5.17, which
shall provide for Building hours of operation of 7:00 A.M. to 6:00 P.M., Monday
through Friday (excluding holidays), or (ii) on Saturdays,


                                       8
<PAGE>   12

Sundays, or holidays, all said heating, ventilation or extra electrical service
to be furnished solely upon the prior written request of Tenant submitted during
business hours to Landlord at least 24 hours in advance of the time such service
is needed, or pursuant to such other procedures as may be established from time
to time by Landlord for the Building or the Project (such after-hour heating,
ventilation and lighting charge shall be billed at Landlord's actual cost basis
prorated with the similar use of other tenants of the Building);

                (d) Maintaining and replacing non-Building Standard lamps,
bulbs, starters and ballasts (whether or not the light fixtures were installed
by Landlord as part of the Tenant Improvements);

                (e) Upon Tenant's request or otherwise as permitted by the
provisions herein, repair and maintenance service which is the obligation of
Tenant under this Lease;

                (f) To the extent not covered by insurance either carried or
required to be carried by Landlord hereunder, and subject to the waiver of
subrogation rights set forth in Section 7.05, repair, maintenance or janitorial
service to the Leased Premises or the Common Areas which is required as a result
of the acts or omissions of Tenant, its agents, employees, contractors, invitees
or licensees; and

                (g) Any basic service in amounts reasonably determined by
Landlord to exceed the amounts required to be provided under Section 4.01(b),
but only if Landlord elects to provide such additional or excess service.

                For the purposes of this Section 4.02, if, in Landlord's
reasonable opinion, Tenant's use of electrical and/or water service at the
Leased Premises is excessive, Landlord may install a separate meter(s) at the
Leased Premises to measure the amount of electricity and/or water consumed by
Tenant therein. The cost of such installation and of such excess electricity
and/or water (at the rates charged for such services by the local public
utility) shall be paid by Tenant to Landlord upon receipt by Tenant of a bill
therefor, which cost shall not be included within the computation of Basic
Operating Costs.

                The cost chargeable to Tenant for all extra services shall
constitute Additional Rent and shall include an amount equal to Landlord's
actual out-of-pocket expenses for administering such extra services. Additional
Rent shall be paid monthly by Tenant to Landlord concurrently with the payment
of Base Rent.

        4.3 WINDOW COVERINGS. All window coverings for the Leased Premises shall
be those provided by Landlord (with the actual cost of such blinds to be
deducted from Landlord's Contribution) as Building Standard Improvements. Tenant
shall not place or maintain any window coverings, blinds, curtains or drapes
other than those supplied by Landlord on any exterior window without Landlord's
prior written approval, which Landlord shall have the right to grant or withhold
in its absolute and sole discretion.

        4.4 GRAPHICS AND SIGNAGE. Landlord shall provide identification (the
size of such identification shall be approximately its pro rata share) of
Tenant's name and suite numerals on a building directory in the Building lobby.
All signs, notices, advertisements and graphics of every kind or character,
visible in or from the Common Areas or the exterior of the Leased Premises shall
be subject to Landlord's prior written approval, not to be unreasonably
withheld, conditioned or delayed. Landlord may remove, without notice to and at
the expense of Tenant, any sign, notice, advertisement or graphic of any kind
inscribed, displayed or affixed in violation of the foregoing requirement. All
approved signs, notices, advertisements or graphics shall be printed, affixed or
inscribed at Tenant's expense by a person selected by Landlord. Landlord shall
be entitled to revise the Project graphics and signage standards at any time.

        4.5 [Intentionally deleted.]

        4.6 REPAIR OBLIGATION. Landlord's obligation with respect to maintenance
and repair shall be limited to (i) the structural portions of the Building; (ii)
the exterior walls of the Building, including exterior glass and glazing; (iii)
the exterior roof; (iv) mechanical, electrical, plumbing and life safety
systems; (v) the Common Areas; and (vi) landscaped areas. However, Landlord
shall not have any obligation to repair damage caused by Tenant, its agents,
employees, contractors, invitees or licensees. Landlord shall have the right,
but


                                       9
<PAGE>   13

not the obligation, to undertake work of repair which Tenant is required to
perform under this Lease and which Tenant fails or refuses to perform within the
notice and cure periods permitted hereunder. Tenant shall reimburse Landlord
upon demand, as Additional Rent, for all costs incurred by Landlord in
performing any such repair for the account of Tenant, together with an amount
equal to ten percent (10%) of such costs to reimburse Landlord for its
administration and managerial effort. Except as specifically set forth in this
Lease, Landlord shall have no obligation whatsoever to maintain or repair the
Leased Premises or the Project. The parties intend that the terms of this Lease
govern their respective maintenance and repair obligations. Tenant expressly
waives the benefit of any statute now or hereafter in effect to the extent it is
inconsistent with the terms of this Lease with respect to such obligations or
which affords Tenant the right to make repairs at the expense of Landlord or
terminate this Lease by reason of the condition of the Leased Premises or any
needed repairs. Subject to the provisions of Section 5.04 below, Landlord shall,
at all times during the Term, keep and maintain all portions of the Project,
including the Building (other than the interior of the Leased Premises), in the
condition and repair maintained by landlords of similar Class A office space in
the financial district of San Francisco. Without limiting the foregoing and
except as otherwise provided herein, Landlord shall be responsible for causing
the Building to comply with all applicable federal, state and local laws,
statutes, ordinances, rules or regulations.

        4.7 PEACEFUL ENJOYMENT. Landlord covenants with Tenant that upon Tenant
paying the Rent and all other charges required under this Lease and performing
all of Tenant's covenants and agreements herein contained, Tenant shall
peacefully have, hold and enjoy the Leased Premises subject to all of the terms
of this Lease and to any deed of trust, mortgage, ground lease or other
agreement to which this Lease may be subordinate. This covenant and the other
covenants of Landlord contained in this Lease shall be binding upon Landlord and
its successors only with respect to breaches occurring during its or their
respective ownerships of Landlord's interest hereunder.


                                   ARTICLE 5.
                               TENANT'S COVENANTS

        5.1 PAYMENTS BY TENANT. Tenant shall pay Rent at the times and in the
manner provided in this Lease. All obligations of Tenant hereunder to make
payments to Landlord shall constitute Rent and failure to pay the same when due
shall give rise to the rights and remedies provided for in Section 7.08. If
there is more than one Tenant, the obligations imposed under this Lease upon
Tenant shall be joint and several.

        5.2 TENANT IMPROVEMENTS. The Tenant Improvements shall be installed and
constructed by the Contractor pursuant to EXHIBIT B. All Tenant Improvements
shall become the property of Landlord upon installation and shall be surrendered
to Landlord without compensation to Tenant upon termination of this Lease by
lapse of time or otherwise.

        5.3 TAXES ON PERSONAL PROPERTY. In addition to, and wholly apart from
its obligation to pay Tenant's Proportionate Share of Increased Basic Operating
Costs, Tenant shall be responsible for, and shall pay prior to delinquency, all
taxes or governmental service fees, possessory interest taxes, fees or charges
in lieu of any such taxes, capital levies, and any other charges imposed upon,
levied with respect to, or assessed against Tenant's personal property and on
its interest pursuant to this Lease. To the extent that any such taxes are not
separately assessed or billed to Tenant, Tenant shall pay the amount thereof as
invoiced to Tenant by Landlord, which invoice shall include a copy of a tax bill
or signed statement from the applicable taxing authority which shall state that
such tax is directly attributable to Tenant's interest in this Lease or personal
property located at the Premises.

        5.4 REPAIRS BY TENANT. Tenant shall be obligated to maintain and repair
the Leased Premises, to keep the same at all times in good order, condition and
repair, and, upon expiration of the Term, to surrender the same to Landlord in
the same condition as on the Term Commencement Date, reasonable wear and tear,
taking by condemnation, and damage by casualty excepted. Tenant's obligations
shall include, without limitation, the obligation to maintain and repair all
non-structural portions of the walls, floors, ceilings and fixtures and to
repair all damage caused by Tenant, its agents, employees, contractors, invitees
and others


                                       10
<PAGE>   14

using the Leased Premises with Tenant's expressed or implied permission, to the
extent not covered by insurance either carried or required to be carried by
Landlord hereunder, and subject to the waiver of subrogation rights set forth in
Section 7.05. At the request of Tenant, Landlord shall perform the work of
maintenance and repair constituting Tenant's obligation under this Section 5.04
at Tenant's sole cost and expense and as an extra service to be rendered
pursuant to Section 4.02(e). Any work of repair and maintenance performed by or
for the account of Tenant by persons other than Landlord shall be performed by
contractors approved by Landlord and in accordance with reasonable procedures
Landlord shall from time to time establish. Tenant shall give Landlord prompt
notice of any damage to or defective condition in any part of the Building's
mechanical, electrical, plumbing, life safety or other system servicing, located
in or passing through the Leased Premises of which Tenant is or becomes aware.

        5.5 WASTE. Tenant shall not commit or allow any waste or damage to be
committed in any portion of the Leased Premises or the Project.

        5.6 ASSIGNMENT OR SUBLEASE.

                (a) Tenant shall not voluntarily or by operation of law assign,
transfer or encumber (collectively "Assign") or sublet all or any part of
Tenant's interest in this Lease or in the Leased Premises without Landlord's
prior written consent, which shall not be unreasonably withheld, given under and
subject to the terms of this Section 5.06. Notwithstanding the foregoing, the
Tenant may, upon written notice to the Landlord, in whole or in part, sublet the
Leased Premises, or Assign this Lease to an affiliate, parent or subsidiary of
the Tenant which retains at least a fifty percent (50%) interest in the Tenant,
so long as Tenant shall remain responsible in case of default, and, provided,
further, no such permitted subletting or assignment shall relieve the Tenant of
liability under this Lease. An assignment of this Lease to an entity arising as
a result of merger, acquisition or consolidation shall be permitted as long as
the entity's financial condition is at least equivalent to the greater of (i)
the financial condition of Tenant as of the date of this Lease, or (ii) the
financial condition of Tenant as of the date of the proposed merger, acquisition
or consolidation.

                (b) Except as permitted in Section 5.06(a), if Tenant desires to
Assign this Lease or any interest herein or sublet the Leased Premises or any
part thereof, Tenant shall give Landlord written notice of such intent. Tenant's
notice shall specify the date the proposed assignment or sublease would be
effective and be accompanied by information pertinent to Landlord's
determination as to the financial and operational responsibility and
appropriateness of the proposed assignee or subtenant, including, without
limitation, its name, business and financial condition, financial details of the
proposed transfer, the intended use (including any modification) of the Leased
Premises, and exact copies of all of the proposed agreement(s) between Tenant
and the proposed assignee or subtenant. Tenant shall promptly provide Landlord
with (i) such other or additional information or documents reasonably requested
(within ten (10) days after receiving Tenant's notice) by Landlord, and (ii) an
opportunity to meet and interview the proposed assignee or subtenant, if
requested by Landlord.

                (c) Landlord shall have a period of twenty (20) days following
such interview and receipt of such additional information (or thirty (30) days
from the date of Tenant's original notice if Landlord does not request
additional information or an interview) within which to notify Tenant in writing
that Landlord elects either (i) to terminate this Lease as to the space so
affected as of the effective date specified by Tenant, in which event Tenant
will be relieved of all further obligations hereunder as to such space (Landlord
shall recapture such space in its "as is" condition with all costs of such
recapture being borne by Landlord), or (ii) to permit Tenant to Assign this
Lease or sublet such space, subject, however, to prior written approval of the
proposed assignee or sublessee by Landlord, such consent not to be unreasonably
withheld, conditioned or delayed so long as the use of the Leased Premises by
such proposed assignee or sublessee would be a Permitted Use, the proposed
assignee or sublessee is of sound financial condition as determined by Landlord
in its reasonable discretion, the proposed assignee or sublessee executes such
reasonable assumption documentation as Landlord shall require, and the proposed
assignee or sublessee is not a party with whom Landlord has been discussing the
leasing of space in the Building. Notwithstanding the foregoing, if Landlord
elects option (i) above, Tenant may elect to withdraw Tenant's request to sublet
or assign such portion of the Premises by written notice to Landlord given on or
before the date which is five (5) business days following


                                       11
<PAGE>   15

Landlord's notice to Tenant of its intent to recapture such space. Upon such
notice by Tenant, Landlord's election to recapture the subject space in that
instance shall be null and void and Tenant shall retain possession of such
subject space. If Landlord fails to notify Tenant in writing of such election
within said period, Landlord shall be deemed to have waived option (i) above,
but written approval by Landlord of the proposed assignee or sublessee shall
still be required. Failure by Landlord to approve a proposed subtenant or
assignee shall not cause a termination of this Lease.

                (d) In the event Tenant shall request the consent of Landlord to
any assignment or subletting hereunder, Tenant shall pay Landlord a processing
fee of $250.00 and shall reimburse Landlord for Landlord's reasonable attorneys'
fees incurred in connection therewith. All such fees shall be deemed Additional
Rent under this Lease.

                (e) Any rent or other consideration realized by Tenant under any
such sublease or assignment in excess of (i) the Rent payable hereunder, (ii)
any reasonable tenant improvement allowance or other economic concession (e.g.,
space planning allowance, moving expenses, free or reduced rent periods, etc.),
(iii) any advertising costs and brokerage commissions associated with such
assignment or sublease, and (iv) any reasonable legal fees associated with such
assignment or sublease ("Profit"), shall be divided and paid as follows: fifty
percent (50%) to Tenant and fifty percent (50%) to Landlord; provided, however,
that if Tenant is in default hereunder beyond any applicable cure period,
Landlord shall be entitled to all such excess rent.

                (f) In any subletting undertaken by Tenant, Tenant shall
diligently seek to obtain not less than fair market sublease rent for the space
to sublet. In any assignment of this Lease in whole or in part, Tenant shall
seek to obtain from the assignee consideration reflecting a value of not less
than fair market assignment rent for the space subject to such assignment.

                (g) The consent of Landlord to any assignment or subletting
shall not constitute a consent to any subsequent assignment or subletting by
Tenant or to any subsequent or successive assignment or subletting by the
assignee or subtenant. However, Landlord may consent to subsequent assignments
and sublettings of the Lease or sublease or amendments or modifications thereto,
without notifying Tenant or any other party liable on the Lease or sublease and
without obtaining their consent. Such action shall not relieve Tenant or any
such other party from liability under this Lease or a sublease.

                (h) No assignment or subletting by Tenant shall relieve Tenant
of any obligation under this Lease. In the event of default by an assignee or
subtenant of Tenant or any successor of Tenant in the performance of any of the
terms hereof, Landlord may proceed directly against Tenant without the necessity
of exhausting remedies against such assignee, subtenant or successor. Any
assignment or subletting which conflicts with the provisions hereof shall be
void and, at Landlord's option, shall constitute a default under this Lease.

                (i) Notwithstanding anything to the contrary contained within
this Section 5.06, Landlord acknowledges that, although Tenant anticipates that
its space needs will encompass the total of the Leased Premises at some point in
the near future, a portion of the space which Tenant is currently accepting and
leasing may be initially determined to be in excess of Tenant's current short
term space planning needs. As a result, should Tenant submit a request to
Landlord for Landlord's consent to Tenant's sublease of a portion of the Leased
Premises, at any time during the first thirty (30) months of the Term, such
request shall not be subject to Landlord's right of recapture pursuant to
Subsection 5.06(c) above. After the thirtieth (30th) month of the Term, should
Tenant submit a request to Landlord for Landlord's consent to Tenant's sublease
of a portion of the Leased Premises and such sublease along with all other
current subleases and assignments, in the aggregate, do not exceed 9,561
rentable square feet, such request shall not be subject to Landlord's right of
recapture pursuant to Subsection 5.06(c) above.

        5.7 ALTERATIONS, ADDITIONS AND IMPROVEMENTS.

                (a) Tenant shall not make or allow to be made any alterations or
additions in or to the

                                       12
<PAGE>   16
Leased Premises without first obtaining the written consent of Landlord.
Landlord's consent will not be unreasonably withheld, conditioned or delayed
with respect to proposed alterations and additions which (i) comply with all
applicable laws, ordinances, rules and regulations; (ii) are compatible with and
does not adversely affect the Building and its mechanical, electrical, heating,
ventilation and life safety systems; (iii) will not affect the structural
portions of the Building; (iv) will not unreasonably interfere with the use and
occupancy of any other portion of the Building by any other tenant, its
employees or invitees; and (v) will not trigger any additional costs to
Landlord. Specifically, but without limiting the generality of the foregoing,
Landlord's right of consent shall encompass plans and specifications for the
proposed alterations or additions, construction means and methods, the identity
of any contractor or subcontractor to be employed on the work of alterations or
additions, and the time for performance of such work. Tenant shall supply to
Landlord any additional documents and information requested by Landlord in
connection with Tenant's request for consent hereunder. For the purposes herein,
the Landlord Improvements and Tenant Improvements set forth in EXHIBIT B hereto
shall not constitute alterations, additions or improvements.

                (b) Any consent given by Landlord under this Section 5.07 shall
be deemed conditioned upon: (i) Tenant's acquiring all applicable permits
required by governmental authorities; (ii) Tenant's furnishing to Landlord
copies of such permits, together with copies of the approved plans and
specifications, prior to commencement of the work thereon; and (iii) the
compliance by Tenant with the conditions of all applicable permits and approvals
in a prompt and expeditious manner.

                (c) Tenant shall provide Landlord with not less than fifteen
(15) days prior written notice of commencement of the work so as to enable
Landlord to post and record appropriate notices of non-responsibility. All
alterations and additions permitted hereunder shall be made and performed by
Tenant without cost or expense to Landlord. Tenant shall pay the contractors and
suppliers all amounts due to them when due and keep the Leased Premises and the
Project free from any and all mechanics', materialmen's and other liens and
claims arising out of any work performed, materials furnished or obligations
incurred by or for Tenant. Landlord may require, at its sole option, that Tenant
provide to Landlord, at Tenant's expense, a lien and completion bond in an
amount equal to the total estimated cost of any alterations, additions or
improvements to be made in or to the Leased Premises, to protect Landlord
against any liability for mechanics', materialmen's and other liens and claims
related to such alterations, additions or improvements, and to ensure timely
completion of the work. In the event any alterations or additions to the Leased
Premises are performed by Landlord hereunder, whether by prearrangement or
otherwise, Landlord shall be entitled to charge Tenant a ten percent (10%)
administration fee in addition to the actual costs of labor and materials
provided. No administration fee, however, shall be charged on the costs of and
installation of wall and floor coverings and finishes. Such costs and fees shall
be deemed Additional Rent under this Lease, and may be charged and payable prior
to commencement of the work.

                (d) Any and all alterations, additions or improvements made to
the Leased Premises by Tenant shall become the property of Landlord upon
installation and shall be surrendered to Landlord without compensation to Tenant
upon the termination of this Lease by lapse of time or otherwise unless (i)
Landlord conditioned its approval of such alterations, additions or improvements
on Tenant's agreement to remove them, or (ii) if Tenant did not provide a
Removal Determination Request (as defined below), Landlord notifies Tenant prior
to (or promptly after) the Term Expiration Date that the alterations, additions
and/or improvements must be removed, in which case Tenant shall, by the Term
Expiration Date (or promptly thereafter), remove such alterations, additions and
improvements, repair any damage resulting from such removal and restore the
Leased Premises to their condition existing prior to the date of installation of
such alterations, additions and improvements, normal wear, tear and damage by
casualty excepted. Prior to making any alterations, additions or improvements to
the Leased Premises, Tenant may make a written request that Landlord determine
in advance whether or not Tenant must remove such alterations, additions or
improvements on the Term Expiration Date ("Removal Request Determination").
Notwithstanding anything to the contrary set forth above, this clause shall not
apply to movable equipment or furniture owned by Tenant. Tenant shall repair at
its sole cost and expense all damage caused to the Leased Premises and the
Project by removal of Tenant's movable equipment or furniture and such other
alterations, additions and improvements as Tenant shall be required or allowed
by Landlord to remove from the Leased Premises; provided, such repair shall not
include painting of walls or replacement of carpeting.


                                       13
<PAGE>   17

                (e) All alterations, additions and improvements permitted under
this Section 5.07 shall be constructed diligently, in a good and workmanlike
manner with new, good and sufficient materials and in compliance with all
applicable laws, ordinances, rules and regulations (including, without
limitation, building codes and those related to accessibility and use by
individuals with disabilities). Tenant shall, promptly upon completion of the
work, furnish Landlord with "as built" drawings for any alterations, additions
or improvements performed under this Section 5.07.

        5.8 COMPLIANCE WITH LAWS AND INSURANCE STANDARDS. Tenant shall not
occupy or use, or permit any portion of the Leased Premises to be occupied or
used in a manner that violates any applicable law, ordinance, rule, regulation,
order, permit, covenant, easement or restriction of record, or the
recommendations of Landlord's engineers or consultants, relating in any manner
to the Project, or for any business or purpose which is disreputable,
objectionable or productive of fire hazard. Tenant shall not do or permit
anything to be done which would result in the cancellation, or in any way
increase the cost, of the all risk property insurance coverage on the Project
and/or its contents. Landlord represents and warrants to the best of its
knowledge that office use of the Leased Premises permitted hereunder is not
prohibited by, nor does it conflict with, any covenant, easement or restriction
encumbering the Project, and further represents and warrants that the office use
of the Leased Premises will not increase or affect the existing rate of any fire
or other insurance policy covering damage to the Project, or cause cancellation
of any such insurance policy. If Tenant does or permits anything to be done
which increases the cost of any insurance covering or affecting the Project,
then Tenant shall reimburse Landlord, upon demand, as Additional Rent, for such
additional costs. Landlord shall deliver to Tenant a written statement setting
forth the amount of any such insurance cost increase and showing in reasonable
detail the manner in which it has been computed, which statement shall be signed
by Landlord's insurance carrier setting forth that the increase in insurance
premiums is directly attributable to Tenant's acts or omissions. Tenant shall,
at Tenant's sole cost and expense, comply with all laws, ordinances, rules,
regulations and orders (state, federal, municipal or promulgated by other
agencies or bodies having or claiming jurisdiction) related to Tenant's
particular use of the Leased Premises now in effect or which may hereafter come
into effect including, but not limited to, (a) accessibility and use by
individuals with disabilities, and (b) environmental conditions in, on or about
the Leased Premises. If anything done by Tenant in its use or occupancy of the
Leased Premises shall create, require or cause imposition of any requirement by
any public authority for structural or other upgrading of or alteration or
improvement to the Project, Tenant shall, at Landlord's option, either perform
the upgrade, alteration or improvement at Tenant's sole cost and expense or
reimburse Landlord upon demand, as Additional Rent, for the cost to Landlord of
performing such work. The judgment of any court of competent jurisdiction or the
admission by Tenant in any action against Tenant, whether Landlord is a party
thereto or not, that Tenant has violated any law, ordinance, rule, regulation,
order, permit, covenant, easement or restriction shall be conclusive of that
fact as between Landlord and Tenant. Landlord represents and warrants that a
path of travel, as that term is used in Title 24 and the Americans With
Disabilities Act (collectively "ADA"), which is compliant with the requirements
of the ADA either (i) currently exists, or (ii) Landlord has obtained a hardship
waiver for certain areas, extending from the entry of the Building through the
entry of the Leased Premises.

        5.9 NO NUISANCE; NO OVERLOADING. Tenant shall use and occupy the Leased
Premises, and control its agents, employees, contractors, invitees and visitors
in such manner so as not to create any nuisance, or unreasonably interfere with,
annoy or disturb (whether by noise, odor, vibration or otherwise) any other
tenant or occupant of the Project or Landlord in its operation of the Project.
Tenant shall not place or permit to be placed any loads upon the floors, walls
or ceilings in excess of the maximum designed load specified by Landlord or
which might damage the Leased Premises, the Building, or any portion thereof.

        5.10 FURNISHING OF FINANCIAL STATEMENTS; TENANT'S REPRESENTATIONS. In
order to induce Landlord to enter into this Lease, Tenant agrees that it shall
promptly furnish Landlord, from time to time, within ten (10) business days of
receipt of Landlord's written request therefor, with financial statements in
form and substance reasonably satisfactory to Landlord reflecting Tenant's
current financial condition as of the end of Tenant's previous fiscal year;
provided, such financial statements may not be requested more frequently than
once annually. Tenant represents and warrants that to Tenant's knowledge all
financial statements, records and information furnished by Tenant to Landlord in
connection with this Lease are true, correct and complete


                                       14
<PAGE>   18

in all respects.

        5.11 ENTRY BY LANDLORD. Landlord, its employees, agents and consultants,
shall have the right to enter the Leased Premises at any time, in cases of an
emergency, and otherwise at reasonable times to inspect the same, to clean, to
perform such work as may be permitted or required under this Lease, to make
repairs to or alterations of the Leased Premises or other portions of the
Project or other tenant spaces therein, to deal with emergencies, to post such
notices as may be permitted or required by law to prevent the perfection of
liens against Landlord's interest in the Project or to show the Leased Premises
to prospective tenants during the last six (6) months of the Term, purchasers or
encumbrancers; provided, however, that Landlord shall use its best efforts to
minimize interference with Tenant's business operations in the Leased Premises.
Tenant shall not be entitled to any abatement of Rent or damages by reason of
the exercise of any such right of entry.

        5.12 NONDISTURBANCE AND ATTORNMENT.

                (a) This Lease and the rights of Tenant hereunder shall be
subject and subordinate to the lien of any deed of trust, mortgage or other
hypothecation or security instrument (collectively, "Security Device") now or
hereafter placed upon, affecting or encumbering the Project or any part thereof
or interest therein, and to any and all advances made thereunder, interest
thereon or costs incurred and any modifications, renewals, supplements,
consolidations, replacements and extensions thereof. With respect to any
Security Device entered into by Landlord after execution of this Lease, such
subordination is conditioned on Landlord obtaining assurance in a commercially
reasonable form (a "nondisturbance agreement") from the holder of or beneficiary
under such encumbrance that Tenant's possession will not be disturbed so long as
Tenant is not in default under this Lease and attorns to the record owner of the
Leased Premises. Landlord shall obtain and deliver to Tenant a nondisturbance
agreement from Fleet National Bank in the form attached hereto as EXHIBIT E
within ten (10) business days of full execution of this Lease. Without the
consent of Tenant, the holder of any such Security Device or the beneficiary
thereunder shall have the right to elect to be subject and subordinate to this
Lease, such subordination to be effective upon such terms and conditions as such
holder or beneficiary may direct which are not inconsistent with the provisions
hereof. Tenant agrees to attorn to and recognize as the Landlord under this
Lease the holder or beneficiary under a Security Device or any other party that
acquires ownership of the Leased Premises by reason of a foreclosure or sale
under any Security Device (or deed in lieu thereof). The new owner following
such foreclosure, sale or deed shall not be (i) liable for any act or omission
of any prior landlord or with respect to events occurring prior to acquisition
of ownership; (ii) subject to any offsets or defenses which Tenant might have
against any prior landlord; (iii) bound by prepayment of more than one (1)
month's Rent; or (iv) liable to Tenant for any security deposit not actually
received by such new owner.

                (b) Tenant shall not unreasonably withhold its consent to
changes or amendments to this Lease requested by the holder of a Security Device
so long as these changes do not alter the basic business terms of this Lease or
otherwise materially diminish any rights or materially increase any obligations
of Tenant hereunder. If, within fifteen (15) days after notice from Landlord,
Tenant fails or unreasonably refuses to execute with Landlord the amendment(s)
to this Lease accomplishing the reasonable change(s) or amendment(s) which are
requested by such holder such amendments shall be deemed accepted and shall be
enforceable by Landlord and such lender and binding upon Tenant, its successors
and assigns as if agreed to in writing, without need of further action or
documentation.

        5.13 ESTOPPEL CERTIFICATE. Within fifteen (15) days following either
party's request, the other party shall execute, acknowledge and deliver written
estoppel certificates addressed to the persons or parties identified in such
request, on a form specified by such requesting party, certifying as to such
facts (if true) and agreeing to such notice provisions and other matters as such
mortgagee(s) or purchaser(s) may reasonably require, including, without
limitation, the following: (a) that this Lease is unmodified and in full force
and effect (or in full force and effect as modified, and stating the
modifications); (b) the amount of, and date to which Rent and other charges have
been paid in advance; (c) the amount of any Security Deposit; and (d)
acknowledging that neither party is in default under this Lease (or, if a party
is claimed to be in default, stating the nature of the alleged default).
However, in no event shall any such estoppel certificate require an


                                       15
<PAGE>   19

amendment of the provisions of this Lease or otherwise affect or abridge a
party's rights hereunder. Any such estoppel certificate may be relied upon by
any such person or party designated in such request. Failure by a party to
execute and deliver any such estoppel certificate within the time requested
shall be conclusive upon such party that (1) this Lease is in full force and
effect and has not been modified except as represented by the requesting party;
(2) not more than one month's Rent has been paid in advance; and (3) neither
party is in default under this Lease.

        5.14 SECURITY DEPOSIT.

                (a) Concurrently with the execution hereof, Tenant shall pay to
Landlord the agreed upon Security Deposit as security for the full and faithful
performance of Tenant's obligations under this Lease. If at any time during the
Term, Tenant shall be in default in the payment of Rent or in default for any
other reason, Landlord may use, apply or retain such part of the Security
Deposit as necessary for cure of Tenant's failure to make payment of any amount
due Landlord or to cure such default or to reimburse or compensate Landlord for
any liability, loss, cost, expense or damage (including attorneys' fees) which
Landlord may suffer or incur by reason of Tenant's defaults. If Landlord uses or
applies all or any part of the Security Deposit, Tenant shall, on demand, pay to
Landlord a sum sufficient to restore the Security Deposit to the full amount
required by this Lease. Upon expiration of the Term or earlier termination of
this Lease and after Tenant has vacated the Leased Premises, Landlord shall
return the Security Deposit to Tenant, reduced by such amounts as may be
required by Landlord to remedy defaults on the part of Tenant in the payment of
Rent and to perform Tenant's obligations hereunder. The portion of the deposit
not so required shall be paid over to Tenant (or, at Landlord's option, to the
last assignee of Tenant's interest in this Lease) within thirty (30) days after
expiration of the Term or earlier termination hereof. Landlord shall hold the
Security Deposit for the foregoing purposes and shall segregate the Security
Deposit from its general funds in an interest bearing account. No part of the
Security Deposit shall be considered to be held in trust, or to be prepayment of
any monies to be paid by Tenant under this Lease.

                (b) In lieu of a cash deposit, Tenant may deliver the Security
Deposit to Landlord in the form of a clean and irrevocable letter of credit (the
"Letter of Credit") issued by and drawable upon (said issuer being referred to
as the "Issuing Bank" (Tenant shall have the right to change the Issuing Bank
during the term of this Lease)) a financial institution which is approved by
Landlord in its sole discretion, provided that Landlord shall not unreasonably
withhold its consent to an Issuing Bank which has outstanding unsecured,
uninsured and unguaranteed indebtedness, or shall have issued a letter of credit
or other credit facility that constitutes the primary security for any
outstanding indebtedness (which is otherwise uninsured and unguaranteed), that
is then rated, without regard to qualification of such rating by symbols such as
"+" or "-" or numerical notation, "Aa" or better by Moody's Investors Service
and "AA" or better by Standard & Poor's Rating Service, and has combined
capital, surplus and undivided profits of not less than $100,000,000. Such
Letter of Credit shall (a) name Landlord as beneficiary, (b) be in the amount of
the Security Deposit, (c) have a term of not less than one year, (d) permit
multiple drawings, (e) be fully transferable by Landlord, and (f) otherwise be
in form and content reasonably satisfactory to Landlord. If upon any transfer of
the Letter of Credit, any fees or charges shall be so imposed, then such fees or
charges shall be payable solely by Tenant and the Letter of Credit shall so
specify. The Letter of Credit shall provide that it shall be deemed
automatically renewed, without amendment, for consecutive periods of one year
each thereafter during the Term unless the Issuing Bank sends a notice (the
"Non-Renewal Notice") to Landlord by certified mail, return receipt requested,
not less than 45 days next preceding the then expiration date of the Letter of
Credit stating that the Issuing Bank has elected not to renew the Letter of
Credit. Landlord shall have the right, upon receipt of the Non-Renewal Notice,
to draw the full amount of the Letter of Credit, by sight draft on the Issuing
Bank, and shall thereafter hold or apply the cash proceeds of the Letter of
Credit pursuant to the terms of this Article. The Issuing Bank shall agree with
all drawers, endorsers and bona fide holders that drafts drawn under and in
compliance with the terms of the Letter of Credit will be duly honored upon
presentation to the Issuing Bank at an office location in San Francisco. The
Letter of Credit shall be subject in all respects to the Uniform Customs and
Practice for Documentary Credits (1993 revision), International Chamber of
Commerce Publication No. 500.

                (c) Notwithstanding anything in this Section 5.14 to the
contrary, on the third (3rd)


                                       16
<PAGE>   20

anniversary of the Term Commencement Date, the amount of the Security Deposit
shall be reduced by $200,000; on the fourth (4th) anniversary of the Term
Commencement Date, the amount of the Security Deposit shall be reduced by an
additional $200,000; on the fifth (5th) anniversary of the Term Commencement
Date, the amount of the Security Deposit shall be reduced by an additional
$200,000; and on the sixth (6th) anniversary of the Term Commencement Date, the
amount of the Security Deposit shall be reduced by an additional $200,000. In
addition, on the sixth (6th) anniversary of the Term Commencement Date or any
time thereafter, if Tenant has achieved an audited net worth (as defined by
GAAP) of $50,000,000 or greater, the Security Deposit shall be reduced by an
additional $200,000. Upon any reduction of the amount of the Security Deposit,
such amount reduced shall be returned to Tenant, or a reduction shall be made to
the Letter of Credit, as the case may be.

        5.15 SURRENDER. Subject to the provisions of Section 5.07 hereof, on the
Term Expiration Date (or earlier termination of this Lease), Tenant shall quit
and surrender possession of the Leased Premises to Landlord in as good order and
condition as they were in on the Term Commencement Date, reasonable wear and
tear, taking by condemnation and damage by casualty excepted. Reasonable wear
and tear shall not include any damage or deterioration that would have been
prevented by good maintenance practice or by Tenant performing all of its
obligations under this Lease. Tenant shall, without cost to Landlord, remove all
furniture, equipment, trade fixtures, debris and articles of personal property
owned by Tenant in the Leased Premises, and shall repair any damage to the
Project resulting from such removal, provided such repair shall not include
either repainting or recarpeting of the Leased Premises. Any such property not
removed by Tenant by the Term Expiration Date (or earlier termination of this
Lease) shall be considered abandoned, and Landlord may remove any or all of such
items and dispose of same in any lawful manner or store same in a public
warehouse or elsewhere for the account and at the expense and risk of Tenant. If
Tenant shall fail to pay the cost of storing any such property after storage for
thirty (30) days or more, Landlord may sell any or all of such property at
public or private sale, in such manner and at such times and places as Landlord
may deem proper, without notice to or demand upon Tenant. Landlord shall apply
the proceeds of any such sale as follows: first, to the costs of such sale;
second, to the costs of storing any such property; third, to the payment of any
other sums of money which may then or thereafter be due to Landlord from Tenant
under any of the terms of this Lease; and fourth, the balance, if any, to
Tenant.

        5.16 TENANT'S REMEDIES. Landlord shall not be deemed in breach of this
Lease unless Landlord fails within a reasonable time to perform an obligation
required to be performed by Landlord. For purposes of this Section 5.16, a
reasonable time shall in no event, be less than thirty (30) days after receipt
by Landlord (except in the event of an emergency, in which case Landlord's
response time must be reasonable in light of the emergency), and by the holders
of any ground lease, deed of trust or mortgage covering the Leased Premises
whose name and address shall have been furnished Tenant in writing for such
purpose, of written notice specifying wherein such obligation of Landlord has
not been performed; provided, however, that if the nature of Landlord's
obligation is such that more than thirty (30) days after such notice are
reasonably required for its performance, then Landlord shall not be in breach of
this Lease if performance is commenced within said thirty (30)-day period and
thereafter diligently pursued to completion. If Landlord fails to cure such
default within the time provided for in this Lease, the holder of any such
ground lease, deed of trust or mortgage shall have an additional thirty (30)
days to cure such default (except in the case of an emergency); provided that if
such default cannot reasonably be cured within that thirty (30) day period, then
such holder shall have such additional time to cure the default as is reasonably
necessary under the circumstances. Tenant shall look solely to Landlord's
interest in the Project for recovery of any judgment from Landlord. Except with
respect to Landlord's interest in the Building and proceeds therefrom, neither
Landlord nor any of its trustees, directors, officers, agents, employees or
representatives (or, if Landlord is a partnership, its partners, whether general
or limited) shall ever be personally liable for any such judgment. Any lien
obtained to enforce any such judgment and any levy of execution thereon shall be
subject and subordinate to any lien, deed of trust or mortgage to which Section
5.12 applies or may apply. Tenant shall not have the right to terminate this
Lease or withhold, reduce or offset any amount against any payments of Rent due
and payable under this Lease by reason of a breach of this Lease by Landlord.

        5.17 RULES AND REGULATIONS. Tenant shall comply with the rules and
regulations for the Project attached as EXHIBIT D and such reasonable amendments
thereto as Landlord may adopt from time to time


                                       17
<PAGE>   21

with prior notice to Tenant.


                                   ARTICLE 6.
                              ENVIRONMENTAL MATTERS

        6.1 HAZARDOUS MATERIALS PROHIBITED.

                (a) Except for a battery back-up system (for emergency power)
provided by Tenant, at its sole cost and expense, and subject to Landlord's
reasonable approval, Tenant shall not cause or permit any Hazardous Material (as
defined in Section 6.01(c) below) to be brought, kept, used, generated, released
or disposed in, on, under or about the Leased Premises or the Project by Tenant,
its agents, employees, contractors or invitees; provided, however, that Tenant
may use, store and dispose of, in accordance with applicable Laws, limited
quantities of standard office and janitorial supplies, but only to the extent
reasonably necessary for Tenant's operations in the Leased Premises. Tenant
hereby indemnifies Landlord from and against (i) any breach by Tenant of the
obligations stated in the preceding sentence, (ii) any breach of the obligations
stated in Section 6.01(b) below, or (iii) any claims or liability resulting from
Tenant's use of Hazardous Materials. Tenant hereby agrees to defend and hold
Landlord harmless from and against any and all claims, liability, losses,
damages, costs and/or expenses (including, without limitation, diminution in
value of the Project, or any portion thereof, damages for the loss or
restriction on use of rentable or usable space or of any amenity of the Project,
damages arising from any adverse impact on marketing of space in the Project,
and sums paid in settlement of claims, fines, penalties, attorneys' fees,
consultants' fees and experts' fees) which arise during or after the Term as a
result of any breach of the obligations stated in Sections 6.01(a) or 6.01(b) or
otherwise resulting from Tenant's use of Hazardous Materials. This
indemnification of Landlord by Tenant includes, without limitation, death of or
injury to person, damage to any property or the environment and costs incurred
in connection with any investigation of site conditions or any cleanup,
remedial, removal, or restoration work required by any federal, state or local
governmental agency or political subdivision because of any Hazardous Material
present in, on, under or about the Leased Premises or the Project (including
soil and ground water contamination) which results from such a breach. Without
limiting the foregoing, if the presence of any Hazardous Material in, on, under
or about the Leased Premises or the Project caused or permitted by Tenant
results in any contamination of the Leased Premises or the Project, Tenant shall
promptly take all actions at its sole expense as are necessary to return the
same to the condition existing prior to the introduction of such Hazardous
Material; provided that Landlord's approval of such actions, and the contractors
to be used by Tenant in connection therewith, shall first be obtained. This
indemnification of Landlord by Tenant shall survive the expiration or sooner
termination of this Lease.

                (b) Tenant covenants and agrees that Tenant shall at all times
be responsible and liable for, and be in compliance with, all federal, state,
local and regional laws, ordinances, rules, codes and regulations, as amended
from time to time ("Governmental Requirements"), relating to health and safety
and environmental matters, arising, directly or indirectly, out of Tenant's use
of Hazardous Materials (as defined in Section 6.01(c) below) in the Project.
Health and safety and environmental matters for which Tenant is responsible
under this paragraph include, without limitation (i) notification and reporting
to governmental agencies, (ii) the provision of warnings of potential exposure
to Hazardous Materials to Landlord and Tenant's agents, employees, licensees,
contractors and others, (iii) the payment of taxes and fees, (iv) the proper
off-site transportation and disposal of Hazardous Materials, and (v) all
requirements, including training, relating to the use of equipment. Immediately
upon discovery of a release of Hazardous Materials associated with Tenant's
activities, Tenant shall give written notice to Landlord, whether or not such
release is subject to reporting under Governmental Requirements. The notice
shall include information on the nature and conditions of the release and
Tenant's planned response. Tenant shall be liable for the cost of any clean-up
of the release of any Hazardous Materials by Tenant on the Project.

                (c) As used in this Lease, the term "Hazardous Material" means
any hazardous or toxic substance, material or waste which is or becomes
regulated by any local governmental authority, the State of California or the
United States Government. The term "Hazardous Material" includes, without
limitation, any substance, material or waste which is (i) defined as a
"hazardous waste" or similar term under the laws of the


                                       18
<PAGE>   22
jurisdiction where the Project is located; (ii) designated as a "hazardous
substance" pursuant to Section 311 of the Federal Water Pollution Control Act
(33 U.S.C. Section 1317); (iii) defined as a "hazardous waste" pursuant to
Section 1004 of the Federal Resource, Conservation and Recovery Act, 42 U.S.C.
Section 6901 et seq. (42 U.S.C. Section 6903); (iv) defined as a "hazardous
substance" pursuant to Section 101 of the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Section 9601 et seq. (42 U.S.C.
Section 9601); (v) hydrocarbons, petroleum, gasoline, crude oil or any products,
by-products or fractions thereof; or (vi) asbestos in any form or condition.

                (d) As used in this Article 6, the term "Laws" means any
applicable federal, state or local laws, ordinances, rules or regulations
relating to any Hazardous Material affecting the Project, including, without
limitation, the specific laws, ordinances and regulations referred to in Section
6.01(c) above. References to specific Laws shall also be references to any
amendments thereto and to any applicable successor Laws.


                (e) To the best of Landlord's knowledge, except as disclosed in
the environmental reports (the "Environmental Reports") provided to Tenant by
Landlord (at Landlord's sole cost and expense) (i) there are no Hazardous
Materials in the Building, and (ii) the Building is in compliance with all Laws
relating to any Hazardous Material. Landlord's knowledge is limited to the
matters contained in the Environmental Reports. Tenant acknowledges its receipt
and review of the Environmental Reports prior to entering into this Lease.
Landlord represents and warrants that (i) during the period of its ownership of
the Project prior to entering into this Lease, it has not released any Hazardous
Materials on the Project, and (ii) after entering into this Lease, Landlord will
not release any Hazardous Materials on the Project. Landlord hereby agrees to
indemnify, protect, defend and hold the Tenant harmless of and from any and all
claims, liability, costs, penalties, fines, damages, injury, judgments,
forfeiture, losses or expenses (including without limitation reasonable
attorneys' fees) arising out of or in any way related to any breach by Landlord
of its representations and warranties in this Section 6.01(e) and Landlord shall
be liable for the cost of any clean-up of the release of any Hazardous Materials
by Landlord on the Project. Landlord, at its sole expense, shall cause to be
removed any asbestos or other Hazardous Materials discovered in the Leased
Premises (except any Hazardous Materials installed by Tenant or part of the
Tenant Improvements) during the term of this Lease required by Government
Requirements to be removed and Landlord shall restore the Leased Premises to its
condition prior to the removal of such Hazardous Materials. Landlord hereby
agrees to indemnify, protect, defend and hold the Tenant harmless of and from
any and all claims, liability, costs, penalties, fines, damages, injury,
judgments, forfeiture, losses or expenses (including without limitation
reasonable attorneys' fees) arising out of or in any way related to or resulting
from any Hazardous Materials discovered in the Leased Premises or on the Project
with were not brought, kept, used, generated, released or disposed in, on, under
or about the Leased Premises or the Project by Tenant, its agents, employees,
contractors or invitees.

        6.2 LIMITATIONS ON ASSIGNMENT AND SUBLETTING. It shall not be
unreasonable for Landlord to withhold its consent to any proposed assignment or
subletting of the Leased Premises if (i) the proposed transferee's anticipated
use of the Leased Premises involves the generation, storage, use, treatment, or
disposal of Hazardous Material (excluding standard office and janitorial
supplies; in limited quantities as hereinabove provided); (ii) the proposed
transferee has been required by any prior landlord, lender or governmental
authority to take remedial action in connection with Hazardous Material
contaminating a property if the contamination resulted from such transferee's
actions or use of the property in question; or (iii) the proposed transferee is
subject to an enforcement order issued by any governmental authority in
connection with the generation, storage, use, treatment or disposal of a
Hazardous Material.

        6.3 RIGHT OF ENTRY. Landlord, its employees, agents and consultants,
shall have the right to enter the Leased Premises at any time, in case of an
emergency, and otherwise during reasonable hours and upon reasonable notice to
Tenant, in order to conduct periodic environmental inspections and tests to
determine whether any Hazardous Materials are present. The costs and expenses of
such inspections shall be paid by Landlord unless a default or breach of this
Lease, violation of Laws or contamination caused or permitted by Tenant is found
to exist. In such event, Tenant shall reimburse Landlord upon demand, as
Additional Rent, for the costs and expenses of such inspections.


                                       19
<PAGE>   23

        6.4 NOTICE TO LANDLORD. Tenant shall immediately notify Landlord in
writing of: (i) any enforcement, clean-up, removal or other governmental or
regulatory action instituted or threatened regarding the Leased Premises or the
Project pursuant to any Laws; (ii) any claim made or threatened by any person
against Tenant or the Leased Premises relating to damage, contribution, cost
recovery, compensation, loss or injury resulting from or claimed to result from
any Hazardous Material; and (iii) any reports made to or received from any
governmental agency arising out of or in connection with any Hazardous Material
in or removed from the Leased Premises or the Project, including any complaints,
notices, warnings or asserted violations in connection therewith. Tenant shall
also supply to Landlord as promptly as possible, and in any event within three
(3) business days after Tenant first receives or sends the same, copies of all
claims, reports, complaints, notices, warnings, asserted violations or other
communications relating in any way to the Leased Premises or Tenant's use
thereof.


                                   ARTICLE 7.
             INSURANCE, INDEMNITY, CONDEMNATION, DAMAGE AND DEFAULT

        7.1 LANDLORD'S INSURANCE. Landlord shall secure and maintain policies of
insurance for the Project (including the Leased Premises) covering loss of or
damage to the Project, including the Tenant Improvements, but excluding all
subsequent alterations, additions and improvements to the Leased Premises, with
loss payable to Landlord and to the holders of any deeds of trust, mortgages or
ground leases on the Project. Landlord shall not be obligated to obtain
insurance for Tenant's trade fixtures, equipment, furnishings, machinery or
other property. Such policies shall provide protection against fire and extended
coverage perils and such additional perils as Landlord deems suitable, and with
such deductible(s) as Landlord shall deem reasonably appropriate. Landlord shall
further secure and maintain commercial general liability insurance with respect
to the Project in such amount as Landlord shall determine, such insurance to be
in addition to, and not in lieu of, the liability insurance required to be
maintained by Tenant. In addition, Landlord may secure and maintain rental
income insurance. If the annual cost to Landlord for any such insurance exceeds
the standard rates because of the nature of Tenant's operations, Tenant shall,
upon receipt of appropriate invoices together with a statement signed by
Landlord's insurance carrier setting forth that the increase in insurance
premiums is directly attributable to Tenant's operations at the Leased Premises,
reimburse Landlord for such increases in cost, which amounts shall be deemed
Additional Rent hereunder. Tenant shall not be named as an additional insured on
any policy of insurance maintained by Landlord. The proceeds from any property
damage insurance maintained by Landlord hereunder shall be used in repair and
restoration of the Building.

        7.2 TENANT'S LIABILITY INSURANCE.

                (a) Tenant (with respect to both the Leased Premises and the
Project) shall secure and maintain, at its own expense, at all times during the
Term, a policy or policies of commercial general liability insurance protecting
Tenant and naming Landlord, the holders of any deeds of trust, mortgages or
ground leases on the Project, and Landlord's representatives (which term,
whenever used in this Article 7, shall be deemed to include Landlord's partners,
trustees, ancillary trustees, officers, directors, shareholders, beneficiaries,
agents, employees and independent contractors) as additional insureds against
claims for bodily injury, personal injury, advertising injury and property
damage (including attorneys' fees) based upon, involving or arising out of
Tenant's operations, assumed liabilities or Tenant's use, occupancy or
maintenance of the Leased Premises and the Common Areas of the Project. Such
insurance shall provide for a minimum amount of Two Million Dollars
($2,000,000.00) for property damage or injury to or death of one or more than
one person in any one accident or occurrence, with an annual aggregate limit of
at least Four Million Dollars ($4,000,000.00). The coverage required to be
carried shall include fire legal liability, blanket contractual liability,
personal injury liability (libel, slander, false arrest and wrongful eviction),
broad form property damage liability, products liability and completed
operations coverage (as well as owned, non-owned and hired automobile liability
if an exposure exists) and the policy shall contain an exception to any
pollution exclusion which insures damage or injury arising out of heat, smoke or
fumes from a hostile fire. Such insurance shall be written on an occurrence
basis and contain a separation of insureds provision or cross-liability
endorsement


                                       20
<PAGE>   24

acceptable to Landlord. Tenant shall provide Landlord with a certificate
evidencing such insurance coverage. The certificate shall indicate that the
insurance provided specifically recognizes the liability assumed by Tenant under
this Lease (including without limitation performance by Tenant under Section
7.04) and that Tenant's insurance is primary to and not contributory with any
other insurance maintained by Landlord, whose insurance shall be considered
excess insurance only. Not more frequently than every two (2) years, if, in the
opinion of any mortgagee of Landlord or of the insurance broker retained by
Landlord, the amount of liability insurance coverage at that time is not
adequate, then Tenant shall increase its liability insurance coverage as
required by either any mortgagee of Landlord or Landlord's insurance broker.

                (b) Tenant shall, at Tenant's expense, comply with (i) all
insurance company requirements pertaining to the use of the Leased Premises and
(ii) all rules, orders, regulations or requirements of the American Insurance
Association (formerly the National Board of Fire Underwriters) and with any
similar body.

        7.3 TENANT'S ADDITIONAL INSURANCE REQUIREMENTS.

                (a) Tenant shall secure and maintain, at Tenant's expense, at
all times during the Term, a policy of physical damage insurance on all of
Tenant's fixtures, furnishings, equipment, machinery, merchandise and personal
property in the Leased Premises and on any alterations, additions or
improvements made by or for Tenant upon the Leased Premises, all for the full
replacement cost thereof without deduction for depreciation of the covered items
and in amounts that meet any co-insurance clauses of the policies of insurance.
Such insurance shall insure against those risks customarily covered in an "all
risk" policy of insurance covering physical loss or damage. Tenant shall use the
proceeds from such insurance for the replacement of fixtures, furnishings,
equipment and personal property and for the restoration of any alterations,
additions or improvements to the Leased Premises. In addition, Tenant shall
secure and maintain, at all times during the Term, loss of income, business
interruption and extra expense insurance in such amounts as will reimburse
Tenant for direct or indirect loss of earnings and incurred costs attributable
to all perils commonly insured against by prudent tenants or attributable to
prevention of access to the Leased Premises or to the Building as a result of
such perils; such insurance shall be maintained with Tenant's property insurance
carrier. Further, Tenant shall secure and maintain at all times during the Term
workers' compensation insurance in such amounts as are required by law,
employer's liability insurance in the amount of One Million Dollars
($1,000,000.00) per occurrence, and all such other insurance as may be required
by applicable law or as may be reasonably required by Landlord. In the event
Tenant makes any alterations, additions or improvements to the Leased Premises,
prior to commencing any work in the Leased Premises, Tenant shall secure
"builder's all risk" insurance which shall be maintained throughout the course
of construction, such policy being an all risk builder's risk completed value
form, in an amount approved by Landlord, but not less than the total contract
price for the construction of such alterations, additions or improvements and
covering the construction of such alterations, additions or improvements, and
such other insurance as Landlord may reasonably require, it being understood and
agreed that all of such alterations, additions or improvements shall be insured
by Tenant pursuant to this Section 7.03 immediately upon completion thereof.
Tenant shall provide Landlord with certificates of all such insurance. The
property insurance certificate shall confirm that the waiver of subrogation
required to be obtained pursuant to Section 7.05 is permitted by the insurer.
Tenant shall, prior to the expiration of any policy of insurance required to be
maintained by Tenant under this Lease, furnish Landlord with an "insurance
binder" or other satisfactory evidence of renewal thereof.

                (b) All policies required to be carried by Tenant under this
Lease shall be issued by and binding upon a reputable insurance company of good
financial standing licensed or authorized to do business in the State of
California with a rating of at least A-VII, or such other rating as may be
required by a lender having a lien on the Project, as set forth in the most
current issue of "Best's Insurance Reports." Tenant shall not do or permit
anything to be done that would invalidate the insurance policies referred to in
this Article 7. Evidence of insurance provided to Landlord shall include an
endorsement showing that Landlord, its representatives and the holders of any
deeds of trust, mortgages or ground leases on the Project are included as
additional insureds on general liability insurance, and as loss payees for
property insurance, to the extent required hereunder, and an endorsement whereby
the insurer agrees not to cancel, non-renew or materially


                                       21
<PAGE>   25

alter the policy without at least thirty (30) days prior written notice to
Landlord, its representatives and any mortgagee of Landlord.

                (c) In the event that Tenant fails to provide evidence of
insurance required to be provided by Tenant under this Lease, prior to
commencement of the Term, and thereafter during the Term, within thirty (30)
days following Landlord's request therefor, and prior to the expiration date of
any such coverage, Landlord shall be authorized (but not required) to procure
such coverage in the amounts stated with all costs thereof (plus a ten percent
(10%) administrative fee) to be chargeable to Tenant and payable upon written
invoice therefor, which amounts shall be deemed Additional Rent hereunder.

                (d) The minimum limits of insurance required by this Lease, or
as carried by Tenant, shall not limit the liability of Tenant nor relieve Tenant
of any obligation hereunder.

        7.4 INDEMNITY AND EXONERATION.

                (a) Except for the negligence or willful misconduct of Landlord
and Landlord's representatives, Landlord and Landlord's representatives shall
not be liable for any loss, injury or damage to person or property of Tenant,
Tenant's agents, employees, contractors, invitees or any other person, whether
caused by theft, fire, act of God, acts of the public enemy, riot, strike,
insurrection, war, court order, requisition or order of governmental body or
authority or which may arise through repair, alteration or maintenance of any
part of the Project or failure to make any such repair or from any other cause
whatsoever, except as expressly otherwise provided in Sections 7.06 and 7.07.
Landlord shall not be liable for any loss, injury or damage arising from any act
or omission of any other tenant or occupant of the Project, nor shall Landlord
be liable under any circumstances for damage or inconvenience to Tenant's
business or for any loss of income or profit therefrom.

                (b) Tenant shall indemnify, protect, defend and hold the
Project, Landlord and its representatives, harmless of and from any and all
claims, liability, costs, penalties, fines, damages, injury, judgments,
forfeiture, losses (including without limitation diminution in the value of the
Leased Premises) or expenses (including without limitation attorneys' fees,
consultant fees, testing and investigation fees, expert fees and court costs)
arising out of or in any way related to or resulting directly or indirectly from
(i) the use or occupancy of the Leased Premises, (ii) the activities of Tenant,
its agents, employees, contractors or invitees in or about the Leased Premises
or the Project (where not covered by Landlord's insurance), (iii) any failure of
Tenant to comply with any applicable law, and (iv) any default or breach by
Tenant in the performance of any obligation of Tenant under this Lease;
provided, however, that the foregoing indemnity shall not be applicable to
claims arising by reason of the negligence or willful misconduct of Landlord or
Landlord's representative or are related to any Landlord default under this
Lease.

                (c) Tenant shall indemnify, protect, defend and hold the
Project, Landlord and its representatives, harmless of and from any and all
claims, liability, costs, penalties, fines, damages, injury, judgments,
forfeiture, losses (including without limitation diminution in the value of the
Leased Premises) or expenses (including without limitation attorneys' fees,
consultant fees, testing and investigation fees, expert fees and court costs)
arising out of or in any way related to or resulting directly or indirectly from
work or labor performed, materials or supplies furnished to or at the request of
Tenant or in connection with obligations incurred by or performance of any work
done for the account of Tenant in the Leased Premises or the Project, with the
exception of any such work, labor, materials or supplies directly related to any
Landlord Improvements or Tenant Improvements constructed pursuant to EXHIBIT B
attached hereto.

                (d) The provisions of this Section 7.04 shall survive the
expiration or sooner termination of this Lease. BY SIGNING ITS INITIALS BELOW,
TENANT ACKNOWLEDGES THAT IT HAS READ AND UNDERSTANDS THE MEANING AND
RAMIFICATIONS OF THE PROVISIONS SET FORTH IN THIS SECTION 7.04 AND FURTHER
ACKNOWLEDGES THAT SUCH PROVISIONS WERE SPECIFICALLY NEGOTIATED.

------------------------
TENANT'S INITIALS



                                       22
<PAGE>   26

        7.5 WAIVER OF SUBROGATION. Anything in this Lease to the contrary
notwithstanding, Landlord and Tenant each waives all rights of recovery, claim,
action or cause of action against the other, its agents (including partners,
both general and limited), trustees, officers, directors, and employees, for any
loss or damage that may occur to the Leased Premises, or any improvements
thereto, or the Project or any personal property of such party therein, by
reason of any cause required to be insured against under this Lease to the
extent of the coverage required, regardless of cause or origin, including
negligence of the other party hereto, provided that such party's insurance is
not invalidated thereby; and each party covenants that, to the fullest extent
permitted by law, no insurer shall hold any right of subrogation against such
other party. Tenant shall advise its insurers of the foregoing and such waiver
shall be a part of each policy maintained by Tenant which applies to the Leased
Premises, any part of the Project or Tenant's use and occupancy of any part
thereof.

        7.6 CONDEMNATION.

                (a) If the Leased Premises are taken under the power of eminent
domain or sold under the threat of the exercise of such power (all of which are
referred to herein as "condemnation"), this Lease shall terminate as to the part
so taken as of the date the condemning authority takes title or possession,
whichever first occurs (the "date of taking"). If the Leased Premises or any
portion of the Project is taken by condemnation to such an extent as to render
the Leased Premises untenantable as reasonably determined by Landlord and
Tenant, this Lease shall, at the option of either party to be exercised in
writing within thirty (30) days after receipt of written notice of such taking,
forthwith cease and terminate as of the date of taking. All proceeds from any
condemnation of the Leased Premises shall belong and be paid to Landlord,
subject to the rights of any mortgagee of Landlord's interest in the Project or
the beneficiary of any deed of trust which constitutes an encumbrance thereon;
provided that Tenant shall be entitled to any compensation separately awarded to
Tenant for Tenant's relocation expenses or, loss of Tenant's trade fixtures. If
this Lease continues in effect after the date of taking pursuant to the
provisions of this Section 7.06(a), Landlord shall proceed with reasonable
diligence to repair, at its expense, the remaining parts of the Project and the
Leased Premises to substantially their former condition to the extent that the
same is feasible (subject to reasonable changes which Landlord shall deem
desirable) and so as to constitute a complete and tenantable Project and Leased
Premises. Gross Rent shall abate to the extent appropriate during the period of
restoration, and Gross Rent shall thereafter be equitably adjusted according to
the remaining Rentable Area of the Leased Premises and the Building.

                (b) In the event of a temporary taking of all or a portion of
the Leased Premises, there shall be no abatement of Rent and Tenant shall remain
fully obligated for performance of all of the covenants and obligations on its
part to be performed pursuant to the terms of this Lease. All proceeds awarded
or paid with respect thereto shall belong to Tenant.

        7.7 DAMAGE OR DESTRUCTION. In the event of a fire or other casualty in
the Leased Premises, Tenant shall immediately give notice thereof to Landlord.
The following provisions shall then apply:

                (a) If the damage is limited solely to the Leased Premises and
the Leased Premises can, in Landlord's opinion, be made tenantable with all
damage repaired within six (6) months from the date of damage, then Landlord
shall be obligated to rebuild the same to substantially their former condition
to the extent that the same is feasible (subject to reasonable changes which
Landlord shall deem desirable and such changes as may be required by applicable
law) and shall proceed with reasonable diligence to do so and this Lease shall
remain in full force and effect.

                (b) If portions of the Project outside the boundaries of the
Leased Premises are damaged or destroyed (whether or not the Leased Premises are
also damaged or destroyed) and the Leased Premises and the Project can, in
Landlord's reasonable opinion, both be made tenantable with all damage repaired
within six (6) months from the date of damage or destruction, and provided that
Landlord determines that it is economically feasible, then Landlord shall be
obligated to rebuild the same to substantially their former condition to the
extent that the same is feasible (subject to reasonable changes which Landlord
shall


                                       23
<PAGE>   27

reasonably deem desirable and such changes as may be required by applicable law)
and shall proceed with reasonable diligence to do so and this Lease shall remain
in full force and effect.

                (c) Notwithstanding anything to the contrary contained in
Sections 7.07(a) or 7.07(b) above, Landlord shall not have any obligation
whatsoever to repair, reconstruct or restore the Leased Premises when any damage
thereto or to the Project occurs during the last twelve (12) months of the Term
and Tenant has not effectively exercised any option granted to Tenant to extend
the Term. Under such circumstances, Landlord shall promptly notify Tenant of its
decision not to rebuild, whereupon the Lease shall terminate as of the date of
such notice.

                (d) If neither Section 7.07(a) nor 7.07(b) above applies,
Landlord shall so notify Tenant within sixty (60) days after the date of the
damage or destruction and either Tenant or Landlord may terminate this Lease
within thirty (30) days after the date of such notice, such termination notice
to be immediately effective; provided, however, that Landlord shall have the
right to elect to reconstruct the Project and the Leased Premises, in which
event (i) Landlord shall notify Tenant of such election within said sixty (60)
day period and Tenant shall thereupon have no right to terminate this Lease, and
(ii) Landlord shall proceed with reasonable diligence to rebuild the Project and
the Leased Premises to substantially their former condition to the extent that
the same is feasible (subject to reasonable changes which Landlord shall deem
desirable and such changes as may be required by applicable law).

                (e) During any period when Tenant's use of the Leased Premises
is significantly impaired by damage or destruction, Gross Rent shall abate in
proportion to the degree to which Tenant's use of the Leased Premises is
impaired until such time as the Leased Premises are made tenantable as
reasonably determined by Landlord; provided that no such rental abatement shall
be permitted if the casualty is the result of the negligence or willful
misconduct of Tenant or Tenant's employees, agents, contractors or invitees.

                (f) The proceeds from any insurance paid by reason of damage to
or destruction of the Project or any part thereof insured by Landlord shall
belong to and be paid to Landlord, subject to the rights of any mortgagee of
Landlord's interest in the Project or the beneficiary of any deed of trust which
constitutes an encumbrance thereon. Tenant shall be responsible at its sole cost
and expense for the repair, restoration and replacement of (i) its fixtures,
furnishings, equipment, machinery, merchandise and personal property in the
Leased Premises, and (ii) its alteration, additions and improvements; provided,
however, that Landlord shall have the option of requiring Tenant to assign to
Landlord (or any party designated by Landlord) some or all of the proceeds
payable to Tenant under this Article 7, whereupon Landlord shall be responsible
for the repair or restoration of such insured property.

                (g) Landlord's repair and restoration obligations under this
Section 7.07 shall not impair or otherwise affect the rights and obligations of
the parties set forth elsewhere in this Lease. Subject to Section 7.07(e),
Landlord shall not be liable for any inconvenience or annoyance to Tenant, its
employees, agents, contractors or invitees, or injury to Tenant's business
resulting in any way from such damage or the repair thereof. Landlord and Tenant
agree that the terms of this Lease shall govern the effect of any damage to or
destruction of the Leased Premises or the Project with respect to the
termination of this Lease and hereby waive the provisions of any present or
future statute or law to the extent inconsistent therewith.

        7.8 DEFAULT BY TENANT.

                (a) Events of Default. The occurrence of any of the following
shall constitute an event of default on the part of Tenant:

                        (1) Abandonment. Vacating the Leased Premises without
the intention to reoccupy same, or abandonment of the Leased Premises for a
continuous period of six (6) months.

                        (2) Nonpayment Of Rent. Failure to pay any installment
of Rent due and payable hereunder on the date when payment is due, such failure
continuing for a period of three (3) business days after written notice of such
failure; provided, however, that Landlord shall not be required to provide


                                       24
<PAGE>   28

such notice more than one (1) time during any Computation Year of the Term with
respect to non-payment of Gross Rent or Additional Rent, the third such
non-payment constituting default without requirement of notice; furthermore, if
Tenant shall be served with a demand for the payment of past due Rent, any
payment(s) tendered thereafter to cure any default by Tenant shall be made only
by cashier's check, wire-transfer or direct deposit of immediately available
funds;

                        (3) Other Obligations. Failure to perform any
obligation, agreement or covenant under this Lease other than those matters
specified in subsections 7.08(a)(1) and 7.08(a)(2), such failure continuing for
a period of fifteen (15) business days after written notice of such failure (or
such longer period as is reasonably necessary to remedy such default, provided
that Tenant commences the remedy within such fifteen (15)-day period and
continuously and diligently pursues such remedy at all times until such default
is cured);

                        (4) General Assignment. Any general arrangement or
assignment by Tenant for the benefit of creditors;

                        (5) Bankruptcy. The filing of any voluntary petition in
bankruptcy by Tenant, or the filing of an involuntary petition against Tenant,
which involuntary petition remains undischarged for a period of sixty (60) days.
In the event that under applicable law the trustee in bankruptcy or Tenant has
the right to affirm this Lease and continue to perform the obligations of Tenant
hereunder, such trustee or Tenant shall, within such time period as may be
permitted by the bankruptcy court having jurisdiction, cure all defaults of
Tenant hereunder outstanding as of the date of the affirmance of this Lease and
provide to Landlord such adequate assurances as may be necessary to ensure
Landlord of the continued performance of Tenant's obligations under this Lease;

                        (6) Receivership. The appointment of a trustee or
receiver to take possession of all or substantially all of Tenant's assets or
the Leased Premises, where possession is not restored to Tenant within ten (10)
business days;

                        (7) Attachment. The attachment, execution or other
judicial seizure of all or substantially all of Tenant's assets or the Leased
Premises, if such attachment or other seizure remains undismissed or
undischarged for a period of ten (10) business days after the levy thereof;

                        (8) Insolvency. The admission by Tenant in writing of
its inability to pay its debts as they become due; the filing by Tenant of a
petition seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future statute,
law or regulation; the filing by Tenant of an answer admitting or failing timely
to contest a material allegation of a petition filed against Tenant in any such
proceeding; or, if within sixty (60) days after the commencement of any
proceeding against Tenant seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future statute, law or regulation, such proceeding shall not have been
dismissed;

                        (9) Guarantor. If the performance of Tenant's
obligations under this Lease is guaranteed: (i) the death of a guarantor; (ii)
the termination of a guarantor's liability with respect to this Lease other than
in accordance with the terms of such guaranty; (iii) a guarantor's becoming
insolvent or the subject of a bankruptcy filing; (iv) a guarantor's refusal to
honor the guaranty; or (v) a guarantor's breach of its guaranty obligation on an
anticipatory breach basis, and Tenant's failure, within sixty (60) days
following written notice by or on behalf of Landlord to Tenant of any such
event, to provide Landlord with written alternative assurance or security,
which, when coupled with the then existing resources of Tenant, equals or
exceeds the combined financial resources of Tenant and the guarantor(s) that
existed at the time of execution of this Lease; or

                        (10) Partner. If Tenant is a partnership or consists of
more than one (1) person or entity, if any partner of the partnership or any
person or entity constituting Tenant is involved in any of the events or acts
described in subsections 7.08(a)(4) through (8).


                                       25
<PAGE>   29

                        (11) Misrepresentation. The discovery by Landlord that
any representation, warranty or financial statement given to Landlord by Tenant
or any guarantor of Tenant's obligations under this Lease was materially false
or misleading.

                (b) Remedies Upon Default:

                        (1) Termination. If an event of default occurs, Landlord
shall have the right, with or without notice or demand, immediately (after
expiration of any applicable grace period specified herein) to terminate this
Lease, and at any time thereafter recover possession of the Leased Premises or
any part thereof and expel and remove therefrom Tenant and any other person
occupying the same, by any lawful means, and again repossess and enjoy the
Leased Premises without prejudice to any of the remedies that Landlord may have
under this Lease, or at law or in equity by reason of Tenant's default or of
such termination.

                        (2) Continuation After Default. Even though Tenant has
breached this Lease and/or abandoned the Leased Premises, this Lease shall
continue in effect for so long as Landlord does not terminate Tenant's right to
possession under subsection 7.08(b)(1) hereof in writing, and Landlord may
enforce all of its rights and remedies under this Lease, including (but without
limitation) the right to recover Rent as it becomes due, and Landlord, without
terminating this Lease, may exercise all of the rights and remedies of a
landlord under Section 1951.4 of the Civil Code of the State of California or
any amended or successor code section. Acts of maintenance or preservation,
efforts to relet the Leased Premises or the appointment of a receiver upon
application of Landlord to protect Landlord's interest under this Lease shall
not constitute an election to terminate Tenant's right to possession. If
Landlord elects to relet the Leased Premises for the account of Tenant, the rent
received by Landlord from such reletting shall be applied as follows: first, to
the payment of any indebtedness other than Rent due hereunder from Tenant to
Landlord; second, to the payment of any costs of such reletting; third, to the
payment of the cost of any alterations or repairs to the Leased Premises;
fourth, to the payment of Rent due and unpaid hereunder; and the balance, if
any, shall be held by Landlord and applied in payment of future Rent as it
becomes due. If that portion of rent received from the reletting which is
applied against the Rent due hereunder is less than the amount of the Rent due,
Tenant shall pay the deficiency to Landlord promptly upon demand by Landlord.
Such deficiency shall be calculated and paid monthly. Tenant shall also pay to
Landlord, as soon as determined, any costs and expenses incurred by Landlord in
connection with such reletting or in making alterations and repairs to the
Leased Premises, which are not covered by the rent received from the reletting.

                (c) Damages Upon Termination. Should Landlord terminate this
Lease pursuant to the provisions of subsection 7.08(b)(1) hereof, Landlord shall
have all the rights and remedies of a landlord provided by Section 1951.2 of the
Civil Code of the State of California. Upon such termination, in addition to any
other rights and remedies to which Landlord may be entitled under applicable
law, Landlord shall be entitled to recover from Tenant: (i) the worth at the
time of award of the unpaid Rent and other amounts which had been earned at the
time of termination; (ii) the worth at the time of award of the amount by which
the unpaid Rent which would have been earned after termination until the time of
award exceeds the amount of such Rent loss that Tenant proves could have been
reasonably avoided; (iii) the worth at the time of award of the amount by which
the unpaid Rent for the balance of the Term after the time of award exceeds the
amount of such Rent loss that Tenant proves could be reasonably avoided; and
(iv) any other amount necessary to compensate Landlord for all the detriment
proximately caused by Tenant's failure to perform its obligations under this
Lease or which, in the ordinary course of things, would be likely to result
therefrom. The "worth at the time of award" of the amounts referred to in
clauses (i) and (ii) shall be computed with interest at the lesser of twelve
percent (12%) per annum or the maximum rate then allowed by law. The "worth at
the time of award" of the amount referred to in clause (iii) shall be computed
by discounting such amount at the discount rate of the Federal Reserve Bank of
San Francisco at the time of the award plus one percent (1%).

                (d) Computation of Rent for Purposes of Default. For purposes of
computing unpaid Rent which would have accrued and become payable under this
Lease pursuant to the provisions of


                                       26
<PAGE>   30

Section 7.08(c), unpaid Rent shall consist of the sum of:

                        (1) the total Base Rent for the balance of the Term,
plus

                        (2) a computation of Tenant's Proportionate Share of
Increased Basic Operating Cost for the balance of the Term, the assumed amount
for the Computation Year of the default and each future Computation Year in the
Term to be equal to Tenant's Proportionate Share of Increased Basic Operating
Cost for the Computation Year immediately prior to the year in which default
occurs, compounded at a per annum rate equal to the mean average rate of
inflation for the preceding five (5) calendar years as determined by the United
States Department of Labor, Bureau of Labor Statistics Consumer Price Index (All
Urban Consumers, all items (1982-84=100)) for the Metropolitan Area or Region in
which the Project is located. If such Index is discontinued or revised, the
average rate of inflation shall be determined by reference to the index
designated as the successor or substitute index by the government of the United
States.

                (e) Late Charge. If any payment required to be made by Tenant
under this Lease is not received by Landlord on or before the date the same is
due after expiration of all applicable notice and cure periods, Tenant shall pay
to Landlord an amount equal to ten percent (10%) of the delinquency. The parties
agree that Landlord would incur costs not contemplated by this Lease by virtue
of such delinquencies, including without limitation administrative, collection,
processing and accounting expenses, the amount of which would be extremely
difficult to compute, and the amount stated herein represents a reasonable
estimate thereof. Acceptance of such late charge by Landlord shall in no event
constitute a waiver of Tenant's breach or default with respect to such
delinquency, or prevent Landlord from exercising any of Landlord's other rights
and remedies.

                (f) Interest on Past-Due Obligations. Except as expressly
otherwise provided in this Lease, any Rent due Landlord hereunder, other than
late charges, which is not received by Landlord on the date on which it was due,
shall bear interest from the day after it was due at the maximum rate then
allowed by law, in addition to the late charge provided for in Section 7.08(e).

                (g) Landlord's Right to Perform. Notwithstanding anything to the
contrary set forth elsewhere in this Lease, in the event Tenant fails to perform
any affirmative duty or obligation of Tenant under this Lease, then after
expiration of all applicable notice and cure periods (except without notice in
case of an emergency) Landlord may (but shall not be obligated to) perform such
duty or obligation on Tenant's behalf, including, without limitation, the
obtaining of insurance policies or governmental licenses, permits or approvals.
Tenant shall reimburse Landlord upon demand for the costs and expenses of any
such performance (including penalties, interest and attorneys' fees incurred in
connection therewith). Such costs and expenses incurred by Landlord shall be
deemed Additional Rent hereunder.

                (h) Remedies Cumulative. All rights, privileges and elections or
remedies of Landlord are cumulative and not alternative with all other rights
and remedies at law or in equity to the fullest extent permitted by law.

                (i) Waiver. Tenant waives any right of redemption or relief from
forfeiture under California Code of Civil Procedure Sections 1174 and 1179, or
under any other present or future law in the event Tenant is evicted and
Landlord takes possession of the Leased Premises by reason of a default.


                                   ARTICLE 8.
                                 OPTION TO RENEW

        8.1 OPTION TO RENEW.

                (a) Landlord hereby grants to Tenant one (1) option (the
"Option") to extend the term of this Lease for an additional period of five (5)
years (the "Option Term"), all on the following terms and conditions:


                                       27
<PAGE>   31

                        (1) The Option must be exercised, if at all, by written
notice irrevocably exercising the Option ("Option Notice") delivered by Tenant
to Landlord not later than twelve (12) months prior to the Term Expiration Date.
Further, the Option shall not be deemed to be properly exercised if, as of the
date of the Option Notice or at the Term Expiration Date, (i) Tenant is in
default under this Lease, (ii) Tenant has assigned this Lease or its interest
therein (other than to an affiliate or subsidiary of Tenant), or (iii) Tenant,
or Tenant's affiliate or subsidiary, is in possession of less than fifty percent
(50%) of the square footage of the Leased Premises. Provided Tenant has properly
and timely exercised the Option, the term of this Lease shall be extended for
the period of the Option Term, and all terms, covenants and conditions of this
Lease shall remain unmodified and in full force and effect, except that the Base
Rent shall be modified as set forth in subsection 8.01(a)(2) below.

                        (2) The Base Rent payable for the Option Term shall be
the greater of (i) the Base Rent payable on the Term Expiration Date, or (ii)
the then-current rental rate per rentable square foot (as further defined below,
"FMRR") being agreed to in new leases by the Landlord and other landlords of
buildings in the San Francisco, California area which are comparable in quality,
location and prestige to the Building ("Comparable Buildings") and tenants
leasing space in the Building or Comparable Buildings. As used herein, "FMRR"
shall mean the rental rate per rentable square foot for which Landlord and other
landlords are entering into new leases within the time period of fifteen (15) to
twelve (12) months prior to the Term Expiration Date ("Market Determination
Period"), with new tenants leasing from Landlord and other landlords office
space in the Building and Comparable Buildings ("Comparative Transactions"). To
the extent such other Comparable Buildings have historically received lower or
higher rents from the rents in the Building, then for the purpose of arriving at
the FMRR, such rates when used to establish the FMRR in the Building shall be
increased or decreased as appropriate to reflect such historical differences.
Landlord shall provide its determination of the FMRR to Tenant within twenty
(20) days after Landlord receives the Option Notice. Tenant shall have fifteen
(15) days ("Tenant's Review Period") after receipt of Landlord's notice of the
FMRR within which to accept such FMRR or to reasonably object thereto in
writing. In the event Tenant objects to the FMRR submitted by Landlord, Landlord
and Tenant shall attempt to agree upon such FMRR. If Landlord and Tenant fail to
reach agreement on such FMRR within fifteen (15) days following Tenant's Review
Period (the "Outside Agreement Date"), then each party shall place in a separate
sealed envelope its final proposal as to FMRR and such determination shall be
submitted to arbitration in accordance with subparagraph 8.01(b) below.

                (b) Landlord and Tenant shall meet with each other within five
(5) business days of the Outside Agreement Date and exchange the sealed
envelopes and then open such envelopes in each other's presence. If Landlord and
Tenant do not mutually agree upon the FMRR within one (1) business day of the
exchange and opening of envelopes, then, within ten (10) business days of the
exchange and opening of envelopes, Landlord and Tenant shall agree upon and
jointly appoint one arbitrator who shall be by profession be a real estate
appraiser or broker who shall have been active over the five (5) year period
ending on the date of such appointment in the leasing of comparable commercial
properties in the vicinity of the Building. Neither Landlord nor Tenant shall
consult with such broker or appraiser as to his or her opinion as to FMRR prior
to the appointment. The determination of the arbitrator shall be limited solely
to the issue of whether Landlord's or Tenant's submitted FMRR for the Premises
is the closer to the actual rental rate per rentable square foot for new leases
within the Market Determination Period for Comparative Transactions. Such
arbitrator may hold such hearings and require such briefs as the arbitrator, in
his or her sole discretion, determines is necessary. In addition, Landlord or
Tenant may submit to the arbitrator with a copy to the other party within five
(5) business days after the appointment of the arbitrator any data and
additional information that such party deems relevant to the determination by
the arbitrator ("Data") and the other party may submit a reply in writing within
five (5) business days after receipt of such Data.

                        (1) The arbitrator shall, within thirty (30) days of his
or her appointment, reach a decision as to whether the parties shall use
Landlord's or Tenant's submitted FMRR, and shall notify Landlord and Tenant of
such determination.

                        (2) The decision of the arbitrator shall be binding upon
Landlord and Tenant.


                                       28
<PAGE>   32

                        (3) If Landlord and Tenant fail to agree upon and
appoint such arbitrator, then the appointment of the arbitrator shall be made by
the American Arbitration Association.

                        (4) The cost of arbitration shall be paid by Landlord
and Tenant equally.

                        (5) The arbitration proceeding and all evidence given or
discovered pursuant thereto shall be maintained in confidence by all parties.


                                   ARTICLE 9.
                              MISCELLANEOUS MATTERS

        9.1 PARKING. None.

        9.2 BROKERS. Landlord has been represented in this transaction by
Landlord's Broker. Tenant has been represented in this transaction by Tenant's
Broker. Upon full execution of this Lease by both parties, Landlord shall pay to
Landlord's Broker and Tenant's Broker a fee for brokerage services rendered by
it in this transaction provided for in separate written agreements between
Landlord and Landlord's Broker and Landlord's Broker and Tenant's Broker. Tenant
represents and warrants to Landlord that the brokers named in the Basic Lease
Information sheet are the only agents, brokers, finders or other similar parties
with whom Tenant has had any dealings in connection with the negotiation of this
Lease and the consummation of the transaction contemplated hereby. Tenant hereby
agrees to indemnify, defend and hold Landlord free and harmless from and against
liability for compensation or charges which may be claimed by any agent, broker,
finder or other similar party by reason of any dealings with or actions of
Tenant in connection with the negotiation of this Lease and the consummation of
this transaction, including any costs, expenses and attorneys' fees incurred
with respect thereto.

        9.3 NO WAIVER. No waiver by either party of the default or breach of any
term, covenant or condition of this Lease by the other shall be deemed a waiver
of any other term, covenant or condition hereof, or of any subsequent default or
breach by the other of the same or of any other term, covenant or condition
hereof. Landlord's consent to, or approval of, any act shall not be deemed to
render unnecessary the obtaining of Landlord's consent to, or approval of, any
subsequent or similar act by Tenant, or be construed as the basis of an estoppel
to enforce the provision or provisions of this Lease requiring such consent.
Regardless of Landlord's knowledge of a default or breach at the time of
accepting Rent, the acceptance of Rent by Landlord shall not be a waiver of any
preceding default or breach by Tenant of any provision hereof, other than the
failure of Tenant to pay the particular Rent so accepted. Any payment given
Landlord by Tenant may be accepted by Landlord on account of monies or damages
due Landlord (with the exception of any such amounts in dispute) notwithstanding
any qualifying statements or conditions made by Tenant in connection therewith,
which statements and/or conditions shall be of no force or effect whatsoever
unless specifically agreed to in writing by Landlord at or before the time of
deposit of such payment.

        9.4 RECORDING. Neither this Lease nor a memorandum thereof shall be
recorded without the prior written consent of Landlord, which consent may be
withheld in Landlord's sole discretion.

        9.5 HOLDING OVER. If Tenant holds over after expiration or termination
of this Lease without the written consent of Landlord, Tenant shall pay for each
month of hold-over tenancy 150% of the Gross Rent which Tenant was obligated to
pay for the month immediately preceding the end of the Term for each month or
any part thereof of any such hold-over period, together with such other amounts
as may become due hereunder. Any holding over shall constitute a lease from
month-to-month, terminable upon thirty (30) days' notice from either party on
the terms of this Lease except that monthly rental shall be 150% of the Gross
Rent which Tenant was obligated to pay for the month immediately preceding the
end of the Term, together with such other amounts as may become due hereunder.

        9.6 TRANSFERS BY LANDLORD. The term "Landlord" as used in this Lease
shall mean the owner(s) at


                                       29
<PAGE>   33

the time in question of the fee title to the Leased Premises or, if this is a
sublease, of the Tenant's interest in the master lease. If Landlord transfers,
in whole or in part, its rights and obligations under this Lease or in the
Project, upon its transferee's assumption of Landlord's obligations hereunder
and delivery to such transferee of any unused Security Deposit then held by
Landlord, no further liability or obligations shall thereafter accrue against
the transferring or assigning person as Landlord hereunder. Subject to the
foregoing, the obligations and/or covenants in this Lease to be performed by the
Landlord shall be binding only upon the Landlord as defined in this Section
9.06.

        9.7 ATTORNEYS' FEES. In the event either party places the enforcement of
this Lease, or any part of it, or the collection of any Rent due, or to become
due, hereunder, or recovery of the possession of the Leased Premises, in the
hands of an attorney, or files suit upon the same, the prevailing party shall
recover its reasonable attorneys' fees, costs and expenses, including those
which may be incurred on appeal. Such fees may be awarded in the same suit or
recovered in a separate suit, whether or not suit is filed or any suit that may
be filed is pursued to decision or judgment. The term "prevailing party" shall
include, without limitation, a party who substantially obtains or defeats the
relief sought, as the case may be, whether by compromise, settlement, judgment,
or the abandonment by the other party of its claim or defense. The attorneys'
fee award shall not be computed in accordance with any court fee schedule, but
shall be such as to fully reimburse all attorneys' fees reasonably incurred.

        9.8 TERMINATION; MERGER. No act or conduct of Landlord, including,
without limitation, the acceptance of keys to the Leased Premises, shall
constitute an acceptance of the surrender of the Leased Premises by Tenant
before the scheduled Term Expiration Date. Only a written notice from Landlord
to Tenant shall constitute acceptance of the surrender of the Leased Premises
and accomplish a termination of this Lease. Unless specifically stated otherwise
in writing by Landlord, the voluntary or other surrender of this Lease by
Tenant, the mutual termination or cancellation hereof, or a termination hereof
by Landlord for default by Tenant, shall automatically terminate any sublease or
lesser estate in the Leased Premises; provided, however, Landlord shall, in the
event of any such surrender, termination or cancellation, have the option to
continue any one or all of any existing subtenancies. Landlord's failure within
thirty (30) days following any such event to make any written election to the
contrary by written notice to the holder of any such lesser interest, shall
constitute Landlord's election to have such event constitute the termination of
such interest.

        9.9 AMENDMENTS; INTERPRETATION. This Lease may not be altered, changed
or amended, except by an instrument in writing signed by the parties in interest
at the time of the modification. The captions of this Lease are for convenience
only and shall not be used to define or limit any of its provisions.

        9.10 SEVERABILITY. If any term or provision of this Lease, or the
application thereof to any person or circumstances, shall to any extent be
invalid or unenforceable, the remainder of this Lease, or the application of
such provision to persons or circumstances other than those as to which it is
invalid or unenforceable, shall not be affected thereby, and each provision of
this Lease shall be valid and shall be enforceable to the fullest extent
permitted by law.

        9.11 NOTICES. All notices, demands, consents and approvals which are
required or permitted by this Lease to be given by either party to the other
shall be in writing and shall be deemed to have been fully given by personal
delivery or by recognized overnight courier service or when deposited in the
United States mail, certified or registered, with postage prepaid, and addressed
to the party to be notified at the address for such party specified on the Basic
Lease Information sheet, or to such other place as the party to be notified may
from time to time designate by at least fifteen (15) days' notice to the
notifying party given in accordance with this Section 9.11, except that upon
Tenant's taking possession of the Leased Premises, the Leased Premises shall
constitute Tenant's address for notice purposes. A copy of all notices given to
Landlord under this Lease shall be concurrently transmitted to such party or
parties at such addresses as Landlord may from time to time hereafter designate
by notice to Tenant.

        Any notice sent by registered or certified mail, return receipt
requested, shall be deemed given on the date of delivery shown on the receipt
card, or if no delivery date is shown, the postmark thereon. Notices delivered
by nationally recognized overnight courier shall be deemed given twenty-four
(24) hours


                                       30
<PAGE>   34

after delivery of the same to the courier. If notice is received on a Saturday,
Sunday or legal holiday, it shall be deemed received on the next business day.
Tenant hereby appoints as its agent to receive the service of all default
notices and notice of commencement of unlawful detainer proceedings the person
in charge of or apparently in charge of or occupying the Leased Premises at the
time, and, if there is no such person, then such service may be made by
attaching the same on the main entrance of the Leased Premises.

        9.12 FORCE MAJEURE. Any prevention, delay or stoppage of work to be
performed by Landlord or Tenant which is due to strikes, labor disputes,
inability to obtain labor, materials, equipment or reasonable substitutes
therefor, acts of God, governmental restrictions or regulations or controls,
judicial orders, enemy or hostile government actions, civil commotion, or other
causes beyond the reasonable control of the party obligated to perform
hereunder, shall excuse performance of the work by that party for a period equal
to the duration of that prevention, delay or stoppage. Nothing in this Section
9.12 shall excuse or delay Tenant's obligation to pay Rent or other charges due
under this Lease.

        9.13 GUARANTOR. If there are to be any guarantors of this Lease, the
guarantee shall be on a form provided by Landlord, and each such guarantor shall
have the same obligations as Tenant under this Lease, including, but not limited
to, the obligation to provide the estoppel certificate and information called
for by Section 5.13. It shall constitute a default of Tenant under this Lease if
any such guarantor fails or refuses, upon reasonable request by Landlord, to
give: (a) evidence of the due execution of the guarantee called for by this
Lease, including the authority of the guarantor (and of the party signing on
guarantor's behalf) to obligate such guarantor on said guarantee, and including,
in the case of a corporate guarantor, a certified copy of a resolution of the
board of directors of guarantor authorizing the making of such guarantee,
together with a certificate of incumbency showing the signatures of the persons
authorized to sign on its behalf; (b) current financial statements of guarantor
as may, from time to time, be requested by Landlord; (c) an estoppel
certificate; or (d) written confirmation that the guarantee is still in effect.

        9.14 SUCCESSORS AND ASSIGNS. This Lease shall be binding upon and inure
to the benefit of Landlord, its successors and assigns (subject to the
provisions hereof, including, without limitation, Section 5.15), and shall be
binding upon and inure to the benefit of Tenant, its successors, and to the
extent assignment or subletting, may be approved or deemed approved by Landlord
hereunder, Tenant's assigns or subtenants.

        9.15 FURTHER ASSURANCES. Landlord and Tenant each agree to promptly sign
all documents reasonably requested to give effect to the provisions of this
Lease.

        9.16 INCORPORATION OF PRIOR AGREEMENTS. This Lease, including the
exhibits and addenda attached to it, contains all agreements of Landlord and
Tenant with respect to any matter referred to herein. No prior agreement or
understanding pertaining to such matters shall be effective.

        9.17 APPLICABLE LAW. This Lease shall be governed by, construed and
enforced in accordance with the laws of the State of California.

        9.18 TIME OF THE ESSENCE. Time is of the essence of each and every
covenant of this Lease. Each and every covenant, agreement or other provision of
this Lease on Tenant's part to be performed shall be deemed and construed as a
separate and independent covenant of Tenant, not dependent on any other
provision of this Lease or on any other covenant or agreement set forth herein.

        9.19 NO JOINT VENTURE. This Lease shall not be deemed or construed to
create or establish any relationship of partnership or joint venture or similar
relationship or arrangement between Landlord and Tenant hereunder.

        9.20 AUTHORITY. If Tenant is a corporation, trust or general or limited
partnership, each individual executing this Lease on behalf of Tenant represents
and warrants that he or she is duly authorized to execute and deliver this Lease
on Tenant's behalf and that this Lease is binding upon Tenant in accordance with
its terms. If Tenant is a corporation, trust or partnership, Tenant shall,
within ten (10) business days after


                                       31
<PAGE>   35

request by Landlord, deliver to Landlord evidence satisfactory to Landlord of
such authority.

        9.21 [intentionally deleted].

        9.22 OFFER. Preparation of this Lease by Landlord or Landlord's agent
and submission of same to Tenant shall not be deemed an offer to lease to
Tenant. This Lease is not intended to be binding and shall not be effective
until fully executed by both Landlord and Tenant.

     [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE TO FOLLOW.]


                                       32
<PAGE>   36

        9.23 EXHIBITS; ADDENDA. The following Exhibits and addenda are attached
to, incorporated in and made a part of this Lease: EXHIBIT A Floor Plan of the
Leased Premises; EXHIBIT B Initial Improvement of the Leased Premises; EXHIBIT C
Confirmation of Term of Lease; EXHIBIT D Building Rules and Regulations; and
EXHIBIT E Form of Fleet National Bank's Lease Subordination, Non-Disturbance and
Attornment Agreement.

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

                                     "LANDLORD":

                                     CEP INVESTORS XII LLC,
                                     a Delaware limited liability company

                                     By: EPI Investors XII LLC,
                                         a California limited liability company
                                         Its Manager

                                         By: Ellis Partners, Inc.,
                                             a California corporation
                                             Its Manager


                                             By:  /s/ JAMES F. ELLIS
                                                -------------------------
                                             Typed Name:  James F. Ellis
                                                        -----------------
                                             Title:
                                                   ----------------------


                                     "TENANT":

                                     FORT POINT PARTNERS, INC.,
                                     a California corporation


                                     By:  /s/ MATTHEW ROCHE
                                        ---------------------------------
                                     Typed Name:  Matthew Roche
                                                -------------------------
                                     Title:  President
                                           ------------------------------



                                     By:  /s/  JAMES T. ROCHE
                                        ---------------------------------
                                     Typed Name:  James Roche
                                                -------------------------
                                     Title:   CEO
                                           ------------------------------


                                       33
<PAGE>   37

                                    EXHIBIT A

                                   FLOOR PLAN
                                     OF THE
                                 LEASED PREMISES


                                       1

<PAGE>   38

                                    EXHIBIT B

                   INITIAL IMPROVEMENT OF THE LEASED PREMISES


        1. Tenant Improvements and Landlord Improvements. Landlord shall cause
Pankow Builders (the "Contractor") to construct and install the Tenant
Improvements (as defined below) and the Landlord Improvements (as defined
below). The Contractor shall construct and install the tenant improvements (the
"Tenant Improvements") in the Leased Premises, substantially in accordance with
plans, working drawings and specifications ("Tenant's Plans") prepared by
Landlord's architects and electrical, structural, mechanical, HVAC and other
engineers and consultants and approved by Landlord and Tenant, which approval
shall not be unreasonably withheld, conditioned or delayed by either party. The
contract between Landlord and Landlord's architect shall be subject to Tenant's
approval, which approval shall not be unreasonably withheld. The costs of
preparing Tenant's Plans and performing the Tenant Improvements shall be
allocated between, and paid by, Landlord and Tenant as set forth in this EXHIBIT
B.

                (a) Landlord shall enter into a construction contract with
Contractor for the construction of the Tenant Improvements in accordance with
Tenant's Plans. The construction contract shall be in a form and shall contain
such terms and conditions as may be approved by Tenant, which approval shall not
be unreasonably withheld. Tenant shall have three (3) days to review the first
draft of the proposed construction contract and two (2) business days to respond
to any revision of the construction contract thereafter. The construction
contract shall provide that Tenant is a third party beneficiary of the contract
and shall be entitled to enforce all warranties directly against the Contractor.
The construction contract shall also provide that the work to be performed shall
be performed for cost plus a fixed fee of fifteen percent (15%) (which fee shall
include the Contractor's overhead, general conditions and profit) to a
guaranteed maximum price with all savings to accrue to the Tenant. The
guaranteed price may include a contingency of up to five percent (5%) of the
total amount of bids received from subcontractors and materialmen for the work
and the use of such contingency shall require the consent of the Tenant. Any
unused contingency shall be credited to Tenant. The construction contract shall
include allowances only for those items for which Tenant approves allowances,
which approval shall not be unreasonably withheld. The Contractor shall be
responsible for any costs due to its negligence or breach and for overtime
required to complete the work (unless approved by Tenant) on time and for any
changes due to governmental or other requirements which are not properly
addressed or included in the Tenant's Plans.

                (b) Landlord shall require Contractor to competitively bid major
subcontracts and materials purchases. With the exception of mechanical,
electrical and fire safety subcontractors (whose charges shall not exceed those
generally charged in other similar buildings in the vicinity for tenant
improvement projects of the sort described in the Tenant's Plans), at least
three bids shall be secured for each subcontract and material contract. All bids
shall be on a fixed price basis. Tenant shall have the right to select which of
the bids will be acceptable.

                (c) Landlord shall supervise the completion of the Tenant
Improvements in accordance with Tenant's Plans and shall use best efforts to
secure Substantial Completion of such work by October 15, 1999, as to the 20th
floor, and by December 1, 1999, as to the balance of the Leased Premises.
Landlord and Tenant acknowledge that completion of the 20th floor by October 15,
1999 may require overtime and Tenant will not unreasonably withhold its approval
for use of overtime labor.

        2. Tenant's Plans. Tenant and Landlord shall mutually approve Tenant's
Plans in writing, each party's approval shall not be unreasonably withheld. When
the Tenant's Plans are completed, they shall be submitted to Tenant for review
together with a preliminary estimate of costs prepared by Contractor broken down
by category and trade, so that Tenant may review the Tenant's Plans and make
reasonable decisions concerning costs. Tenant's Plans shall also be submitted by
Landlord to the appropriate governmental body for plan checking and a building
permit. Landlord shall, at Landlord's sole cost and expense, make any changes to
Tenant's Plans required to obtain a building permit. Tenant shall have ten (10)
days from its receipt of Tenant's Plans and preliminary cost estimates to
approve or disapprove Tenant's Plans in writing. If


                                       1
<PAGE>   39

Tenant disapproves Tenant's Plans, Landlord shall cause Tenant's Plans to be
revised and new preliminary estimates of costs to be prepared to reflect the
changes requested by Tenant and revised Tenant's Plans and revised preliminary
cost estimates shall be submitted to Tenant for its approval or disapproval. The
process of review, revision and submission to Tenant for approval or disapproval
shall be continued until Tenant's Plans and the preliminary costs are approved
by Landlord and Tenant. Tenant shall be deemed to have disapproved Tenant's
Plans if Tenant fails to reply within such ten-day period, but such failure to
reply shall constitute a Tenant Delay. Landlord shall use commercially
reasonable efforts to ensure that the Tenant's Plans comply with all applicable
codes, laws, ordinances, rules and regulations, not adversely affect the
Building shell or core or any systems, components or elements of the Building,
are in a form sufficient to secure the approval of all government authorities
with jurisdiction over the Building, and are otherwise satisfactory to Landlord
and Tenant in their reasonable discretion. Tenant's Plans shall be complete
plans, working drawings and specifications for the layout, improvement and
finish of the Leased Premises consistent with the construction of the Building,
including mechanical and electrical drawings and decorating plans, showing at a
minimum, all of the following:

                (1) Location and type of all partitions;

                (2) Location and type of all doors, with hardware and keying
schedule;

                (3) Ceiling plans, including light fixtures;

                (4) Location of telephone equipment room, with all special
electrical and cooling requirements;

                (5) Location and type of all electrical outlets, switches,
telephone outlets, and lights;

                (6) Location of all sprinklers (on a design build basis or in
consultation with a sprinkler engineer);

                (7) Location and type of all equipment requiring special
electrical requirements;

                (8) Location, weight per square foot and description of any
heavy equipment or filing system exceeding fifty (50) pounds per square foot
live and dead load;

                (9) Requirements for air conditioning or special ventilation;

                (10) Location, type and color of floor covering;

                (11) Location, type and color of wall covering;

                (12) Location, type and color of paint or finishes;

                (13) Location and type of plumbing;

                (14) Location, brands, model numbers and type of kitchen
equipment;

                (15) Indicate critical dimensions necessary for construction;

                (16) Details showing all millwork with verified dimensions and
dimensions of all equipment to be built in, corridor entrances, bracing or
support of special walls or glass partitions, and any other items or information
requested by Landlord;

                (17) Location of all cabling; and

                (18) Location and design of Tenant's server room and battery
back-up system and other


                                       2
<PAGE>   40

systems and all special electrical and heating and ventilation requirements.

        3. Landlord's review and approval of Tenant's Plans shall not
constitute, and Landlord shall not be deemed to have made, any representation or
warranty as to the suitability of the Leased Premises or the Tenant Improvements
for Tenant's needs, except as expressly provided in this Lease.

        4. Construction.

                (a) The Tenant Improvements and the Landlord Improvements in the
Leased Premises and in the Building shall be diligently completed substantially
in accordance with Tenant's Plans by the Contractor in a good and workmanlike
manner. Notwithstanding anything in the Lease to the contrary, "Substantial
Completion" of the Tenant Improvements on any floor shall not be deemed to have
occurred until Tenant's receipt of a factually correct notice from Landlord's
architect certifying to Tenant that each of the following is true and correct:
(a) the Tenant Improvements on the floor in question are substantially complete
except for minor details which will not adversely affect Tenant's ability to
conduct its business operations on such floor; (b) Landlord's Improvements on or
affecting the floor in question have been substantially completed; and (c) all
mechanical and electrical systems serving the floor in question are functioning
in a normal manner, consistent with their design. Landlord shall have no
liability to Tenant if the Leased Premises is not suitable for Tenant's
occupancy or if Tenant or Landlord has not obtained all the necessary permits
for Tenant to occupy the Leased Premises by October 15, 1999, as to the 20th
floor, and by December 1, 1999, as to the balance of the Leased Premises.

                (b) Landlord, at its sole cost and expense, shall provide or
construct the following (collectively, "Landlord's Improvements") in the Leased
Premises and the Building (if applicable), in accordance with all applicable
laws, rules, codes and ordinances, including without limitation, the Americans
with Disabilities Act, the disability access requirements of California Title
24, and building codes:

                        (i) Floor Coverings: All existing floor coverings shall
be removed.

                        (ii) Elevator: The elevator systems serving, and the
elevator lobbies located on, the 20th, 21st and 22nd floors shall be restored
and refurbished using first-class materials, including, without limitation,
incandescent lighting and carpeting or high-quality tiling and wood paneling.

                        (iii) Partitions/Ceilings: All existing partitions shall
be demolished.

                        (iv) Sprinkler System: Landlord shall provide the tap
into the main sprinkler riser and install the main sprinkler loop around the
core area of the Leased Premises in compliance with all requirements of Section
403.24.1, et. seq., of the San Francisco Building Code as the same exist as of
the date of this Lease regardless of when such requirements will become
effective, including the installation of sprinkler drops and heads.

                        (v) Life Safety Systems: Landlord shall provide Class
"E" and strobe panels with adequate connection points on the floors of the
Leased Premises for code-required speaker and strobe lights as well as flow and
tamper switches for the sprinkler systems, in accordance with existing code. The
panels are to be installed in proximity to the Leased Premises. Landlord shall
provide life safety systems in all common areas on the floors of the Leased
Premises, if any, in accordance with all applicable laws, codes and ordinances,
including, without limitation, ADA compliant strobe/horn units ad addressable
manual pull stations at all exits, exit stairways, and in common area corridors
of the floors of the Leased Premises, if any. Landlord shall supply the capacity
to the base building fire alarm system to add all tenant fire alarm devices
required by all applicable laws, codes and ordinances in the Leased Premises.
The point of connection shall for such wiring shall be a junction box in the
base building electrical room of each floor. Landlord shall provide a power
supply connected to the base building fire alarm system to power ADA-compliant
strobe lights required by code in the Leased Premises. The power supply shall
provide four outputs of 1.5 amps maximum each or 4 amps maximum total.

                        (vi) Bathrooms and Common Corridors: All restrooms (one
for each sex on each


                                       3
<PAGE>   41

floor) on the floors of the Leased Premises shall be brought to meet all local
codes, as well as ADA. Cosmetically, Landlord shall refurbish the restrooms in a
manner consistent with a Class "A" San Francisco office tower including, without
limitation, ceramic floor and wall tiles (up to ceiling), new fixtures similar
in style to those found in other restrooms in the Building. Landlord shall also
correct all existing code violations, if any, in the common areas on the floors
of the Leased Premises, if any.

                        (vii) Electrical Load Requirements: Landlord shall
provide an average of 6.5 watts per usable square foot of the Leased Premises
(1.5 watts of the 6.5 watts shall be for lighting), peak demand load, of
electrical power per floor stubbed to electrical closets on each floor of the
Leased Premises each located at either end of the core area of the Leased
Premises. Notwithstanding the foregoing, Tenant may use more electrical power as
long as Tenant's use does not adversely affect any other Tenant of the Building.

                        (viii) Telephone Requirements: Landlord shall provide to
Tenant 200 pairs of copper phone wire per floor stubbed to the telephone closet
(with capacity to add fiber optic cable) of each floor located at the core area
of the Leased Premises.

                        (ix) Condenser Water Loop: Landlord shall provide a
condenser water loop stubbed to each of the floors of the Leased Premises for
access to condensed water for Tenant's air conditioning needs (however, Tenant,
at its sole cost, shall be responsible for the installation, operation and
maintenance of such air conditioning units).

                        (x) Exterior: Complete weather-tight exterior.

                        (xi) Heating and Ventilating Control System: Any
Building management system for control of the heating and ventilating system as
may be required by the Landlord.

                        (xii) Security System: Any security systems required by
the Landlord.

                        (xiii) Structural: A structural system in compliance
with all seismic and other codes.

                        (xiv) Asbestos Abatement: Removal (if accessible) or
encapsulation of all asbestos containing materials located in the Leased
Premises.

        5. Landlord's and Tenant's Contributions. Landlord shall give Tenant an
allowance in the maximum amount of (i) $30.00 per square foot of Rentable Area
as to the 20th floor ($285,420 based upon 9,514 rentable square feet), (ii)
$30.00 per square foot of Rentable Area as to the 21st floor ($286,830 based
upon 9,561 rentable square feet), and (iii) $38.00 per square foot of Rentable
Area as to the 22nd floor ($335,312 based upon 8,824 rentable square feet),
which equals $907,562.00 ("Landlord's Contribution"). A maximum of $2.00 per
square foot of Rentable Area may be used by Tenant towards communications
equipment and cabling. Landlord shall pay Landlord's Contribution directly to
Landlord's architects and engineers and to the Contractor for the account of
Tenant, in installments as professional services for Tenant's Plans are
rendered, and Tenant Improvements are completed, upon Landlord's receipt of a
written request for payment accompanied by written invoices and other written
evidence reasonably satisfactory to Landlord showing the costs incurred, until
Landlord's Contribution is exhausted. Tenant shall pay to Landlord (or Landlord
may deduct from Landlord's Contribution), a construction management fee of $1.00
per square foot of rentable Area, which equals $27,899.00, based upon 27,899
rentable square feet (the "Construction Management Fee").

                (a) If the Improvement Costs (as defined below) for which Tenant
is responsible are reasonably estimated to exceed Landlord's Contribution, then
Tenant shall contribute, within ten (10) days after request from the Landlord
its share of each progress payment or other Improvement Cost paid by Landlord
which share shall be the percentage derived by dividing the amount by which the
Improvement Costs, in excess of Landlord's Contribution, for which Tenant is
responsible by the total Improvement Costs.


                                       4
<PAGE>   42

When the work in the Leased Premises is completed, then Landlord shall, as soon
as reasonably practicable, furnish Tenant with an accounting of all Improvement
Costs and Tenant's share of such costs for Tenant's approval, which approval
shall not be unreasonably withheld or delayed (in no event shall Tenant's
approval take longer than ten (10) days). Any amounts owing to either party
shall be settled in cash within ten (10) days after the accounting has been
approved by Tenant. If Landlord's Contribution is not expended for the Tenant
Improvements within three months after substantial completion of the Tenant
Improvements, then the amount not expended shall be given to Tenant as a credit
against Base Rent next coming due under the Lease.

                (b) Landlord's Contribution shall be expended only for
"Improvement Costs", which shall consist only of the following to the extent
expended for Tenant Improvements (and the preparation of Tenant's Plans):

                        (i) all amounts paid to the Contractor, pursuant to
Landlord's general construction contract therewith, for costs of the work,
subject to the guaranteed maximum price in the general contract;

                        (ii) all costs paid to the Contractor with respect to
any changes which have been requested by Tenant and which are not required as a
result of any errors or omissions by Landlord;

                        (iii) fees, charges, and levies by any governmental
agencies for authorizations, licenses, and permits required in connection with
the Tenant Improvements;

                        (iv) all utility connection charges and payments;

                        (v) sales and use taxes;

                        (vi) testing and inspection costs;

                        (vii) costs paid to contractors installing Tenant's
cabling, telephone, furniture systems and other work designated by Tenant or to
other contractors which Landlord and Landlord agree shall perform any work of
improvement at the Leased Premises;

                        (viii) all reasonable amounts paid to Landlord's
architects and to prepare Tenant's Plans, but excluding any changes thereto
which are required as a result of any errors or omissions by Landlord; and

                        (ix) the Construction Management Fee.

                (c) All costs other than Improvement Costs which are incurred by
Landlord in connection with the design and construction of work in the Leased
Premises or the Building shall be borne by Landlord, which excluded items shall
include, without limitation, the following:

                        (i) all costs to complete Landlord's Improvements and
the Building core and shell including, without limitation, all costs of plans,
permits and engineering associated therewith;

                        (ii) costs for any improvements which are not described
in the final Tenant's Plans;

                        (iii) accountants' fees and attorneys' fees incurred by
Landlord;

                        (iv) other than as agreed to by Tenant in the guaranteed
maximum price contract or an approved change order, costs for overtime labor in
excess of any reasonable amount provided for in the general contract or any
subcontract or material supply contract if not previously approved by Tenant;

                        (v) except to the extent caused by Tenant delays, costs
incurred as a


                                       5
<PAGE>   43

consequence of delay, errors or omissions, or construction defects caused by
Landlord;

                        (vi) the costs of correcting or replacing any work for
which monies are payable under any warranty or insurance; and

                        (vii) charges for the use of elevators, hoists, parking
or other Building facilities, services or equipment during construction.

        6. Changes. Except for minor and immaterial changes, if Tenant requests
any change in Tenant's Plans, Tenant shall request such change in a written
notice to Landlord. Any such Tenant requested change ("Change Request") in
materials or change in specifications in the Tenant's Plans after the approval
thereof by Landlord and Tenant, shall be made only after the approval of
Landlord which shall not be unreasonably withheld, conditioned or delayed. No
Change Request shall be incorporated into the Tenant's Improvements unless
Landlord has submitted an estimate to Tenant in writing of the increased cost
thereof, and Landlord and Tenant have agreed in writing on such Change Request
in excess of such item which would have been provided in accordance with
Tenant's Plans. If Tenant approves such estimate it shall notify Landlord in
writing within seven (7) days and the Contractor shall process such work. If
Tenant shall fail to timely approve such estimate, such failure shall be deemed
a disapproval and the Contractor shall proceed with the work as set forth in
Tenant's Plans. Savings resulting from any Change Request incorporated into the
Tenant Improvements shall reduce the guaranteed maximum price. The net
additional cost any Change Request incorporated into the Tenant Improvements
shall increase the guaranteed price and shall be an Improvement Cost.

        7. Other Work by Tenant. The furnishing and installing of furniture,
telephone equipment (excluding wiring and cabling to the extent a part of the
Landlord's Improvements), office equipment and wiring, shall be furnished and
installed by Tenant at Tenant's expense. Subject to the provisions of the Lease
and subject to the approval of the Contractor, Tenant shall have the right to
install computer cabling, telephone cabling and other telecommunications cabling
and equipment during construction of the Tenant Improvements so that they are
integrated with the Tenant Improvements. Subject to the provisions of the Lease
and subject to the approval of the Contractor, Tenant shall also have the right
to have its equipment and furniture systems installed during continuation of the
work on the Tenant Improvements so that they are integrated with the other work
being performed on the Leased Premises. Landlord shall make reasonable efforts
to accommodate such work by Tenant and shall keep Tenant informed of scheduling
and other information reasonably required so that Tenant may schedule such work
and its move into the Leased Premises.

        8. Requirements for Other Work Performed by Tenant. All other work
performed at the Building or in the Project by Tenant or Tenant's contractor or
subcontractors shall be subject to the following additional requirements:

                (a) Such work shall not proceed until Landlord has reasonably
approved in writing: (i) Tenant's contractor, (ii) the amount and coverage of
public liability and property damage insurance, with Landlord named as an
additional insured, carried by Tenant's contractor, (iii) complete and detailed
plans and specifications for such work, and (iv) a schedule for the work.
Landlord shall provide its approval or disapproval (and specifying the reasons
for any disapproval) within two (2) business days after request by Tenant. If
Landlord fails to respond to any request within such two-day period, Landlord
shall be deemed to have disapproved such requested matters.

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

                (c) Tenant or Tenant's contractor shall arrange for necessary
utility, hoisting and freight elevator service, on a nonexclusive basis, with
Landlord for which Landlord shall not charge Tenant. Landlord


                                       6
<PAGE>   44

shall have the right to require any necessary movement of large, heavy or bulky
materials requiring the use of a freight elevator to be done after regular
working hours.

                (d) Tenant shall be responsible for cleaning the Leased
Premises, the Building and the Project and removing all debris in connection
with work by Tenant or its contractors. All completed work shall be subject to
inspection and acceptance by Landlord. Tenant shall reimburse Landlord for the
cost all extra reasonable expense incurred by Landlord by reason of faulty work
done by Tenant or Tenant's contractor or by reason of inadequate cleanup by
Tenant or Tenant's contractor. Landlord will provide Tenant with copies of third
party consultant invoices within five (5) business days of Tenant's request for
such invoices.

        9. Tenant Delay. If the completion of the Tenant Improvements is delayed
(i) at the written request of Tenant, (ii) by Tenant's failure to comply with
the foregoing provisions (including failure to pay any sums payable by Tenant
within the time periods specified herein), (iii) by changes in the Tenant's
Plans ordered by Tenant or by extra work ordered by Tenant, (iv) because Tenant
chooses to have additional work performed by Landlord, or (v) because of any
other act or omission of Tenant (collectively, "Tenant Delay"), then Tenant
shall be responsible for all costs and any expenses occasioned by such Tenant
Delay including, without limitation, any costs and expenses attributable to
increases in labor or materials. Notwithstanding the foregoing, and except as
provided for in paragraph 2 above, no Tenant Delay shall be deemed to have
occurred unless and until Landlord has provided notice to Tenant, in compliance
with the Lease, specifying the action or inaction by Tenant which Landlord
contends constitutes a Tenant Delay. If such action or inaction is not cured by
Tenant within one (1) business day after receipt of such notice and if such
action actually causes a delay in the Substantial Completion of the work in the
Leased Premises, then a Tenant Delay, as set forth in such notice, shall be
deemed to have occurred commencing as of the second (2nd) business day following
receipt of such notice and continuing for the number of days Landlord was in
fact delayed in the Substantial Completion of the Tenant Improvements in the
Leased Premises. If a Tenant Delay actually causes the delay of Substantial
Completion and the Term Commencement Date, then Tenant shall pay Lessor the Base
Rent for the portion of the Leased Premises affected for the entire period of
such delay.

        10. Punch List. Substantial Completion shall be October 15, 1999 for the
20th floor and December 1, 1999 for the 21st and 22nd floors unless Landlord
provides Tenant with a written notice that Substantial Completion of the Tenant
Improvements will be a later date. Except as otherwise specified by Tenant in
the punch list described, and except for latent defects, Tenant shall be deemed
to have accepted the Leased Premises upon Substantial Completion. If Tenant
discovers minor deviations or variations from the plans and specifications for
Tenant's improvements which do not materially and adversely affect Tenant's use
of the Leased Premises and are of a nature commonly found on a "punch list" (as
that term is used in the construction industry), Tenant shall, within fifteen
(15) days of Substantial Completion, notify Landlord in writing ("Punch List")
of such deviations. Landlord shall promptly repair all Punch List items. The
existence of such Punch List items, and Landlord's correction and repair of the
same, shall not postpone the Term Commencement Date or Tenant's obligation to
pay Rent. All Punch List items shall be completed as soon as reasonably
practicable, but not later than thirty (30) days after the Punch List is given
to the Landlord by the Tenant.


                                       7
<PAGE>   45

                                    EXHIBIT C

                          CONFIRMATION OF TERM OF LEASE


        This Confirmation of Term of Lease is made by and between _____, a
_____, as Landlord, and _____, a _____, as Tenant, who agree as follows:

        1. Landlord and Tenant entered into a Lease dated ____________________,
19_____ (the "Lease"), in which Landlord leased to Tenant and Tenant leased from
Landlord the Leased Premises described in the Basic Lease Information sheet of
the Lease (the "Leased Premises").

        2. Pursuant to Section 3.01 of the Lease, Landlord and Tenant agree to
confirm the commencement date and expiration date of the Term of the Lease as
follows:

                a. _________________________, 19_____, is the Term Commencement
                   Date;

                b. _________________________, 19_____, is the Term Expiration
                   Date;

                c. _________________________, 19_____, is the commencement date
                   of Rent under the Lease.

        3. Tenant hereby confirms that the Lease is in full force and effect
and:

                a. It has accepted possession of the Leased Premises as provided
                   in the Lease;

                b. The improvements and space required to be furnished by
                   Landlord under the Lease have been furnished;

                c. Landlord has fulfilled all its duties of an inducement
                   nature;

                d. The Lease has not been modified, altered or amended, except
                   as follows:__________________________________________________
                   _____; and

                e. There are no setoffs or credits against Rent and no security
                   deposit has been paid except as expressly provided by the
                   Lease.


     [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE TO FOLLOW.]


                                       1

<PAGE>   46

        4. The provisions of this Confirmation of Term of Lease shall inure to
the benefit of, or bind, as the case may require, the parties and their
respective successors, subject to the restrictions on assignment and subleasing
contained in the Lease.

        DATED: _________________________, 19_____


"LANDLORD":                                      "TENANT":

CEP INVESTORS XII LLC,                           FORT POINT PARTNERS, INC.,
a Delaware limited liability company             a California corporation

By: EPI Investors XII LLC,                       By:____________________________
    a California limited liability company
    Its Manager                                  Typed Name:____________________

                                                 Title:_________________________

    By: Ellis Partners, Inc.,
        a California corporation,
        Its Manager


        By:______________________________

        Typed Name:______________________

        Title:___________________________



                                       2

<PAGE>   47

                                    EXHIBIT D
                         BUILDING RULES AND REGULATIONS

        1. The sidewalks, doorways, halls, stairways, vestibules and other
similar areas shall not be obstructed by Tenant or used by it for any purpose
other than ingress to and egress from the Leased Premises, and for going from
one part of the Building to another part. Corridor doors, when not in use, shall
be kept closed. Before leaving the Building, Tenant shall ensure that all doors
to the Leased Premises are securely locked and all water faucets and electricity
are shut off.

        2. Plumbing fixtures shall be used only for their designated purpose,
and no foreign substances of any kind shall be deposited therein. Damage to any
such fixtures resulting from misuse by Tenant or any employee or invitee of
Tenant shall be repaired at the expense of Tenant.

        3. Nails, screws and other attachments to the Building require prior
written consent from Landlord, except for the routine hanging of pictures and
diplomas or certifications. Tenant shall not mar or deface the Leased Premises
in any way. Tenant shall not place anything on or near the glass of any window,
door or wall which may appear unsightly from outside the Leased Premises.

        4. All contractors and technicians rendering any installation service to
Tenant shall be subject to Landlord's approval and supervision prior to
performing services. This applies to all work performed in the Building,
including, but not limited to, installation of telephones, telegraph equipment,
wiring of any kind, and electrical devices, as well as all installations
affecting floors, walls, woodwork, windows, ceilings and any other physical
portion of the Building.

        5. Movement in or out of the Building of furniture, office equipment,
safes or other bulky material which requires the use of elevators, stairways, or
the Building entrance and lobby shall be restricted to hours established by
Landlord. All such movement shall be under Landlord's supervision, and the use
of an elevator for such movements shall be restricted to the Building's freight
elevator. Arrangements shall be made at least 24 hours in advance with Landlord
regarding the time, method, and routing of such movements. Tenant shall pay for
the services of the employees of the elevator service company employed when
safes and other heavy articles are moved into or from the Building, and Tenant
shall assume all risks of damage and pay the cost of repairing or providing
compensation for damage to the Building, to articles moved and injury to persons
or property resulting from such moves. Landlord shall not be liable for any acts
or damages resulting from any such activity.

        6. Landlord shall have the right to limit the weight and size of, and to
designate the location of, all safes and other heavy property brought into the
Building.

        7. Tenant shall cooperate with Landlord in maintaining the Leased
Premises. Tenant shall not employ any person for the purpose of cleaning the
Leased Premises other than the Building's cleaning and maintenance personnel.
Window cleaning shall be done only by Landlord's agents at such times and during
such hours as Landlord shall elect. Janitorial services will not be furnished on
nights when rooms are occupied after 7:00 P.M.

        8. Deliveries of water, soft drinks, newspapers or other such items to
the Leased Premises shall be restricted to hours established by Landlord and
made by use of the freight elevator if Landlord so directs.

        9. Nothing shall be swept or thrown into the corridors, halls, elevator
shafts or stairways. No birds, fish or animals of any kind shall be brought into
or kept in, on or about the Leased Premises, with the exception of guide dogs
where necessary.

        10. No cooking shall be done in the Leased Premises except in connection
with a convenience lunch room for the sole use of employees and guests (on a
non-commercial basis) in a manner which complies with all of the provisions of
the Lease and which does not produce fumes or odors.


                                       2
<PAGE>   48

        11. Food, soft drink or other vending machines shall not be placed
within the Leased Premises without Landlord's prior written consent.

        12. Tenant shall not install or operate on the Leased Premises any
electric heater, stove or similar equipment without Landlord's prior written
consent. Tenant shall not use or keep on the Leased Premises any kerosene,
gasoline, or inflammable or combustible fluid or material other than limited
quantities reasonably necessary for the operation and maintenance of office
equipment utilized at the Leased Premises. No explosives shall be brought onto
the Project at any time.

        13. Tenant shall not waste electricity or water and agrees to cooperate
fully with Landlord to assure the most effective operation of the Building's
heating and to comply with any governmental energy-saving rules, laws or
regulations of which Tenant has actual notice.

        14. [Intentionally deleted]

        15. Tenant, its employees, agents and invitees shall each comply with
all requirements necessary for the security of the Leased Premises, including,
if implemented by Landlord, the use of service passes issued by Landlord for
after-hours movement of office equipment/packages, and the signing of a security
register in the Building lobby after hours. Landlord reserves the right to
refuse entry to the Building after normal business hours to Tenant, its
employees, agents or invitees, or any other person without satisfactory
identification showing his or her right of access to the Building at such time.
Landlord shall not be liable for any damages resulting from any error in regard
to any such identification or from such admission to or exclusion from the
Building. Landlord shall not be liable to Tenant for losses due to theft or
burglary, or for damage by unauthorized persons in, on or about the Project, and
Tenant assumes full responsibility for protecting the Leased Premises from
theft, robbery and pilferage, which includes keeping doors locked and other
means of entry closed.

        16. Landlord will furnish Tenant with a reasonable number of initial
keys for entrance doors into the Leased Premises, and may charge Tenant for
additional keys thereafter. All such keys shall remain the property of Landlord.
No additional locks are allowed on any door of the Leased Premises without
Landlord's prior written consent and Tenant shall not make any duplicate keys.
Upon termination of this Lease, Tenant shall surrender to Landlord all keys to
the Leased Premises, and give to Landlord the combination of all locks for safes
and vault doors, if any, in the Leased Premises.

        17. Tenant shall not bring into (or permit to be brought into) the
Building any bicycle or other type of vehicle.

        18. Landlord retains the right at any time, without liability to Tenant,
to change the name and street address of the Building, except as otherwise
expressly provided in the Lease with respect to signage.

        19. Canvassing, peddling, soliciting, and distribution of handbills in
or at the Project are prohibited and Tenant will cooperate to prevent these
activities.

        20. The Building hours of operation are 7:00 A.M. to 6:00 P.M., Monday
through Friday, excluding holidays. Landlord reserves the right to close and
keep locked all entrance and exit doors of the Building on Saturdays, Sundays
and legal holidays, and between the hours of 6:01 P.M. of any day and 6:59 A.M.
of the following day, and during such other hours as Landlord may deem advisable
for the protection of the Building and the tenants thereof.

        21. The requirements of Tenant will be attended to only upon application
to the Project manager. Employees will not perform any work or do anything
outside of their regular duties unless under specific instruction from the
Project manager.

        22. Tenant shall cooperate fully with the life safety program of the
Building as established and administered by Landlord. This shall include
participation by Tenant and its employees in exit drills, fire inspections, life
safety orientations and other programs relating to fire and life safety that may
be established


                                       3

<PAGE>   49

by Landlord.

        23. No smoking shall be permitted in the Building.

        24. Landlord reserves the right to rescind any of these rules and
regulations and to make future rules and regulations required for the safety,
protection and maintenance of the Project, the operation and preservation of the
good order thereof, and the protection and comfort of the tenants and their
employees and visitors. Such rules and regulations, when made and written notice
thereof given to Tenant, shall be binding as if originally included herein.
Landlord shall not be responsible to Tenant for the non-observance or violation
of these rules and regulations by any other tenant of the Building. Landlord
reserves the right to exclude or expel from the Project any person who, in
Landlord's judgment, is under the influence of liquor or drugs, or who shall in
any manner do any act in violation of any of these rules and regulations


                                       4

<PAGE>   50









                                       5

<PAGE>   51

LANDLORD REPRESENTS AND WARRANTS THAT TO THE BEST OF ITS KNOWLEDGE ANY HANDLING,
TRANSPORTATION, STORAGE, TREATMENT OR USE OF HAZARDOUS MATERIALS, AS DEFINED
BELOW, THAT HAVE OCCURRED IN, ON, UNDER OR IN THE VICINITY OF THE PREMISES OR
THE BUILDING PRIOR TO THE COMMENCEMENT DATE HAVE BEEN IN COMPLIANCE WITH ALL
APPLICABLE LAWS; THAT NO LEAK, SPILL, RELEASE, DISCHARGE, EMISSION OR DISPOSAL
OF HAZARDOUS MATERIALS HAS OCCURRED IN, ON, UNDER OR IN THE VICINITY OF THE
PREMISES OR THE BUILDING PRIOR TO THE COMMENCEMENT DATE; THAT THE SOIL,
GROUNDWATER, AND SOIL VAPOR IN, ON, UNDER OR IN THE VICINITY OF THE PREMISES AND
THE BUILDING ARE FREE OF TOXIC OR HAZARDOUS MATERIALS AS OF THE COMMENCEMENT
DATE AND THAT AS OF THE COMMENCEMENT DATE THE PREMISES, DOES NOT CONTAIN ANY
ASBESTOS, LEAD PAINT RADON OR PCB'S.


Landlord covenants and agrees that, as between Tenant and Landlord, Landlord
shall at all times be responsible and liable for, and be in compliance with all
Governmental Requirements relating to health and safety and environmental
matters, arising, directly or indirectly, out of use of Hazardous Materials in
the Project, with the exception of any such use of Hazardous Materials by
Tenant. Landlord shall be liable for, and shall promptly perform, all clean-up,
remediation and monitoring of any release of Hazardous Materials within the
Project, with the exception of any release for which Tenant is responsible
pursuant to Subsection 6.01(b) above, and the cost of such clean-up, remediation
and monitoring shall not be included within Basic Operating Costs.







                                       6
<PAGE>   52

                                   EXHIBIT E

                      LEASE SUBORDINATION, NON-DISTURBANCE
                            AND ATTORNMENT AGREEMENT

        This agreement ("Lease Subordination,, Non-Disturbance and Attornment
Agreement" or "Agreement") is made as of the _______ day of
_______________________, 199_, among FLEET NATIONAL BANK, a national banking
association organized under the laws of the United States, and having a place of
business at Suite 800, 111 Westminster Street, Providence, Rhode Island 02903,
as Agent (the "Agent") for the Lenders (as that term is defined in a certain
Loan Agreement by and between the hereinafter defined Borrower, the Agent and
the Lenders), ___________________, a ____________________, having a place of
business at ________________________ ("Landlord" or "Borrower"), and
_____________________________________ ("Tenant").

                             Introductory Provisions

        A. Agent and the Lenders are relying on this Agreement as an inducement
to Lenders in making and maintaining a loan ("Loan") secured by, among other
things, a [Mortgage and Security Agreement] [Deed of Trust and Security
Agreement] ("Mortgage") given by Borrower to Agent covering property commonly
known as and numbered __________________________, ___________________,
__________________ and further described in Exhibit A attached hereto
("Property"). Agent is also the "Assignee" under an Assignment of Leases and
Rents ("Assignment") from Borrower with respect to the Property.

        B. Tenant is the tenant under that certain lease ("Lease") dated
________________, 19__, made with [Landlord] [Landlord's predecessor in title],
covering certain premises ("Premises") at the Property as more particularly
described in the Lease [and in the "Notice of Lease" dated
______________________, 19__ which has been recorded at __________________ in
Book _____________, Page __________].

        C. Lenders require, as a condition to the making and maintaining of the
Loan, that the Mortgage be and remain superior to the Lease and that Agent's
rights under the Assignment be recognized.

        D. Tenant requires as a condition to the Lease being subordinate to the
Mortgage that its rights under the Lease be recognized.

        E. Agent, Landlord, and Tenant desire to confirm their understanding
with respect to the Mortgage and the Lease.



<PAGE>   53

        NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
and agreements contained herein, and other valuable consideration, the receipt
and adequacy of which are hereby acknowledged, and with the understanding by
Tenant that Lenders shall rely hereon in making and maintaining the Loan, Agent,
Landlord, and Tenant agree as follows:

        1. Subordination. The Lease and the rights of Tenant thereunder are
subordinate and inferior to the Mortgage and any amendment, renewal,
substitution, extension or replacement thereof and each advance made thereunder
as though the Mortgage, and each such amendment, renewal, substitution,
extension or replacement were executed and recorded, and the advance made,
before the execution of the Lease.

        2. Non-Disturbance. So long as Tenant is not in default (beyond any
period expressed in the Lease within which Tenant may cure such default) in the
payment of rent or in the performance or observance of any of the terms,
covenants or conditions of the Lease on Tenant's part to be performed or
observed, (i) Tenant's occupancy of the Premises shall not be disturbed by
Agent in the exercise of any of its rights under the Mortgage during the term of
the Lease, or any extension or renewal thereof made in accordance with the terms
of the Lease, and (ii) Agent will not join Tenant as a party defendant in any
action or proceeding for the purpose of terminating Tenant's interest and estate
under the Lease because of any default under the Mortgage.

        3. Attornment and Certificates. In the event Agent succeeds to the
interest of Borrower as Landlord under the Lease, or if the Property or the
Premises are sold pursuant to any foreclosure of the Mortgage, Tenant shall
attorn to Agent, or a purchaser upon any such foreclosure sale, and shall
recognize Agent, or such purchaser, thereafter as the Landlord under the Lease.
Such attornment shall be effective and self-operative without the execution of
any further instrument. Tenant agrees, however, to execute and deliver at any
time and from time to time, upon the request of any holder(s) of any of the
indebtedness or other obligations secured by the Mortgage, or upon request of
any such purchaser, (a) any instrument or certificate which, in the reasonable
judgment of such holder(s), or such purchaser, may be necessary or appropriate
in any such foreclosure proceeding or otherwise to evidence such attornment, and
(b) an instrument or certificate regarding the status of the Lease, consisting
of statements, if true (and if not true, specifying in what respect), (i) that
the Lease is in full force and effect, (ii) the date through which rentals have
been paid, (iii) the duration and date of the commencement of the term of the
Lease, (iv) the nature of any amendments or modifications to the Lease, (v) that
no default, or state of facts, which with the passage of time, or notice, or
both, would constitute a default, exists on the part of either party to the
Lease, and (vi) the dates on which payments of additional rent, if any, are due
under the Lease.



                                       2
<PAGE>   54
        4. Limitations. If Agent exercises any of its rights under the
Assignment or the Mortgage, or if Agent shall succeed to the interest of
Landlord under the Lease in any manner, or if any purchaser acquires the
Property, or the Premises, upon or after any foreclosure of the Mortgage, or any
deed in lieu thereof, Agent or such purchaser, as the case may be, shall have
the same remedies by entry, action or otherwise in the event of any default by
Tenant (beyond any period expressed in the Lease within which Tenant may cure
such default) in the payment of rent or in the performance or observance of any
of the terms, covenants and conditions of the Lease on Tenant's part to be paid,
performed or observed that the Landlord had or would have had if Agent or such
purchaser had not succeeded to the interest of the present Landlord. From and
after any such attornment, Agent or such purchaser shall be bound to Tenant
under all the terms, covenants and conditions of the Lease, and Tenant shall,
from and after such attornment to Agent, or to such purchaser, have the same
remedies against Agent, or such purchaser, for the breach of an agreement
contained in the Lease that Tenant might have had under the Lease against
Landlord, if Agent or such purchaser had not succeeded to the interest of
Landlord. Provided, however, that Agent or such purchaser shall only be bound
during the period of its ownership, and that in the case of the exercise by
Agent of its rights under the Mortgage, or the Assignment, or any combination
thereof, or a foreclosure, or deed in lieu of foreclosure, all Tenant claims
shall be satisfied only out of the interest, if any, of Agent, or such
purchaser, in the Property, and Agent and such purchaser shall not be (a) liable
for any act or omission of any prior landlord (including the Landlord); or (b)
liable for or incur any obligation with respect to the construction of the
Property or any improvements of the Premises or the Property; or (c) subject to
any offsets or defenses which Tenant might have against any prior landlord
(including the Landlord); or (d) bound by any rent or additional rent which
Tenant might have paid for more than the then current rental period to any prior
landlord (including the Landlord); or (e) bound by any amendment or modification
of the Lease, or any consent to any assignment or sublet, made without Agent's
prior written consent; or (f) bound by or responsible for an security deposit
not actually received by Agent; or (g) liable for or incur any obligation with
respect to any breach of warranties or representations of any nature under the
Lease or otherwise including without limitation any warranties or
representations respecting use, compliance with zoning, landlord's title,
landlord's authority, habitability and/or fitness for any purpose, or
possession; or (h) liable for consequential damages. The foregoing shall not,
however: (i) relieve Agent or such purchaser, of the obligation to remedy or
cure any conditions at the Premises the existence of which constitutes a
Landlord default under the Lease and which continue at the time of such
succession or acquisition, or (ii) deprive the Tenant of the right to terminate
the Lease for a breach of Landlord covenant which is not cured as provided for
herein and in the Lease and as



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<PAGE>   55

a result of which there is a material interference with Tenant's permitted use
and occupation of the Premises or any permitted business conducted therein.

        5. Rights Reserved. Nothing herein contained is intended nor shall it
be construed, to abridge or adversely affect any right or remedy of: (a) the
Landlord under the Lease, or any subsequent Landlord, against the Tenant in the
event of any default by Tenant (beyond any period expressed in the Lease within
which Tenant may cure such default) in the payment of rent or in the performance
or observance of any of the terms, covenants or conditions of the Lease on
Tenant's part to be performed or observed; or (b) the Tenant under the Lease
against the original or any prior Landlord in the event of any default by the
original Landlord to pursue claims against such original or prior Landlord
whether or not such claim is barred against Agent or a subsequent purchaser.

        6. Notice and Right to Cure. Tenant agrees to provide Agent with a copy
of each notice of default given to Landlord under the Lease, at the same time as
such notice of default is given to the Landlord, and that in the event of any
default by the Landlord under the Lease, Tenant will take no action to terminate
the Lease (a) if the default is not curable by Agent (so long as the default
does not interfere with Tenant's use and occupation of the Premises), or (b) if
the default is curable by Agent, unless the default remains uncured for a period
of thirty (30) days after written notice thereof shall have been given, postage
prepaid, to Agent at the address provided in Section 7 below; provided, however,
that if any such default is such that it reasonably cannot be cured within such
thirty (30) day period, such period shall be extended for such additional period
of time as shall be reasonably necessary (including, without limitation, a
reasonable period of time to obtain possession of the Property and to foreclose
the Mortgage), if Agent gives Tenant written notice within such thirty (30) day
period of Agent's election to undertake the cure of the default and if curative
action (including, without limitation, action to obtain possession and
foreclose) is instituted within a reasonable period of time and is thereafter
diligently pursued. Agent shall have no obligation to cure any default under the
Lease.

        7. Notices. Any notice or communication required or permitted hereunder
shall be in writing, and shall be given or delivered: (i) by United States mail,
registered or certified, postage fully prepaid, return receipt requested, or
(ii) by recognized courier service or recognized overnight delivery service; and
in any event addressed to the party for which it is intended at its address set
forth below:

               To Agent:   Fleet National Bank, as Agent
                           111 Westminster Street
                           Suite 800
                           Providence, Rhode Island 02903



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<PAGE>   56

                           Attention: Commercial Real Estate Department

               To Tenant:  ___________________________________________
                           ___________________________________________
                           ___________________________________________
                           ___________________________________________

or such other address as such party may have previously specified by notice
given or delivered in accordance with the foregoing. Any such notice shall be
deemed to have been given and received on the date delivered or tendered for
delivery during normal business hours as herein provided.

        8. No Oral Change. This Agreement may not be modified orally or in any
manner than by an agreement in writing signed by the parties hereto or their
respective successors in interest.

        9. Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the parties hereto, their respective heirs, personal
representatives, successors and assigns, and any purchaser or purchasers at
foreclosure of the Property or any portion thereof, and their respective heirs,
personal representatives, successors and assigns.

        10. Payment of Rent To Agent. Tenant acknowledges that it has notice
that the Lease and the rent and all sums due thereunder have been assigned to
Agent as part of the security for the obligations secured by the Mortgage. In
the event Agent notifies Tenant of a default under the Loan and demands that
Tenant pay its rent and all other sums due under the Lease to Agent, Tenant
agrees that it will honor such demand and pay its rent and all other sums due
under the Lease to Agent, or Agent's designated agent, until otherwise notified
in writing by Agent. Borrower unconditionally authorizes and directs Tenant to
make rental payments directly to Agent following receipt of such notice and
Borrower further agrees that Tenant may rely upon such notice without any
obligation to further inquire as to whether or not any default exists under the
Mortgage or the Assignment and notwithstanding any notice from or claim of
Borrower to the contrary. Borrower shall have no right or claim against Tenant
for or by reason of any payments of rent or other charges made by Tenant to
Agent following Tenant's receipt of any such notice.

        11. No Amendment or Cancellation of Lease. As long as the Mortgage
remains undischarged of record, Tenant shall not agree to amend or modify the
Lease in any material respect, or agree to cancel or terminate the Lease or
agree to subordinate the Lease to any other mortgage or deed of trust, without
Agent's prior written consent in each instance.

        12. No Waiver. This Agreement does not:

        (a)     constitute a waiver by Agent of any of its rights under the
                Mortgage or any of the other Loan Documents (as defined in the
                Mortgage); or



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<PAGE>   57

        (b)     in any way release Borrower from its obligations to comply with
                the terms, provisions, conditions, covenants and agreements and
                clauses of the Mortgage and other Loan Documents.

        13. Borrower Compliance. The provisions of the Mortgage remain in full
force and effect and must be complied with by Borrower.

        14. Captions. Captions and headings of sections are not parts of this
Agreement and shall not be deemed to affect the meaning or construction of any
of the provisions of this Agreement.

        15. Counterparts. This Agreement may be executed in several counterparts
each of which when executed and delivered is an original, but all of which
together shall constitute one instrument.

        16. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of ____________________.

        17. Parties Bound. The provisions of this Agreement shall be binding
upon and inure to the benefit of Tenant, Agent, Lenders and Borrower and their
respective successors and assigns.

        IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as a sealed instrument, as of the date first above written.

                                            AGENT:

                                            FLEET NATIONAL BANK, as Agent

                                            By:_________________________________
                                               Name:____________________________
                                               Title:___________________________

                                            Date executed by Agent:

                                            TENANT:

                                            [insert name]

                                            BY:_________________________________
                                               Name:____________________________
                                               Title:___________________________

                                            Date executed by Tenant:____________



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<PAGE>   58

                                            LANDLORD:

                                            [insert name]

                                            BY:_________________________________
                                               Name:____________________________
                                               Title:___________________________
                                               Date executed by Landlord:_______

           [INSERT APPLICABLE STATE ACKNOWLEDGEMENTS FOR All PARTIES)



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