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                                                                   Exhibit 10.18

                             BASIC LEASE INFORMATION
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<S>                                 <C>
LEASE DATE:                         October 26, 1998

TENANT:                             VAXGEN, INC.

TENANT'S ADDRESS:                   Until the Term Commencement Date:

                                    501 Forbes Boulevard
                                    South San Francisco, CA 94080
                                    Phone: (650) 225-7000
                                    Fax: (650) 225-7057

                                    After the Term Commencement Date:

                                    347 Oyster Point Blvd., Suite 102
                                    South San Francisco, CA 94080

LANDLORD:                           Oyster Point Tech Center LLC, a Delaware Limited
                                    Liability Company

LANDLORD'S ADDRESS:                 c/o Trammell Crow NW, Inc.
                                    1241 East Hillsdale Blvd., Ste. 200
                                    Foster City, CA 94404
                                    Phone: (650) 578-8100
                                    Fax: (650) 345-2506

PROJECT:                            A two (2) building project totaling
                                    approximately 104,780 square feet to be
                                    constructed on approximately 5.52 acres of
                                    land to be known as 347 and 349 Oyster Point
                                    Blvd., South San Francisco, California 94080
                                    which legal description is contained herein
                                    in Exhibit A-1.

BUILDING:                           That approximately 39,780 square foot two
                                    story building to be constructed as part of
                                    the Project and to be known as 347 Oyster
                                    Point Boulevard, South San Francisco,
                                    California 94808, as approximately depicted
                                    on the site plan attached as Exhibit A-2.

PREMISES:                           Approximately 9,651 square feet of the Building to be
                                    known as 347 Oyster Point Boulevard, Suite
                                    102, South San Francisco, California 94080
                                    as shown herein Exhibit A-3.

PERMITTED USE:                      Office, laboratory, research and development facility
                                    with wet chemistry and biology labs, clean rooms and
                                    storage and use of Disclosed Hazardous Materials and use
                                    of laboratory animals but only in the ordinary course of
                                    Tenant's business (subject to the approval of the City
                                    of South San Francisco and all other necessary
                                    government agencies).  The term "Disclosed Hazardous
                                    Materials" as used in this Lease shall mean only those
                                    chemical and biological materials and substances of the
                                    types and quantities described in the inventory listing
                                    that was delivered by Tenant to Landlord on or prior to
                                    the date of execution of this Lease, a copy of which is
                                    attached to this Lease as Exhibit F, and those other
                                    materials and substances of which Tenant shall have
                                    notified Landlord in writing and of which Landlord shall
                                    have approved in writing from time to time pursuant to
                                    this Lease.

PARKING DENSITY:                    3 non-designated spaces per 1000 square foot of rentable area.
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TERM COMMENCEMENT DATE:             December 31, 1998

LENGTH OF TERM:                     Sixty-two (62) months

RENT:
    Base Rent                       Months of Term        Rent Per Square Foot             Monthly Rent
                                    --------------        --------------------             ------------
                                    Month 1-2             -0-
                                    Months 3-14           $1.50 psf per month               $14,476.50
                                    Months 15-26          $1.55 psf per month               $14,959.00
                                    Months 27-38          $1.60 psf per month               $15,442.00
                                    Month 39-50           $1.65 psf per month               $15,924.00
                                    Month 51-62           $1.70 psf per month               $16,507.00
Estimated First Year Basic
    Operating Cost                  $.30 psf per month, estimated at $2,895.00/mo.

SECURITY DEPOSIT:                   $17,371.50 plus secured first lien on Tenant's fixtures
                                    and improvements

TENANT'S PROPORTIONATE
SHARE:                              Subject to change, but based on the rentable square feet
                                    of the Premises divided by the total rentable square
                                    feet of the Building and the Project, respectively,
                                    estimated as follows:

                                                                 Of Building:                 23.85%
                                                                 Of Project                    9.21%

BROKER:                             Dean Givas
                                    Trammell Crow NW, Inc.
                                    1241 East Hillsdale Blvd., Suite 200
                                    Foster City, CA 94404
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The foregoing Basic Lease Information is incorporated into and made a part of
this Lease. Defined terms in the Lease shall have the meanings ascribed to them
in the Basic Lease Information unless otherwise stated. Each reference in this
Lease to any of the Basic Lease Information shall mean the respective
information above and shall be construed to incorporate all of the terms
provided under the particular Lease paragraph pertaining to such information. In
the event of any conflict between the Basic Lease Information and the Lease, the
latter shall control. The term "days" as used in this Lease means "calendar
days" unless the specific term "business days" is used.


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                                                                   Exhibit 10.19


                                      LEASE

THIS LEASE is made as of this 26 day of October, 1998, by and between Oyster
Point Tech Center LLC, a Delaware limited liability company (hereinafter called
"Landlord") and VaxGen, Inc., a Delaware corporation (hereinafter called
"Tenant").

PREMISES            1.   Landlord hereby leases to Tenant, and Tenant leases
                         from Landlord, the Premises, for the Term, at the
                         rental, and upon all of the terms and conditions set
                         forth in this Lease. The Premises is part of the
                         rentable area of 347 Oyster Point Boulevard (sometimes
                         referred to herein as the "Building") and is depicted
                         on Exhibit A-3. The Premises comprises 23.85% percent
                         of the rentable area of the Building. The Building is
                         part of the Project. The Building is outlined in yellow
                         on Exhibit A-2. Landlord shall, at its sole cost and
                         expense, construct the Building shell, parking lot,
                         exterior common areas, and landscaping approximately in
                         the manner depicted on Exhibit C hereto ("Initial
                         Project Specifications"). The Initial Project
                         Specifications shall include, without limitation, the
                         Building shell, roof, all exterior windows and doors,
                         fire sprinklers at the roof line, utilities, services
                         to the Building exterior, and Building Core as defined
                         in Exhibit B-1. Tenant shall perform Tenant's Work (as
                         defined in Exhibit B-1 hereto) for the Premises in the
                         manner described in Exhibit B-1 hereto.

TERM                2.   The Term of this Lease ("Term") shall commence on
                         December 31, 1998 ("Term Commencement Date") and
                         continue in full force and effect for the number of
                         months specified as the Length of Term in the Basic
                         Lease Information or until this Lease is terminated as
                         otherwise provided herein. If the Term Commencement
                         Date is a date other than the first day of the calendar
                         month, the Term shall be the number of months of the
                         Length of Term in addition to the remainder of the
                         calendar month following the Term Commencement Date.
                         Within ten (10) days after requested by Landlord or
                         Tenant, Landlord and Tenant shall execute an amendment
                         to this Lease stating and confirming the Term
                         Commencement Date and Tenant's acceptance of the
                         Premises.

POSSESSION          3.   Landlord shall deliver, and Tenant shall accept
                         delivery of, and take immediate possession of the
                         Premises on the Term Commencement Date. Landlord shall
                         have no liability to Tenant if the Term Commencement
                         Date is delayed by ninety (90) days or less, or to the
                         extent that any delay is the result of Force Majeure,
                         as defined in Paragraph 34. If Landlord is delayed by
                         more than ninety (90) days for reason other than Force
                         Majeure, Tenant's sole right and remedy shall be to
                         terminate this Lease. Landlord shall permit Tenant, or
                         Tenant's agents, to enter the Premises prior to the
                         Term Commencement Date ("Early Possession") for the
                         purpose of installing Tenant's equipment and fixtures
                         provided that such installation shall not interfere
                         with performance of Landlord's Work, as defined herein.
                         The term "Fixture" or "Trade Fixture" shall be defined
                         as anything attached in any manner to Landlord's
                         property. All portable, unattached items are Tenant's
                         property. Tenant and Landlord agree that Tenant does
                         not own any Trade Fixtures in the Premises except those
                         items listed in Exhibit B-3 or otherwise agreed to in a
                         separate writing between Landlord and Tenant. Landlord
                         owns all remaining Trade Fixtures. If Landlord permits
                         such Early Possession, from and after the date on which
                         Tenant or its agent first enters the Premises therefor,
                         all of the terms and conditions of this Lease
                         (including, but not limited to, insurance and indemnity
                         provisions) shall be applicable to Tenant's occupancy
                         save and except for the requirement to pay Base Rent
                         and Base Operating Costs.

USE                 4.   A. GENERAL. Tenant shall use the Premises for the
                         Permitted Use and for no other use or purpose. Tenant
                         shall control Tenant's employees, agents, customers,
                         visitors, invitees, licensees, contractors, assignees
                         and subtenants (collectively, "Tenant's Parties") in
                         such a manner that Tenant and Tenant's Parties
                         cumulatively do not exceed the Parking Density at any
                         time. Tenant and Tenant's Parties shall have the
                         nonexclusive right to use, in common with other parties
                         occupying the Building or the Project, the parking
                         areas and driveways of the Project, and other common
                         areas subject to such rules and regulations not in
                         conflict with

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                    this Lease as Landlord may from time to time prescribe.

                    B. LIMITATIONS. Tenant shall not permit any odors, smoke,
                    dust, gas, substances, noise or vibrations to emanate from
                    the Premises, nor take any action which would constitute a
                    nuisance or would disturb, obstruct or endanger any other
                    tenants of the Building or the Project or interfere with
                    their use of their respective premises. Storage outside the
                    Premises of materials, vehicles or any other items is
                    prohibited, with the exception of outside storage in areas
                    designated and approved in advance and in writing by
                    Landlord. Tenant may be required to provide screening for
                    such outside storage, at the discretion of Landlord. Tenant
                    shall not use or allow the Premises to be used for any
                    improper, immoral, unlawful or objectionable purpose, nor
                    shall Tenant cause or maintain or permit any nuisance in, on
                    or about the Premises or the Project. Tenant shall not
                    commit or suffer the commission of any waste in, on or about
                    the Premises or the Project. Tenant shall not allow any sale
                    by auction upon the Premises or the Project, or place any
                    loads upon the floors, walls or ceilings which endanger the
                    structure, or place any harmful liquids in the drainage
                    system of the Building or the Project. No waste, materials
                    or refuse shall be dumped upon or permitted to remain
                    outside the Premises except in trash containers placed
                    inside exterior enclosure designated for that purpose by
                    Landlord. Landlord shall not be responsible to Tenant for
                    the noncompliance by any other tenant or occupant of the
                    Building or the Project with any of the above-referenced
                    rules or any other terms or provisions of such tenant's or
                    occupant's lease or other contract. Landlord agrees not to
                    materially discriminate in the enforcement of any of the
                    above-referenced rules against Tenant only and not against
                    other tenants or occupants of the Project.

                    C. COMPLIANCE WITH REGULATIONS. By entering the Premises,
                    Tenant accepts the Premises in the condition existing as of
                    the date of such entry, subject to all existing or future
                    applicable municipal, state and federal and other
                    governmental statutes, regulations, laws and ordinances,
                    including zoning ordinances and regulations governing and
                    relating to the use, occupancy and possession of the
                    Premises and the use, storage, generation and disposal of
                    Hazardous Materials (hereinafter defined) in, on or under
                    the Premises (collectively "Regulations"). Except for
                    matters which occurred prior to the Term Commencement Date
                    and were not caused directly or indirectly by Tenant or by
                    any of the Tenant's Parties, Tenant shall, at Tenant's sole
                    expense, strictly comply with all Regulations now in force
                    or which may be hereafter in force relating to the Premises
                    and the use of the Premises and/or the use, storage,
                    generation of Hazardous Materials in, on and under the
                    Premises. Tenant shall at its sole cost and expense obtain
                    any and all licenses or permits necessary for Tenant's use
                    of the Premises. Tenant shall promptly comply with the
                    requirements of any board of fire underwriters or other
                    similar body now or hereafter constituted. Tenant shall not
                    do or permit anything to be done in, on, or about the
                    Premises or bring or keep anything which will in any way
                    increase the rate of any insurance paid for by Landlord upon
                    the Premises, the Building or the Project, or upon any
                    contents therein or cause a cancellation of said insurance
                    or otherwise affect said insurance in any manner without the
                    written consent of Landlord, which consent shall not be
                    unreasonably withheld, if reasonably related to the conduct
                    of Tenant's business within the Premises. In the event of
                    such written consent by Landlord, Tenant shall pay for any
                    increase in the rate of any insurance paid for by Landlord
                    as set forth above. Tenant shall indemnify, defend, protect
                    and hold Landlord harmless from and against any loss, cost,
                    expense, damage, attorneys' fees or liability arising out of
                    the failure of Tenant to comply with any Regulation or
                    comply with the requirements set forth herein. Nothing in
                    this section shall be construed to require Tenant to make
                    any structural alterations or modifications to the building
                    systems servicing the Premises, the Building, or the
                    Project, except to the extent such modification is required
                    as the consequence of Tenant's specific use of the Premises.




<PAGE>   5
                    D. HAZARDOUS MATERIALS. Tenant shall not cause, or allow any
                    of Tenant's Parties to cause, any Hazardous Materials to be
                    generated, stored, used, treated, removed, transported,
                    handled and disposed of on or about the Premises, the
                    Building or the Project without Landlord's prior written
                    approval, provided that, Tenant shall be permitted to use
                    the Disclosed Hazardous Materials in the ordinary course of
                    its business subject to the conditions and requirements of
                    this Lease. Landlord's conditional authorization of the
                    Disclosed Hazardous Materials shall be strictly limited to
                    the types of quantities described in Exhibit F, and shall
                    not be construed as an authorization for Tenant to generate,
                    store, use, treat, remove, transport, handle or dispose of
                    any additional quantities of Disclosed Hazardous Materials
                    or any other Hazardous Materials in, on, about or under the
                    Premises, Building or the Project. Tenant acknowledges that
                    any change in the types or quantities or Disclosed Hazardous
                    Materials described in Exhibit F, or any change in the means
                    and methods of generating, storing, treating, removing,
                    transporting, handling or disposing of such Disclosed
                    Hazardous Materials, shall require the prior written
                    approval of Landlord in each instance. Tenant represents and
                    warrants to Landlord that (a) prior to its use of Hazardous
                    Materials on the Premises, it will have received or obtained
                    issuance of, and will maintain in effect, all permits,
                    approvals, licenses, or other authorizations necessary for
                    Tenant's activities with respect to the Disclosed Hazardous
                    Materials, and (b) Tenant has not been cited, fined, or
                    otherwise found to be in violation of any governmental
                    requirement or fire, safety and insurance requirements or
                    regulations applicable to any Disclosed Hazardous Materials,
                    and (b) Tenant has not been cited, fined, or otherwise found
                    to be in violation of any governmental requirement or fire,
                    safety and insurance requirements or regulations applicable
                    to any Disclosed Hazardous Materials or any other Hazardous
                    Materials in any other leased premises. At least once during
                    each twelve (12) month of the Lease Term, Tenant shall
                    provide Landlord with an inventory list describing the
                    minimum and maximum quantities of each of the Disclosed
                    Hazardous Materials generated, stored, used, treated,
                    removed, transported, handled and disposed of on or about
                    the Premises, the Building or the Project the succeeding
                    twelve (12) months, and a copy of its Hazardous Materials
                    Management Plan ("HMMP") in the form submitted by Tenant to
                    the fire department. Tenant agrees to notify Landlord
                    immediately if Tenant receives notification or otherwise
                    becomes aware of: (a) any threatened or actual release,
                    spill or discharge of any other any Disclosed Hazardous
                    Materials in, on, about or under the Premises, the Building
                    or the Project, or (b) any threatened or actual lien,
                    action, or proceeding or notice that any Disclosed Hazardous
                    Materials or any other Hazardous Materials is not being
                    generated, stored, used, treated, removed, transported,
                    placed, manufactured, handled, or disposed of in strict
                    compliance with any and all governmental requirements and
                    regulations or applicable fire, safety or insurance
                    requirements and regulations. If Tenant or any of Tenant's
                    Parties is partially or wholly responsible or potentially
                    responsible for such condition, situation, lien, action or
                    notice, Tenant's notice to Landlord shall include a
                    statement as to the actions Tenant proposes to take in
                    response to such condition, situation, lien, action or
                    notice. As used in this Lease, "Hazardous Materials" shall
                    include, but not be limited to, hazardous, toxic and
                    radioactive materials and those substances defined as
                    "hazardous substances," "hazardous materials," "hazardous
                    wastes," "toxic substances," or other similar designations
                    in any federal, state, or local law, regulation, or
                    ordinance. Landlord shall have the right at all reasonable
                    times to inspect the Premises and to conduct tests and
                    investigations to determine whether Tenant is in compliance
                    with the foregoing provisions. The costs of all such
                    inspections, tests and investigations shall be borne by
                    Tenant provided that so long as Tenant is not in Default
                    hereunder Tenant shall not be responsible for the cost of
                    more than one (1) inspection per calendar year and Tenant's
                    liability for the cost of each such inspection shall not
                    exceed $5,000 per inspection. Tenant shall indemnify, defend
                    (by counsel selected by Landlord and approved by Tenant,
                    which approval shall not be unreasonably withheld), protect
                    and hold Landlord harmless from and against all liabilities,
                    losses, actually incurred costs and expenses, demands,
                    causes of action, claims or judgments directly or indirectly
                    arising out of the use, generation, storage or disposal of
                    Hazardous Materials by Tenant or any of Tenant's Parties,
                    which indemnity shall include, without limitation,
                    reasonable attorneys' and consultants' fees, the cost of any
                    required or necessary repair, cleanup or


<PAGE>   6




                    detoxification, and the preparation of any closure or other
                    required plans, whether such action is required or necessary
                    prior to or following the termination of this Lease. Neither
                    the written consent by Landlord to the use, generation,
                    storage or disposal of Hazardous Materials nor the strict
                    compliance by Tenant with all laws pertaining to Hazardous
                    Materials shall excuse Tenant from Tenant's obligation of
                    indemnification pursuant to this Paragraph 4.D. Tenant's
                    obligations pursuant to the foregoing indemnity shall
                    survive the termination of this Lease.

RULES AND         
REGULATIONS    5.   Tenant shall faithfully observe and comply with any rules
                    and regulations not in conflict with this Lease Landlord may
                    from time to time prescribe in writing for the purpose of
                    maintaining the proper care, cleanliness, safety, traffic
                    flow and general order of the Premises, the Building, or the
                    Project. Tenant shall cause Tenant's Parties to comply with
                    all such rules and regulations. Landlord shall not be
                    responsible to Tenant for the non-compliance by any other
                    tenant or occupant of the Building or the Project with any
                    of the rules and regulations.

RENT           6.   A. BASE RENT. Base Rent for the Premises shall be calculated
                    on the basis of the rentable square feet of the Premises at
                    the rates specified in the Base Lease Information. Rentable
                    square feet shall include a load factor for core areas of
                    the Building as determined by Landlord's architect. Tenant's
                    obligation to pay Base Rent for the Premises shall commence
                    on the Term Commencement Date. Upon completion of Landlord's
                    Work, Landlord's architect shall certify to Landlord the
                    rentable square feet of the Premises, measured from the
                    outside of exterior walls, but including areas below the
                    "dripline" in the exterior entrances, to the midpoint of any
                    interior demising walls plus Tenant's proportionate share of
                    Building Core areas which include lobby areas, utility
                    rooms, mechanical shafts, elevator shafts, stairs in lobby,
                    etc. The calculation of the rentable square feet of the
                    Premises shall not include the stairs located within the
                    Premises which serve the second floor unit but shall include
                    an allocation for the exit corridor from the point of
                    Tenant's access to the corridor to the exterior exit. The
                    allocation to Tenant for the exit corridor shall be based on
                    the square footage of Tenant's interior Premises (excluding
                    core areas) divided by the square footage of interior
                    premises for all tenants having access to the corridor.
                    Landlord's architect shall also certify the rentable square
                    feet of the Building and the Project. Landlord's architect's
                    certification of rentable square feet for the Premises, the
                    Building and the Project shall be binding upon both Landlord
                    and Tenant for all purposes under this Lease. Landlord and
                    Tenant currently estimate that the rentable square feet of
                    the Premises and the Base Rent for the Premises will be as
                    stated in the Base Rent shall be determined and, if
                    requested by Landlord or Tenant, Landlord and Tenant shall
                    enter into an amendment of this Lease which states the
                    actual Base Rent as so determined. Upon determination of the
                    actual Base Rent for the Premises, Landlord and Tenant shall
                    adjust, if necessary, the Base Rent deposited by Tenant for
                    the first full month of the Term as provided in Paragraph
                    6.B. below, and Tenant's share of Operating costs, as
                    defined in Paragraph 7A. theretofore paid.

                    B. PAYMENTS. Tenant shall pay to Landlord, without demand
                    throughout the Term, Base Rent as specified in the Basic
                    Lease Information and finally determined as provided in
                    Paragraph 6.A., payable in monthly installments in advance
                    on or before the first day of each calendar month, in lawful
                    money of the United States, without deduction or offset
                    whatsoever, at the address specified in the Basic Lease
                    Information or to such other place as Landlord may from time
                    to time designate in writing. Base Rent and Estimated Basic
                    Operating Costs as defined in Paragraph 7.A. for the first
                    full month of the Term (based upon the estimated rentable
                    area as hereinabove provided) shall be paid by Tenant upon
                    Tenant's execution of this Lease. If the obligation for
                    payment of Base Rent commences on other than the first day
                    of month, then Base Rent (calculated at the rate applicable
                    to the second full month of the Term) for the partial month
                    shall be prorated on the basis of the actual number of days
                    in the month.



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

BASIC          7.   A. Basic Operating Cost. In addition to the Base Rent
OPERATING COST      required to be paid hereunder, Tenant shall pay as
                    Additional Rent, Basic Operating Costs in the manner set
                    forth below. The Basic Operating Costs shall be calculated
                    on the basis of Landlord's architect's certification of the
                    rentable square feet of the Premises, the building and the
                    Project. The certification by Landlord's architect of the
                    rentable square feet of the Premises, the Building and the
                    Project shall be conclusive and binding upon both Landlord
                    and Tenant for all purposes of this Lease. Tenant's
                    obligation to pay Basic Operating Costs with respect to the
                    Premises, the Building and the Project shall commence on
                    March 1, 1999. Landlord shall account for each item of Basic
                    Operating Costs attributable to the Premises, the Building
                    and the Project, as determined by Landlord in Landlord's
                    sole discretion, and unless provided to the contrary in this
                    Lease, Tenant shall pay the Basic Operating Costs, as set
                    forth in the Basic Lease Information. "Basic Operating
                    Costs" shall mean all expenses and costs of every kind and
                    nature which Landlord shall pay or become obligated to pay
                    because of or in connection with the management,
                    maintenance, preservation and operation of the Building and
                    the Project (determined in accordance with generally
                    accepted accounting principles, consistently applied)
                    including but not limited to the following:

                    (1) TAXES. All real 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, levies, fees
                    or charges general and special, ordinary and extraordinary,
                    unforeseen as well as foreseen, of any kind (including fees
                    "in-lieu" of any such tax or assessment) which are assessed,
                    levied, charged, confirmed, or imposed by any public
                    authority upon the Project, its operations or the Rent (or
                    any portion or component thereof) (all of the foregoing
                    being hereinafter collectively referred to as "real property
                    taxes"), or any tax imposed in substitution, partially or
                    totally, of any tax previously included within the
                    definition of real property taxes, or any additional tax the
                    nature of which was previously included within the
                    definition of real property taxes, except (a) inheritance or
                    estate taxes imposed upon or assessed against the Project,
                    or any part thereof or interest therein, and (b) taxes
                    computed upon the basis of net income of Landlord or the
                    owner of any interest therein, except as otherwise provided
                    in the following sentence. Basic Operating Costs shall also
                    include any taxes, assessments, or any other fees imposed by
                    any public authority upon or measured by the monthly rental
                    or other charges payable hereunder, including, without
                    limitation, any gross income tax or excise tax levied by the
                    local governmental authority in which the Project is
                    located, the federal government, or any other governmental
                    body with respect to receipt of such rental, or upon, with
                    respect to or by reason of the development, possession,
                    leasing, operation, management, maintenance, alteration,
                    repair, use or occupancy by Tenant of the Premises or any
                    portion thereof, or upon this transaction or any document to
                    which Tenant is a party creating or transferring an interest
                    or an estate in the Premises. In the event that it shall not
                    be lawful for Tenant to reimburse Landlord for all or any
                    part of such taxes, the Base Rent payable to Landlord under
                    this Lease shall be revised to net to landlord the same net
                    rental after imposition of any such taxes on Landlord as
                    would have been payable to Landlord prior to the payment of
                    any such taxes. If Landlord at any time during the Term of
                    this Lease or within two (2) years after termination of this
                    Lease shall receive a refund of real property taxes
                    applicable to a period within the Term of this Lease for
                    which Tenant has paid real property taxes hereunder,
                    Landlord shall refund to Tenant Tenant's proportionate share
                    of said refund if Tenant is not then in Default or was not
                    in Default at the termination of the Lease, as the case may
                    be. If Tenant timely pays real property taxes to Landlord,
                    Landlord alone shall be responsible for any fines,
                    penalties, interest and other charges that result from


                                  
<PAGE>   8
                    any late payment of taxes by Landlord.

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

                    (3) REPAIRS AND IMPROVEMENTS. The cost of all repairs,
                    replacements and general maintenance for the Premises, the
                    Building and the Project (except for those repairs expressly
                    made the financial responsibility of Landlord pursuant to
                    the terms of this Lease, repairs to the extent paid for by
                    proceeds of insurance or by Tenant or other third parties,
                    and alterations attributable solely to tenants of the
                    Project other than Tenant). Tenant shall not be responsible
                    for the cost of repairs to tenant-occupied buildings which
                    are part of the Project other than the Building. Such
                    repairs, replacements, and general maintenance shall include
                    the cost of any capital improvements made to or capital
                    assets acquired for the Project, the Building, or the
                    Premises after the Term Commencement Date that are intended
                    by Landlord to reduce any other Basic Operating Cost, are
                    reasonably necessary for the health and safety of the
                    occupants of the Project, or are made to the Building by
                    Landlord after the date of this Lease are required under any
                    governmental law or regulation, such costs or allocable
                    portions thereof to be amortized over the useful life of the
                    improvement, as determined by the Landlord, together with
                    interest on the unamortized balance at the "prime rate"
                    charged at the time such improvements or capital assets are
                    constructed or acquired by Wells Fargo Bank, N.A. (San
                    Francisco) plus two (2) percentage points, but in no event
                    more than the maximum rate permitted by law.

                    (4) SERVICES. To the extent such expenses are not the
                    obligation of Tenant under the provisions of this Lease, all
                    expenses relating to maintenance, janitorial and service
                    agreements and services, and costs of supplies and equipment
                    used in operating and maintaining the Premises, the Building
                    and the Project and the equipment therein and the adjacent
                    sidewalks, driveways, parking and service areas, including,
                    without limitation, alarm service, window cleaning, elevator
                    maintenance, the Building exterior maintenance and Project
                    landscaping.

                    (5) UTILITIES. To the extent such expenses are not the
                    obligation of Tenant under other provisions of this Lease,
                    the cost of all utilities which benefit all or a portion of
                    the Premises, the Building or the Project.

                    (6) MANAGEMENT FEE. A management and accounting cost
                    recovery fee equal to three (3%) percent of the sum of Base
                    Rent and Basic Operating Cost.

                    (7) LEGAL AND ACCOUNTING. Legal and accounting expenses
                    relating to the Project other than legal expenses related to
                    negotiating leases with tenants and/or prospective tenants
                    in the Project, and any costs or expenses otherwise
                    reimbursable to Landlord, including, without limitation, any
                    costs or expenses reimbursed by policies of insurance
                    carried by Landlord or required to be carried by Landlord
                    under this Lease, and any cost or expenses reimbursable by
                    any tenant within the Building and/or the Project pursuant
                    to such tenant's lease in the Project. Accounting expense
                    shall be limited to preparation of annual reconciliation of
                    estimated and actual Operating Costs.

                    In the event that the Building is not fully occupied during
                    any fiscal year of the Term as determined by Landlord, an
                    adjustment shall be made in computing the Basic Operating
                    Costs for such year so that Tenant pays an equitable portion
                    of all variable items of Basic Operating Costs, as
                    reasonably determined by Landlord; provided, however, that
                    in no event shall Landlord be entitled to collect in excess
                    of one hundred (100%) percent of the total Basic Operating
                    Costs from all of the tenants in the Building including
                    Tenant.

                    Basic Operating Costs shall not include specific costs
                    incurred for the account of, separately


                                    
<PAGE>   9




                    billed to and paid by specific tenants. Notwithstanding
                    anything herein to the contrary, in any instance wherein
                    Landlord, in Landlord's sole discretion, deems Tenant to be
                    responsible for any amounts greater than Tenant's
                    Proportionate Share, Landlord shall have the right to
                    allocate costs in any manner Landlord reasonably deems
                    appropriate.

                    B. PAYMENT OF ESTIMATED BASIC OPERATING COSTS. "Estimated
                    Basic Operating Costs" for any particular year shall mean
                    Landlord's estimate of the Basic Operating Cost for such
                    fiscal year made prior to commencement of such fiscal year
                    as hereinafter provided. Landlord shall have the right from
                    time to time to revise its fiscal year and interim
                    accounting periods so long as the periods as so revised are
                    reconciled with prior periods in accordance with generally
                    accepted accounting principles applied in a consistent
                    manner. During the last month of each fiscal year during the
                    Term, or as soon thereafter as practicable, Landlord shall
                    give Tenant written notice of the Estimated Basic Operating
                    Costs for the ensuing fiscal year. Tenant shall pay Tenant's
                    Proportionate Share of the Estimated Basic Operating Cost
                    with installments of Base Rent for the fiscal year to which
                    the Estimated Basic Operating Cost applies in monthly
                    installments on the first day of each calendar month during
                    such year, in advance. If at any time during the course of
                    the fiscal year, Landlord determines that Basic Operating
                    Cost is projected to vary from the then Estimated Basic
                    Operating Cost by more than ten (10%) percent, Landlord may,
                    by written notice to Tenant, revise the Estimated Basic
                    Operating cost for the balance of such fiscal year, and
                    Tenant's monthly installments for the remainder of such year
                    shall be adjusted so that by the end of such fiscal year
                    Tenant has paid to Landlord Tenant's Proportionate Share of
                    the revised Estimated Basic Operating Cost for such year.
                    Upon execution of this Lease, Tenant shall pay to Landlord
                    the Estimated Basic Operating Cost for such year. Upon
                    execution of this Lease, Tenant shall pay to Landlord the
                    Estimated Basic Operating Cost for the Premises (calculated
                    on the estimated rentable square feet) for the first full
                    month of the Term. Upon final determination of the rentable
                    square feet, Landlord and Tenant shall adjust such estimated
                    payment.

                    C. COMPUTATION OF BASIC OPERATING COST ADJUSTMENT. "Basic
                    Operating Cost Adjustment" shall mean the difference between
                    Estimated Basic Operating Cost and Basic Operating Cost for
                    any fiscal year determined as hereinafter provided. Within
                    one hundred twenty (120) days after the end of each fiscal
                    year, as determined by Landlord, or as soon thereafter as
                    practicable, Landlord shall deliver to Tenant a statement of
                    Basic Operating Cost for the fiscal year just ended,
                    accompanied by a computation of Basic Operating Cost
                    Adjustment. If such statement shows that Tenant's payment
                    based upon Estimated Basic Operating Cost is less than
                    Tenant's Proportionate Share of Basic Operating Cost, then
                    Tenant shall pay to Landlord the difference within twenty
                    (20) days after receipt of such statement. If such statement
                    shows that Tenant's payments of Estimated Basic Operating
                    Cost exceed Tenant's Proportionate Share of Basic Operating
                    Cost, then (provided that Tenant is not in Default under
                    this Lease) Landlord shall credit the difference against the
                    Estimated Basic Operating Cost payment next due. If this
                    Lease has been terminated or the Term hereof has expired
                    prior to the date of such statement, then the Basic
                    Operating Cost Adjustment shall be paid by the appropriate
                    party within twenty (20) days after the date of delivery of
                    the statement and this obligation shall survive termination
                    of the Lease. Should this Lease commence or terminate at any
                    time other than the first day of the fiscal year, Tenant's
                    Proportionate Share of the Basic Operating Cost adjustment
                    shall be prorated by reference to the exact number of
                    calendar days during such fiscal year that this Lease is in
                    effect.

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


                                      
<PAGE>   10




                    be necessary to the Building or the Project.

                    E. TENANT AUDIT. In the event that Tenant shall dispute the
                    amount set forth in any statement provided by Landlord under
                    Paragraph 7.B. or 7.C. above, Tenant shall have the right,
                    not later than sixty (60) days following the receipt of such
                    statement and upon the condition that Tenant shall have paid
                    Landlord the full amount that has been invoiced, to cause
                    Landlord's books and records with respect to Basic Operating
                    Cost for such fiscal year to be audited by certified public
                    accountants selected by Tenant and subject to Landlord's
                    reasonable right of approval. The Basic Operating Cost
                    Adjustment shall be appropriately adjusted on the basis of
                    such audit and the appropriate party shall pay to the other
                    all amounts found by such audit to be owing within thirty
                    (30) days. If such audit discloses a liability for a refund
                    in excess of five (5%) percent of Tenant's Proportionate
                    Share of the Basic Operating Cost Adjustment previously
                    reported, the cost of such audit shall be borne by Landlord;
                    otherwise the cost of such audit shall be paid by Tenant. If
                    Tenant shall not request an audit in accordance with the
                    provisions of this Paragraph 7.E. within sixty (60) days
                    after receipt of Landlord's statement provided pursuant to
                    Paragraph 7.B. or 7.C., such statement shall be final an
                    binding for all purposes hereof.

INSURANCE AND  8.   A. Landlord's Insurance. Landlord agrees to maintain
INDEMNIFICATION     insurance insuring the Building against fire, lightning,
                    vandalism and malicious mischief (including, if Landlord
                    elects, "All Risk" coverage, earthquake, and/or flood
                    insurance), in an amount of not less than one hundred (100%)
                    percent of the current replacement cost thereof, except
                    where commercially unreasonable, with deductibles and the
                    form and endorsements of such coverage as selected by
                    Landlord. Such insurance may also include, at Landlord's
                    option, insurance against loss of Base Rent and Additional
                    Rent, in an amount equal to the amount of Base Rent and
                    Additional Rent payable by Tenant for a period of at least
                    twelve (12) months commencing on the date of loss. Such
                    insurance shall be for the sole benefit of Landlord and
                    under Landlord's sole control. Landlord shall not be
                    obligated to insure any furniture, equipment, machinery,
                    goods or supplies which Tenant may keep or maintain in the
                    Premises, or any leasehold improvements, additions or
                    alterations within the Premises. Landlord may also carry
                    such other insurance as Landlord may deem prudent or
                    advisable, including, without limitation, liability
                    insurance in such amounts and on such terms as Landlord
                    shall determine.

                    B. TENANT'S INSURANCE.

                    (1) PROPERTY INSURANCE. Tenant shall procure at Tenant's
                    sole cost and expense and keep in effect from the date of
                    this Lease and at all times until the end of the Term,
                    insurance on all personal property, Fixtures and all
                    improvements made by or for Tenant to the Premises, insuring
                    such property for the full replacement value of such
                    property, exclusive of reasonable deductibles.

                    (2) LIABILITY INSURANCE. Tenant shall procure at Tenant's
                    sole cost and expense and keep in effect from the date of
                    this Lease and at all times until the end of the Term either
                    Comprehensive General Liability insurance or Commercial
                    General Liability insurance applying to the use and
                    occupancy of the Premises and the Building, and any part of
                    either, and any areas adjacent thereto, and the business
                    operated by Tenant, or by any other occupant on the
                    Premises. Such insurance shall include Broad Form
                    Contractual Liability insurance coverage insuring all of
                    Tenant's indemnity obligations under this Lease. Such
                    coverage shall have a minimum combined single limit of
                    liability of at least two million dollars ($2,000,000.00),
                    and a general aggregate limit of five million dollars
                    ($5,000,000.00). All such policies shall be written to apply
                    to all bodily injury, property damage or loss, personal
                    injury and other covered loss, however occasioned, occurring
                    during the policy term, shall be endorsed to add Landlord,
                    Riggs Bank N.A., as trustee of Multi-Employer Trust, the
                    Multi-Employer Trust, Kennedy Associates Real Estate
                    Counsel, Inc., and the officers, agents and employees of
                    each of the foregoing entities, and any party of which
                    Tenant has been


                                      
<PAGE>   11




                    notified holding an interest to which this Lease may be
                    subordinated as an additional insured, and shall provide
                    that such coverage shall be primary as it pertains to the
                    Premises and that any insurance maintained by Landlord
                    pertaining to the Premises shall be excess insurance only.
                    Such coverage shall also contain endorsements: (i) deleting
                    any employee exclusion on personal injury coverage; (ii)
                    including employees as additional insureds; (iii) deleting
                    any liquor liability exclusion; and (iv) providing for
                    coverage of employer's automobile non-ownership liability.
                    All such insurance shall provide for severability of
                    interests; shall provide that an act or omission of one of
                    the named insureds shall not reduce or avoid coverage to the
                    other named insureds; and shall afford coverage for all
                    claims based on acts, omissions, injury and damage, which
                    claims occurred or arose (or the onset of which occurred or
                    arose) in whole or in part during the policy period. Said
                    coverage shall be written on an "occurrence" basis, if
                    available. If an "occurrence" basis form is not available,
                    Tenant must purchase "tail" coverage for the most number of
                    years available, and tenant must also purchase "tail"
                    coverage if the retroactive date of an "occurrence" basis
                    form is changed so as to leave a gap in coverage for
                    occurrences that might have occurred in prior years. If a
                    "claims made" policy is ever used, the policy must be
                    endorsed so that Landlord is given the right to purchase
                    "tail" coverage should Tenant for any reason not do so or if
                    the policy is to be cancelled for nonpayment of premium.

                    (3) GENERAL INSURANCE REQUIREMENTS. All coverages described
                    in this Paragraph 8.B. shall be endorsed to provide Landlord
                    with thirty (30) days' notice of cancellation or change in
                    terms. If at any time during the Term the amount or coverage
                    of insurance which Tenant is required to carry under this
                    Paragraph 8.B. is, in Landlord's reasonable judgment,
                    materially less than the amount or type of insurance
                    coverage typically carried by owners or tenants of
                    properties located in the general area in which the Premises
                    are located which are similar to and operated for similar
                    purposes as the Premises, Landlord shall have the right to
                    require Tenant to increase the amount or change the types of
                    insurance coverage required under this Paragraph 8.B. All
                    insurance policies required to be carried under this Lease
                    shall be written by companies rated A or better in "Best's
                    Insurance Guide" and authorized to do business in
                    California. Any deductible amounts under any insurance
                    policies required hereunder shall be subject to Landlord's
                    prior written approval. In any event deductible amounts
                    shall not exceed five thousand dollars ($5,000.00). Tenant
                    shall deliver to Landlord on or before the Term Commencement
                    Date, and thereafter at least thirty (30) days before the
                    expiration dates of the expiring policies, certified copies
                    of Tenant's insurance policies, or a certificate evidencing
                    the same issued by the insurer thereunder, showing that all
                    premiums have been paid for the full policy period; and, in
                    the event Tenant shall fail to procure such insurance, or to
                    deliver such policies or certificates, Landlord may, at
                    Landlord's option and in addition to Landlord's other
                    remedies in the event of a Default by Tenant hereunder,
                    procure the same for the account of Tenant, and the cost
                    thereof shall be paid to Landlord as Additional Rent.

                    C. INDEMNIFICATION. Landlord shall not be liable to Tenant
                    for any loss or damage to person or property caused by
                    theft, fire, acts of God, acts of a public enemy, riot,
                    strike, insurrection, war, court order, requisition or order
                    of governmental body or authority or for any damage or
                    inconvenience which may arise through repair or alteration
                    of any part of the Building or the Project or failure to
                    make any such repair, except as expressly otherwise provided
                    in Paragraph 10. Tenant shall indemnify, defend by counsel
                    reasonably acceptable to Landlord, protect and hold Landlord
                    harmless from and against any and all liabilities, losses,
                    costs, damages, injuries or expenses, including reasonable
                    attorneys' fees and court costs, arising out of or related
                    to: (1) claims of injury to or death of persons or damage to
                    property occurring or resulting directly or indirectly from
                    the use or occupancy of the Premises, or from activities of
                    Tenant or Tenant's Parties (2) claims for work or labor
                    performed, or for materials or supplies furnished to or at
                    the request of Tenant in connection with performance of any
                    work done for the account of Tenant within the Premises or
                    Project; and (3) claims arising from any breach or Default
                    on the part of Tenant in the performance of any covenant
                    contained in this Lease. The foregoing indemnity shall not
                    be applicable to claims arising from the gross negligence or
                    willful misconduct of Landlord and Landlord shall indemnify


                                       
<PAGE>   12




                    Tenant for any loss incurred by Tenant as a direct
                    consequence of any such gross negligence or willful
                    misconduct of Landlord. The provisions of this Paragraph
                    shall survive the expiration or termination of this Lease
                    with respect to any claims or liability occurring prior to
                    such expiration or termination.

WAIVER OF      9.   To the extent permitted by law and without affecting the
SUBROGATION         coverage provided by insurance to be maintained hereunder,
                    Landlord and Tenant each waive any right to recover against
                    the other for: (a) damages for injury to or death of
                    persons; (b) damages to property; (c) damages to the
                    Premises or any part thereof, and (d) claims arising by
                    reason of the foregoing due to hazards covered by insurance
                    to the extent of proceeds recovered therefrom. This
                    provision is intended to waive fully, and for benefit of
                    each party, any rights and/or claims which might give rise
                    to a right of subrogation in favor of any insurance carrier.
                    The coverage obtained by each party pursuant to this Lease
                    shall include, without limitation, a waiver of subrogation
                    by the carrier which conforms to the provisions of this
                    Paragraph.

LANDLORD'S     10.  Landlord shall at Landlord's expense maintain the structural
REPAIRS             soundness of the structural beams of the roof, the
                    foundations and exterior walls of the Building in good
                    repair, reasonable wear and tear excepted; provided that,
                    Landlord shall not be responsible for the cost of any
                    repairs resulting from damage, destruction or deterioration
                    which is caused by Tenant or Tenant's Parties. The term
                    "exterior walls" as used herein shall not include windows,
                    glass or plate glass, doors, special store fronts or office
                    entries. Landlord shall perform on behalf of Tenant and
                    other tenants of the Project, as an item of Basic Operating
                    Cost, the exterior maintenance of the Building, the Project,
                    and public and common areas of the Project, including but
                    not limited to the roof, pest extermination, the landscaped
                    areas, parking areas, driveways, the truck staging areas,
                    fire sprinkler systems, sanitary and storm sewer lines,
                    utility services, electric and telephone equipment servicing
                    the Building(s), exterior lighting, and anything which
                    affects the operation and exterior appearance of the
                    Project, which determination shall be at Landlord's sole
                    discretion. Except for the expenses directly involving the
                    items specifically described in the first sentence of this
                    Paragraph 10., Tenant shall reimburse Landlord for all such
                    costs in accordance with Paragraph 7. Any damage caused by
                    or repairs necessitated by any act of Tenant or Tenant's
                    Parties may be repaired by Landlord at Landlord's option and
                    at Tenant's expense. Tenant shall immediately give Landlord
                    written notice of any defect or need of repairs after which
                    Landlord shall have a reasonable opportunity to repair same.
                    Landlord's liability with respect to any defects, repairs,
                    or maintenance for which Landlord is responsible under any
                    of the provisions of this Lease shall be limited to the cost
                    of such repairs or maintenance. Except in case of emergency,
                    Landlord shall provide Tenant with reasonable notice before
                    entering the Premises to conduct repairs.

TENANT'S       11.  Tenant shall at Tenant's expense throughout the Term of this
REPAIRS             Lease maintain all parts of the Premises in a good, clean
                    and secure condition and promptly make all necessary repairs
                    and replacements, including but not limited to all windows,
                    glass, doors, walls and wall finishes, floor covering,
                    heating, ventilating and air conditioning systems, truck
                    doors, dock bumpers, dock plates and levelers, plumbing work
                    and Fixtures, roof (exclusive of structural beams),
                    downspouts, electrical and lighting systems, and fire
                    sprinklers. Tenant shall at Tenant's expense also perform
                    regular removal of trash and debris. If required by the
                    railroad company, Tenant agrees to sign a joint maintenance
                    agreement governing the use of the rail spur, if any. Tenant
                    shall, at Tenant's own expense, enter into a regularly
                    scheduled preventive maintenance/service contract with a
                    maintenance contractor for servicing all hot water, heating
                    and air conditioning systems and equipment within or serving
                    the Premises. The maintenance contractor and the contract
                    must be approved by Landlord. The service contract must
                    include all services suggested by the equipment manufacturer
                    within the operation/ maintenance manual and must become
                    effective and a copy thereof delivered to Landlord within
                    thirty (30) days after the Term Commencement Date. Tenant
                    shall not damage any demising wall or disturb the integrity
                    and support provided by any demising wall and shall, at its
                    sole expense, immediately repair any damage to any demising
                    wall caused


                                      
<PAGE>   13




                    by Tenant or Tenant's Parties. To the extent permitted by
                    applicable contracts or law, Landlord shall make available
                    to Tenant the benefits of any contractor warranties
                    applicable to items for which Tenant has repair, maintenance
                    or replacement responsibility hereunder, provided, however,
                    that Landlord shall not be obligated to incur any cost or
                    liability in so doing.

ALTERATIONS 12.     Tenant shall not make, or allow to be made, any Alterations
                    or physical additions in, about or to the Premises without
                    obtaining the prior written consent of Landlord, except as
                    stated below, which consent shall not be unreasonably
                    withheld with respect to proposed alterations and additions
                    which: (a) comply with all applicable laws, ordinances,
                    rules and regulations; (b) are in Landlord's opinion
                    compatible with the Project and its mechanical, plumbing,
                    electrical, heating/ventilation/air conditioning systems,
                    (c) are constructed utilizing Union Labor as set forth in
                    Section 2.4. of Exhibit B-1; (d) will not interfere with the
                    use and occupancy of any other portion of the Building or
                    the Project by any other tenant or its invitees; (e) are
                    performed promptly and in a workman like manner; (f) the
                    Project remains lien free as a result of the construction;
                    and (g) are constructed using all new materials. The term
                    "Alteration" as used herein is defined as alterations,
                    additions, substitutions, installations, changes and
                    improvements, but excludes minor decorations. So long as
                    Tenant is not in Default under this Lease, Tenant shall have
                    the right to make up to fifteen thousand dollars ($15,000)
                    worth of Alterations to the Premises per year, which would
                    otherwise be permissible under the Lease and which do not
                    involve demolition or effect the structural parts or
                    exterior of the Building, without obtaining the prior
                    written consent of Landlord. Prior to commencing any
                    construction, Tenant shall nevertheless submit to Landlord
                    copies of its plans and specification, and Tenant's work
                    shall be performed pursuant to the other requirements of
                    this section. Specifically, but without limiting the
                    generality of the foregoing, Landlord shall have the right
                    of written consent for all plans and specifications for the
                    proposed Alterations or additions, construction means and
                    methods, all appropriate permits and licenses, any
                    contractor or subcontractor to be employed on the work of
                    Alteration or additions, and the time for performance of
                    such work. Tenant shall also supply to Landlord any
                    documents and information reasonably requested by Landlord
                    in connection with Landlord's consideration of a request for
                    approval hereunder. Tenant shall reimburse Landlord for all
                    costs which Landlord may incur in connection with granting
                    approval to Tenant for any such Alterations and additions,
                    including any costs or expenses which Landlord may incur in
                    electing to have outside architects and engineers review
                    said plans and specifications. All such Alterations,
                    physical additions or improvements shall remain the property
                    of Tenant until termination of this Lease, at which time
                    they shall be and become the property of Landlord if
                    Landlord so elects; provided, however, that Landlord may, at
                    Landlord's option, require that Tenant, at Tenant's expense,
                    remove any or all Alterations, additions, improvements and
                    partitions made by Tenant and restore the Premises by the
                    termination of this Lease, whether by lapse of time, or
                    otherwise, to their condition existing prior to the
                    construction of any such alterations, additions, partitions
                    or leasehold improvements, except for initial Tenant
                    Improvements made pursuant to Exhibit B-1. All such removals
                    and restoration shall be accomplished in a good and
                    workmanlike manner so as not to cause any damage to the
                    Premises or Project whatsoever. If Tenant fails to so remove
                    such alterations, additions, improvements and partitions or
                    Tenant's Trade Fixtures or furniture, Landlord may keep and
                    use them or remove any of them and cause them to be stored
                    or sold in accordance with applicable law, at Tenant's sole
                    expense. In addition to and wholly apart from Tenant's
                    obligation to pay Tenant's Proportionate Share or Basic
                    Operating Cost, Tenant shall be responsible for and shall
                    pay prior to delinquency any taxes or governmental service
                    fees, possessory interest taxes, fees or charges in lieu of
                    any such taxes, capital levies, or other charges imposed
                    upon, levied with respect to or assessed against its
                    personal property, on the value of the alterations,
                    additions or improvements within the Premises, and on
                    Tenant's 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.


                                      
<PAGE>   14






SIGNS          13.  Subject to the provisions of this Section, Tenant may, at
                    Tenant's cost , erect a sign on the Premises. All signs,
                    notices, graphics and advertising balloons of every kind or
                    character, visible in or from public view or corridors, the
                    common areas or the exterior of the Premises, shall be
                    subject to Landlord's prior written approval. Landlord shall
                    provide, at Landlord's cost, monument signage on Oyster
                    Point Boulevard which identifies Tenant's business. Tenant
                    shall not place or maintain any banners whatsoever or any
                    window decor in or on any exterior window or window fronting
                    upon any common areas or service area or upon any truck
                    doors or man doors without Landlord's prior written
                    approval. Any installation of signs or graphics on or about
                    the Premises and Project shall be subject to any applicable
                    governmental laws, CC&Rs, ordinances, regulations and to any
                    other reasonable requirements imposed by Landlord. Tenant
                    shall remove all such signs and graphics prior to the
                    termination of this Lease. Such installations and removals
                    shall be made in such manner as to avoid injury or
                    defacement of the Premises, the Building or the Project and
                    any other improvements contained therein, and Tenant shall
                    repair any injury or defacement, including without
                    limitation, discoloration caused by such installation or
                    removal.

INSPECTION/    14.  After reasonable notice, except in emergencies where no such
POSTING NOTICES     notice shall be required, Landlord, and Landlord's agents
                    and representatives, shall have the right to enter the
                    Premises to inspect the same, to clean, to perform such work
                    as may be permitted or required hereunder, to make repairs
                    or alterations to the Premises or Project or to other tenant
                    spaces therein, to deal with emergencies, to post such
                    notices as may be permitted or required by law to prevent
                    the perfection of liens against Landlord's interest in the
                    Project or to exhibit the Premises to prospective tenants,
                    purchasers, encumbrances or others, or for any other purpose
                    as Landlord may deem necessary or desirable; provided,
                    however, that Landlord shall use reasonable efforts not to
                    unreasonably interfere with Tenant's business operations.
                    Provided that Tenant is not in Default hereunder, Landlord
                    shall not advertise or show the Premises to prospective
                    successor tenants except during the last twelve (12) months
                    of the Lease term. Tenant shall not be entitled to any
                    abatement of Rent by reason of the exercise of any such
                    right of entry. At any time within six (6) months prior to
                    the end of the Term, Landlord shall have the right to erect
                    on the Premises and/or Project a suitable sign indicating
                    that the Premises are available for lease, but agrees not to
                    attach such sign directly to the Building. Tenant shall give
                    written notice to Landlord at least thirty (30) days prior
                    to vacating the Premises and shall meet with Landlord for a
                    joint inspection of the Premises at the time of vacating. In
                    the event of Tenant's failure to give such notice or
                    participate in such joint inspection, Landlord's inspection
                    at or after Tenant's vacating the Premises shall
                    conclusively be deemed correct for purposes of determining
                    Tenant's responsibility for repairs and restoration.

UTILITIES      15.  Tenant shall pay directly for all water, gas, heat, air
                    conditioning, light, power, telephone, sewer, sprinkler
                    charges and other utilities and services used on or from the
                    Premises, together with any taxes, penalties, surcharges or
                    the like pertaining thereto, and maintenance charges for
                    utilities and shall furnish all electric light bulbs,
                    ballasts and tubes. If any such services are not separately
                    metered to Tenant, Tenant shall pay a reasonable proportion,
                    as determined by Landlord, of all charges jointly serving
                    other premises. Landlord shall not be liable for any damages
                    directly or indirectly resulting from nor shall the Rent or
                    any monies owed Landlord under this Lease herein reserved be
                    abated by reason of: (a) the installation, use or
                    interruption of use of any equipment used in connection with
                    the furnishing of any such utilities or services; (b) the
                    failure to furnish or delay in furnishing any such utilities
                    or services when such failure or delay is caused by acts of
                    God or the elements, labor disturbances of any character, or
                    any other accidents or other conditions beyond the
                    reasonable control of Landlord; or (c) the limitation,
                    curtailment, rationing or restriction on use of water,
                    electricity, gas or any other form of energy or any other
                    service or utility whatsoever serving the Premises or
                    Project. Landlord shall be entitled to cooperate voluntarily
                    and in a reasonable manner with the efforts of national,
                    state or local governmental agencies or utility suppliers in
                    reducing energy or other resource consumption. The
                    obligation to make services available hereunder shall be
                    subject to the limitations of any such voluntary, reasonable
                    program.

                                       

<PAGE>   15






SUBORDINATION  16.  Without the necessity of any additional document being
                    executed by Tenant for the purpose of effecting a
                    subordination, this Lease shall be subject and subordinate
                    at all times to: (a) all ground leases or underlying leases
                    which may now exist or hereafter be executed affecting the
                    Premises and/or the land upon which the Premises and Project
                    are situated, or both; and (b) any mortgage or deed of trust
                    which may now exist or be placed upon said Project, land,
                    ground leases or underlying leases, or Landlord's interest
                    or estate in any of said items which is specified as
                    security. At the request of Tenant, Landlord will endeavor
                    to obtain from the secured party under any mortgage or deed
                    of trust which is senior to this Lease, a nondisturbance
                    agreement upon such lender's customary form therefor.
                    Notwithstanding the foregoing, Landlord shall have the right
                    to subordinate or cause to be subordinated any such ground
                    leases or underlying leases or any such lines to this Lease.
                    In the event that any ground lease or underlying lease
                    terminates for any reason or any mortgage or deed of trust
                    is foreclosed or a conveyance in lieu of foreclosure is made
                    for any reason, Tenant shall, notwithstanding any
                    subordination, attorn to and become the Tenant of the
                    successor in interest to Landlord at the option of such
                    successor in interest. Within ten (10) days after request by
                    Landlord, Tenant shall execute and deliver any additional
                    documents evidencing Tenant's attornment or the
                    subordination of this Lease with respect to any such ground
                    leases or underlying leases or any such mortgage or deed of
                    trust, in the form requested by landlord or by any ground
                    landlord, mortgagee, or beneficiary under a deed of trust.

FINANCIAL      17.  At the request of Landlord, Tenant shall provide to Landlord
STATEMENTS          Tenant's current financial statement or other information
                    discussing financial worth of Tenant within thirty (30) days
                    after the date of Landlord's request, which Landlord shall
                    use solely for purposes of this Lease and in connection with
                    the ownership, management and disposition of the Project.

ESTOPPEL       18.  Tenant agrees from time to time, within ten (10) business
CERTIFICATE         days after request of Landlord, to deliver to Landlord, or
                    Landlord's designee, an estoppel certificate per Exhibit D
                    or in an alternate form that the requesting party may
                    require stating that this Lease is in full force and effect,
                    the date to which Rent has been paid, the unexpired portion
                    of this Lease, and such other matters pertaining to this
                    Lease as may be reasonably requested by Landlord. Landlord
                    and Tenant intend that any statement delivered pursuant to
                    this Paragraph may be relied upon by any mortgagee,
                    beneficiary, purchaser or prospective purchaser of the
                    Project or any interest therein. The parties agree that
                    Tenant's obligation to furnish such estoppel certificates in
                    a timely fashion is a material inducement for Landlord's
                    execution of the Lease, and shall be an Event of Default if
                    Tenant fails to fully comply. Tenant acknowledges that
                    failure to provide the Estoppel Certificate to Landlord or
                    Landlord's designee within the time provided above may cause
                    Landlord to incur substantial damages. Tenant hereby agrees
                    to indemnify Landlord for any liabilities, losses, costs,
                    damages (including, without limitation, compensatory,
                    incidental and consequential damages), injuries or expenses
                    arising from the failure of Tenant to deliver the Estoppel
                    certificate in the manner provided in this Paragraph within
                    twenty (20) business days after requested by Landlord. In
                    addition to any other remedies Landlord may have at law and
                    equity, Landlord shall be entitled to specific performance
                    of this Paragraph. The provisions of this Paragraph shall
                    survive the expiration or termination of this Lease with
                    respect to any claims or liability occurring prior to such
                    expiration or termination.

SECURITY       19.  Tenant agrees to deposit with Landlord upon execution of
DEPOSIT             this Lease, a Security Deposit as stated in the
                    Basic Lease Information, which sum shall be held by
                    Landlord, without obligation for interest, as security for
                    the performance of Tenant's covenants and obligations under
                    this Lease. The Security Deposit is not an advance rental
                    deposit or a measure of damages incurred by Landlord in case
                    of Tenant's Default. Landlord is not required to keep all or
                    any part of the Security Deposit separate from its general
                    accounts. Upon the occurrence of any Event of Default by
                    Tenant, Landlord may, from time to time, without prejudice
                    to any other remedy provided herein or provided by law, use
                    such fund to the extent necessary to make good any arrears
                    of Rent or other payments due to Landlord hereunder, and any
                    other damage, injury, expense or liability caused by such
                    Event of Default, and


                                       

<PAGE>   16




                    Tenant shall pay to Landlord, on demand, the amount so
                    applied in order to restore the Security Deposit to its
                    original amount. Although the Security Deposit shall be
                    deemed the property of Landlord, any remaining balance of
                    such deposit shall be returned by Landlord to Tenant at such
                    time after termination of this Lease that all of Tenant's
                    obligation under this Lease have been fulfilled. Landlord
                    may use and commingle the Security Deposit with other funds
                    of Landlord. Tenant agrees, represents and warrants that all
                    of Tenant's Work will be free and clear of all liens and
                    encumbrances of any kind as and when installed, and shall
                    immediately become subject to Landlord's first lien security
                    interest in such work. As additional security, Tenant agrees
                    to execute and deliver to Landlord a Uniform Commercial Code
                    Financing Statement and Security Agreement on all Trade
                    Fixtures and improvements otherwise made pursuant to
                    Tenant's Work as set forth in Exhibit B in a form reasonably
                    satisfactory to the Landlord.

TENANT'S       20.  The liability of Landlord to Tenant for any default by
REMEDIES            Landlord under the terms of this Lease are not personal
                    obligations of the Landlord or other trustees, advisors,
                    partners, directors, officers and shareholders of Landlord,
                    and Tenant agrees to look solely to Landlord's interest in
                    the Project (including net revenues generated by the
                    Project) together with proceeds of sale, insurance proceeds,
                    and any award or settlement in eminent domain for the
                    recovery of any amount from Landlord, and shall not look to
                    other assets of Landlord nor seek recourse against the
                    assets of the Landlord or other trustees, advisors,
                    partners, directors, officers and shareholders of Landlord.



ASSIGNMENT AND 21.  A. GENERAL. Tenant shall not assign this Lease or sublet the
SUBLETTING          Premises or any part thereof without Landlord's
                    prior written approval. If Tenant desires to assign this
                    Lease, it must present the Landlord with an ERISA
                    Certificate in compliance with the provisions of Paragraph
                    37. of this Lease signed by the potential assignee,
                    demonstrate that the potential assignee has adequate credit,
                    demonstrate to the Landlord's satisfaction that the
                    potential assignee's proposed use of the Premises is
                    compatible with the Project and complies with all applicable
                    laws, ordinances, rules and regulations. If Tenant desires
                    to assign this Lease or sublet any or all of the Premises,
                    Tenant shall give Landlord written notice sixty (60) days
                    prior to the anticipated effective date of the assignment or
                    sublease. Landlord shall then have a period of fifteen (15)
                    days following receipt of such notice to notify Tenant in
                    writing whether Landlord elects to permit Tenant to assign
                    this Lease or sublet such space, subject, however, to
                    Landlord's prior written approval of the proposed assignee
                    or subtenant and of any related documents or agreements
                    associated with the assignment or sublease. Landlord's
                    consent to a proposed assignment of sublet shall not be
                    unreasonably withheld. Without limiting the other instances
                    in which it may be reasonable for Landlord to withhold
                    Landlord's consent to an assignment or subletting, Landlord
                    and Tenant acknowledge that it shall be reasonable for
                    Landlord to withhold Landlord's consent in the following
                    instances: The use of the Premises by such proposed assignee
                    or subtenant would not be a permitted use or would increase
                    the Parking Density of the Project; the proposed assignee or
                    subtenant is not of sound financial condition, as reasonably
                    determined by Landlord after receipt of the proposed
                    assignee's financial statements in form satisfactory to
                    Landlord; the proposed assignee or subtenant is a
                    governmental agency; the proposed assignee or subtenant does
                    not have a good reputation as a tenant of property; the
                    proposed assignee or subtenant is a person with whom
                    Landlord is negotiating to lease space in the Project; the
                    assignment of subletting would entail any alterations which
                    would lessen the value of the leasehold improvements in the
                    Premises; or if Tenant is in Default of any obligation of
                    Tenant under this Lease, or Tenant has defaulted under this
                    Lease on three (3) or more occasions during any twelve (12)
                    months preceding the date that Tenant shall request consent.
                    Failure by Landlord to approve a proposed assignee or
                    subtenant shall not cause a termination of this Lease.
                    Notwithstanding anything to the contrary in this Paragraph
                    21., Tenant shall have the right to assign the Premises to
                    any entity without first obtaining consent of Landlord
                    resulting from a merger or consolidation with Tenant, a
                    public offering and sale of some or all of Tenant's stock, a
                    transfer of shares of Tenant's stock on the public stock
                    exchange, or a transfer of the Lease in connection with the
                    sale of all or substantially all of Tenant's assets;

                                       

<PAGE>   17




                    provided that: (a) Tenant shall not be in Default of any of
                    its obligations under this Lease and shall not have
                    previously defaulted under this Lease on three (3) or more
                    occasions during any twelve (12) month period preceding the
                    date of such transaction, (b) Tenant shall give Landlord at
                    least sixty (60) days prior written notice of any such
                    proposed transaction, (c) the entity which results from the
                    merger, consolidation or other transaction of Tenant shall
                    have a net equity of at least Ten Million Dollars
                    ($10,000,000) which has been demonstrated in appropriate
                    documentation delivered to Landlord prior to the occurrence
                    of such transaction, and (d) such entities shall execute an
                    ERISA Certificate as set forth in Paragraph 37. The right to
                    assign and/or sublet the Premises is personal to the Tenant
                    and shall not inure to the benefit of any assignee,
                    subtenant or successor of Tenant.

                    B. BONUS RENT. Any Rent or other consideration realized by
                    Tenant under any approved sublease or assignment in excess
                    of the Rent payable hereunder, after deducting on an
                    amortized basis Tenant's actual payment of a reasonable
                    brokerage commission, reasonable attorneys' fees, reasonable
                    marketing expenses related to the subletting, reasonable
                    costs of Tenant's improvements to the subleased or assigned
                    premises for the subtenant's use, and the unamortized
                    portion of Tenant's Work, as defined in Exhibit B-1,
                    attributed to the subleased or assigned premises in excess
                    of the Tenant Improvement Allowance, as defined in Exhibit
                    B-1, shall be divided and paid, fifty (50%) percent to
                    Tenant, fifty (50%) percent to Landlord. The deduction for
                    the unamortized portion of Tenant's Work shall be based on a
                    7 1/2 year amortization period at a rate of eleven percent
                    (11%) per annum. All other reasonable costs shall be fully
                    amortized over the term of the sublease at a rate of eleven
                    percent (11%) per annum.

                    C. CORPORATION. If Tenant is a corporation, a transfer of
                    corporate shares by sale, assignment, bequest, inheritance,
                    operation of law or other disposition (including such a
                    transfer to or by a receiver or trustee in federal or state
                    bankruptcy, insolvency or other proceedings), so as to
                    result in a change in the present control of such
                    corporation or any of its parent corporations by the person
                    or persons owning a majority of said corporate shares, shall
                    constitute an assignment for purposes of this Lease.

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

                    E. LIABILITY. No assignment or subletting by Tenant shall
                    relieve Tenant of any obligation under this Lease. Any
                    assignment or subletting which conflicts with the provisions
                    hereof shall be void.

                    F. OPTIONS. Tenant must be in possession of the entire
                    Premises in order to exercise its options to renew and/or
                    expand, and/or expend under this Lease.

AUTHORITY      22.  Landlord represents and warrants that it has full right and
OF PARTIES          authority to enter into this Lease and to perform all of
                    Landlord's obligations hereunder. Tenant represents and
                    warrants that it has full right and authority to enter into
                    this Lease and to perform all of Tenant's obligations
                    hereunder.

                                       

<PAGE>   18






CONDEMNATION   23.  A. CONDEMNATION RESULTING IN TERMINATION. If the whole or
                    any substantial part of the Premises, the Building, and/or
                    the Project of which the Premises are a part should be taken
                    or condemned for any public use under governmental law,
                    ordinance or regulation, or by right of eminent domain, or
                    by private purchase in lieu thereof, and the taking would
                    prevent or materially interfere with the Permitted Use of
                    the Premises, this Lease shall terminate and the Rent shall
                    abated during the unexpired portion of this Lease, effective
                    when the physical taking of said Premises shall have
                    occurred.

                    B. CONDEMNATION NOT RESULTING IN TERMINATION. If a portion
                    of the Project of which the Premises are a part should be
                    taken or condemned for any public use under any governmental
                    law, ordinance, or regulation, or by right of eminent
                    domain, or by private purchase in lieu thereof, and this
                    Lease is not terminated as provided in Paragraph 23.A.
                    above, this Lease shall not terminate, but the Rent payable
                    hereunder during the unexpired portion of the Lease shall be
                    reduced, beginning on the date when the physical taking
                    shall have occurred, to such amount as may be fair and
                    reasonable under all of the circumstances.

                    C. AWARD. Landlord shall be entitled to any and all payment,
                    income, rent, award, or any interest therein whatsoever
                    which may be paid or made in connection with such taking or
                    conveyance and Tenant shall have no claim against Landlord
                    or otherwise for the value of any unexpired portion of this
                    Lease. Notwithstanding the foregoing, any compensation
                    specifically awarded Tenant for loss of business, Tenant's
                    personal property, moving costs or loss of goodwill, shall
                    be and remain the property of Tenant and Tenant shall have
                    the right to make any claim for the value of its interest in
                    the Property, including, without limitation, the unamortized
                    value of Tenant Improvements paid for by Tenant, as set
                    forth in Exhibit B-1, including those items set forth in
                    Exhibit B-3.

CASUALTY       24.  A. GENERAL. If the Premises or the Building should be
DAMAGE              damaged or destroyed by fire, tornado, earthquake or other
                    casualty, Tenant shall give immediate written notice thereof
                    to Landlord. Within thirty (30) days after Landlord's
                    receipt of such notice, Landlord shall notify Tenant whether
                    in Landlord's reasonable opinion such repairs can reasonably
                    be made either: (1) within ninety (90) days; (2) in more
                    than ninety (90) days but in less than one hundred eight
                    (180) days; or (3) in more than one hundred eight (180) days
                    from the date of such notice. Landlord's determination shall
                    be binding on Tenant.

                    B. LESS THAN 90 DAYS. If the Premises or the Building should
                    be damaged by fire, tornado, earthquake or other casualty
                    but only to such extent that rebuilding or repairs can in
                    Landlord's estimation be reasonably completed within ninety
                    (90) days after the date of such damage, this Lease shall
                    not terminate, and provided that insurance proceeds are
                    available to fully repair the damage, Landlord shall proceed
                    to rebuild and repair the Premises in the manner determined
                    by Landlord, except that Landlord shall not be required to
                    rebuild, repair or replace any part of the partitions.
                    Fixtures, additions and other leasehold improvements which
                    may have been placed in, on or about the Premises. If the
                    Premises are untenantable in whole or in part following such
                    damage, the Rent payable hereunder during the period in
                    which they are untenantable shall be abated proportionately,
                    but only to the extent the Premises are unfit for occupancy.

                    C. GREATER THAN 90 DAYS. If the Premises or the Building
                    should be damaged by fire, tornado, earthquake or other
                    casualty but only to such extent that rebuilding or repairs
                    can in Landlord's estimation be reasonably completed in more
                    than ninety (90) days but in less than one hundred eighty
                    (180) days, then Landlord shall have the option of either:
                    (1) terminating the Lease effective upon the date of the
                    occurrence of such damage, in which event the Rent shall be
                    abated during the unexpired portion of the Lease; or (2)
                    electing to rebuild or repair the Premises to substantially
                    the condition in which they existed prior to such damage,
                    provided that insurance proceeds are available, to fully
                    repair the damage, except that Landlord shall not be
                    required to rebuild, repair or replace any part of the
                    partitions, Fixtures, additions and other improvements which
                    may have been placed in, on or about the Premises.


                                      
<PAGE>   19




                    If the Premises are untenantable in whole or in part
                    following such damage, the Rent payable hereunder during the
                    period in which they are untenantable shall be abated
                    proportionately, but only to the extent the Premises are
                    unfit for occupancy. In the event that Landlord should fail
                    to complete such repairs and rebuilding within one hundred
                    eight days (180) days after the date upon which Landlord is
                    notified by Tenant of such damage, such period of time to be
                    extended for delays caused by the fault or neglect of Tenant
                    or because of acts of God, acts of public agencies, labor
                    disputes, strikes, fires, freight embargoes, rainy or stormy
                    weather, inability to obtain materials, supplies or fuels,
                    or delays of the contractors or subcontractors or any other
                    causes or contingencies beyond the reasonable control of
                    Landlord, Tenant may at Tenant's option within ten (10) days
                    after the expiration of such one hundred eighty (180) day
                    period (as such may be extended), terminate this Lease by
                    delivering written notice of termination to Landlord as
                    Tenant's exclusive remedy, whereupon all rights hereunder
                    shall cease and terminate thirty (30) days after Landlord's
                    receipt of such termination notice.

                    D. GREATER THAN 180 DAYS. If the Premises or the Building
                    should be so damaged by fire, tornado, earthquake or other
                    casualty that rebuilding or repairs cannot in Landlord's
                    reasonable estimation be completed within one hundred eighty
                    (180) days after such damage, this Lease shall terminate and
                    the Rent shall be abated during the unexpired portion of
                    this Lease, effective upon the date of the occurrence of
                    such damage.

                    E. TENANT'S FAULT. If the Premises or any other portion of
                    the Building is damaged by fire or other casualty resulting
                    from the fault, negligence, or breach of this Lease by
                    Tenant or any of Tenant's Parties, Base Rent and Additional
                    Rent shall not be diminished during the repair of such
                    damage and Tenant shall be liable to Landlord for the cost
                    and expense is not covered by insurance proceeds.

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

                    G. WAIVER. Except as otherwise provided in this Paragraph
                    24., Tenant hereby waives the provisions of Sections
                    1932(a), 1933(4), 1941 and 1942 of the Civil Code of
                    California.

HOLDING OVER   25.  If Tenant shall retain possession of the Premises or any
                    portion thereof without Landlord's consent following the
                    expiration of the Lease or sooner termination for any
                    reason, then Tenant shall pay to Landlord for each day of
                    such retention one hundred and fifty (150%) percent of the
                    amount of the daily rental as of the last month prior to the
                    date of expiration or termination. Tenant shall also
                    indemnify, defend, protect and hold Landlord harmless from
                    any loss, liability or cost, including reasonable attorneys'
                    fees, resulting from delay by Tenant in surrendering the
                    Premises, including, without limitation, any claims made by
                    any succeeding tenant founded on such delay. Acceptance of
                    Rent by Landlord following expiration or termination shall
                    not constitute a renewal of this Lease, and nothing
                    contained in this Paragraph 25. shall waive Landlord's right
                    of reentry or any other right. Unless Landlord consents in
                    writing to Tenant's holding over, Tenant shall be only a
                    Tenant at sufferance, whether or not Landlord accepts any
                    Rent from Tenant while Tenant is holding over without
                    Landlord's written consent. Additionally, in the event that
                    upon termination of the Lease, Tenant has not fulfilled its
                    obligation with respect to repairs and cleanup of the
                    Premises or any other Tenant obligations as set forth in
                    this Lease, then Landlord shall have the right to perform
                    any such obligations as it deems necessary at Tenant's sole
                    cost and expense, and any time required by Landlord to
                    complete such obligations shall be considered a period of

                                       

<PAGE>   20




                    holding over and the terms of this Paragraph 25. shall
                    apply.

DEFAULT        26.  A. EVENTS OF DEFAULT. The occurrence of any of the following
                    shall constitute an event of default ("Event of Default" or
                    "Default") on the part of Tenant:

                    (1) ABANDONMENT. Abandonment of the Premises for a
                    continuous period in excess of thirty (30) business days
                    will not be an Event of Default so long as Tenant timely
                    performs all other monetary and non-monetary obligations
                    under this Lease and keeps the Premises locked and secured.
                    Tenant waives any right to notice Tenant may have under
                    Section 1951.3 of the Civil Code of the State of California,
                    the terms of this Paragraph 26.A. being deemed such notice
                    to Tenant as required by said Section 1951.3.

                    (2) NONPAYMENT OF RENT. Failure to pay any installment of
                    Rent or any other amount due and payable hereunder within
                    five (5) days following the date when said payment is due.

                    (3) OTHER OBLIGATIONS. Failure to perform any obligation,
                    agreement or covenant under this Lease other than those
                    matters specified in subparagraphs (1) and (2) of this
                    Paragraph 26.A., such failure continuing for fifteen (15)
                    days after written notice of such failure. In the event
                    Tenant has commenced to cure the failure of performance
                    within the fifteen (15) day period, but has not completed
                    the cure despite diligent attempts to do so, Tenant shall
                    have an additional period not to exceed thirty (30)
                    additional days after such fifteen (15) day period to
                    complete such cure so long as Tenant continues to diligently
                    pursue the cure to completion during such additional thirty
                    (30) day period.

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

                    (5) BANKRUPTCY. The filing of any voluntary petition in
                    bankruptcy by Tenant, or the filing of an involuntary
                    petition by Tenant's creditors, which involuntary petition
                    remains undischarged for a period of 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, in such time period as may be permitted by the
                    bankruptcy court having jurisdiction, cure all Defaults of
                    Tenant hereunder outstanding as of the date of the
                    affirmance of this Lease and provide to Landlord such
                    adequate assurances as may be necessary to ensure Landlord
                    of the continued performance of Tenant's obligations under
                    this Lease.

                    (6) RECEIVERSHIP. The employment of a receiver to take
                    possession of substantially all of Tenant's assets or the
                    Premises, if such appointment remains undismissed or
                    undischarged for a period of sixty (60) days after the order
                    therefor.

                    (7) ATTACHMENT. The attachment, execution or other judicial
                    seizure of all or substantially all of Tenant's assets or
                    the Premises, if such attachment or other seizure remains
                    undismissed or undischarged for a period of sixty (60) days
                    after the levy thereof.

                    (8) DELAYS. Any delay in the construction of Landlord's Work
                    caused by Tenant or Tenant's Work as provided in Exhibit
                    B-1.

                    B. REMEDIES UPON DEFAULT.

                    (1) TERMINATION. In the event of the occurrence of any Event
                    of Default, Landlord shall have the right to give a written
                    termination notice to Tenant, and on the date specified in
                    such notice, Tenant's right to possession shall terminate,
                    and this Lease shall terminate unless on or before such date
                    all arrears of rental and all other sums payable by Tenant
                    under this Lease and all reasonable costs and expenses
                    incurred by or on behalf of Landlord hereunder shall have
                    been paid by Tenant and all other Events of Default of this
                    Lease by Tenant at the

                                       

<PAGE>   21




                    time existing shall have been fully remedied to the
                    satisfaction of Landlord. At any time after such
                    termination, Landlord may recover possession of the Premises
                    or any part thereof and expel and remove therefrom Tenant
                    and any other person occupying the same, by any lawful
                    means, and again repossess and enjoy the Premises without
                    prejudice to any of the remedies that Landlord may have
                    under this Lease, or at law or equity by reason of Tenant's
                    Default or of such termination.

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

                    C. DAMAGES AFTER DEFAULT. Should Landlord terminate this
                    Lease pursuant to the provisions of Paragraph 26.B.(1)
                    hereof, Landlord shall have the rights and remedies of a
                    Landlord provided by Section 1951.2 of the Civil Code of the
                    State of California, or successor code sections. 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: (1) the
                    worth at the time of award of the unpaid Rent and other
                    amounts which had been earned at the time of termination,
                    (2) the worth at the time of award of the amount by which
                    the unpaid Rent which would have been earned after
                    termination until the time of award exceeds the amount of
                    such Rent loss that the Tenant proves could be reasonably
                    avoided; (3) the worth at the time of award of the amount by
                    which the unpaid Rent for the balance of the Term after the
                    time of award exceeds the amount of such Rent loss that the
                    Tenant proves could be reasonably avoided; and (4) any other
                    amount necessary to compensate Landlord for all the
                    detriment proximately caused by Tenant's failure to perform
                    Tenant's obligations under this Lease or which, in the
                    ordinary course of things, would be likely to result
                    therefrom. The "worth at the time of award" of the amounts
                    referred to in (1) and (2), above shall be computed at the
                    lesser of the "prime rate," as announced from time to time
                    by Wells Fargo, N.A. (San Francisco) plus five (5)
                    percentage points, or the maximum interest rate allowed by
                    law ("Applicable Interest Rate"). The "worth at the time of
                    award" of the amount referred to in (3) above shall be
                    computed by discounting such amount at the Federal Discount
                    Rate of the Federal Reserve Bank of San Francisco at the
                    time of the award plus one (1%) percent. If this Lease
                    provides for any periods during the Term during which Tenant
                    is not required to pay Base Rent or if Tenant otherwise
                    receives a Rent concession, then upon the occurrence of an
                    Event of Default, Tenant shall owe to Landlord the full
                    amount of such Base Rent or value of such Rent concession,
                    plus interest at the applicable Interest Rate, calculated
                    from the date that such Base Rent or Rent concession would
                    have been payable.

                    D. LATE CHARGE. If any installment of Rent is not paid
                    within five (5) business days from the date when due, such
                    amount shall bear interest at the Applicable Interest Rate
                    from the date on which said payment shall be due until the
                    date on which Landlord shall receive said payment. In
                    addition, Tenant shall pay Landlord a late charge equal to
                    five (5%) percent of the delinquency, to compensate Landlord
                    for the loss of the use of the amount not paid and the
                    administrative costs caused by the delinquency, the parties
                    agreeing that Landlord's damage by virtue of such
                    delinquencies would be difficult to compute and the amount
                    stated herein represents a reasonable estimate hereof. This
                    provision shall not relieve Tenant of Tenant's obligation to
                    pay Rent at the time and in the manner herein specified.

                    E. REMEDIES CUMULATIVE. All rights, privileges and elections
                    or remedies of the parties are

                                       

<PAGE>   22




                    cumulative and not alternative, to the extent permitted by
                    law and except as otherwise provided herein.

LIENS          27.  Tenant shall keep the Premises free from liens arising out
                    of or related to work performed, materials or supplies
                    furnished or obligations incurred by Tenant or in connection
                    with work made, suffered or done by or on behalf of Tenant
                    in or on the Premises or Project. In the event that Tenant
                    shall not, within ten (10) business days following the
                    imposition of any such lien, cause the same to be released
                    of record by payment or posting of a proper bond, Landlord
                    shall have, in addition to all other remedies provided
                    herein and by law, the right, but not the obligation, to
                    cause the same to be released by such means as Landlord
                    shall deem proper, including payment of the claim giving
                    rise to such lien. All sums paid by Landlord on behalf of
                    Tenant and all expenses incurred by Landlord in connection
                    therefor shall be payable to landlord by Tenant on demand
                    with interest at the Applicable Interest Rate. Landlord
                    shall have the right at all times to post and keep posted on
                    the Premises any notices permitted or required by law, or
                    which Landlord shall deem proper, for the protection of
                    Landlord, the Premises, the Project and any other party
                    having an interest therein, from mechanics' and
                    materialmen's liens, and Tenant shall give Landlord not less
                    than five (5) business days prior written notice of the
                    commencement of any work in the Premises or Project which
                    could lawfully give rise to a claim for mechanics' or
                    materialmen's liens.

TRANSFERS BY   28.  In the event of a sale or conveyance by Landlord of the
LANDLORD            Building or the Project or a foreclosure by any creditor of
                    Landlord, the same shall operate to release Landlord from
                    any liability upon any of the covenants or conditions,
                    express or implied, herein contained in favor of Tenant, to
                    the extent required to be performed after the passing of
                    title to Landlord's successor-in-interest. In such event,
                    Tenant agrees to look solely to the responsibility of the
                    successor-in-interest of Landlord under this Lease with
                    respect to the performance of the covenants and duties of
                    "Landlord" to be performed after the passing of title to
                    Landlord's successor-in-interest. This Lease shall not be
                    affected by any such sale and Tenant agrees to attorn to the
                    purchaser or assignee. Landlord's successor(s)-in-interest
                    shall not have liability to Tenant with respect to the
                    failure to perform all of the obligations of "Landlord", to
                    the extent required to be performed prior to the date such
                    successor(s)-in-interest became the owner of the Building.

RIGHT OF       29.  All covenants and agreements to be performed by Tenant under
LANDLORD TO         any of the terms of this Lease shall be performed by Tenant
PERFORM TENANT'S    at Tenant's sole cost and expense and without any abatement
COVENANTS           of Rent. If Tenant shall fail to pay any sum of money, other
                    than Base Rent and Basic Operating cost, required to be paid
                    by Tenant hereunder or shall fail to perform any other act
                    on Tenant's part to be performed hereunder, and such failure
                    shall continue for five 95) days after notice thereof by
                    Landlord, Landlord may, but shall not be obligated to do so,
                    and without waiving or releasing Tenant from any obligations
                    of Tenant, make any such payment or perform any such act on
                    Tenant's part to be made or performed. All sums, so paid by
                    Landlord and all necessary incidental costs together with
                    interest thereon at the Applicable Interest Rate from the
                    date of such payment by Landlord shall be payable to
                    Landlord on demand, and Tenant covenants to pay such sums,
                    and Landlord shall have, in addition to any other right or
                    remedy of Landlord, the same right and remedies in the event
                    of the non-payment thereof by Tenant as in the case of
                    Default by Tenant in the payment of Base Rent and Basic
                    Operating Cost.

WAIVER         30.  If either Landlord or Tenant waives the performance of any
                    term, covenant or condition contained in this Lease, such
                    waiver shall not be deemed to be a waiver of any subsequent
                    breach of the same or any other term, covenant or condition
                    contained herein. The acceptance of Rent by Landlord shall
                    not constitute a waiver of any preceding breach by Tenant of
                    any term, covenant or condition of this Lease, regardless of
                    Landlord's knowledge of such preceding breach at the time
                    Landlord accepted such Rent. Failure by Landlord to enforce
                    any of the terms, covenants or conditions of this Lease for
                    any length of time shall not be deemed to waive or to
                    decrease the right of Landlord to insist thereafter upon
                    strict

                                      

<PAGE>   23




                    performance by Tenant. Waiver by Landlord of any term,
                    covenant or condition contained in this Lease may only be
                    made by a written document signed by Landlord.

NOTICES        31.  Each provision of this Lease or of any applicable
                    governmental laws, ordinances, regulations and other
                    requirements with reference to sending, mailing or delivery
                    of any notice or the making of any payment by Landlord or
                    Tenant to the other shall be deemed to be complied with when
                    and if the following steps are taken:

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

                    B. OTHER. All notices, demands, consents and approvals which
                    may or are required to be given by either party to the other
                    hereunder shall be in writing and either personally
                    delivered, sent by commercial overnight courier, sent by
                    facsimile, or mailed, certified or registered, postage
                    prepaid, and addressed to the party to be notified at the
                    address for such party as specified in the Basic Lease
                    Information and, in the case of Tenant, at the Premises or
                    to such other place as the party to be notified may from
                    time to time designate by at least fifteen (15) days notice
                    to the notifying party. Notices shall be deemed served upon
                    receipt or refusal to accept delivery. Tenant appoints as
                    its agent to receive the service of all default notices and
                    notice of commencement of unlawful detainer proceedings the
                    person in charge of or apparently in charge of occupying the
                    Premises at the time.

ATTORNEYS'     32.  In the event that Landlord places the enforcement of this
FEES                Lease, or any part thereof, or the collection of any Rent
                    due, or to become due hereunder, or recovery of possession
                    of the Premises in the hands of an attorney, Tenant shall
                    pay to Landlord, upon demand, Landlord's reasonable
                    attorneys' fees and court costs. In any action which
                    Landlord or Tenant brings to enforce its respective rights
                    hereunder, the unsuccessful party shall pay all costs
                    incurred by the prevailing party including reasonable
                    attorneys' fees, to be fixed by the court, and said costs
                    and attorneys' fees shall be a part of the judgment in said
                    action.

SUCCESSORS     33.  This lease shall be binding upon and inure to the benefit of
AND ASSIGNS         Landlord, its successors and assigns, and shall be binding
                    upon and inure to the benefit of Tenant, its successors, and
                    to the extent assignment is approved by Landlord hereunder,
                    Tenant's assigns.

FORCE MAJEURE  34.  In the event that Landlord shall be delayed, hindered in or
                    prevented from the performance of any act or obligation
                    required under this Lease by reason of acts of God, strikes,
                    lockouts, labor troubles or disputes, inability to procure
                    or shortage of materials or labor, failure of power or
                    utilities, delay in transportation, fire, vandalism,
                    accident, flood, severe weather, other casualty,
                    governmental requirements (including mandated changes in the
                    plans and specifications of Landlord's Work resulting from
                    changes in pertinent governmental requirements or
                    interpretations thereof), riot, insurrection, civil
                    commotion, sabotage, explosion, war, natural or local
                    emergency, acts or omissions of others, including Tenant, or
                    other reasons of a similar or dissimilar nature not solely
                    the fault of, or under the exclusive control of, Landlord
                    (individually and collectively, "Force Majeure"), then
                    performance of such act or obligation shall be excused for
                    the period of the delay and the period for the performance
                    of any such act or obligations shall be extended for the
                    period equivalent to the period of such delay.

BROKERAGE      35.  Landlord shall pay a brokerage commission to Broker in
COMMISSION          accordance with a separate agreement between Landlord and
                    Broker. Tenant warrants to Landlord that Tenant's sole
                    contact with Landlord or with the Premises in connection
                    with this transaction has been directly with Landlord and
                    Broker, and that no other broker or finder can properly
                    claim a right

                                       

<PAGE>   24




                    to a commission or a finder's fee based upon contacts
                    between the claimant and Tenant with respect to Landlord or
                    the Premises. Tenant shall indemnify, defend by counsel
                    acceptable to Landlord, protect and hold Landlord harmless
                    from and against any loss, cost or expense, including, but
                    not limited to, attorneys' fees and costs, resulting from
                    any claim for a fee or commission by any broker or finder in
                    connection with the Premises and this Lease other than
                    Broker.

MISCELLANEOUS  36.  A. GENERAL. The terms "Tenant and/or Landlord" or any
                    pronoun used in place thereof shall indicate and include the
                    masculine or feminine, the singular or plural number,
                    individuals, firms or corporations, and their respective
                    successors, executors, administrators and permitted assigns,
                    according to the context thereof.

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

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

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

                    E. MODIFICATION. This Lease may not be modified except by a
                    written instrument signed by the parties hereto.

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

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

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

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

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

               K.   DRAFTING AND DETERMINATION PRESUMPTION. The parties
                    acknowledge that this Lease has been agreed to by both the
                    parties, that both Landlord and Tenant have consulted with
                    attorneys with respect to the terms of this Lease and that
                    no presumption shall be created against Landlord because
                    Landlord drafted this Lease. Except as otherwise
                    specifically set forth in this Lease, with respect to any
                    consent, determination or estimation of Landlord required in
                    this Lease or requested of Landlord, Landlord's consent,
                    determination or estimation shall be made in Landlord's good
                    faith opinion, whether objectively reasonable or
                    unreasonable.

                                      

<PAGE>   25






                    L. EXHIBITS. Exhibits A through F attached hereto are hereby
                    incorporated herein by this reference.

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

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

                    O. WAIVER OF JURY TRIAL. IF ANY ACTION OR PROCEEDING BETWEEN
                    LANDLORD AND TENANT TO ENFORCE THE PROVISIONS OF THIS LEASE
                    (INCLUDING AN ACTION OR PROCEEDING BETWEEN LANDLORD AND THE
                    TRUSTEE OR DEBTOR IN POSSESSION WHILE TENANT IS A DEBTOR IN
                    A PROCEEDING UNDER ANY BANKRUPTCY LAW) PROCEEDS TO TRIAL,
                    LANDLORD AND TENANT HEREBY WAIVE THERI RESPECTIVE RIGHTS TO
                    A JURY IN SUCH TRIAL. Landlord and Tenant agree that this
                    Paragraph constitutes a written consent to waiver of trial
                    by jury within the meaning of California Code of Civil
                    Procedure Section 631(a)(2), and Tenant does hereby
                    authorize and empower Landlord to file this Paragraph and or
                    this Lease, as required, with the clerk or judge of any
                    court of competent jurisdiction as a written consent to
                    waiver of jury trial.

                    P. COVENANT OF QUIET ENJOYMENT. So long as Tenant is not in
                    Default under this Lease, Tenant has the right to occupy and
                    enjoy the Premises during the Term of this Lease in peace
                    and without disturbance from Landlord or any other party
                    subject to Landlord's supervision or control.

ADDITIONAL     37.  A. ERISA REPRESENTATIONS. Tenant represents to Landlord that
PROVISIONS          with the exception of this Lease, neither the Tenant nor any
                    affiliate of the Tenant is a tenant under a lease or any
                    other tenancy arrangement (1) with (a) Riggs & Company, a
                    division of Riggs Bank N.A.., a trustee of the
                    Multi-Employer Trust; (b) Riggs Bank N.A., a trustee of the
                    Multi-Employer Property Trust; (c) the Multi-Employer
                    Property Trust; (d) the National Bank of Washington
                    Multi-Employer Property Trust, the previous name of the
                    Multi-Employer Property Trust; (e) The Riggs National Bank
                    of Washington, D.C., as trustee of the Multi-Employer
                    Property Trust; (f) the Harman International Business Campus
                    Joint Venture; (g) the Corporate Drive Corporation as
                    trustee of the Corporate Drive Nominee Realty Trust; (h)
                    Goldbelt Place Joint Venture; (i) Arboretum Lakes-1, L.L.C.,
                    a Delaware limited liability company; (j) Village Green of
                    Rochester Hills Associates L.L.C., a Michigan limited
                    liability company; (k) Pine Street Development, L.L.C., a
                    Washington limited liability company; (l) MEPT Realty LLC, a
                    New York limited liability company; (m) MEPT, L.L.C., a
                    Delaware limited liability company; (n) Cabrillo Properties
                    LLC, a Delaware limited liability company; (o) Valencia
                    L.L.C., a Delaware limited liability company; or (p) Mission
                    Trails L.L.C., a Delaware limited liability company; or (2)
                    involving any property in which any one or more of the
                    entities named in clauses (1)(a) through (p) are known by
                    the Tenant to have an ownership interest.

                    B. ANTI-DISCRIMINATION. There shall be no discrimination
                    against or segregation of any person or group of persons, on
                    account of race, color, creed, religious, sex, marital
                    status, national origin, or ancestry, in the leasing,
                    subleasing, transferring, use, occupancy, tenure or
                    enjoyment of the Premises, nor shall the Landlord or Tenant
                    or any person claiming under or through the Landlord or
                    Tenant, establish or permit any such practice or practices
                    of discrimination or segregation with reference to the
                    selection, location, number, use or occupancy of tenants,
                    sublessees, subtenants, or vendees in the Premises.

                    C. RIGHT OF FIRST OFFER. Provided that at the time of
                    Tenant's exercise there is no Default and no act or omission
                    of Tenant that would become a Default with the passage of
                    time or the giving of notice, Tenant shall have a one-time
                    right of first offer ("Right of First Offer") to lease
                    either or both of the other tenant spaces in the Building
                    comprised of approximately

                                      

<PAGE>   26




                    19,752 and 9,991 square feet, respectively. Right of First
                    Offer shall be on the terms and conditions set forth in this
                    section. Landlord shall provide Tenant with written notice
                    ("First-Offer Notice") when Landlord determines at
                    Landlord's sole discretion that either of the spaces will
                    become available for lease to third parties ("Third
                    Parties"). Third Parties is defined as parties other than
                    the existing tenant. Provided that Tenant is not in Default
                    as of the time of exercise of the Right of First Offer, and
                    provided that as of such date there is no act or omission of
                    Tenant that would become a Default with the passage of time
                    or the giving of notice, if Tenant wishes to exercise its
                    Right of First Offer, Tenant shall within ten (10) business
                    days after delivery of the First-Offer Notice to Tenant,
                    deliver written notice to Landlord of its intention to
                    exercise its Right of First Offer on all of the space
                    offered in the First-Offer Notice. Tenant may not lease less
                    than all of the space so offered. If Tenant does not
                    exercise its Right of First Offer and elect to lease the
                    space so offered within the prescribed response period, the
                    Right of First Offer shall terminate as to such space and
                    the Landlord shall be free to lease the space to anyone on
                    any terms at any time during the Lease Term, without any
                    obligation to provide Tenant with a further right to lease
                    that space.

                    If Tenant timely and validly exercises the Right of First
                    Offer, Tenant and Landlord shall negotiate in good faith the
                    terms of the lease on the offered space. If Landlord and
                    Tenant cannot agree as to the terms of the lease within
                    twenty (20) days of Tenant's written notice exercising its
                    right of First Offer, Landlord shall be free to lease the
                    space or any portion thereof to anyone on any terms it deems
                    acceptable.

                    D. OPTION TO EXTEND TERM. Provided that Tenant is not in
                    Default as of the time of exercise of this option and the
                    commencement date of the First Option Period, and provided
                    that as of such date there is no act or omission of Tenant
                    that would become a Default with the passage of time or the
                    giving of notice, Tenant shall have an option ("First
                    Extension Option") to extend the Term of the Lease for the
                    Premises in "as is" condition at the expiration of the
                    original Lease Term for a period ending on September 30,
                    2005 ("First Option Period"). All of the terms and
                    conditions of this Lease except for Base Rent and the
                    provisions of this Paragraph shall be applicable to the
                    First Option Period. Provided that Tenant is not in Default
                    as of the time of exercise of this option and the
                    commencement date of the Section Option Period, that as of
                    said date there is no act or omission of Tenant that would
                    become a Default with the passage of time or the giving of
                    notice, and that Tenant has duly exercised the First
                    Extension Option, Tenant shall have a second option ("Second
                    Extension Option") to extend the Term of the Lease for the
                    Premises in "as is" condition at the expiration of the First
                    Option Period for a period ending on the last day of the
                    120th full calendar month following the original Term
                    Commencement Date ("Second Option Period"). All of the terms
                    and conditions of this Lease except for Base Rent and the
                    provisions of this Paragraph shall be applicable to the
                    Second Option Period.

                    The Base Rent for the Premises under each option shall be
                    the then current market rent for comparable facilities in
                    the proximate South San Francisco market area. The
                    definition of comparable facilities shall incorporate the
                    parking amenities of the Premises, and the Building's
                    location, age, quality, amenities, identity, exterior
                    appearance, interior improvements, and type of construction,
                    excluding laboratory and manufacturing improvements paid for
                    by Tenant.

                    Tenant shall give Landlord written notice of its intent to
                    exercise its option at least twelve (12) but nor more than
                    eighteen (18) months prior to the expiration of the then
                    current Term for the Premises. Within fifteen (15) days
                    after Tenant exercises its option to extend, Landlord shall
                    provide Tenant with the Base Rent, as determined by
                    Landlord, for the Option Period. The parties are obligated
                    to negotiate in good faith to agree on the Base Rent. If the
                    parties have not mutually agreed on the Base Rent within
                    thirty (30) days from notification by Landlord to Tenant of
                    Landlord's determination of Base Rent, each party hereto
                    shall appoint one representative who shall be a licensed
                    real estate broker experienced in the leasing of comparable
                    facilities in the County of San Mateo to act as an
                    arbitrator. The two (2)

                                      

<PAGE>   27




                    arbitrators so appointed shall determine the Base Rent for
                    the relevant Option Period. The determination of said Base
                    Rent shall be made by said two (2) arbitrators within sixty
                    (60) days from notification by Landlord to Tenant of
                    Landlord's determination of Base Rent and they shall submit
                    said determination in writing and signed by said arbitrators
                    in duplicate. One of the written notifications shall be
                    delivered to Landlord and the other to Tenant.

                    In the event the two (2) arbitrators of the parties hereto
                    cannot agree on the Base Rent for the Premises herein, said
                    two (2) arbitrators shall appoint a third arbitrator who
                    shall be a licensed real estate broker experienced in the
                    leasing of comparable facilities in the County of San Mateo,
                    to act as an arbitrator. The Base Rent for the relevant
                    Option Period shall be independently determined by the third
                    of said arbitrators, which said determination shall be made
                    within ninety (90) days from notification by Landlord to
                    Tenant of Landlord's determination of Base Rent. The role of
                    the third arbitrator shall then be to immediately select
                    from the proposed resolution of arbitrators #1 and #2 the
                    one that most closely approximates the third arbitrator's
                    determination of Base Rent. The third arbitrator shall have
                    no right to adopt a compromise or middle ground or any
                    modification of either of the two final proposed
                    resolutions. The resolution that the third arbitrator
                    chooses as most closely approximating his determination of
                    the Base Rent shall constitute the decision of all
                    arbitrators and shall be final and binding upon the parties.

                    The parties hereto shall pay the charges of the arbitrator
                    appointed by it and any expenses incurred by such
                    arbitrator. The charges and expenses of the third
                    arbitrator, as provided herein, shall be paid by the parties
                    hereto in equal shares.

                    In the event either arbitrator #1 or arbitrator #2 fails to
                    present a Base Rent figure within the thirty (30) day
                    period, the Base Rent presented by the other arbitrator
                    shall be considered final and binding on both parties.

                    Notwithstanding anything to the contrary herein contained,
                    Tenant's right to extend the term by exercise of the
                    foregoing Option shall be conditioned upon the following:
                    (i) at the time of the exercise of the Option, and at the
                    time of the commencement of the extended term, Tenant shall
                    be in possession of and occupying the Premises for the
                    conduct of its business therein and the same shall not be
                    occupied by any assignee, subtenant or licensee, and (ii)
                    the notice of exercise shall constitute a representation and
                    promise by Tenant to Landlord effective as of the date of
                    the exercise and as of the date of commencement of the
                    extended term, that Tenant shall not assign the lease in
                    whole or in part, or sublet all of any portion of the
                    Premises, the election to extend the term being for purposes
                    of utilizing the Premises for Tenant's purposes in the
                    conduct of Tenant's business therein.

                    E. NOTICE TO LENDER OF DEFAULT. In the event that a notice
                    of default ("Notice of Default") is served on Landlord,
                    Tenant shall provide a copy of such Notice of Default to all
                    lenders of whom Tenant has been notified for whose benefit a
                    Deed of Trust then encumbers the Project (a "Beneficiary").

                    F. LENDER'S TIME TO CURE. In the event that Tenant is served
                    with a Notice of Default and Landlord fails to cure such
                    default within the time provided in this Lease, Beneficiary
                    shall have an additional thirty (30) days within which to
                    cure the default, commencing with its receipt of the Notice
                    of Default, or if such default cannot be cured within that
                    time, then such additional time as may be necessary to
                    effect such cure if within such thirty (30) days the
                    Beneficiary has commenced and is diligently pursuing the
                    remedies necessary to cure such default (including, but not
                    limited to, commencement of foreclosure proceedings, if
                    necessary to effect such cure).

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

                                   "Landlord"

                                      

<PAGE>   28






                               OYSTER POINT TECH CENTER LLC, a Delaware Limited
                               Liability Company

                               By:  RIGGS & COMPANY, a division of Riggs Bank
                               N.A., its sole member

                               Riggs Bank N.A. as Trustee for the 
                               Multi-Employer Property Trust


                               By:    /s/ MARY ANNE MARTIN          
                                   ---------------------------------------------

                               Its:   Managing Director             
                                   ---------------------------------------------

                               "Tenant"

                               VAXGEN, INC., a Delaware corporation


                               By:    /s/ ROBERT NOWINSKI           
                                   ---------------------------------------------
                               Its:   Chairman                      
                                   ---------------------------------------------



                               By:                                  
                                  ----------------------------------------------
                               Its:                                 
                                  ----------------------------------------------


                                      


<PAGE>   29





                                  EXHIBIT A-1


                          LEGAL DESCRIPTION OF PROJECT


PARCEL I:

BEGINNING at granite monument set 10 chains South of the corner common to
Sections 14-15-22 and 13 in Township 3 South of Range 5 West, Mount Diablo Base
and Meridian; running thence along the line dividing said Sections 22 and 23,
North 460.02 feet to the Southwesterly corner of tide Lot No. 8; thence along
the Southerly line of said tide Lot 8, as same is described in Deed from Morgan
Oyster Company, to Bay Counties Land Company, dated March 25, 1909 and recorded
in Book 163 of Deeds at page 44; Records of San Mateo County, South 81 degrees
45' East 339.24 feet; North 64 degrees 45' East 214.80 feet to a point; thence
leaving said Southerly line South 508.85 feet; thence South 88 degrees 27' 14"
West 229.94 feet; thence North 89 degrees 59' West 300.16 feet; thence North
12.0 feet to the point of beginning.

PARCEL II:

A non-exclusive easement for storm drainage purposes in on and over the
following described property:

That portion of the Easterly 12.50 feet of the Westerly 62.50 feet of Parcel "B"
as described in the Lot Line Adjustment recorded September 1, 1992 under
Document Number 92141612 in the Records of San Mateo County, also being the
Westerly 12.50 feet of Parcel 1 as shown on the Map of Oyster Point Business
Park (recorded April 12, 1982 in Book 52 of Parcel Maps at page 58 in the
Records of San Mateo County that lies Southerly of the line shown as "N 81
degrees 45' 55" W 339.24" on said Parcel Map (52 PM 58).

The easement is appurtenant to Parcel I above and was created by Easement for
Storm Drainage dated July 31, 1997, by and between Shelton Properties Inc., a
Hawaii corporation and TC Northern California, Inc., a Delaware corporation,
recorded August 1, 1997, Document No. 97093545, San Mateo County Records.

PARCEL III:

A non-exclusive easement for grading and lateral support for the intended
purpose and Grantee may import, deposit grade, compact, and maintain soil and
fill on the easement area, in on and over the following described property.

A portion of Parcel "B" as described in the Lot Line Adjustment recorded under
Series Number 92141612 in the Official Records of said County, described as
follows:

Beginning at the Southwesterly corner of Parcel "B" thence North 81 degrees 45'
55" West along said line 44.44 feet to the actual point of beginning and through
the following numbered courses:

1) South 81 degrees 45' 55" East along the Southerly line of Parcel "B" 345.32
   feet
2) North 64 degrees 44' 05" East along the Southerly line of Parcel "B" 220.36 
   feet
3) North 30 degrees 04' 12" West 10.04 feet
4) South 64 degrees 44' 05" West 216.51 feet
5) North 81 degrees 45' 55" West along said line 330.51 feet
6) South 57 degrees 57' 36" West 15.47 feet to the point of beginning.

PARCEL IV:

A non-exclusive easement for grading and lateral support for the intended
purpose and Grantee may, import, deposit grade, compact and maintain soil and
file on the easement area, in, on and over the following described property:

A portion of the lands described in the Lot Line Adjustment recorded under
Serial Number 92141612 in the Official Records of said County, described as
follows:

                                      


<PAGE>   30






Beginning at the Southeasterly corner of Parcel A of said Lot Line Adjustment.
This also being the Southeasterly corner of Parcel 4 of the Map recorded in
Volume 23 of Parcel Maps at page 27 in the records of said County; thence North
00 degrees 00' 55" West along the Westerly line of Parcel A 48.00 feet to the
actual point of beginning and through the following numbered courses:

1) North 10 degrees 07' 28" West 131.03 feet
2) North 05 degrees 00' 57" West 80.31 feet
3) North 02 degrees 52' 40" West 40.05 feet
4) North 04 degrees 50' 57" East 141.51 feet to a curve to the right with a
   radius of 30.00 feet 
5) Along said curve through a central of 53 degrees 06' 39" an arc distance of 
   27.81 feet to the Southerly line of Parcel B.
6) South 81 degrees 45' 55" East along said line 6.08 feet to the Easterly line
   of Parcel A 7) South 00 degrees 00' 55" East along said line 412.02 feet to 
   the point of beginning.



A.P. No        015-190-020           JPN 015 019 190 02 A
                                     R/W 015 019 190 03
                                     R/W 015 001 010 20.02



                                      
<PAGE>   31




                                   EXHIBIT A-2

                                    Site Plan


                                      
<PAGE>   32




                                   EXHIBIT A-3

                                  Stacking Plan
                                  (First Floor)


                                      
<PAGE>   33




                                   EXHIBIT B-1

                        INITIAL IMPROVEMENTS OF PREMISES


        1.     LANDLORD'S WORK

               1.1 Landlord's work ("Landlord's Work") shall be defined as the
construction of the Building shell more particularly described in Exhibit C and
Building Core improvements as defined below, including soft costs associated
with Landlord's Work. Such soft costs shall include, but are not limited to
architecture, engineering, consultants, shell building permits and impact fees,
utility fees, loan fees, construction interest, transaction fees, and
development fees. The scope of the shell construction shall include: The
Building shell, roof, all exterior windows and doors, fire sprinklers at the
roof line, utilities and services to the Building's exterior, the parking lot,
exterior common areas, and landscaping. The scope of the Building Core
Improvements shall include: lobbies, restrooms, locker areas with showers,
janitorial room, elevator, elevator equipment room, roof screen and stair
assemblies.

               1.2 Landlord's Work shall be completed through Landlord's general
contractor, South Bay Construction, in compliance with all applicable codes and
regulations.

               1.3 In addition to Tenant Improvement Allowance described in
Paragraph 2.1 below, Landlord, at Landlord's sole cost and expense, shall pay
for all costs involved in Landlord's Work described in paragraph 1.1.

               1.4 Changes requested by Tenant to the Building shell and/or Core
Improvements shall be at Tenant's sole cost and expense.

        2.     TENANT'S WORK

               2.1 All interior improvements, including installation of Trade
Fixtures (except those items set forth in Exhibit B-3) and furnishings
(collectively referred to herein at "Tenant's Work"), shall be constructed by
Tenant at its sole cost and expense. All of the plans and specifications for
Tenant's Work shall be approved by Landlord in advance of commencing any
construction. Such approval by Landlord shall not be unreasonably withheld.
Tenant shall invest a minimum of fifty dollars ($50.00) per rentable square
foot, in excess of the Tenant Improvement Allowance supplied by Landlord,
excluding soft costs ("Soft Costs"), as defined below. Tenant shall, on or
before the Term Commencement Date, provide Landlord with an accounting,
certified by an officer of Tenant, itemizing all amounts expended by Tenant in
excess of the Tenant Improvement Allowance to improve the Premises. If the
Amount expended by Tenant is less than fifty dollars ($50.00) per rentable
square foot of the Building, Tenant shall, together with the accounting, deliver
to Landlord an unconditional irrevocable letter of credit in an amount equal to
the difference between the amount expended by Tenant and fifty dollars ($50.00)
per rentable square foot of the Building. At any time prior to the thirty-sixth
month of the Lease Term (but in no event more frequently than monthly) Tenant
may provide Landlord with an amended accounting, as above, showing additional
amounts expended by Tenant to improve the Premises since the last date shown on
the immediately preceding accounting. If the total amount expended by Tenant is
less than fifty dollars ($50.00) per rentable square foot of the Building, the
amount of the letter of credit may be reduced to a sum equal to the difference
between the amount expended by Tenant and fifty dollars ($50.00) per rentable
square foot of the Building. On or before the last day of the thirty-sixth month
of the Lease Term, Tenant shall provide an amended accounting as above showing
in addition any amounts expended by Tenant to improve the Premises since the
last date shown on Tenant's most recent accounting. If the total amount expended
by Tenant is less than fifty dollars ($50.00) per rentable square foot, Landlord
shall be immediately entitled to draw down from the letter of credit an amount
equal to the difference between the amount expended by Tenant and fifty dollars
($50.00) per rentable square foot. Upon such draw the requirement that this
letter of credit be maintained shall terminate. The letter of credit shall (a)
designate Landlord or its assignees as beneficiary, (b) be issued by a financial
institution approved by Landlord, (c) be in form satisfactory to Landlord, and
(d) be for a term of thirty-eight months. Landlord shall not be required to
deliver any certifications or documentation of any kind to the issuer in order
to make a draw, other than Landlord's written demand. The issuer shall not be
required to conduct any inquiry or investigation before paying Landlord the
requested amount of the draw. Landlord may assign, transfer or pledge the letter
of credit to any lender or purchaser in connection with any financing or sale of
the Premises. Landlord shall provide to Tenant a Tenant Improvement Allowance of
up to a maximum of twenty-four dollars ($24.00) per rentable


                                      
<PAGE>   34




square foot on the Premises ("Tenant Improvement Allowance") including Soft
Costs associated with Tenant's Work. Soft Costs shall include, but are not
limited to architecture, engineering, consultants, shell building permits and
impact fees, utility fees, loan fees, transaction fees, and Landlord's
construction management fee. Tenant shall promptly pay when due all costs for
Tenant's Work. Landlord shall reimburse Tenant a portion of such costs not to
exceed in the aggregate the amount of the Tenant Improvement Allowance. Tenant
shall, not more frequently than monthly after commencement of the construction
of Tenant's Work, submit to landlord requests for reimbursement of amounts
expended by Tenant for Tenant's Work. Each request shall be certified by an
officer of Tenant and shall include, without limitation, (i) copies of all
invoices paid by Tenant for which reimbursement is sought (ii) proof of payment
of each invoice (iii) a fully executed unconditional lien release from each
payee, and (iv) such additional information as Landlord may reasonably request.
After Landlord has received and approved each request as provided herein,
Landlord shall process the approved request for payment by its lender and upon
disbursement by Landlord's Lender reimburse Tenant promptly for one-half of all
amounts shown in the request as expenditures for costs to which the Tenant
Improvement Allowance applies, as hereinbelow provided up to the maximum amount
set forth above.

               2.2 Tenant's Improvement Allowance (twenty-four dollars ($24.00)
per rentable square foot on the Premises) shall be applied to, but not limited
to the following costs:

               (i)    Costs paid to general contractors and subcontractors for
                      labor, material, permits, bonds and the like relating to
                      the Premises.

               (ii)   Construction management fee to Landlord in the amount of
                      two percent (2%) of the Tenant Improvement Allowance;

               (iii)  Cost of labor, material and overhead for change orders
                      approved by landlord in accordance with this Exhibit B-1
                      and minor field changes;

               (iv)   Architectural, engineering and other design fees;

               (v)    Plans, drawings and printing costs;

               (vi)   Insurance premiums;

               (vii)  Cost of any reasonably required reports, surveys or 
                      studies;

               (viii) The cost of utility connections, installation of utility
                      facilities and meters and user installation or hook-up
                      fees;

               (ix)   All governmental fees and development impact fees,
                      including fees for permits, charges and costs of obtaining
                      governmental approvals;

               (x)    Recording costs and filing fees; and

               2.3 Tenant shall contract with an architect approved by Landlord
for Tenant's Work (such approval shall not be unreasonably withheld by Landlord)
to furnish architectural plans and specifications ("Tenant's Plans and
Specifications") required for the construction of Tenant's Work. Tenant's Plans
and Specifications shall also be based on the Interior Improvement
Specifications attached hereto as Exhibit B-2.

               2.4 Tenant shall contract with a general contractor approved by
Landlord for completion of Tenant's Work. Tenant's suppliers, contractors,
workmen and mechanics shall be subject to approval by Landlord, which shall not
be unreasonably withheld or delayed, prior to the commencement of work and shall
be subject to Landlord's administrative control while performing their work.
Landlord shall coordinate with Tenant's representative the scheduling of
Tenant's Work. Prior to commencement of Landlord's Work, Tenant shall notify
Landlord with respect to any special scheduling requirements of Tenant in
connection with the installation of Tenant's Work. If at any time any supplier,
contractor, workman or mechanic performing Tenant's Work hinders or delays any
other work in the Building or performs any work which may or does impair the
quality, integrity or performance of any portion of the Building, Tenant shall
take all

                                      

<PAGE>   35




steps necessary to bring an end to the delay or hindrance, and the contractor in
question shall not recommence Tenant's Work until reasonable steps have been
taken to avoid further delay or hindrance. In performing Tenant's Work, Tenant
shall be required to employ contractors (and subcontractors) which (a) are
parties to, and bound by, a collective bargaining agreement with a labor
organization affiliated with the Building and Construction Trades Council of the
AFL-CIO and (b) employ only members of such labor organizations to perform work
within their respective jurisdictions), with the exception of labor hired for
network cabling for personal and mainframe computer systems and related items.
Tenant shall reimburse Landlord for any repairs or corrections of Landlord's
Work or of Tenant's Work or of any portion of the Building caused by or
resulting from the work of any supplier, contractor, workman or mechanic with
whom Tenant contracts. Landlord shall provide access to Tenant's suppliers,
contractors, workmen and mechanics so as to achieve timely completion and
occupancy of the Premises.

               2.5 Unless the Lease has been terminated pursuant to Paragraph 26
of the Lease, upon the termination or expiration of the Lease, as such term may
be extended, Tenant shall have the right to remove items listed in Exhibit B-3
which have been installed and paid for by Tenant. Tenant shall repair any damage
to the Premises resulting from such removal, patch and repair the walls, floor
and ceiling and return the Premises in clean condition.

        3.     COMPLETION DATES

               3.1 Tenant shall notify Landlord in advance of the approximate
date on which Tenant's Work will be substantially completed and will notify
Landlord when Tenant's Work is in fact substantially competed ("Substantial
Completion"). If any dispute shall arise as to whether the Premises are
substantially completed and ready for Tenant's occupancy, a certificate
furnished by an independent architect mutually agreed to by Landlord and Tenant
certifying the date of Substantial Completion shall be conclusive. The following
shall constitute tenant delays ("Tenant Delays") under the Lease:

                        (a) Tenant's failure to furnish complete and timely
instruction or approvals;

                        (b) Tenant's failure to submit conceptual plans for
Tenant's Work to Landlord within thirty (30) days from execution of Lease;

                        (c) Tenant's failure to submit preliminary Plans and
Specifications for Tenant's Work for approval by Landlord within thirty (30)
days from execution of Lease;

                        (d) Tenant's failure to enter into contract with
Landlord's general contractor for construction of Tenant's Work within
forty-five (45) days of execution of Lease;

                        (e) Tenant's failure to substantially complete
construction of Tenant's Work as evidenced by a Temporary Certificate of
Occupancy by March 31, 1999; and

                        (f) Tenant's failure to deliver a Certificate of
Occupancy to Landlord within thirty (30) days after Substantial Completion of
Tenant's Work.

Tenant Delays resulting in postponement of the Term Commencement Date shall
cause Tenant to be charged rent under the terms of the Lease for each day of
such delay. All time periods indicated above shall be computed on a calendar
basis with no allowance for holidays, weekends or other customs.

               3.3 Except as otherwise provided in the Lease, failure of
Landlord to deliver possession of the Premises within the time and in the
condition provided for in the Lease will not give rise to any claim for damages
by Tenant against Landlord or Landlord's general contractor. If Landlord fails
to deliver the Premises in the condition as provided for under this Lease,
Landlord shall promptly correct any such deficiencies, excluding any immaterial
deficiencies which do not prevent Tenant from using the Premises for their
intended use. If Landlord fails to correct such deficiencies within a reasonable
time, Tenant may pursue its legal remedies against Landlord.


                                      
<PAGE>   36




                                   EXHIBIT B-2

                       INTERIOR IMPROVEMENT SPECIFICATIONS

NOTE:  Not all specified items listed herein refer to this project.

1.      WALLS

        A.     All walls receive paint to be properly prepared. Texture to be
               medium spray finish with 1 coat of latex paint to cover. Paint
               to be Pittsburg Doric white.

        B.     Demising walls, between tenant spaces to roof height shall be
               metal studs with 5/8" gypsum board both sides. Fire tape finish.
               U.O.N. See T.I. drawings for size, gauge and spacing.

        C.     Restroom studs with 5/8" gypsum board to 6" above adjacent
               ceiling U.O.N. with friction fit sound batt insulation. Wainscot
               at wet walls to be +4' - 0' high with ceramic tile. Texture to
               be smooth finish with semi-gloss latex paint U.O.N.

        D.     Interior Office Walls. Metal studs with 5/8" gypsum board on both
               sides to underside of ceiling, U.O.N. Perimeter office walls
               between office and warehouse areas to 6" above ceiling, U.O.N.
               per Title 24 energy calculation requirements.

        E.     Other. As may be directed by code or tenant purposes for fire
               protection, sound or energy insulation, demountability and
               aesthetics.

        F.     See tenant improvements drawings for specifications on size, 
               gauge and spacing of studs.

2.      CEILING

        A.     General, Finished ceiling height to be 10'.

        B.     Restrooms. Finished ceiling height to be 9' with metal joist with
               5/8" gypsum board. Texture to be smooth finish with semi-gloss
               latex paint with friction fit sound batt insulation. See tenant
               improvement drawings for specifications on size, gauge and
               spacing of joists.

        C.     Office. 2' x 4' T-bar suspended ceiling system with 2' x 4'
               Second Look II acoustical ceiling tile by Armstrong or approved
               equal.

        D.     Other. As may be directed by tenant or as may otherwise be
               required by tenant or codes. See tenant improvement drawings.

3.      FLOOR COVERING

        A.     Carpet - 30 oz. Cut pile nylon Design Weave "Westbridge"/26 oz.
               Loop Design Weave "Caravan" or equivalent without pad. Carpet to
               be glued down installation. Color to be selected by Tenant.

        B.     V.C.T. Armstrong "Standard Excelon" - 1/8" gauge: 12" x 12" or
               approved equal.

        C.     Sheet vinyl Congoleum "Forever" or approved equal.

        D.     Base. 2-1/2" covered based at carpet and resilient floors.

        E.     Ceramic tile at toilet rooms with 6" ceramic tile base.

        F.     Sealed Concrete. Sealed with a clear acrylic sealer.

                                       

<PAGE>   37






4.      DOORS

        A.     Interior. SP Particleboard Core Oak 3'-0" x 9'-0", Rotary Swan
               Red Oak Veneer door by Weyerhauser or equal. 20 minute rated at
               one hour fire walls. In laboratory and laboratory support
               spaces, hollow metal doors.

5.      FRAMES (DOORS & WINDOWS)

        A.     Timely Standard prefinished steel door and sidelight frame in
               standard white. "Timely II" at rated walls.

        B.     Other. As may be directed by code.

6.      HARDWARE

        A.     Latch set and lockset - Schlage D Series in brushed stainless
               steel with H.C. Levon lever.

        B.     Butts - 2 pair per door finished to match.

7.      RESTROOM ACCESSORIES

        A.     Water closet, white American Standard flush valve #2221.18 with
               Olsonite #95 seat and Sloan Ryal #110.3 flush valve. H.C. stalls
               to have white #9468.018 water closet with Sloan Royal #115.3
               flush valve.

        B.     Urinal, white American Standard "Washbrook" #6501.010 with Sloan
               Royal #186 flush valve.

        C.     Lavatory, American Standard with faucet #0355.07 and drain
               #2103.786.

        D.     Recessed towel dispenser/waste receptacle, Bobrick #B3944.

        E.     Surface mounted seat cover dispense, Bobrick.

        F.     Surface mounted toilet tissue dispenser, Bobrick #B2740.

        G.     Hook, Bobrick #B682.

        H.     Grab bars, Bobrick #B6806, 36" and 42".

        I.     Toilet partitions, Bobrick 1080 series, plastic laminate, or
               equivalent. Baked enamel floor-braced with coat hook/bumper.

        J.     Urival partitions, Bobrick 1085 "Duraline" series, or equivalent.

        K.     Recessed toilet room accessories, Bobrick B301, B3570 and B35704,
               or equivalent.

8.      HVAC

        Gas-fired roof-mounted VAV system for cooling, heating and ventilation.
        Designed and installed in accordance with the California Energy Act -
        Title 24.

                1.      All cuts in roof to be properly sealed, flashed and hot
                        mopped.

9.      ELECTRICAL

        A.      Designed and installed in accordance with the California Energy
                Act - Title 24.

                                       

<PAGE>   38






        B.     Power distributed as required by tenant for warehouse, assembly
               and manufacturing equipment, appliance operation and special
               office machinery shall be ceiling hung U.O.N.

        C.     Warehouse/Manufacturing/Assembly Lighting. High Bay THS 150-watt
               high pressure sodium light fixtures by Lithonia or equal in areas
               with open ceiling. U.O.N. See tenant improvement drawings. T-bar
               dropped ceilings 2' x 4' recessed mounted fluorescent fixtures
               with light levels ranging from 15-75 foot candles as specified by
               Owner. Fixtures same as for office lighting following.

        D.     Office lighting is 2' x 4' recessed mounted fluorescent ceiling
               fixtures, Lithonia 2PM4G B3 40 18LS 120 or equal, approved by
               Owner, with parabolic lens.

        E.     Downlights.  Halo #117-1CT-331-P Coilex Baffle 7" O.D. trim.

        F.     Wallwashers.  Halo #1176-T-425P Coilex Baffle with scoop trim 7" 
               O.D.

        G.     Track Lights. Halo 120v single circuit power trac with Coilex
               Continental lampholdes #L733P.1.

        H.     Wall-mounted fixture at restroom.  Lithonia Wallens #W240-120A.

        I.     Other lighting as required by tenant or code.

        J.     Provide plates for all power outlets. Provide pull wires at all
               telephone and cable (C.R.T.) pull locations as indicated on plan.

        K.     Illuminated exit signs as required by tenant or code.

        L.     Emergency lighting as required by code.

10.     FINISHES/SPECIALTIES

        A.     Special office wall or floor finishes. See tenant improvement
               drawings or specifications.

        B.     Lunch room, conference room, coffee or wet bar cabinetry and
               plumbing. See tenant improvement drawings.

                                       

<PAGE>   39




                                   EXHIBIT B-3

                      MOVEABLE EQUIPMENT AND TRADE FIXTURES

Moveable Equipment & Trade Fixtures includes:

        Lab Benches and Counters

        Fume Hoods

        Cold Rooms


                                      
<PAGE>   40




                                    EXHIBIT C

                          INITIAL PROJECT SPECIFICATION

GENERAL DESCRIPTION

o   Two story concrete tilt-up building.

o   Clear heights of 13'8" on the top floor and 24'2-1/2" and 19'2-1/2" on the
    bottom floor (349 and 347 Oyster Point respectively).

o   Bay spacing of 33'-4" and 34' x 60' on the top floor and 33'-4" and 34' x
    30' on the bottom (349 and 347 Oyster Point respectively).

BUILDING STRUCTURE

o   All foundations to include footings, foundation walls or other building
    foundation components required to support the entire building structure.

o   Columns shall be steel box or pipe columns.

o   All columns, beams, joists, purlins, headers, or other framing members to
    support the roof, roofing membrane and stair openings.

o   Five inch (5") thick concrete slab on grade with #3 reinforcing bars at 18"
    on center each way or welded wire mesh and any other reinforcing or
    structural connections that may be necessary or required.

o   Two and a half (2-1/2") thick concrete slab over metal deck supported by
    structural metal beams and columns.

o   Exterior walls that enclose the perimeter of the building with steel
    reinforcing and structural connections that may be necessary or required.

o   All exterior glass and glazing with pained aluminum frames. Glass to be
    tinted as appropriate to the aesthetic design of the building. All exterior
    doors, door closer and locking devices necessary for proper functioning.

o   Hybrid Volcraft panel roof system to support roofing membrane.

o   Four (4) play built-up roofing (including a base sheet, two plays and a cap
    sheet) and all flashings by Owens-Corning, Johns Manville, or equal.

o   Painting of all concrete walls with Tex-Coat or Kel-Tex textural paint. All
    caulking of exterior concrete joint in preparation for painting.

o   The foundation and structural framing should be designed to support a
    minimum live load of 100 pounds per square foot in all areas.

o   The floor-to-floor height of the building shall allow a minimum of 10'0"
    interior drop ceiling height.

o Roof hatch and ladder within each building.

PLUMBING

o   Underground sanitary sewer laterals connected to the city sewer main the
    street and piped into the building and under the concrete slab on grade for
    the length of the building. Sewer lines to consist of a six inch (6"
    sanitary sewer line


                                      
<PAGE>   41




    and a six inch (6") biowaste sewer line. Sanitary sewer line under the slabs
    will be in a close proximity to the building restroom locations.

o   Domestic water mains connected to the city water main in the street and
    stubbed to the building. Water main to the building shall be two inches (2")
    in size with a three inch (3") supply line.

o   Roof drain leaders piped and connected to the site storm drainage systems or
    asphalt paved area.

o   Gas lines connected from the city public utility mains and gas meters
    adjacent to, and in close proximity to the building. Meters supplied by
    utility company.

ELECTRICAL

o   All primary electrical service to the building that is complete including
    underground conduit and wire feeders from transformers pads into the
    building's main switchgear electrical room. The electrical characteristics
    of the secondary side of transformers shall be 277/480 volt, 3 Phase and the
    rate capacity of the transformers shall be 2,000 amps for each building.

o   Underground pull section, meter, and panel(s), for site lighting and
    landscaping.

o   Underground conduit from the street to the building for telephone trunk line
    service by Pacific Telephone Conduit to the building shall not be less than
    4".

o   An electrically operated landscape irrigation controller that is a complete
    and functioning system.

o   Underground conduit from the building to the main fire protection system,
    shut off valve (PIV) for installation for security alarm wiring.

o   All parking lot and landscaping lighting to include fixtures, underground
    conduit, wire, distribution panel and controller. All exterior lighting
    shall be a complete and functioning system.

FIRE PROTECTION

o   A complete and fully functional overhead system distributed throughout the
    building with a density of .2/3000 on the top floors and .4/2000 and
    .495/2000 on the bottom floors (349 and 347 Oyster Point respectively).

o   System shall include all sprinkler heads that may be required by building
    codes above the ceiling, when ceilings are installed.

LOADING

o   Two (2) grade level 12' x 14' roll-up doors plus at least one (1) 12' x 10'
    location for future grade level opening per building.

SITEWORK

o   All work outside the building perimeter walls shall be considered site work
    for the building shell and shall include grading, asphalt concrete, paving,
    landscaping (hard and soft), landscape and irrigation, storm drainage,
    utility service laterals, curbs, butters, sidewalks, specialty paving (if
    required), retaining walls, fencing and gates, trash enclosures, planters,
    sign monuments, parking lot and landscape lighting and other exterior
    lighting per code.

o   Paving sections for automobile and truck access shall be according to the
    Geological Soils Report.

o   All parking lot striping to include handicap signage and spaces.


                                      
<PAGE>   42






o   Underground site storm drainage system shall be connected to the city storm
    system main.

EXCLUSIONS

The following items are not included in the building shell:

o   Electrical panels and distribution.

o   Security system.



                                       

<PAGE>   43




                                    EXHIBIT D

                           TENANT ESTOPPEL CERTIFICATE

               TO:    Oyster Point Tech Center LLC
                      c/o Trammell Crow NW, Inc.
                      1241 East Hillsdale Blvd., Ste. 200
                      Foster City, CA 94404

THIS IS TO CERTIFY:

        1. That the undersigned is the Tenant under that certain lease dated
_____________________, and, if applicable, amended on ___________________, by
and between ______________________________ ("Landlord"), and the undersigned
("Tenant") covering those certain premises located as shown on the drawing made
part of the Lease (the "Premises").

        2. That said Lease is in full force and effect and, except as noted in
Paragraph 1. Above, has not been modified, changed, altered or amended in any
respect, and is the only lease or agreement between the Tenant and the Landlord
affecting the Premises.

        3. To the best of Tenant's knowledge, the information set forth below is
true and correct:
<TABLE>

<S>                   <C>
               (a)    Square footage of the Premises: _____________________________________

               (b)    Annual rent as of the Commencement of Lease: $_______________________

               (c)    Current annual rent (if different than at commencement): $___________

               (d)    Commencement date of Lease: _________________________________________

               (e)    Lease termination date: _____________________________________________

               (f)    Rent paid to and including: _________________________________________

               (g)    Security deposit: $__________________________________________________

               (h)    Prepaid rent for an in amount of: $__________________________________

               (i)    Free rent period: ___________________________________________________

               (j)    Amount of current monthly escrow payment obligations with respect to
                      taxes, insurance, and Common Area Maintenance charges under the Lease:

                      Taxes:                                   $___________________________

                      Insurance:                               $___________________________

                      Common Area Maintenance Charges:         $___________________________

               (k)    Dates through which Tenant has paid monthly escrow
                      payments and Common Area Maintenance charges:

                      Escrow Payment for Taxes:                 ___________________________

                      Escrow Payment for Insurance:             ___________________________

                      Common Area Maintenance Charges:          ___________________________

</TABLE>

        4. Delete if Tenant has not occupied the Premises: Tenant now occupies
the Premises, accepts the Premises in their current condition subject only to
those punch list items listed in Exhibit A, if any, and is not aware of any
defect in the Premises except as described in Exhibit A, if any.

       5. Delete if Tenant has occupied the Premises: Tenant does not occupy the
Premises. The status of the plans and specifications for and the construction of
Tenant Improvements is described in Exhibit A. Tenant is familiar with the
Tenant Improvement work done to date and is now aware of any defect in such
work, except as described in Exhibit A.

                                       

<PAGE>   44







        6. No rent has been paid in the current month other than as disclosed in
Paragraph 3. No free rent or other concessions, benefits, or inducements other
than as specified in the Lease have been granted to Tenant or undertaken by the
Landlord.

        7. Tenant has not been granted any renewal, expansion, purchase options
or any rights of first refusal, except as disclosed in writing in the Lease.

        8. Neither Tenant nor to the best of Tenant's knowledge, Landlord is in
breach of the Lease and there has not occurred any event, act, omission or
condition which by notice or lapse of time or both or otherwise, will result in
any breach by Tenant or to the best of Tenant's knowledge, by Landlord. As of
the date hereof and except as set forth in the Lease, the undersigned is
entitled to no credit, offset or deduction in rent. Tenant knows of no
liabilities or obligations of Landlord which have accrued but are unsatisfied
under the Lease as of the date of this Certificate.

        9. To the best of Tenant's knowledge, there are no actions, whether
voluntary or otherwise, pending against the undersigned under the bankruptcy
laws or other laws for the relief of debtors of the United States or any state
thereof.

        10. With the exception of this Lease and except as otherwise disclosed
in writing to Landlord, neither the Tenant nor any affiliate of the Tenant is a
tenant under a lease or any other tenancy arrangement (i) with (a) ________; (b)
__________; (c) __________; or (ii) involving any property in which the entities
named in clauses (____), (_____) or (______) are known by the Tenant to have an
ownership interest.



DATED this ___________ day of _____________, 19___.



                                            TENANT:

                                            VAXGEN, INC., a Delaware Corporation

                                            By: ________________________________

                                            Name: ______________________________

                                            Its: _______________________________


(Tenant to attach Exhibit A to Tenant Estoppel Certificate, List of Defects, if
necessary.)


                                      
<PAGE>   45




                                    EXHIBIT E

                              RULES AND REGULATIONS
                           FOR TENANT'S CONTRACTOR(S)

1.  Tenant's contractor will be responsible for making arrangements with
    Landlord as to time for the use of building and equipment such as elevators
    and loading areas. The delivery of materials, equipment and supplies to the
    Building or Premises must be coordinated with Landlord at least two 92)
    business days prior to delivery. The Building debris box is not to be used
    for waste produced by Tenant's contractor.

2.  Tenant's contractor shall not interfere with the Landlord's contractor and
    sub-trades in any way and will cooperate fully with same.

3.  All Tenant's contractor's waste and debris must be removed from the Premises
    and Building regularly and promptly. All combustible waste and debris must
    be stored in a covered, fire-proof container prior to removal.

4.  Tenant's contractor and sub-trades shall take all precautions to ensure the
    security and the site condition of the Premises and Building in which the
    work is being performed, including their own tools, equipment and materials,
    and are responsible for any damage caused by employees and sub-trades to any
    part of the Building or Premises.

5.  Tenant's contractor shall remove and properly replace underfloor duct access
    coverings as required for Tenant's trades and services. Any damage to
    underfloor duct access coverings shall be repaired or replaced by Tenant's
    contractor to the satisfaction of Landlord.

6.  Tenant's contractor must provide their own fire protection equipment, have
    same on premises at all times and conform to any requirements of Landlord or
    Landlord's contractor regarding fire protection.

7.  Tenant's contractor shall carry out all work in compliance with all Federal,
    State, county and city Building Codes and applicable Acts. Ordinances and
    Statutes.

8.  Tenant's contractor shall provide all their own protective devices and
    coverings, so as to protect the Building finishes provided by Landlord in
    the Building.

9.  No attachments to or use of window frames and mullions, ceiling systems,
    glass, ceiling frame or building frame, will be permitted without the
    expressed written consent of Landlord.

10. All Tenant's contractors, employees and trades must be confined to the area
    in which work is being performed.

11. Tenant or Tenant's contractor shall carry builder's risk insurance with
    limits of not less than the amount requested by Landlord, insurance covering
    loss or damage to the work during the course of construction; worker's
    compensation/employer's liability insurance covering all employees of
    contractor and subcontractor. All such policies shall name Landlord and
    Tenant as additional insureds. A certificate of insurance must be provided
    to Landlord prior to commencement of work.

12. Any construction, alteration, maintenance, repair, replacement, removal or
    decoration undertaken by Tenant's contractor shall be carried out in a good,
    workmanlike, and prompt manner, shall comply with applicable statutes, laws,
    ordinances, regulations, rules orders and requirements of the authorities
    having jurisdiction thereof, and shall be subject to supervision by Landlord
    or its employees, agents, or contractors. All construction shall be
    performed in a timely manner without delays or interruptions.

13. Tenant's contractors shall not use excessive quantities of electricity or
    water and shall not shut off any water, electricity, sprinkler systems or
    other services without first obtaining Landlord's express authorization.

                                       
<PAGE>   46




                                    EXHIBIT F

                       DISCLOSED HAZARDOUS MATERIALS LIST

  Preliminary Estimate of Maximum Amounts of Hazardous Chemicals and Biohazards
<TABLE>
<CAPTION>
Organics
<S>                                         <C>   
Chloroform                                  10 gal
Ethanol                                     40 gal
Methanol                                    10 gal
Isopropyl alcohol                           10 gal
Butanol                                    0.5 gal
Phenol                                      10 gal
DMSO                                         4 gal
Glutaraldeheyde                            0.5 gal
Formaldehyde                                 2 gal
Formamide                                    2 gal
Mercaptoethanol                              1 gal
Paraformaldehyde                             1 gal
Toluene                                      1 gal

Acids
Acetic acid                                 10 gal
Nitric acid                                  4 gal
Hydrochoric acid                             4 gal
Sulfuric acid                                4 gal
Trichloroacetic acid                         1 gal
Formic acid                                  4 gal
Chlorox                                     20 gal

Bases
Ammonium hydroxide                           4 gal
Sodium hydroxide                            10 gal

Miscellaneous chemicals
Acrylamide                                    6 kg
CO2 Gas                                     12 tanks
CO2 Solid                                   100 lbs
Film developing chemicals                   60 gal (fully diluted)
Ethidium bromide                              50 g
Propidium iodide                              10 g
Methotrexate                                   2 g
Sodium azide                                 200 g
Thimerisol                                    50 g
Guanidine thiocyanate                        500 g

Radiochemicals                              (maximum weekly consumption)
125 NaI                                      40 mCi
35S-labeled amino acids and nucleotides      40 mCi
3H Tritium                                   10 mCi
32P                                          40 mCi
14C                                          10 mCi

Biologic Hazards
E. coli                                       40 L
HIV1                                           3 L
</TABLE>


                                      
<PAGE>   47



<TABLE>

<S>                                         <C>
SIV/SHIV                                        1L
Human blood/serum/plasma                      600L
Rodent blood/serum/plasma                    100 L
Nonhuman primateblood serum/plasma             10L

</TABLE>