<PAGE>   1

                                                                   EXHIBIT 10.10

                                LEASE AGREEMENT
                             BASIC LEASE INFORMATION

<TABLE>
<S>                        <C>
LEASE DATE:                June 21, 2000

LANDLORD:                  PRINCIPAL DEVELOPMENT INVESTORS, LLC,
                           a Delaware limited liability company

LANDLORD'S ADDRESS:        c/o Legacy Partners Commercial, Inc.
                           101 Lincoln Centre Drive, Fourth Floor
                           Foster City, California 94404-1167

TENANT:                    ABAXIS, INC.,
                           a California corporation

TENANT'S ADDRESS:          1320 Chesapeake Terrace
                           Sunnyvale, California 94089

PREMISES:                  Approximately 91,124 rentable square feet, which is the entirety of Building E as shown
                           on Exhibit A

PREMISES ADDRESS:          3240 Whipple Road
                           Union City, California 94587

                           BUILDING E:                           Approximately 91,124 rentable square feet
                           LOT:                                  The tax parcel upon which Building E is situated
                           PARK: CROSSROADS TECHNOLOGY PARK:     Approximately 322,238 rentable square feet
                           PHASE I:                              Approximately 233,298 rentable square feet

TERM:                      January 1, 2001 ("Commencement Date"), through
                           December 31, 2010 ("Expiration Date")

BASE RENT (Para. 3):       Sixty Eight Thousand Three Hundred Forty-Three and 00/100 Dollars ($68,343.00) per month

ADJUSTMENTS TO BASE RENT:  Commencing on January 1, 2002, the monthly Base Rent shall increase to $71,076.72;
                           Commencing on January 1, 2003, the monthly Base Rent shall increase to $73,919.79;
                           Commencing on January 1, 2004, the monthly Base Rent shall increase to $76,876.58;
                           Commencing on January 1, 2005, the monthly Base Rent shall increase to $79,951.64;
                           Commencing on January 1, 2006, the monthly Base Rent shall increase to $83,149.71;
                           Commencing on January 1, 2007, the monthly Base Rent shall increase to $86,475.70;
                           Commencing on January 1, 2008, the monthly Base Rent shall increase to $89,934.73;
                           Commencing on January 1, 2009, the monthly Base Rent shall increase to $93,532.12; and
                           Commencing on January 1, 2010, the monthly Base Rent shall increase to $97,273.40.

ADVANCE RENT (Para. 3):    Eighty Four Thousand One Hundred Ninety-Eight and 58/100 Dollars ($84,198.58)

COLLATERAL FOR TENANT'S
PERFORMANCE UNDER THE
LEASE (Para. 4):           Refer to Section 4 herein.
</TABLE>

*TENANT'S SHARE OF OPERATING EXPENSES (Para. 6.1):        100% of the Building
*TENANT'S SHARE OF TAX EXPENSES (Para. 6.2):              100% of the Building
*TENANT'S SHARE OF COMMON AREA UTILITY COSTS (Para. 7.2): 100% of the Building
*TENANT'S SHARE OF UTILITY EXPENSES (Para. 7.1):          100% of the Building

*The amount of Tenant's Share of the expenses as referenced above shall be
subject to modification as set forth in this Lease.

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PERMITTED USES (Para. 9):  Office, biotechnology/pharmaceutical R&D, manufacturing, and related warehousing, but only to the extent
                           permitted by the City of Union City, California, and all agencies and governmental authorities having
                           jurisdiction thereof

PARKING SPACES:            Two hundred forty-six (246) non-exclusive and non-designated spaces (to be confirmed by Landlord's
                           architect subject to final space plan).

BROKER (Para. 33):         BT Commercial and Technology Commercial for Tenant
                           BT Commercial for Landlord

EXHIBITS:                  Exhibit A -  Premises, Building, Lot and/or Park
                           Exhibit B -  Tenant Improvements
                           Exhibit C -  Rules and Regulations
                           Exhibit D -  Covenants, Conditions and Restrictions (Intentionally omitted)
                           Exhibit E -  Tenant's Initial Hazardous Materials Disclosure Certificate
                           Exhibit F -  Change of Commencement Date - Example
                           Exhibit G -  Sign Criteria (Intentionally omitted)
                           Exhibit H -  Letter of Credit
                           Exhibit I -  Tenant's Property
                           Exhibit J -  Subordination, Non-Disturbance and Attornment Agreement

ADDENDA:                   Addendum 1 - Option to Extend the Lease Term
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                                TABLE OF CONTENTS


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<CAPTION>
SECTION                                                                                           PAGE
<S>                                                                                               <C>
1.      Premises....................................................................................3

2.      Occupancy; Adjustment of Commencement Date..................................................3

3.      Rent........................................................................................3

4.      Collateral for Tenant's Performance Under the Lease/Letter of Credit........................3

5.      Condition of Premises; Tenant Improvements..................................................4

6.      Additional Rent.............................................................................5

7.      Utilities and Services......................................................................7

8.      Late Charges................................................................................7

9.      Use of Premises.............................................................................8

10.     Alterations; and Surrender of Premises......................................................8

11.     Repairs and Maintenance.....................................................................9

12.     Insurance..................................................................................10

13.     Limitation of Liability and Indemnity......................................................11

14.     Assignment and Subleasing..................................................................11

15.     Subordination..............................................................................13

16.     Right of Entry.............................................................................14

17.     Estoppel Certificate.......................................................................14

18.     Tenant's Default...........................................................................14

19.     Remedies for Tenant's Default..............................................................15

20.     Holding Over...............................................................................16

21.     Landlord's Default.........................................................................16

22.     Parking....................................................................................16

23.     Transfer of Landlord's Interest............................................................16

24.     Waiver.....................................................................................16

25.     Casualty Damage............................................................................16

26.     Condemnation...............................................................................18

27.     Environmental Matters/Hazardous Materials..................................................18

28.     Financial Statements.......................................................................19

29.     General Provisions:........................................................................20

30.     Signs......................................................................................21

31.     Mortgagee Protection.......................................................................21

32.     Warranties of Tenant.......................................................................21

33.     Brokerage Commission.......................................................................21

34.     Quiet Enjoyment............................................................................22
</TABLE>


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                             NNN TENANT IMPROVEMENTS
                                 LEASE AGREEMENT


The Basic Lease Information set forth on Page 1 and this Lease are and shall be
construed as a single instrument.

1.     PREMISES

Landlord hereby leases the Premises to Tenant upon the terms and conditions
contained herein. Tenant shall have the right to use, on a non-exclusive basis,
parking areas and ancillary facilities located within the Common Areas of the
Park, subject to the terms of this Lease. Landlord and Tenant hereby agree that
for purposes of this Lease, as of the Lease Date, the rentable square footage
area of each of the Premises, the Building, the Phase (if any) and the Park
shall be deemed to be the number of rentable square feet as set forth in the
Basic Lease Information. Tenant hereby acknowledges that the rentable square
footage of the Premises may include a proportionate share of certain areas used
in common by all occupants of the Building, the Phase (if any) and/or the Park
(for example corridors, common restrooms, an electrical room or telephone room).
Tenant further agrees that the number of rentable square feet of any of the
Building, the Phase (if any) and the Park may subsequently change after the
Lease Date commensurate with any modifications to any of the foregoing by
Landlord, and Tenant's Share shall accordingly change. The term "Project" as
used herein shall mean and collectively refer to the Building, the Common Areas,
the Lot, the Phase (if any) and the Park.

2.     OCCUPANCY; ADJUSTMENT OF COMMENCEMENT DATE

       2.1 If Landlord, for any reason whatsoever, cannot deliver possession of
the Premises to Tenant on the Commencement Date in the condition specified in
Section 5 hereof, Landlord shall not be subject to any liability nor shall the
validity of the Lease be affected; provided, the Term of this Lease and the
obligation to pay Rent shall commence on the date possession is actually
tendered to Tenant and the Expiration Date shall be extended commensurately. If
the commencement date and/or the expiration date of this Lease is other than the
Commencement Date and Expiration Date specified in the Basic Lease Information,
Landlord and Tenant shall execute a written amendment to this Lease,
substantially in the form of Exhibit F hereto, wherein the parties shall specify
the actual commencement date, expiration date and the date on which Tenant is to
commence paying Rent. The word "Term" whenever used herein refers to the initial
term of this Lease and any valid extension(s) thereof.

       2.2 If Landlord permits Tenant to occupy the Premises prior to the actual
Commencement Date, such occupancy shall be at Tenant's sole risk and subject to
all the provisions of this Lease. Additionally, Landlord shall have the right to
impose additional reasonable conditions on Tenant's early occupancy.

3.     RENT

On the date that Tenant executes this Lease, Tenant shall deliver to Landlord
the original executed Lease, the Advance Rent (which shall be applied against
the Rent payable for the first month(s) Tenant is required to pay Rent), the
Security Deposit, and all insurance certificates evidencing the insurance
required to be obtained by Tenant under Section 12 and Exhibit B of this Lease.
Tenant agrees to pay Landlord the Base Rent, without prior notice or demand,
abatement, offset, deduction or claim, in advance at Landlord's Address on the
Commencement Date and thereafter on the first (1st) day of each month throughout
the balance of the Term of the Lease beginning the second (2nd) month of the
Term of the Lease (provided, however, that Landlord has actually received the
Advance Rent as provided herein). In addition to the Base Rent, Tenant shall pay
Landlord in advance on the Commencement Date and thereafter on the first (1st)
day of each month throughout the balance of the Term of this Lease, as
Additional Rent, Tenant's Share of Operating Expenses, Tax Expenses, Common Area
Utility Costs, and Utility Expenses. The term "Rent" whenever used herein refers
to the aggregate of all these amounts. If Landlord permits Tenant to occupy the
Premises without requiring Tenant to pay rental payments for a period of time,
the waiver of the requirement to pay rental payments shall only apply to the
waiver of the Base Rent. The Rent for any fractional part of a calendar month at
the commencement or expiration or termination of the Lease Term shall be a
prorated amount of the Rent for a full calendar month based upon a thirty (30)
day month. To the extent not already paid as part of the Advance Rent any
prorated Rent shall be paid on the Commencement Date, and any prorated Rent for
the final calendar month hereof shall be paid on the first day of the calendar
month in which the date of expiration or termination occurs.

4.     COLLATERAL FOR TENANT'S PERFORMANCE UNDER THE LEASE/LETTER OF CREDIT

Simultaneously with Tenant's delivery to Landlord of this Lease and the first
month's Base Rent in accordance with the provisions of Section 3 above, Tenant
shall deliver to Landlord, as collateral for the full and faithful performance
by Tenant of all of its obligations under this Lease and for all losses and
damages Landlord may suffer as a result of any default by Tenant under this
Lease, an irrevocable and unconditional negotiable letter of credit, in the form
and containing the terms required herein, payable in the County of Santa Clara,
California, running in favor of Landlord issued by a solvent nationally
recognized bank with a long term rating of BBB or higher, or as otherwise agreed
in writing by Landlord, under the supervision of the Superintendent of Banks of
the State of California, or a National Banking Association, in the amount of
Eight hundred Twenty Thousand One Hundred Sixteen Dollars ($820,116.00) (the
"Letter of Credit"). The Letter of Credit shall be (a) at sight and irrevocable
and unconditional, (b) maintained in effect, whether through replacement,
renewal or extension, for the entire Lease Term (the "Letter of Credit
Expiration Date") and Tenant shall deliver a new Letter of Credit or certificate
of renewal or extension to Landlord at least thirty (30) days prior to the
expiration of the Letter of Credit, without any action whatsoever on the part of
Landlord, (c) subject to the Uniform Customs and Practices for Documentary
Credits (1993-Rev) International Chamber of Commerce Publication #500, (d) in
substantially the form of Exhibit H attached hereto with the certification
portion thereof being the same as set forth in Exhibit H hereto, and (e) fully
assignable by Landlord and permit partial draws. Additionally, provided Tenant
has not been in default of this Lease beyond applicable notice and cure periods
for the previous consecutive twenty-four (24) month period, the face amount of
the Letter of Credit may be reduced as follows: (i) at any time after the
twenty-fourth (24th) month of the Term, and provided Tenant has earned a
cumulative net profit in excess of Two Million Dollars ($2,000,000.00) for the
four (4) previous quarters (as reported in Tenant's audited financial
statements), the face amount of the Letter of Credit shall be reduced to Four
Hundred Ten Thousand Fifty-eight Dollars ($410,058.00); and (ii)


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at any time after the date which is thirty-six (36) months after the face amount
of the Letter of Credit is reduced as provided in (i) above, provided Tenant has
earned a cumulative net profit in excess of Two Million Dollars ($2,000,000.00)
for the four (4) previous quarters (as reported in Tenant's audited financial
statements), the face amount of the Letter of Credit shall be reduced to
Ninety-seven Thousand Two Hundred Seventy-Three Dollars ($97,273.00). In
addition to the foregoing, the form and terms of the Letter of Credit (and the
bank issuing the same) shall be acceptable to Landlord, in Landlord's sole
discretion, and shall provide, among other things, in effect that: (1) Landlord,
or its then managing agent, shall have the right to draw down an amount up to
the face amount of the Letter of Credit upon the presentation to the issuing
bank of Landlord's (or Landlord's then managing agent's) statement that such
amount is due to Landlord under the terms and conditions of this Lease, it being
understood that if Landlord or its managing agent be a limited liability
company, corporation, partnership or other entity, then such statement shall be
signed by a managing member (if a limited liability company) an officer (if a
corporation), a general partner (if a partnership), or any authorized party (if
another entity); (2) the Letter of Credit will be honored by the issuing bank
without inquiry as to the accuracy thereof and regardless of whether the Tenant
disputes the content of such statement; and (3) in the event of a transfer of
Landlord's interest in the Building, Landlord shall transfer the Letter of
Credit, in whole or in part (or cause a substitute letter of credit to be
delivered, as applicable), to the transferee and thereupon the Landlord shall,
without any further agreement between the parties, be released by Tenant from
all liability therefor, and it is agreed that the provisions hereof shall apply
to every transfer or assignment of the whole or any portion of said Letter of
Credit to a new Landlord. Tenant hereby acknowledges and agrees that Landlord is
entering into this Lease in material reliance upon the ability of Landlord to
draw upon the Letter of Credit upon the occurrence of any default on the part of
Tenant hereunder which continues beyond any applicable notice and cure periods.
Tenant further acknowledges and agrees that if Landlord cannot draw upon the
Letter of Credit within the times and in the manner as anticipated by Landlord
herein, Landlord shall suffer irreparable damage, harm and injury. From time to
time during the Term of this Lease it is anticipated by the parties that the
Letter of Credit will need to be amended, modified and, possibly reissued.
Landlord and Tenant hereby covenant and agree to cooperate with one another to
promptly effectuate any such amendments, modifications and new issuances,
including without limitation, executing and submitting to the Issuer any and all
documents or instruments as may be reasonably required to effectuate same. Each
and every time during the Term of this Lease there is a change in the identity
or address of the parties, including without limitation, any change in the
identity of Landlord due to the sale, transfer or other conveyance by Landlord
of its rights and interests in, to and under this Lease to any other party,
person or entity, the Letter of Credit shall immediately be amended or reissued
to reflect such changes and the parties hereby agree to execute and submit to
the Issuer such further applications, documents and instruments as may be
necessary to effectuate same. It is the intention of the parties that each and
every successor and assign of both Landlord and Tenant be bound by and subject
to the terms and provisions of this Section 4. Landlord may, at any time and
without notice to Tenant and without first obtaining Tenant's consent thereto,
assign all or any portion of its interest in and to the Letter of Credit to
another party, person or entity, regardless of whether or not such assignment is
separate from or as a part of the assignment by Landlord of its rights and
interests in and to this Lease. If, as a result of any such application of all
or any part of the Letter of Credit, the amount of the Letter of Credit shall be
less than Eight hundred Twenty Thousand One Hundred Sixteen Dollars
($820,116.00) (or such lesser amount as may be permitted in accordance with this
Section 4), Tenant shall within five (5) business days of Landlord's written
notice (such notice to be given pursuant to Section 29.9 herein) thereafter
provide Landlord with additional letter(s) of credit in an amount equal to the
deficiency (or a replacement letter of credit in the total amount of Eight
hundred Twenty Thousand One Hundred Sixteen Dollars ($820,116.00) (or such
lesser amount as may be permitted in accordance with this Section 4) and each
such additional (or replacement) letter of credit shall comply with all of the
provisions of this Section 4, and if Tenant fails to do so, notwithstanding
anything to the contrary contained in Section 18 hereof, the same shall
constitute an incurable default by Tenant. Tenant further covenants and warrants
that it will neither assign nor encumber the Letter of Credit or any part
thereof and that neither Landlord nor its successors or assigns will be bound by
any such assignment, encumbrance, attempted assignment or attempted encumbrance.
Without limiting the generality of the foregoing, if the Letter of Credit
expires earlier than the Letter of Credit Expiration Date, Landlord will accept
a renewal thereof or substitute letter of credit (such renewal or substitute
letter of credit to be in effect not later than thirty (30) days prior to the
expiration thereof), which shall be irrevocable and automatically renewable as
above provided through the Letter of Credit Expiration Date upon the same terms
as the expiring letter of credit or such other terms as may be acceptable to
Landlord in its sole discretion. However, if the Letter of Credit is not timely
renewed or a substitute letter of credit is not timely received, or if Tenant
fails to maintain the Letter of Credit in the amount and terms set forth in this
Section 4, Landlord shall have the right to present such Letter of Credit to the
bank in accordance with the terms of this Section 4, and the entire sum
evidenced thereby shall be paid to and held by Landlord as collateral for
performance of all of Tenant's obligations under this Lease and for all losses
and damages Landlord may suffer as a result of any default by Tenant under this
Lease. If there shall occur a default under this Lease as set forth in Section
18 of this Lease, Landlord may, but without obligation to do so, draw upon the
Letter of Credit, in part or in whole, to cure any default of Tenant and/or to
compensate Landlord for any and all damages of any kind or nature sustained or
which may be sustained by Landlord resulting from Tenant's default. Tenant
agrees not to interfere in any way with payment to Landlord of the proceeds of
the Letter of Credit, either prior to or following a "draw" by Landlord of any
portion of the Letter of Credit, regardless of whether any dispute exists
between Tenant and Landlord as to Landlord's right to draw from the Letter of
Credit. No condition or term of this Lease shall be deemed to render the Letter
of Credit conditional to justify the issuer of the Letter of Credit in failing
to honor a drawing upon such Letter of Credit in a timely manner. Landlord and
Tenant acknowledge and agree that in no event or circumstance shall the Letter
of Credit or any renewal thereof or substitute therefor be (i) deemed to be or
treated as a "security deposit" within the meaning of California Civil Code
Section 1950.7 (as supplemented, amended, replaced and substituted from time to
time), (ii) subject to the terms of such Section 1950.7 (as supplemented,
amended, replaced and substituted from time to time), or (iii) intended to serve
as a "security deposit" within the meaning of such Section 1950.7 (as
supplemented, amended, replaced and substituted from time to time). The parties
hereto recite that with respect to the Letter of Credit, (x) the Letter of
Credit is not intended to serve as a security deposit and such Section 1950.7
(as supplemented, amended, replaced and substituted from time to time), and any
and all other laws, rules and regulations applicable to security deposits in the
commercial context ("Security Deposit Laws") shall have no applicability or
relevancy to the Letter of Credit and (y) Tenant waives any and all rights,
duties and obligations it may now or, in the future, will have relating to or
arising from the Security Deposit Laws.

5.     CONDITION OF PREMISES; TENANT IMPROVEMENTS

Tenant agrees to accept the Premises on the Commencement Date as then being
suitable for Tenant's intended use and in good operating order, condition and
repair in its then existing "AS IS" condition, except as otherwise set forth in


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Exhibit B hereto. The Tenant Improvements (defined in Exhibit B) shall be
installed in accordance with the terms, conditions, criteria and provisions set
forth in Exhibit B. By taking possession of the Premises, Tenant shall be deemed
to have accepted the Premises in good condition and state of repair. Tenant
expressly acknowledges and agrees that neither Landlord nor any of Landlord's
agents, representatives or employees has made any representations as to the
suitability, fitness or condition of the Premises for the conduct of Tenant's
business or for any other purpose, including without limitation, any storage
incidental thereto. Any Tenant Improvements to be constructed hereunder shall be
in compliance with the requirements of the ADA (defined below), and all costs
incurred for purposes of compliance therewith shall be a part of and included in
the costs of the Tenant Improvements.

Landlord shall cause the existing plumbing, electrical systems, fire sprinkler
system, lighting, HVAC and loading doors in the Premises (other than those
constructed by Tenant or Tenant's Representatives) (hereinafter "Building
Components") to be in good operating condition on the Commencement Date of this
Lease. Except as otherwise provided in this Lease, should any of the Building
Components not be in good operating condition on the Commencement Date, then
Landlord, within a commercially reasonable time period after receipt of written
notice from Tenant setting forth with specificity the nature and extent of such
non-compliance, shall rectify such non-compliance at no expense to Tenant. If
Tenant does not give Landlord written notice of a non-compliance within thirty
(30) days after the Commencement Date of this Lease (except for HVAC
non-compliance, in which event Tenant shall have sixty (60) days to notify
Landlord), then Landlord and Tenant agree that the Building Components shall be
deemed to be in good operating condition, and Landlord shall have no
responsibility for the costs and expenses related to any non-compliance of any
of the Building Components. Tenant shall have the benefit of any warranties on
the Building Components that are in effect as of the Commencement Date of the
Lease.

6.     ADDITIONAL RENT

It is intended by Landlord and Tenant that this Lease be a "triple net lease."
The costs and expenses described in this Section 6 and all other sums, charges,
costs and expenses specified in this Lease other than Base Rent are to be paid
by Tenant to Landlord as additional rent (collectively, "Additional Rent").

       6.1    OPERATING EXPENSES:

              6.1.1 DEFINITION OF OPERATING EXPENSES. Tenant shall pay to
Landlord Tenant's Share of all Operating Expenses as Additional Rent. The term
"Operating Expenses" as used herein shall mean the total amounts paid or payable
by Landlord in connection with the ownership, management, maintenance, repair
and operation of the Premises and the other portions of the Project. These
Operating Expenses may include, but are not limited to, Landlord's cost of: (i)
repairs to, and maintenance of, the roof membrane, the non-structural portions
of the roof and the non-structural elements of the perimeter exterior walls of
the Building; (ii) maintaining the outside paved area, landscaping and other
common areas of the Park. The term "Common Areas" shall mean all areas and
facilities within the Park exclusive of the Premises and the other portions of
the Park leasable exclusively to other tenants. The Common Areas include, but
are not limited to, interior lobbies, mezzanines, parking areas, access and
perimeter roads, sidewalks, rail spurs (if any), and landscaped areas; (iii)
annual insurance premium(s) insuring against personal injury and property damage
(including, if Landlord elects, "all risk" or "special purpose" coverage) and
all other insurance, including, but not limited to, earthquake and flood for the
Project, rental value insurance against loss of Rent for a period of at least
nine (9) months commencing on the date of loss, and subject to the provisions of
Section 25 below, any commercially reasonable deductible; (iv) (a) modifications
and/or new improvements to any portion of the Project occasioned by any rules,
laws or regulations effective subsequent to the Lease Date; (b) reasonably
necessary replacement improvements to any portion of the Project after the
Commencement Date; and (c) new improvements to the Project that reduce operating
costs or improve life/safety conditions, all of the foregoing as reasonably
determined by Landlord, in its sole but reasonable discretion; provided, if such
costs are of a capital nature, then such costs or allocable portions thereof
shall be amortized on a straight-line basis over the estimated useful life of
the capital item or fifteen (15) years whichever is shorter, as reasonably
determined by Landlord, together with reasonable interest on the amortized
balance; (v) the management and administration of any and all portions of the
Project, including, without limitation, a commercially reasonable property
management fee, accounting, auditing, billing, postage, salaries and benefits
for clerical and supervisory employees, whether located on the Project or
off-site, payroll taxes and legal and accounting costs and all fees, licenses
and permits related to the ownership, operation and management of the Project;
(vi) preventative maintenance and repair contracts including, but not limited
to, contracts for elevator systems (if any) and heating, ventilation and air
conditioning systems, lifts for disabled persons, if Landlord elects to so
procure; (vii) security and fire protection services for any portion of the
Building, if and to the extent, in Landlord's sole discretion, such services are
provided; (viii) the creation and modification of any rail spur or track
agreements, licenses, easements or other similar undertakings with respect to
the Project; (ix) supplies, materials, equipment, rental equipment and other
similar items used in the operation and/or maintenance of the Project and any
reasonable reserves established for replacement or repair of any Common Area
improvements or equipment; (x) any and all levies, charges, fees and/or
assessments payable to any applicable owner's association or similar body; (xi)
except for ADA Work (defined below) performed as part of the Tenant Improvements
pursuant to Exhibit B hereto and charged against the Tenant Improvement
Allowance, any barrier removal work or other required improvements, alterations
or work to any portion of the Project generally required under the ADA (defined
below) (the "ADA Work"); provided, if such ADA Work is required under the ADA
due to Tenant's use of the Premises or any Alteration (defined below) made to
the Premises by or on behalf of Tenant, then the cost of such ADA Work shall be
borne solely by Tenant and shall not be included as part of the Operating
Expenses; and (xii) the repairs and maintenance items set forth in Section 11.2
below.

              6.1.2 OPERATING EXPENSE EXCLUSIONS. Notwithstanding anything to
the contrary contained herein, for purposes of this Lease, the term "Operating
Expenses" shall not include the following: (i) costs (including permit, license,
and inspection fees) incurred in renovating, improving, decorating, painting, or
redecorating vacant space or space for other tenants within the Project; (ii)
costs incurred because Landlord or another tenant actually violated the terms
and conditions of any lease for premises within the Project; (iii) legal and
auditing fees (other than those fees reasonably incurred in connection with the
maintenance and operation of all or any portion the Project), leasing
commissions, advertising expenses, and other costs incurred in connection with
the original leasing of the Project or future re-leasing of any portion of the
Project; (iv) depreciation of the Building or any other improvements situated
within the Project; (v) any items for which Landlord is actually reimbursed by
insurance or by direct reimbursement by any other tenant of the Project; (vi)
costs of repairs or other work necessitated by fire, windstorm or other casualty


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<PAGE>   6

(excluding any deductibles) and/or costs of repair or other work necessitated by
the exercise of the right of eminent domain to the extent insurance proceeds or
a condemnation award, as applicable, is actually received by Landlord for such
purposes; provided, such costs of repairs or other work shall be paid by the
parties in accordance with the provisions of Sections 25 and 26, below; (vii)
other than any interest charges for capital improvements referred to in Section
6.1.1(iv) hereinabove, any interest or payments on any financing for the
Building, the Phase or the Project, interest and penalties incurred as a result
of Landlord's late payment of any invoice (provided that Tenant pays Tenant's
Share of Operating Expenses and Tax Expenses to Landlord when due as set forth
herein), and any bad debt loss, rent loss or reserves for same; (viii) costs
associated with the investigation and/or remediation of Hazardous Materials
(hereafter defined) present in, on or about any portion of the Project, unless
such costs and expenses are the responsibility of Tenant as provided in Section
27 hereof, in which event such costs and expenses shall be paid solely by Tenant
in accordance with the provisions of Section 27 hereof; (ix) Landlord's cost for
the repairs and maintenance items set forth in Section 11.3, below; (x) overhead
and profit increment paid to Landlord or to subsidiaries or affiliates of
Landlord for goods and/or services in the Project to the extent the same exceeds
the costs of such by unaffiliated third parties on a competitive basis; or any
costs included in Operating Expenses representing an amount paid to a person,
firm, corporation or other entity related to Landlord which is in excess of the
amount which would have been paid in the absence of such relationship; (xi) any
payments under a ground lease or master lease; (xii) reports, points, fees and
other lender costs and closing costs on any mortgage or mortgages, or other debt
instruments encumbering the Premises, the Building, the Phase or the Park;
(xiii) any items for which Landlord is reimbursed by insurance; (xiv) leasing.
commissions advertising and promotional expenses and any other costs of
disbursements incurred in connection with the original leasing of the Premises,
the Building, the Phase or the Park, or future re-leasing of same; (xv)
Landlord's general corporate or partnership overhead and general administrative
expenses; the cost of signs identifying the Landlord and tenants of the Park
(except for directory signs identifying tenants of the Park, which shall be
included in Operating Expenses as provided in Section 6.1.1 herein); (xvi)
non-recurring costs to remedy structural defects in original construction
materials or installations in the Premises, Building, Phase or the Park; (xvii)
costs incurred in installing, operating and maintaining any specialty service
that is not industry-standard for comparable buildings in the San Francisco East
Bay, provided that this exclusion shall not apply to such services that are
required by Law; charitable or political contributions made by Landlord; (xviii)
fees or dues payable to trade associations and industry associations; (xix)
entertaining, dining or travel expenses (other than those expenses reasonably
incurred in connection with the maintenance and operation of all or any portion
of the Premises, the Building, the Phase or the Park; and (xx) flowers, gifts,
balloons or similar items provided to Tenant, other tenants, employees, vendors,
contractors, prospective tenants or agents.

       6.2 TAX EXPENSES: Tenant shall pay to Landlord Tenant's Share of all real
property taxes applicable to the Project. Prior to delinquency, Tenant shall pay
any and all taxes and assessments levied upon Tenant's Property (defined below
in Section 10) located or installed in or about the Premises by, or on behalf of
Tenant. To the extent any such taxes or assessments are not separately assessed
or billed to Tenant, then Tenant shall pay the amount thereof as invoiced by
Landlord. Tenant shall also reimburse and pay Landlord, as Additional Rent,
within twenty (20) days after demand therefor, one hundred percent (100%) of (i)
any increase in real property taxes attributable to any and all Alterations
(defined below in Section 10), Tenant Improvements, fixtures, equipment or other
improvements of any kind whatsoever placed in, on or about the Premises for the
benefit of, at the request of, or by Tenant, and (ii) taxes and assessments
levied or assessed upon or with respect to the possession, operation, use or
occupancy by Tenant of the Premises or any other portion of the Project. The
term "Tax Expenses" shall mean and include, without limitation, any form of tax
and assessment (general, special, supplemental, ordinary or extraordinary),
commercial rental tax, payments under any improvement bond or bonds, license
fees, license tax, business license fee, rental tax, transaction tax or levy
imposed by any authority having the direct or indirect power of tax (including
any city, county, state or federal government, or any school, agricultural,
lighting, drainage or other improvement district thereof) as against any legal
or equitable interest of Landlord in the Premises or any other portion of the
Project or any other tax, fee, or excise, however described, including, but not
limited to, any value added tax, 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. The term "Tax Expenses"
shall not include any franchise, estate, inheritance, net income, or excess
profits tax imposed upon Landlord, or a penalty fee imposed as a result of
Landlord's failure to pay Tax Expenses when due.

       6.3 PAYMENT OF EXPENSES: Landlord shall estimate Tenant's Share of the
Operating Expenses and Tax Expenses for the calendar year in which the Lease
commences. Commencing on the Commencement Date, one-twelfth (1/12th) of this
estimated amount shall be paid by Tenant to Landlord, as Additional Rent, and
thereafter on the first (1st) day of each month throughout the remaining months
of such calendar year. Thereafter, Landlord may estimate such expenses for each
calendar year during the Term of this Lease and Tenant shall pay one-twelfth
(1/12th) of such estimated amount as Additional Rent hereunder on the first
(1st) day of each month during such calendar year and for each ensuing calendar
year throughout the Term of this Lease. Tenant's obligation to pay Tenant's
Share of Operating Expenses and Tax Expenses shall survive the expiration or
earlier termination of this Lease.

       6.4 ANNUAL RECONCILIATION: By June 30th of each calendar year, or as soon
thereafter as reasonably possible, Landlord shall furnish Tenant with an
accounting of actual and accrued Operating Expenses and Tax Expenses. Within
thirty (30) days of Landlord's delivery of such accounting, Tenant shall pay to
Landlord the amount of any underpayment. Notwithstanding the foregoing, failure
by Landlord to give such accounting by such date shall not constitute a waiver
by Landlord of its right to collect any underpayment by Tenant at any time.
Landlord shall credit the amount of any overpayment by Tenant toward the next
estimated monthly installment(s) falling due, or where the Term of the Lease has
expired, refund the amount of overpayment to Tenant as soon as possible
thereafter. If the Term of the Lease expires prior to the annual reconciliation
of expenses Landlord shall have the right to reasonably estimate Tenant's Share
of such expenses, and if Landlord determines that there has been an
underpayment, Landlord may deduct such underpayment from Tenant's Security
Deposit provided, however, prior to such deduction, Landlord shall first give
Tenant thirty (30) days from the date of Landlord's invoice therefor to pay such
underpayment. Failure by Landlord to accurately estimate Tenant's Share of such
expenses or to otherwise perform such reconciliation of expenses shall not
constitute a waiver of Landlord's right to collect any of Tenant's underpayment
at any time during the Term of the Lease or at any time after the expiration or
earlier termination of this Lease.

       6.5 AUDIT: After delivery to Landlord of at least thirty (30) days prior
written notice, Tenant, at its sole cost and expense through any accountant
designated by it, shall have the right to examine and/or audit the books and


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<PAGE>   7

records evidencing such costs and expenses for the previous one (1) calendar
year, during Landlord's reasonable business hours but not more frequently than
once during any calendar year. Any such accounting firm designated by Tenant may
not be compensated on a contingency fee basis. The results of any such audit
(and any negotiations between the parties related thereto) shall be maintained
strictly confidential by Tenant and its accounting firm, attorneys, and other
professional advisors and, unless litigation ensues between the parties, shall
not be disclosed, published or otherwise disseminated to any other party other
than to Landlord and its authorized agents. Landlord and Tenant each shall use
its best efforts to cooperate in such negotiations and to promptly resolve any
discrepancies between Landlord and Tenant in the accounting of such costs and
expenses. If through such audit it is determined that there is a discrepancy of
more than five percent (5%) of the total of such costs and expenses, then
Landlord shall reimburse Tenant for the reasonable accounting costs and expenses
incurred by Tenant in performing such audit, including Tenant's in-house or
outside auditors or accountants, not to exceed $2,000.00. However, if through
such audit it is determined that there is a discrepancy of five percent (5%) or
less, then Tenant shall reimburse Landlord for the reasonable accounting costs
and expenses associated with Landlord's in-house auditors or accounting
personnel as well as those reasonable costs and expenses incurred by Landlord
for any outside accounting firms or auditors in connection with such audit, not
to exceed $2,000.00.

7.     UTILITIES AND SERVICES

Tenant shall pay the cost of all (i) water, sewer use, sewer discharge fees and
sewer connection fees, gas, electricity, telephone, telecommunications, cabling
and other utilities billed or metered separately to the Premises and (ii) refuse
pickup and janitorial service to the Premises. Utility Expenses, Common Area
Utility Costs and all other sums and charges set forth in this Section 7 are
considered part of Additional Rent.

       7.1 UTILITY EXPENSES: For any such utility fees, use charges, or similar
services that are not billed or metered separately to Tenant, including without
limitation, water and sewer charges, and garbage and waste disposal
(collectively, "Utility Expenses"), Tenant shall pay to Landlord Tenant's Share
of Utility Expenses. If Landlord reasonably determines that Tenant's Share of
Utility Expenses is not commensurate with Tenant's use of such services, Tenant
shall pay to Landlord the amount which is attributable to Tenant's use of the
utilities or similar services, as reasonably estimated and determined by
Landlord, based upon factors such as size of the Premises and intensity of use
of such utilities by Tenant such that Tenant shall pay the portion of such
charges reasonably consistent with Tenant's use of such utilities and similar
services. If Tenant disputes any such estimate or determination, then Tenant
shall either pay the estimated amount or cause the Premises to be separately
metered at Tenant's sole expense. Tenant shall also pay Tenant's Share of any
assessments, charges, and fees included within any tax bill for the Lot on which
the Premises are situated, including without limitation, entitlement fees,
allocation unit fees, sewer use fees, and any other similar fees or charges.

       7.2 COMMON AREA UTILITY COSTS: Tenant shall pay to Landlord Tenant's
Share of any Common Area utility costs, fees, charges and expenses
(collectively, "Common Area Utility Costs"). Tenant shall pay to Landlord
one-twelfth (1/12th) of the estimated amount of Tenant's Share of the Common
Area Utility Costs on the Commencement Date and thereafter on the first (1st)
day of each month throughout the balance of the Term of this Lease. Any
reconciliation thereof shall be substantially in the same manner as set forth in
Section 6.4 above.

       7.3 MISCELLANEOUS: Tenant acknowledges that the Premises may become
subject to the rationing of utility services or restrictions on utility use as
required by a public utility company, governmental agency or other similar
entity having jurisdiction thereof. Tenant agrees that its tenancy and occupancy
hereunder shall be subject to such rationing restrictions as may be imposed upon
Landlord, Tenant, the Premises, or other portions of the Project, and Tenant
shall in no event be excused or relieved from any covenant or obligation to be
kept or performed by Tenant by reason of any such rationing or restrictions. If
permitted by applicable Laws, Landlord shall have the right at any time and from
time to time during the Term of this Lease to either contract for service from a
different company or companies (each such company referred to as an "Alternate
Service Provider") other than the company or companies presently providing
electricity service for the Project (the "Electric Service Provider") or
continue to contract for service from the Electric Service Provider, at
Landlord's sole discretion. Tenant agrees to cooperate with Landlord, the
Electric Service Provider, and any Alternate Service Provider at all times and,
as reasonably necessary, shall allow Landlord, the Electric Service Provider,
and any Alternate Service Provider reasonable access to the Building's electric
lines, feeders, risers, wiring, and any other machinery within the Premises.

8.     LATE CHARGES

Any and all sums or charges set forth in this Section 8 are considered part of
Additional Rent. Tenant acknowledges that late payment (the second day of each
month or any time thereafter) by Tenant to Landlord of Rent and all other sums
due hereunder, will cause Landlord to incur costs not contemplated by this
Lease. Such costs may include, without limitation, processing and accounting
charges, and late charges that may be imposed on Landlord by the terms of any
note secured by any encumbrance against the Premises, and late charges and
penalties due to the late payment of real property taxes on the Premises.
Therefore, if any installment of Rent or any other sum payable by Tenant is not
received by Landlord within five (5) business days of the due date, Tenant shall
promptly pay to Landlord a late charge, as liquidated damages, in an amount
equal to five percent (5%) of such delinquent amount for the first instance
during any calendar year, seven percent (7%) for the second (2nd) instance
during any calendar year and ten percent (10%) for the third (3rd) instance in
any calendar year in which Landlord does not receive Rent within such
five-business-day period plus interest on such delinquent amount at the rate
equal to the prime rate plus three percent (3%) for every month or portion
thereof after the first thirty (30) days that such sums remain unpaid.
Notwithstanding the foregoing, Landlord waives the late charge for the first
(1st) instance during the Term of this Lease in which Tenant fails to timely pay
Rent. If Tenant delivers to Landlord a check for which there are not sufficient
funds, Landlord may require Tenant to replace such check with a cashier's check
for the amount of such check and all other charges payable hereunder. The
parties agree that this late charge and the other charges referenced above
represent a fair and reasonable estimate of the costs that Landlord will incur
by reason of such late payment by Tenant, excluding attorneys' fees and costs.
Acceptance of any late charge or other charges shall not constitute a waiver by
Landlord of Tenant's default with respect to the delinquent amount, nor prevent
Landlord from exercising any of the other rights and remedies available to
Landlord for any other breach of Tenant under this Lease. If a late charge
becomes payable for three (3) installments of Rent, then Landlord, at Landlord's
sole option, can either require the Rent be paid quarterly in advance or be paid
monthly in


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<PAGE>   8

advance by cashier's check or by electronic funds transfer.

9.     USE OF PREMISES

       9.1 COMPLIANCE WITH LAWS, RECORDED MATTERS, AND RULES AND REGULATIONS:
The Premises are to be used solely for the purposes and uses specified in the
Basic Lease Information and for no other uses or purposes without Landlord's
prior written consent. Landlord's consent shall not be unreasonably withheld or
delayed so long as the proposed use (i) does not involve the use of Hazardous
Materials other than as expressly permitted under the provisions of Section 29
below, (ii) does not require any additional parking spaces, and (iii) is
compatible and consistent with the other uses then being made in the Project and
in other similar types of buildings in the vicinity of the Project, as
reasonably determined by Landlord. The use of the Premises by Tenant and its
employees, representatives, agents, invitees, licensees, subtenants, customers
or contractors (collectively, "Tenant's Representatives") shall be subject to,
and at all times in compliance with, (a) any and all applicable laws, rules,
codes, ordinances, statutes, orders and regulations as same exist from time to
time throughout the Term of this Lease (collectively, the "Laws"), including
without limitation, the requirements of the Americans with Disabilities Act, a
federal law codified at 42 U.S.C. 12101 et seq., including, but not limited to
Title III thereof, all regulations and guidelines related thereto and all
requirements of Title 24 of the State of California (collectively, the "ADA"),
(b) any and all documents, instruments, licenses, restrictions, easements or
similar instruments, conveyances or encumbrances which are at any time, and from
time to time, required to be made by or given by Landlord in any manner relating
to the initial development of the Project and/or the construction from time to
time of any additional buildings or other improvements in the Project, including
without limitation any Tenant Improvements (collectively, the "Development
Documents"), (c) any and all documents, easements, covenants, conditions and
restrictions, and similar instruments, together with any and all amendments and
supplements thereto made from time to time each of which has been or hereafter
is recorded in any official or public records with respect to the Premises or
any other portion of the Project (collectively, the "Recorded Matters"), and (d)
any and all rules and regulations set forth in Exhibit C hereto, any other
reasonable rules and regulations promulgated by Landlord now or hereafter
enacted relating to parking and the operation of the Premises and/or any other
part of the Project and any and all rules, restrictions and/or regulations
imposed by any applicable owners association or similar entity or body
(collectively, the "Rules and Regulations"). Landlord reserves to itself the
right, from time to time, to grant, without the consent of Tenant, such
easements, rights and dedications that Landlord deems reasonably necessary, and
to cause the recordation of parcel or subdivision maps and/or restrictions, so
long as such easements, rights, dedications, maps and restrictions, as
applicable, do not materially and adversely interfere with Tenant's operations
in the Premises. Tenant agrees to sign any documents reasonably requested by
Landlord to effectuate any such easements, rights, dedications, maps or
restrictions. Tenant agrees to, and does hereby, assume full and complete
responsibility to ensure that the Premises, including without limitation, the
Tenant Improvements, are in compliance with all applicable Laws throughout the
Term of this Lease. Additionally, Tenant shall be solely responsible for the
payment of all costs, fees and expenses associated with any modifications,
improvements or other Alterations to the Premises and/or any other portion of
the Project occasioned by the enactment of, or changes to, any Laws arising from
Tenant's particular use of the Premises or Alterations or other improvements
made to the Premises regardless of when such Laws became effective. Tenant shall
not initiate, submit an application for, or otherwise request, any land use
approvals or entitlements with respect to the Premises or any other portion of
the Project, including without limitation, any variance, conditional use permit
or rezoning, without first obtaining Landlord's prior written consent thereto,
which consent may be given or withheld in Landlord's sole discretion.

       9.2 PROHIBITION ON USE: Tenant shall not use the Premises or permit
anything to be done in or about the Premises nor keep or bring anything therein
which will in any way increase the existing rate of or affect any policy of fire
or other insurance upon the Building or any of its contents, or cause a
cancellation of any insurance policy; provided, however, notwithstanding the
foregoing, if Tenant permissibly uses the Premises for the purposes allowed by
the provisions of this Lease and such permissible use increases the rate of
premiums paid for such insurance, then Tenant shall not be considered in breach
of the foregoing restriction so long as Tenant agrees to pay, and actually does
promptly pay, as Additional Rent any such increase in the rate of, or premiums
for, such insurance. No auctions may be held or otherwise conducted in, on or
about any portion of the Premises or the Project without Landlord's prior
written consent thereto. Tenant shall not do or permit anything to be done in or
about the Premises which will in any way obstruct or interfere with the rights
of Landlord or other tenants or occupants of any portion of the Project. The
Premises shall not be used for any unlawful purpose. Tenant shall not cause,
maintain or permit any private or public nuisance in, on or about any portion of
the Premises or the Project, including, but not limited to, any offensive odors,
noises, fumes or vibrations. Tenant shall not damage or deface or otherwise
commit or suffer to be committed any waste in, upon or about the Premises or any
other portion of the Project. Tenant shall not place or store, nor permit any
other person or entity to place or store, any property, equipment, materials,
supplies, personal property or any other items or goods outside of the Premises
for any period of time. Tenant shall not permit any animals, including, but not
limited to, any household pets, to be brought or kept in or about the Premises.
Tenant shall not install any radio or television antenna, satellite dish,
microwave, loudspeaker or other device on the roof or exterior walls of the
Building or any other portion of the Project. Tenant shall not interfere with
radio, telecommunication, or television broadcasting or reception from or in the
Building or elsewhere. Tenant shall place no loads upon the floors, walls, or
ceilings in excess of the maximum designed load permitted by the applicable
Uniform Building Code or which may damage the Building or outside areas within
the Project. Tenant shall not place any harmful liquids in the drainage systems
or dump or store waste materials, refuse or other such materials, or allow such
materials to remain outside the Building area, except for any non-hazardous or
non-harmful materials which may be stored in refuse dumpsters.

10.    ALTERATIONS; AND SURRENDER OF PREMISES

       10.1 ALTERATIONS: Tenant shall be permitted to make, at its sole cost and
expense, non-structural alterations and additions to the interior of the
Premises and alterations and additions not visible from the exterior of the
Premises without obtaining Landlord's prior written consent, provided the cost
of same does not exceed $20,000.00 each job and $30,000.00 cumulatively each
calendar year except for recarpeting, which shall not exceed $40,000.00 in any
one (1) calendar year, (the "Permitted Improvements"). Tenant, however, shall
first notify Landlord of such alterations or additions so that Landlord may post
a Notice of Non-Responsibility on the Premises. Within ten (10) business days of
Landlord's receipt of Tenant's written notice of any item comprising the
Permitted Improvements and at the time that Landlord's consent is given as to
any alterations for which Landlord's consent is required, Landlord shall notify
Tenant, in writing, whether or not Landlord will required Tenant to remove such
item from the Premises upon the expiration or


                                       8
<PAGE>   9

earlier termination of this Lease. Except for the Permitted Improvements, Tenant
shall not install any signs, fixtures, improvements, nor make or permit any
other alterations or additions (individually, an "Alteration", and collectively,
the "Alterations") to the Premises without the prior written consent of
Landlord, which consent shall not be unreasonably withheld so long as any such
Alteration does not affect the Building systems or the structural integrity of
the Premises or the Building. If any such Alteration is expressly permitted by
Landlord, Tenant shall deliver at least ten (10) days prior notice to Landlord,
from the date Tenant intends to commence construction, sufficient to enable
Landlord to post a Notice of Non-Responsibility. In all events, Tenant shall
obtain all permits or other governmental approvals prior to commencing any of
such work and deliver a copy of same to Landlord. All Alterations shall be at
Tenant's sole cost and expense, and shall be installed by a licensed contractor
(reasonably approved by Landlord) in compliance with all applicable Laws
(including, but not limited to, the ADA), Development Documents, Recorded
Matters, and Rules and Regulations. Tenant shall keep the Premises and the
property on which the Premises are situated free from any liens arising out of
any work performed, materials furnished or obligations incurred by or on behalf
of Tenant. Tenant shall, prior to construction of any and all Alterations, cause
its contractor(s) and/or major subcontractor(s) to provide insurance as
reasonably required by Landlord, and Tenant shall provide such assurances to
Landlord, including without limitation, waivers of lien, surety company
performance bonds as Landlord shall require to assure payment of the costs
thereof to protect Landlord and the Project from and against any loss from any
mechanic's, materialmen's or other liens.

       10.2 SURRENDER OF PREMISES: At the expiration of the Term or earlier
termination of this Lease, Tenant shall surrender the Premises to Landlord (a)
in good condition and repair (damage by acts of God, casualty, and normal wear
and tear excepted), but with all non-working light bulbs and ballasts replaced
and all roll-up doors and plumbing fixtures in good condition and working order,
and (b) in accordance with the provisions of Section 27 hereof. Normal wear and
tear shall not include any damage or deterioration that would have been
prevented by proper maintenance by Tenant, or Tenant otherwise performing all of
its obligations under this Lease. On or before the expiration or earlier
termination of this Lease, (i) Tenant shall remove the Permitted Improvements
(to the extent Landlord has notified Tenant in writing of such removal as
required in Section 10.1 above) all of Tenant's Property (as hereinafter
defined) and Tenant's signage from the Premises and the other portions of the
Project, (ii) Landlord may, by notice to Tenant given not later than ninety (90)
days prior to the Expiration Date (except in the event of a termination of this
Lease prior to the scheduled Expiration Date, in which event no advance notice
shall be required), require Tenant, at Tenant's expense, to remove any or all
Alterations as to which Landlord notified Tenant, at the time of consent, that
removal would be required; and Tenant shall remove such requested Alterations
from the Premises, and (iii) to the extent Landlord has advised Tenant on or
about the time that the Tenant Improvements were constructed and installed in
the Premises that Tenant is to remove all or portions of the items comprising
the Tenant Improvements (the "Removable TIs"), Tenant shall remove the Removable
TIs. Tenant shall repair any damage caused by such removal of the Tenant's
Property, the requested Alterations and the Removable TIs. For purposes hereof,
the term "Tenant's Property" shall mean and refer to all equipment, trade
fixtures, computer wiring and cabling, furnishings, inventories, goods and
personal property of Tenant, including, but not limited to, Tenant's property
set forth on Exhibit I hereto. Any of Tenant's Property not so removed by Tenant
as required herein shall be deemed abandoned and may be stored, removed, and
disposed of by Landlord at Tenant's expense, and Tenant waives all claims
against Landlord for any damages resulting from Landlord's retention and
disposition of such property; provided, however, Tenant shall remain liable to
Landlord for all costs incurred in storing and disposing of such abandoned
property of Tenant. All Tenant Improvements and Alterations except those which
Landlord requires Tenant to remove shall remain in the Premises as the property
of Landlord. If the Premises are not surrendered at the expiration of the Term
or earlier termination of this Lease, and in accordance with the provisions of
this Section 10 and Section 27 below, Tenant shall continue to be responsible
for the payment of Rent (as the same may be increased pursuant to Section 20
below) until the Premises are so surrendered in accordance with said provisions.
Tenant shall indemnify, defend and hold the Indemnitees (hereafter defined)
harmless from and against any and all damages, expenses, costs, losses or
liabilities arising from any delay by Tenant in so surrendering the Premises
including, without limitation, any damages, expenses, costs, losses or
liabilities arising from any claim against Landlord made by any succeeding
tenant or prospective tenant founded on or resulting from such delay and losses
and damages suffered by Landlord due to lost opportunities to lease any portion
of the Premises to any such succeeding tenant or prospective tenant, together
with, in each case, actual attorneys' fees and costs.

11.    REPAIRS AND MAINTENANCE

       11.1 TENANT'S REPAIRS AND MAINTENANCE OBLIGATIONS: Except for those
portions of the Building to be maintained by Landlord, as provided in Sections
11.2 and 11.3 below, Tenant shall, at its sole cost and expense, keep and
maintain all parts of the Premises and such portions of the Building and
improvements as are within the exclusive control of Tenant in good, clean and
safe condition and repair, promptly making all necessary repairs and
replacements, whether ordinary or extraordinary, with materials and workmanship
of the same character, kind and quality as the original thereof, all of the
foregoing to the reasonable satisfaction of Landlord including, but not limited
to, repairing any damage caused by Tenant or any of Tenant's Representatives and
replacing any property so damaged by Tenant or any of Tenant's Representatives.
Without limiting the generality of the foregoing, Tenant shall be solely
responsible for promptly maintaining, repairing and replacing (a) all mechanical
systems, heating, ventilation and air conditioning systems serving the Premises,
unless maintained by Landlord, (b) all plumbing work and fixtures, (c)
electrical wiring systems, fixtures and equipment exclusively serving the
Premises, (d) all interior lighting (including, without limitation, light bulbs
and/or ballasts) and exterior lighting exclusively serving the Premises or
adjacent to the Premises, (e) all glass, windows, window frames, window
casements, skylights, interior and exterior doors, door frames and door closers,
(f) all roll-up doors, ramps and dock equipment, including without limitation,
dock bumpers, dock plates, dock seals, dock levelers and dock lights, (g) all
tenant signage, (h) lifts for disabled persons serving the Premises, (i)
sprinkler systems, fire protection systems and security systems, except to the
extent maintained by Landlord, and (j) all partitions, fixtures, equipment,
interior painting, interior walls and floors, and floor coverings of the
Premises and every part thereof (including, without limitation, any demising
walls contiguous to any portion of the Premises). Additionally, Tenant shall be
solely responsible for performance of the regular removal of trash and debris.
Tenant shall have no right of access to or right to install any device on the
roof of the Building nor make any penetrations of the roof of the Building
without the express prior written consent of Landlord, which consent shall not
be withheld unreasonably.

       11.2 MAINTENANCE BY LANDLORD: Subject to the provisions of Section 11.1,
and further subject to Tenant's obligation under Section 6 to reimburse
Landlord, in the form of Additional Rent, for Tenant's Share of the cost and
expense of the following described items, Landlord agrees to repair and maintain
the following items: fire protection services; the roof and roof coverings
(provided that Tenant installs no additional air conditioning or other equipment
on


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<PAGE>   10

the roof that damages the roof coverings, in which event Tenant shall pay all
costs relating to the presence of such additional equipment); the plumbing and
mechanical systems serving the Building, excluding the plumbing, mechanical and
electrical systems exclusively serving the Premises; any rail spur and rail
crossing; exterior painting of the Building; and the parking areas, pavement,
landscaping, sprinkler systems, sidewalks, driveways, curbs, and lighting
systems in the Common Areas. Notwithstanding anything in this Section 11 to the
contrary, Landlord shall have the right to either repair or to require Tenant to
repair any damage to any portion of the Premises and any other portion of the
Project caused by or created due to any act, omission, negligence or willful
misconduct of Tenant or any of Tenant Representatives and to restore the
Premises and the other affected portions of the Project, as applicable, to the
condition existing prior to the occurrence of such damage. If Landlord elects to
perform such repair and restoration work, Tenant shall reimburse Landlord upon
demand for all costs and expenses incurred by Landlord in connection therewith.
Tenant shall promptly report, in writing, to Landlord any defective condition
known to it which Landlord is required to repair, and failure to so report any
such defect shall make Tenant responsible to Landlord for any liability incurred
by Landlord by reason of such condition.

       11.3 LANDLORD'S REPAIRS AND MAINTENANCE OBLIGATIONS: Subject to the
provisions of Sections 11.1, 25 and 26, and except for repairs rendered
necessary by the intentional or negligent acts or omissions of Tenant or any of
Tenant's Representatives, Landlord agrees, at Landlord's sole cost and expense,
to (a) keep in good repair the structural portions of the floors, foundations
and exterior perimeter walls of the Building (exclusive of glass and exterior
doors), and (b) replace the structural portions of the roof of the Building
(excluding the roof membrane).

       11.4 TENANT'S FAILURE TO PERFORM REPAIRS AND MAINTENANCE OBLIGATIONS: If
Tenant refuses or neglects to repair and maintain the Premises and the other
areas properly as required herein and to the reasonable satisfaction of
Landlord, Landlord may, but without obligation to do so, at any time make such
repairs or maintenance without Landlord having any liability to Tenant for any
loss or damage that may accrue to Tenant's Property or to Tenant's business by
reason thereof, except to the extent any damage is caused by the willful
misconduct or gross negligence of Landlord or its authorized agents and
representatives. If Landlord makes such repairs or maintenance, upon completion
thereof Tenant shall pay to Landlord, as Additional Rent, Landlord's costs and
expenses incurred therefor. The obligations of Tenant hereunder shall survive
the expiration of the Term of this Lease or the earlier termination thereof.
Tenant hereby waives any right to repair at the expense of Landlord under any
applicable Laws now or hereafter in effect with respect to the Premises.

12.    INSURANCE

       12.1 TYPES OF INSURANCE: Tenant shall maintain in full force and effect
at all times during the Term of this Lease, at Tenant's sole cost and expense,
for the protection of Tenant and Landlord, as their interests may appear,
policies of insurance issued by a carrier or carriers reasonably acceptable to
Landlord and its lender (which afford the following coverages: (i) worker's
compensation and employer's liability, as required by law; (ii) commercial
general liability insurance (occurrence form) providing coverage against any and
all claims for bodily injury and property damage occurring in, on or about the
Premises arising out of Tenant's and Tenant's Representatives' use or occupancy
of the Premises. Such insurance shall include coverage for blanket contractual
liability, fire damage, premises, personal injury, completed operations and
products liability. Such insurance shall have a combined single limit of not
less than Two Million Dollars ($2,000,000) per occurrence with a Three Million
Dollar ($3,000,000) aggregate limit and excess/umbrella insurance in the amount
of Three Million Dollars ($3,000,000). If Tenant has other locations which it
owns or leases, the policy shall include an aggregate limit per location
endorsement; (iii) comprehensive automobile liability insurance with a combined
single limit of at least $1,000,000 per occurrence for claims arising out of any
company owned automobiles; (iv) "all risk" or "special purpose" property
insurance, including without limitation, sprinkler leakage, covering damage to
or loss of any of Tenant's Property and the Tenant Improvements located in, on
or about the Premises, and in addition, coverage for flood, earthquake, and
business interruption of Tenant, together with, if the property of any of
Tenant's invitees, vendors or customers is to be kept in the Premises,
warehouser's legal liability or bailee customers insurance for the full
replacement cost of the property belonging to such parties and located in the
Premises. Such insurance shall be written on a replacement cost basis (without
deduction for depreciation) in an amount equal to one hundred percent (100%) of
the full replacement value of the aggregate of the items referred to in this
clause (iv); and (v) such other insurance or higher limits of liability as is
then customarily required for similar types of buildings within the general
vicinity of the Project or as may be reasonably required by any of Landlord's
lenders.

       12.2 INSURANCE POLICIES: Insurance required to be maintained by Tenant
shall be written by companies (i) licensed to do business in the State of
California, (ii) domiciled in the United States of America, and (iii) having a
"General Policyholders Rating" of at least A:X (or such higher rating as may be
required by a lender having a lien on the Premises) as set forth in the most
current issue of "A.M. Best's Rating Guides." Any deductible amounts under any
of the insurance policies required hereunder shall not exceed Five Thousand
Dollars ($5,000). Tenant shall deliver to Landlord certificates of insurance and
true and complete copies of any and all endorsements required herein for all
insurance required to be maintained by Tenant hereunder at the time of execution
of this Lease by Tenant. Tenant shall, at least fifteen (15) days prior to
expiration of each policy, furnish Landlord with certificates of renewal or
"binders" thereof. Each certificate shall expressly provide that such policies
shall not be cancelable or otherwise subject to material modification except
after thirty (30) days prior written notice to the parties named as additional
insureds as required in this Lease (except for cancellation for nonpayment of
premium, in which event cancellation shall not take effect until at least ten
(10) days' notice has been given to Landlord). Tenant shall have the right to
provide insurance coverage which it is obligated to carry pursuant to the terms
of this Lease under a blanket insurance policy, provided such blanket policy
expressly affords coverage for the Premises and for Landlord as required by this
Lease.

       12.3 ADDITIONAL INSUREDS AND COVERAGE: Each of Landlord, Landlord's
property management company or agent, and Landlord's lender(s) having a lien
against the Premises or any other portion of the Project shall be named as
additional insureds or loss payees (as applicable) under all of the policies
required in Section 12.1(ii) and, with respect to the Tenant Improvements, in
Section 12.1(iv) hereof. Additionally, all of such policies shall provide for
severability of interest. All insurance to be maintained by Tenant shall, except
for workers' compensation and employer's liability insurance, be primary,
without right of contribution from insurance maintained by Landlord. Any
umbrella/excess liability policy (which shall be in "following form") shall
provide that if the underlying aggregate is exhausted, the excess coverage will
drop down as primary insurance. The limits of insurance maintained by Tenant
shall not limit Tenant's liability under this Lease. It is the parties'
intention that the insurance to be procured and maintained by Tenant as


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<PAGE>   11

required herein shall provide coverage for any and all damage or injury arising
from or related to Tenant's operations of its business and/or Tenant's or
Tenant's Representatives' use of the Premises and any of the areas within the
Project. Notwithstanding anything to the contrary contained herein, to the
extent Landlord's cost of maintaining insurance with respect to the Building
and/or any other buildings within the Project is increased as a result of
Tenant's acts, omissions, Alterations, improvements, use or occupancy of the
Premises, Tenant shall pay one hundred percent (100%) of, and for, each such
increase as Additional Rent.

       12.4 FAILURE OF TENANT TO PURCHASE AND MAINTAIN INSURANCE: If Tenant
fails to obtain and maintain the insurance required herein throughout the Term
of this Lease, Landlord may, but without obligation to do so, purchase the
necessary insurance and pay the premiums therefor. If Landlord so elects to
purchase such insurance, Tenant shall promptly pay to Landlord as Additional
Rent, the amount so paid by Landlord, upon Landlord's demand therefor. In
addition, Landlord may recover from Tenant and Tenant agrees to pay, as
Additional Rent, any and all losses, damages, expenses and costs which Landlord
may sustain or incur by reason of Tenant's failure to obtain and maintain such
insurance.

       12.5 WAIVER OF SUBROGATION: Landlord and Tenant hereby mutually waive
their respective rights of recovery against each other for any loss of, or
damage to, either parties' property to the extent that such loss or damage is
insured by an insurance policy required to be in effect at the time of such loss
or damage. Each party shall obtain any special endorsements, if required by its
insurer, whereby the insurer waives its rights of subrogation against the other
party. This provision is intended to waive fully, and for the benefit of the
parties hereto, any rights and/or claims which might give rise to a right of
subrogation in favor of any insurance carrier.

       12.6 LANDLORD'S INSURANCE: Landlord shall maintain in full force and
effect during the Term of this Lease, subject to reimbursement as provided in
Section 6, policies of insurance which afford such coverages as are commercially
reasonable and as is consistent with other properties in Landlord's portfolio.
Notwithstanding the foregoing, Landlord shall obtain and keep in force during
the Term of this Lease, as an item of Operating Expenses, a policy or policies
in the name of Landlord, with loss payable to Landlord and to the holders of any
mortgages, deeds of trust or ground leases on the Premises ("Lender(s)"),
insuring loss or damage to the Building, including all improvements, fixtures
(other than trade fixtures) and permanent additions, and insuring for loss of
rents for a period of at least nine (9) months commencing on the date of such
loss. However, all alterations, additions and improvements made to the Premises
by Tenant (other than the Tenant Improvements) shall be insured by Tenant rather
than by Landlord. The amount of such insurance procured by Landlord shall be
equal to at least eighty percent (80%) of the full replacement cost of the
Building, including all improvements and permanent additions as the same shall
exist from time to time, or the amount required by Lenders. At Landlord's
option, such policy or policies shall insure against all risks of direct
physical loss or damage (including, without limitation, the perils of flood and
earthquake), including coverage for any additional costs resulting from debris
removal and reasonable amounts of coverage for the enforcement of any ordinance
or law regulating the reconstruction or replacement of any undamaged sections of
the Building required to be demolished or removed by reason of the enforcement
of any building, zoning, safety or land use laws as the result of a covered
cause of loss. If any such insurance coverage procured by Landlord has a
deductible clause, the deductible shall not exceed commercially reasonable
amounts, and in the event of any casualty, the amount of such deductible shall
be an item of Operating Expenses as so limited. Notwithstanding anything to the
contrary contained herein, to the extent the cost of maintaining insurance with
respect to the Building and/or any other buildings within the Park is increased
as a result of Tenant's acts, omissions, use or occupancy of the Premises,
Tenant shall pay one hundred percent (100%) of, and for, such increase(s) as
Additional Rent.

13.    LIMITATION OF LIABILITY AND INDEMNITY

Except to the extent of damage resulting from the gross negligence or willful
misconduct of Landlord or its authorized representatives, Tenant agrees to
protect, defend (with counsel reasonably acceptable to Landlord) and hold
Landlord and Landlord's lenders, partners, members, property management company
(if other than Landlord), agents, directors, officers, employees,
representatives, contractors, successors and assigns and each of their
respective partners, members, directors, heirs, employees, representatives,
agents, contractors, heirs, successors and assigns (collectively, the
"Indemnitees") harmless and indemnify the Indemnitees from and against all
liabilities, damages, demands, penalties, costs, claims, losses, judgments,
charges and expenses (including reasonable attorneys' fees, costs of court and
expenses necessary in the prosecution or defense of any litigation including the
enforcement of this provision) (collectively, "Claims") arising from or in any
way related to, directly or indirectly, (i) Tenant's or Tenant's
Representatives' use of the Premises and other portions of the Project, (ii) the
conduct of Tenant's business, (iii) from any activity, work or thing done,
permitted or suffered by Tenant in or about the Premises, (iv) in any way
connected with the Premises, the Alterations or with the Tenant's Property
therein, including, but not limited to, any liability for injury to person or
property of Tenant, Tenant's Representatives or third party persons, and/or (v)
Tenant's failure to perform any covenant or obligation of Tenant under this
Lease. Tenant agrees that the obligations of Tenant herein shall survive the
expiration or earlier termination of this Lease.

Except to the extent of damage resulting from the gross negligence or willful
misconduct of Landlord or its authorized representatives, to the fullest extent
permitted by law, Tenant agrees that neither Landlord nor any of the Indemnitees
shall at any time or to any extent whatsoever be liable, responsible or in any
way accountable for any loss, liability, injury, death or damage to persons or
property which at any time may be suffered or sustained by Tenant or by any
person(s) whomsoever who may at any time be using, occupying or visiting the
Premises or any other portion of the Project, including, but not limited to, any
acts, errors or omissions of any other tenants or occupants of the Project.
Tenant shall not, in any event or circumstance, be permitted to offset or
otherwise credit against any payments of Rent required herein for matters for
which Landlord may be liable hereunder. Landlord and its authorized
representatives shall not be liable for any interference with light or air.

14.    ASSIGNMENT AND SUBLEASING

       14.1 PROHIBITION: Except to a Related Entity in accordance with the
provisions of Section 14.8 below, Tenant shall not, without the prior written
consent of Landlord, assign, mortgage, hypothecate, encumber, grant any license
or concession, pledge or otherwise transfer this Lease or any interest herein,
permit any assignment or other such transfer of this Lease or any interest
hereunder by operation of law, sublet the Premises or any part thereof, or
permit


                                       11
<PAGE>   12

the use of the Premises by any persons other than Tenant and Tenant's
Representatives (all of the foregoing are sometimes referred to collectively as
"Transfers" and any person to whom any Transfer is made or sought to be made is
sometimes referred to as a "Transferee"). No consent to any Transfer shall
constitute a waiver of the provisions of this Section 14, and all subsequent
Transfers may be made only with the prior written consent of Landlord, which
consent shall not be unreasonably withheld, but which consent shall be subject
to the provisions of this Section 14.

       14.2 REQUEST FOR CONSENT: If Tenant seeks to make a Transfer other than a
transfer to a Related Entity, Tenant shall notify Landlord, in writing, and
deliver to Landlord at least thirty (30) days (but not more than one hundred
eighty (180) days) prior to the proposed commencement date of the Transfer (the
"Proposed Effective Date") the following information and documents (the
"Tenant's Notice"): (i) a description of the portion of the Premises to be
transferred (the "Subject Space"); (ii) all of the terms of the proposed
Transfer including without limitation, the Proposed Effective Date, the name and
address of the proposed Transferee, and a copy of the existing or proposed
assignment, sublease or other agreement governing the proposed Transfer; (iii)
current financial statements of the proposed Transferee certified by an officer,
member, partner or owner thereof, and any such other information as Landlord may
then reasonably require, including without limitation, audited financial
statements for the previous three (3) most recent consecutive fiscal years; (iv)
the Plans and Specifications (defined below), if any; and (v) such other
information as Landlord may then reasonably require. Tenant shall give Landlord
the Tenant's Notice by registered or certified mail addressed to Landlord at
Landlord's Address specified in the Basic Lease Information. Within thirty (30)
days after Landlord's receipt of the Tenant's Notice (the "Landlord Response
Period") Landlord shall notify Tenant, in writing, of its determination with
respect to such requested proposed Transfer and the election to recapture as set
forth in Section 14.5 below. If Landlord does not elect to recapture pursuant to
the provisions of Section 14.5 hereof and Landlord does consent to the requested
proposed Transfer, Tenant may thereafter assign its interests in and to this
Lease or sublease all or a portion of the Premises to the same party and on the
same terms as set forth in the Tenant's Notice. If Landlord fails to respond to
Tenant's Notice within Landlord's Response Period, then, after Tenant delivers
to Landlord thirty (30) days written notice (the "Second Response Period") and
Landlord fails to respond thereto prior to the end of the Second Response
Period, the proposed Transfer shall then be deemed approved by Landlord.

       14.3 CRITERIA FOR CONSENT: Tenant acknowledges and agrees that, among
other circumstances for which Landlord could reasonably withhold consent to a
proposed Transfer, it shall be reasonable for Landlord to withhold its consent
where (a) Tenant is or has been in default of its obligations under this Lease
beyond applicable notice and cure periods, (b) the use to be made of the
Premises by the proposed Transferee is prohibited under this Lease or differs
from the uses permitted under this Lease, (c) the proposed Transferee or its
business is subject to compliance with additional requirements of the ADA beyond
those requirements which are applicable to Tenant, unless the proposed
Transferee shall (1) first deliver plans and specifications for complying with
such additional requirements (the "Plans and Specifications") and obtain
Landlord's written consent thereto, and (2) comply with all Landlord's
conditions contained in such consent, (d) the proposed Transferee does not
intend to occupy a substantial portion of the Premises assigned or sublet to it,
(e) Landlord reasonably disapproves of the proposed Transferee's business
operating ability or history, reputation or creditworthiness or the character of
the business to be conducted by the proposed Transferee at the Premises, (f) the
proposed Transferee is a governmental agency or unit or an existing tenant in
the Project, (g) the proposed Transfer would violate any "exclusive" rights of
any occupants in the Project or cause Landlord to violate another agreement or
obligation to which Landlord is a party or otherwise subject, (h) Landlord or
Landlord's agent has shown space in the Project to the proposed Transferee or
responded to any inquiries from the proposed Transferee or the proposed
Transferee's agent concerning availability of space in the Project, at any time
within the preceding six (6) months, (i) Landlord otherwise determines that the
proposed Transfer would have the effect of decreasing the value of the Building
or the Project, or increasing the expenses associated with operating,
maintaining and repairing the Project, (j) either the proposed Transferee, or
any person or entity which directly or indirectly, controls, is controlled by,
or is under common control with, the proposed Transferee: (i) occupies space in
the Building at the time of the request for consent, or (ii) is negotiating with
Landlord to lease space in the Building at such time, (k) the Transfer occurs
during the time period between the Commencement Date and the date that at least
ninety percent (90%) of the rentable square feet of the Building is leased, (l)
the rent proposed to be charged by Tenant to the proposed Transferee during the
term of such Transfer, calculated using a present value analysis, is less than
ninety-five percent (95%) of the rent then being quoted by Landlord, at the
proposed time of such Transfer, for comparable space in the Building or any
other Building in the Project for a comparable term, calculated using a present
value system, or (m) the proposed Transferee will use, store or handle Hazardous
Materials (defined below) in or about the Premises of a type, nature or quantity
not then acceptable to Landlord.

       14.4 EFFECTIVENESS OF TRANSFER AND CONTINUING OBLIGATIONS: Prior to the
date on which any permitted Transfer becomes effective, Tenant shall deliver to
Landlord (i) a counterpart of the fully executed Transfer document, (ii) an
executed Hazardous Materials Disclosure Certificate substantially in the form of
Exhibit E hereto (the "Transferee HazMat Certificate"), and (iii) Landlord's
standard form of Consent to Assignment or Consent to Sublease, as applicable,
executed by Tenant and the Transferee in which each of Tenant and the Transferee
confirms its obligations pursuant to this Lease. Failure or refusal of a
Transferee to execute any such consent instrument shall not release or discharge
the Transferee from its obligation to do so or from any liability as provided
herein. The voluntary, involuntary or other surrender of this Lease by Tenant,
or a mutual cancellation by Landlord and Tenant, shall not work a merger, and
any such surrender or cancellation shall, at the option of Landlord, either
terminate all or any existing subleases or operate as an assignment to Landlord
of any or all of such subleases. Each permitted Transferee shall assume and be
deemed to assume this Lease and shall be and remain liable jointly and severally
with Tenant for payment of Rent and for the due performance of, and compliance
with all the terms, covenants, conditions and agreements herein contained on
Tenant's part to be performed or complied with, for the Term of this Lease. No
Transfer shall affect the continuing primary liability of Tenant (which,
following assignment, shall be joint and several with the assignee), and Tenant
shall not be released from performing any of the terms, covenants and conditions
of this Lease. An assignee of Tenant shall become directly liable to Landlord
for all obligations of Tenant hereunder, but no Transfer by Tenant shall relieve
Tenant of any obligations or liability under this Lease whether occurring before
or after such consent, assignment, subletting or other Transfer. The acceptance
of any or all of the Rent by Landlord from any other person (whether or not such
person is an occupant of the Premises) shall not be deemed to be a waiver by
Landlord of any provision of this Lease or to be a consent to any Transfer. For
purposes hereof, if Tenant is a business entity, direct or indirect transfer of
fifty percent (50%) or more of the ownership interest of the entity (whether in
a single transaction or in the aggregate through more than one transaction)
shall be deemed a Transfer and shall be subject to all the provisions hereof.
Any and all options, first rights of refusal, tenant improvement allowances and
other similar rights granted to Tenant in this Lease, if any,


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<PAGE>   13

shall not be assignable by Tenant unless expressly authorized in writing by
Landlord. Except for a Transfer to a Related Entity as provided herein, any
transfer made without Landlord's prior written consent, shall, at Landlord's
option, be null, void and of no effect, and shall, at Landlord's option,
constitute a material default by Tenant of this Lease. As Additional Rent
hereunder, Tenant shall pay to Landlord, a fee in the amount of seven hundred
fifty dollars ($750) plus Tenant shall promptly reimburse Landlord for actual
reasonable legal and other expenses incurred by Landlord in connection with any
actual or proposed Transfer.

       14.5 RECAPTURE: Except with respect to a Transfer to a Related Entity in
accordance with Section 14.8 below, if the Transfer (i) by itself or taken
together with then existing or pending Transfers covers or totals, as the case
may be, more than thirty-five percent (35%) of the rentable square feet of the
Premises, or (ii) is for a term which by itself or taken together with then
existing or pending Transfers is greater than fifty percent (50%) of the period
then remaining in the Term of this Lease as of the time of the Proposed
Effective Date, then Landlord shall have the right, to be exercised by giving
written notice to Tenant (the "Landlord's Recapture Notice"), to recapture the
Subject Space described in the Tenant's Notice. If within fifteen (15) days of
Landlord's delivery to Tenant of the Landlord's Recapture Notice Tenant does not
deliver to Landlord written notice (the "Tenant's Recapture Rescission Notice")
that Tenant has elected (i) not to consummate such proposed Transfer, and (ii)
to rescind the request to enter into such proposed Transfer, such Landlord's
Recapture Notice shall serve to terminate this Lease with respect to the
proposed Subject Space, or, if the proposed Subject Space covers all the
Premises, it shall serve to terminate the entire Term of this Lease, in either
case, as of the Proposed Effective Date. However, no termination of this Lease
with respect to part or all of the Premises shall become effective without the
prior written consent, where necessary, of the holder of each deed of trust
encumbering the Premises or any other portion of the Project. If this Lease is
terminated pursuant to the foregoing provisions regarding Landlord's recapture
right with respect to less than the entire Premises, the Rent shall be adjusted
on the basis of the proportion of rentable square feet retained by Tenant to the
rentable square feet originally demised and this Lease as so amended shall
continue thereafter in full force and effect.

       14.6 TRANSFER PREMIUM: If Landlord consents to a Transfer, as a condition
thereto which the Tenant hereby agrees is reasonable, Tenant shall pay to
Landlord, as Additional Rent any "Transfer Premium" received by Tenant from such
Transferee. The term "Transfer Premium" shall mean all rent, additional rent and
other consideration (excluding compensation for Tenant's Property as defined in
this Lease) payable by such Transferee which either initially or over the term
of the Transfer exceeds the Rent or pro rata portion of the Rent, as the case
may be, for such space reserved in the Lease. Tenant shall pay the Landlord
monthly, as Additional Rent, at the same time as the monthly installments of
Rent are payable hereunder, fifty percent (50%) of the Transfer Premium with no
deduction whatsoever for of any and all expenses and costs of Tenant related to
such Transfer.

       14.7 WAIVER: Notwithstanding any Transfer, or any indulgences, waivers or
extensions of time granted by Landlord to any Transferee, or failure by Landlord
to take action against any Transferee, Tenant agrees that Landlord may, at its
option, proceed against Tenant without having taken action against or joined
such Transferee, except that Tenant shall have the benefit of any indulgences,
waivers and extensions of time granted to any such Transferee.

       14.8 RELATED ENTITIES: Notwithstanding anything to the contrary contained
in this Section 14, so long as Tenant delivers to Landlord (1) at least fifteen
(15) business days prior written notice of its intention to Transfer the
Premises to any Related Entity, which notice shall set forth the name of the
Related Entity, (2) a copy of the proposed agreement pursuant to which such
Transfer shall be effectuated, and (3) such other information concerning the
Related Entity as Landlord may reasonably require, including without limitation,
information regarding any change in the proposed use of any portion of the
Premises and any financial information with respect to such Related Entity, and
so long as (i) any change in the proposed use of the subject portion of the
Premises is in conformance with the uses permitted to be made under this Lease
and do not involve the use or storage of any Hazardous Materials except as
otherwise expressly permitted under Section 29 of this Lease, and (ii) at the
time of the proposed assignment or sublease, the net profits and financial
condition of the Related Entity is reasonably adequate and sufficient in
relation to the then remaining obligations of Tenant under this Lease, then
Tenant may effect a Transfer (X) to any Related Entity, or (Y) in connection
with any merger, consolidation or sale of substantially all of the assets of
Tenant, a sale of all or substantially all of the stock of Tenant, or a public
offering of all of Tenant's stock without having to obtain the prior written
consent of Landlord thereto. For purposes of this Lease the term "Related
Entity" shall mean and refer to any corporation or entity which controls, is
controlled by or is under common control with Tenant, as all of such terms are
customarily used in the industry.

15.    SUBORDINATION

To the fullest extent permitted by law, this Lease, the rights of Tenant under
this Lease and Tenant's leasehold interest shall be subject and subordinate at
all times to: (i) all ground leases or underlying leases which may now exist or
hereafter be executed affecting the Building, the Lot, or any other portion of
the Project, and (ii) the lien of any mortgage or deed of trust which may now or
hereafter exist for which the Building, the Lot, ground leases or underlying
leases, any other portion of the Project or Landlord's interest or estate in any
of said items is specified as security. Notwithstanding the foregoing, Landlord
or any such ground lessor, mortgagee, or any beneficiary shall have the right to
require this Lease be superior to any such ground leases or underlying leases or
any such liens, mortgage or deed of trust. If 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
attorn to and become the Tenant of the successor in interest to Landlord,
provided such successor in interest will not disturb Tenant's use, occupancy or
quiet enjoyment of the Premises if Tenant is not in material default of the
terms and provisions of this Lease. The successor in interest to Landlord
following foreclosure, sale or deed in lieu thereof shall not be: (a) liable for
any act or omission of any prior lessor or with respect to events occurring
prior to acquisition of ownership; (b) subject to any offsets or defenses which
Tenant might have against any prior lessor; (c) bound by prepayment of more than
one (1) month's Rent, except in those instances when Tenant pays Rent quarterly
in advance pursuant to Section 8 hereof, then not more than three months' Rent;
or (d) liable to Tenant for any Security Deposit not actually received by such
successor in interest to the extent any portion or all of such Security Deposit
has not already been forfeited by, or refunded to, Tenant. Landlord shall be
liable to Tenant for all or any portion of the Security Deposit not forfeited
by, or refunded to Tenant, until and unless Landlord transfers such Security
Deposit to the successor in interest. Tenant covenants and agrees to execute
(and acknowledge if required by Landlord, any lender or ground lessor) and
deliver, within five (5) days of a demand or request by Landlord and in the form
reasonably requested by Landlord, ground lessor, mortgagee


                                       13
<PAGE>   14

or beneficiary, any additional documents evidencing the priority or
subordination of this Lease with respect to any such ground leases or underlying
leases or the lien of any such mortgage or deed of trust. Tenant hereby agrees
that if at any time during the Term of this Lease, Landlord places a lien of a
deed of trust against, the Premises, the Building and the Lot in favor of
Principal Mutual Life Insurance Company (the "Related Lender"), Tenant shall
sign, notarize and deliver a subordination, non-disturbance and attornment
agreement substantially in the form of Exhibit J attached hereto, entitled
"Subordination, Non-Disturbance and Attornment Agreement." If Landlord at any
time during the Term of the Lease causes the Premises, the Building and the Lot
to be encumbered by a deed of trust or mortgage pursuant to which the
beneficiary of such deed of trust or mortgage is a party or entity other than
the Related Lender, the parties acknowledge and agree that the form of any
non-disturbance and attornment agreement that may be requested to be executed
and delivered by Tenant in connection therewith may not be the "Subordination,
Non-Disturbance and Attornment Agreement" attached to the Lease as Exhibit J,
but such agreement will be a similar commercially reasonable form which will not
adversely affect Tenant's rights hereunder. If the foregoing occurs and/or if
any party which acquires, or otherwise succeeds to, Landlord's interest in the
Premises, the Building or the Lot (including without limitation, any ground
lessee) encumbers or places a lien against the Premises, the Building or the Lot
with a mortgage, deed of trust or similar security instrument and the
beneficiary thereof requires this Lease to be subordinated to such encumbrance
or lien, Landlord or the successor of Landlord will use commercially reasonable
efforts to provide to Tenant a subordination, non-disturbance and attornment
agreement in form reasonably acceptable to Landlord or such successor of
Landlord, the subject beneficiary and Tenant. If said subordination,
non-disturbance and attornment agreement is required and agreed upon by the
aforesaid parties, Landlord or the successor of Landlord, the subject
beneficiary and Tenant shall cause any such subordination, non-disturbance and
attornment agreement to be executed, acknowledged and recorded concurrently
with, or as soon as practicable after, the execution and recordation of any such
lien, deed of trust or mortgage. In addition to the foregoing, if Landlord
enters into a ground lease with regard to the Building and/or the Lot and such
ground lessee requires this Lease to be subordinated to such ground lease,
Landlord, the ground lessee and ground lessor will use commercially reasonable
efforts to provide to Tenant a subordination, non-disturbance and attornment
agreement in form reasonably acceptable to such Landlord, ground lessee, ground
lessor, any beneficiary of ground lessee, and to Tenant.

16.    RIGHT OF ENTRY

Landlord and its agents shall have the right to enter the Premises with
twenty-four (24) hours' written or verbal notice at all reasonable times for
purposes of inspection, exhibition, posting of notices, investigation,
replacements, repair, maintenance and alteration, subject, however, to Tenant's
reasonable security procedures. Tenant shall use its best efforts to cooperate
with Landlord and Landlord's Representatives with respect to Landlord's right of
entry herein. It is further agreed that Landlord shall have the right to use any
and all means Landlord deems necessary to enter the Premises in an emergency.
Landlord shall have the right to place "for rent" or "for lease" signs on the
outside of the Premises, the Building and in the Common Areas. Landlord shall
also have the right to place "for sale" signs on the outside of the Building and
in the Common Areas. Tenant hereby waives any Claim from damages or for any
injury or inconvenience to or interference with Tenant's business, or any other
loss occasioned thereby except for any Claim for any of the foregoing arising
out of the sole active gross negligence or willful misconduct of Landlord or its
authorized representatives. Notwithstanding the foregoing, Landlord and its
agents may enter the Premises at any time without prior notice in the event of
an emergency which determination of such emergency shall be in Landlord's sole
but reasonable judgment.

17.    ESTOPPEL CERTIFICATE

Tenant shall execute (and acknowledge if required by any lender or ground
lessor) and deliver to Landlord, within ten (10) calendar days after Landlord
provides such to Tenant, a statement in writing certifying that this Lease is
unmodified and in full force and effect (or, if modified, stating the nature of
such modification), the date to which the Rent and other charges are paid in
advance, if any, acknowledging that there are not, to Tenant's knowledge, any
uncured defaults on the part of Landlord hereunder or specifying such defaults
as are claimed, and such other matters as Landlord may reasonably require. Any
such statement may be conclusively relied upon by Landlord and any prospective
purchaser or encumbrancer of the Building or other portions of the Project.
Tenant's failure to deliver such statement within such time shall be conclusive
upon the Tenant that (a) this Lease is in full force and effect, without
modification except as may be represented by Landlord; (b) there are no uncured
defaults in Landlord's performance; and (c) not more than one month's Rent has
been paid in advance, except in those instances when Tenant pays Rent quarterly
in advance pursuant to Section 8 hereof, then not more than three months' Rent
has been paid in advance.

18.    TENANT'S DEFAULT

The occurrence of any one or more of the following events shall, at Landlord's
option, constitute a material default by Tenant of the provisions of this Lease:

       18.1 The abandonment (as statutorily defined) of the Premises by Tenant
or the vacation of the Premises by Tenant which would cause any insurance policy
to be invalidated or otherwise lapse;

       18.2 The failure by Tenant to make any payment of Rent, Additional Rent
or any other payment required hereunder within five (5) days after Landlord's
delivery of written notice to Tenant that said payment is past due. Tenant
agrees that any such written notice delivered by Landlord, to the fullest extent
permitted by Law, shall serve as the statutorily required notice under
applicable Law;

       18.3 The failure by Tenant to observe, perform or comply with any of the
conditions, covenants or provisions of this Lease (except failure to make any
payment of Rent and/or Additional Rent) and such failure is not cured within (i)
thirty (30) days of the date on which Landlord delivers written notice of such
failure to Tenant for all failures other than with respect to (a) Hazardous
Materials (defined in Section 27 hereof), (b) Tenant making the repairs,
maintenance and replacements required under the provisions of Section 11.1
hereof, or (c) the timely delivery by Tenant of a subordination, non-disturbance
and attornment agreement (an "SNDA"), a counterpart of a fully executed Transfer
document and a consent thereto (collectively, the "Transfer Documents"), an
estoppel certificate and insurance certificates, (ii) ten (10) days of the date
on which Landlord delivers written notice of such failure to Tenant for all
failures in any way related to Hazardous Materials or Tenant failing to timely
make the repairs, maintenance or


                                       14
<PAGE>   15

replacements required by Section 11.1, (iii) the time period, if any, specified
in the applicable sections of this Lease with respect to subordination,
assignment and sublease, estoppel certificates and insurance, and (iv) Tenant's
use of the Premises which will increase the existing rate of or affect any
policy of fire or other insurance upon the Building or any of its contents, or
cause a cancellation of any insurance policy as required by Section 9.2 herein.
However, Tenant shall not be in default of its obligations hereunder if such
failure (other than any failure of Tenant to timely and properly make the
repairs, maintenance, or replacements required by Section 11.1, or timely
deliver an SNDA, the Transfer Documents, an estoppel certificate or insurance
certificates, for which no additional cure period shall be given to Tenant)
cannot reasonably be cured within such thirty (30) or ten (10) day period, as
applicable, and Tenant promptly commences, and thereafter diligently proceeds
with same to completion, all actions necessary to cure such failure as soon as
is reasonably possible, but in no event shall the completion of such cure be
later than sixty (60) days after the date on which Landlord delivers to Tenant
written notice of such failure, unless Landlord, acting reasonably and in good
faith, otherwise expressly agrees in writing to a longer period of time based
upon the circumstances relating to such failure as well as the nature of the
failure and the nature of the actions necessary to cure such failure; or

       18.4 The making of a general assignment by Tenant for the benefit of
creditors, the filing of a voluntary petition by Tenant or the filing of an
involuntary petition by any of Tenant's creditors seeking the rehabilitation,
liquidation, or reorganization of Tenant under any law relating to bankruptcy,
insolvency or other relief of debtors and, in the case of an involuntary action,
the failure to remove or discharge the same within sixty (60) days of such
filing, the appointment of a receiver or other custodian to take possession of
substantially all of Tenant's assets or this leasehold, Tenant's insolvency or
inability to pay Tenant's debts or failure generally to pay Tenant's debts when
due, any court entering a decree or order directing the winding up or
liquidation of Tenant or of substantially all of Tenant's assets, Tenant taking
any action toward the dissolution or winding up of Tenant's affairs, the
cessation or suspension of Tenant's use of the Premises, or the attachment,
execution or other judicial seizure of substantially all of Tenant's assets or
this leasehold.

19.    REMEDIES FOR TENANT'S DEFAULT

       19.1 LANDLORD'S RIGHTS: In the event of Tenant's material default under
this Lease, Landlord may terminate Tenant's right to possession of the Premises
by any lawful means in which case upon delivery of written notice by Landlord
this Lease shall terminate on the date specified by Landlord in such notice and
Tenant shall immediately surrender possession of the Premises to Landlord. In
addition, the Landlord shall have the immediate right of re-entry whether or not
this Lease is terminated, and if this right of re-entry is exercised following
abandonment of the Premises by Tenant, Landlord may consider any of Tenant's
Property left on the Premises to also have been abandoned. No re-entry or taking
possession of the Premises by Landlord pursuant to this Section 19 shall be
construed as an election to terminate this Lease unless a written notice of such
intention is given to Tenant. If Landlord relets the Premises or any portion
thereof, Tenant shall be liable immediately to Landlord for all costs Landlord
incurs in reletting the Premises or any part thereof, including, without
limitation, broker's commissions, expenses of cleaning, redecorating, and
further improving the Premises and other similar costs (collectively, the
"Reletting Costs"). Any and all of the Reletting Costs shall be fully chargeable
to Tenant and shall not be prorated or otherwise amortized in relation to any
new lease for the Premises or any portion thereof. Reletting may be for a period
shorter or longer than the remaining term of this Lease. In no event shall
Tenant be entitled to any excess rent received by Landlord. No act by Landlord
other than giving written notice to Tenant shall terminate this Lease. Acts of
maintenance, efforts to relet the Premises or the appointment of a receiver on
Landlord's initiative to protect Landlord's interest under this Lease shall not
constitute a termination of Tenant's right to possession. So long as this Lease
is not terminated, Landlord shall have the right to remedy any default of
Tenant, to maintain or improve the Premises, to cause a receiver to be appointed
to administer the Premises and new or existing subleases and to add to the Rent
payable hereunder all of Landlord's reasonable costs in so doing, with interest
at the maximum rate permitted by law from the date of such expenditure.

       19.2 DAMAGES RECOVERABLE: If Tenant breaches this Lease and abandons (as
statutorily defined) the Premises before the end of the Term, or if Tenant's
right to possession is terminated by Landlord because of a breach or default
under this Lease, then in either such case, Landlord may recover from Tenant all
damages suffered by Landlord as a result of Tenant's failure to perform its
obligations hereunder, including without limitation, the unamortized cost of any
Tenant Improvements constructed by or on behalf of Tenant pursuant to Exhibit B
hereto to the extent Landlord has paid for such improvements, the unamortized
portion of any broker's or leasing agent's commission incurred with respect to
the leasing of the Premises to Tenant for the balance of the Term of the Lease
remaining after the date on which Tenant is in default of its obligations
hereunder, and all Reletting Costs, and the worth at the time of the award
(computed in accordance with paragraph (3) of Subdivision (a) of Section 1951.2
of the California Civil Code) of the amount by which the Rent then unpaid
hereunder for the balance of the Lease Term exceeds the amount of such loss of
Rent for the same period which Tenant proves could be reasonably avoided by
Landlord and in such case, Landlord prior to the award, may relet the Premises
for the purpose of mitigating damages suffered by Landlord because of Tenant's
failure to perform its obligations hereunder; provided, however, that even
though Tenant has abandoned the Premises following such breach, this Lease shall
nevertheless continue in full force and effect for as long as Landlord does not
terminate Tenant's right of possession, and until such termination, Landlord
shall have the remedy described in Section 1951.4 of the California Civil Code
(Landlord may continue this Lease in effect after Tenant's breach and
abandonment and recover Rent as it becomes due, if Tenant has the right to
sublet or assign, subject only to reasonable limitations) and may enforce all
its rights and remedies under this Lease, including the right to recover the
Rent from Tenant as it becomes due hereunder. The "worth at the time of the
award" within the meaning of Subparagraphs (a)(1) and (a)(2) of Section 1951.2
of the California Civil Code shall be computed by allowing interest at the rate
of ten percent (10%) per annum. Tenant waives redemption or relief from
forfeiture under California Code of Civil Procedure Sections 1174 and 1179 (or
any successor or substitute statute), or under any other present or future law,
in the event Tenant is evicted or Landlord takes possession of the Premises by
reason of any default of Tenant hereunder. Tenant hereby waives for Tenant and
for all those claiming under Tenant all rights now or hereafter existing to
redeem by order or judgment of any court or by any legal process or writ,
Tenant's right of occupancy of the Premises after any termination of this Lease.

       19.3 RIGHTS AND REMEDIES CUMULATIVE: The foregoing rights and remedies of
Landlord are not exclusive; they are cumulative in addition to any rights and
remedies now or hereafter existing at law, in equity by statute or otherwise, or
to any equitable remedies Landlord may have, and to any remedies Landlord may
have under bankruptcy laws or laws affecting creditors' rights generally. In
addition to all remedies set forth above, if Tenant materially defaults under
this Lease, all options granted to Tenant hereunder shall automatically
terminate, unless otherwise expressly


                                       15
<PAGE>   16

agreed to in writing by Landlord.

20.    HOLDING OVER

If Tenant holds over after the expiration of the Lease Term hereof, with or
without the express or implied consent of Landlord, such tenancy shall be from
month-to-month only, and shall not constitute a renewal hereof or an extension
for any further term, and in such case Base Rent shall be payable at a monthly
rate equal to one hundred fifty percent (150%) of the greater of (i) the Base
Rent applicable during the last rental period of the Lease Term under this Lease
or (ii) the fair market rental rate for the Premises as of the commencement of
such holdover period. Such month-to-month tenancy shall be subject to every
other term, covenant and agreement contained herein. Landlord hereby expressly
reserves the right to require Tenant to surrender possession of the Premises to
Landlord as provided in this Lease upon the expiration or other termination of
this Lease. The provisions of this Section 20 shall not be deemed to limit or
constitute a waiver of any other rights or remedies of Landlord provided herein
or at law. If Tenant fails to surrender the Premises upon the termination or
expiration of this Lease, in addition to any other liabilities to Landlord
accruing therefrom, Tenant shall protect, defend, indemnify and hold Landlord
harmless from all Claims resulting from such failure, including but not limited
to, any Claims made by any succeeding tenant founded upon such failure to
surrender, and any lost profits to Landlord resulting therefrom.

21.    LANDLORD'S DEFAULT

Landlord shall not be considered in default of this Lease unless Landlord fails
within a reasonable time to perform an obligation required to be performed by
Landlord hereunder. For purposes hereof, a reasonable time shall not be less
than thirty (30) days after receipt by Landlord of written notice specifying the
nature of the obligation Landlord has not performed; provided, however, that if
the nature of Landlord's obligation is such that more than thirty (30) days,
after receipt of written notice, is reasonably necessary for its performance,
then Landlord shall not be in default of this Lease if performance of such
obligation is commenced within such thirty (30) day period and thereafter
diligently pursued to completion.

22.    PARKING

Tenant may use the number of non-designated and non-exclusive parking spaces
specified in the Basic Lease Information. Landlord shall exercise reasonable
efforts to ensure that such spaces are available to Tenant for its use, but
Landlord shall not be required to enforce Tenant's right to use the same. In no
event shall Tenant or any of Tenant's Representatives park or permit any parking
of vehicles overnight.

23.    TRANSFER OF LANDLORD'S INTEREST

If there is any sale or other transfer of the Premises or any other portion of
the Project by Landlord or any of Landlord's interest therein, Landlord shall
automatically be entirely released from all liability under this Lease and
Tenant agrees to look solely to such transferee for the performance of
Landlord's obligations hereunder after the date of such transfer. A ground lease
or similar long term lease by Landlord of the entire Building or Lot, of which
the Premises are a part, shall be deemed a sale within the meaning of this
Section 23. Tenant agrees to attorn to such new owner provided such new owner
does not disturb Tenant's use, occupancy or quiet enjoyment of the Premises so
long as Tenant is not in material default of any of the provisions of this
Lease.

24.    WAIVER

No delay or omission in the exercise of any right or remedy of either party on
any default by the other party shall impair such a right or remedy or be
construed as a waiver. The subsequent acceptance of Rent by Landlord after
default by Tenant of this Lease shall not be deemed a waiver of such default,
other than a waiver of timely payment for the particular Rent payment involved,
and shall not prevent Landlord from maintaining an unlawful detainer or other
action based on such breach. No payment by Tenant or receipt by Landlord of a
lesser amount than the monthly Rent and other sums due hereunder shall be deemed
to be other than on account of the earliest Rent or other sums due, nor shall
any endorsement or statement on any check or accompanying any check or payment
be deemed an accord and satisfaction; and Landlord may accept such check or
payment without prejudice to Landlord's right to recover the balance of such
Rent or other sum or pursue any other remedy provided in this Lease. No failure,
partial exercise or delay on the part of either party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof.

25.    CASUALTY DAMAGE

       25.1 CASUALTY. If the Premises or any part [excluding any of Tenant's
Property, any Tenant Improvements and any Alterations installed by or for the
benefit of Tenant (collectively, the "Tenant's FF&E")] shall be damaged or
destroyed by fire or other casualty, Tenant shall give immediate written notice
thereof to Landlord. Within sixty (60) days after receipt by Landlord of such
notice, Landlord shall notify Tenant, in writing, whether the necessary repairs
can reasonably be made, as reasonably determined by Landlord: (a) within ninety
(90) days; (b) in more than ninety (90) days but in less than one hundred eighty
(180) days; or (c) in more than one hundred eighty (180) days, from the date of
Tenant's written notice.

              25.1.1 MINOR INSURED DAMAGE. If the Premises (other than the
Tenant's FF&E) are damaged only to such extent that repairs, rebuilding and/or
restoration can be reasonably completed within ninety (90) days, this Lease
shall not terminate and, provided that insurance proceeds are available and paid
to Landlord to fully repair the damage and/or Tenant otherwise voluntarily
contributes any shortfall thereof to Landlord, Landlord shall repair the
Premises to substantially the same condition that existed prior to the
occurrence of such casualty, except Landlord shall not be required to rebuild,
repair, or replace any of Tenant's FF&E. The Rent payable hereunder shall be
abated proportionately from the date and to the extent Tenant vacates the
affected portions of the Premises until any and all repairs required herein to
be made by Landlord are substantially completed but such abatement shall only be
to the extent (i) of the portion of the Premises which is actually rendered
unusable and unfit for occupancy and only during the time Tenant is not actually
using same, and (ii) Landlord receives rental abatement insurance proceeds
therefor.


                                       16
<PAGE>   17

              25.1.2 INSURED DAMAGE REQUIRING MORE THAN 90 DAYS TO REPAIR. If
the Premises (other than the Tenant's FF&E) are damaged only to such extent that
repairs, rebuilding and/or restoration can be reasonably completed, as
reasonably determined by Landlord, in more than ninety (90) days but in less
than one hundred eighty (180) days, then Landlord shall have the option of: (a)
terminating the Lease effective upon making the determination of the extent of
such damage, in which event the Rent shall be abated from the date of the
occurrence of such damage, provided Tenant diligently proceeds to and
expeditiously vacates the Premises (but, in all events Tenant must vacate and
surrender the Premises to Landlord by no later than ten (10) business days
thereafter or there shall not be any abatement of Rent until Tenant so vacates
the Premises ); or (b) electing to repair the Premises to substantially the same
condition that existed prior to the occurrence of such casualty, provided
insurance proceeds are available and paid to Landlord and Tenant otherwise
voluntarily contributes any shortfall thereof to Landlord to fully repair the
damage (except that Landlord shall not be required to rebuild, repair, or
replace any of Tenant's FF&E). The Rent payable hereunder shall be abated
proportionately from the date and to the extent Tenant actually vacates the
affected portions of the Premises until any and all repairs required herein to
be made by Landlord are substantially completed but such abatement shall only be
to the extent (i) of the portion of the Premises which is actually rendered
unusable and unfit for occupancy and only during the time Tenant is not actually
using same, and (ii) Landlord receives rental abatement insurance proceeds
therefor. If Landlord fails to substantially complete such repairs within one
hundred eighty (180) days after the date on which Landlord is notified by Tenant
of the occurrence of such casualty [such 180-day period to be extended for
delays caused by Tenant or any of Tenant's Representatives ("Tenant Delays") or
any force majeure events, which events shall include, but not be limited to,
acts or events beyond Landlord's and/or its contractors' control, acts of God,
earthquakes, strikes, lockouts, riots, boycotts, casualties not caused by
Landlord or Tenant, discontinuance of any utility or other service required for
performance of the work, moratoriums, governmental delays in issuing permits,
governmental agencies and weather, and the lack of availability or shortage of
materials ("Force Majeure Delays")], Tenant may within ten (10) business days
after expiration of such one hundred eighty (180) day period (as same may be
extended), terminate this Lease by delivering written notice to Landlord as
Tenant's exclusive remedy, whereupon all rights of Tenant hereunder shall cease
and terminate ten (10) business days after Landlord's receipt of such notice and
Tenant shall immediately vacate the Premises and surrender possession thereof to
Landlord.

              25.1.3 MAJOR INSURED DAMAGE. If the Premises (other than the
Tenant's FF&E) are damaged to such extent that repairs, rebuilding and/or
restoration cannot be reasonably completed, as reasonably determined by
Landlord, within one hundred eighty (180) days, then either Landlord or Tenant
may terminate this Lease by giving written notice within twenty (20) days after
notice from Landlord regarding the time period of repair. If either party
notifies the other of its intention to so terminate the Lease, then this Lease
shall terminate and the Rent shall be abated from the date of the occurrence of
such damage, provided Tenant diligently proceeds to and expeditiously vacates
the Premises (but, in all events Tenant must vacate and surrender the Premises
to Landlord by no later than ten (10) business days thereafter or there shall
not be any abatement of Rent until Tenant so vacates the Premises). If neither
party elects to terminate this Lease, Landlord shall promptly commence and
diligently prosecute to completion the repairs to the Premises, provided
insurance proceeds are available and paid to Landlord to fully repair the damage
or Tenant voluntarily contributes any shortfall thereof to Landlord (except that
Landlord shall not be required to rebuild, repair, or replace any of Tenant's
FF&E). During the time when Landlord is prosecuting such repairs to substantial
completion, the Rent payable hereunder shall be abated proportionately from the
date and to the extent Tenant actually vacates the affected portions of the
Premises until any and all repairs required herein to be made by Landlord are
substantially completed but such abatement shall only be to the extent (i) of
the portion of the Premises which is actually rendered unusable and unfit for
occupancy and only during the time Tenant is not actually using same, and (ii)
Landlord receives rental abatement insurance proceeds therefor.

              25.1.4 DAMAGE NEAR END OF TERM. Notwithstanding anything to the
contrary contained in this Lease except for the provisions of Section 25.3
below, if the Premises are substantially damaged or destroyed during the last
year of then applicable term of this Lease, either Landlord or Tenant may, at
their option, cancel and terminate this Lease by giving written notice to the
other party of its election to do so within thirty (30) days after receipt by
Landlord of notice from Tenant of the occurrence of such casualty. If either
party so elects to terminate this Lease, all rights of Tenant hereunder shall
cease and terminate ten (10) days after Tenant's receipt or delivery of such
notice, as applicable, and Tenant shall immediately vacate the Premises and
surrender possession thereof to Landlord.

       25.2 DEDUCTIBLE AND UNINSURED CASUALTY. Tenant shall be responsible for
and shall pay to Landlord, as Additional Rent, the deductible amounts under the
insurance policies obtained by Landlord and Tenant under this Lease if the
proceeds of which are used to repair the Premises as contemplated in this
Section 25. Notwithstanding the foregoing, if other portions of the Building are
also damaged by said casualty and insurance proceeds are payable therefor, then
Tenant shall only pay its proportionate share of the deductible as reasonably
determined by Landlord. If any portion of the Premises is damaged and is not
fully covered by the aggregate of insurance proceeds received by Landlord and
any applicable deductible, and Tenant does not voluntarily contribute any
shortfall thereof to Landlord, or if the holder of any indebtedness secured by
the Premises requires that the insurance proceeds be applied to such
indebtedness, then Landlord or Tenant shall have the right to terminate this
Lease by delivering written notice of termination to the other party within
thirty (30) days after the date of notice to Tenant of any such event, whereupon
all rights and obligations of Tenant shall cease and terminate hereunder, except
for those obligations expressly provided for in this Lease to survive such
termination of the Lease.

       25.3 TENANT'S FAULT AND LENDER'S RIGHTS. Notwithstanding anything to the
contrary contained herein, if the Premises (other than Tenant's FF&E) or any
other portion of the Building be damaged by fire or other casualty resulting
from the intentional or negligent acts or omissions of Tenant or any of Tenant's
Representatives, (i) the Rent shall not be diminished during the repair of such
damage, (ii) Tenant shall not have any right to terminate this Lease due to the
occurrence of such casualty or damage, and (iii) Tenant shall be liable to
Landlord for the cost and expense of the repair and restoration of all or any
portion of the Building caused thereby (including, without limitation, any
deductible) to the extent such cost and expense is not covered by insurance
proceeds. Notwithstanding anything to the contrary contained herein, if the
holder of any indebtedness secured by the Premises or any other portion of the
Project requires that the insurance proceeds be applied to such indebtedness,
then 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 Tenant of any such event, whereupon all rights and obligations of Tenant
shall cease and terminate hereunder, except for those obligations expressly
provided for in this Lease to survive such termination of the Lease.


                                       17
<PAGE>   18

       25.4 TENANT'S WAIVER. Landlord shall not be liable for any inconvenience
or annoyance to Tenant, injury to the business of Tenant, loss of use of any
part of the Premises by Tenant or loss of Tenant's Property, resulting in any
way from such damage, destruction or the repair thereof, except that, Landlord
shall allow Tenant a fair diminution of Rent during the time and to the extent
the Premises are actually unusable and unfit for occupancy and Tenant is not
using or otherwise occupying same as specifically provided above in this Section
25. With respect to any damage or destruction which Landlord is obligated to
repair or may elect to repair, Tenant hereby waives all rights to terminate this
Lease or offset any amounts against Rent pursuant to rights accorded Tenant by
any law currently existing or hereafter enacted, including but not limited to,
all rights pursuant to the provisions of Sections 1932(2.), 1933(4.), 1941 and
1942 of the California Civil Code, as the same may be amended or supplemented
from time to time.

26.    CONDEMNATION

If twenty-five percent (25%) or more of the Premises is condemned by eminent
domain, inversely condemned or sold in lieu of condemnation for any public or
quasi-public use or purpose ("Condemned"), then Tenant or Landlord may terminate
this Lease as of the date when physical possession of the Premises is taken and
title vests in such condemning authority, and Rent shall be adjusted to the date
of termination. Tenant shall not because of such condemnation assert any claim
against Landlord or the condemning authority for any compensation because of
such condemnation, and Landlord shall be entitled to receive the entire amount
of any award without deduction for any estate of interest or other interest of
Tenant; provided, however, the foregoing provisions shall not preclude Tenant,
at Tenant's sole cost and expense, from obtaining any separate award to Tenant
for loss of or damage to Tenant's Property or for damages for cessation or
interruption of Tenant's business provided such award is separate from
Landlord's award and provided further such separate award does not diminish nor
otherwise impair the award otherwise payable to Landlord. In addition to the
foregoing, Tenant shall be entitled to seek compensation for the relocation
costs recoverable by Tenant pursuant to the provisions of California Government
Code Section 7262. If neither party elects to terminate this Lease, Landlord
shall, if necessary, promptly proceed to restore the Premises or the Building,
as applicable, to substantially its same condition prior to such partial
condemnation, allowing for the reasonable effects of such partial condemnation,
and a proportionate allowance shall be made to Tenant, as reasonably determined
by Landlord, for the Rent corresponding to the time during which, and to the
part of the Premises of which, Tenant is deprived on account of such partial
condemnation and restoration. Landlord shall not be required to spend funds for
restoration in excess of the amount received by Landlord as compensation
awarded.

27.    ENVIRONMENTAL MATTERS/HAZARDOUS MATERIALS

       27.1 HAZARDOUS MATERIALS DISCLOSURE CERTIFICATE: Prior to executing this
Lease, Tenant has delivered to Landlord Tenant's executed initial Hazardous
Materials Disclosure Certificate (the "Initial HazMat Certificate"), a copy of
which is attached hereto as Exhibit E. Tenant covenants, represents and warrants
to Landlord that the information in the Initial HazMat Certificate is true and
correct and accurately describes the use(s) of Hazardous Materials which will be
made and/or used on the Premises by Tenant. Tenant shall, commencing with the
date which is one year from the Commencement Date and continuing every year
thereafter, deliver to Landlord, an executed Hazardous Materials Disclosure
Certificate ("the "HazMat Certificate") describing Tenant's then present use of
Hazardous Materials on the Premises, and any other reasonably necessary
documents as requested by Landlord. The HazMat Certificates required hereunder
shall be in substantially the form attached hereto as Exhibit E.

       27.2 DEFINITION OF HAZARDOUS MATERIALS: As used in this Lease, the term
Hazardous Materials shall mean and include (a) any hazardous or toxic wastes,
materials or substances, and other pollutants or contaminants, which are or
become regulated by any Environmental Laws; (b) petroleum, petroleum by
products, gasoline, diesel fuel, crude oil or any fraction thereof; (c) asbestos
and asbestos containing material, in any form, whether friable or non-friable;
(d) polychlorinated biphenyls; (e) radioactive materials; (f) lead and
lead-containing materials; (g) any other material, waste or substance displaying
toxic, reactive, ignitable or corrosive characteristics, as all such terms are
used in their broadest sense, and are defined or become defined by any
Environmental Law (defined below); or (h) any materials which cause or threatens
to cause a nuisance upon or waste to any portion of the Project or any
surrounding property; or poses or threatens to pose a hazard to the health and
safety of persons on the Premises, any other portion of the Project or any
surrounding property. For purposes of this Lease, the term "Hazardous Materials"
shall not include nominal amounts of ordinary household cleaners, office
supplies and janitorial supplies which are not actionable under any
Environmental Laws.

       27.3 PROHIBITION; ENVIRONMENTAL LAWS: Tenant shall not be entitled to use
or store any Hazardous Materials on, in, or about any portion of the Premises
and the Project without, in each instance, obtaining Landlord's prior written
consent thereto. If Landlord, in its sole discretion, consents to any such usage
or storage, then Tenant shall be permitted to use and/or store only those
Hazardous Materials that are necessary for Tenant's business and to the extent
disclosed in the HazMat Certificate and as expressly approved by Landlord in
writing. Any such usage and storage may only be to the extent of the quantities
of Hazardous Materials as specified in the then applicable HazMat Certificate as
expressly approved by Landlord. In all events such usage and storage must at all
times be in full compliance with any and all local, state and federal
environmental, health and/or safety-related laws, statutes, orders, standards,
courts' decisions, ordinances, rules and regulations (as interpreted by judicial
and administrative decisions), decrees, directives, guidelines, permits or
permit conditions, currently existing and as amended, enacted, issued or adopted
in the future which are or become applicable to Tenant or all or any portion of
the Premises (collectively, the "Environmental Laws"). Tenant agrees that any
changes to the type and/or quantities of Hazardous Materials specified in the
most recent HazMat Certificate may be implemented only with the prior written
consent of Landlord, which consent may be given or withheld in Landlord's sole
discretion. Tenant shall not be entitled nor permitted to install any tanks
under, on or about the Premises for the storage of Hazardous Materials without
the express written consent of Landlord, which may be given or withheld in
Landlord's sole discretion. Landlord shall have the right at all times during
the Term of this Lease to (i) inspect the Premises, (ii) conduct tests and
investigations to determine whether Tenant is in compliance with the provisions
of this Section 27 or to determine if Hazardous Materials are present in, on or
about the Project, and (iii) request lists of all Hazardous Materials used,
stored or otherwise located on, under or about any portion of the Premises
and/or the Common Areas. The cost of all such inspections, tests and
investigations shall be borne by Tenant, if Landlord reasonably determines that
Tenant or any of Tenant's Representatives are directly or indirectly responsible
in any manner for any contamination revealed by such inspections, tests and
investigations. The aforementioned rights granted herein to Landlord and its
representatives shall not create (a) a duty on Landlord's part to inspect, test,


                                       18
<PAGE>   19

investigate, monitor or otherwise observe the Premises or the activities of
Tenant and Tenant's Representatives with respect to Hazardous Materials,
including without limitation, Tenant's operation, use and any remediation
related thereto, or (b) liability on the part of Landlord and its
representatives for Tenant's use, storage, disposal or remediation of Hazardous
Materials, it being understood that Tenant shall be solely responsible for all
liability in connection therewith.

       27.4 TENANT'S ENVIRONMENTAL OBLIGATIONS: Tenant shall give to Landlord
immediate verbal and follow-up written notice of any spills, releases,
discharges, disposals, emissions, migrations, removals or transportation of
Hazardous Materials on, under or about any portion of the Premises or in any
Common Areas; provided that Tenant has actual, implied or constructive knowledge
of such event(s). Tenant, at its sole cost and expense, covenants and warrants
to promptly investigate, clean up, remove, restore and otherwise remediate
(including, without limitation, preparation of any feasibility studies or
reports and the performance of any and all closures) any spill, release,
discharge, disposal, emission, migration or transportation of Hazardous
Materials arising from or related to the intentional or negligent acts or
omissions of Tenant or Tenant's Representatives such that the affected portions
of the Project and any adjacent property are returned to the condition existing
prior to the appearance of such Hazardous Materials. Any such investigation,
clean up, removal, restoration and other remediation shall only be performed
after Tenant has obtained Landlord's prior written consent, which consent shall
not be unreasonably withheld so long as such actions would not potentially have
a material adverse long-term or short-term effect on any portion of the Project.
Notwithstanding the foregoing, Tenant shall be entitled to respond immediately
to an emergency without first obtaining Landlord's prior written consent.
Tenant, at its sole cost and expense, shall conduct and perform, or cause to be
conducted and performed, all closures as required by any Environmental Laws or
any agencies or other governmental authorities having jurisdiction thereof. If
Tenant fails to so promptly investigate, clean up, remove, restore, provide
closure or otherwise so remediate, Landlord may, but without obligation to do
so, take any and all steps necessary to rectify the same and Tenant shall
promptly reimburse Landlord, upon demand, for all costs and expenses to Landlord
of performing investigation, clean up, removal, restoration, closure and
remediation work. All such work undertaken by Tenant, as required herein, shall
be performed in such a manner so as to enable Landlord to make full economic use
of the Premises and the other portions of the Project after the satisfactory
completion of such work.

       27.5 ENVIRONMENTAL INDEMNITY: In addition to Tenant's obligations as set
forth hereinabove, Tenant agrees to, and shall, protect, indemnify, defend (with
counsel reasonably acceptable to Landlord) and hold Landlord and the other
Indemnitees harmless from and against any and all Claims (including, without
limitation, diminution in value of any portion of the Premises or the Project,
damages for the loss of or restriction on the use of rentable or usable space,
and from any adverse impact of Landlord's marketing of any space within the
Project) arising at any time during or after the Term of this Lease in
connection with or related to, directly or indirectly, the use, presence,
transportation, storage, disposal, migration, removal, spill, release or
discharge of Hazardous Materials on, in or about any portion of the Project as a
result (directly or indirectly) of the intentional or negligent acts or
omissions of Tenant or any of Tenant's Representatives. Neither the written
consent of Landlord to the presence, use or storage of Hazardous Materials in,
on, under or about any portion of the Project nor the strict compliance by
Tenant with all Environmental Laws shall excuse Tenant from its obligations of
indemnification pursuant hereto. Tenant shall not be relieved of its
indemnification obligations under the provisions of this Section 27.5 due to
Landlord's status as either an "owner" or "operator" under any Environmental
Laws.

       27.6 SURVIVAL: Tenant's obligations and liabilities pursuant to the
provisions of this Section 27 shall survive the expiration or earlier
termination of this Lease. If it is determined by Landlord that the condition of
all or any portion of the Project is not in compliance with the provisions of
this Lease with respect to Hazardous Materials, including without limitation,
all Environmental Laws at the expiration or earlier termination of this Lease,
then Landlord may require Tenant to hold over possession of the Premises until
Tenant can surrender the Premises to Landlord in the condition in which the
Premises existed as of the Commencement Date and prior to the appearance of such
Hazardous Materials except for reasonable wear and tear, including without
limitation, the conduct or performance of any closures as required by any
Environmental Laws. The burden of proof hereunder shall be upon Tenant. For
purposes hereof, the term "reasonable wear and tear" shall not include any
deterioration in the condition or diminution of the value of any portion of the
Project in any manner whatsoever related to directly, or indirectly, Hazardous
Materials. Any such holdover by Tenant will be with Landlord's consent, will not
be terminable by Tenant in any event or circumstance and will otherwise be
subject to the provisions of Section 20 of this Lease.

       27.7 TENANT'S EXCULPATION: Tenant shall not be liable for, nor otherwise
obligated to, Landlord under any provision of this Lease with respect to (i) any
claim, remediation obligation, investigation obligation, liability, cause of
action, attorney's fees, consultants' cost, expense or damage resulting from any
Hazardous Material present in, on or about the Premises or any of the Buildings
in the Park to the extent not caused nor otherwise permitted, directly or
indirectly, by Tenant or Tenant's Representatives; or (ii) the removal,
investigation, monitoring or remediation of any Hazardous Material present in,
on or about the Premises, the Building or the Park caused by any source,
including third parties other than Tenant and Tenant's Representatives, as a
result of, or in connection with, the acts or omissions of persons other than
Tenant or Tenant's Representatives; provided, however, Tenant shall be fully
liable for and otherwise obligated to Landlord under the provisions of this
Lease for all liabilities, costs, damages, penalties, claims, judgments,
expenses (including without limitation, attorneys' and experts' fees and costs)
and losses to the extent (a) Tenant or any of Tenant's Representatives
contributes to the presence of such Hazardous Materials or Tenant and/or any of
Tenant's Representatives exacerbates the conditions caused by such Hazardous
Materials, or (b) Tenant and/or Tenant's Representatives allows or permits
persons over which Tenant or any of Tenant's Representatives has control and/or
for which Tenant or any of Tenant's Representatives are legally responsible for,
to cause such Hazardous Materials to be present in, on, under, through or about
any portion of the Premises, the Building or the Park, or does not take all
reasonably appropriate actions to prevent such persons over which Tenant or any
of Tenant's Representatives has control and/or for which Tenant or any of
Tenant's Representatives are legally responsible from causing the presence of
Hazardous Materials in, on, under, through or about any portion of the Premises,
the Building or the Park.

28.    FINANCIAL STATEMENTS

Tenant and any permitted Transferee, for the reliance of Landlord, any lender
holding or anticipated to acquire a lien upon any portion of the Project or any
prospective purchaser of any portion of the Project within ten (10) days after
Landlord's request therefor, but not more often than once annually so long as
Tenant is not in material default of this Lease, shall deliver to Landlord the
then current audited financial statements of Tenant (including interim periods


                                       19
<PAGE>   20

following the end of the last fiscal year for which annual statements are
available). If audited financial statements have not been prepared, Tenant and
any permitted Transferee shall provide Landlord with unaudited financial
statements and such other information, the type and form of which are acceptable
to Landlord in Landlord's reasonable discretion, which reflects the financial
condition of Tenant and any permitted Transferee. Notwithstanding the foregoing,
Landlord agrees that the form of Tenant's annual report shall be a form which is
acceptable to Landlord.

29.    GENERAL PROVISIONS:

       29.1 TIME. Time is of the essence in this Lease and with respect to each
and all of its provisions in which performance is a factor.

       29.2 SUCCESSORS AND ASSIGNS. The covenants and conditions herein
contained, subject to the provisions as to assignment, apply to and bind the
heirs, successors, executors, administrators and assigns of the parties hereto.

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

       29.4 LANDLORD EXCULPATION. The liability of Landlord to Tenant for any
default by Landlord under the terms of this Lease shall be limited to the actual
interest of Landlord and its present or future partners or members in the
Building, and Tenant agrees to look solely to Landlord's interest in the
Building for satisfaction of any liability and shall not look to other assets of
Landlord nor seek any recourse against the assets of the individual partners,
members, directors, officers, shareholders, agents or employees of Landlord,
including without limitation, any property management company of Landlord
(collectively, the "Landlord Parties"). It is the parties' intention that
Landlord and the Landlord Parties shall not in any event or circumstance be
personally liable, in any manner whatsoever, for any judgment or deficiency
hereunder or with respect to this Lease. The liability of Landlord under this
Lease is limited to its actual period of ownership of title to the Building.

       29.5 SEVERABILITY AND GOVERNING LAW. Any provisions of this Lease which
shall prove to be invalid, void or illegal shall in no way affect, impair or
invalidate any other provisions hereof and such other provision shall remain in
full force and effect. This Lease shall be governed by, and construed in
accordance with, the laws of the State of California.

       29.6 ATTORNEYS' FEES. In the event any dispute between the parties
results in litigation or other proceeding, the prevailing party shall be
reimbursed by the party not prevailing for all reasonable costs and expenses,
including, without limitation, reasonable attorneys' and experts' fees and costs
incurred by the prevailing party in connection with such litigation or other
proceeding, and any appeal thereof. Such costs, expenses and fees shall be
included in and made a part of the judgment recovered by the prevailing party,
if any.

       29.7 ENTIRE AGREEMENT. It is understood and acknowledged that there are
no oral agreements between the parties hereto affecting this Lease and this
Lease supersedes and cancels any and all previous negotiations, arrangements,
brochures, agreements and understandings, if any, between the parties hereto or
displayed by Landlord to Tenant with respect to the subject matter thereof, and
none thereof shall be used to interpret or construe this Lease. This Lease and
any side letter or separate agreement executed by Landlord and Tenant in
connection with this Lease and dated of even date herewith contain all of the
terms, covenants, conditions, warranties and agreements of the parties relating
in any manner to the rental, use and occupancy of the Premises, shall be
considered to be the only agreement between the parties hereto and their
representatives and agents, and none of the terms, covenants, conditions or
provisions of this Lease can be modified, deleted or added to except in writing
signed by the parties hereto. All negotiations and oral agreements acceptable to
both parties have been merged into and are included herein. There are no other
representations or warranties between the parties, and all reliance with respect
to representations is based totally upon the representations and agreements
contained in this Lease. The parties acknowledge that (i) each party and/or its
counsel have reviewed and revised this Lease, and (ii) no rule of construction
to the effect that any ambiguities are to be resolved against the drafting party
shall be employed in the interpretation or enforcement of this Lease or any
amendments or exhibits to this Lease or any document executed and delivered by
either party in connection with this Lease.

       29.8 WARRANTY OF AUTHORITY. On the date that Tenant executes this Lease,
Tenant shall deliver to Landlord an original certificate of status for Tenant
issued by the California Secretary of State or statement of partnership for
Tenant recorded in the county in which the Premises are located, as applicable,
and such other documents as Landlord may reasonably request with regard to the
lawful existence of Tenant. Each person executing this Lease on behalf of a
party represents and warrants that (1) such person is duly and validly
authorized to do so on behalf of the entity it purports to so bind, and (2) if
such party is a partnership, corporation or trustee, that such partnership,
corporation or trustee has full right and authority to enter into this Lease and
perform all of its obligations hereunder.

       29.9 NOTICES. All notices, demands, statements or communications
(collectively, "Notices") given or required to be given by either party to the
other hereunder shall be in writing, shall be sent by United States certified or
registered mail, postage prepaid, return receipt requested, or delivered
personally (i) to Tenant at the Tenant's Address set forth in the Basic Lease
Information, or to such other place as Tenant may from time to time designate in
a Notice to Landlord; or (ii) to Landlord at Landlord's Address set forth in the
Basic Lease Information, or to such other firm or to such other place as
Landlord may from time to time designate in a Notice to Tenant. Any Notice will
be deemed given on the date shown on the return receipt or verification of mail
courier, as provided in this Section 29.9, upon the date personal delivery is
made, or if mailed without a return receipt, then within forty-eight (48) hours
after the date deposited in the mail.

       29.10 JOINT AND SEVERAL; COVENANTS AND CONDITIONS. If Tenant consists of
more than one person or entity, the obligations of all such persons or entities
shall be joint and several. Each provision to be performed by Tenant hereunder
shall be deemed to be both a covenant and a condition.

       29.11 CONFIDENTIALITY. Each party shall keep and maintain such
confidential information strictly confidential. Tenant shall not disclose such
confidential information to any person or entity other than its financial,
legal, and space planning consultants, its prospective investors and lenders and
its prospective subtenants for the Premises. Landlord


                                       20
<PAGE>   21

shall not disclose such financial information to any person or entity other than
its financial and legal consultants, its property management company, its
prospective investors in the Park, and its prospective purchasers and lenders.

       29.12 LANDLORD RENOVATIONS. Tenant acknowledges that Landlord may from
time to time, at Landlord's sole option, renovate, improve, develop, alter, or
modify (collectively, the "Renovations") portions of the Building, Premises,
Common Areas and the Project, including without limitation, systems and
equipment, roof, and structural portions of the same. In connection with such
Renovations, Landlord may, among other things, erect scaffolding or other
necessary structures in the Building, limit or eliminate access to portions of
the Project, including portions of the Common Areas, or perform work in the
Building, which work may create noise, dust or leave debris in the Building.
Tenant hereby agrees, as long as Tenant's normal business operation is not
materially and substantially impaired, that such Renovations and Landlord's
actions in connection with such Renovations shall in no way constitute a
constructive eviction of Tenant nor entitle Tenant to any abatement of Rent.
Landlord shall have no responsibility, or for any reason be liable to Tenant,
for any direct or indirect injury to or interference with Tenant's business
arising from the Renovations, nor shall Tenant be entitled to any compensation
or damages from Landlord for loss of the use of the whole or any part of the
Premises or of Tenant's Property, Alterations or improvements resulting from the
Renovations or Landlord's actions in connection with such Renovations, or for
any inconvenience or annoyance occasioned by such Renovations or Landlord's
actions in connection with such Renovations.

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

30.    SIGNS

All signs and graphics of every kind visible in or from public view or corridors
or the exterior of the Premises shall be subject to Landlord's prior written
approval and shall be subject to and in compliance with all applicable Laws,
Development Documents, Recorded Matters, Rules and Regulations, and Landlord's
sign criteria as same may exist from time to time or as set forth in Exhibit G
hereto. Tenant shall remove all such signs and graphics prior to the expiration
or earlier termination of this Lease. Such installations and removals shall be
made in a manner as to avoid damage or defacement of the Premises. Tenant shall
repair any damage or defacement, including without limitation, discoloration
caused by such installation or removal. Landlord shall have the right, at its
option, to deduct from the Security Deposit such sums as are reasonably
necessary to remove such signs and make any repairs necessitated by such
removal. Notwithstanding the foregoing, in no event shall any: (a) neon,
flashing or moving sign(s) or (b) sign(s) which are likely to interfere with the
visibility of any sign, canopy, advertising matter, or decoration of any kind of
any other business or occupant of the Building or the other portions of the
Project be permitted hereunder. Tenant further agrees to maintain each such sign
and graphics, as may be approved, in good condition and repair at all times.
Should Tenant elect to sublease the Premises as provided in Section 14 herein,
Tenant may place one professionally designed and manufactured sign (with the
words "Sublease Available") in the landscaped area close to the main entrance to
the Premises for the period of Tenant's marketing of the Premises. Such sign
shall not exceed an area of six (6) square feet, and shall be first approved by
Landlord, which approval shall not be unreasonably withheld or delayed.

31.    MORTGAGEE PROTECTION

Upon any default on the part of Landlord, Tenant will give written Notice by
registered or certified mail to any beneficiary of a deed of trust or mortgagee
of a mortgage covering the Premises who has provided Tenant with notice of their
interest together with an address for receiving Notice, and shall offer such
beneficiary or mortgagee a reasonable opportunity to cure the default, including
time to obtain possession of the Premises by power of sale or a judicial
foreclosure, if such should prove necessary to effect a cure. If such default
cannot be cured within such time period, then such additional time as may be
necessary will be given to such beneficiary or mortgagee to effect such cure so
long as such beneficiary or mortgagee has commenced the cure within the original
time period and thereafter diligently pursues such cure to completion, in which
event this Lease shall not be terminated while such cure is being diligently
pursued. Tenant agrees that each lender to whom this Lease has been assigned by
Landlord is an express third party beneficiary hereof. Tenant shall not make any
prepayment of Rent more than one (1) month in advance without the prior written
consent of each such lender, except if Tenant is required to make quarterly
payments of Rent in advance pursuant to the provisions of Section 8 above.
Tenant waives the collection of any deposit from such lender(s) or any purchaser
at a foreclosure sale of such lender(s)' deed of trust unless the lender(s) or
such purchaser shall have actually received and not refunded the deposit. Tenant
agrees to make all payments under this Lease to the lender with the most senior
encumbrance upon receiving a direction, in writing, to pay said amounts to such
lender. Tenant shall comply with such written direction to pay without
determining whether an event of default exists under such lender's loan to
Landlord. If, in connection with obtaining financing for the Premises or any
other portion of the Project, Landlord's lender shall request reasonable
modification(s) to this Lease as a condition to such financing, Tenant shall not
unreasonably withhold, delay or defer its consent thereto, provided such
modifications do not materially and adversely affect Tenant's rights hereunder
or the use, occupancy or quiet enjoyment of Tenant hereunder.

32.    WARRANTIES OF TENANT

Tenant hereby warrants and represents to Landlord, for the express benefit of
Landlord, that Tenant has undertaken a complete and independent evaluation of
the risks inherent in the execution of this Lease and the operation of the
Premises for the use permitted hereby, and that, based upon said independent
evaluation, Tenant has elected to enter into this Lease and hereby assumes all
risks with respect thereto. Tenant hereby further warrants and represents to
Landlord, for the express benefit of Landlord, that in entering into this Lease,
Tenant has not relied upon any statement, fact, promise or representation
(whether express or implied, written or oral) not specifically set forth herein
in writing and that any statement, fact, promise or representation (whether
express or implied, written or oral) made at any time to Tenant, which is not
expressly incorporated herein in writing, is hereby waived by Tenant.

33.    BROKERAGE COMMISSION

Landlord and Tenant each represents and warrants for the benefit of the other
that it has had no dealings with any real estate broker, agent or finder in
connection with the Premises and/or the negotiation of this Lease, except for
the


                                       21
<PAGE>   22

Broker(s) specified in the Basic Lease Information, and that it knows of no
other real estate broker, agent or finder who is or might be entitled to a real
estate brokerage commission or finder's fee in connection with this Lease or
otherwise based upon contacts between the claimant and Tenant. Each party shall
indemnify and hold harmless the other from and against any and all liabilities
or expenses arising out of claims made for a fee or commission by any real
estate broker, agent or finder in connection with the Premises and this Lease
other than Broker(s), if any, resulting from the actions of the indemnifying
party. Unless expressly agreed to in writing by Landlord and Broker(s), no real
estate brokerage commission or finder's fee shall be owed to, or otherwise
payable to, the Broker(s) for any renewals or other extensions of the initial
Term of this Lease or for any additional space leased by Tenant other than the
Premises as same exists as of the Lease Date. Tenant further represents and
warrants to Landlord that Tenant will not receive (i) any portion of any
brokerage commission or finder's fee payable to the Broker(s) in connection with
this Lease or (ii) any other form of compensation or incentive from the
Broker(s) with respect to this Lease.

34.    QUIET ENJOYMENT

Landlord covenants with Tenant, upon the paying of Rent and observing and
keeping the covenants, agreements and conditions of this Lease on its part to be
kept, and during the periods that Tenant is not otherwise in default of any of
the terms or provisions of this Lease, and subject to the rights of any of
Landlord's lenders, (i) that Tenant shall and may peaceably and quietly have,
hold, occupy and enjoy the Premises and the Common Areas during the Term of this
Lease, and (ii) neither Landlord, nor any successor or assign of Landlord, shall
disturb Tenant's occupancy or enjoyment of the Premises and the Common Areas.
The foregoing covenant is in lieu of any other covenant express or implied.


       IN WITNESS WHEREOF, this Lease is executed by the parties as of the Lease
Date referenced on Page 1 of this Lease.

TENANT:

ABAXIS, INC.,
a California corporation

By:    /s/ Donald Stewart
       -------------------------------
Its:   Chief Financial Officer
       -------------------------------
Date:  June 21, 2000
       -------------------------------

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


LANDLORD:

PRINCIPAL DEVELOPMENT INVESTORS, LLC,
a Delaware limited liability company

By:    PRINCIPAL LIFE INSURANCE COMPANY,
       an Iowa corporation, its member

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

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

Date:
       -------------------------------


If Tenant is a CORPORATION, the authorized officers must sign on behalf of the
corporation and indicate the capacity in which they are signing. The Lease must
be executed by the president or vice-president and the secretary or assistant
secretary, unless the bylaws or a resolution of the board of directors shall
otherwise provide, in which event, the bylaws or a certified copy of the
resolution, as the case may be, must be attached to this Lease.


                                       22
<PAGE>   23

                                    EXHIBIT A
                                    PREMISES


This exhibit, entitled "Premises", is and shall constitute Exhibit A to that
certain Lease Agreement dated June 21, 2000 (the "Lease"), by and between
PRINCIPAL DEVELOPMENT INVESTORS, LLC, a Delaware limited liability company
("Landlord") and ABAXIS, INC., a California corporation ("Tenant") for the
leasing of certain premises located in Crossroads Technology Park at Building E,
3240 Whipple Road, Union City, California (the "Premises").

The Premises consist of the rentable square footage of space specified in the
Basic Lease Information and has the address specified in the Basic Lease
Information. The Premises are a part of and are contained in the Building
specified in the Basic Lease Information. The cross-hatched area depicts the
Premises within the Project:


                                       1
<PAGE>   24

                          EXHIBIT B TO LEASE AGREEMENT
                               TENANT IMPROVEMENTS


This exhibit, entitled "Tenant Improvements", is and shall constitute Exhibit B
to that certain Lease Agreement dated June 21, 2000 (the "Lease"), by and
between PRINCIPAL DEVELOPMENT INVESTORS, LLC, a Delaware limited liability
company ("Landlord") and ABAXIS, INC., a California corporation ("Tenant") for
the leasing of certain premises located in Crossroads Technology Park at
Building E, 3240 Whipple Road, Union City, California (the "Premises"). The
terms, conditions and provisions of this Exhibit B are hereby incorporated into
and are made a part of the Lease. Any capitalized terms used herein and not
otherwise defined herein shall have the meaning ascribed to such terms as set
forth in the Lease.

1. TENANT IMPROVEMENTS. Subject to the conditions set forth below, Landlord
agrees to construct and install certain improvements ("Tenant Improvements") in
the Building of which the Premises are a part in accordance with the Approved
Final Drawings (defined below) and pursuant to the terms of this Exhibit B.

2. DEFINITION. "Tenant Improvements" as used in this Lease shall include only
those interior improvements to be made to the Premises as specified in the
Approved Final Drawings (defined below) and agreed to by Tenant and Landlord in
accordance with the provisions hereof. "Tenant Improvements" shall specifically
not include (i) any alterations, additions or improvements installed or
constructed by Tenant, (ii) any of Tenant's trade fixtures, racking, security
equipment, equipment, furniture, furnishings, telephone and/or data equipment,
telephone and/or data lines or other personal property, and (iii) any
supplemental fire protection improvements or equipment, including without
limitation, in-rack fire sprinklers, hose racks, reels, smoke vents, and draft
curtains (collectively, "Tenant's Installations").

3. TENANT'S INITIAL PLANS; THE WORK. Tenant desires Landlord to perform certain
Tenant Improvements in the Premises. The Tenant Improvements shall be in
substantial accordance with the plan(s) and scope of work (collectively, the
"Initial Plans") which will be prepared by Legacy Partners CDS, Inc. after the
parties meet and confer to agree upon a scope of work immediately after
execution of this Lease. Within fifteen (15) business days from the date
Landlord and Tenant meet to discuss the scope of work, Landlord shall deliver to
Tenant the Initial Plans. A copy of the Initial Plans shall be attached hereto
as Schedule 1, as soon as practicable thereafter. Such work, as shown in the
Initial Plans and as more fully detailed in the Approved Final Drawings (as
defined and described in Section 4 below), shall be hereinafter referred to as
the "Work". Not later than five (5) days after the Initial Plans are prepared
and delivered to Tenant, Tenant or Tenant's Representatives shall furnish to
Landlord such additional plans, drawings, specifications and finish details as
Landlord may reasonably request to enable Landlord's architects and engineers,
as applicable, to prepare mechanical, electrical and plumbing plans and to
prepare the Final Drawings, including, but not limited to, a final telephone
layout and special electrical connections, if any. All plans, drawings,
specifications and other details describing the Work which have been, or are
hereafter, furnished by or on behalf of Tenant shall be subject to Landlord's
approval, which approval shall not be unreasonably withheld. Landlord shall not
be deemed to have acted unreasonably if it withholds its approval of any plans,
specifications, drawings or other details or of any Change Request (hereafter
defined in Section 11 below) because, in Landlord's reasonable opinion, the work
as described in any such item, or any Change Request, as the case may be: (a) is
likely to adversely affect Building systems, the structure of the Building or
the safety of the Building or its occupants; (b) might impair Landlord's ability
to furnish services to Tenant or other tenants in the Building; (c) would
increase the cost of operating the Building or the Park; (d) would violate any
applicable governmental, administrative body's or agencies' laws, rules,
regulations, ordinances, codes or similar requirements (or interpretations
thereof); (e) contains or uses Hazardous Materials; (f) would adversely affect
the appearance of the Building or the Park; (g) might adversely affect another
tenant's premises or such other tenant's use and enjoyment of such premises; (h)
is prohibited by any ground lease affecting the Building, the Lot and/or the
Park, any Recorded Matters or any mortgage, trust deed or other instrument
encumbering the Building, the Lot and/or the Park; (i) is likely to be
substantially delayed because of unavailability or shortage of labor or
materials necessary to perform such work or the difficulties or unusual nature
of such work; (j) is not, at a minimum, in accordance with Landlord's Building
Standards (defined below); or (k) would increase the Tenant Improvement Costs
(defined in Section 9 below) by more than ten percent (10%) from the cost
originally estimated and anticipated by the parties. The foregoing reasons,
however, shall not be the only reasons for which Landlord may withhold its
approval, whether or not such other reasons are similar or dissimilar to the
foregoing. Neither the approval by Landlord of the Work or the Initial Plans or
any other plans, specifications, drawings or other items associated with the
Work nor Landlord's performance, supervision or monitoring of the Work shall
constitute any warranty or covenant by Landlord to Tenant of the adequacy of the
design for Tenant's intended use of the Premises. Tenant agrees to, and does
hereby, assume full and complete responsibility to ensure that the Work and the
Approved Final Drawings are adequate to fully meet the needs and requirements of
Tenant's intended operations of its business within the Premises and Tenant's
use of the Premises.

4. FINAL DRAWINGS AND APPROVED FINAL DRAWINGS. If necessary for the performance
of the Work, and to the extent not already included as part of the Initial Plans
attached hereto, Landlord shall prepare or cause to be prepared final working
drawings and specifications for the Work (the "Final Drawings") based on and
consistent with the Initial Plans and the other plans, specifications, drawings,
finish details or other information furnished by Tenant or Tenant's
Representatives to Landlord and approved by Landlord pursuant to Section 3
above. Tenant shall cooperate diligently with Landlord and Landlord's architect,
engineer and other representatives and Tenant shall furnish within five (5) days
after any request therefor, all information required by Landlord or Landlord's
architect, engineer or other representatives for completion of the Final
Drawings. So long as the Final Drawings are substantially consistent with the
Initial Plans, Tenant shall approve the Final Drawings within five (5) days
after receipt of same from Landlord. Tenant's failure to approve or disapprove
such Final Drawings within the foregoing five (5) day time period, shall be
conclusively deemed to be approval of same by Tenant. If Tenant reasonably
disapproves of any matters included in the Final Drawings because such items are
not substantially consistent with the Initial Plans, Tenant shall, within the
aforementioned five (5) day period, deliver to Landlord written notice of its
disapproval and Tenant shall specify in such written notice, in sufficient
detail as Landlord may reasonably require, the matters disapproved, the reasons
for such disapproval, and the specific changes or revisions necessary to be made
to the Final Drawings to cause such drawings to substantially conform to the
Initial Plans. Any additional costs associated with such requested changes or
revisions shall be included as part of the Tenant Improvement Costs (defined
below). The foregoing procedure shall be followed by the parties until the Final
Drawings are acceptable to both Landlord and Tenant. Landlord and Tenant shall
indicate their approval of the Final Drawings by initialing each sheet of the
Final Drawings and delivering to one another a true and complete copy of such
initialed Final Drawings (the "Approved Final Drawings"). A true and complete
copy of the Approved Final Drawings shall be attached to the Lease as Exhibit
B-1 and shall be made a part thereof. Any changes or revisions to the Approved
Final Drawings requested by Tenant must first be approved by Landlord, which
approval shall not be unreasonably withheld, subject to the provisions of
Section 3 above. If Landlord approves such requested changes or revisions,
Landlord shall


                                       1
<PAGE>   25

cause the Approved Final Drawings to be revised accordingly and Landlord and
Tenant shall initial each sheet of the Approved Final Drawings as revised and
replace and attach a true and complete copy thereof to the Lease as Exhibit B-1.
Landlord and Tenant hereby covenant to each other to cooperate with each other
and to act reasonably in the preparation and approval of the Final Drawings and
the Approved Final Drawings.

5. PERFORMANCE OF WORK. As soon as practicable after Tenant and Landlord initial
and attach to the Lease as Exhibit B-1 a true and complete copy of the Approved
Final Drawings, Landlord shall submit the Approved Final Drawings to the
governmental authorities having rights of approval over the Work and shall apply
for the necessary approvals and building permits. Subject to the satisfaction of
all conditions precedent and subsequent to its obligations under this Exhibit B,
and further subject to the provisions of Section 10 hereof, as soon as
practicable after Landlord or its representatives have received all necessary
approvals and building permits, Landlord will put the Approved Final Drawings
out for bid to several licensed, bonded and insured general contractors. The
Tenant Improvements shall be constructed by a general contractor selected by
Landlord (the "General Contractor"). Landlord shall commence construction, or
cause the commencement of construction by the General Contractor, of the Tenant
Improvements, as soon as practicable after selection of the General Contractor.
Except as hereinafter expressly provided to the contrary, Landlord shall cause
the performance of the Work using (except as may be stated or otherwise shown in
the Approved Final Drawings) building standard materials, quantities and
procedures then in use by Landlord ("Building Standards").

6. SUBSTANTIAL COMPLETION. Landlord and Tenant shall cause the General
Contractor to Substantially Complete (defined below) the Tenant Improvements in
accordance with the Approved Final Drawings by the Commencement Date of the
Lease as set forth in Section 2 of the Lease (the "Completion Date"), subject to
delays due to (a) acts or events beyond its control including, but not limited
to, acts of God, earthquakes, strikes, lockouts, boycotts, casualties,
discontinuance of any utility or other service required for performance of the
Work, moratoriums, governmental agencies, delays on the part of governmental
agencies and weather, (b) the lack of availability or shortage of specialized
materials used in the construction of the Tenant Improvements, (c) any matters
beyond the control of Landlord, the General Contractor or any subcontractors,
(d) any changes required by the fire department, building and/or planning
department, building inspectors or any other agency having jurisdiction over the
Building, the Work and/or the Tenant Improvements (except to the extent such
changes are directly attributable to Tenant's use or Tenant's specialized tenant
improvements, in which event such delays are considered Tenant Delays) (the
events and matters set forth in Subsections (a), (b), (c) and (d) are
collectively referred to as "Force Majeure Delays"), or (e) any Tenant Delays
(defined in Section 7 below). The Tenant Improvements shall be deemed
substantially complete on the date that the General Contractor issues to
Landlord a notice of substantial completion, or the date that the building
officials of the applicable governmental agency(s) issues its final approval of
the construction of the Tenant Improvements whether in the form of the issuance
of a final permit, certificate of occupancy or the written approval evidencing
its final inspection on the building permit(s), or the date on which Tenant
first takes occupancy of the Premises, whichever first occurs ("Substantial
Completion", or "Substantially Completed", or "Substantially Complete"). Tenant
hereby acknowledges and agrees that the term "Substantial Completion" of the
Tenant Improvements as used herein will not include the completion of any work
associated with Tenant's Installations, including without limitation, Tenant's
high-pile storage requirements, Tenant's racking systems, and work related to
any requirements of governmental and regulatory agencies with respect to any of
Tenant's Installations. If the Work is not deemed to be Substantially Completed
on or before the scheduled Completion Date, (i) Landlord agrees to use
reasonable efforts to Substantially Complete the Work as soon as practicable
thereafter, (ii) the Lease shall remain in full force and effect, (iii) Landlord
shall not be deemed to be in breach or default of the Lease or this Exhibit B as
a result thereof and Landlord shall have no liability to Tenant as a result of
any delay in occupancy (whether for damages, abatement of all or any portion of
the Rent, or otherwise), and (iv) except in the event of any Tenant Delays,
which will not affect the Commencement Date but will extend the Completion Date
without any penalty or liability to Landlord, and notwithstanding anything to
the contrary contained in the Lease, the Commencement Date and the Expiration
Date of the term of the Lease (as defined in Section 2 of the Lease) shall be
extended commensurately by the amount of time attributable to such Force Majeure
Delays, and Landlord and Tenant shall execute a written amendment to the Lease
evidencing such extensions of time, substantially in the form of Exhibit F to
the Lease. Subject to the provisions of Section 10.2 of the Lease, the Tenant
Improvements shall belong to Landlord and shall be deemed to be incorporated
into the Premises for all purposes of the Lease, unless Landlord, in writing,
indicates otherwise to Tenant.

7. TENANT DELAYS. There shall be no extension of the scheduled Commencement Date
or Expiration Date of the term of the Lease (as otherwise permissibly extended
in accordance with the provisions of Section 6 above) if the Work has not been
Substantially Completed by the scheduled Commencement Date due to any delay
attributable to Tenant and/or any of Tenant's Representatives or Tenant's
intended use of the Premises (collectively, "Tenant Delays"), including, but not
limited to, any of the following described events or occurrences: (a) delays
related to changes made or requested by Tenant to the Work and/or the Approved
Final Drawings; (b) the failure of Tenant to furnish all or any plans, drawings,
specifications, finish details or other information required under Sections 3
and 4 above; (c) the failure of Tenant to comply with the requirements of
Section 10 below; (d) Tenant's requirements for special work or materials,
finishes, or installations other than the Building Standards or Tenant's
requirements for special construction or phasing; (e) any changes required by
the fire department, building or planning department, building inspectors or any
other agency having jurisdiction over the Building, the Work and/or the Tenant
Improvements if such changes are directly attributable to Tenant's use or
Tenant's specialized tenant improvements; (f) the completion of any work
associated with Tenant's Installations, including without limitation, Tenant's
high-pile storage requirements, Tenant's racking systems, and work related to
any requirements of governmental and regulatory agencies with respect to any of
Tenant's Installations; (g) the performance of any additional work pursuant to a
Change Request that is requested by Tenant; (h) the performance of work in or
about the Premises by any person, firm or corporation employed by or on behalf
of Tenant, including, without limitation, any failure to complete or any delay
in the completion of such work; and/or (i) any and all delays caused by or
arising from acts or omissions of Tenant and/or Tenant's Representatives, in any
manner whatsoever, including, but not limited to, any and all revisions to the
Approved Final Drawings. Any delays in the construction of the Tenant
Improvements due to any of the events described above, shall in no way extend or
affect the date on which Tenant is required to commence paying Rent under the
terms of the Lease. It is the intention of the parties that all of such delays
will be considered Tenant Delays for which Tenant shall be wholly and completely
responsible for any and all consequences related to such delays, including,
without limitation, any costs and expenses attributable to increases in labor or
materials.

8. TENANT IMPROVEMENT ALLOWANCE. Landlord shall provide an allowance for the
planning and construction of the Tenant Improvements for the Work to be
performed in the Premises, as described in the Initial Plans and the Approved
Final Drawings, in the amount of Nine Hundred Eleven Thousand Two Hundred Forty
and 00/100 Dollars ($911,240.00) (the "Tenant Improvement Allowance") based upon
an allowance of Ten and 00/100 Dollars ($10.00) per rentable square foot for
91,124 rentable square feet of the Premises to be improved, as described in the
Initial Plans and


                                       2
<PAGE>   26

the Approved Final Drawings. Tenant shall not be entitled to any credit,
abatement or payment from Landlord in the event that the amount of the Tenant
Improvement Allowance specified above exceeds the actual Tenant Improvement
Costs. The Tenant Improvement Allowance shall only be used for tenant
improvements typically installed by Landlord in manufacturing/flex buildings.
The Tenant Improvement Allowance shall be the maximum contribution by Landlord
for the Tenant Improvement Costs and shall be subject to the provisions of
Section 10 below.

9. TENANT IMPROVEMENT COSTS. The Tenant Improvements' cost (the "Tenant
Improvement Costs") shall mean and include any and all costs and expenses of the
Work, including, without limitation, all of the following:

       (a) All costs of preliminary space planning and final architectural and
engineering plans and specifications (including, without limitation, the scope
of work, all plans and specifications, the Initial Plans, the Final Drawings and
the Approved Final Drawings) for the Tenant Improvements, and architectural
fees, engineering costs and fees, and other costs associated with completion of
said plans;

       (b) All costs of obtaining building permits and other necessary
authorizations and approvals from the City of Union City, California and other
applicable agencies and jurisdictions;

       (c) All costs of interior design and finish schedule plans and
specifications including as-built drawings;

       (d) All direct and indirect costs of procuring, constructing and
installing the Tenant Improvements in the Premises, including, but not limited
to, the construction fee for overhead and profit, the cost of all on-site
supervisory and administrative staff, office, equipment and temporary services
rendered by Landlord's consultants and the General Contractor in connection with
construction of the Tenant Improvements, and all labor (including overtime) and
materials constituting the Work;

       (e) All fees payable to the General Contractor, architect and Landlord's
engineering firm if they are required by Tenant to redesign any portion of the
Tenant Improvements following Tenant's approval of the Approved Final Drawings;
and

       (f) A construction management fee payable to Landlord in the amount of
four and one-half percent (4.5%) of all direct and indirect costs of procuring,
constructing and installing the first $1,366,860.00 of Tenant Improvements in
the Premises and the Building and one and one-half percent (1 _%) of all such
costs exceeding the first $1,366,860.00, provided, however, that the total
construction management fee paid to Landlord shall not exceed the sum of
$75,000.00

10. EXCESS TENANT IMPROVEMENT COSTS. The term "Excess Tenant Improvement Costs"
as used herein shall mean and refer to the aggregate of (i) all costs related to
any and all Change Requests/Change Orders, and (ii) the amount by which the
actual Tenant Improvement Costs (exclusive of all costs referred to in item (i)
above) (the "Actual TI Costs") exceed the Tenant Improvement Allowance, subject
to the remaining provisions of this Section 10. Tenant shall faithfully pay all
of the Excess Tenant Improvement Costs to Landlord in the following described
manner. A portion of the Excess Tenant Improvement Costs up to a maximum amount
of Four Hundred Fifty Five Thousand Six Hundred Twenty and 00/100 Dollars
($455,620.00), based on Five and 00/100 Dollars ($5.00) per rentable square foot
for 91,124 square feet of the Premises, shall be amortized over the initial term
of the Lease at the rate of thirteen percent (13%) per annum and such amortized
amount (together with interest charges thereon) shall paid by Tenant with, and
as part of, the Rent for the Premises in accordance with the provisions and
requirements of Section 3 of the Lease (the "Amortized Excess TI Costs"). The
portion of the Excess Tenant Improvement Costs in excess of the Amortized Excess
TI Costs shall be paid by Tenant, in cash, to Landlord within ten (10) days of
Landlord's delivery to Tenant of a written demand therefor together with a
reconciliation of such costs. No Work shall be commenced until Tenant has fully
complied with the preceding provisions of this Section 10. If Tenant fails to
remit the sums so demanded by Landlord pursuant to Section 8 above and this
Section 10 within the time periods required, Landlord may, at its option,
declare Tenant in default under the Lease.

11. CHANGE REQUESTS. No changes or revisions to the Approved Final Drawings
shall be made by either Landlord or Tenant unless approved in writing by both
parties. Upon Tenant's request and submission by Tenant (at Tenant's sole cost
and expense) of the necessary information and/or plans and specifications for
any changes or revisions to the Approved Final Drawings and/or for any work
other than the Work described in the Approved Final Drawings ("Change Requests")
and the approval by Landlord of such Change Request(s), which approval Landlord
agrees shall not be unreasonably withheld, Landlord shall perform the additional
work associated with the approved Change Request(s), at Tenant's sole cost and
expense, subject, however, to the following provisions of this Section 11. Prior
to commencing any additional work related to the approved Change Request(s),
Landlord shall submit to Tenant a written statement of the cost of such
additional work and a proposed tenant change order therefor ("Change Order") in
the standard form then in use by Landlord. Tenant shall execute and deliver to
Landlord such Change Order and shall pay the entire cost of such additional work
in the following described manner. Any costs related to such approved Change
Request(s), Change Order and any delays associated therewith, shall be added to
the Tenant Improvement Costs and shall be paid for by Tenant as and with any
Excess Tenant Improvement Costs as set forth in Section 10 above. The billing
for such additional costs to Tenant shall be accompanied by evidence of the
amounts billed as is customarily used in the business. Costs related to approved
Change Requests and Change Orders shall include without limitation, any
architectural or design fees, Landlord's construction fee for overhead and
profit, the cost of all on-site supervisory and administrative staff, office,
equipment and temporary services rendered by Landlord and/or Landlord's
consultants, and the General Contractor's price for effecting the change. If
Tenant fails to execute or deliver such Change Order, or to pay the costs
related thereto, then Landlord shall not be obligated to do any additional work
related to such approved Change Request(s) and/or Change Orders, and Landlord
may proceed to perform only the Work, as specified in the Approved Final
Drawings. Landlord shall equitably adjust the amount of the Tenant Improvement
Costs for any deletions in the scope of the Work.

12. TERMINATION. If the Lease is terminated prior to the Completion Date, for
any reason due to the default of Tenant hereunder, in addition to any other
remedies available to Landlord under the Lease, Tenant shall pay to Landlord as
Additional Rent under the Lease, within five (5) days of receipt of a statement
therefor, any and all costs incurred by Landlord and not reimbursed or otherwise
paid by Tenant through the date of termination in connection with the Tenant
Improvements to the extent planned, installed and/or constructed as of such date
of termination, including, but not limited to, any costs related to the removal
of all or any portion of the Tenant Improvements and restoration costs related
thereto. Subject to the provisions of Section 10.2 of the Lease, upon the
expiration or earlier termination of the Lease, Tenant shall not be required to
remove the Tenant Improvements it being the intention of the parties that the
Tenant Improvements are to be considered incorporated into the Building.
Notwithstanding anything to the contrary


                                       3
<PAGE>   27

contained herein, Landlord shall have the right to terminate the Lease, upon
written notice to Tenant, if Landlord is unable to obtain a building permit for
the Tenant Improvements within one hundred eighty (180) days from the date the
Lease is signed by Tenant.

13. TENANT ACCESS. Landlord, in Landlord's reasonable discretion and upon
receipt of a written request from Tenant, may grant Tenant a license to have
access to the Premises prior to the Completion Date to allow Tenant to do other
work required by Tenant to make the Premises ready for Tenant's use and (the
"Tenant's Pre-Occupancy Work"). It shall be a condition to the grant by Landlord
and continued effectiveness of such license that:

       (a) Tenant shall give to Landlord a written request to have such access
not less than five (5) business days prior to the date on which such proposed
access will commence (the "Access Notice"). The Access Notice shall contain or
be accompanied by each of the following items, all in form and substance
reasonably acceptable to Landlord: (i) a detailed description of and schedule
for Tenant's Pre-Occupancy Work; (ii) the names and addresses of all
contractors, subcontractors and material suppliers and all other representatives
of Tenant who or which will be entering the Premises on behalf of Tenant to
perform Tenant's Pre-Occupancy Work or will be supplying materials for such
work, and the approximate number of individuals, itemized by trade, who will be
present in the Premises; (iii) copies of all contracts, subcontracts, material
purchase orders, plans and specifications pertaining to Tenant's Pre-Occupancy
Work; (iv) copies of all licenses and permits required in connection with the
performance of Tenant's Pre-Occupancy Work; (v) certificates of insurance (in
amounts satisfactory to Landlord and with the parties identified in, or required
by, the Lease named as additional insureds) and instruments of indemnification
against all claims, costs, expenses, penalties, fines, and damages which may
arise in connection with Tenant's Pre-Occupancy Work; and (vi) assurances of the
ability of Tenant to pay for all of Tenant's Pre-Occupancy Work and/or a letter
of credit or other security deemed appropriate by Landlord securing Tenant's
lien-free completion of Tenant's Pre-Occupancy Work.

       (b) Such pre-term access by Tenant and Tenant's employees, agents,
contractors, consultants, workmen, mechanics, suppliers and invitees shall be
subject to scheduling by Landlord.

       (c) Tenant's employees, agents, contractors, consultants, workmen,
mechanics, suppliers and invitees shall fully cooperate, work in harmony and
not, in any manner, interfere with Landlord or Landlord's agents or
representatives in performing the Work and any additional work pursuant to
approved Change Orders, Landlord's work in other areas of the Building or the
Park, or the general operation of the Building. If at any time any such person
representing Tenant shall not be cooperative or shall otherwise cause or
threaten to cause any such disharmony or interference, including, without
limitation, labor disharmony, and Tenant fails to immediately institute and
maintain corrective actions as directed by Landlord, then Landlord may revoke
such license upon twenty-four (24) hours' prior written notice to Tenant.

       (d) Any such entry into and occupancy of the Premises or any portion
thereof by Tenant or any person or entity working for or on behalf of Tenant
shall be deemed to be subject to all of the terms, covenants, conditions and
provisions of the Lease, excluding only the covenant to pay Rent. Landlord shall
not be liable for any injury, loss or damage that may occur to any of Tenant's
Pre-Occupancy Work made in or about the Premises or to any property placed
therein prior to the commencement of the term of the Lease, the same being at
Tenant's sole risk and liability. Tenant shall be liable to Landlord for any
damage to any portion of the Premises, the Work or the additional work related
to any approved Change Orders caused by Tenant or any of Tenant's employees,
agents, contractors, consultants, workmen, mechanics, suppliers and invitees. In
the event that the performance of Tenant's Pre-Occupancy Work causes extra costs
to be incurred by Landlord or requires the use of other Building services,
Tenant shall promptly reimburse Landlord for such extra costs and/or shall pay
Landlord for such other Building services at Landlord's standard rates then in
effect.

14. LEASE PROVISIONS; CONFLICT. The terms and provisions of the Lease, insofar
as they are applicable, in whole or in part, to this Exhibit B, are hereby
incorporated herein by reference, and specifically including all of the
provisions of Section 31 of the Lease. In the event of any conflict between the
terms of the Lease and this Exhibit B, the terms of this Exhibit B shall
prevail. Any amounts payable by Tenant to Landlord hereunder shall be deemed to
be Additional Rent under the Lease and, upon any default in the payment of same,
Landlord shall have all rights and remedies available to it as provided for in
the Lease.


                                       4
<PAGE>   28

                          EXHIBIT C TO LEASE AGREEMENT
                               RULES & REGULATIONS



This exhibit, entitled "Rules & Regulations", is and shall constitute Exhibit C
to that certain Lease Agreement dated June 21, 2000 (the "Lease"), by and
between PRINCIPAL DEVELOPMENT INVESTORS, LLC, a Delaware limited liability
company ("Landlord") and ABAXIS, INC., a California corporation ("Tenant") for
the leasing of certain premises located in Crossroads Technology Park at
Building E, 3240 Whipple Road, Union City, California (the "Premises"). The
terms, conditions and provisions of this Exhibit C are hereby incorporated into
and are made a part of the Lease. Any capitalized terms used herein and not
otherwise defined herein shall have the meaning ascribed to such terms as set
forth in the Lease:


1. No advertisement, picture or sign of any sort shall be displayed on or
outside the Premises or the Building without the prior written consent of
Landlord. Landlord shall have the right to remove any such unapproved item
without notice and at Tenant's expense.

2. Tenant shall not regularly park motor vehicles in designated parking areas
after the conclusion of normal daily business activity.

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

4. All window coverings installed by Tenant and visible from the outside of the
Building require the prior written approval of Landlord.

5. Tenant shall not use, keep or permit to be used or kept any foul or noxious
gas or substance or any flammable or combustible materials on or around the
Premises, the Building or the Park.

6. Tenant shall not alter any lock or install any new locks or bolts on any door
at the Premises without the prior consent of Landlord.

7. Tenant agrees not to make any duplicate keys without the prior consent of
Landlord.

8. Tenant shall park motor vehicles in those general parking areas as designated
by Landlord except for loading and unloading. During those periods of loading
and unloading, Tenant shall not unreasonably interfere with traffic flow within
the Park and loading and unloading areas of other Tenants.

9. Tenant shall not disturb, solicit or canvas any occupant of the Building or
Park and shall cooperate to prevent same.

10. No person shall go on the roof without Landlord's permission.

11. Business machines and mechanical equipment belonging to Tenant which cause
noise or vibration that may be transmitted to the structure of the Building, to
such a degree as to be objectionable to Landlord or other Tenants, shall be
placed and maintained by Tenant, at Tenant's expense, on vibration eliminators
or other devices sufficient to eliminate noise or vibration.

12. All goods, including material used to store goods, delivered to the Premises
of Tenant shall be immediately moved into the Premises and shall not be left in
parking or receiving areas overnight.

13. Tractor trailers which must be unhooked or parked with dolly wheels beyond
the concrete loading areas must use steel plates or wood blocks under the dolly
wheels to prevent damage to the asphalt paving surfaces. No parking or storing
of such trailers will be permitted in the auto parking areas of the Park or on
streets adjacent thereto.

14. Forklifts which operate on asphalt paving areas shall not have solid rubber
tires and shall only use tires that do not damage the asphalt.

15. Tenant is responsible for the storage and removal of all trash and refuse.
All such trash and refuse shall be contained in suitable receptacles stored
behind screened enclosures at locations approved by Landlord.

16. Tenant shall not store or permit the storage or placement of goods, or
merchandise or pallets or equipment of any sort outside of the Premises nor in
or around the Building, the Park or any of the Common Areas of the foregoing. No
displays or sales of merchandise shall be allowed in the parking lots or other
Common Areas.

17. Tenant shall not permit any animals, including, but not limited to, any
household pets, to be brought or kept in or about the Premises, the Building,
the Park or any of the Common Areas of the foregoing.

18. Tenant shall not permit any motor vehicles to be washed on any portion of
the Premises or in the Common Areas of the Park, nor shall Tenant permit
mechanical work or maintenance of motor vehicles to be performed on any portion
of the Premises or in the Common Areas of the Park.


                                       1
<PAGE>   29

                                    EXHIBIT E
                   HAZARDOUS MATERIALS DISCLOSURE CERTIFICATE


Your cooperation in this matter is appreciated. Initially, the information
provided by you in this Hazardous Materials Disclosure Certificate is necessary
for the Landlord (identified below) to evaluate and finalize a lease agreement
with you as Tenant. After a lease agreement is signed by you and the Landlord
(the "Lease Agreement"), on an annual basis in accordance with the provisions of
Section 27 of the signed Lease Agreement, you are to provide an update to the
information initially provided by you in this certificate. The information
contained in the initial Hazardous Materials Disclosure Certificate and each
annual certificate provided by you thereafter will be maintained in
confidentiality by Landlord subject to release and disclosure as required by (i)
any lenders and owners and their respective environmental consultants, (ii) any
prospective purchaser(s) of all or any portion of the property on which the
Premises are located, (iii) Landlord to defend itself or its lenders, partners
or representatives against any claim or demand, and (iv) any laws, rules,
regulations, orders, decrees, or ordinances, including, without limitation,
court orders or subpoenas. Any and all capitalized terms used herein, which are
not otherwise defined herein, shall have the same meaning ascribed to such term
in the signed Lease Agreement. Any questions regarding this certificate should
be directed to, and when completed, the certificate should be delivered to:

Landlord:      PRINCIPAL DEVELOPMENT INVESTORS, LLC,
               a Delaware limited liability company
               c/o Legacy Partners Commercial, Inc.
               101 Lincoln Centre Drive, Fourth Floor
               Foster City, California  94404
               Attn:  Senior Vice President, Operations
               Phone: (650) 571-2200

Name of (Prospective) Tenant:  ABAXIS, INC., a California corporation

Mailing Address:  1320 Chesapeake Terrace, Sunnyvale, California 94089

Contact Person, Title and Telephone Number(s):  TBD

Contact Person for Hazardous Waste Materials Management and Manifests and
Telephone Number(s): TBD

Address of (Prospective) Premises: 3240 Whipple Road, Union City, California
94587

Length of (Prospective) Initial Term:  120 months


1.     GENERAL INFORMATION:

       Describe the initial proposed operations to take place in, on, or about
       the Premises, including, without limitation, principal products
       processed, manufactured or assembled services and activities to be
       provided or otherwise conducted. Existing Tenants should describe any
       proposed changes to on-going operations.

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

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

2.     USE, STORAGE AND DISPOSAL OF HAZARDOUS MATERIALS

       2.1    Will any Hazardous Materials be used, generated, stored or
              disposed of in, on or about the Premises? Existing Tenants should
              describe any Hazardous Materials which continue to be used,
              generated, stored or disposed of in, on or about the Premises.

              Wastes                       Yes [ ]            No [ ]
              Chemical Products            Yes [ ]            No [ ]
              Other                        Yes [ ]            No [ ]

              If Yes is marked, please explain:
                                                --------------------------------

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

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

       2.2    If Yes is marked in Section 2.1, attach a list of any Hazardous
              Materials to be used, generated, stored or disposed of in, on or
              about the Premises, including the applicable hazard class and an
              estimate of the quantities of such Hazardous Materials at any
              given time; estimated annual throughput; the proposed location(s)
              and method of storage (excluding nominal amounts of ordinary
              household cleaners and janitorial supplies which are not regulated
              by any Environmental Laws); and the proposed location(s) and
              method of disposal for each Hazardous Material, including, the
              estimated frequency, and the proposed contractors or
              subcontractors. Existing Tenants should attach a list setting
              forth the information requested above and such list should include
              actual data from on-going operations and the identification of any
              variations in such information from the prior year's certificate.

3.     STORAGE TANKS AND SUMPS

       3.1    Is any above or below ground storage of gasoline, diesel,
              petroleum, or other Hazardous Materials in tanks or sumps proposed
              in, on or about the Premises? Existing Tenants should describe any
              such actual or proposed activities.

              Yes [ ]      No [ ]

              If yes, please explain:
                                      ------------------------------------------

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

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

4.     WASTE MANAGEMENT



                                       1
<PAGE>   30

       4.1    Has your company been issued an EPA Hazardous Waste Generator I.D.
              Number? Existing Tenants should describe any additional
              identification numbers issued since the previous certificate.

              Yes [ ]      No [ ]

       4.2    Has your company filed a biennial or quarterly reports as a
              hazardous waste generator? Existing Tenants should describe any
              new reports filed.

              Yes [ ]      No [ ]

              If yes, attach a copy of the most recent report filed.

5.     WASTEWATER TREATMENT AND DISCHARGE

       5.1    Will your company discharge wastewater or other wastes to:

              ________ storm drain?        _______ sewer?
              ________ surface water?      _______ no wastewater or other wastes
                                                   discharged.

              Existing Tenants should indicate any actual discharges. If so,
              describe the nature of any proposed or actual discharge(s).

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

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

       5.2    Will any such wastewater or waste be treated before discharge?

              Yes [ ]      No [ ]

              If yes, describe the type of treatment proposed to be conducted.
              Existing Tenants should describe the actual treatment conducted.

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

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

6.     AIR DISCHARGES

       6.1    Do you plan for any air filtration systems or stacks to be used in
              your company's operations in, on or about the Premises that will
              discharge into the air; and will such air emissions be monitored?
              Existing Tenants should indicate whether or not there are any such
              air filtration systems or stacks in use in, on or about the
              Premises which discharge into the air and whether such air
              emissions are being monitored.

              Yes [ ]      No [ ]

              If yes, please describe:
                                      ------------------------------------------

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

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

       6.2    Do you propose to operate any of the following types of equipment,
              or any other equipment requiring an air emissions permit? Existing
              Tenants should specify any such equipment being operated in, on or
              about the Premises.

              ________ Spray booth(s)      _______ Incinerator(s)
              ________ Dip tank(s)         _______ Other (Please describe)
              ________ Drying oven(s)      _______ No Equipment Requiring Air
                                                   Permits

              If yes, please describe:
                                      ------------------------------------------

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

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

7.     HAZARDOUS MATERIALS DISCLOSURES

       7.1    Has your company prepared or will it be required to prepare a
              Hazardous Materials management plan ("Management Plan") pursuant
              to Fire Department or other governmental or regulatory agencies'
              requirements? Existing Tenants should indicate whether or not a
              Management Plan is required and has been prepared.

              Yes [ ]      No [ ]

              If yes, attach a copy of the Management Plan. Existing Tenants
              should attach a copy of any required updates to the Management
              Plan.

       7.2    Are any of the Hazardous Materials, and in particular chemicals,
              proposed to be used in your operations in, on or about the
              Premises regulated under Proposition 65? Existing Tenants should
              indicate whether or not there are any new Hazardous Materials
              being so used which are regulated under Proposition 65.

              Yes [ ]      No [ ]

              If yes, please explain:
                                     -------------------------------------------

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

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


                                       2
<PAGE>   31

8.     ENFORCEMENT ACTIONS AND COMPLAINTS

       8.1    With respect to Hazardous Materials or Environmental Laws, has
              your company ever been subject to any agency enforcement actions,
              administrative orders, or consent decrees or has your company
              received requests for information, notice or demand letters, or
              any other inquiries regarding its operations? Existing Tenants
              should indicate whether or not any such actions, orders or decrees
              have been, or are in the process of being, undertaken or if any
              such requests have been received.

              Yes [ ]      No [ ]

              If yes, describe the actions, orders or decrees and any continuing
              compliance obligations imposed as a result of these actions,
              orders or decrees and also describe any requests, notices or
              demands, and attach a copy of all such documents. Existing Tenants
              should describe and attach a copy of any new actions, orders,
              decrees, requests, notices or demands not already delivered to
              Landlord pursuant to the provisions of Section 27 of the signed
              Lease Agreement.

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

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

       8.2    Have there ever been, or are there now pending, any lawsuits
              against your company regarding any environmental or health and
              safety concerns?

              Yes [ ]      No [ ]

              If yes, describe any such lawsuits and attach copies of the
              complaint(s), cross-complaint(s), pleadings and all other
              documents related thereto as requested by Landlord. Existing
              Tenants should describe and attach a copy of any new complaint(s),
              cross-complaint(s), pleadings and other related documents not
              already delivered to Landlord pursuant to the provisions of
              Section 27 of the signed Lease Agreement.

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

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

       8.3    Have there been any problems or complaints from adjacent Tenants,
              owners or other neighbors at your company's current facility with
              regard to environmental or health and safety concerns? Existing
              Tenants should indicate whether or not there have been any such
              problems or complaints from adjacent Tenants, owners or other
              neighbors at, about or near the Premises.

              Yes [ ]      No [ ]

              If yes, please describe. Existing Tenants should describe any such
              problems or complaints not already disclosed to Landlord under the
              provisions of the signed Lease Agreement.

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

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

9.     PERMITS AND LICENSES

       9.1    Attach copies of all Hazardous Materials permits and licenses
              including a Transporter Permit number issued to your company with
              respect to its proposed operations in, on or about the Premises,
              including, without limitation, any wastewater discharge permits,
              air emissions permits, and use permits or approvals. Existing
              Tenants should attach copies of any new permits and licenses as
              well as any renewals of permits or licenses previously issued.

The undersigned hereby acknowledges and agrees that (A) this Hazardous Materials
Disclosure Certificate is being delivered in connection with, and as required
by, Landlord in connection with the evaluation and finalization of a Lease
Agreement and will be attached thereto as an exhibit; (B) that this Hazardous
Materials Disclosure Certificate is being delivered in accordance with, and as
required by, the provisions of Section 27 of the Lease Agreement; and (C) that
Tenant shall have and retain full and complete responsibility and liability with
respect to any of the Hazardous Materials disclosed in the HazMat Certificate
notwithstanding Landlord's/Tenant's receipt and/or approval of such certificate.
Tenant further agrees that none of the following described acts or events shall
be construed or otherwise interpreted as either (a) excusing, diminishing or
otherwise limiting Tenant from the requirement to fully and faithfully perform
its obligations under the Lease with respect to Hazardous Materials, including,
without limitation, Tenant's indemnification of the Indemnitees and compliance
with all Environmental Laws, or (b) imposing upon Landlord, directly or
indirectly, any duty or liability with respect to any such Hazardous Materials,
including, without limitation, any duty on Landlord to investigate or otherwise
verify the accuracy of the representations and statements made therein or to
ensure that Tenant is in compliance with all Environmental Laws; (i) the
delivery of such certificate to Landlord and/or Landlord's acceptance of such
certificate, (ii) Landlord's review and approval of such certificate, (iii)
Landlord's failure to obtain such certificate from Tenant at any time, or (iv)
Landlord's actual or constructive knowledge of the types and quantities of
Hazardous Materials being used, stored, generated, disposed of or transported on
or about the Premises by Tenant or Tenant's Representatives. Notwithstanding the
foregoing or anything to the contrary contained herein, the undersigned
acknowledges and agrees that Landlord and its partners, lenders and
representatives may, and will, rely upon the statements, representations,
warranties, and certifications made herein and the truthfulness thereof in
entering into the Lease Agreement and the continuance thereof throughout the
term, and any renewals thereof, of the Lease Agreement.

I (print name) ________________, acting with full authority to bind the
(proposed) Tenant and on behalf of the (proposed) Tenant, certify, represent and
warrant that the information contained in this certificate is true and correct.


(PROSPECTIVE) TENANT:

By:
       --------------------------------
Title:
       --------------------------------
Date:
       --------------------------------


                                       3
<PAGE>   32

                                    EXHIBIT F
                       FIRST AMENDMENT TO LEASE AGREEMENT
                           CHANGE OF COMMENCEMENT DATE



This First Amendment to Lease Agreement (the "Amendment") is made and entered
into to be effective as of _________________________, by and between
_____________________________ ("Landlord"), and ________________________
("Tenant"), with reference to the following facts:


                                    RECITALS

A. Landlord and Tenant have entered into that certain Lease Agreement dated
___________ (the "Lease"), for the leasing of certain premises containing
approximately __________ rentable square feet of space located at
____________________________, California (the "Premises") as such Premises are
more fully described in the Lease.

B. Landlord and Tenant wish to amend the Commencement Date of the Lease.

NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Landlord and Tenant hereby agree as follows:

       1.     Recitals: Landlord and Tenant agree that the above recitals are
              true and correct.

       2.     The Commencement Date of the Lease shall be
              ________________________.

       3.     The last day of the Term of the Lease (the "Expiration Date")
              shall be ______________.

       4.     The dates on which the Base Rent will be adjusted are:

               for the period ________ to _______ the monthly Base Rent shall be
               $___________;

               for the period ________ to _______ the monthly Base Rent shall be
               $__________; and

               for the period ________ to _______ the monthly Base Rent
               shall be $___________.

       5. Effect of Amendment: Except as modified herein, the terms and
conditions of the Lease shall remain unmodified and continue in full force and
effect. In the event of any conflict between the terms and conditions of the
Lease and this Amendment, the terms and conditions of this Amendment shall
prevail.

       6. Definitions: Unless otherwise defined in this Amendment, all terms not
defined in this Amendment shall have the meaning set forth in the Lease.

       7. Authority: Subject to the provisions of the Lease, this Amendment
shall be binding upon and inure to the benefit of the parties hereto, their
respective heirs, legal representatives, successors and assigns. Each party
hereto and the persons signing below warrant that the person signing below on
such party's behalf is authorized to do so and to bind such party to the terms
of this Amendment.

       8. The terms and provisions of the Lease are hereby incorporated in this
Amendment.


IN WITNESS WHEREOF, the parties have executed this Amendment as of the date and
year first above written.

[PROPERTY MANAGER: Please provide Tenant information and Word Processing will
complete the signature block]


                                       1
<PAGE>   33

                                    EXHIBIT H

                                LETTER OF CREDIT


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

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

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

                         ------------------------------
                         Contact Phones:
                                        ---------------

                          IRREVOCABLE LETTER OF CREDIT



________________, 2000                        Our irrevocable standby Letter of
                                              Credit: No.
                                                         -----------------------
Beneficiary:

-----------------------------------           Applicant:

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

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

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

                                              Amount: Exactly USD $_____________
                                              (_______________________
                                              and __/100 Dollars)

                                              Final Date of Expiration: ________

       We (the "Bank") hereby issue our irrevocable standby Letter of Credit No.
___________ in Beneficiary's favor for the account of the above-referenced
Applicant, in the aggregate amount of exactly USD $_______________.

       This Letter of Credit is available with us at our above office by
presentation of your draft drawn on us at sight bearing the clause: "Drawn under
No. ______________ [INSERT NAME OF BANK] Letter of Credit No. ______________"
and accompanied by the following:

       1. Beneficiary's signed certification purportedly signed by an authorized
officer or agent stating:

              (A) "Such amount is due to the Beneficiary as landlord under the
terms and conditions of that certain lease agreement dated ______________ for
premises located at _______________________________________________"; or

              (B) "The Bank has notified us that this Letter of Credit will not
be extended beyond the current expiration date of this Letter of Credit and
Applicant has not delivered to Beneficiary at least thirty (30) days prior to
the current expiration of this Letter of Credit a replacement Letter of Credit
satisfactory to Beneficiary."

       2. The original of this Letter of Credit.

       SPECIAL CONDITIONS:

       Partial draws under this Letter of Credit are permitted. Notwithstanding
anything to the contrary contained herein, this Letter of Credit shall expire
permanently without renewal on ________________________.

       This Letter of Credit shall be automatically extended for an additional
period of one (1) year, without amendment, from the present or each future
expiration date but in any event not beyond _____________ which shall be the
final expiration date of this Letter of Credit, unless, at least thirty (30)
days prior to the then current expiration date we notify you by registered
mail/overnight courier service at the above address that this Letter of Credit
will not be extended beyond the current expiration date.

       We hereby agree with you that all drafts drawn under and in compliance
with the terms of this Letter of Credit will be duly honored upon presentation
to us of the documents described in Paragraph 1 above on or before the
expiration date of this Letter of Credit, without inquiry as to the accuracy
thereof and regardless of whether Applicant disputes the content of any such
documents or certifications.

       This Letter of Credit is transferable and any such transfer may be
effected by us, provided that you deliver to us your written request for
transfer in form and substance reasonably satisfactory to us. Beneficiary may,
at any time and without notice to Applicant and without first obtaining
Applicant's consent thereto, transfer all or any portion of Beneficiary's
interest in and to the Letter of Credit to another party, person or entity,
regardless of whether or not such transfer is separate from or as a part of the
assignment by Beneficiary of Beneficiary's rights and interests in and to the
Lease. The original of this Letter of Credit together with any amendments
thereto must accompany any such transfer request.


                                       1
<PAGE>   34

       Except so far as otherwise expressly stated, this documentary credit is
subject to Uniform Customs and Practice for Documentary Credits, 1993 Revision,
International Chamber of Commerce Publication No. 500.


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

By:
   ----------------------------------
   Authorized signature

Please direct any correspondence including drawing or inquiry quoting our
reference number to the above referenced address.

This document consists of two pages.


                                       2
<PAGE>   35

                                    EXHIBIT I
                                TENANT'S PROPERTY

A.     Laboratory benches and casework;

B.     Air compressors;

C.     Air handlers, HEPA filtration systems, and dehumidification units for
       rotor and bead manufacturing areas;

D.     Warehouse racking;

E.     Pre-manufactured cold rooms;

F.     Fume hoods; and

G.     DI water systems.


                                       1
<PAGE>   36

                                    EXHIBIT J
             SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT





       THIS AGREEMENT, made and entered into as of ___________________, 2000, by
and between Principal Mutual Life Insurance Company, an Iowa corporation, with
principal offices located at 711 High Street, Des Moines, Iowa (hereinafter
called "Mortgagee"), Principal Development Investors LLC, a Delaware limited
liability company (hereinafter called, collectively, "Landlord"), c/o Legacy
Partners Commercial, Inc., as manager for Landlord with the manager's principal
office at 101 Lincoln Centre Drive, Fourth Floor, Foster City, California 94404,
and Abaxis, Inc., a California corporation, having its principal office at 3240
Whipple Road, Union City, California 94587, Attention: Facilities Department
(hereinafter called "Tenant");


                               W I T N E S S E T H

WHEREAS, Tenant has by a written lease, dated for reference purposes as of June
21, 2000, as amended and all future amendments approved by Mortgagee, and any
extensions included as options therein (hereinafter called the "Lease"), leased
from Landlord all or part of certain real estate and improvements thereon
located at 3240 Whipple Road, Union City, California, as more particularly
described in Exhibit A attached hereto (the "Demised Premises"); and


WHEREAS, Landlord has previously encumbered the Demised Premises as security for
a loan from Lender to Landlord in the form of a Deed of Trust (hereinafter
called the "Mortgage"); and


WHEREAS, Tenant, Landlord and Mortgagee have agreed to the following with
respect to their mutual rights and obligations pursuant to the Lease and the
Mortgage;


NOW, THEREFORE, for and in consideration of Ten Dollars ($10.00) paid by each
party to the other and the mutual covenants and agreements herein contained and
other good and valuable consideration, the receipt whereof is hereby
acknowledged, the parties hereto do hereby covenant and agree as follows:

       (1) Tenant's interest in the Lease and all rights of Tenant thereunder
shall be and are hereby declared subject and subordinate to the Mortgage upon
the Demised Premises and its terms, and the term "Mortgage" as used herein shall
also include any amendment, supplement, modification, renewal or replacement
thereof.

       (2) In the event of any foreclosure of the Mortgage or any conveyance in
lieu of foreclosure, and provided that the Lease, immediately prior to such
foreclosure of the Mortgage or conveyance in lieu of foreclosure, shall have
been in full force and effect and Tenant shall not then be in Default (as such
term is defined in the Lease) of its obligations under the Lease, then in any
such event, Mortgagee shall neither terminate the Lease nor join Tenant in
foreclosure proceedings, nor disturb Tenant's possession, nor shall the
leasehold estate or tenancy created by the Lease be affected in any way, and the
Lease shall continue in full force and effect as a direct lease between Tenant
and Mortgagee.

       (3) After the receipt by Tenant of notice from Mortgagee of any
foreclosure of the Mortgage or any conveyance of the Demised Premises in lieu of
foreclosure, Tenant will thereafter attorn to and recognize Mortgagee or any
purchaser from Mortgagee at any foreclosure sale or otherwise as its substitute
landlord, and having thus attorned, Tenant's possession shall not thereafter be
disturbed providing, and as long as, Tenant shall continue to pay annual rental
under the Lease, and Tenant otherwise observes or performs the covenants, terms
and conditions of the Lease to be observed and performed by Tenant thereunder.
Any such attornment and recognition of a substitute landlord shall be upon all
of the terms, covenants, conditions and agreement as are then set forth in Lease
except as otherwise herein.

       (4) Except as otherwise required pursuant to the provisions of Section 8
of the Lease, Tenant shall not prepay any of the rents, or income derived under
the Lease more than one month in advance except with the prior written consent
of Mortgagee.

       (5) In no event shall Mortgagee be liable for the return of any security
deposit, any act or omission of the Landlord, nor shall Mortgagee be subject to
any offsets or deficiencies which Tenant may be entitled to assert against the
Landlord as a result of any act or omission of Landlord occurring prior to
Mortgagee's obtaining possession of the Demised Premises except for the
obligations of Landlord to provide the Tenant Improvement Allowance in
accordance with the provisions of Exhibit B to the Lease. Provided, however, so
long as Mortgagee and Landlord remain the parties named herein, the provisions
of this paragraph shall not apply.

       (6) Mortgagee has received an assignment of the Lease and the Lease may
not be amended or altered and Tenant may not be released therefrom or from any
of its obligations except with the written consent of Mortgagee or except as
otherwise so expressly provided under the provisions of the Lease.

       (7) This Agreement and its terms shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns,
including without limitation, any purchaser at any foreclosure sale.

       (8) This Agreement may be executed in counterparts, each of which shall
be deemed to be an original, and such counterparts when taken together shall
constitute but one agreement.


                                       1
<PAGE>   37

       (9) Landlord hereby confirms and authorizes Tenant to recognize Mortgagee
as its substitute landlord and to pay all Rent and charges directly to Mortgagee
upon receiving written notice from Mortgagee in accordance with the provisions
of Paragraph 3 above.

       IN WITNESS WHEREOF, this Agreement has been fully executed under seal on
the day and year first above written.

MORTGAGEE:

PRINCIPAL MUTUAL LIFE INSURANCE COMPANY,
an Iowa corporation

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


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

Date:
       ----------------------------------



TENANT:

ABAXIS, INC.,
a California corporation


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

Date:
       ----------------------------------



LANDLORD:

PRINCIPAL DEVELOPMENT INVESTORS, LLC,
a Delaware limited liability company


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

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

Date:
       ----------------------------------


                                       2
<PAGE>   38

STATE OF CALIFORNIA        )
                           ) ss.
COUNTY OF ALAMEDA          )

       On this ____________ day of __________, 2000 before me, a Notary Public
in and for said County, personally appeared ___________________ and
________________, to me personally known to be the identical persons whose names
are subscribed to the instrument as officers for the Tenant herein named, who
being each by me duly sworn did say that they are the __________________ and
___________________ respectively of ABAXIS, INC., a California corporation, and
that said instrument was signed on behalf of said corporation by authority of
its Board of Directors, and the aforesaid officers each acknowledged the
execution of said instrument to be the duly authorized act and deed of said
corporation, by it and by each of them voluntarily executed.



-----------------------------------------------------------
Notary Public in and for the County of Alameda, California


<PAGE>   39

STATE OF IOWA              )
                           ) ss.
COUNTY OF POLK             )


       On this ____________ day of __________, 2000 before me, a Notary Public
in and for said County, personally appeared ___________________ and
________________, to me personally known to be the identical persons whose names
are subscribed to the instrument as officers for the Landlord herein named, who
being each by me duly sworn did say that they are the __________________ and
___________________ respectively of PRINCIPAL DEVELOPMENT INVESTORS LLC, a
Delaware limited liability company, and that said instrument was signed on
behalf of said corporation by authority of its Board of Directors, and the
aforesaid officers each acknowledged the execution of said instrument to be the
duly authorized act and deed of said corporation, by it and by each of them
voluntarily executed.



----------------------------------------------
Notary Public in and for Polk Co., Iowa


                                       1
<PAGE>   40

STATE OF IOWA              )
                           ) ss.
COUNTY OF POLK             )


       On this ____________ day of __________, 2000 before me, a Notary Public
in and for said County, personally appeared ___________________ and
________________, to me personally known to be the identical persons whose names
are subscribed to the instrument as officers for the Landlord herein named, who
being each by me duly sworn did say that they are the __________________ and
___________________ respectively of PRINCIPAL MUTUAL LIFE INSURANCE COMPANY, a
corporation, and that said instrument was signed on behalf of said corporation
by authority of its Board of Directors, and the aforesaid officers each
acknowledged the execution of said instrument to be the duly authorized act and
deed of said corporation, by it and by each of them voluntarily executed.



------------------------------------------------
Notary Public in and for Polk Co., Iowa


                                       1
<PAGE>   41

                                    EXHIBIT A
           TO SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT

                                   PAGE 1 OF 1


                                       2
<PAGE>   42

                                   ADDENDUM 1
                         OPTION TO EXTEND THE LEASE TERM


This Addendum 1 (the "Addendum") is incorporated as part of that certain Lease
Agreement dated for reference purposes as of June 21, 2000 (the "Lease"), by and
between ABAXIS, INC., a California corporation ("Tenant"), and PRINCIPAL
DEVELOPMENT INVESTORS, LLC, a Delaware limited liability company ("Landlord"),
for the leasing of those certain premises located at 3240 Whipple Road, Union
City, California 94587 as more particularly described in Exhibit A to the Lease
(the "Premises"). Any capitalized terms used herein and not otherwise defined
herein shall have the meaning ascribed to such terms as set forth in the Lease.

1. GRANT OF EXTENSION OPTION. Subject to the provisions, limitations and
conditions set forth in Paragraph 5 below, Tenant shall have an option
("Option") to extend the initial term of the Lease for five (5) years (the
"Extended Term").

2. TENANT'S OPTION NOTICE. Tenant shall have the right to deliver written notice
to Landlord of its intent to exercise this Option (the "Option Notice"). If
Landlord does not receive the Option Notice from Tenant on a date which is
neither more than four hundred twenty (420) days nor less than three hundred
sixty-five (365) days prior to the end of the initial term of the Lease, all
rights under this Option shall automatically terminate and shall be of no
further force or effect. Upon the proper exercise of this Option, subject to the
provisions, limitations and conditions set forth in Paragraph 5 below, the
initial term of the Lease shall be extended for the Extended Term.

3. ESTABLISHING THE INITIAL MONTHLY BASE RENT FOR THE EXTENDED TERM. The initial
monthly Base Rent for the Extended Term shall be the then current market rent
for the highest and best use for similar space within the competitive market
area of the Premises (the "Fair Rental Value"). "Fair Rental Value" of the
Premises means the current market rental value of the Premises as of the
commencement of the Extended Term, taking into consideration all relevant
factors, including length of term, the uses permitted under the Lease, the
quality, size, design and location of the Premises, including the condition and
value of existing tenant improvements (excluding Tenant's Property or other
improvements constructed by Tenant directly and paid by Tenant), and the monthly
base rent paid by tenants for premises comparable to the Premises, and located
in the competitive market area of the Premises, as reasonably determined by
Landlord.

If Tenant does not agree with the Fair Rental Value (as reasonably determined by
Landlord) for the Extended Term within ten (10) days of receipt by Landlord of
the Option Notice for the Extended Term, Landlord and Tenant each, at its cost
and by giving notice to the other party, shall appoint a competent and impartial
commercial real estate broker (hereinafter "broker") with at least five (5)
years' full-time commercial real estate brokerage experience in the geographical
area of the Premises to set the Fair Rental Value for the Extended Term. If
either Landlord or Tenant does not appoint a broker within ten (10) days after
the other party has given notice of the name of its broker, the single broker
appointed shall be the sole broker and shall set the Fair Rental Value for the
Extended Term. If two (2) brokers are appointed by Landlord and Tenant as stated
in this paragraph, they shall meet promptly and attempt to set the Fair Rental
Value. In addition, if either of the first two (2) brokers fails to submit their
opinion of the Fair Rental Value within the time frames set forth below, then
the single Fair Rental Value submitted shall automatically be the initial
monthly Base Rent for the Extended Term and shall be binding upon Landlord and
Tenant. If the two (2) brokers are unable to agree within ten (10) days after
the second broker has been appointed, they shall attempt to select a third
broker, meeting the qualifications stated in this paragraph within ten (10) days
after the last day the two (2) brokers are given to set the Fair Rental Value.
If the two (2) brokers are unable to agree on the third broker, either Landlord
or Tenant by giving ten (10) days' written notice to the other party, can apply
to the Presiding Judge of the Superior Court of the county in which the Premises
is located for the selection of a third broker who meets the qualifications
stated in this paragraph. Landlord and Tenant each shall bear one-half (_) of
the cost of appointing the third broker and of paying the third broker's fee.
The third broker, however selected, shall be a person who has not previously
acted in any capacity for either Landlord or Tenant. Within fifteen (15) days
after the selection of the third broker, the third broker shall select one of
the two Fair Rental Values submitted by the first two brokers as the Fair Rental
Value for the Extended Term. The determination of the Fair Rental Value by the
third broker shall be binding upon Landlord and Tenant.

In no event shall the monthly Base Rent for any period of the Extended Term as
determined pursuant to this Addendum, be less than the highest monthly Base Rent
charged during the initial term of the Lease. Upon determination of the initial
monthly Base Rent for the Extended Term pursuant to the terms outlined above,
Landlord and Tenant shall immediately execute an amendment to the Lease. Such
amendment shall set forth among other things, the initial monthly Base Rent for
the Extended Term and the actual commencement date and expiration date of the
Extended Term. Tenant shall have no other right to further extend the initial
term of the Lease under this Addendum unless Landlord and Tenant otherwise
expressly agree in writing.

4. CONDITION OF PREMISES AND BROKERAGE COMMISSIONS FOR THE EXTENDED TERM. If
Tenant timely and properly exercises this Option, in strict accordance with the
terms contained herein: (1) Tenant shall accept the Premises in its then "As-Is"
condition and, accordingly, Landlord shall not be required to perform any
additional improvements to the Premises; and (2) Tenant hereby agrees that it
will solely be responsible for any and all brokerage commissions and finder's
fees payable to any broker now or hereafter procured or hired by Tenant or who
claims a commission based on any act or statement of Tenant ("Tenant's Broker")
in connection with the Option. Tenant hereby further agrees that Landlord shall
in no event or circumstance be responsible for the payment of any such
commissions and fees to Tenant's Broker.

5. LIMITATIONS ON, AND CONDITIONS TO, EXTENSION OPTION. Except with respect to a
Transfer to a Related Entity in accordance with the provisions of this Lease,
this Option is personal to Tenant and may not be assigned, voluntarily or
involuntarily, separate from or as part of the Lease. At Landlord's option, all
rights of Tenant under this Option shall terminate and be of no force or effect
if any of the following individual events occur or any combination thereof
occur: (1) Tenant has been in default (after notice and the applicable cure
period has expired) at any time during the initial term of the Lease, or is in
default of any provision of the Lease on the date Landlord receives the Option
Notice; and/or (2) Tenant has assigned its rights and obligations under all or
part of the Lease or Tenant has subleased all or part of the Premises; and/or
(3) Tenant's or the Related Entity's financial condition is unacceptable to
Landlord at the time the Option Notice is delivered to Landlord; provided,
however, if the net profits and financial condition of Tenant or the Related
Entity (as the case may then be ) is reasonably adequate and sufficient in
relation to the then remaining


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<PAGE>   43

obligations of Tenant under this Lease, then Tenant's or the Related Entity's
(as applicable) then existing financial condition shall be acceptable to
Landlord, as determined by Landlord in its sole but reasonable discretion;
and/or (4) Tenant has failed to exercise properly this Option in a timely manner
in strict accordance with the provisions of this Addendum; and/or (5) Tenant no
longer has possession of all or any part of the Premises under the Lease, or if
the Lease has been terminated earlier, pursuant to the terms and provisions of
the Lease.

6. TIME IS OF THE ESSENCE. Time is of the essence with respect to each and every
time period set forth in this Addendum.


TENANT INITIALS                     LANDLORD INITIALS


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