<PAGE>   1
                                                                  EXHIBIT 10.30

                                      LEASE



                                 BY AND BETWEEN

                                 MELP VII L.P.,
                        A CALIFORNIA LIMITED PARTNERSHIP
                                   AS LANDLORD
                                       AND
                         AVIRON, A DELAWARE CORPORATION

                                    AS TENANT


                                OCTOBER 20, 1999



<PAGE>   2


                                      LEASE


        THIS LEASE, dated October 20, 1999 for reference purposes only, is made
by and between MELP VII L.P., a California limited partnership ("Landlord") and
Aviron, a Delaware corporation, to be effective and binding upon the parties as
of the date the last of the designated signatories to this Lease shall have
executed this Lease (the "Effective Date of this Lease").


                              ARTICLE 1  REFERENCE

1.1 REFERENCES. All references in this Lease (subject to any further
clarifications contained in this Lease) to the following terms shall have the
following meaning or refer to the respective address, person, date, time period,
amount, percentage, calendar year or fiscal year as below set forth:

<TABLE>
<CAPTION>
<S>                                         <C>
        Tenant's Address for Notice:        Prior to Commencement Date:

                                            297 N. Bernardo
                                            Mountain View, CA  94043
                                            Attn:  Chief Financial Officer

                                            After Commencement Date:

                                            4575 Patrick Henry Drive
                                            Santa Clara, CA  95054

        Landlord's Address for Notices:     c/o Menlo Equities LLC
                                            525 University Avenue
                                            Suite 100
                                            Palo Alto, California 94301

        Landlord's Representative:          Henry Bullock/Richard Holmstrom
        Phone Number:                       (650) 326-9300

        Intended Commencement Date:         November 1, 1999

        Intended Term:                      Five years

        Lease                               Expiration Date: Five (5) Years from
                                            the Actual Lease Commencement Date,
                                            unless earlier terminated by
                                            Landlord in accordance with the
                                            terms of this Lease, or extended by
                                            Tenant pursuant to Article 15.

        Options to Renew:                   One option(s) to renew, for a term
                                            of five (5) years.
</TABLE>

<PAGE>   3

<TABLE>
<S>                                        <C>
        First Month's Prepaid Rent:         $39,375.00

        Tenant's Security Deposit:          $44,316.91

        Late Charge Amount:                 Five Percent (5%) of the Delinquent Amount

        Tenant's Required Liability
        Coverage:                           $3,000,000 Combined Single Limit

        Tenant's Broker(s):                 BT Commercial

        Property:                           That certain real property situated in the City
                                            of Santa Clara, County of Santa Clara, State of
                                            California, as presently improved with one
                                            building, which real property is shown on the
                                            Site Plan attached hereto as Exhibit "A" and is
                                            commonly known as or otherwise described as
                                            follows:  4575 Patrick Henry Drive, Suite
                                            ___, Santa Clara, California.

        Building:                           That certain building on the Property in which
                                            the Leased Premises are located commonly known as
                                            4575 Patrick Henry Drive (the "Building") located
                                            on Assessor's Parcel No. 104-04-131, which
                                            Building is shown outlined on Exhibit "A" hereto.

        Outside Areas:                      The "Outside Areas" shall mean all areas within
                                            Assessor's Parcel No. 104-04-131 which are
                                            located outside the Building, such as pedestrian
                                            walkways, parking areas, landscaped areas, open
                                            areas and enclosed trash disposal areas.

        Leased                              Premises: All the interior space within the Building,
                                            including stairwells, connecting walkways, and
                                            atriums, consisting of approximately 22,500 square
                                            feet and, for purposes of this Lease, agreed to
                                            contain said number of square feet.

        Tenant's Expense Share:             The term "Tenant's Expense Share" shall mean the
                                            percentage obtained by dividing the rentable
                                            square footage of the Leased Premises at the time
                                            of calculation by the rentable square footage of
                                            all buildings located on the Property at the time
                                            of calculation.  Such percentage is currently
                                            40.9%.  In the event that any portion of the
                                            Property is sold by Landlord, or the rentable
                                            square footage of the Leased Premises or the
                                            Property is otherwise changed, Tenant's Expense
                                            Share shall be recalculated to equal the
                                            percentage described in the first sentence of
                                            this paragraph, so that the aggregate Tenant's
                                            Expense Share of all tenants of the Property
                                            shall equal 100%.

        Base Monthly Rent:                  The term "Base Monthly Rent" shall mean the
                                            following:

                                            Months                      Rent
                                             1 - 12                     $39,375.00
                                            13 - 24                     $40,556.25
                                            25 - 36                     $41,772.94
                                            37 - 48                     $43,026.12
                                            49 - 60                     $44,316.91

        Permitted Use:                      Office, research and administration and related
                                            legal uses.
</TABLE>

<PAGE>   4

<TABLE>
<S>                                        <C>
        Exhibits:                           The term "Exhibits" shall mean the Exhibits of
                                            this Lease which are described as follows:
                                            Exhibit "A" - Site Plan showing the Property and
                                            delineating the Building in which the Leased
                                            Premises are located.
                                            Exhibit "B" - Work Letter
                                            Exhibit "C" - Form of Tenant Estoppel Certificate
</TABLE>

                 ARTICLE 2  LEASED PREMISES, TERM AND POSSESSION

2.1 DEMISE OF LEASED PREMISES. Landlord hereby leases to Tenant and Tenant
hereby leases from Landlord for Tenant's own use in the conduct of Tenant's
business and not for purposes of speculating in real estate, for the Lease Term
and upon the terms and subject to the conditions of this Lease, that certain
interior space described in Article 1 as the Leased Premises, reserving and
excepting to Landlord the right to fifty percent (50%) of all assignment
consideration and excess rentals as provided in Article 7 below. Tenant's lease
of the Leased Premises, together with the appurtenant right to use the Outside
Areas as described in Paragraph 2.2 below, shall be conditioned upon and be
subject to the continuing compliance by Tenant with (i) all the terms and
conditions of this Lease, (ii) all Laws governing the use of the Leased Premises
and the Property, (iii) all Private Restrictions, easements and other matters
now of public record respecting the use of the Leased Premises and Property, and
(iv) all reasonable rules and regulations from time to time established by
Landlord. Notwithstanding any provision of this Lease to the contrary, Landlord
hereby reserves to itself and its designees all rights of access, use and
occupancy of the Building roof, and Tenant shall have no right of access, use or
occupancy of the Building roof except (if at all) to the extent required in
order to enable Tenant to perform Tenant's maintenance and repair obligations
pursuant to this Lease.

2.2 RIGHT TO USE OUTSIDE AREAS. As an appurtenant right to Tenant's right to
the use and occupancy of the Leased Premises, Tenant shall have the right to use
the Outside Areas in conjunction with its use of the Leased Premises solely for
the purposes for which they were designated and intended and for no other
purposes whatsoever. Tenant's right to so use the Outside Areas shall be subject
to the limitations on such use as set forth in Article 1 and shall terminate
concurrently with any termination of this Lease.

2.3 LEASE COMMENCEMENT DATE AND LEASE TERM. Subject to Paragraph 2.4 below, the
term of this Lease shall begin, and the Lease Commencement Date shall be deemed
to have occurred, on the Intended Commencement Date, as set forth in Article 1
(the "Lease Commencement Date"). The term of this Lease shall in all events end
at 11:59 p.m. on the day immediately preceding the five (5) year anniversary of
the Lease Commencement Date. The Lease Term shall be that period of time
commencing on the Lease Commencement Date and ending on the Lease Expiration
Date (the "Lease Term").

2.4 DELIVERY OF POSSESSION. Landlord shall deliver to Tenant possession of the
Leased Premises on November 1, 1999; if Landlord is unable to deliver possession
of the Leased Premises on such date to Tenant in no event shall Landlord be
liable in damages to Tenant for such delay.

2.5 PERFORMANCE OF IMPROVEMENT WORK; ACCEPTANCE OF POSSESSION. Landlord shall
have no obligation to make any improvements or alterations to the Leased
Premises before delivering the Leased Premises to Tenant. Tenant will be
responsible for performing improvement work pursuant to the Work Letter (such
work and installations hereinafter referred to as the "Improvement Work").
Without limiting the foregoing, Landlord agrees to deliver in good working order
the roof surface and all existing plumbing, lighting, heating, ventilating and
air conditioning systems within the Leased Premises.

<PAGE>   5

2.6 SURRENDER OF POSSESSION. Not later than the expiration or upon the sooner
termination of this Lease, Tenant shall remove all of Tenant's signs from the
exterior of the Building and shall remove all of Tenant's equipment, trade
fixtures, furniture, supplies, wall decorations, special improvements (as
defined in Exhibit B) and other personal property from within the Leased
Premises, the Building and the Outside Areas, and shall vacate and surrender the
Leased Premises, the Building, the Outside Areas and the Property to Landlord in
the same condition, broom clean, as existed at the Lease Commencement Date,
reasonable wear and tear, acts of God and condemnation excepted. Tenant shall
repair all damage to the Leased Premises, the exterior of the Building and the
Outside Areas caused by Tenant's removal of Tenant's property. Tenant shall
patch and refinish, to Landlord's reasonable satisfaction, all penetrations made
by Tenant or its employees to the floor, walls or ceiling of the Leased
Premises, whether such penetrations were made with Landlord's approval or not.
Tenant shall repair or replace all stained or damaged ceiling tiles, wall
coverings and floor coverings to the reasonable satisfaction of Landlord. Tenant
shall repair all damage caused by Tenant to the exterior surface of the Building
and the paved surfaces of the Outside Areas and, where necessary, replace or
resurface same. Additionally, to the extent that Landlord shall have notified or
is deemed to have notified Tenant in writing at the time the improvements were
completed that it desired to have certain improvements made by Tenant or at the
request of Tenant removed at the expiration or sooner termination of the Lease,
Tenant shall, upon the expiration or sooner termination of the Lease, remove any
such improvements constructed or installed by Landlord or Tenant and repair all
damage caused by such removal. If the Leased Premises, the Building, the Outside
Areas and the Property are not surrendered to Landlord in the condition required
by this paragraph at the expiration or sooner termination of this Lease,
Landlord may, at Tenant's expense, so remove Tenant's signs, property and/or
improvements not so removed and make such repairs and replacements not so made
or hire, at Tenant's expense, independent contractors to perform such work.
Tenant shall be liable to Landlord for all costs incurred by Landlord in
returning the Leased Premises, the Building and the Outside Areas to the
required condition, together with interest on all costs so incurred from the
date paid by Landlord at the then maximum rate of interest not prohibited or
made usurious by law until paid. Tenant shall pay to Landlord the amount of all
costs so incurred plus such interest thereon, within twenty (20) days of
Landlord's billing Tenant for same. Tenant shall indemnify Landlord against loss
or liability resulting from delay by Tenant in surrendering the Leased Premises,
including, without limitation, any claims made by any succeeding Tenant or any
losses to Landlord with respect to lost opportunities to lease to succeeding
tenants.

               ARTICLE 3  RENT, LATE CHARGES AND SECURITY DEPOSITS

3.1 BASE MONTHLY RENT. Commencing on the Lease Commencement Date (as determined
pursuant to Paragraph 2.3 above) and continuing throughout the Lease Term,
Tenant shall pay to Landlord, without prior demand therefor, in advance on the
first day of each calendar month, the amount set forth as "Base Monthly Rent" in
Article 1 (the "Base Monthly Rent").

3.2 ADDITIONAL RENT. Commencing on the Lease Commencement Date (as determined
pursuant to Paragraph 2.3 above) and continuing throughout the Lease Term, in
addition to the Base Monthly Rent and to the extent not required by Landlord to
be contracted for and paid directly by Tenant, Tenant shall pay to Landlord as
additional rent (the "Additional Rent") the following amounts:

        (a) An amount equal to all Property Operating Expenses (as defined in
Article 13) incurred by Landlord. Payment shall be made by the following method:

                Landlord shall deliver to Tenant Landlord's reasonable estimate
of any given expense (such as Landlord's Insurance Costs or Real Property
Taxes), or group of expenses, which it anticipates will be paid or incurred for
the ensuing calendar or fiscal year, as Landlord may determine, and Tenant shall
pay to Landlord an amount equal to the estimated amount of such expenses for
such year in equal monthly installments during such year with the installments
of Base Monthly Rent. The estimated amount may be changed over the course of the
year to reflect Landlord's reasonable understanding of a change in the amount.

Landlord reserves the right to change from time to time the methods of billing
Tenant for any given expense or group of expenses or the periodic basis on which
such expenses are billed.

        (b) Landlord's share of the consideration received by Tenant upon
certain assignments and sublettings as required by Article 7.

<PAGE>   6

        (c) Any legal fees and costs that Tenant is obligated to pay or
reimburse to Landlord pursuant to Article 13; and

        (d) Any other charges or reimbursements due Landlord from Tenant
pursuant to the terms of this Lease.

Notwithstanding the foregoing, Landlord may elect by written notice to Tenant to
have Tenant pay Real Property Taxes or any portion thereof directly to the
applicable taxing authority, in which case Tenant shall make such payments and
deliver satisfactory evidence of payment to Landlord no later than five (5) days
before such Real Property Taxes become delinquent.

3.3 YEAR-END ADJUSTMENTS. If Landlord shall have elected to bill Tenant for the
Property Operating Expenses (or any group of such expenses) on an estimated
basis in accordance with the provisions of Paragraph 3.2(a)(iii) above, Landlord
shall furnish to Tenant within three months following the end of the applicable
calendar or fiscal year, as the case may be, a statement setting forth (i) the
amount of such expenses paid or incurred during the just ended calendar or
fiscal year, as appropriate, and (ii) the amount that Tenant has paid to
Landlord for credit against such expenses for such period. If Tenant shall have
paid more than its obligation for such expenses for the stated period, Landlord
shall, at its election, either (i) credit the amount of such overpayment toward
the next ensuing payment or payments of Additional Rent that would otherwise be
due or (ii) refund in cash to Tenant the amount of such overpayment within
thirty (30) days after the date of such statement. If such year-end statement
shall show that Tenant did not pay its obligation for such expenses in full,
then Tenant shall pay to Landlord the amount of such underpayment within twenty
(20) days from receipt of Landlord's billing of same to Tenant. The provisions
of this Paragraph shall survive the expiration or sooner termination of this
Lease. Tenant may, at any time within sixty (60) days after Landlord delivers to
Tenant Landlord's final reconciliation of Property Operating Expenses, audit
Landlord's books and records with respect to the Property Operating Expenses.

3.4 LATE CHARGE, AND INTEREST ON RENT IN DEFAULT. Tenant acknowledges that the
late payment by Tenant of any monthly installment of Base Monthly Rent or any
Additional Rent will cause Landlord to incur certain costs and expenses not
contemplated under this Lease, the exact amounts of which are extremely
difficult or impractical to fix. Such costs and expenses will include without
limitation, administration and collection costs and processing and accounting
expenses. Therefore, if any installment of Base Monthly Rent is not received by
Landlord from Tenant within five (5) calendar days after the same becomes due,
Tenant shall immediately pay to Landlord a late charge in an amount equal to the
amount set forth in Article 1 as the "Late Charge Amount," and if any Additional
Rent is not received by Landlord when the same becomes due, Tenant shall
immediately pay to Landlord a late charge in an amount equal to 5% of the
Additional Rent not so paid. Landlord and Tenant agree that this late charge
represents a reasonable estimate of such costs and expenses and is fair
compensation to Landlord for the anticipated loss Landlord would suffer by
reason of Tenant's failure to make timely payment. In no event shall this
provision for a late charge be deemed to grant to Tenant a grace period or
extension of time within which to pay any rental installment or prevent Landlord
from exercising any right or remedy available to Landlord upon Tenant's failure
to pay each rental installment due under this Lease when due, including the
right to terminate this Lease. If any rent remains delinquent for a period in
excess of five (5) calendar days, then, in addition to such late charge, Tenant
shall pay to Landlord interest on any rent that is not so paid from said tenth
day at the lesser of (a) then maximum rate of interest not prohibited or made
usurious by Law or (b) the prime rate (as set forth in the money rates section
of The Wall Street Journal) plus 5% until paid.

3.5 PAYMENT OF RENT. Except as specifically provided otherwise in this Lease,
all rent shall be paid in lawful money of the United States, without any
abatement, reduction or offset for any reason whatsoever, to Landlord at such
address as Landlord may designate from time to time. Tenant's obligation to pay
Base Monthly Rent and all Additional Rent shall be appropriately prorated at the
commencement and expiration of the Lease Term. The failure by Tenant to pay any
Additional Rent as required pursuant to this Lease when due shall be treated the
same as a failure by Tenant to pay Base Monthly Rent when due, and Landlord
shall have the same rights and remedies against Tenant as Landlord would have
had Tenant failed to pay the Base Monthly Rent when due.

<PAGE>   7

3.6 PREPAID RENT. Tenant shall, upon execution of this Lease, pay to Landlord
the amount set forth in Article 1 as "First Month's Prepaid Rent" as prepayment
of rent for credit against the first payment of Base Monthly Rent due hereunder.

3.7 SECURITY DEPOSIT. Tenant has deposited with Landlord the amount set forth
in Article 1 as the "Security Deposit" as security for the performance by Tenant
of the terms of this Lease to be performed by Tenant, and not as prepayment of
rent. Landlord may apply such portion or portions of the Security Deposit as are
reasonably necessary for the following purposes: (i) to remedy any default by
Tenant, beyond applicable notice and cure periods, in the payment of Base
Monthly Rent or Additional Rent or a late charge or interest on defaulted rent,
or any other monetary payment obligation of Tenant under this Lease; (ii) to
repair damage to the Leased Premises, the Building or the Outside Areas caused
or permitted to occur by Tenant; (iii) to clean and restore and repair the
Leased Premises, the Building or the Outside Areas following their surrender to
Landlord if not surrendered in the condition required pursuant to the provisions
of Article 2, and (iv) to remedy any other default of Tenant, beyond applicable
notice and cure periods, to the extent permitted by Law including, without
limitation, paying in full on Tenant's behalf any sums claimed by materialmen or
contractors of Tenant to be owing to them by Tenant for work done or
improvements made at Tenant's request to the Leased Premises. In this regard,
Tenant hereby waives any restriction on the uses to which the Security Deposit
may be applied as contained in Section 1950.7(c) of the California Civil Code
and/or any successor statute. In the event the Security Deposit or any portion
thereof is so used, Tenant shall pay to Landlord, within five (5) days of the
receipt of demand, an amount in cash sufficient to restore the Security Deposit
to the full original sum. If Tenant fails to promptly restore the Security
Deposit and if Tenant shall have paid to Landlord any sums as "Last Month's
Prepaid Rent," Landlord may, in addition to any other remedy Landlord may have
under this Lease, reduce the amount of Tenant's Last Month's Prepaid Rent, if
any, by transferring all or portions of such Last Month's Prepaid Rent to
Tenant's Security Deposit until such Security Deposit is restored to the amount
set forth in Article 1. Landlord shall not be deemed a trustee of the Security
Deposit. Landlord may use the Security Deposit in Landlord's ordinary business
and shall not be required to segregate it from Landlord's general accounts.
Tenant shall not be entitled to any interest on the Security Deposit. If
Landlord transfers the Building or the Property during the Lease Term, Landlord
shall pay the Security Deposit to any subsequent owner in conformity with the
provisions of Section 1950.7 of the California Civil Code and/or any successor
statute, in which event the transferring landlord shall be released from all
liability for the return of the Security Deposit. Tenant specifically grants to
Landlord (and Tenant hereby waives the provisions of California Civil Code
Section 1950.7 to the contrary) a period of forty-five (45) days following a
surrender of the Leased Premises by Tenant to Landlord within which to inspect
the Leased Premises, make required restorations and repairs, receive and verify
workmen's billings therefor, and prepare a final accounting with respect to the
Security Deposit. In no event shall the Security Deposit or any portion thereof,
be considered prepaid rent.

               ARTICLE 4  USE OF LEASED PREMISES AND OUTSIDE AREA

4.1 PERMITTED USE. Tenant shall be entitled to use the Leased Premises solely
for the "Permitted Use" as set forth in Article 1 and for no other purpose
whatsoever. Tenant shall continuously and without interruption use the Leased
Premises for such purpose for the entire Lease Term. Any discontinuance of such
use for a period of sixty consecutive calendar days shall be, at Landlord's
election, a default by Tenant under the terms of this Lease. Tenant shall have
the right to use the Outside Areas in conjunction with its Permitted Use of the
Leased Premises solely for the purposes for which they were designed and
intended and for no other purposes whatsoever.

4.2 GENERAL LIMITATIONS ON USE. Tenant shall not do or permit anything to be
done in or about the Leased Premises, the Building, the Outside Areas or the
Property which does or could (i) jeopardize the structural integrity of the
Building or (ii) cause damage to any part of the Leased Premises, the Building,
the Outside Areas or the Property. Tenant shall not operate any equipment within
the Leased Premises which does or could (i) injure, vibrate or shake the Leased
Premises or the Building, (ii) damage, overload or impair the efficient
operation of any electrical, plumbing, heating, ventilating or air conditioning
systems within or servicing the Leased Premises or the Building, or (iii) damage
or impair the efficient operation of the sprinkler system (if any) within or
servicing the Leased Premises or the Building. Tenant shall not install any
equipment or antennas on or make any penetrations of the exterior walls or roof
of the Building. Tenant shall not affix any equipment to or make any
penetrations or cuts in the floor, ceiling, walls or roof of the Leased Premises
without Landlord's consent, which will not be unreasonably

<PAGE>   8

withheld; if Landlord consents to any such installation, penetration or cut,
Tenant shall restore the affected area to its condition before such
installation, penetration or cut. Tenant shall not place any loads upon the
floors, walls, ceiling or roof systems which could endanger the structural
integrity of the Building or damage its floors, foundations or supporting
structural components. Tenant shall not place any explosive, flammable or
harmful fluids or other waste materials in the drainage systems of the Leased
Premises, the Building, the Outside Areas or the Property. Tenant shall not
drain or discharge any fluids in the landscaped areas or across the paved areas
of the Property. Tenant shall not use any of the Outside Areas for the storage
of its materials, supplies, inventory or equipment and all such materials,
supplies, inventory or equipment shall at all times be stored within the Leased
Premises. Tenant shall not commit nor permit to be committed any waste in or
about the Leased Premises, the Building, the Outside Areas or the Property.

4.3 NOISE AND EMISSIONS. All noise generated by Tenant in its use of the Leased
Premises shall be confined or muffled so that it does not interfere with the
businesses of or unreasonably annoy the occupants and/or users of adjacent
properties. All dust, fumes, odors and other emissions generated by Tenant's use
of the Leased Premises shall be sufficiently dissipated in accordance with sound
environmental practice and exhausted from the Leased Premises in such a manner
so as not to interfere with the businesses of or unreasonably annoy the
occupants and/or users of adjacent properties, or cause any damage to the Leased
Premises, the Building, the Outside Areas or the Property or any component part
thereof or the property of adjacent property owners.

4.4 TRASH DISPOSAL. Tenant shall provide trash bins or other adequate garbage
disposal facilities within the trash enclosure areas provided or permitted by
Landlord outside the Leased Premises sufficient for the interim disposal of all
of its trash, garbage and waste. All such trash, garbage and waste temporarily
stored in such areas shall be stored in such a manner so that it is not visible
from outside of such areas, and Tenant shall cause such trash, garbage and waste
to be regularly removed from the Property. Tenant shall keep the Leased Premises
and the Outside Areas in a clean, safe and neat condition free and clear of all
of Tenant's trash, garbage, waste and/or boxes, pallets and containers
containing same at all times.

4.5 PARKING. Tenant will have the right, on a non-exclusive basis, to use 83
parking spaces in the parking area designated on Exhibit A hereto. Tenant shall
not, at any time, park or permit to be parked any recreational vehicles,
inoperative vehicles or equipment in the Outside Areas or on any portion of the
Property. Tenant agrees to assume responsibility for compliance by its employees
and invitees with the parking provisions contained herein. If Tenant or its
employees park any vehicle within the Property in violation of these provisions,
then Landlord may, upon prior written notice to Tenant giving Tenant one (1) day
(or any applicable statutory notice period, if longer than one (1) day) to
remove such vehicle(s), in addition to any other remedies Landlord may have
under this Lease, charge Tenant, as Additional Rent, and Tenant agrees to pay,
as Additional Rent, One Hundred Dollars ($100) per day for each day or partial
day that each such vehicle is so parked within the Property. Landlord reserves
the right to grant easements and access rights to others for use of the parking
areas on the Property, provided that such grants do not materially interfere
with Tenant's use of the parking areas.

4.6 SIGNS. Tenant shall not place or install on or within any portion of the
Leased Premises, the exterior of the Building, the Outside Areas or the Property
any sign, advertisement, banner, placard, or picture which is visible from the
exterior of the Leased Premises. Tenant shall not place or install on or within
any portion of the Leased Premises, the exterior of the Building, the Outside
Areas or the Property any business identification sign which is visible from the
exterior of the Leased Premises until Landlord shall have approved in writing
and in its sole but reasonable discretion the location, size, content, design,
method of attachment and material to be used in the making of such sign;
provided, however, that so long as such signs are normal and customary business
directional or identification signs within the Building, Tenant shall not be
required to obtain Landlord's approval. Any sign, once approved by Landlord,
shall be installed at Tenant's sole cost and expense and only in strict
compliance with Landlord's approval, using a person reasonably approved by
Landlord to install same. Landlord may remove any signs (which have not been
approved in writing by Landlord), advertisements, banners, placards or pictures
so placed by Tenant on or within the Leased Premises, the exterior of the
Building, the Outside Areas or the Property and charge to Tenant the cost of
such removal, together with any costs incurred by Landlord to repair any damage
caused thereby, including any cost incurred to restore the surface (upon which
such sign was so affixed) to its original condition. Tenant shall remove all of
Tenant's signs, repair any damage caused thereby, and restore the surface upon
which the sign was affixed to its original condition, all to Landlord's
reasonable satisfaction,

<PAGE>   9

upon the expiration or earlier termination of this Lease.

4.7 COMPLIANCE WITH LAWS AND PRIVATE RESTRICTIONS. Subject to the provisions of
Section 6.3 below, Tenant shall abide by and shall promptly observe and comply
with, at its sole cost and expense, all Laws and Private Restrictions respecting
the use and occupancy of the Leased Premises, the Building, the Outside Areas or
the Property including, without limitation, all Laws governing the use and/or
disposal of hazardous materials, and shall defend with competent counsel,
indemnify and hold Landlord harmless from any claims, damages or liability
resulting from Tenant's failure to so abide, observe, or comply. Tenant's
obligations hereunder shall survive the expiration or sooner termination of this
Lease.

4.8 COMPLIANCE WITH INSURANCE REQUIREMENTS. With respect to any insurance
policies required or permitted to be carried by Landlord in accordance with the
provisions of this Lease, Tenant shall not conduct nor permit any other person
to conduct any activities nor keep, store or use (or allow any other person to
keep, store or use) any item or thing within the Leased Premises, the Building,
the Outside Areas or the Property which (i) is prohibited under the terms of any
such policies, (ii) could result in the termination of the coverage afforded
under any of such policies, (iii) could give to the insurance carrier the right
to cancel any of such policies, or (iv) could cause an increase in the rates
(over standard rates) charged for the coverage afforded under any of such
policies. Tenant shall comply with all requirements of any insurance company,
insurance underwriter, or Board of Fire Underwriters which are necessary to
maintain, at standard rates, the insurance coverages carried by either Landlord
or Tenant pursuant to this Lease.

4.9 LANDLORD'S RIGHT TO ENTER. Landlord and its agents shall have the right to
enter the Leased Premises during normal business hours after giving Tenant
reasonable notice and subject to Tenant's reasonable security measures for the
purpose of (i) inspecting the same; (ii) showing the Leased Premises to
prospective purchasers, mortgagees or tenants; (iii) making necessary
alterations, additions or repairs; and (iv) performing any of Tenant's
obligations when Tenant has failed to do so after any notice (if required) from
Landlord provided, that during any entry pursuant to clause (ii), Tenant may
accompany Landlord. Landlord shall have the right to enter the Leased premises
during normal business hours (or as otherwise agreed), subject to Tenant's
reasonable security measures, for purposes of supplying any maintenance or
services agreed to be supplied by Landlord. Landlord shall have the right to
enter the Outside Areas during normal business hours for purposes of (i)
inspecting the exterior of the Building and the Outside Areas; (ii) posting
notices of nonresponsibility (and for such purposes Tenant shall provide
Landlord at least ten (10) days' prior written notice of any work to be
performed on the Leased Premises); and (iii) supplying any services to be
provided by Landlord. Any entry into the Leased Premises or the Outside Areas
obtained by Landlord in accordance with this paragraph shall not under any
circumstances be construed or deemed to be a forcible or unlawful entry into, or
a detainer of, the Leased Premises, or an eviction, actual or constructive of
Tenant from the Leased Premises or any portion thereof. In exercising the
foregoing rights, Landlord will make reasonable efforts not to interfere with
Tenant's use of the Premises or with Tenant's parking rights.

4.10 USE OF OUTSIDE AREAS. Tenant, in its use of the Outside Areas, shall at
all times keep the Outside Areas in a safe condition free and clear of all
materials, equipment, debris, trash (except within existing enclosed trash
areas), inoperable vehicles, and other items which are not specifically
permitted by Landlord to be stored or located thereon by Tenant. If, in the
reasonable opinion of Landlord, unauthorized persons are using any of the
Outside Areas by reason of, or under claim of, the express or implied authority
or consent of Tenant, then Tenant, upon demand of Landlord, shall restrain, to
the fullest extent then allowed by Law, such unauthorized use, and shall
initiate such appropriate proceedings as may be required to so restrain such
use. Landlord reserves the right to grant easements and access rights to others
for use of the Outside Areas and shall not be liable to Tenant for any
diminution in Tenant's right to use the Outside Areas as a result. In exercising
the rights set forth in this Section 4.10, Landlord shall not materially
increase Tenant's obligations or diminish Tenant's rights under this Lease,
unless the rights are exercised to comply with a requirement of a utility
provider or governmental entity.

4.11 ENVIRONMENTAL PROTECTION. Tenant's obligations under this Section 4.11
shall survive the expiration or termination of this Lease.

<PAGE>   10

        (a) As used herein, the term "Hazardous Materials" shall mean any toxic
or hazardous substance, material or waste or any pollutant or infectious or
radioactive material, including but not limited to those substances, materials
or wastes regulated now or in the future under any of the following statutes or
regulations and any and all of those substances included within the definitions
of "hazardous substances," "hazardous materials," "hazardous waste," "hazardous
chemical substance or mixture," "imminently hazardous chemical substance or
mixture," "toxic substances," "hazardous air pollutant," "toxic pollutant," or
"solid waste" in the (a) Comprehensive Environmental Response, Compensation and
Liability Act of 1990 ("CERCLA" or "Superfund"), as amended by the Superfund
Amendments and Reauthorization Act of 1986 ("SARA"), 42 U.S.C. Section 9601 et
seq., (b) Resource Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C.
Section 6901 et seq., (c) Federal Water Pollution Control Act ("FSPCA"), 33
U.S.C. Section 1251 et seq., (d) Clean Air Act ("CAA"), 42 U.S.C. Section 7401
et seq., (e) Toxic Substances Control Act ("TSCA"), 14 U.S.C. Section 2601 et
seq., (f) Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et
seq., (g) Carpenter-Presley-Tanner Hazardous Substance Account Act ("California
Superfund"), Cal. Health & Safety Code Section 25300 et seq., (h) California
Hazardous Waste Control Act, Cal. Health & Safety code Section 25100 et seq.,
(i) Porter-Cologne Water Quality Control Act ("Porter-Cologne Act"), Cal. Water
Code Section 13000 et seq., (j) Hazardous Waste Disposal Land Use Law, Cal.
Health & Safety codes Section 25220 et seq., (k) Safe Drinking Water and Toxic
Enforcement Act of 1986 ("Proposition 65"), Cal. Health & Safety code Section
25249.5 et seq., (l) Hazardous Substances Underground Storage Tank Law, Cal.
Health & Safety code Section 25280 et seq., (m) Air Resources Law, Cal. Health &
Safety Code Section 39000 et seq., and (n) regulations promulgated pursuant to
said laws or any replacement thereof, or as similar terms are defined in the
federal, state and local laws, statutes, regulations, orders or rules. Hazardous
Materials shall also mean any and all other biohazardous wastes and substances,
materials and wastes which are, or in the future become, regulated under
applicable Laws for the protection of health or the environment, or which are
classified as hazardous or toxic substances, materials or wastes, pollutants or
contaminants, as defined, listed or regulated by any federal, state or local
law, regulation or order or by common law decision, including, without
limitation, (i) trichloroethylene, tetrachloroethylene, perchloroethylene and
other chlorinated solvents, (ii) any petroleum products or fractions thereof,
(iii) asbestos, (iv) polychlorinated biphenyls, (v) flammable explosives, (vi)
urea formaldehyde, (vii) radioactive materials and waste, and (viii) materials
and wastes that are harmful to or may threaten human health, ecology or the
environment.

        (b) Notwithstanding anything to the contrary in this Lease, Tenant, at
its sole cost, shall comply with all Laws relating to the storage, use and
disposal of Hazardous Materials; provided, however, that Tenant shall not be
responsible for contamination of the Leased Premises by Hazardous Materials
existing as of the date the Leased Premises are delivered to Tenant (whether
before or after the Scheduled Delivery Date) unless caused by Tenant. Tenant
shall not store, use or dispose of any Hazardous Materials except for those
Hazardous Materials (i) listed in a Hazardous Materials management plan
("HMMP"), if any, which if applicable to Tenant, Tenant shall deliver to
Landlord upon execution of this Lease and update at least annually with Landlord
and (ii) that are ordinary and customary office cleaning products in amounts
reasonably necessary for Tenant's permitted use of the Leased Premises
("Permitted Materials") which may be used, stored and disposed of provided (i)
such Permitted Materials are used, stored, transported, and disposed of in
strict compliance with applicable laws, (ii) such Permitted Materials shall be
limited to the materials listed in clause (ii) above or on (and may be used only
in the quantities specified in) the HMMP, if any, and (iii) Tenant shall provide
Landlord with copies of all material safety data sheets and other documentation
required under applicable Laws in connection with Tenant's use of Permitted
Materials, if any, as and when such documentation is provided to any regulatory
authority having jurisdiction, in no event shall Tenant cause or permit to be
discharged into the plumbing or sewage system of the Building or onto the land
underlying or adjacent to the Building any Hazardous Materials. Tenant shall be
solely responsible for and shall defend, indemnify, and hold Landlord and its
agents harmless from and against all claims, costs and liabilities, including
reasonable attorneys' fees and costs, arising out of or in connection with
Tenant's storage, use and/or disposal of Hazardous Materials. If the presence of
Hazardous Materials on the Leased Premises caused or permitted by Tenant results
in contamination or deterioration of water or soil, then Tenant shall promptly
take any and all action necessary to clean up such contamination, but the
foregoing shall in no event be deemed to constitute permission by Landlord to
allow the presence of such Hazardous Materials. At any time prior to the
expiration of the Lease Term if Tenant has a reasonable basis to suspect that
there has been any release or the presence of Hazardous Materials in the ground
or ground water on the Leased Premises which did not exist upon commencement of
the Lease Term, Tenant

<PAGE>   11

shall promptly so notify Landlord and shall have the right, but not the
obligation, to conduct appropriate tests of water and soil and to deliver to
Landlord the results of such tests to demonstrate that no contamination in
excess of permitted levels has occurred as a result of Tenant's use of the
Leased Premises. Tenant shall further be solely responsible for, and shall
defend, indemnify, and hold Landlord and its agents harmless from and against
all claims, costs and liabilities, including reasonable attorneys' fees and
costs, arising out of or in connection with any removal, cleanup and restoration
work and materials required hereunder to return the Leased Premises and any
other property of whatever nature to their condition existing prior to the
appearance of the Hazardous Materials caused by Tenant.

        (c) Upon termination or expiration of the Lease, Tenant at its sole
expense shall cause all Hazardous Materials placed in or about the Leased
Premises, the Building and/or the Property by Tenant, its agents, contractors,
or invitees, and all installations (whether interior or exterior) made by or on
behalf of Tenant relating to the storage, use, disposal or transportation of
Hazardous Materials to be removed from the property and transported for use,
storage or disposal in accordance and compliance with all Laws and other
requirements respecting Hazardous Materials used or permitted to be used by
Tenant. If applicable to Tenant, Tenant shall apply for and shall obtain from
all appropriate regulatory authorities (including any applicable fire department
or regional water quality control board) all permits, approvals and clearances
necessary for the closure of the Property and shall take all other actions as
may be required to complete the closure of the Building and the Property. In
addition, prior to vacating the Leased Premises, Tenant shall undertake and
submit to Landlord an environmental site assessment from an environmental
consulting company reasonably acceptable to Landlord which site assessment shall
evidence Tenant's compliance with this Paragraph 4.11. Notwithstanding anything
to the contrary contained in the foregoing, if Tenant uses only ordinary office
cleaning products on the Leased Premises, and unless Tenant commences to use
other Hazardous Materials, Tenant shall not be obligated to perform the
environmental site assessment referenced in the preceding sentence.

        (d) At any time prior to expiration of the Lease term, subject to
reasonable prior notice (not less than forty-eight (48) hours) and Tenant's
reasonable security requirements and provided such activities do not
unreasonably interfere with the conduct of Tenant's business at the Leased
Premises, Landlord shall have the right to enter in and upon the Property,
Building and Leased Premises in order to conduct appropriate tests of water and
soil to determine whether levels of any Hazardous Materials in excess of legally
permissible levels has occurred as a result of Tenant's use thereof. Landlord
shall furnish copies of all such test results and reports to Tenant and, at
Tenant's option and cost, shall permit split sampling for testing and analysis
by Tenant. Such testing shall be at Tenant's expense if Landlord has a
reasonable basis for suspecting and confirms the presence of Hazardous Materials
in the soil or surface or ground water in, on, under, or about the Property, the
Building or the Leased Premises, which has been caused by or resulted from the
activities of Tenant, its agents, contractors, or invitees.

        (e) Landlord may voluntarily cooperate in a reasonable manner with the
efforts of all governmental agencies in reducing actual or potential
environmental damage. Tenant shall not be entitled to terminate this Lease or to
any reduction in or abatement of rent by reason of such compliance or
cooperation. Tenant agrees at all times to cooperate fully with the requirements
and recommendations of governmental agencies regulating, or otherwise involved
in, the protection of the environment.

4.12 RULES AND REGULATIONS. Landlord shall have the right from time to time to
establish reasonable rules and regulations and/or amendments or additions
thereto respecting the use of the Building, the Leased Premises and the Outside
Areas for the care and orderly management of the Property. Upon delivery to
Tenant of a copy of such rules and regulations or any amendments or additions
thereto, Tenant shall comply with such rules and regulations. A violation by
Tenant of any of such rules and regulations shall constitute a default by Tenant
under this Lease. If there is a conflict between the rules and regulations and
any of the provisions of this Lease, the provisions of this Lease shall prevail.
Landlord shall not be responsible or liable to Tenant for the violation of such
rules and regulations by any other tenant of the Property. Notwithstanding
anything to the contrary contained in this Section 4.12, Tenant shall not be
required to comply with any rule or regulation (unless required by governmental
authorities or requirements) that unreasonably interferes with Tenant's use of
the Premises or Tenant's parking rights.

4.13 RESERVATIONS. Landlord reserves the right from time to time to grant,
without the consent or joinder of Tenant, such easements, rights of way and
dedications that Landlord deems

<PAGE>   12

necessary, and to cause the recordation of parcel maps and restrictions, so long
as such easements, rights of way and dedications not unreasonably interfere with
the use of the Leased Premises by Tenant, materially increase Tenant's
obligations or diminish Tenant's rights under this Lease, unless required by
governmental authorities or requirements. Tenant agrees to execute any documents
reasonably requested by Landlord to effectuate any such easement rights,
dedications, maps or restrictions.

             ARTICLE 5  REPAIRS, MAINTENANCE, SERVICES AND UTILITIES

5.1 REPAIR AND MAINTENANCE. Except in the case of damage to or destruction of
the Leased Premises, the Building, the Outside Areas or the Property caused by
an act of God or other peril, in which case the provisions of Article 10 shall
control, the parties shall have the following obligations and responsibilities
with respect to the repair and maintenance of the Leased Premises, the Building,
the Outside Areas, and the Property.

        (a) TENANT'S OBLIGATIONS. Subject to the provisions of Section 5.1(b)
below, Tenant shall, at all times during the Lease Term and at its sole cost and
expense, regularly clean and continuously keep and maintain in good order,
condition and repair the Leased Premises and every part thereof including,
without limiting the generality of the foregoing, (i) all interior walls, floors
and ceilings, (ii) all windows, doors and skylights, (iii) all electrical
wiring, conduits, connectors and fixtures within the Leased Premises or
connected to outside services, (iv) all plumbing, pipes, sinks, toilets, faucets
and drains, (v) all lighting fixtures, bulbs and lamps and all heating,
ventilating and air conditioning equipment serving the Leased Premises, and (vi)
all entranceways to the Leased Premises. Tenant, if requested to do so by
Landlord, shall hire, at Tenant's sole cost and expense, a licensed heating,
ventilating and air conditioning contractor to regularly and periodically (not
less frequently than every three months) inspect and perform required
maintenance on the heating, ventilating and air conditioning equipment and
systems serving the Leased Premises, or alternatively, Landlord may, at its
election, contract in its own name for such regular and periodic inspections of
and maintenance on such heating, ventilating and air conditioning equipment and
systems and charge to Tenant, as Additional Rent, the cost thereof. Landlord
shall contract in its own name for regular and periodic inspections (not less
frequently than every six months) of and maintenance on the roof by a licensed
roofing contractor and charge to Tenant, as Additional Rent, Tenant's Expense
Share of the cost thereof. Tenant shall, at its sole cost and expense, repair
all damage to the Leased Premises, the Building, the Outside Areas or the
Property caused by the activities of Tenant, its employees, invitees or
contractors promptly following written notice from Landlord to so repair such
damages. If Tenant shall fail to perform the required maintenance or fail to
make repairs required of it pursuant to this paragraph within a reasonable
period of time following notice from Landlord to do so, then Landlord may, at
its election and without waiving any other remedy it may otherwise have under
this Lease or at law, perform such maintenance or make such repairs and charge
to Tenant, as Additional Rent, the costs so incurred by Landlord for same. All
glass within or a part of the Leased Premises, both interior and exterior, is at
the sole risk of Tenant and any broken glass shall promptly be replaced by
Tenant at Tenant's expense with glass of the same kind, size and quality.

        (b) LANDLORD'S OBLIGATION. Landlord shall, at all times during the
Lease Term, maintain in good condition and repair the foundation, roof
structure, load-bearing and exterior walls of the Building. Subject to Section
13.12(c), the provisions of this subparagraph (b) shall in no way limit the
right of Landlord to charge to Tenant, as Additional Rent pursuant to Article 3
(to the extent permitted pursuant to Article 3), the costs incurred by Landlord
in performing such maintenance and/or making such repairs.

5.2 UTILITIES. Tenant shall arrange at its sole cost and expense and in its own
name, for the supply of gas and electricity to the Leased Premises. In the event
that such services are not separately metered, Tenant shall, at its sole
expense, cause such meters to be installed. Landlord shall maintain the water
meter(s) in its own name; provided, however, that if at any time during the
Lease Term Landlord shall require Tenant to put the water service in Tenant's
name, Tenant shall do so at Tenant's sole cost. Tenant shall be responsible for
determining if the local supplier of water, gas and electricity can supply the
needs of Tenant and whether or not the existing water, gas and electrical
distribution systems within the Building and the Leased Premises are adequate
for Tenant's needs. Tenant shall be responsible for determining if the existing
sanitary and storm sewer systems now servicing the Leased Premises and the
Property are adequate for Tenant's needs. Tenant shall pay all charges for
water, gas, electricity and storm and sanitary sewer services as so supplied to
the Leased Premises, irrespective of whether or not the services are maintained
in Landlord's or Tenant's name.

<PAGE>   13

5.3 SECURITY. Tenant acknowledges that Landlord has not undertaken any duty
whatsoever to provide security for the Leased Premises, the Building, the
Outside Areas or the Property and, accordingly, Landlord is not responsible for
the security of same or, except to the extent caused by the sole active
negligence or willful misconduct of Landlord, its agents, employees or
contractors, the protection of Tenant's property or Tenant's employees, invitees
or contractors. To the extent Tenant determines that such security or protection
services are advisable or necessary, Tenant shall arrange for and pay the costs
of providing same.

5.4 ENERGY AND RESOURCE CONSUMPTION. Landlord may voluntarily cooperate in a
reasonable manner with the efforts of governmental agencies and/or utility
suppliers in reducing energy or other resource consumption within the Property.
Tenant shall not be entitled to terminate this Lease or to any reduction in or
abatement of rent by reason of such compliance or cooperation. Tenant agrees at
all times to cooperate fully with Landlord and to abide by all reasonable rules
established by Landlord (i) in order to maximize the efficient operation of the
electrical, heating, ventilating and air conditioning systems and all other
energy or other resource consumption systems with the Property and/or (ii) in
order to comply with the requirements and recommendations of utility suppliers
and governmental agencies regulating the consumption of energy and/or other
resources.

5.5 LIMITATION OF LANDLORD'S LIABILITY. Landlord shall not be liable to Tenant
for injury to Tenant, its employees, agents, invitees or contractors, damage to
Tenant's property, except to the extent caused by the gross negligence or
willful misconduct of Landlord, its agents, employees or contractors, or loss of
Tenant's business or profits, nor shall Tenant be entitled to terminate this
Lease or to any reduction in or abatement of rent by reason of (i) Landlord's
failure to provide security services or systems within the Property for the
protection of the Leased Premises, the Building or the Outside Areas, or the
protection of Tenant's property or Tenant's employees, invitees, agents or
contractors, or (ii) Landlord's failure to perform any maintenance or repairs to
the Leased Premises, the Building, the Outside Areas or the Property until
Tenant shall have first notified Landlord, in writing, of the need for such
maintenance or repairs, and then only after Landlord shall have had a reasonable
period of time following its receipt of such notice within which to perform such
maintenance or repairs, or (iii) any failure, interruption, rationing or other
curtailment in the supply of water, electric current, gas or other utility
service to the Leased Premises, the Building, the Outside Areas or the Property
from whatever cause (other than Landlord's sole active negligence or willful
misconduct or that of its agents, employees or contractors), or (iv) the
unauthorized intrusion or entry into the Leased Premises by third parties (other
than Landlord).

                     ARTICLE 6  ALTERATIONS AND IMPROVEMENTS

6.1 BY TENANT. Tenant shall not make any alterations to or modifications of the
Leased Premises or construct any improvements within the Leased Premises the
cost of which exceeds $10,000 until Landlord shall have first approved, in
writing, the plans and specifications therefor, which approval will not be
unreasonably withheld or delayed. Landlord's approval shall be deemed given if
not denied by Landlord in a written notice to Tenant delivered within fifteen
(15) days following receipt of Tenant's written request. Tenant's written
request shall also contain a request for Landlord to elect whether or not it
will require Tenant to remove the subject alterations, modifications or
improvements at the expiration or earlier termination of this Lease. If such
additional request is not included, Landlord may make such election at the
expiration or earlier termination of this Lease (and for purposes of Tenant's
removal obligations set forth in Section 2.6 above, Landlord shall be deemed to
have made the election at the time the alterations, modifications or
improvements were completed). All such modifications, alterations or
improvements, once so approved, shall be made, constructed or installed by
Tenant at Tenant's expense (including all permit fees and governmental charges
related thereto), using a licensed contractor first reasonably approved by
Landlord, in substantial compliance with the Landlord-approved plans and
specifications therefor. All work undertaken by Tenant shall be done in
accordance with all Laws and in a good and workmanlike manner using new
materials of good quality. Tenant shall not commence the making of any such
modifications or alterations or the construction of any such improvements until
(i) all required governmental approvals and permits shall have been obtained,
(ii) all requirements regarding insurance imposed by this Lease have been
satisfied, (iii) Tenant shall have given Landlord at least five (5) business
days prior written notice of its intention to commence such work so that
Landlord may post and file notices of non-responsibility, and (iv) if reasonably
requested by Landlord, Tenant shall have obtained contingent liability and broad
form builder's risk insurance in an amount satisfactory to Landlord in its
reasonable discretion to cover any perils relating to the proposed work not
covered by

<PAGE>   14

insurance carried by Tenant pursuant to Article 9. In no event shall Tenant make
any modification, alterations or improvements whatsoever to the Outside Areas or
the exterior or structural components of the Building including, without
limitation, any cuts or penetrations in the floor, roof or exterior walls of the
Leased Premises. As used in this Article, the term "modifications, alterations
and/or improvements" shall include, without limitation, the installation of
additional electrical outlets, overhead lighting fixtures, drains, sinks,
partitions, doorways, or the like.

6.2 OWNERSHIP OF IMPROVEMENTS. All modifications, alterations and improvements
made or added to the Leased Premises by Tenant (other than Tenant's inventory,
equipment, movable furniture, wall decorations and trade fixtures) shall be
deemed real property and a part of the Leased Premises, but shall remain the
property of Tenant during the Lease. Any such modifications, alterations or
improvements, once completed, shall not be altered or removed from the Leased
Premises during the Lease Term without Landlord's written approval first
obtained in accordance with the provisions of Paragraph 6.1 above. At the
expiration or sooner termination of this Lease, all such modifications,
alterations and improvements other than Tenant's inventory, equipment, movable
furniture, wall decorations and trade fixtures, shall automatically become the
property of Landlord and shall be surrendered to Landlord as part of the Leased
Premises as required pursuant to Article 2, unless Landlord shall require Tenant
to remove any of such modifications, alterations or improvements in accordance
with the provisions of Article 2, in which case Tenant shall so remove same.
Landlord shall have no obligations to reimburse Tenant for all or any portion of
the cost or value of any such modifications, alterations or improvements so
surrendered to Landlord. All modifications, alterations or improvements which
are installed or constructed on or attached to the Leased Premises by Landlord
and/or at Landlord's expense shall be deemed real property and a part of the
Leased Premises and shall be property of Landlord. All lighting, plumbing,
electrical, heating, ventilating and air conditioning fixtures, partitioning,
window coverings, wall coverings and floor coverings installed by Tenant shall
be deemed improvements to the Leased Premises and not trade fixtures of Tenant.

6.3 ALTERATIONS REQUIRED BY LAW. Tenant shall make all modifications,
alterations and improvements to the Leased Premises, at its sole cost, that are
required by any Law because of (i) Tenant's use or occupancy of the Leased
Premises, the Building, the Outside Areas or the Property, (ii) Tenant's
application for any permit or governmental approval, or (iii) Tenant's making of
any modifications, alterations or improvements to or within the Leased Premises.
If Landlord shall, at any time during the Lease Term, be required by any
governmental authority to make any modifications, alterations or improvements to
the Building or the Property, the cost incurred by Landlord in making such
modifications, alterations or improvements, including interest at a rate equal
to the greater of (a) 12%, or (b) the sum of that rate quoted by Wells Fargo
Bank, N.T. & S.A. from time to time as its prime rate, plus two percent (2%)
("Wells Prime Plus Two") (but in no event more than the maximum rate of interest
not prohibited or made usurious), shall be amortized by Landlord over the useful
life of such modifications, alterations or improvements, as determined in
accordance with generally accepted accounting principles, and the monthly
amortized cost of such modifications, alterations and improvements as so
amortized shall be considered a Property Maintenance Cost.

6.4 LIENS. Tenant shall keep the Property and every part thereof free from any
lien, and shall pay when due all bills arising out of any work performed,
materials furnished, or obligations incurred by Tenant, its agents, employees or
contractors relating to the Property. If any such claim of lien is recorded
against Tenant's interest in this Lease, the Property or any part thereof,
Tenant shall bond against, discharge or otherwise cause such lien to be entirely
released within twenty (20) days after the same has been recorded. Tenant's
failure to do so shall be conclusively deemed a material default under the terms
of this Lease.

<PAGE>   15

                 ARTICLE 7  ASSIGNMENT AND SUBLETTING BY TENANT

7.1 BY TENANT. Tenant shall not sublet the Leased Premises or any portion
thereof or assign its interest in this Lease, whether voluntarily or by
operation of Law, without Landlord's prior written consent which shall not be
unreasonably withheld or delayed. Any attempted subletting or assignment without
Landlord's prior written consent, at Landlord's election, shall constitute a
default by Tenant under the terms of this Lease. The acceptance of rent by
Landlord from any person or entity other than Tenant, or the acceptance of rent
by Landlord from Tenant with knowledge of a violation of the provisions of this
paragraph, shall not be deemed to be a waiver by Landlord of any provision of
this Article or this Lease or to be a consent to any subletting by Tenant or any
assignment of Tenant's interest in this Lease. Without limiting the
circumstances in which it may be reasonable for Landlord to withhold its consent
to an assignment or subletting, Landlord and Tenant acknowledge that it shall be
reasonable for Landlord to withhold its consent in the following instances:

        (a) the proposed assignee or sublessee is a governmental agency;

        (b) in Landlord's reasonable judgment, the use of the Leased Premises by
the proposed assignee or sublessee would involve occupancy by other than for a
Permitted Use, would entail any alterations which would lessen the value of the
leasehold improvements in the Leased Premises, or would require increased
services by Landlord;

        (c) in Landlord's reasonable judgment, the financial worth of the
proposed assignee is less than that of Tenant or does not meet the credit
standards applied by Landlord;

        (d) the proposed assignee or sublessee (or any of its affiliates) has
been in material default under a lease, has been in litigation with a previous
landlord, or in the ten years prior to the assignment or sublease has filed for
bankruptcy protection, has been the subject of an involuntary bankruptcy, or has
been adjudged insolvent;

        (e) Landlord has experienced a previous default by or is in litigation
with the proposed assignee or sublessee;

        (f) in Landlord's reasonable judgment, the Leased Premises, or the
relevant part thereof, will be used in a manner that will violate any negative
covenant as to use contained in this Lease;

        (g) the use of the Leased Premises by the proposed assignee or sublessee
will violate any applicable law, ordinance or regulation;

        (h) the proposed assignee or sublessee is, as of the date of this Lease,
a tenant in the Building;

        (i) the proposed assignment or sublease fails to include all of the
terms and provisions required to be included therein pursuant to this Article 7;

        (j) Tenant is in default of any obligation of Tenant under this Lease,
or Tenant has defaulted under this Lease on three or more occasions during the
12 months preceding the date that Tenant shall request consent; or

        (k) in the case of a subletting of less than the entire Leased Premises,
if the subletting would result in the division of the Leased Premises into more
than two subparcels or would require improvements to be made outside of the
Leased Premises.

Tenant may, without obtaining Landlord's consent, assign this Lease or sublet
the Leased Premises (a) to an affiliate or subsidiary of Tenant, provided that
(i) such affiliate or subsidiary is wholly owned by Tenant and (ii) such
affiliate or subsidiary will use the Leased Premises in the same manner as
Tenant used the Leased Premises; and (b) to an entity that acquires
substantially all the assets of Tenant (by merger, reorganization or sale),
provided that such entity (i) has net worth that exceeds the net worth of Tenant
immediately before the acquisition and (ii) conducts operations in the Leased
Premises substantially identical to the operations of Tenant before the
acquisition.

7.2 MERGER, REORGANIZATION, OR SALE OF ASSETS. Subject to the provisions of
Section 7.1 above, any dissolution, merger, consolidation or other
reorganization of Tenant, or the sale or other transfer in the aggregate over
the Lease Term of a controlling percentage of the capital stock of

<PAGE>   16

Tenant, or the sale or transfer of all or a substantial portion of the assets of
Tenant, shall be deemed a voluntary assignment of Tenant's interest in this
Lease. The phrase "controlling percentage" means the ownership of and the right
to vote stock possessing more than fifty percent of the total combined voting
power of all classes of Tenant's capital stock issued, outstanding and entitled
to vote for the election of directors. If Tenant is a partnership, a withdrawal
or change, voluntary, involuntary or by operation of Law, of any general
partner, or the dissolution of the partnership, shall be deemed a voluntary
assignment of Tenant's interest in this Lease.

7.3 LANDLORD'S ELECTION. If Tenant shall desire to assign its interest under
the Lease or to sublet the Leased Premises, Tenant must first notify Landlord,
in writing, of its intent to so assign or sublet, at least twenty (20) days in
advance of the date it intends to so assign its interest in this Lease or sublet
the Leased Premises but not sooner than one hundred eighty days in advance of
such date, specifying in detail the terms of such proposed assignment or
subletting, including the name of the proposed assignee or sublessee, the
property assignee's or sublessee's intended use of the Leased Premises, current
financial statements (including a balance sheet, income statement and statement
of cash flow, all prepared in accordance with generally accepted accounting
principles) of such proposed assignee or sublessee, the form of documents to be
used in effectuating such assignment or subletting and such other information as
Landlord may reasonably request. Landlord shall have a period of ten (10)
business days following receipt of such notice and the required information
within which to do one of the following: (i) consent to such requested
assignment or subletting subject to Tenant's compliance with the conditions set
forth in Paragraph 7.4 below, or (ii) refuse to so consent to such requested
assignment or subletting, provided that such consent shall not be unreasonably
refused or delayed, or (iii) terminate this Lease as to the portion (including
all) of the Leased Premises that is the subject of the proposed assignment or
subletting. Notwithstanding anything to the contrary contained in this Section,
if Landlord elects to exercise its right of recapture as set forth in this
Section, Tenant shall have the right, within five (5) days after receipt of
Landlord's election, to notify Landlord in writing that Tenant rescinds its
request for Landlord's consent to the assignment or sublet, in which case this
Lease shall continue in full force and effect. During such ten (10) business day
period, Tenant covenants and agrees to supply to Landlord, upon request, all
necessary or relevant information which Landlord may reasonably request
respecting such proposed assignment or subletting and/or the proposed assignee
or sublessee.

7.4 CONDITIONS TO LANDLORD'S CONSENT. If Landlord elects to consent, or shall
have been ordered to so consent by a court of competent jurisdiction, to such
requested assignment or subletting, such consent shall be expressly conditioned
upon the occurrence of each of the conditions below set forth, and any purported
assignment or subletting made or ordered prior to the full and complete
satisfaction of each of the following conditions shall be void and, at the
election of Landlord, which election may be exercised at any time following such
a purported assignment or subletting but prior to the satisfaction of each of
the stated conditions, shall constitute a material default by Tenant under this
Lease until cured by satisfying in full each such condition by the assignee or
sublessee. The conditions are as follows:

        (a) Landlord having approved in form and substance the assignment or
sublease agreement and any ancillary documents, which approval shall not be
unreasonably withheld by Landlord if the requirements of this Article 7 are
otherwise complied with.

        (b) Each such sublessee or assignee having agreed, in writing
satisfactory to Landlord and its counsel and for the benefit of Landlord, to
assume, to be bound by, and to perform the obligations of this Lease to be
performed by Tenant which relate to space being subleased.

        (c) Tenant having fully and completely performed all of its obligations
under the terms of this Lease through and including the date of such assignment
or subletting.

        (d) Tenant having reimbursed to Landlord all reasonable costs and
reasonable attorneys' fees incurred by Landlord in conjunction with the
processing and documentation of any such requested subletting or assignment.

        (e) Tenant having delivered to Landlord a complete and fully-executed
duplicate original of such sublease agreement or assignment agreement (as
applicable) and all related agreements.

        (f) Tenant having paid, or having agreed in writing to pay as to future
payments, to

<PAGE>   17

Landlord fifty percent (50%) of all assignment consideration or excess rentals
to be paid to Tenant or to any other on Tenant's behalf or for Tenant's benefit
for such assignment or subletting as follows:

                (i) If Tenant assigns its interest under this Lease and if all
or a portion of the consideration for such assignment is to be paid by the
assignee at the time of the assignment, that Tenant shall have paid to Landlord
and Landlord shall have received an amount equal to fifty percent (50%) of the
assignment consideration so paid or to be paid (whichever is the greater) at the
time of the assignment by the assignee; or

                (ii) If Tenant assigns its interest under this Lease and if
Tenant is to receive all or a portion of the consideration for such assignment
in future installments, that Tenant and Tenant's assignee shall have entered
into a written agreement with and for the benefit of Landlord satisfactory to
Landlord and its counsel whereby Tenant and Tenant's assignee jointly agree to
pay to Landlord an amount equal to fifty percent (50%) of all such future
assignment consideration installments to be paid by such assignee as and when
such assignment consideration is so paid.

                (iii) If Tenant subleases the Leased Premises, that Tenant and
Tenant's sublessee shall have entered into a written agreement with and for the
benefit of Landlord satisfactory to Landlord and its counsel whereby Tenant and
Tenant's sublessee jointly agree to pay to Landlord fifty percent (50%) of all
excess rentals to be paid by such sublessee as and when such excess rentals are
so paid.

7.5 ASSIGNMENT CONSIDERATION AND EXCESS RENTALS DEFINED. For purposes of this
Article, including any amendment to this Article by way of addendum or other
writing, the term "assignment consideration" shall mean all consideration to be
paid by the assignee to Tenant or to any other party on Tenant's behalf or for
Tenant's benefit as consideration for such assignment, deducting any commissions
paid by Tenant or any other costs or expenses (including, without limitation,
tenant improvements, capital improvements, building upgrades, permit fees,
attorneys' fees, and other consultants' fees) incurred by Tenant in connection
with such assignment, and the term "excess rentals" shall mean all consideration
to be paid by the sublessee to Tenant or to any other party on Tenant's behalf
or for Tenant's benefit for the sublease of all or any portion of the Leased
Premises in excess of the rent due to Landlord under the terms of this Lease for
the portion so subleased for the same period, deducting any commissions paid by
Tenant or any other costs or expenses (including, without limitation, tenant
improvements, capital improvements, building upgrades, permit fees, attorneys'
fees, and other consultants' fees) incurred by Tenant in connection with such
sublease. Tenant agrees that the portion of any assignment consideration and/or
excess rentals arising from any assignment or subletting by Tenant which is to
be paid to Landlord pursuant to this Article now is and shall then be the
property of Landlord and not the property of Tenant.

7.6 PAYMENTS. All payments required by this Article to be made to Landlord
shall be made in cash or check in full as and when they become due. At the time
Tenant, Tenant's assignee or sublessee makes each such payment to Landlord,
Tenant or Tenant's assignee or sublessee, as the case may be, shall deliver to
Landlord an itemized statement in reasonable detail showing the method by which
the amount due Landlord was calculated and certified by the party making such
payment as true and correct.

7.7 GOOD FAITH. The rights granted to Tenant by this Article are granted in
consideration of Tenant's express covenant that all pertinent allocations which
are made by Tenant between the rental value of the Leased Premises and the value
of any of Tenant's personal property which may be conveyed or leased generally
concurrently with and which may reasonably be considered a part of the same
transaction as the permitted assignment or subletting shall be made fairly,
honestly and in good faith. If Tenant shall breach this covenant, Landlord may
immediately declare Tenant to be in default under the terms of this Lease and
terminate this Lease and/or exercise any other rights and remedies Landlord
would have under the terms of this Lease in the case of a material default by
Tenant under this Lease.

7.8 EFFECT OF LANDLORD'S CONSENT. No subletting or assignment, even with the
consent of Landlord, shall relieve Tenant of its personal and primary obligation
to pay rent and to perform all of the other obligations to be performed by
Tenant hereunder. Consent by Landlord to one or more assignments of Tenant's
interest in this Lease or to one or more sublettings of the Leased Premises
shall not be deemed to be a consent to any subsequent assignment or subletting.
If

<PAGE>   18

Landlord shall have been ordered by a court of competent jurisdiction to consent
to a requested assignment or subletting, or such an assignment or subletting
shall have been ordered by a court of competent jurisdiction over the objection
of Landlord, such assignment or subletting shall not be binding between the
assignee (or sublessee) and Landlord until such time as all conditions set forth
in Paragraph 7.4 above have been fully satisfied (to the extent not then
satisfied) by the assignee or sublessee, including, without limitation, the
payment to Landlord of all agreed assignment considerations and/or excess
rentals then due Landlord.

          ARTICLE 8  LIMITATION ON LANDLORD'S LIABILITY AND INDEMNITY

8.1 LIMITATION ON LANDLORD'S LIABILITY AND RELEASE. Landlord shall not be
liable to Tenant for, and Tenant hereby releases Landlord and its partners,
principals, members, officers, agents, employees, lenders, attorneys, and
consultants from, any and all liability, whether in contract, tort or on any
other basis, for any injury to or any damage sustained by Tenant, Tenant's
agents, employees, contractors or invitees, any damage to Tenant's property, or
any loss to Tenant's business, loss of Tenant's profits or other financial loss
of Tenant resulting from or attributable to the condition of, the management of,
the repair or maintenance of, the protection of, the supply of services or
utilities to, the damage in or destruction of the Leased Premises, the Building,
the Property or the Outside Areas, including without limitation (i) the failure,
interruption, rationing or other curtailment or cessation in the supply of
electricity, water, gas or other utility service to the Property, the Building
or the Leased Premises; (ii) the vandalism or forcible entry into the Building
or the Leased Premises; (iii) the penetration of water into or onto any portion
of the Leased Premises; (iv) the failure to provide security and/or adequate
lighting in or about the Property, the Building or the Leased Premises, (v) the
existence of any design or construction defects within the Property, the
Building or the Leased Premises; (vi) the failure of any mechanical systems to
function properly (such as the HVAC systems); (vii) the blockage of access to
any portion of the Property, the Building or the Leased Premises, except that
Tenant does not so release Landlord from such liability to the extent such
damage was proximately caused by Landlord's or Landlord's agents', employees' or
contractors' active negligence or willful misconduct, or Landlord's failure to
perform an obligation expressly undertaken pursuant to this Lease after a
reasonable period of time shall have lapsed following receipt of written notice
from Tenant to so perform such obligation. In this regard, Tenant acknowledges
that it is fully apprised of the provisions of Law relating to releases, and
particularly to those provisions contained in Section 1542 of the California
Civil Code which reads as follows:

          "A general release does not extend to claims which the
          creditor does not know or suspect to exist in his favor at
          the time of executing the release, which if known by him
          must have materially affected his settlement with the
          debtor."

Notwithstanding such statutory provision, and for the purpose of implementing a
full and complete release and discharge, Tenant hereby (i) waives the benefit of
such statutory provision and (ii) acknowledges that, subject to the exceptions
specifically set forth herein, the release and discharge set forth in this
paragraph is a full and complete settlement and release and discharge of all
claims and is intended to include in its effect, without limitation, all claims
which Tenant, as of the date hereof, does not know of or suspect to exist in its
favor.

8.2 TENANT'S INDEMNIFICATION OF LANDLORD. Tenant shall defend with competent
counsel reasonably satisfactory to Landlord any claims made or legal actions
filed or threatened against Landlord with respect to the violation of any Law,
or the death, bodily injury, personal injury, property damage, or interference
with contractual or property rights suffered by any third party occurring within
the Leased Premises or resulting from Tenant's use or occupancy of the Leased
Premises, the Building or the Outside Areas, or resulting from Tenant's
activities in or about the Leased Premises, the Building, the Outside Areas or
the Property, and Tenant shall indemnify and hold Landlord, Landlord's partners,
principals, members, employees, agents and contractors harmless from any loss
liability, penalties, or expense whatsoever (including any loss attributable to
vacant space which otherwise would have been leased, but for such activities)
resulting therefrom, except to the extent proximately caused by the active
negligence or willful misconduct of Landlord, its agents, employees or
contractors. This indemnity agreement shall survive the expiration or sooner
termination of this Lease.

                              ARTICLE 9  INSURANCE

9.1 TENANT'S INSURANCE. Tenant shall maintain insurance complying with all of
the following:

        (a) Tenant shall procure, pay for and keep in full force and effect, at
all times during the Lease Term, the following:

<PAGE>   19

                (i) Commercial general liability insurance insuring Tenant
against liability for personal injury, bodily injury, death and damage to
property occurring within the Leased Premises, or resulting from Tenant's use or
occupancy of the Leased Premises, the Building, the Outside Areas or the
Property, or resulting from Tenant's activities in or about the Leased Premises
or the Property, with coverage in an amount equal to Tenant's Required Liability
Coverage (as set forth in Article 1), which insurance shall contain "blanket
contractual liability" and "broad form property damage" endorsements insuring
Tenant's performance of Tenant's obligations to indemnify Landlord as contained
in this Lease.

                (ii) Fire and property damage insurance in so-called "fire and
extended coverage" form insuring Tenant against loss from physical damage to
Tenant's personal property, inventory, trade fixtures and improvements within
the Leased Premises with coverage for the full actual replacement cost thereof;

                (iii) Business income/extra expense insurance sufficient to pay
Base Monthly Rent and Additional Rent for a period of not less than twelve (12)
months;

                (iv) Plate glass insurance, at actual replacement cost;

                (v) Boiler and machinery insurance, if applicable, to limits
sufficient to restore the Building;

                (vi) If applicable, product liability insurance (including,
without limitation, if food and/or beverages are distributed, sold and/or
consumed within the Leased Premises, to the extent obtainable, coverage for
liability arising out of the distribution, sale, use or consumption of food
and/or beverages (including alcoholic beverages, if applicable) at the Leased
Premises for not less than Tenant's Required Liability Coverage (as set forth in
Article 1);

                (vii) Workers' compensation insurance (statutory coverage) with
employer's liability in amounts not less than $1,000,000 insurance sufficient to
comply with all laws; and

                (viii) With respect to making of any alterations or
modifications or the construction of improvements or the like undertaken by
Tenant, course of construction, commercial general liability, automobile
liability and workers' compensation (to be carried by Tenant's contractor), in
an amount and with coverage reasonably satisfactory to Landlord.

<PAGE>   20

        (b) Each policy of liability insurance required to be carried by Tenant
pursuant to this paragraph or actually carried by Tenant with respect to the
Leased Premises or the Property: (i) shall, except with respect to insurance
required by subparagraph (a)(vii) above, name Landlord, Landlord's property
manager and Lender(s), if any, and such others as are designated by Landlord, as
additional insureds; (ii) shall be primary insurance providing that the insurer
shall be liable for the full amount of the loss, up to and including the total
amount of liability set forth in the declaration of coverage, without the right
of contribution from or prior payment by any other insurance coverage of
Landlord; (iii) shall be in a form reasonably satisfactory to Landlord; (iv)
shall be carried with companies reasonably acceptable to Landlord with Best's
ratings of at least A and XI; (v) shall provide that such policy shall not be
subject to cancellation, lapse or change except after at least thirty (30) days
prior written notice to Landlord, and (vi) shall contain a so-called
"severability" or "cross liability" endorsement. Each policy of property
insurance maintained by Tenant with respect to the Leased Premises or the
Property or any property therein (i) shall provide that such policy shall not be
subject to cancellation, lapse or change except after at least thirty (30) days
prior written notice to Landlord and (ii) shall contain a waiver and/or a
permission to waive by the insurer of any right of subrogation against Landlord,
its partners, principals, members, officers, employees, agents and contractors,
which might arise by reason of any payment under such policy or by reason of any
act or omission of Landlord, its partners, principals, members, officers,
employees, agents and contractors.

        (c) Prior to the time Tenant or any of its contractors enters the Leased
Premises, Tenant shall deliver to Landlord, with respect to each policy of
insurance required to be carried by Tenant pursuant to this Article, a copy of
such policy (appropriately authenticated by the insurer as having been issued,
premium paid) or a certificate of the insurer certifying in form reasonably
satisfactory to Landlord that a policy has been issued, premium paid, providing
the coverage required by this Paragraph and containing the provisions specified
herein. With respect to each renewal or replacement of any such insurance, the
requirements of this Paragraph must be complied with not less than thirty days
prior to the expiration or cancellation of the policies being renewed or
replaced. Landlord may, at any time and from time to time, inspect and/or copy
any and all insurance policies required to be carried by Tenant pursuant to this
Article. If Landlord's Lender, insurance broker, advisor or counsel reasonably
determines at any time that the amount of coverage set forth in Paragraph 9.1(a)
for any policy of insurance Tenant is required to carry pursuant to this Article
is not adequate, then Tenant shall increase the amount of coverage for such
insurance to such greater amount as Landlord's Lender, insurance broker, advisor
or counsel reasonably deems adequate.

9.2 LANDLORD'S INSURANCE. With respect to insurance maintained by Landlord:

        (a) Landlord shall maintain, as the minimum coverage required of it by
this Lease, fire and property damage insurance in so-called "fire and extended
coverage" form insuring Landlord (and such others as Landlord may designate)
against loss from physical damage to the Building with coverage of not less than
one hundred percent (100%) of the full actual replacement cost thereof and
against loss of rents for a period of not less than six months. Such fire and
property damage insurance, at Landlord's election but without any requirements
on Landlord's behalf to do so, (i) may be written in so-called "all risk" form,
excluding only those perils commonly excluded from such coverage by Landlord's
then property damage insurer; (ii) may provide coverage for physical damage to
the improvements so insured for up to the entire full actual replacement cost
thereof; (iii) may be endorsed to cover loss or damage caused by any additional
perils against which Landlord may elect to insure, including earthquake and/or
flood; and/or (iv) may provide coverage for loss of rents for a period of up to
twelve months. Landlord shall not be required to cause such insurance to cover
any of Tenant's personal property, inventory, and trade fixtures, or any
modifications, alterations or improvements made or constructed by Tenant to or
within the Leased Premises, except permanently affixed Tenant Improvements
constructed pursuant to the Work Letter. Landlord shall use commercially
reasonable efforts to obtain such insurance at competitive rates.

        (b) Landlord shall maintain commercial general liability insurance
insuring Landlord (and such others as are designated by Landlord) against
liability for personal injury, bodily injury, death, and damage to property
occurring in, on or about, or resulting from the use or occupancy of the
Property, or any portion thereof, with combined single limit coverage of at
least Ten Million Dollars ($10,000,000). Landlord may carry such greater
coverage as Landlord or Landlord's Lender, insurance broker, advisor or counsel
may from time to time determine is reasonably necessary for the adequate
protection of Landlord and the Property.

<PAGE>   21

        (c) Landlord may maintain any other insurance which in the opinion of
its insurance broker, advisor or legal counsel is prudent in carry under the
given circumstances, provided such insurance is commonly carried by owners of
property similarly situated and operating under similar circumstances.

9.3 MUTUAL WAIVER OF SUBROGATION. Landlord hereby releases Tenant, and Tenant
hereby releases Landlord and its respective partners, principals, members,
officers, agents, employees and servants, from any and all liability for loss,
damage or injury to the property of the other in or about the Leased Premises or
the Property which is caused by or results from a peril or event or happening
which is covered by insurance actually carried and in force at the time of the
loss by the party sustaining such loss; provided, however, that such waiver
shall be effective only to the extent permitted by the insurance covering such
loss and to the extent such insurance is not prejudiced thereby. Landlord and
Tenant will use reasonable efforts to cause their property insurance to contain
a waiver and/or a permission to waive by the insurer of any right of subrogation
against Tenant or Landlord (as applicable), their partners, principals, members,
officers, employees, agents and contractors.

                      ARTICLE 10  DAMAGE TO LEASED PREMISES

10.1 LANDLORD'S DUTY TO RESTORE. If the Leased Premises, the Building or the
Outside Area are damaged by any peril after the Effective Date of this Lease,
Landlord shall restore the same, as and when required by this paragraph, unless
this Lease is terminated by Landlord pursuant to Paragraph 10.3 or by Tenant
pursuant to Paragraph 10.4. If this Lease is not so terminated, then upon the
issuance of all necessary governmental permits, Landlord shall commence and
diligently prosecute to completion the restoration of the Leased Premises, the
Building or the Outside Area, as the case may be, to the extent then allowed by
law, to substantially the same condition in which it existed as of the Lease
Commencement Date. Landlord's obligation to restore shall be limited to the
improvements constructed by Landlord. Landlord shall have no obligation to
restore any alterations, modifications or improvements made by Tenant to the
Leased Premises or any of Tenant's personal property, inventory or trade
fixtures. Upon completion of the restoration by Landlord, Tenant shall forthwith
replace or fully repair all of Tenant's personal property, inventory, trade
fixtures and other improvements constructed by Tenant to like or similar
conditions as existed at the time immediately prior to such damage or
destruction.

10.2 INSURANCE PROCEEDS. All insurance proceeds available from the fire and
property damage insurance carried by Landlord shall be paid to and become the
property of Landlord. If this Lease is terminated pursuant to either Paragraph
10.3 or 10.4, all insurance proceeds available from insurance carried by Tenant
which cover loss of property that is Landlord's property or would become
Landlord's property on termination of this Lease shall be paid to and become the
property of Landlord, and the remainder of such proceeds shall be paid to and
become the property of Tenant. If this Lease is not terminated pursuant to
either Paragraph 10.3 or 10.4, all insurance proceeds available from insurance
carried by Tenant which cover loss to property that is Landlord's property shall
be paid to and become the property of Landlord, and all proceeds available from
such insurance which cover loss to property which would only become the property
of Landlord upon the termination of this Lease shall be paid to and remain the
property of Tenant. The determination of Landlord's property and Tenant's
property shall be made pursuant to Paragraph 6.2.

10.3 LANDLORD'S RIGHT TO TERMINATE. Landlord shall have the option to terminate
this Lease in the event any of the following occurs, which option may be
exercised only by delivery to Tenant of a written notice of election to
terminate within thirty days after the date of such damage or destruction:

        (a) The Building is damaged by any peril covered by valid and
collectible insurance actually carried by Landlord and in force at the time of
such damage or destruction (an "insured peril") to such an extent that the
estimated cost to restore the Building exceeds the lesser of (i) the insurance
proceeds available from insurance actually carried by Landlord, or (ii) fifty
percent of the then actual replacement cost thereof;

        (b) The Building is damaged by an uninsured peril, which peril Landlord
was not required to insure against pursuant to the provisions of Article 9 of
this Lease.

        (c) The Building is damaged by any peril and, because of the laws then
in force, the Building (i) cannot be restored at reasonable cost or (ii) if
restored, cannot be used for the same

<PAGE>   22

use being made thereof before such damage.

10.4 TENANT'S RIGHT TO TERMINATE. If the Leased Premises, the Building or the
Outside Area are damaged by any peril and Landlord does not elect to terminate
this Lease or is not entitled to terminate this Lease pursuant to this Article,
then as soon as reasonably practicable, Landlord shall furnish Tenant with the
written opinion of Landlord's architect or construction consultant as to when
the restoration work required of Landlord may be complete. Tenant shall have the
option to terminate this Lease in the event any of the following occurs, which
option may be exercised only by delivery to Landlord of a written notice of
election to terminate within ten (10) business days after Tenant receives from
Landlord the estimate of the time needed to complete such restoration:

        (a) If the time estimated to substantially complete the restoration
exceeds twelve months from and after the date the architect's or construction
consultant's written opinion is delivered; or

        (b) If the damage occurred within twelve months of the last day of the
Lease Term and the time estimated to substantially complete the restoration
exceeds one hundred eighty days from and after the date such restoration is
commenced.

        (c) If the time estimated for completion of the restoration is less than
two hundred seventy (270) days but Landlord fails to complete the restoration
within two hundred seventy (270) days after commencement of the restoration.

10.5 TENANT'S WAIVER. Landlord and Tenant agree that the provisions of
Paragraph 10.4 above, captioned "Tenant's Right To Terminate", are intended to
supersede and replace the provisions contained in California Civil Code, Section
1932, Subdivision 2, and California Civil Code, Section 1934, and accordingly,
Tenant hereby waives the provisions of such Civil Code Sections and the
provisions of any successor Civil Code Sections or similar laws hereinafter
enacted.

10.6 ABATEMENT OF RENT. In the event of damage to the Leased Premises which
does not result in the termination of this Lease, the Base Monthly Rent (and any
Additional Rent) shall be temporarily abated during the period of restoration in
proportion in the degree to which Tenant's use of the Leased Premises is
impaired by such damage.

                            ARTICLE 11  CONDEMNATION

11.1 TENANT'S RIGHT TO TERMINATE. Except as otherwise provided in Paragraph
11.4 below regarding temporary takings, Tenant shall have the option to
terminate this Lease if, as a result of any taking, (i) all of the Leased
Premises is taken, or (ii) twenty-five percent (25%) or more of the Leased
Premises is taken and the part of the Leased Premises that remains cannot,
within a reasonable period of time, be made reasonably suitable for the
continued operation of Tenant's business. Tenant must exercise such option
within a reasonable period of time, to be effective on the later to occur of (i)
the date that possession of that portion of the Leased Premises that is
condemned is taken by the condemnor or (ii) the date Tenant vacated the Leased
Premises.

11.2 LANDLORD'S RIGHT TO TERMINATE. Except as otherwise provided in Paragraph
11.4 below regarding temporary takings, Landlord shall have the option to
terminate this Lease if, as a result of any taking, (i) all of the Leased
Premises or the Building is taken, (ii) twenty-five percent (25%) or more of the
Building is taken and the part of the Leased Premises that remains cannot,
within a reasonable period of time, be made reasonably suitable for the
continued operation of Tenant's business, or (iii) because of the laws then in
force, the Leased Premises may not be used for the same use being made before
such taking, whether or not restored as required by Paragraph 11.3 below. Any
such option to terminate by Landlord must be exercised within a reasonable
period of time, to be effective as of the date possession is taken by the
condemnor.

11.3 RESTORATION. If any part of the Leased Premises or the Building is taken
and this Lease is not terminated, then Landlord shall, to the extent not
prohibited by laws then in force, repair any damage occasioned thereby to the
remainder thereof to a condition reasonably suitable for Tenant's continued
operations and otherwise, to the extent practicable, in the manner and to the
extent provided in Paragraph 10.1.

11.4 TEMPORARY TAKING. If a portion of the Leased Premises is temporarily taken
for a

<PAGE>   23

period of one year or less and such period does not extend beyond the Lease
Expiration Date, this Lease shall remain in effect. If any portion of the Leased
Premises is temporarily taken for a period which exceeds one year or which
extends beyond the Lease Expiration Date, then the rights of Landlord and Tenant
shall be determined in accordance with Paragraphs 11.1 and 11.2 above.

11.5 DIVISION OF CONDEMNATION AWARD. Any award made for any taking of the
Property, the Building, or the Leased Premises, or any portion thereof, shall
belong to and be paid to Landlord, and Tenant hereby assigns to Landlord all of
its right, title and interest in any such award; provided, however, that Tenant
shall be entitled to receive any portion of the award that is made specifically
(i) for the taking of personal property, inventory or trade fixtures belonging
to Tenant, (ii) for the interruption of Tenant's business or its moving costs,
or (iii) for the value of any leasehold improvements installed and paid for by
Tenant. The rights of Landlord and Tenant regarding any condemnation shall be
determined as provided in this Article, and each party hereby waives the
provisions of Section 1265.130 of the California Code of Civil Procedure, and
the provisions of any similar law hereinafter enacted, allowing either party to
petition the Supreme Court to terminate this Lease and/or otherwise allocate
condemnation awards between Landlord and Tenant in the event of a taking of the
Leased Premises.

11.6 ABATEMENT OF RENT. In the event of a taking of the Leased Premises which
does not result in a termination of this Lease (other than a temporary taking),
then, as of the date possession is taken by the condemning authority, the Base
Monthly Rent shall be reduced in the same proportion that the area of that part
of the Leased Premises so taken (less any addition to the area of the Leased
Premises by reason of any reconstruction) bears to the area of the Leased
Premises immediately prior to such taking.

11.7 TAKING DEFINED. The term "taking" or "taken" as used in this Article 11
shall mean any transfer or conveyance of all or any portion of the Property to a
public or quasi-public agency or other entity having the power of eminent domain
pursuant to or as a result of the exercise of such power by such an agency,
including any inverse condemnation and/or any sale or transfer by Landlord of
all or any portion of the Property to such an agency under threat of
condemnation or the exercise of such power.

                        ARTICLE 12  DEFAULT AND REMEDIES

12.1 EVENTS OF TENANT'S DEFAULT. Tenant shall be in default of its obligations
under this Lease if any of the following events occur:

        (a) Tenant shall have failed to pay Base Monthly Rent or any Additional
Rent when due; or

        (b) Tenant shall have done or permitted to be done any act, use or thing
in its use, occupancy or possession of the Leased Premises or the Building or
the Outside Areas which is prohibited by the terms of this Lease; or

        (c) Tenant shall have failed to perform any term, covenant or condition
of this Lease (except those requiring the payment of Base Monthly Rent or
Additional Rent, which failures shall be governed by subparagraph (a) above)
within thirty (30) days after receipt of written notice from Landlord to Tenant
specifying the nature of such failure and requesting Tenant to perform same; or

        (d) Tenant shall have sublet the Leased Premises or assigned or
encumbered its interest in this Lease in violation of the provisions contained
in Article 7, whether voluntarily or by operation of law; or

        (e) Tenant shall have abandoned the Leased Premises and failed to
maintain the Leased Premises in its condition as required when the Leased
Premises was occupied; or

        (f) Tenant or any Guarantor of this Lease shall have permitted or
suffered the sequestration or attachment of, or execution on, or the appointment
of a custodian or receiver with respect to, all or any substantial part of the
property or assets of Tenant (or such Guarantor) or any property or asset
essential to the conduct of Tenant's (or such Guarantor's) business, and Tenant
(or such Guarantor) shall have failed to obtain a return or release of the same
within sixty (60) days thereafter, or prior to sale pursuant to such
sequestration, attachment or levy, whichever is earlier; or

<PAGE>   24

        (g) Tenant or any Guarantor of this Lease shall have made a general
assignment of all or a substantial part of its assets for the benefit of its
creditors; or

        (h) Tenant or any Guarantor of this Lease shall have allowed (or sought)
to have entered against it a decree or order which: (i) grants or constitutes an
order for relief, appointment of a trustee, or condemnation or a reorganization
plan under the bankruptcy laws of the United States; (ii) approves as properly
filed a petition seeking liquidation or reorganization under said bankruptcy
laws or any other debtor's relief law or similar statute of the United States or
any state thereof; or (iii) otherwise directs the winding up or liquidation of
Tenant; provided, however, if any decree or order was entered without Tenant's
consent or over Tenant's objection, Landlord may not terminate this Lease
pursuant to this Subparagraph if such decree or order is rescinded or reversed
within sixty (60) days after its original entry; or

        (i) Tenant or any Guarantor of this Lease shall have availed itself of
the protection of any debtor's relief law, moratorium law or other similar law
which does not require the prior entry of a decree or order.

12.2 LANDLORD'S REMEDIES. In the event of any default by Tenant, and without
limiting Landlord's right to indemnification as provided in Article 8.2,
Landlord shall have the following remedies, in addition to all other rights and
remedies provided by law or otherwise provided in this Lease, to which Landlord
may resort cumulatively, or in the alternative:

        (a) Landlord may, at Landlord's election, keep this Lease in effect and
enforce, by an action at law or in equity, all of its rights and remedies under
this Lease including, without limitation, (i) the right to recover the rent and
other sums as they become due by appropriate legal action, (ii) the right to
make payments required by Tenant, or perform Tenant's obligations and be
reimbursed by Tenant for the cost thereof with interest at the then maximum rate
of interest not prohibited by law from the date the sum is paid by Landlord
until Landlord is reimbursed by Tenant, and (iii) the remedies of injunctive
relief and specific performance to prevent Tenant from violating the terms of
this Lease and/or to compel Tenant to perform its obligations under this Lease,
as the case may be.

        (b) Landlord may, at Landlord's election, terminate this Lease by giving
Tenant written notice of termination, in which event this Lease shall terminate
on the date set forth for termination in such notice, in which event Tenant
shall immediately surrender the Leased Premises to Landlord, and if Tenant fails
to do so, Landlord may, without prejudice to any other remedy which it may have
for possession or arrearages in rent, enter upon and take possession of the
Leased Premises and expel or remove Tenant and any other person who may be
occupying the Leased Premises or any part thereof, without being liable for
prosecution or any claim or damages therefor. Any termination under this
subparagraph shall not relieve Tenant from its obligation to pay to Landlord all
Base Monthly Rent and Additional Rent then or thereafter due, or any other sums
due or thereafter accruing to Landlord, or from any claim against Tenant for
damages previously accrued or then or thereafter accruing. In no event shall any
one or more of the following actions by Landlord, in the absence of a written
election by Landlord to terminate this Lease constitute a termination of this
Lease:

                (i) Appointment of a receiver or keeper in order to protect
Landlord's interest hereunder;

                (ii) Consent to any subletting of the Leased Premises or
assignment of this Lease by Tenant, whether pursuant to the provisions hereof or
otherwise; or

                (iii) Any action taken by Landlord or its partners, principals,
members, officers, agents, employees, or servants, which is intended to mitigate
the adverse effects of any breach of this Lease by Tenant, including, without
limitation, any action taken to maintain and preserve the Leased Premises on any
action taken to relet the Leased Premises or any portion thereof for the account
at Tenant and in the name of Tenant.

        (c) In the event Tenant breaches this Lease and abandons the Leased
Premises, Landlord may terminate this Lease, but this Lease shall not terminate
unless Landlord gives Tenant written notice of termination. If Landlord does not
terminate this Lease by giving written notice of termination, Landlord may
enforce all its rights and remedies under this Lease, including the right and
remedies provided by California Civil Code Section 1951.4 ("lessor may continue
lease in effect after lessee's breach and abandonment and recover rent as it
becomes

<PAGE>   25

due, if lessee has right to sublet or assign, subject only to reasonable
limitations"), as in effect on the Effective Date of this Lease.

        (d) In the event Landlord terminates this Lease, Landlord shall be
entitled, at Landlord's election, to the rights and remedies provided in
California Civil Code Section 1951.2, as in effect on the Effective Date of this
Lease. For purposes of computing damages pursuant to Section 1951.2, an interest
rate equal to the maximum rate of interest then not prohibited by law shall be
used where permitted. Such damages shall include, without limitation:

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

                (ii) The worth at the time of award of the amount by which the
unpaid rent for the balance of the term after the time of award exceeds the
amount of such rental loss that Tenant proves could be reasonably avoided,
computed by discounting such amount at the discount rate of the Federal Reserve
Bank of San Francisco, at the time of award plus one percent; and

                (iii) Any other amount necessary to compensate Landlord for all
detriment proximately caused by Tenant's failure to perform Tenant's obligations
under this Lease, or which in the ordinary course of things would be likely to
result therefrom, including without limitation, the following: (i) expenses for
cleaning, repairing or restoring the Leased Premises, (ii) expenses for
altering, remodeling or otherwise improving the Leased Premises for the purpose
of reletting, including removal of existing leasehold improvements and/or
installation of additional leasehold improvements (regardless of how the same is
funded, including reduction of rent, a direct payment or allowance to a new
tenant, or otherwise), (iii) broker's fees allocable to the remainder of the
term of this Lease, advertising costs and other expenses of reletting the Leased
Premises; (iv) costs of carrying and maintaining the Leased Premises, such as
taxes, insurance premiums, utility charges and security precautions, (v)
expenses incurred in removing, disposing of and/or storing any of Tenant's
personal property, inventory or trade fixtures remaining therein; (vi)
reasonable attorney's fees, expert witness fees, court costs and other
reasonable expenses incurred by Landlord (but not limited to taxable costs) in
retaking possession of the Leased Premises, establishing damages hereunder, and
releasing the Leased Premises; and (vii) any other expenses, costs or damages
otherwise incurred or suffered as a result of Tenant's default.

12.3 LANDLORD'S DEFAULT AND TENANT'S REMEDIES. In the event Landlord fails to
perform its obligations under this Lease, Landlord shall nevertheless not be in
default under the terms of this Lease until such time as Tenant shall have first
given Landlord written notice specifying the nature of such failure to perform
its obligations, and then only after Landlord shall have had thirty (30) days
following its receipt of such notice (except in the case of emergency, in which
case Landlord will have a reasonable period of time to perform in light of all
the circumstances) within which to perform such obligations; provided that, if
longer than thirty (30) days is reasonably required in order to perform such
obligations, Landlord shall have such longer period. In the event of Landlord's
default as above set forth, then, and only then, Tenant may then proceed in
equity or at law to compel Landlord to perform its obligations and/or to recover
damages proximately caused by such failure to perform (except as and to the
extent Tenant has waived its right to damages as provided in this Lease).

12.4 LIMITATION OF TENANT'S RECOURSE. If Landlord is a corporation, trust,
partnership, joint venture, limited liability company, unincorporated
association, or other form of business entity, Tenant agrees that (i) the
obligations of Landlord under this Lease shall not constitute personal
obligations of the officers, directors, trustees, partners, joint venturers,
members, owners, stockholders, or other principals of such business entity, and
(ii) Tenant shall have recourse only to the property of such corporation, trust,
partnership, joint venture, limited liability company, unincorporated
association, or other form of business entity for the satisfaction of such
obligations and not against the assets of such officers, directors, trustees,
partners, joint venturers, members, owners, stockholders or principals.
Additionally, if Landlord is a partnership or limited liability company, then
Tenant covenants and agrees:

        (a) No partner or member of Landlord shall be sued or named as a party
in any suit or action brought by Tenant with respect to any alleged breach of
this Lease (except to the extent necessary to secure jurisdiction over the
partnership and then only for that sole purpose);

<PAGE>   26

        (b) No service of process shall be made against any partner or member of
Landlord except for the sole purpose of securing jurisdiction over the
partnership; and

        (c) No writ of execution will ever be levied against the assets of any
partner or member of Landlord other than to the extent of his or her interest in
the assets of the partnership or limited liability company constituting
Landlord.

Tenant further agrees that each of the foregoing covenants and agreements shall
be enforceable by Landlord and by any partner or member of Landlord and shall be
applicable to any actual or alleged misrepresentation or nondisclosure made
regarding this Lease or the Leased Premises or any actual or alleged failure,
default or breach of any covenant or agreement either expressly or implicitly
contained in this Lease or imposed by statute or at common law.

12.5 TENANT'S WAIVER. Landlord and Tenant agree that the provisions of
Paragraph 12.3 above are intended to supersede and replace the provisions of
California Civil Code Sections 1932(1), 1941 and 1942, and accordingly, Tenant
hereby waives the provisions of California Civil Code Sections 1932(1), 1941 and
1942 and/or any similar or successor law regarding Tenant's right to terminate
this Lease or to make repairs and deduct the expenses of such repairs from the
rent due under this Lease.

                         ARTICLE 13  GENERAL PROVISIONS

13.1 TAXES ON TENANT'S PROPERTY. Tenant shall pay before delinquency any and
all taxes, assessments, license fees, use fees, permit fees and public charges
of whatever nature or description levied, assessed or imposed against Tenant or
Landlord by a governmental agency arising out of, caused by reason of or based
upon Tenant's estate in this Lease, Tenant's ownership of property, improvements
made by Tenant to the Leased Premises or the Outside Areas, improvements made by
Landlord for Tenant's use within the Leased Premises or the Outside Areas,
Tenant's use (or estimated use) of public facilities or services or Tenant's
consumption (or estimated consumption) of public utilities, energy, water or
other resources (collectively, "Tenant's Interest"). Upon demand by Landlord,
Tenant shall furnish Landlord with satisfactory evidence of these payments. If
any such taxes, assessments, fees or public charges are levied against Landlord,
Landlord's property, the Building or the Property, or if the assessed value of
the Building or the Property is increased by the inclusion therein of a value
placed upon Tenant's Interest, regardless of the validity thereof, Landlord
shall have the right to require Tenant to pay such taxes, and if not paid and
satisfactory evidence of payment delivered to Landlord at least ten days prior
to delinquency, then Landlord shall have the right to pay such taxes on Tenant's
behalf and to invoice Tenant for the same. Tenant shall, within the earlier to
occur of (a) thirty (30) days of the date it receives an invoice from Landlord
setting forth the amount of such taxes, assessments, fees, or public charge so
levied, or (b) the due date of such invoice, pay to Landlord, as Additional
Rent, the amount set forth in such invoice. Failure by Tenant to pay the amount
so invoiced within such time period shall be conclusively deemed a default by
Tenant under this Lease. Tenant shall have the right to bring suit in any court
of competent jurisdiction to recover from the taxing authority the amount of any
such taxes, assessments, fees or public charges so paid.

13.2 HOLDING OVER. This Lease shall terminate without further notice on the
Lease Expiration Date (as set forth in Article 1). Any holding over by Tenant
after expiration of the Lease Term shall neither constitute a renewal nor
extension of this Lease nor give Tenant any rights in or to the Leased Premises
except as expressly provided in this Paragraph. Any such holding over to which
Landlord has consented shall be construed to be a tenancy from month to month,
on the same terms and conditions herein specified insofar as applicable, except
that the Base Monthly Rent shall be increased to an amount equal to one hundred
fifty percent (150%) of the Base Monthly Rent payable during the last full month
immediately preceding such holding over. Tenant acknowledges that if Tenant
holds over without Landlord's consent, such holding over may compromise or
otherwise affect Landlord's ability to enter into new leases with prospective
tenants regarding the Leased Premises. Therefore, if Tenant fails to surrender
the Leased Premises upon the expiration or termination of this Lease, in
addition to any other liabilities to Landlord accruing therefrom, Tenant shall
protect, defend, indemnify and hold Landlord harmless from and against all
claims resulting from such failure, including, without limiting the foregoing,
any claims made by any succeeding tenant founded upon such failure to surrender,
and any losses suffered by Landlord, including lost profits, resulting from such
failure to surrender.

13.3 SUBORDINATION TO MORTGAGES. This Lease is subject to and subordinate to
all ground

<PAGE>   27

leases, mortgages and deeds of trust which affect the Building or the Property
and which are of public record as of the Effective Date of this Lease, and to
all renewals, modifications, consolidations, replacements and extensions
thereof. However, if the lessor under any such ground lease or any lender
holding any such mortgage or deed of trust shall advise Landlord that it desires
or requires this Lease to be made prior and superior thereto, then, upon written
request of Landlord to Tenant, Tenant shall, within ten (10) business days after
Landlord's request, execute, acknowledge and deliver any and all customary or
reasonable documents or instruments which Landlord and such lessor or lender
deems necessary or desirable to make this Lease prior thereto. Tenant hereby
consents to Landlord's ground leasing the land underlying the Building or the
Property and/or encumbering the Building or the Property as security for future
loans on such terms as Landlord shall desire, all of which future ground leases,
mortgages or deeds of trust shall be subject to and subordinate to this Lease.
However, if any lessor under any such future ground lease or any lender holding
such future mortgage or deed of trust shall desire or require that this Lease be
made subject to and subordinate to such future ground lease, mortgage or deed of
trust, then Tenant agrees, within ten days after Landlord's written request
therefor, to execute, acknowledge and deliver to Landlord any and all documents
or instruments reasonably requested by Landlord or by such lessor or lender as
may be necessary or proper to assure the subordination of this Lease to such
future ground lease, mortgage or deed of trust, but only if such lessor or
lender agrees to recognize Tenant's rights under this Lease and agrees not to
disturb Tenant's quiet possession of the Leased Premises so long as Tenant is
not in default under this Lease. Landlord will use its best efforts to provide
Tenant with non-disturbance agreements reasonably acceptable to Tenant from any
ground lessors, mortgage holders or lien holders of Landlord. If Landlord
assigns the Lease as security for a loan, Tenant agrees to execute such
documents as are reasonably requested by the lender and to provide reasonable
provisions in the Lease protecting such lender's security interest which are
customarily required by institutional lenders making loans secured by a deed of
trust.

13.4 TENANT'S ATTORNMENT UPON FORECLOSURE. Tenant shall, upon request, attorn
(i) to any purchaser of the Building or the Property at any foreclosure sale or
private sale conducted pursuant to any security instruments encumbering the
Building or the Property, (ii) to any grantee or transferee designated in any
deed given in lieu of foreclosure of any security interest encumbering the
Building or the Property, or (iii) to the lessor under an underlying ground
lease of the land underlying the Building or the Property, should such ground
lease be terminated; provided that such purchaser, grantee or lessor recognizes
Tenant's rights under this Lease.

13.5 MORTGAGEE PROTECTION. In the event of any default on the part of Landlord,
Tenant will give notice by registered mail to any Lender or lessor under any
underlying ground lease who shall have requested, in writing, to Tenant that it
be provided with such notice, and Tenant shall offer such Lender or lessor a
reasonable opportunity to cure the default, including time to obtain possession
of the Leased Premises by power of sale or judicial foreclosure or other
appropriate legal proceedings if reasonably necessary to effect a cure.

13.6 ESTOPPEL CERTIFICATE. Tenant will, following any request by Landlord,
promptly execute and deliver to Landlord an estoppel certificate substantially
in form attached as Exhibit C, (i) certifying that this Lease is unmodified and
in full force and effect, or, if modified, stating the nature of such
modification and certifying that this Lease, as so modified, is in full force
and effect, (ii) stating the date to which the rent and other charges are paid
in advance, if any, (iii) acknowledging that there are not, to Tenant's
knowledge, any uncured defaults on the part of Landlord hereunder, or specifying
such defaults if any are claimed, and (iv) certifying such other information
about this Lease as may be reasonably requested by Landlord, its Lender or
prospective lenders, investors or purchasers of the Building or the Property.
Tenant's failure to execute and deliver such estoppel certificate within ten
(10) business days after Landlord's request therefor shall be a material default
by Tenant under this Lease without any notice that might otherwise be required
pursuant to Section 12.1, and Landlord shall have all of the rights and remedies
available to Landlord as Landlord would otherwise have in the case of any other
material default by Tenant, including the right to terminate this Lease and sue
for damages proximately caused thereby, it being agreed and understood by Tenant
that Tenant's failure to so deliver such estoppel certificate in a timely manner
could result in Landlord being unable to perform committed obligations to other
third parties which were made by Landlord in reliance upon this covenant of
Tenant; notwithstanding anything to the contrary in Section 12.1, such a default
is deemed non-curable, and Landlord has no obligation to permit Tenant to cure
such default. Landlord and Tenant intend that any statement delivered pursuant
to this paragraph may be relied upon by any Lender or purchaser or prospective
Lender or purchaser of the Building,

<PAGE>   28

the Property, or any interest in them.

13.7 TENANT'S FINANCIAL INFORMATION. Tenant shall, within ten business days
after Landlord's request therefor, deliver to Landlord a copy of Tenant's (and
any guarantor's) current financial statements (including a balance sheet, income
statement and statement of cash flow, all prepared in accordance with generally
accepted accounting principles) and any such other information reasonably
requested by Landlord regarding Tenant's financial condition. Landlord shall be
entitled to disclose such financial statements or other information to its
Lender, to any present or prospective principal of or investor in Landlord, or
to any prospective Lender or purchaser of the Building, the Property, or any
portion thereof or interest therein. Any such financial statement or other
information which is marked "confidential" or "company secrets" (or is otherwise
similarly marked by Tenant) shall be confidential and shall not be disclosed by
Landlord to any third party except as specifically provided in this paragraph,
unless the same becomes a part of the public domain without the fault of
Landlord.

13.8 TRANSFER BY LANDLORD. Landlord and its successors in interest shall have
the right to transfer their interest in the Building, the Property, or any
portion thereof at any time and to any person or entity. In the event of any
such transfer, the Landlord originally named herein (and in the case of any
subsequent transfer, the transferor), from the date of such transfer, (i) shall
be automatically relieved, without any further act by any person or entity, of
all liability for the performance of the obligations of the Landlord hereunder
which may accrue after the date of such transfer and (ii) shall be relieved of
all liability for the performance of the obligations of the Landlord hereunder
which have accrued before the date of transfer if its transferee agrees to
assume and perform all such prior obligations of the Landlord hereunder. Tenant
shall attorn to any such transferee. After the date of any such transfer, the
term "Landlord" as used herein shall mean the transferee of such interest in the
Building or the Property.

13.9 FORCE MAJEURE. The obligations of each of the parties under this Lease
(other than the obligations to pay money) shall be temporarily excused if such
party is prevented or delayed in performing such obligations by reason of any
strikes, lockouts or labor disputes; government restrictions, regulations,
controls, action or inaction; civil commotion; or extraordinary weather, fire or
other acts of God.

13.10 NOTICES. Any notice required or permitted to be given under this Lease
shall be in writing and (i) personally delivered, (ii) sent by United States
mail, registered or certified mail, postage prepaid, return receipt requested,
(iii) sent by Federal Express or similar nationally recognized overnight courier
service, or (iv) transmitted by facsimile with a hard copy sent within one (1)
business day by any of the foregoing means, and in all cases addressed as
follows, and such notice shall be deemed to have been given upon the date of
actual receipt or delivery (or refusal to accept delivery) at the address
specified below (or such other addresses as may be specified by notice in the
foregoing manner) as indicated on the return receipt or air bill:

        IF TO LANDLORD:      MELP VII, L.P.
                             c/o Menlo Equities LLC
                             525 University Avenue
                             Suite 100
                             Palo Alto, California  94301
                             Attention: Henry Bullock/Richard Holmstrom
                             Facsimile:  (650) 326-9300

        with a copy to:      Folger Levin & Kahn LLP
                             275 Battery Street, 23rd Floor
                             San Francisco, CA  94111
                             Attention:  Adam Sachs
                             Facsimile:  (415) 986-2827

        IF TO TENANT:        Aviron
                             4575 Patrick Henry Drive
                             Santa Clara, CA  95054
                             Attention: Chief Financial Officer

<PAGE>   29

Any notice given in accordance with the foregoing shall be deemed received upon
actual receipt or refusal to accept delivery.

13.11 ATTORNEYS' FEES. In the event any party shall bring any action,
arbitration proceeding or legal proceeding alleging a breach of any provision of
this Lease, to recover rent, to terminate this Lease, or to enforce, protect,
determine or establish any term or covenant of this Lease or rights or duties
hereunder of either party, the prevailing party shall be entitled to recover
from the non-prevailing party as a part of such action or proceeding, or in a
separate action for that purpose brought within one year from the determination
of such proceeding, reasonable attorneys' fees, expert witness fees, court costs
and other reasonable expenses incurred by the prevailing party.

13.12 DEFINITIONS. Any term that is given a special meaning by any provision in
this Lease shall, unless otherwise specifically stated, have such meaning
wherever used in this Lease or in any Addenda or amendment hereto. In addition
to the terms defined in Article 1, the following terms shall have the following
meanings:

        (a) REAL PROPERTY TAXES. The term "Real Property Tax" or "Real Property
Taxes" shall each mean Tenant's Expense Share of (i) all taxes, assessments,
levies and other charges of any kind or nature whatsoever, general and special,
foreseen and unforeseen (including all instruments of principal and interest
required to pay any general or special assessments for public improvements and
any increases resulting from reassessments caused by any change in ownership or
new construction), now or hereafter imposed by any governmental or
quasi-governmental authority or special district having the direct or indirect
power to tax or levy assessments, which are levied or assessed for whatever
reason against the Property or any portion thereof, or Landlord's interest
herein, or the fixtures, equipment and other property of Landlord that is an
integral part of the Property and located thereon, or Landlord's business of
owning, leasing or managing the Property or the gross receipts, income or
rentals from the Property, (ii) all charges, levies or fees imposed by any
governmental authority against Landlord by reason of or based upon the use of or
number of parking spaces within the Property, the amount of public services or
public utilities used or consumed (e.g. water, gas, electricity, sewage or waste
water disposal) at the Property, the number of person employed by tenants of the
Property, the size (whether measured in area, volume, number of tenants or
whatever) or the value of the Property, or the type of use or uses conducted
within the Property, and all costs and fees (including attorneys' fees)
reasonably incurred by Landlord in contesting any Real Property Tax and in
negotiating with public authorities as to any Real Property Tax. If, at any time
during the Lease Term, the taxation or assessment of the Property prevailing as
of the Effective Date of this Lease shall be altered so that in lieu of or in
addition to any the Real Property Tax described above there shall be levied,
awarded or imposed (whether by reason of a change in the method of taxation or
assessment, creation of a new tax or charge, or any other cause) an alternate,
substitute, or additional use or charge (i) on the value, size, use or occupancy
of the Property or Landlord's interest therein or (ii) on or measured by the
gross receipts, income or rentals from the Property, or on Landlord's business
of owning, leasing or managing the Property or (iii) computed in any manner with
respect to the operation of the Property, then any such tax or charge, however
designated, shall be included within the meaning of the terms "Real Property
Tax" or "Real Property Taxes" for purposes of this Lease. If any Real Property
Tax is partly based upon property or rents unrelated to the Property, then only
that part of such Real Property Tax that is fairly allocable to the Property
shall be included within the meaning of the terms "Real Property Tax" or "Real
Property Taxes." Notwithstanding the foregoing, the terms "Real Property Tax" or
"Real Property Taxes" shall not include estate, inheritance, transfer, gift or
franchise taxes of Landlord or the federal or state income tax imposed on
Landlord's income from all sources. Tenant also shall not be required to pay any
portion of any tax or assessment expense (i) levied on Landlord's rental income,
unless such tax or assessment expense is imposed in lieu of real property taxes;
or (ii) imposed on land and improvements other than the Property (including the
Building and the Leased Premises).

        (b) LANDLORD'S INSURANCE COSTS. The term "Landlord's Insurance Costs"
shall mean Tenant's Expense Share of the costs to Landlord to carry and maintain
the policies of fire and property damage insurance for the Building and the
Property and general liability and any other insurance required or permitted to
be carried by Landlord pursuant to Article 9, together with any deductible
amounts paid by Landlord upon the occurrence of any insured casualty or loss.

<PAGE>   30

        (c) PROPERTY MAINTENANCE COSTS. The term "Property Maintenance Costs"
shall mean Tenant's Expense Share of all costs and expenses (except Landlord's
Insurance Costs and Real Property Taxes) paid or incurred by Landlord in
protecting, operating, maintaining, repairing and preserving the Property and
all parts thereof, including without limitation, (i) market rate professional
management fees, (ii) any costs incurred by Landlord in the making of any
modifications, alterations or improvements required by any governmental
authority as set forth in Article 6, which are so amortized during the Lease
Term, and (iii) such other costs as may be paid or incurred with respect to
operating, maintaining, and preserving the Property, such as repairing and
resurfacing the exterior surfaces of the Building (including roofs), repairing
and resurfacing paved areas, repairing and replacing structural parts of the
Building, and repairing and replacing, when necessary, electrical, plumbing,
heating, ventilating and air conditioning systems serving the Building; with
respect to any items that are capital in nature, the cost of such items will be
amortized over the useful life of such items. Notwithstanding anything in this
paragraph to the contrary, Tenant will not be responsible for capital costs
associated with the foundation , structural exterior walls or structural roof
elements of the Building (excepting capital costs associated with the
non-structural roof elements, heating, ventilation, air conditioning, the
parking lot and landscaping) unless the cost was incurred as a result of
Tenant's activities or alterations. Notwithstanding anything to the contrary
contained in this Lease, in no event shall Tenant have any obligation to
perform, to pay directly, or to reimburse Landlord for, all or any portion of
the following repairs, maintenance, improvements, replacements, premiums,
claims, losses, fees, commissions, charges, disbursements, attorneys' fees,
experts' fees, costs and expenses (collectively, "Costs"): (i) Costs occasioned
by the act, omission or violation of law by Landlord, any other occupant of the
Building, or their respective agents, employees or contractors, or Costs to
correct any construction defect in the Leased Premises or the Building; (ii)
Costs occasioned by fire, acts of God or other casualties (but only to the
extent that Landlord receives insurance proceeds to cover such losses provided
that, to the extent that Landlord seeks to recover the deductible portion of an
insured loss as a portion of Property Maintenance Costs, Landlord may only
recover an amortized portion of such amount, as amortized at 12% over the useful
life of the restored, replaced or rebuilt item) or by the exercise of the power
of eminent domain; (iii) Costs which would properly be capitalized under
generally accepted accounting principles and which relate to repairs,
alterations, improvements, replacements, equipment and tools except to the
extent that Tenant's share of such Costs is amortized at 12% over the useful
life of the capital improvement in question in accordance with generally
accepted accounting principles; (iv) Costs which Tenant pays directly to a third
person; (v) Costs (A) arising from the mutually disproportionate use of any
utility or service supplied by Landlord to any other occupant of the Building;
or (B) associated with utilities and services of a type not provided to Tenant;
(vi) Costs incurred in connection with negotiations or disputes with other
occupant(s) of the Building or their agents, employees, contractors or invitees,
and Costs arising from the violation by Landlord or any occupant of the Building
(other than Tenant) of the terms and conditions of any lease or other agreement;
(vii) depreciation, amortization or other expense reserves (except as otherwise
permitted under this Lease), or (viii) Costs related to Hazardous Materials,
except to the extent the Cost is caused by the storage, use or disposal of the
Hazardous Material in question by Tenant, its agents, contractors or invitees.

        (d) PROPERTY OPERATING EXPENSES. The term "Property Operating Expenses"
shall mean and include all Real Property Taxes, plus all Landlord's Insurance
Costs, plus all Property Maintenance Costs.

        (e) LAW. The term "Law" shall mean any judicial decisions and any
statute, constitution, ordinance, resolution, regulation, rule, administrative
order, or other requirements of any municipal, county, state, federal, or other
governmental agency or authority having jurisdiction over the parties to this
Lease, the Leased Premises, the Building or the Property, or any of them, in
effect either at the Effective Date of this Lease or at any time during the
Lease Term, including, without limitation, any regulation, order, or policy of
any quasi-official entity or body (e.g. a board of fire examiners or a public
utility or special district).

        (f) LENDER. The term "Lender" shall mean the holder of any promissory
note or other evidence of indebtedness secured by the Property or any portion
thereof.

        (g) PRIVATE RESTRICTIONS. The term "Private Restrictions" shall mean
(as they may exist from time to time) any and all covenants, conditions and
restrictions, private agreements, easements, and any other recorded documents or
instruments affecting the use of the Property, the Building, the Leased
Premises, or the Outside Areas.

<PAGE>   31

        (h) RENT. The term "Rent" shall mean collectively Base Monthly Rent and
all Additional Rent.

13.13 GENERAL WAIVERS. One party's consent to or approval of any act by the
other party requiring the first party's consent or approval shall not be deemed
to waive or render unnecessary the first party's consent to or approval of any
subsequent similar act by the other party. No waiver of any provision hereof, or
any waiver of any breach of any provision hereof, shall be effective unless in
writing and signed by the waiving party. The receipt by Landlord of any rent or
payment with or without knowledge of the breach of any other provision hereof
shall not be deemed a waiver of any such breach. No waiver of any provision of
this Lease shall be deemed a continuing waiver unless such waiver specifically
states so in writing and is signed by both Landlord and Tenant. No delay or
omission in the exercise of any right or remedy accruing to either party upon
any breach by the other party under this Lease shall impair such right or remedy
or be construed as a waiver of any such breach theretofore or thereafter
occurring. The waiver by either party of any breach of any provision of this
Lease shall not be deemed to be a waiver of any subsequent breach of the same or
any other provisions herein contained.

13.14 MISCELLANEOUS. Should any provisions of this Lease prove to be invalid or
illegal, such invalidity or illegality shall in no way affect, impair or
invalidate any other provisions hereof, and such remaining provisions shall
remain in full force and effect. Time is of the essence with respect to the
performance of every provision of this Lease in which time of performance is a
factor. Any copy of this Lease which is executed by the parties shall be deemed
an original for all purposes. This Lease shall, subject to the provisions
regarding assignment, apply to and bind the respective heirs, successors,
executors, administrators and assigns of Landlord and Tenant. The term "party"
shall mean Landlord or Tenant as the context implies. If Tenant consists of more
than one person or entity, then all members of Tenant shall be jointly and
severally liable hereunder. This Lease shall be construed and enforced in
accordance with the Laws of the State in which the Leased Premises are located.
The captions in this Lease are for convenience only and shall not be construed
in the construction or interpretation of any provision hereof. When the context
of this Lease requires, the neuter gender includes the masculine, the feminine,
a partnership, corporation, limited liability company, joint venture, or other
form of business entity, and the singular includes the plural. The terms "must,"
"shall," "will," and "agree" are mandatory. The term "may" is permissive. When a
party is required to do something by this Lease, it shall do so at its sole cost
and expense without right of reimbursement from the other party unless specific
provision is made therefor. Where Landlord's consent is required hereunder, the
consent of any Lender shall also be required. Landlord and Tenant shall both be
deemed to have drafted this Lease, and the rule of construction that a document
is to be construed against the drafting party shall not be employed in the
construction or interpretation of this Lease. Where Tenant is obligated not to
perform any act or is not permitted to perform any act, Tenant is also obligated
to restrain any others reasonably within its control, including agents,
invitees, contractors, subcontractors and employees, from performing such act.
Landlord shall not become or be deemed a partner or a joint venturer with Tenant
by reason of any of the provisions of this Lease.

13.15 QUIET ENJOYMENT. Landlord covenants to Tenant that on Tenant's paying
rental and performing the covenants required to be performed under this Lease by
Tenant, Tenant shall and may quietly enjoy the Leased Premises without
interference by Landlord or any person claiming by through or under Landlord.

           ARTICLE 14  CORPORATE AUTHORITY BROKERS AND ENTIRE AGREEMENT

14.1 CORPORATE AUTHORITY. If Tenant is a corporation, each individual executing
this Lease on behalf of such corporation represents and warrants that Tenant is
validly formed and duly authorized and existing, that Tenant is qualified to do
business in the State in which the Leased Premises are located, that Tenant has
the full right and legal authority to enter into this Lease, and that he or she
is duly authorized to execute and deliver this Lease on behalf of Tenant in
accordance with its terms. Tenant shall, within thirty days after receipt of
Landlords' request, deliver to Landlord a certified copy of the resolution of
its board of directors authorizing or ratifying the execution of this Lease and
if Tenant fails to do so, Landlord at its sole election may elect to terminate
this Lease.

14.2 BROKERAGE COMMISSIONS. Tenant represents, warrants and agrees that it has
not had any dealings with any real estate broker(s), leasing agent(s), finder(s)
or salesmen, other than the Brokers (as named in Article 1) with respect to the
lease of the Leased Premises pursuant to this Lease. Landlord and Tenant will
indemnify, defend with competent counsel, and hold the other

<PAGE>   32

harmless from any liability for the payment of any real estate brokerage
commissions, leasing commissions or finder's fees claimed by any other real
estate broker(s), leasing agent(s), finder(s), or salesmen to be earned or due
and payable by reason of the indemnifying party's agreement or promise (implied
or otherwise) to pay (or to have the other pay) such a commission or finder's
fee by reason of its leasing the Leased Premises pursuant to this Lease.

14.3 ENTIRE AGREEMENT. This Lease and the Exhibits (as described in Article 1),
which Exhibits are by this reference incorporated herein, constitute the entire
agreement between the parties, and there are no other agreements, understandings
or representations between the parties relating to the lease by Landlord of the
Leased Premises to Tenant, except as expressed herein. No subsequent changes,
modifications or additions to this Lease shall be binding upon the parties
unless in writing and signed by both Landlord and Tenant.

14.4 LANDLORD'S REPRESENTATIONS. Tenant acknowledges that neither Landlord nor
any of its agents made any representations or warranties respecting the
Property, the Building or the Leased Premises, upon which Tenant relied in
entering into the Lease, which are not expressly set forth in this Lease. Tenant
further acknowledges that neither Landlord nor any of its agents made any
representations as to (i) whether the Leased Premises may be used for Tenant's
intended use under existing Law, or (ii) the suitability of the Leased Premises
for the conduct of Tenant's business, or (iii) the exact square footage of the
Leased Premises, and that Tenant relies solely upon its own investigations with
respect to such matters. Tenant expressly waives any and all claims for damage
by reason of any statement, representation, warranty, promise or other agreement
of Landlord or Landlord's agent(s), if any, not contained in this Lease or in
any Exhibit attached hereto.

                          ARTICLE 15  OPTION TO EXTEND

15.1 OPTION. So long as Aviron or a permitted assignee (but not subtenant)
pursuant to Article 7 is the Tenant hereunder and occupies the entirety of the
Leased Premises, and subject to the condition set forth in clause (b) below,
Tenant shall have one option to extend the term of this Lease with respect to
the entirety of the Leased Premises, for a period of five (5) years from the
expiration of the Lease Term (the "Extension Period"), subject to the following
conditions:

        (a) The option to extend shall be exercised, if at all, by notice of
exercise given to Landlord by Tenant not more than twelve months nor less than
nine months prior to the expiration of the Lease Term;

        (b) Anything herein to the contrary notwithstanding, if Tenant is in
default, beyond the applicable cure period, under any of the terms, covenants or
conditions of this Lease, either at the time Tenant exercises the extension
option or on the commencement date of the Extension Period, Landlord shall have,
in addition to all of Landlord's other rights and remedies provided in this
Lease, the right to terminate such option to extend upon notice to Tenant.

15.2 TERMS. In the event the option is exercised in a timely fashion, the Lease
shall be extended for the term of the Extension Period upon all of the terms and
conditions of this Lease, provided that the Base Monthly Rent for the Extension
Period shall be the "Fair Market Rent" for the Leased Premises, increased as set
forth below. For purposes hereof, "Fair Market Rent" shall mean the Base Monthly
Rent determined pursuant to the process described below. In no event, however,
shall any adjustment of Base Monthly Rent pursuant to this paragraph result in a
decrease of the Base Monthly Rent for the Leased Premises below the amount due
from Tenant for the preceding portion of the initial Lease Term for which Base
Monthly Rent had been fixed.

15.3 NOTIFICATION. Within thirty (30) days after receipt of Tenant's notice of
exercise, Landlord shall notify Tenant in writing of Landlord's estimate of the
Base Monthly Rent (with applicable rental increase provisions) for the Extension
Period, based on the provisions of Paragraph 15.2 above. Within thirty (30) days
after receipt of such notice from Landlord, Tenant shall have the right either
to (i) accept Landlord's statement of Base Monthly Rent as the Base Monthly Rent
for the applicable extension period; or (ii) elect to arbitrate Landlord's
estimate of Fair Market Rent, such arbitration to be conducted pursuant to the
provisions hereof. Failure on the part of Tenant to require arbitration of Fair
Market Rent within such 30-day period shall constitute acceptance of the Base
Monthly Rent (with applicable rental increase provisions) for the Extension
Period as calculated by Landlord. If Tenant elects arbitration, the arbitration
shall be concluded within 90 days after the date of Tenant's election, subject
to extension for an additional 30-day period if a third arbitrator is required
and does not act in a timely manner. To the extent that arbitration has not been
completed prior to the expiration of any preceding period

<PAGE>   33

for which Base Monthly Rent has been determined, Tenant shall pay Base Monthly
Rent (with applicable rental increase provisions) at the rate calculated by
Landlord, with the potential for an adjustment to be made once Fair Market Rent
is ultimately determined by arbitration.

15.4 ARBITRATION. In the event of arbitration, the judgment or the award
rendered in any such arbitration may be entered in any court having jurisdiction
and shall be final and binding between the parties. The arbitration shall be
conducted and determined in the City and County of Santa Clara in accordance
with the then prevailing rules of the American Arbitration Association or its
successor for arbitration of commercial disputes except to the extent that the
procedures mandated by such rules shall be modified as follows:

        (a) Tenant shall make demand for arbitration in writing within thirty
(30) days after service of Landlord's determination of Fair Market Rent given
under Paragraph 15.3 above, specifying therein the name and address of the
person to act as the arbitrator on its behalf. The arbitrator shall be qualified
as a real estate appraiser familiar with the fair market rent of similar
industrial, research and development, or office space in the Silicon Valley area
who would qualify as an expert witness over objection to give opinion testimony
addressed to the issue in a court of competent jurisdiction. Failure on the part
of Tenant to make a proper demand in a timely manner for such arbitration shall
constitute a waiver of the right thereto. Within fifteen (15) days after the
service of the demand for arbitration, Landlord shall give notice to Tenant,
specifying the name and address of the person designated by Landlord to act as
arbitrator on its behalf who shall be similarly qualified. If Landlord fails to
notify Tenant of the appointment of its arbitrator, within or by the time above
specified, then the arbitrator appointed by Tenant shall be the arbitrator to
determine the issue.

        (b) In the event that two arbitrators are chosen pursuant to Paragraph
15.4(a) above, the arbitrators so chosen shall, within fifteen (15) days after
the second arbitrator is appointed determine the Fair Market Rent (with
applicable rental increase provisions; such Fair Market Rent will be based on
the fair market value for facilities comparable to the Leased Premises in
comparable locations within what is commonly referred to as the "Marriott
Business Park" in Santa Clara, California. If the two arbitrators shall be
unable to agree upon a determination of Fair Market Rent within such 15-day
period, they, themselves, shall appoint a third arbitrator, who shall be a
competent and impartial person with qualifications similar to those required of
the first two arbitrators pursuant to Paragraph 15.4(a). In the event they are
unable to agree upon such appointment within seven days after expiration of such
15-day period, the third arbitrator shall be selected by the parties themselves,
if they can agree thereon, within a further period of fifteen (15) days. If the
parties do not so agree, then either party, on behalf of both, may request
appointment of such a qualified person by the then Chief Judge of the United
States District Court having jurisdiction over the County of Santa Clara, acting
in his private and not in his official capacity, and the other party shall not
raise any question as to such Judge's full power and jurisdiction to entertain
the application for and make the appointment. The three arbitrators shall decide
the dispute if it has not previously been resolved by following the procedure
set forth below.

        (c) Where an issue cannot be resolved by agreement between the two
arbitrators selected by Landlord and Tenant or settlement between the parties
during the course of arbitration, the issue shall be resolved by the three
arbitrators within 15 days of the appointment of the third arbitrator in
accordance with the following procedure. The arbitrator selected by each of the
parties shall state in writing his determination of the Fair Market Rent
supported by the reasons therefor with counterpart copies to each party. The
arbitrators shall arrange for a simultaneous exchange of such proposed
resolutions. The role of the third arbitrator shall be to select which of the
two proposed resolutions most closely approximates his determination of Fair
Market Rent. The third arbitrator shall have no right to propose a middle ground
or any modification of either of the two proposed resolutions. The resolution he
chooses as most closely approximating his determination shall constitute the
decision of the arbitrators and be final and binding upon the parties.

        (d) In the event of a failure, refusal or inability of any arbitrator to
act, his successor shall be appointed by him, but in the case of the third
arbitrator, his successor shall be appointed in the same manner as provided for
appointment of the third arbitrator. The arbitrators shall decide the issue
within fifteen (15) days after the appointment of the third arbitrator. Any
decision in which the arbitrator appointed by Landlord and the arbitrator
appointed by Tenant concur shall be binding and conclusive upon the parties.
Each party shall pay the fee and expenses of its respective arbitrator and both
shall share the fees and expenses of the third

<PAGE>   34

arbitrator, if any, and the attorneys' fees and expenses of counsel for the
respective parties and of witnesses shall be paid by the respective party
engaging such counsel or calling such witnesses.

        (e) The arbitrators shall have the right to consult experts and
competent authorities to obtain factual information or evidence pertaining to a
determination of Fair Market Rent, but any such consultation shall be made in
the presence of both parties with full right on their part to cross-examine. The
arbitrators shall render their decision and award in writing with counterpart
copies to each party. The arbitrators shall have no power to modify the
provisions of this Lease.

                          ARTICLE 16  FIRST OFFER RIGHT

16.1 FIRST OFFER RIGHT. Landlord agrees to give Tenant a First Offer Right on
the adjacent space in the Building of approximately 32,500 square feet in the
Building, which is currently leased by DRS Precision Echo, Inc. and which is
designated on Exhibit A hereto (the "Offered Space").

        If Landlord intends during the term of this Lease to lease all or any
portion of the Offered Space, and if Tenant is not then in default (beyond the
applicable cure period, but in no event more than thirty (30) days) under this
Lease, Landlord shall give written notice of such intention to Tenant,
specifying the material terms on which Landlord is willing to lease the Option
Space to Tenant, and shall offer to Tenant the opportunity to lease the Offered
Space on the terms specified in Landlord's notice. Tenant shall have five (5)
days after the date of giving of such notice by Landlord in which to accept such
offer by written notice to Landlord. Upon such acceptance by Tenant, the Offered
Space shall be leased to Tenant on the terms set forth in Landlord's notice and
on the additional terms and provisions set forth herein (except to the extent
inconsistent with the terms set forth in Landlord's notice) and the parties
shall promptly execute an amendment to this Lease adding the Offered Space to
the Leased Premises and making any appropriate amendments to provisions of this
Lease to reflect different rent and other obligations applicable to the Offered
Space under the terms of the Landlord's notice. If Tenant does not accept
Landlord's offer within the allotted time, Landlord shall thereafter have the
right to lease the Offered Space to a third party, at any time after Tenant's
failure to accept Landlord's offer, at a minimum rental and on other terms and
conditions determined by Landlord (which may be more or less favorable to the
tenant than the minimum rental and other terms offered to Tenant in Landlord's
notice).

        Tenant's First Refusal Rights shall be subordinate to any rights of DRS
Precision Echo, Inc. with respect to the Offered Space.

                          ARTICLE 17  TELEPHONE SERVICE

        Notwithstanding any other provision of this Lease to the contrary:

                (a) So long as the entirety of the Leased Premises is leased to
Tenant:

                        (i) Landlord shall have no responsibility for providing
to Tenant any telephone equipment, including wiring, within the Leased Premises
or for providing telephone service or connections from the utility to the Leased
Premises; and

                        (ii) Landlord makes no warranty as to the quality,
continuity or availability of the telecommunications services in the Building,
and Tenant hereby waives any claim against Landlord for any actual or
consequential damages (including damages for loss of business) in the event
Tenant's telecommunications services in any way are interrupted, damaged or
rendered less effective, except to the extent caused by the sole active
negligent or willful act or omission by Landlord, its agents, contractors or
employees. Tenant accepts the telephone equipment (including, without
limitation, the INC, as defined below) in its "AS-IS" condition, and Tenant
shall be solely responsible for contracting with a reliable third party vendor
to assume responsibility for the maintenance and repair thereof (which contract
shall contain provisions requiring such vendor to inspect the INC periodically
(the frequency of such inspections to be determined by such vendor based on its
experience and professional judgment), and requiring such vendor to meet local
and federal requirements for telecommunications material and workmanship).
Landlord shall not be liable to Tenant and Tenant waives all claims against
Landlord whatsoever, whether for personal injury, property damage, loss of use
of the Leased Premises, or otherwise, due to the interruption or failure of
telephone services to the Leased Premises except to the extent caused by the
sole active negligence or willful misconduct of Landlord, its agents, employees
or contractors. Tenant hereby holds Landlord harmless and

<PAGE>   35

agrees to indemnify, protect and defend Landlord from and against any liability
for any damage, loss or expense due to any failure or interruption of telephone
service to the Leased Premises for any reason except to the extent caused by the
sole active negligence or willful misconduct of Landlord, its agents, employees
or contractors. Tenant agrees to obtain loss of rental insurance adequate to
cover any damage, loss or expense occasioned by the interruption of telephone
service.

                (b) At such time as the entirety of the Leased Premise is no
longer leased to Tenant, Landlord shall in its sole discretion have the right,
by written notice to Tenant, to elect to assume limited responsibility for INC,
as provided below, and upon such assumption of responsibility by Landlord, this
subparagraph (b) shall apply prospectively.

                        (i) Landlord shall provide Tenant access to such
quantity of pairs in the Building intra-building network cable ("INC") as is
determined to be available by Landlord in its reasonable discretion. Tenant's
access to the INC shall be solely by arrangements made by Tenant, as Tenant may
elect, directly with Pacific Bell or Landlord (or such vendor as Landlord may
designate), and Tenant shall pay all reasonable charges as may be imposed in
connection therewith. Pacific Bell's charges shall be deemed to be reasonable.
Subject to the foregoing, Landlord shall have no responsibility for providing to
Tenant any telephone equipment, including wiring, within the Leased Premises or
for providing telephone service or connections from the utility to the Leased
Premises, except as required by law.

                        (ii) Tenant shall not alter, modify, add to or disturb
any telephone wiring in the Leased Premises or elsewhere in the Building without
the Landlord's prior written consent, which shall not be unreasonably withheld.
Tenant shall be liable to Landlord for any damage to the telephone wiring in the
Building due to the act, negligent or otherwise, of Tenant or any employee,
contractor or other agent of Tenant. Tenant shall have no access to the
telephone closets within the Building except for the telephone closet located
within the Leased Premises, except in the manner and under procedures
established by Landlord. Tenant shall promptly notify Landlord of any actual or
suspected failure of telephone service to the Leased Premises.

                        (iii) All costs incurred by Landlord for the
installation, maintenance, repair and replacement of telephone wiring in the
Building shall be a Property Maintenance Cost.

                        (iv) Landlord makes no warranty as to the quality,
continuity or availability of the telecommunications services in the Building,
and Tenant hereby waives any claim against Landlord for any actual or
consequential damages (including damages for loss of business) in the event
Tenant's telecommunications services in any way are interrupted, damaged or
rendered less effective, except to the extent caused by the grossly negligent or
willful act or omission by Landlord, its agents, contractors or employees.
Tenant acknowledges that Landlord meets its duty of care to Tenant with respect
to the Building INC by contracting with a reliable third party vendor to assume
responsibility for the maintenance and repair thereof (which contract shall
contain provisions requiring such vendor to inspect the INC periodically (the
frequency of such inspections to be determined by such vendor based on its
experience and professional judgment), and requiring such vendor to meet local
and federal requirements for telecommunications material and workmanship).
Subject to the foregoing, Landlord shall not be liable to Tenant and Tenant
waives all claims against Landlord whatsoever, whether for personal injury,
property damage, loss of use of the Leased Premises, or otherwise, due to the
interruption or failure of telephone services to the Leased Premises except to
the extent caused by the gross negligence or willful misconduct of Landlord, its
agents, employees or contractors. Tenant hereby holds Landlord harmless and
agrees to indemnify, protect and defend Landlord from and against any liability
for any damage, loss or expense due to any failure or interruption of telephone
service to the Leased Premises for any reason except to the extent caused by the
gross negligence or willful misconduct of Landlord, its agents, employees or
contractors. Tenant agrees to obtain loss of rental insurance adequate to cover
any damage, loss or expense occasioned by the interruption of telephone service.

<PAGE>   36

        IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of
the respective dates below set forth with the intent to be legally bound thereby
as of the Effective Date of this Lease first above set forth.


                                           TENANT:
                                           Aviron, a
                                           Delaware corporation


Dated:   October 20, 1999                  By:      /s/ Fred Kurland
                                              ---------------------------------
                                           Title: Senior Vice-President and
                                                  Chief Financial Officer

                                           LANDLORD:

                                           MELP VII, L.P. a California limited
                                              partnership


                                           By: Menlo Equities Associates VII LLC
                                              ----------------------------------
                                           Its: General Partner

Dated:   October 20, 1999                      By: Menlo Equities LLC
                                                  ------------------------------
                                               Title: Managing Member

                                                   By: Menlo Equities, Inc.
                                                      --------------------------
                                                   Title: Managing Member

                                                   By: /s/ Henry D. Bullock
                                                      --------------------------
                                                           Henry D. Bullock
                                                   Its: President


<PAGE>   37


                                    EXHIBIT A

                                    SITE PLAN


<PAGE>   38



                                    EXHIBIT B

                                   WORK LETTER


<PAGE>   39


                                    EXHIBIT C

                          FORM OF ESTOPPEL CERTIFICATE


__________________, 19____


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


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


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


Re
  ---------------------------

                 , California
  ---------------


Ladies and Gentlemen:

Reference is made to that certain Lease, dated as of October 20, 1999, between
MELP VII, L.P., a California limited partnership ("Landlord"), and the
undersigned (herein referred to as the "Lease"). A copy of the Lease [and all
amendment thereto] is [are] attached hereto as EXHIBIT A. At the request of
Landlord in connection with [ State reasons for request for estoppel certificate
], the undersigned hereby certifies to Landlord and to [ State names of other
parties requiring certification ] and each of your respective successors and
assigns as follows:

        1. The undersigned is the tenant under the Lease.

        2. The Lease is in full force and effect and has not been amended,
modified, supplemented or superseded except as indicated in Exhibit A.

        3. There is no defense, offset, claim or counterclaim by or in favor of
the undersigned against Landlord under the Lease or against the obligations of
the undersigned under the Lease. The undersigned has no renewal, extension or
expansion option, no right of first offer or right of first refusal and no other
similar right to renew or extend the term of the Lease or expand the property
demised thereunder except as may be expressly set forth in the Lease.

        4. The undersigned is not aware of any default now existing of the
undersigned or of Landlord under the Lease, nor of any event which with notice
or the passage of time or both would constitute a default of the undersigned or
of Landlord under the Lease.

        5. The undersigned has not received notice of a prior transfer,
assignment, hypothecation or pledge by Landlord of any of Landlord's interest in
the Lease.

        6. The monthly rent due under the Lease is $____________ and has been
paid through __________________, and all additional rent due and payable under
the Lease has been paid through _________________.

        7. The term of the Lease commenced on __________________, and expires on
___________________, unless sooner terminated pursuant to the provisions of the
Lease. Landlord has performed all work required by the Lease for the
undersigned's initial occupancy of the demised property.

        8. The undersigned has deposited the sum of $____________ with Landlord
as security for the performance of its obligations as tenant under the Lease,
and no portion of such deposit has been applied by Landlord to any obligation
under the Lease.

        9. There is no free rent period pending, nor is Tenant entitled to any
Landlord's contribution.

The above certifications are made to Landlord and Lender knowing that Landlord
and Lender will rely thereon in accepting an assignment of the Lease.


Very truly yours,


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

<PAGE>   40

                                                                       Exhibit B

                                   WORK LETTER


        THIS WORK LETTER, dated October __, 1999, is entered into by and between
MELP VII, L.P., a California limited partnership ("Landlord"), and Aviron, a
Delaware corporation ("Tenant"). On or about the date hereof, Landlord and
Tenant entered into that certain Lease (the "Lease") for certain premises (the
"Leased Premises") commonly known as 4575 Patrick Henry Drive, Santa Clara,
California. This Work Letter sets forth the agreement of Landlord and Tenant
with respect to the improvements to be constructed in the Leased Premises. All
defined terms used in this Work Letter shall have the meaning set forth in the
Lease, unless otherwise defined in this Work Letter.

1. CONSTRUCTION OF TENANT IMPROVEMENTS. Tenant shall, through its general
contractor (the "Contractor"), furnish and install within the Leased Premises,
substantially in accordance with the plans and specifications to be approved by
Landlord and Tenant pursuant to paragraph 2 below, certain items of general
construction (the "Tenant Improvements"). The quantities, character and manner
of installation of all of the Tenant Improvements shall be subject to the
limitations imposed by any applicable governmental regulations relating to
conservation of energy and by applicable building codes and regulations. In
addition, Tenant agrees that the Tenant Improvements will not require work which
would (i) require changes to structural components of the Building or the
exterior design of the Building; (ii) require any material modification to the
Building's mechanical or electrical systems; or (iii) be incompatible with the
Building plans filed with the City of Santa Clara.

2. SPACE PLANNING.

(a) Tenant will prepare for Landlord's approval no later than fourteen days
prior to the date Tenant intends to submit its permit application, comprehensive
space planning documents (once approved by Landlord, the "Space Planning
Documents").

(b) All planning and interior design services relating to furniture and
equipment, such as selection of colors, finishes, fixtures, furnishings or floor
coverings, will be included in the cost of the Tenant Improvements, shall be
subject to prior written approval of Landlord, which shall not be unreasonably
withheld or delayed and shall be delivered within five (5) business days after
the request is received by Landlord. In connection with Landlord's approval of
the Space Plans and the Working Drawings, Landlord will notify Tenant of those
improvements it considers to be specialized improvements ("Special
Improvements") for Tenant's particular use of the Leased Premises, and will
notify Tenant which Special Improvements must be removed at the termination of
the Lease; not later than the termination of the Lease, Tenant shall remove all
such designated Special Improvements and restore the Leased Premises before the
termination of the Lease, in accordance with Section 2.6 of the Lease.

<PAGE>   41

3. APPROVAL OF WORKING DRAWINGS.

(a) Landlord and Tenant acknowledge that Tenant shall retain an architect and
engineers to prepare all architectural and engineering plans and specifications
required for the construction of the Tenant Improvements in conformance with the
base building and tenant improvement standard specifications of the Building
(the "Working Drawings"), and to prepare drawings and specifications for Changes
(as defined below), if any, pursuant to paragraph 5 below.

(b) Tenant shall submit the completed Working Drawings to Landlord for
Landlord's approval. Landlord will provide written approval of the Working
Drawings within five (5) business days after receipt of such submission. If
Landlord disapproves any part of the submission, the disapproval shall include
written instructions adequate for Tenant's architect and engineers to revise the
Working Drawings. Such revisions shall be subject to Landlord's approval, which
shall not be unreasonably withheld or delayed. Landlord will finally approve the
revised Working Drawings within five (5) business days after submission thereof
to Landlord.

(c) Upon Landlord's approval of the Working Drawings, Tenant shall be authorized
to cause the Contractor to proceed with the construction of the Tenant
Improvements in accordance with the Working Drawings.

4. COST OF TENANT IMPROVEMENTS. Unless specified otherwise herein, Landlord
shall bear and pay for the cost of the Tenant Improvements (which cost shall
include, without limitation, the costs of construction, the cost of permits and
permit expediting, and all architectural and engineering services obtained by
Landlord in connection with the Tenant Improvements, the Contractor's fees,
Landlord's fee for construction administration in an amount equal to 2.5% of
construction hard costs) up to a maximum of $180,000.00 (the "Tenant Improvement
Allowance"). While the Tenant Improvements are being constructed, Tenant may
submit to Landlord monthly invoices for the cost of the Tenant Improvements
completed in the preceding month together with lien waivers with respect to such
work; within thirty (30) days after such submission, Landlord will reimburse
Tenant for its costs for Tenant Improvements, less 2.5% in payment of Landlord's
construction administration fee, all subject to the $180,000 cap. The Tenant
Improvement Allowance shall be utilized only for building improvements to the
Building, and not for signage, furniture costs, any third party consulting or
contracting fees (except for Tenant's architect's fees), any telecom/cabling
costs, or any other purpose. Tenant shall bear and pay the cost of the Tenant
Improvements (including but not limited to all of the foregoing fees and costs)
in excess of the Tenant Improvement Allowance, if any. The cost of the Tenant
Improvements shall exclude the cost of furniture, fixtures and inventory and
other items of Tenant's Work (as defined below).

        Notwithstanding anything to the contrary contained in this Lease, the
cost of the Tenant Improvements ("Tenant Improvements Cost") to be provided at
Landlord's sole expense shall not include (and Tenant shall have no
responsibility for) the following:

        (i) Costs attributable to (A) building shell construction; (B)
improvements installed outside the demising walls of the Leased Premises unless
(1) necessitated by Tenant Improvements made inside the demising walls of the
Leased Premises; or (2) requested by Tenant or as shown in the approved working
drawings; and (C) improvements installed "off-site"

<PAGE>   42

(such as streets, curbs, gutters, traffic lights for parking and street
lighting);

        (ii) Costs for improvements which are not shown on or described in the
approved working drawings unless otherwise approved by Tenant;

        (iii) Costs incurred to remove Hazardous Materials from the Leased
Premises or the surrounding area unless the presence of such materials was
caused by Tenant or its contractors, employees or agents (including, without
limitation, Tenant's invitees and visitors), contractors, employees or invitees
in violation of Hazardous Materials laws; and

        (iv) Landlord's loan fees, mortgage brokerage fees, interest and other
costs of financing construction costs.

5. CHANGES. Any request by Tenant for a change in the Tenant Improvements after
approval of the Working Drawings (a "Change") shall be accompanied by all
information necessary to clearly identify and explain the proposed Change.
Within five (5) business days after Landlord's receipt of such request, Landlord
shall notify Tenant whether it approves such Change, which approval will not be
unreasonably withheld or delayed.

6. PROCEDURES.

        (a) The construction of Tenant Improvements shall not proceed until
Landlord has approved in writing: (i) Tenant's contractors, (ii) proof of the
amount and coverage of public liability and property damage insurance carried by
Tenant's contractors in the form of an endorsed insurance certificate naming
Landlord, the Contractor, and the agents of Landlord and the Contractor as
additional insureds, in an amount not less than two million dollars, and (iii)
complete and detailed plans and specifications for Tenant's Work.

        (b) The construction of Tenant Improvements shall be performed in
conformity with a valid permit when required, a copy of which shall be furnished
to Landlord before such work is commenced. In any event, all work shall comply
with all applicable laws, codes and ordinances of any governmental entity having
jurisdiction over the Building. Landlord shall have no responsibility for
Tenant's failure to comply with such applicable laws.

        (c) In connection with the construction of Tenant Improvements, (e.g.,
delivering or installing furniture or equipment to the second floor of the
Leased Premises), Tenant or its contractors shall arrange for any necessary
hoisting or elevator service with Landlord and shall pay such reasonable costs
for such services as may be charged by Landlord.

        (d) Tenant shall promptly pay Landlord within twenty (20) days after
receipt of demand for any extra expense incurred by Landlord by reason of faulty
work done by Tenant or its contractors, by reason of damage to existing work
caused by Tenant or its contractors, or by reason of inadequate cleanup by
Tenant or its contractors.

7. TENANT IMPROVEMENT WORK.

        Notwithstanding anything to the contrary contained in the Lease or this
Work Letter, the Tenant Improvements shall be constructed in substantial
conformity with the Working Drawings

<PAGE>   43

and all applicable rules, regulations, statutes, ordinances, laws and building
codes in a good and workmanlike manner, free of defects and using new materials
and equipment of good quality.

        IN WITNESS WHEREOF, Landlord and Tenant have executed this Work Letter
as of the respective dates set forth below.


                                          LANDLORD:

                                          MELP VII, L.P, a California limited
                                          partnership



                                          By:  Menlo Equities Associates VII LLC
                                          Its: General Partner

                                          By:  Menlo Equities LLC
                                          Its: Managing Member

                                          By:  Menlo Equities, Inc.
                                          Its: Managing Member

                                          By:  /s/ HENRY D. BULLOCK
                                              --------------------------------
                                          Its: President
                                               -------------------------------

                                           TENANT:

                                           Aviron, a Delaware corporation

                                           By: /s/ FRED KURLAND
                                               ---------------------------------

                                           Its: Senior Vice President and
                                                Chief Financial Officer
                                               ---------------------------------