<PAGE>   1

                                                                   EXHIBIT 10.33


                           COMMERCIAL LEASE AGREEMENT


                                     BETWEEN


                       AMERICAN INDUSTRIAL PROPERTIES REIT

                                   AS LANDLORD


                                       AND


                          MEDSTONE INTERNATIONAL, INC.

                                    AS TENANT


                           DATED: _____________, 2000

<PAGE>   2

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                           Page
                                                                           ----
<S>             <C>                                                        <C>
ARTICLE 1  -    BASIC LEASE PROVISIONS                                        2
ARTICLE 2  -    TERM AND POSSESSION                                           4
ARTICLE 3  -    RENT                                                          6
ARTICLE 4  -    SECURITY DEPOSIT                                              8
ARTICLE 5  -    OCCUPANCY AND USE                                             9
ARTICLE 6  -    UTILITIES AND SERVICES                                       13
ARTICLE 7  -    MAINTENANCE, REPAIRS, ALTERATIONS AND IMPROVEMENTS           14
ARTICLE 8  -    INSURANCE, FIRE AND CASUALTY                                 16
ARTICLE 9  -    CONDEMNATION                                                 20
ARTICLE 10 -    LIENS                                                        20
ARTICLE 11 -    TAXES ON TENANT'S PROPERTY                                   21
ARTICLE 12 -    SUBLETTING AND ASSIGNING                                     21
ARTICLE 13 -    SUBORDINATION AND TENANT'S ESTOPPEL CERTIFICATE              22
ARTICLE 14 -    DEFAULT                                                      23
ARTICLE 15 -    NOTICES                                                      26
ARTICLE 16 -    MISCELLANEOUS PROVISIONS                                     26

                               EXHIBITS AND RIDERS

                Exhibit A    Site Plan of Premises
                Exhibit B    Acceptance of Premises Memorandum
                Exhibit C    Secretary's Certificate
                Exhibit D    Work Letter
                Rider 1      Renewal Option
</TABLE>

                                       1

<PAGE>   3

                           COMMERCIAL LEASE AGREEMENT

        This Commercial Lease Agreement (hereinafter called this "Lease") is
made this _____day of _____, 2000 between AMERICAN INDUSTRIAL PROPERTIES REIT, a
Texas real estate investment trust, (hereinafter called "Landlord"), and
MEDSTONE INTERNATIONAL, INC., a Delaware corporation (hereinafter called
"Tenant").

                                    ARTICLE 1
                     BASIC LEASE PROVISIONS AND DEFINITIONS

1.    BUILDING:

         a.  NAME:  Columbia Corporate Center
         b.  ADDRESS:  100 Columbia
         c.  PROPERTY NUMBER:
         d.  AGREED RENTABLE AREA: 42,106 square feet

2.    PREMISES:

         a.  SUITE NUMBER:  100
         b.  AGREED RENTABLE AREA:  20,608 square feet (Total
             Project Size 128,216 square feet)

3.    TERM:  SIXTY-FOUR (64) MONTHS

4.    COMMENCEMENT DATE:  July 23, 2000

5.    EXPIRATION DATE:  November 30, 2005

6.    BASE RENT:

<TABLE>
<CAPTION>
                           Rental Period                                     Base Monthly Rent
                           -------------                                     -----------------
<S>                                                                          <C>
                   July 23, 2000 to November 30, 2000                          Rent Abated
                   December 1, 2000 to July 30, 2001                            $18,547.20
                   August 1, 2001 to July 30, 2002                              $19,165.44
                   August 1, 2002 to July 30, 2003                              $20,608.00
                   August 1, 2003 to July 30, 2004                              $21,638.40
                   August 1, 2004 to July 30, 2005                              $22,256.64
                   August 1, 2005 to November 30, 2005                          $23,080.96
</TABLE>

7.    ADDITIONAL RENT, EXPENSE STOPS AND PRO RATA SHARE PERCENTAGE:

<TABLE>
<S>                                                                                <C>
                   A.  OPERATING EXPENSE STOP:                                     $0.00
                   B.  REAL ESTATE TAXES EXPENSE STOP:                             $0.00
                   C.  TENANT'S PRO RATA SHARE PERCENTAGE:                        16.09%
</TABLE>

The following chart is provided as an estimate of Tenant's initial monthly
payment broken down into its components. This chart, however, does not supersede
the specific provisions contained elsewhere in this lease.

<TABLE>
<S>                                                                    <C>
              Initial Monthly Base Rent                                $18,547.20
              Initial Monthly Estimated Operating Expense Escrow       $ 3,778.13
              Initial Monthly Estimated Real Tax Escrow                $ 2,764.91
              Other                                                    $     0.00
                                                                       ----------
              Total Initial Monthly Payment                            $25,090.24
                                                                       ==========
</TABLE>

8.    SECURITY DEPOSIT:  $23,080.96

9.    USE: Headquarter facility for research and development and
      manufacturing of noninvasive medical devices for the disintegration of
      kidney and gall stones.

10.   LANDLORD'S BROKER:  USAA Realty Company

      LANDLORD'S BROKER IS REPRESENTED BY:  Hans Mumper / Kirby Greenlee


                                       2

<PAGE>   4

11.   TENANT'S BROKER:  Cushman & Wakefield of California, Inc.
      TENANT'S BROKER IS REPRESENTED BY:  Jeff Cannon

12.   PAYMENTS:  All payments shall be sent to Landlord at the address
      below, or such other place as Landlord may designate from time to
      time.

            American Industrial Properties, REIT
            P.O. Box 971799, Dept. 9934
            Dallas, TX  75397-1799

13.   LEASE GUARANTOR:  None

14.   NOTICES:  Addresses for notices due under this Lease:

LANDLORD:                                TENANT:

American Industrial Properties REIT      PRIOR TO COMMENCEMENT DATE:
Attention:  Mr. Joseph D. Akers
6210 North Beltline, Suite 170           _______________________________________
Irving, Texas  75063-2656                _______________________________________
(972) 756-0704 Telecopier                _______________________________________
                                         _______________________________________
                                         _______________________________________
PROPERTY MANAGER:                        ________________________Telecopier

Brenna Walraven
USAA Realty Company                      ON OR AFTER COMMENCEMENT DATE:
2201 Dupont Drive, Suite 360
Irvine, California  92612                The Premises
(949) 261-0926 Telecopier                Attention: ____________________________
                                         _______________________ Telecopier


                                      3

<PAGE>   5

                                    ARTICLE 2
                               TERM AND POSSESSION

SECTION 2.1 LEASE OF PREMISES, COMMENCEMENT AND EXPIRATION:

     2.1.1 Lease of Premises: In consideration of the mutual covenants herein,
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord, subject
to all the terms and conditions of this Lease, the portion of the Building (as
described in Item 1 of Article 1) described as the Premises in Item 2 of Article
1 and that is more particularly described by the crosshatched area on Exhibit A
attached hereto (hereinafter called the "Premises"). The agreed rentable area of
the Premises is hereby stipulated to be the "Agreed Rentable Area" of the
Premises set forth in Item 2b of Article 1, irrespective of whether the same
should be more or less. The agreed rentable area of the Building is hereby
stipulated to be the "Agreed Rentable Area" of the Building set forth in Item 1c
of Article 1, irrespective of whether the same should be more or less. The
Building, the land on which the Building is situated and all improvements and
appurtenances to the Building and the land are referred to collectively herein
as the "Property".

     2.1.2 Initial Term and Commencement: The initial term of this Lease shall
be the period of time specified in Item 3 of Article 1. The initial term shall
commence on the Commencement Date (herein so called) set forth in Item 4 of
Article 1 and, unless sooner terminated pursuant to the terms of this Lease, the
initial term of this Lease shall expire, without notice to Tenant, on the
Expiration Date (herein so called) set forth in Item 5 of Article 1 (as such
Commencement Date and/or Expiration Date may be adjusted pursuant to Exhibit B
attached hereto). Notwithstanding anything to the contrary contained herein, the
Lease will expire in the last day of the last month of the Term.

SECTION 2.2 INSPECTION AND DELIVERY OF PREMISES, CONSTRUCTION OF LEASE SPACE
            IMPROVEMENTS AND POSSESSION:

     2.2.1 Delivery and Completion: TENANT HEREBY ACKNOWLEDGES THAT TENANT HAS
INSPECTED THE COMMON AREA (AS HEREINAFTER DEFINED) AND THE PREMISES, AND HEREBY
(I) ACCEPTS THE COMMON AREA IN "AS IS" CONDITION FOR ALL PURPOSES AND (II)
SUBJECT TO LANDLORD'S COMPLETION OF ITS OBLIGATIONS UNDER THE WORK LETTER
(HEREIN SO CALLED) ATTACHED HERETO AS EXHIBIT D, TENANT HEREBY ACCEPTS THE
PREMISES FOR ALL PURPOSES (INCLUDING THE SUITABILITY OF THE PREMISES FOR THE
PERMITTED USE). Landlord will perform or cause to be performed the work and/or
construction of Tenant's Improvements (as defined in the Work Letter) in
accordance with the terms of the Work Letter and will use commercially
reasonable efforts to Substantially Complete (as defined in the Work Letter)
Tenant's Improvements by the Commencement Date. If Tenant's Improvements are not
Substantially Complete by the Commencement Date set forth in Item 6 of Article 1
for any reason whatsoever, Tenant's sole remedy shall be an adjustment of the
Commencement Date and the Expiration Date to the extent permitted under the Work
Letter. The Premises shall be delivered to Tenant on the Commencement Date;
provided, however, Landlord may, at its sole option, permit the Tenant to have
access to the Premises prior to the Commencement Date. Any such occupancy will
not affect the Commencement Date; however, such occupancy will be subject to all
other provisions of this Lease, including without limitation the indemnity
provisions set forth in Section 8.5.1. hereof.

     2.2.2 Common Area: "Common Areas" will mean all areas, spaces, facilities,
and equipment (whether or not located within the Building) made available by
Landlord for the common and joint use of Landlord, Tenant and others designated
by Landlord using or occupying space in the Building or at the Property, as
applicable, to the extent same are not expressly made a part of the Premises,
and are made available for use of all tenants in the Building. Tenant is hereby
granted a nonexclusive right to use the Common Areas during the term of this
Lease for its intended purposes, in common with others designated by Landlord,
subject to the terms and conditions of this Lease, including, without
limitation, the Rules and Regulations. The Common Areas will be at all times
under the exclusive control, management and operation of the Landlord.


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COMMERCIAL LEASE AGREEMENT


                                      4

<PAGE>   6

     2.2.3 Acceptance of Premises Memorandum: Upon Substantial Completion (as
defined in the Work Letter) of Tenant's Improvements, Landlord and Tenant shall
execute the Acceptance of Premises Memorandum (herein so called) attached hereto
as Exhibit B. If Tenant occupies the Premises without executing an Acceptance of
Premises Memorandum, Tenant shall be deemed to have accepted the Premises for
all purposes and Substantial Completion shall be deemed to have occurred on the
earlier to occur of: (i) actual occupancy, (ii) the Commencement Date set forth
in Item 4 of Article 1, or (iii) the date Tenant commences doing business at the
Premises if Landlord consents to an early occupancy as set forth in Section
2.2.1.

SECTION 2.3 REDELIVERY OF THE PREMISES: Upon the expiration or earlier
termination of this Lease, or upon the exercise by Landlord of its right to
re-enter the Premises without terminating this Lease, Tenant shall immediately
deliver to Landlord the Premises in a safe, "broom clean", neat, sanitary and
operational condition, normal wear and tear excepted, together with all keys and
parking and access cards. Tenant shall, by the Expiration Date or the date this
Lease is earlier terminated in accordance with the terms hereof, remove from the
Premises, at the sole expense of Tenant: (i) unless Landlord is asserting its
lien rights therein, any equipment, machinery, trade fixtures and personalty
installed or placed in the Premises by or on behalf of Tenant and (ii) if
requested by Landlord, all or any part of the improvements made to the Premises
by or on behalf of Tenant. All removals described above shall be accomplished in
a good and workmanlike manner so as not to damage the Premises or the primary
structure or structural qualities of the Building or the plumbing, electrical
lines or other utilities. Tenant shall, at its expense, promptly repair any
damage caused by such removal, provided that in the case of improvements that
Tenant is required to remove, Tenant shall restore the Premises to the condition
existing prior to the installation of such improvements. If Tenant fails to
deliver the Premises in the condition aforesaid, then Landlord may restore the
Premises to such a condition at Tenant's expense. All property required to be
removed pursuant to this Section not removed within time period required
hereunder shall thereupon be conclusively presumed to have been abandoned by
Tenant, and Landlord may, at its option, take over possession of such property
and either (a) declare the same to be the property of Landlord or (b) at the
sole cost and expense of Tenant, remove and store and/or dispose of the same or
any part thereof in any manner that Landlord shall choose without incurring
liability to Tenant or any other person.

SECTION 2.4 HOLDING OVER: In the event Tenant, or any party under Tenant
claiming rights to this Lease, retains possession of the Premises after the
expiration or earlier termination of this Lease, such possession shall
constitute and be construed as a tenancy at will only, subject, however, to all
of the terms, provisions, covenants and agreements on the part of Tenant
hereunder; such parties shall be subject to immediate eviction and removal, and
Tenant or any such party covenants and agrees to pay Landlord as rent for the
period of such holdover an amount equal to one hundred fifty percent (150%) the
Base Monthly Rent and Additional Rent (as hereinafter defined) in effect
immediately preceding expiration or termination, as applicable, prorated on a
daily basis. Tenant covenants and agrees to also pay any and all damages
sustained by Landlord as a result of such holdover. The rent during such
holdover period shall be payable to Landlord from time to time on demand;
provided, however, if no demand is made during a particular month, holdover rent
accruing during such month shall be paid in accordance with the provisions of
this Section 2.4. Tenant will vacate the Premises and deliver same to Landlord
immediately upon Tenant's receipt of notice from Landlord to so vacate. No
holding over by Tenant, whether with or without consent of Landlord, shall
operate to extend the term of this Lease. No payments of money by Tenant to
Landlord after the expiration or earlier termination of this Lease shall
reinstate, continue or extend the term of this Lease. No payments of money by
Tenant, other than the holdover rent accruing during such holdover period paid
in accordance with the provisions of this Section 2.4, to Landlord after the
expiration or earlier termination of this Lease shall constitute full payment of
rent under the terms of this Lease, and Tenant further agrees that any such
payment(s), other than the holdover rent accruing in accordance with the
provisions of this Section 2.4, to Landlord shall constitute a default and
breach of this Lease by Tenant pursuant to Article 14 herein. No extension of
this Lease after the expiration or earlier termination thereof shall be valid
unless and until the same shall be evidenced by a writing signed by both
Landlord and Tenant.


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COMMERCIAL LEASE AGREEMENT


                                      5

<PAGE>   7

                                    ARTICLE 3
                                      RENT

SECTION 3.1 BASE RENT: Tenant shall pay as rent for the Premises the applicable
Base Monthly Rent shown in Item 6 of Article 1. The Base Monthly Rent shall be
payable in monthly installments equal to the applicable Base Monthly Rent shown
in Item 6 of Article 1 in advance, without notice, demand, offset or deduction.
The required monthly installments shall commence on the Commencement Date and
shall continue on the first (1st) day of each calendar month thereafter until
the Expiration Date. If the Commencement Date is specified to occur or otherwise
occurs on a day other than the first day of a calendar month, the Base Monthly
Rent for such partial month shall be prorated.

SECTION 3.2 ADDITIONAL RENT:

     3.2.1 Definitions: For purposes of this Lease, the following definitions
shall apply:

          (a)  "Additional Rent", for a particular year, shall equal the product
               of Tenant's Pro Rata Share Percentage (as set forth in Item 7c of
               Article 1), multiplied by the sum of (i) the amount by which all
               Operating Expenses for the applicable calendar year exceed
               Tenant's Operating Expense Stop (as set forth in Item 7a of
               Article 1) plus (ii) the amount by which the Real Estate Taxes
               for the applicable calendar year exceed Tenant's Real Estate
               Taxes Expense Stop as set forth in Item 7b of Article 1). In no
               event shall Tenant be responsible for any "Additional Rent" or
               the costs of repairs, capital expenditures or maintenance which
               occurred prior to the lease commencement.

          (b)  "Operating Expenses" shall mean (without duplication of any costs
               and expenses of which Tenant is responsible under Section 6.1 or
               subsection 7.2.1 below) (i) all of the costs and expenses
               Landlord incurs, pays or becomes obligated to pay in connection
               with operating, managing, maintaining, repairing and insuring the
               Property for a particular calendar year or portion thereof as
               determined by Landlord in accordance with generally accepted
               accounting practices, including, if applicable, if the Property
               is less than one hundred percent (100%) occupied, all additional
               costs and expenses of operating, managing, maintaining, repairing
               and insuring the Property which Landlord determines that would
               have been paid or incurred during the particular calendar year or
               portion thereof if the Property had been one hundred percent
               (100%) occupied, (ii) wages, salaries, employee benefits and
               taxes for personnel working full or part-time in connection with
               the operation, maintenance and management of the Building and the
               Common Areas, (iii) , (iv) the cost of any capital improvement
               made to the Building by Landlord after the date of this Lease
               that is required under any governmental law or regulation,
               together with an amount equal to interest at the rate of twelve
               percent (12%) per annum (the "Amortization Rate") on the
               unamortized balance thereof, (v) the cost of any capital
               improvement made to the Common Areas of the Building after the
               date of this Lease that is required under the interpretations or
               regulations issued from time to time under the provisions of the
               Americans With Disabilities Act of 1990, 42 U.S.C. ss.
               120101-12213 or comparable laws of the State and local agencies
               in which the Property is located (collectively, the "Disability
               Acts"), amortized over such period as Landlord shall reasonably
               determine, together with an amount equal to interest at the
               Amortization Rate on the unamortized balance thereof, (vi) the
               cost of any labor-saving or energy-saving device or other
               equipment installed in the Building after the date hereof,
               amortized over such period as is reasonably determined by


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COMMERCIAL LEASE AGREEMENT


                                      6

<PAGE>   8

               Landlord, together with an amount equal to interest at the
               Amortization Rate on the unamortized balance thereof, (vii) the
               charges assessed against the Property pursuant to any contractual
               covenants or recorded declaration of covenants or the covenants,
               conditions and restrictions of any other similar instrument
               affecting the Property, and (viii) all other costs and expenses
               which would generally be regarded as operating, maintenance,
               repair and management costs and expenses, including those which
               would normally be amortized over a period not to exceed five (5)
               years. Operating Expenses shall not include Real Estate Taxes
               (hereinafter defined). Tenant shall have the right, at its
               expense and with reasonable written notice to Landlord, to
               examine Landlord's "Building Cost" records. Such inspection may
               be accomplished by an officer of the corporation or a Certified
               Public Accountant (CPA) whose compensation is not contingency
               based.

          (c)  "Real Estate Taxes" shall mean all real estate taxes and other
               taxes or assessments, which are levied with respect to the
               Property or any portion thereof for each calendar year and shall
               include any tax, surcharge or assessment which shall be levied in
               addition to or in lieu of real estate taxes, the costs and
               expenses of a consultant, if any, and/or of contesting the
               validity or amount of such real estate or other taxes, and shall
               also include any rental, excise, sales, transaction, privileged,
               or other tax or levy, however denominated, imposed upon or
               measured by the rental payable hereunder or on Landlord's
               business of leasing the Premises, any non-progressive tax on or
               measured by gross rentals received from the rental of space in
               the Building, and any tax in this transaction or any documents to
               which Tenant is a party creating or transferring an interest in
               the Premises, excepting only Landlord's net income taxes
               (collectively, "Real Estate Taxes").

          (d)  "Tenant's Operating Expense Stop" shall be the total Operating
               Expenses for the applicable calendar year set forth in item 7a of
               Article 1 or if no year is so stated, the total dollar amount
               stated in Item 7a of Article 1.

          (e)  "Tenant's Real Estate Taxes Expense Stop" shall be the total of
               all Real Estate Taxes for the applicable calendar year set forth
               in Item 7b of Article 1 or if no year is so stated, the total
               dollar amount stated in Item 7b of Article 1.

          (f)  "Project Costs" shall not include costs and expenses related to
               underground water contamination which occurred prior to Tenant's
               original occupancy of the Premises (as a subtenant to Sears). The
               date of such occupancy is hereby agreed to be March 3, 1994.

     3.2.2 Payment Obligation: In addition to the Base Rent specified in this
Lease, Tenant shall pay to Landlord the Additional Rent, in each calendar year
or partial calendar year, payable in monthly installments as hereinafter
provided. On or prior to the Commencement Date and at least thirty (30) days
prior to each calendar year thereafter (or as soon thereafter as is reasonably
possible), Landlord shall give Tenant written notice of Tenant's estimated
Additional Rent for the applicable calendar year and the amount of the monthly
installment due for each month during such year. Tenant shall pay to Landlord on
the Commencement Date and on the first day of each month thereafter the amount
of the applicable monthly installment, without notice, demand, offset or
deduction, provided, however, if the applicable installment covers a partial
month, then such installment shall be prorated on a daily basis. If Landlord
fails to give Tenant notice of its estimated payments of Additional Rent in
accordance with this subsection for any calendar year, then Tenant shall
continue making monthly estimated payments in accordance with the estimate for
the previous calendar year until a new estimate is provided by Landlord. If
Landlord determines that, because of unexpected increases in Operating Expenses
or other reasons, Landlord's estimate of Operating Expenses was too low, then
Landlord shall have the right to


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COMMERCIAL LEASE AGREEMENT


                                       7
<PAGE>   9

give a new statement of the estimated Additional Rent due from Tenant for the
applicable calendar year or the balance thereof and to bill Tenant for any
deficiency which may have accrued during such calendar year or portion thereof,
and Tenant shall thereafter pay monthly installments of Additional Rent based on
such new statement. Within a reasonable time after the end of each calendar year
and the Expiration Date, Landlord shall prepare and deliver to Tenant a
statement showing Tenant's actual Additional Rent for the applicable calendar
year, provided that with respect to the calendar year in which the Expiration
Date occurs, (x) that calendar year shall be deemed to have commenced on January
1 of that year and ended on the Expiration Date (the "Final Calendar Year") and
(y) Landlord shall have the right to estimate the actual Operating Expenses
allocable to the Final Calendar Year. If Tenant's total monthly payments of
Additional Rent for the applicable calendar year are less than Tenant's actual
Additional Rent, then Landlord shall credit the amount of such overpayment to
Tenant, provided, however, with respect to the Final Calendar Year, Landlord
shall pay to Tenant the amount of such excess payments, less any additional
amounts then owed to Landlord. Unless Tenant takes written exception to any item
within thirty (30) days after the furnishing of an annual statement, such
statement shall be considered as final and accepted by Tenant. Any amount due
Landlord as shown on any such statement shall be paid by Tenant within twenty
(20) days after it is furnished to Tenant.

SECTION 3.3 RENT DEFINED AND NO OFFSETS: The Base Monthly Rent, the Additional
Rent and all other sums required to be paid to Landlord by Tenant under this
Lease, including any sums due under the Work Letter, shall constitute rent and
are sometimes collectively referred to as "Rent". Tenant shall pay each payment
of Rent when due, without prior notice or demand therefor and without deduction
or offset.

SECTION 3.4 LATE CHARGES: If any installment of Base Monthly Rent or Additional
Rent or any other payment of Rent under this Lease shall not be paid when due, a
"Late Charge" of five percent (5%) of the amount overdue may be charged by
Landlord to defray Landlord's administrative expense incident to the handling of
such overdue payments. The parties agree that (a) it would be impractical and
extremely difficult to fix the actual damage Landlord will suffer in the event
of Tenant's late payment, (b) such late charge represents a fair and reasonable
estimate of the detriment that Landlord will suffer by reason of late payment by
Tenant, and (c) the payment of interest as provided in Section 16.9 hereof and
late charges pursuant to this Section 3.4 are distinct and separate in that
payment of interest is to compensate Landlord for the use of Landlord's money by
Tenant, while the payment of late charges is to compensate Landlord for
Landlord's processing, administrative and other costs incurred by Landlord as
the result of Tenant's delinquent payments. Acceptance of any such interest and
late charges will not constitute a waiver of Tenant's default with respect to
the overdue amount, or prevent Landlord from exercising any other rights and
remedies available to Landlord. Each Late Charge shall be payable by Tenant on
demand of Landlord.

                                    ARTICLE 4
                                SECURITY DEPOSIT

Tenant will pay Landlord on the date this Lease is executed by Tenant the
Security Deposit set forth in Item 8 of Article 1 as security for the
performance of the terms hereof by Tenant. Tenant shall not be entitled to
interest thereon and Landlord may commingle such Security Deposit with any other
funds of Landlord. It is expressly understood and agreed that the Security
Deposit is not an advance payment of Rent or a measure of Landlord's damages in
case of default by Tenant. If Tenant defaults with respect to any provisions of
this Lease, Landlord may, but shall not be required to, from time to time,
without prejudice to any other remedy, use, apply or retain all or any part of
the Security Deposit for the payment of any Rent or any other sum in default, or
for the payment of any other amount which Landlord may spend or become obligated
to spend by reason of Tenant's default, or to compensate Landlord for any other
loss or damage which Landlord may suffer by reason of Tenant's default,
including, without limitation, costs and attorneys' fees incurred by Landlord to
recover possession of the Premises. Upon the occurrence of any event of default
by Tenant, Landlord may, from time to time, without prejudice to any other
remedy provided herein or provided by law, use such fund to the extent necessary
to make good any arrears of rentals and any other damage, injury, expense or
liability caused to Landlord by such event of default, and Tenant shall pay to
Landlord on demand the amount so applied in order


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COMMERCIAL LEASE AGREEMENT


                                       8
<PAGE>   10

to restore the security deposit to its original amount. If Tenant shall fully
and faithfully perform every provision of this Lease to be performed by it, the
Security Deposit shall be returned to Tenant within the "Applicable Period"
after the date Landlord receives possession of the Premises from Tenant. The
"Applicable Period" is fourteen (14) days where Landlord has no claim upon the
Security Deposit or the claim of Landlord upon the Security Deposit is only for
defaults in the payment of Rent or any other charges payable by Tenant under
this Lease, and thirty (30) days where the claim of Landlord includes amounts
reasonably necessary to repair damages to the Premises caused by Tenant. Tenant
agrees that it will not assign or encumber or attempt to assign or encumber the
monies deposited with Landlord as the Security Deposit and that Landlord and its
successors and assigns shall not be bound by any such actual or attempted
assignment or encumbrance.

                                    ARTICLE 5
                                OCCUPANCY AND USE

SECTION 5.1 USE OF PREMISES:

     5.1.1 General: The Premises shall, subject to the remaining provisions of
this Section, be used solely for the purpose specified in Item 9 of Article 1.
Prior to commencement of any work pursuant to the Work Letter (or if no work is
to be performed pursuant to a Work Letter, then prior to Tenant's occupancy of
the Premises), Tenant shall satisfy itself and Landlord that the Permitted Use
will comply with all applicable zoning ordinances, rules and regulations.
Without in any way limiting the foregoing, Tenant shall not use any part of the
Premises for sleeping quarters, or for the generation of hazardous or toxic
chemical or materials, and will not use, occupy or permit the use or occupancy
of the Premises for any purpose which is forbidden by or in violation of any
zoning ordinance, law, rule or regulation or any other law, ordinance, or
governmental or municipal regulation, order, or certificate of occupancy, or
which may be dangerous to life, limb or property; or permit the maintenance of
any public or private nuisance; or do or permit any other thing which may
disturb the quiet enjoyment of any other tenant of the Building; or keep any
substance or carry on or permit any operation which might emit offensive odors
or conditions from the Premises; or commit, suffer or permit any waste in or
upon the Premises, or at any time sell, purchase or give away or permit the
sale, purchase or gift of food in any form by or to any of Tenant's agents or
employees or other parties in the Premises except through vending machines in
employees' lunch or rest areas within the Premises for use by Tenant's employees
only; or use an apparatus which might make undue noise or set up vibrations in
the Building; or permit anything to be done which would increase the fire and
extended coverage insurance rate on the Building or contents, and if there is
any increase in such rate by reason of acts of Tenant, then Tenant agrees to pay
such increase upon demand therefor by Landlord. Payment by Tenant of any such
rate increase shall not be a waiver of Tenant's duty to comply herewith. TENANT
SHALL INDEMNIFY AND HOLD LANDLORD HARMLESS FROM ANY AND ALL COSTS, EXPENSES
(INCLUDING REASONABLE ATTORNEYS FEES), CLAIMS AND CAUSES OF ACTION ARISING FROM
TENANT'S FAILURE TO COMPLY WITH SECTION 5.1 PROVIDED, HOWEVER, THAT LANDLORD
SHALL NOT IMPOSE COVENANTS, CONDITIONS, EASEMENTS, OR RESTRICTIONS, UNLESS
REQUIRED BY LAW, WHICH WOULD MATERIALLY AND ADVERSELY AFFECT TENANT'S USE AND
ENJOYMENT OF THE PREMISES. Outside storage, including without limitation,
storage in non-operative or stationary trucks, trailers and other vehicles, and
vehicle maintenance or repair is prohibited without Landlord's prior written
consent. Tenant shall keep the Premises neat and clean at all times. Tenant
shall promptly correct any violation of a governmental law, rule or regulation
with respect to the Premises. Tenant shall comply with any direction of any
governmental authority having jurisdiction which imposes any duty upon Tenant or
Landlord with respect to the Premises, or with respect to the occupancy or use
thereof and shall comply with all matters of record affecting the Premises which
may impose additional restrictions and/or obligations on the Landlord or the
Tenant.

     5.1.2 Hazardous and Toxic Materials:

     (a) Tenant shall not incorporate into, use, release, or otherwise place or
     dispose of at, in, on, under or near the Premises, the Building or the
     Property any hazardous or toxic materials except that Tenant may use and
     temporarily store cleaning and office supplies used in the


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     ordinary course of Tenant's business and then only if (i) such materials
     are in small quantities, properly labeled and contained, (ii) notice of and
     a copy of the current material safety data sheet is first delivered to and
     written consent is obtained from Landlord for each such hazardous or toxic
     material and (iii) such materials are used, transported, stored, handled
     and disposed off-site at properly authorized facilities in accordance with
     the highest accepted industry standards for safety, storage, use and
     disposal in accordance with all applicable governmental laws, rules and
     regulations, including without limitation applicable Environmental Laws.
     Landlord shall have the right to periodically inspect, take samples for
     testing and otherwise investigate the Premises for the presence of
     hazardous or toxic materials. Landlord shall not knowingly dispose of at
     the Premises, in the Building or the Property any hazardous or toxic
     materials and shall otherwise deal with all hazardous or toxic materials at
     the Premises, Building or Property in a manner that will not materially and
     adversely affect Tenant's access, use or occupancy of the Premises. If
     Landlord or Tenant ever has knowledge of the presence in the Premises or
     the Building or the Property of hazardous or toxic materials which affect
     the Premises, the party having knowledge shall notify the other party
     thereof in writing promptly after obtaining such knowledge. For purposes of
     this Lease, hazardous or toxic materials shall mean asbestos containing
     materials ("ACM") and all other materials, substances, wastes and chemicals
     classified defined, listed, or regulated as, or containing, a "hazardous
     substance," "hazardous waste," "toxic substance," "pollutant,"
     "contaminant," "hazardous material," "solid waste," and/or "regulated
     substance," under any Environmental Law. As used herein, the term
     "Environmental Laws" shall mean any and all statutes, rules, regulations,
     ordinances, orders, permits, licenses, and other applicable legal
     requirements, relating directly or indirectly to human health or safety or
     environment, or the presence, handling, treatment, storage, disposal,
     recycling, reporting, remediation, investigation, or monitoring of
     hazardous or toxic materials.

     Landlord shall indemnify Tenant for the term of the lease from any
     pre-existing hazardous and toxic materials located within or on the
     premises or on the surrounding site prior to Tenant's subtenancy and
     occupancy within the premises.

     (b) Prior to commencement of any tenant finish work to be performed by
     Landlord, Tenant shall have the right to make such studies and
     investigations and conduct such non-destructive or non-invasive
     environmental tests and surveys of the Premises as Tenant deems necessary
     or appropriate, subject to the conditions that all such studies and
     investigations shall be completed prior to the commencement of any tenant
     finish work to be performed by landlord. TENANT SHALL RESTORE THE PREMISES
     AND HOLD LANDLORD HARMLESS FROM AND INDEMNIFY LANDLORD AGAINST ALL LOSS,
     DAMAGES, AND CLAIMS RESULTING FROM OR RELATING TO TENANT'S STUDIES, TESTS
     AND INVESTIGATIONS. If such study, test, investigation or survey evidences
     hazardous or toxic materials which affect the Premises, Tenant shall have
     the right to terminate this Lease provided such right shall be exercised,
     if at all, prior to the commencement of any tenant finish work to be
     performed by Landlord and within five (5) days after Tenant receives the
     evidence of hazardous or toxic materials. If Tenant takes occupancy of the
     Premises prior to exercising such right, Tenant's right to terminate this
     Lease shall be null and void and of no further force and effect.

     (c) If Tenant or its employees, agents, contractors, invitees, or visitors
     shall ever violate the provisions of paragraph (a) of this subsection 5.1.2
     or otherwise contaminate the Premises or the Property, then Tenant shall
     promptly, diligently, and expeditiously investigate, clean up, remove and
     dispose of the material causing the violation, in compliance with all
     applicable governmental standards, laws, rules and regulations, including
     without limitation applicable Environmental Laws and then prevalent
     industry practice and standards and shall repair any damage to the Premises
     or the Building or the Property as soon as practicable. Tenant shall


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     notify Landlord in advance of its method, time and procedure for any
     investigation, remediation or monitoring of hazardous or toxic materials
     and Landlord shall have the right to require reasonable changes in such
     method, time or procedure as Landlord considers appropriate to prevent
     interference with any use, occupancy, care, appearance or maintenance of
     the Property or the Building, or the rights of other tenants, or to require
     the same to be done after normal business hours. Under no circumstances
     shall any remediation by Tenant leave any hazardous or toxic materials at,
     in, on, or under the Premises, the Property, or the Building without first
     obtaining the prior written consent of Landlord. Tenant's obligations under
     this subsection 5.1.2(c) shall survive the termination of this Lease. If
     tenant does not properly perform its obligations hereunder and such
     deficiency is not cured to landlord's satisfaction within thirty days after
     notice from landlord of such deficiency, Landlord shall have the right, but
     not the obligation to perform such work and all costs and expenses
     associated therewith shall be due and payable by Tenant upon demand. Tenant
     represents to Landlord that, except as has been disclosed to Landlord in
     writing, Tenant, or any of its owners, partners, managers, members,
     shareholders, or venturers have never been cited for or convicted of any
     violations under applicable laws, rules or regulations including without
     limitation Environmental Laws.

     (d) TENANT AGREES TO DEFEND, INDEMNIFY AND HOLD HARMLESS THE LANDLORD ITS
     OFFICERS, DIRECTORS, SHAREHOLDERS, EMPLOYEES, AGENTS SUCCESSORS, AND
     ASSISIGNS FROM AND AGAINST ALL OBLIGATIONS (INCLUDING REMOVAL AND REMEDIAL
     ACTIONS), LOSSES, CLAIMS, SUITS, JUDGMENTS, LIABILITIES (INCLUDING WITHOUT
     LIMITATION STRICT LIABILITIES), PENALTIES, DAMAGES (INCLUDING CONSEQUENTIAL
     AND PUNITIVE DAMAGES), COSTS AND EXPENSES (INCLUDING ATTORNEYS' AND
     CONSULTANTS' FEES AND EXPENSES) OF ANY KIND OR NATURE WHATSOEVER THAT MAY
     AT ANY TIME BE INCURRED BY, IMPOSED ON OR ASSERTED AGAINST SUCH INDEMNITEES
     DIRECTLY OR INDIRECTLY BASED ON, OR ARISING OR RESULTING FROM THE ACTUAL OR
     ALLEGED PRESENCE OR RELEASE OF HAZARDOUS OR TOXIC MATERIALS ON, AT, IN,
     UNDER, FROM OR NEAR THE PREMISES WHICH IS CAUSED OR PERMITTED BY TENANT, OR
     ITS LICENSEES OR INVITEES OR ANY PERSON ACTING UNDER, ON BEHALF OF, OR AT
     THE DIRECTION OR PERMISSION OF TENANT. THE PROVISIONS OF THIS SECTION
     5.1.2(D) SHALL SURVIVE THE EXPIRATION OR SOONER TERMINATION OF THIS LEASE.

     5.1.3 Building Inspection Survey: Tenant hereby acknowledges that:

     (a) Landlord has heretofore engaged one or more independent contractors
     (collectively "BIS Consultants") to perform limited building inspection
     surveys ("BIS") of the Building to determine if hazardous or toxic
     materials exist on, at, or under the Building, and that prior to execution
     of this Lease, Tenant has had the opportunity to review and has reviewed
     the BIS, and that after execution of this Lease such BIS are made available
     upon written request and within a reasonable time at the office of the
     Property Manager, for Tenant's inspection during normal business hours.

     (b) The purpose of the BIS is to provide information pursuant to 29 C.F.R.
     ss.1910.1001, and no other duties of disclosure or notification are created
     or implied by Landlord's providing an opportunity for review of the BIS by
     Tenant, indicate the presence or absence of hazardous or toxic materials
     (as defined in the Lease) on, at, or under the Building based on the
     present levels or content of said hazardous or toxic materials as presently
     set by the U.S. Environmental Protection Agency ("EPA") or the U.S.
     Occupational Safety and Health Administration ("OSHA"), however, Tenant
     acknowledges that neither extensive testing nor sampling of any
     portion of the Property was performed in connection with the BIS.


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<PAGE>   13

     (c) Landlord has been advised by its BIS Consultants that any such presence
     of said hazardous or toxic materials does not violate lawful levels for
     such materials or require removal or controls beyond those already
     implemented by Landlord. Tenant agrees and acknowledges that Landlord makes
     no express or implied representations or warranties whatsoever regarding
     the BIS, including but not limited to the contents, accuracy, scope or
     recommendations contained therein. In addition, Landlord is not aware of
     any studies, evaluations, tests, surveys, or investigations concerning the
     presence of hazardous or toxic materials at, in, or under the Building
     other than the BIS on file with the Property Manager or any information
     that makes the BIS inaccurate in any material respect.

     (d) Landlord has implemented an Operations and Maintenance Program ("OMP")
     with respect to any asbestos containing materials ("ACM") or presumed
     asbestos containing material ("PACM") located in the Building, and the
     terms of such OMP is set forth in a written document located in the
     Property Manager's office. To reduce the risk that any PACM or ACM in the
     Building will be improperly disturbed or handled by untrained persons,
     Tenant agrees and acknowledges that:

     1.   Removal of thermal system insulation (TSI) and surfacing ACM and PACM
          (i.e., sprayed-on or troweled-on material, e.g., textured ceiling
          paint or fireproofing material);

     2.   Removal of ACM or PACM that are not TSI or surfacing ACM and PACM such
          as vinyl floor covering;

     3.   Repair and maintenance of operations that are likely to disturb any
          ACM or PACM; and

     4.   Custodial and housekeeping activities where even minimal contact with
          any ACM or PACM may occur, shall be undertaken and conducted only upon
          thirty (30) days prior written notice to Landlord of such activity and
          in full accordance with the OMP. In addition, Tenant shall insure and
          hereby agrees that all contractors and subcontractors engaged by
          Tenant agree in writing to be bound by and will undertake and conduct
          all work in full compliance with the OMP, and Tenant agrees to fully
          cooperate with Landlord in all reasonable procedures or actions
          necessary for the conduct of the OMP.

     TENANT HEREBY ACKNOWLEDGES THAT IT SHALL TAKE ALL APPROPRIATE MEASURES TO
     ENSURE THAT THE PRESENCE OF ANY PACM OR ACM PRESENT IN, AT, OR UNDER THE
     PREMISES WILL NOT CONSTITUTE AN UNDUE RISK TO ITSELF, ITS EMPLOYEES,
     AGENTS, CONTRACTORS, INVITEES, OR LICENSES, AND TENANT WARRANTS AND
     REPRESENTS THAT, UPON TAKING POSSESSION OF THE PREMISES, IT HAS FULLY
     SATISFIED ITSELF THAT THE PREMISES ARE ACCEPTABLE AND SUITABLE WITH REGARDS
     TO HAZARDOUS OR TOXIC MATERIALS.

     TENANT AGREES TO PROVIDE LANDLORD WITH TRUE AND CORRECT COPIES OF ANY AND
     ALL STUDIES, EVALUATIONS, TESTS, SURVEYS, OR INVESTIGATIONS PERFORMED BY OR
     ON BEHALF OF TENANT AT ANY TIME INVOLVING THE PREMISES, AND TENANT SHALL
     NOT PERFORM ANY INVASIVE OR DESTRUCTIVE INVESTIGATIONS OR ANALYSES WITHOUT
     LANDLORD'S PRIOR WRITTEN CONSENT, WHICH CONSENT MAY BE WITHHELD, OR GIVEN
     SUBJECT TO ANY CONDITIONS OR RESTRICTIONS, AS LANDLORD SHALL DEEM
     APPROPRIATE IN ITS SOLE DISCRETION. IF LANDLORD CONSENTS TO ANY INVASIVE OR
     DESTRUCTIVE INVESTIGATION OR ANALYSIS, TENANT SHALL FULLY RESTORE ALL AREAS
     AND


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     IMPROVEMENTS WHERE SAMPLES WERE TAKEN OR WORK PERFORMED. REGARDLESS OF THE
     TYPE OF INSPECTIONS OR ANALYSES WHICH TENANT MAY CAUSE TO BE PERFORMED,
     TENANT SHALL IMMEDIATELY REPAIR ALL DAMAGE RESULTING FROM ANY OF THE SAME
     AND SHALL INDEMNIFY AND HOLD LANDLORD, ITS OFFICERS, DIRECTORS,
     SHAREHOLDERS, EMPLOYEES, AGENTS, SUCCESSORS, AND ASSIGNS HARMLESS FROM AND
     AGAINST ALL CLAIMS, ACTIONS, LIABILITIES, DAMAGES, LOSSES, INJURIES OR
     DEATHS IN CONNECTION WITH OR ARISING OUT OF OR FROM ANY INSPECTION,
     TESTING, SAMPLING, OR SIMILAR OR DISSIMILAR ACTIVITY CONDUCTED BY TENANT,
     TENANT'S AGENTS OR CONTRACTORS AT, ON, OR UNDER THE PREMISES FOR HAZARDOUS
     OR TOXIC MATERIALS, WHETHER UNDER THIS RIDER OR OTHERWISE UNDER OR IN
     CONNECTION WITH THE LEASE.

SECTION 5.2 RULES AND REGULATIONS: Tenant will comply with such rules and
regulations (the "Rules and Regulations") generally applying to tenants in the
Building as may be adopted from time to time by Landlord for the management,
cleanliness of, and the preservation of good order and protection of property
in, the Premises and the Building and the Property. A current copy of the Rules
and Regulations applicable to the Building is attached hereto as Exhibit C. All
such Rules and Regulations are hereby made a part hereof. All changes and
amendments to the Rules and Regulations sent by Landlord to Tenant in writing
and conforming to the foregoing standards shall be carried out and observed by
Tenant. Landlord hereby reserves all rights necessary to implement and enforce
the Rules and Regulations and each and every provision of this Lease.

SECTION 5.3 ACCESS; RIGHT OF ENTRY: Without being deemed or construed as
committing an actual or constructive eviction of Tenant and without abatement of
Rent, Landlord or its authorized agents shall have the right to enter the
Premises, upon reasonable notice (except in emergency situations where no prior
notice is required), to inspect the Premises, to show notices of
non-responsibility to show the Premises to prospective lenders, purchasers or
tenants and to fulfill Landlord's obligations or exercise its rights under this
Lease; provided, however, no notice shall be required to inspect or show the
Premises within the six (6) month period prior to expiration of this Lease.
Tenant hereby waives any claim for damages for any injury or inconvenience or
interference with Tenant's business, any loss of occupancy or quiet enjoyment of
the Premises, and any other loss occasioned thereby. Landlord shall have the
right to use any and all means which Landlord may deem proper to enter the
Premises in an emergency without liability therefor.

SECTION 5.4 QUIET POSSESSION: Provided Tenant timely pays Rent and observes and
performs all of the covenants, conditions and provisions on Tenant's part to be
observed and performed hereunder, Tenant shall have the quiet possession of the
Premises without hindrance or molestation by Landlord or its agents until the
Expiration Date, subject to all of the provisions of this Lease and all laws,
encumbrances, liens and restrictive covenants to which the Property is subject.

                                    ARTICLE 6
                             UTILITIES AND SERVICES

SECTION 6.1 UTILITIES: Except for Landlord's obligation under the last two
sentences of this Section 6.1, Tenant shall be responsible for providing all
utilities to the Premises. Without limiting the foregoing, Tenant shall heat the
Premises as necessary to prevent any freeze damage to the Premises or any
portion thereof. Tenant shall directly pay for all utilities used on the
Premises which are separately metered, and reimburse Landlord for sub-metered
utilities (if any) together with any maintenance charges for utilities. The cost
of any utilities which are not separately metered or sub-metered to the Premises
shall be an Operating Expense and charged to Tenant in accordance with Article
3. Tenant's use of electric current shall at no time exceed the capacity of the
feeders or lines to the Building or the risers or wiring installation of the
Building or the Premises. Landlord shall in no event be liable for any
interruption or failure of, and Tenant shall not be entitled to any abatement or
reduction of Rent by reason of, any interruption or failure of utilities or
other services to the Premises, nor shall any such interruption or failure in
any such utility or service be construed as an eviction (constructive or actual)
of Tenant


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or as a breach of the implied warranty of suitability, or relieve Tenant from
the obligation to perform any covenant or agreement herein, and in no event
shall Landlord be liable for damage to persons or property (including, without
limitation, business interruption), or in default hereunder, as a result of any
such interruption or failure unless caused by Landlord's gross negligence, in
which case the rent shall be abated for the duration of any material
interruption to Tenant's business. However, if any such interruption is caused
by a break or other damage to any utility lines located on the Property and
outside of the Building that are under the exclusive control of Landlord, upon
receipt of written notice of such interruption Landlord shall use reasonable
efforts to perform or cause to be performed the necessary repairs within such
time frame as may be reasonable under the circumstances in order to restore the
affected service to the Premises. In addition, if any such interruption is
caused by a break or other damage to any utility line located on the Property
and controlled by a governmental, private or public utility, Landlord will
cooperate with such utility so that the interrupted service is restored to the
Premises as soon as is reasonably possible.

SECTION 6.2 SERVICES: Landlord shall be under no obligation to provide any
services to the Building or Premises, except that Landlord shall provide routine
maintenance and cleaning in the Common Areas and utility service lines and
hookups to the Building.

                                    ARTICLE 7
               MAINTENANCE, REPAIRS, ALTERATIONS AND IMPROVEMENTS

SECTION 7.1 LANDLORD'S OBLIGATION TO MAINTAIN AND REPAIR: Landlord shall
(subject to Section 8.1, Section 8.4, Article 9 and Landlord's rights under
Section 3.2, and except for ordinary wear and tear) maintain load bearing walls
and foundation and repair or replace the roof of the Building when necessary
(with the cost of roof repairs an Operating Expense, and charged to Tenant
pursuant to Section 3.2.1. (b)). Except for maintaining the structural soundness
of the load bearing walls and foundation of the Building located within the
Premises, Landlord shall not be required to maintain or repair any other portion
of the Premises. Tenant hereby waives, so far as permitted by law, the right to
make repairs at Landlord's expense under any law, statute, ordinance, rule,
regulation, order or ruling (including, without limitation, the provisions of
California Civil Code Sections 1941 and 1942 and any successor statutes or laws
of a similar nature).

SECTION 7.2 TENANT'S OBLIGATIONS TO MAINTAIN AND REPAIR:

     7.2.1 Tenant's Obligation: Subject to Sections 7.1, 8.1 and 8.4 and Article
9, Tenant shall, at Tenant's sole cost and expense, and with Landlord's
supervision, repair and, as appropriate, replace any damage or injury done to
the Premises caused by Tenant, Tenant's agents, employees, licensees, invitees
or visitors and shall otherwise keep and maintain in good condition, appearance
and repair (including replacements), the Premises, which obligation shall
include, but not be limited to, the maintenance, repair and, as appropriate,
replacement of (a) all security, fire (including fire sprinkler), heating and
air conditioning systems and fixtures serving the Premises, (b) all plumbing,
sewage, mechanical and electrical systems and fixtures serving the Premises, (c)
all fixtures, walls, ceilings, floors, doors, overhead and dock loading doors,
windows, plate glass, skylights, lamps, fans and all other appliances and
equipment of every kind and nature located in, upon or about the Premises and
(d) the rail spur(s), if any, exclusively serving the Premises. TENANT SHALL
INDEMNIFY AND HOLD LANDLORD HARMLESS FROM ANY AND ALL COSTS, EXPENSES (INCLUDING
REASONABLE ATTORNEYS' FEES), CLAIMS AND CAUSES OF ACTION ARISING FROM OR
INCURRED BY AND/OR ASSERTED IN CONNECTION WITH ANY SUCH MAINTENANCE, REPAIRS,
REPLACEMENTS, DAMAGE OR INJURY OR TENANT'S BREACH OF ITS OBLIGATIONS UNDER THIS
SECTION 7.2. All repairs and replacements performed by or on behalf of Tenant
shall be performed in a good and workmanlike manner acceptable in all aspects to
Landlord, and in accordance with Landlord's standards applicable to alterations
or improvements performed by Tenant. Tenant shall continue to pay Rent, without
abatement, during any period that repairs or replacements are performed or
required to be performed by Tenant under this Section 7.2. Tenant shall make no
repairs to or penetrations of the roof of the Premises without


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<PAGE>   16

Landlord's consent. Landlord shall be responsible for the cost of repairing all
structural defects or repairs to the building including, but not limited to,
retaining walls, exterior walls, foundation, and roof structure during the term
of the Lease.

     7.2.2 Rights of Landlord: Any maintenance, repairs or replacements to be
performed by Tenant under Section 7.2.1 above and any service which Tenant is
required to provide under Section 6.1 above may, upon written notice from
Landlord to Tenant, be performed by Landlord for Tenant's benefit, in which
event Tenant shall reimburse Landlord for all expenses and costs incurred by
Landlord in performing same plus an additional five percent (5%) of such amount
to compensate Landlord for Landlord's overhead and administrative costs relating
to such work. Landlord shall have the same rights with respect to repairs
performed by Tenant as Landlord has with respect to improvements and alterations
performed by Tenant under subsection 7.3.3. In the event Tenant fails, in the
reasonable judgment of Landlord, to maintain the Premises in good order,
condition and repair, or otherwise satisfy its repair and replacement
obligations under subsection 7.2.1 or fails to provide the services required
under Section 6.1 above, and such failure continues beyond a reasonable period
of time, Landlord shall have the right to perform such maintenance, repairs and
replacements or provide such services, at Tenant's sole cost and expense. Tenant
shall pay to Landlord on demand any such expense incurred by Landlord plus an
additional five percent (5%) of such amount to compensate Landlord for
Landlord's overhead and administrative costs relating to such work, together
with interest thereon at the rate specified in Section 16.9 from the date of
demand until paid. All such amounts owing pursuant to this Section 7.2.2 shall
be deemed Rent hereunder.

SECTION 7.3 IMPROVEMENTS AND ALTERATIONS:

     7.3.1 Landlord's Construction Obligation: Landlord's sole construction
obligation under this Lease is as set forth in the Work Letter attached hereto
as Exhibit D.

     7.3.2 Alteration of Building by Landlord; New Construction: Landlord hereby
reserves the right and at all times shall have the right to repair, change,
redecorate, alter, improve, modify, renovate, enclose or make additions to any
part of the Property (including structural elements and load bearing elements
within the Premises), to enclose and/or change the arrangement and/or location
of driveways or parking areas or landscaping or other Common Areas of the
Property, and to construct new improvements on adjacent parcels of land, all
without having committed an actual or constructive eviction of Tenant or breach
of the implied warranty of suitability and without an abatement of Rent (the
"Reserved Right"). When exercising the Reserved Right, Landlord will use
reasonable efforts to minimize interference with Tenant's use and occupancy of
the Premises.

     7.3.3 Alterations, Additions, Improvements and Installations by Tenant:
Tenant shall not, without the prior written consent of Landlord, make any
changes, modifications, alterations, additions or improvements (other than
Tenant's Improvements under the Work Letter) to, nor install any equipment or
machinery (other than office equipment and unattached personal property) on, the
Premises (all such changes, modifications, alterations, additions, improvements
other than Tenant's Improvements under the Work Letter and installations
approved by Landlord are herein collectively referred to as "Installations") if
any such Installations would (i) affect structural or load bearing portions of
the Premises, (ii) result in a material increase of electrical usage above the
normal type and amount of electrical current to be provided by Landlord, (iii)
result in an increase of Tenant's usage of heating or air conditioning, (iv)
impact mechanical, electrical or plumbing systems in the Premises or the
Building, (v) affect areas of the Premises which can be viewed from Common
Areas, (vi) require greater or more difficult cleaning work (e.g., kitchens,
reproduction rooms, and interior glass partitions) or (vii) violate any
provision in Article 5 or Exhibit B attached hereto. All Installations shall be
at Tenant's sole cost and expense. Without in any way limiting Landlord's
consent rights, Landlord's consent shall be conditioned on (a) Landlord
approving the contractor or person making such Installations and approves such
contractor's insurance coverage to be provided in connection with the work, (b)
Landlord's


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supervision of the work, (c) Landlord approving final and complete plans and
specifications for the work and (d) the appropriate governmental agency, if any,
having final and complete plans and specifications for such work. All work
performed by Tenant or its contractor relating to the Installations shall
conform to applicable governmental laws, rules and regulations, including,
without limitation, the Disability Acts. Upon completion of the Installations,
Tenant shall deliver to Landlord "as built" plans. All Installations that
constitute improvements constructed within the Premises shall be surrendered
with the Premises at the expiration or earlier termination of this Lease, unless
Landlord requests that same be removed pursuant to Section 2.3 of this Lease.
TENANT SHALL INDEMNIFY AND SAVE LANDLORD HARMLESS FROM ANY AND ALL COSTS,
EXPENSES (INCLUDING REASONABLE ATTORNEYS' FEES AND COSTS), DEMANDS, CLAIMS,
CAUSES OF ACTION AND LIENS ARISING FROM OR IN CONNECTION WITH ANY INSTALLATIONS
PERFORMED BY OR ON BEHALF OF TENANT. All Installations performed by or on behalf
of Tenant will be performed diligently and in a first-class workmanlike manner,
and in compliance with all applicable laws, ordinances, regulations and rules of
any public authority having jurisdiction over the Building and/or Tenant's and
Landlord's insurance carriers. Landlord will have the right, but not the
obligation, to inspect periodically the work on the Premises and may require
changes in the method or quality of the work.

     7.3.4 Approvals: Any approval by Landlord (or Landlord's architect and/or
engineers) of any of Tenant's contractors or Tenant's drawings or plans or
specifications which are prepared in connection with any construction of
improvements (including without limitation, Tenant's Improvements) in the
Premises shall not in any way be construed as or constitute a representation or
warranty of Landlord as to the abilities of the contractor or the adequacy or
sufficiency of such drawings, plans or specifications or the improvements to
which they relate, for any use, purpose or condition.


                                    ARTICLE 8
                          INSURANCE, FIRE AND CASUALTY

SECTION 8.1  TOTAL OR PARTIAL DESTRUCTION OF THE BUILDING OR THE PREMISES:
Tenant covenants and agrees to immediately give Landlord telephonic and written
notice of any fire or other casualty affecting the Premises or the Building. In
the event that the Building should be totally destroyed by fire or other
casualty or in the event the Building (or any portion thereof) should be so
damaged that rebuilding or repairs cannot be completed, in Landlord's reasonable
opinion, within two hundred seventy (270) days of Landlord's becoming aware of
the applicable fire or casualty, either Landlord or Tenant may, at its option,
terminate this Lease, by written notice to the other, with Tenant's notice to be
given within ten (10) days after being advised by Landlord that the rebuilding
or repairs cannot be completed within two hundred seventy (270) days. In the
event the Building or the Premises should be damaged by fire or other casualty
and, in Landlord's reasonable opinion, the rebuilding or repairs can be
completed within two hundred seventy (270) days of Landlord's becoming aware of
the applicable fire or casualty, or if the damage should be more serious but
neither Landlord nor Tenant elect to terminate this Lease pursuant to this
Section, Landlord shall, within sixty (60) days after the date of receipt of
notice of such damage, commence to rebuild or repair the Building and the
Premises (including Tenant's Improvements, but only to the extent of insurance
proceeds actually received by Landlord for the repair of Tenant's Improvements),
and shall pursue with reasonable diligence the repair and restoration of the
Building and the Premises to substantially the same condition which existed
immediately prior to the happening of the casualty, except that Landlord shall
not be required to rebuild, repair or replace any part of the furniture,
equipment, fixtures, inventory, supplies or any other personalty or any other
improvements (except Tenant's Improvements, but only to the extent of insurance
proceeds actually received by Landlord for the repair of Tenant's Improvements
which shall be first utilized by Landlord before any proceeds of Landlord's
insurance) which may have been placed by Tenant or other tenants within the
Building or at the Premises. Landlord shall allow Tenant a proportionate
diminution of Base Rent and Additional Rent as may be fair and reasonable under
the circumstances during any period of reconstruction or repair of the Premises
due to an occurrence contemplated in this Section 8.1; provided, that Base Rent
and Additional Rent shall be abated only


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to the extent Landlord is compensated for such Base Rent and Additional Rent by
loss of rents insurance, if any. Notwithstanding Landlord's restoration
obligation, in the event any mortgagee under a deed of trust, security agreement
or mortgage on the Building should require that the insurance proceeds be used
to retire or reduce the mortgage debt or if the insurance company issuing
Landlord's fire and casualty insurance policy fails or refuses to pay Landlord
the proceeds under such policy, Landlord have no obligation to rebuild and this
Lease shall terminate upon notice by Landlord to Tenant. Any insurance which may
be carried by Landlord or Tenant against loss or damage to the Building or to
the Premises shall be for the sole benefit of the party carrying such insurance
and under its sole control. Upon termination of the Lease pursuant to this
Section, Base Rent and Additional Rent shall be abated from the date of the fire
or casualty. Landlord and Tenant agree that the foregoing provisions of this
Section 8.1 are to govern their respective rights and obligations in the event
of any damage or destruction and supersede and are in lieu of the provisions of
any applicable law, statute, ordinance, rule, regulation, order or ruling now or
hereafter in force which provide remedies for damage or destruction of leased
premises (including, without limitation, the provisions of California Civil Code
Section 1932, Subsection 2, and Section 1933, Subsection 4 and any successor
statute or laws of a similar nature).

SECTION 8.2 TENANT'S INSURANCE:

     8.2.1 Types of Coverage: Tenant covenants and agrees that from and after
the date of delivery of the Premises from Landlord to Tenant, Tenant will carry
and maintain, at its sole cost and expense, the insurance set forth below:

          (a)  Liability Insurance: Commercial General Liability Insurance
               covering the Premises and Tenant's use thereof against claims for
               personal or bodily injury or property damage occurring upon, in
               or about the Premises (including contractual indemnity and
               liability coverage), such insurance to insure both Tenant and, as
               additional named insureds, Landlord and its subsidiaries,
               directors, agents and employees and the Property Manager, with
               limits of not less than $1,000,000.00 per occurrence and
               $2,000,000.00 in the aggregate, combined single limit, with
               respect to injury to any number of persons and all property
               damage, without a deductible. If the Agreed Rentable Area of the
               Premises is more than 20,000 square feet, then, in addition to
               and not in lieu of the above-stated coverage, Tenant shall carry
               umbrella or so-called excess coverage in an amount not less than
               $1,000,000.00 over Tenant's base coverage amount with no
               deductible. This insurance coverage shall extend to any liability
               of Tenant arising out of the indemnities provided for in this
               Lease.

          (b)  Property Insurance: Property insurance on an "all-risk" coverage
               basis covering all fixtures, equipment and personalty located in
               the Premises, in an amount not less than one hundred percent
               (100%) of full replacement cost thereof, with a deductible not to
               exceed $1,000.00. Such policy will be written in the names of
               Tenant, Landlord, and any other parties reasonably designated by
               Landlord from time to time, as their respective interests may
               appear.

          (c)  Workers Compensation Insurance: Worker's compensation insurance
               including Employer's Liability Insurance with limits in amounts
               not less than $500,000 per accident, $500,000 per individual, and
               $500,000 per policy-disease. Said policy shall insure against and
               satisfy Tenant's obligations and liabilities under the worker's
               compensation laws of the state where the Property is located.

          (d)  Such other insurance as Landlord may reasonably require from time
               to time.

     8.2.2 Other Requirements of Insurance: All such insurance will be issued
and underwritten by companies with an A.M. Best rating of not less than A-VIII
licensed to do business in the state where the Premises is located and will
contain endorsements that (a) such insurance may not lapse with respect to
Landlord or Property Manager or be canceled or amended with respect to Landlord
or Property Manager without the insurance company giving Landlord and Property
Manager at least sixty


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<PAGE>   19

(60) days prior written notice of such cancellation or amendment, (b) Tenant
will be solely responsible for payment of premiums, (c) in the event of payment
of any loss covered by such policy, Landlord or Landlord's designees will be
paid first by the insurance company for Landlord's loss and (d) Tenant's
insurance is primary in the event of overlapping coverage which may be carried
by Landlord.

     8.2.3 Proof of Insurance: Tenant shall deliver to Landlord duplicate
originals of certificates (policies at Landlord's request) of insurance required
by this Section 8.2 prior to the Commencement Date and duly executed originals
of binders of such insurance evidencing in-force coverage, within ten (10) days
prior to the commencement of construction of Tenant's Improvements. Further,
Tenant shall deliver to Landlord renewals thereof at least thirty (30) days
prior to the expiration of the respective policy terms.

SECTION 8.3 LANDLORD'S INSURANCE:

     8.3.1 Types of Coverage: Landlord covenants and agrees that from and after
the date of delivery of the Premises from Landlord to Tenant, Landlord will
carry and maintain the insurance set forth below:

          (a)  Liability Insurance: Commercial General Liability Insurance
               covering the Building and all Common Areas, insuring against
               claims for personal or bodily injury or property damage occurring
               upon, in or about the Building or Common Areas with limits of not
               less than $1,000,000.00 per occurrence and $2,000,000.00 in the
               aggregate, combined single limit, with respect to injury to any
               number of persons and property damage. This insurance coverage
               shall extend to any liability of Landlord arising out of the
               indemnities provided for in this Lease.

          (b)  Property Insurance: Landlord shall at all times during the term
               hereof maintain in effect a policy or policies covering the
               Building (excluding property required to be insured by Tenant) on
               an "all risk" basis in such amounts as Landlord may from time to
               time determine, providing protection against perils included
               within the standard form of "all risk" insurance policy
               promulgated in the State where the Property is located, and such
               other risks as Landlord may from time to time determine and with
               any such deductibles as Landlord may from time to time determine.

     8.3.2 Self-Insurance: Any insurance provided for in subsection 8.3.1 may be
effected by self-insurance or by a policy or policies of blanket insurance
covering additional items or locations or assureds, provided that the
requirements of this Section 8.3 are otherwise satisfied. Tenant shall have no
rights in any policy or policies maintained by Landlord.

SECTION 8.4 WAIVER OF SUBROGATION:

LANDLORD AND TENANT EACH HEREBY WAIVE ANY RIGHTS THEY MAY HAVE AGAINST THE OTHER
(INCLUDING, BUT NOT LIMITED TO, A DIRECT ACTION FOR DAMAGES) ON ACCOUNT OF ANY
LOSS OR DAMAGE OCCASIONED TO LANDLORD OR TENANT, AS THE CASE MAY BE (WHETHER OR
NOT SUCH LOSS OR DAMAGE IS CAUSED BY THE FAULT, NEGLIGENCE OR OTHER TORTIOUS
CONDUCT, ACTS OR OMISSIONS OF LANDLORD OR TENANT OR THEIR RESPECTIVE OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS OR INVITEES), to their respective property, the
Premises, its contents or to any other portion of the Building or the Property
arising from any risk covered by the current form of property insurance and fire
and extended coverage insurance promulgated by the applicable insurance board or
commission in the State where the Property is located and required to be carried
by Tenant and Landlord, respectively under subsections 8.2.1 and 8.3.1 of this
Lease. If a party waiving rights under this Section is carrying an "all-risk"
coverage insurance policy in the promulgated form used in the state where the
Property is located and an amendment to such promulgated form is passed, such
amendment shall be deemed not a part of such promulgated form until it applies
to the policy being carried by the waiving party. The parties hereto each, on
behalf of their respective insurance companies insuring


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<PAGE>   20

the property of either Landlord or Tenant against any such loss, waive any right
of subrogation that Landlord or Tenant or their respective insurers may have
against the other party or their respective officers, directors, employees,
agents or invitees and all rights of their respective insurance companies based
upon an assignment from its insured. Each party to this Lease agrees immediately
to give to each such insurance company written notification of the terms of the
mutual waivers contained in this Section, and to have said insurance policies
properly endorsed, if necessary, to prevent the invalidation of said insurance
coverage by reason of said waivers. The foregoing waiver shall be effective
whether or not the parties maintain the required insurance.

SECTION 8.5 INDEMNITY:

     8.5.1 Tenant's Indemnity: TENANT COVENANTS AND AGREES TO INDEMNIFY AND HOLD
LANDLORD, PROPERTY MANAGER AND THEIR RESPECTIVE PARTNERS, TRUST MANAGERS,
OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS HARMLESS FROM ALL CLAIMS, DEMANDS,
ACTIONS, DAMAGES, LOSS, LIABILITIES, JUDGMENTS, COSTS AND EXPENSES, INCLUDING
WITHOUT LIMITATION, ATTORNEYS' FEES AND COURT COSTS (EACH A "CLAIM" AND
COLLECTIVELY THE "CLAIMS") WHICH (I) ARE SUFFERED BY, RECOVERED FROM OR ASSERTED
AGAINST LANDLORD, (II) ARE NOT PAID BY INSURANCE CARRIED BY TENANT OR LANDLORD
(WITHOUT IN ANY WAY AFFECTING THE REQUIREMENTS OF OR LANDLORD'S RIGHTS UNDER
SECTION 8.2 AND (III) ARISE FROM OR IN CONNECTION WITH (A) THE USE OR OCCUPANCY
OF THE PREMISES AND/OR ANY ACCIDENT, INJURY OR DAMAGE OCCURRING IN OR AT THE
PREMISES OR (B) ANY BREACH BY TENANT OF ANY REPRESENTATION OR COVENANT IN THIS
LEASE; PROVIDED, HOWEVER, SUCH INDEMNIFICATION OF LANDLORD BY TENANT SHALL NOT
INCLUDE ANY CLAIM WAIVED BY LANDLORD UNDER SECTION 8.4 HEREOF, ANY CLAIM TO THE
EXTENT CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF LANDLORD OR ANY
CLAIM RELATING TO HAZARDOUS OR TOXIC MATERIALS EXCEPT TO THE EXTENT SUCH CLAIM
ARISES OUR OF A BREACH BY TENANT OF ANY OF THE PROVISIONS OF SUBSECTION 5.1.2.

     8.5.2 Landlord's Indemnity: LANDLORD WILL INDEMNIFY AND HOLD TENANT AND ITS
OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS HARMLESS FROM ALL CLAIMS WHICH ARE
SUFFERED BY, RECOVERED FROM OR ASSERTED AGAINST TENANT AND WHICH ARE NOT PAID BY
PROCEEDS OF INSURANCE CARRIED BY LANDLORD OR TENANT AND WHICH ARISE FROM OR IN
CONNECTION WITH (A) THE USE OF THE COMMON AREAS AND/OR ANY ACCIDENT, INJURY OR
DAMAGE OCCURRING IN OR ON THE COMMON AREAS OR (B) ANY BREACH BY LANDLORD OF ANY
REPRESENTATION OR COVENANT IN THIS LEASE; PROVIDED, HOWEVER, SUCH
INDEMNIFICATION OF TENANT BY LANDLORD SHALL NOT INCLUDE ANY CLAIM WAIVED BY
TENANT UNDER SECTION 8.4 HEREOF, ANY CLAIM TO THE EXTENT CAUSED BY THE
NEGLIGENCE OR WILLFUL MISCONDUCT OF TENANT OR ANY CLAIM RELATING TO HAZARDOUS OR
TOXIC MATERIALS EXCEPT TO THE EXTENT SUCH CLAIM ARISES OUT OF A BREACH BY
LANDLORD OF ANY OF THE PROVISIONS OF SUBSECTION 5.1.2.


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<PAGE>   21

                                    ARTICLE 9
                                  CONDEMNATION

SECTION 9.1 CONDEMNATION OF THE PROPERTY; If the Property or any portion thereof
that, in Landlord's reasonable opinion, is necessary to the continued efficient
and/or economically feasible use of the Property shall be taken or condemned in
whole or in part for public purposes, or sold to a condemning authority in lieu
of taking, then the term of this Lease shall, at the option of Landlord upon
written notice to Tenant, forthwith cease and terminate.

SECTION 9.2 CONDEMNATION OF PREMISES: In the event that all or substantially all
of the Premises are taken or condemned or sold in lieu thereof or Tenant will be
unable to use a substantial portion of the Premises for a period exceeding two
hundred ten (210) consecutive days by reason of a temporary taking, either
Landlord or Tenant may terminate this Lease by delivering written notice thereof
to the other within ten (10) business days after the taking, condemnation or
sale in lieu thereof.

SECTION 9.3 CONDEMNATION WITHOUT TERMINATION: If upon a taking or condemnation
or sale in lieu of the taking of all or less than all of the Property which
gives either Landlord or Tenant the right to terminate this Lease pursuant to
Section 9.1 or 9.2 and neither Landlord nor Tenant elect to exercise such
termination right, then this Lease shall continue in full force and effect,
provided that, if the taking, condemnation or sale includes any portion of the
Premises or the Building, the Base Rent and Additional Rent shall be
redetermined on the basis of the remaining square feet of Agreed Rentable Area
of the Premises or the Building. Landlord, at Landlord's sole option and
expense, shall restore and reconstruct the Building to substantially its former
condition to the extent that the same may be reasonably feasible, but such work
shall not be required to exceed the scope of the work done by Landlord in
originally constructing the Building, nor shall Landlord in any event be
required to spend for such work in an amount in excess of the amount received by
Landlord as compensation or damages (in excess of amounts retained by the
mortgagee of the Property relating to the property taken) for the part of the
Building or the Premises so taken.

SECTION 9.4 CONDEMNATION PROCEEDS: Landlord shall receive the entire award
(which shall include sales proceeds) payable as a result of a condemnation,
taking or sale in lieu thereof. Tenant hereby expressly assigns to Landlord any
and all right, title and interest of Tenant now or hereafter arising in and to
any such award. Tenant shall, however, have the right to recover from such
authority through a separate award which does not reduce the Landlord's award,
any compensation as may be awarded to Tenant on account of moving and relocation
expenses and depreciation to and removal of Tenant's physical property. Landlord
and Tenant agree that the foregoing provisions of this Article 9 are to govern
their respective rights and obligations in the event of any condemnation of the
Property or the Premises and supersede and are in lieu of the provisions of any
applicable law, statute, ordinance, rule, regulation, order or ruling now or
hereafter enforced which provide remedies for condemnation of leased premises
(including, without limitation, the provisions of California Code of Civil
Procedure Sections 1265.110 through 1265.160 and any successor statutes or laws
of a similar nature).


                                   ARTICLE 10
                                      LIENS

Tenant shall keep the Premises free from all liens arising out of any work
performed, materials furnished or obligations incurred by or for Tenant and
TENANT SHALL INDEMNIFY AND HOLD LANDLORD HARMLESS FROM ANY AND ALL CLAIMS,
CAUSES OF ACTION, DAMAGES, EXPENSES (INCLUDING REASONABLE ATTORNEYS' FEE AND
COSTS), ARISING FROM OR IN CONNECTION WITH ANY SUCH LIENS. In the event that
Tenant shall not, within ten (10) days following notification to Tenant of the
imposition of any such lien, cause the same to be released of record by payment
or the posting of a bond in amount, form and substance acceptable to Landlord,
Landlord shall have, in addition to all other remedies provided herein and by
law, the right but not the obligation, to cause the same to be released by such
means as it shall deem proper, including payment of or defense against the claim
giving rise to


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<PAGE>   22

such lien. All amounts paid or incurred by Landlord in connection therewith
shall be paid by Tenant to Landlord on demand and shall bear interest from the
date of demand until paid at the rate set forth in Section 16.9. Nothing in this
Lease shall be deemed or construed in any way as constituting the consent or
request of Landlord, express or implied, by inference or otherwise, to any
contractor, subcontractor, laborer or materialman for the performance of any
labor or the furnishing of any materials for any specific improvement,
alteration or repair of or to the Building or the Premises or any part thereof,
nor as giving Tenant any right, power or authority to contract for or permit the
rendering of any services or the furnishing of any materials that would give
rise to the filing of any mechanic's or other liens against the interest of
Landlord in the Property or the Premises.

                                   ARTICLE 11
                           TAXES ON TENANT'S PROPERTY

Tenant shall be liable for and shall pay, prior to their becoming delinquent,
any and all taxes and assessments levied against, and any increases in Real
Estate Taxes as a result of, any personal property or trade or other fixtures
placed by Tenant in or about the Premises and any improvements (excluding
Tenant's Improvements) constructed in the Premises by or on behalf of Tenant. In
the event Landlord, at its sole election, pays any such additional taxes, or
increases, Tenant will, within ten (10) days after demand, reimburse Landlord
for the amount thereof. Such amounts shall bear interest from the date paid by
Landlord until reimbursed by Tenant at the rate set forth in Section 16.9.

                                   ARTICLE 12
                            SUBLETTING AND ASSIGNING

SECTION 12.1 SUBLEASE AND ASSIGNMENT: Tenant shall not assign this Lease, or
allow it to be assigned, in whole or in part, by operation of law or otherwise
(it being agreed that for purposes of this Lease, assignment shall include,
without limitation the transfer of a majority interest of stock, partnership or
other forms of ownership interests, merger or dissolution) or mortgage or pledge
the same, or sublet the Premises or any part thereof or permit the Premises to
be occupied by any firm, person, partnership or corporation or any combination
thereof, other than Tenant, without the prior written consent of Landlord which
consent shall not be unreasonably withheld or delayed. In no event shall any
assignment or sublease ever release Tenant from any obligation or liability
hereunder. No assignee or sublessee of the Premises or any portion thereof may
assign or sublet the Premises or any portion thereof. Consent by Landlord to one
or more assignments or sublettings shall not operate as a waiver of Landlord's
rights as to any subsequent assignments and/or sublettings. All reasonable legal
fees and expenses incurred by Landlord in connection with any assignment or
sublease proposed by Tenant will be the responsibility of Tenant and will be
paid by Tenant within twenty (20) days of receipt of an invoice from Landlord.
In addition, Tenant will pay to Landlord an administrative overhead fee of not
less than $500.00 in consideration for Landlord's review of any requested
assignment or sublease.

SECTION 12.2 LANDLORD'S RIGHTS RELATING TO ASSIGNEE OR SUBTENANT: If this Lease
or any part hereof is assigned or the Premises or any part thereof are sublet,
Landlord may at its option collect directly from such assignee or sublessee all
rents becoming due to Tenant under such assignment or sublease and apply such
rent against any sums due to Landlord by Tenant hereunder, Tenant shall receive
twenty-five percent (25%) and Landlord shall receive seventy-five percent (75%)
of all profits associated with Subleasing, less Tenant's fair market leasing
commissions. In no event shall Tenant be required to pay any excess rent to
Landlord unless and until actually received by Tenant from Assignee or
Sublessee. Receipt by Landlord of rent from any assignee, sublessee or occupant
of the Premises or any part thereof shall not be deemed a waiver of the above
covenant in this Lease against assignment and subletting or a release of Tenant


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<PAGE>   23

under this Lease. In the event that, following an assignment or subletting, this
Lease or the rights and obligations of Tenant hereunder are terminated for any
reason, including without limitation in connection with default by or bankruptcy
of Tenant (which, for the purposes of this Section 12.2, shall include all
persons or entities claiming by or through Tenant), Landlord may, at its sole
option, consider this Lease to be thereafter a direct lease to the assignee or
subtenant of Tenant upon the terms and conditions contained in this Lease.

                                   ARTICLE 13
                                SUBORDINATION AND
                          TENANT'S ESTOPPEL CERTIFICATE

SECTION 13.1 SALE OF THE PROPERTY: In the event of a sale or conveyance by
Landlord of the Property, the same shall operate to release Landlord from any
and all liability under this Lease arising after the date of such sale, provided
that if a Security Deposit has been paid by Tenant, Landlord shall not be
released from liability with respect thereto unless Landlord transfers or
credits the Security Deposit to the applicable purchaser.

SECTION 13.2  SUBORDINATION, ATTORNMENT AND NOTICE:  This Lease is subject and
subordinate to any lease wherein Landlord is the tenant and to the liens of any
and all mortgages or deeds of trust, regardless of whether such lease, mortgages
or deeds of trust now exist or may hereafter be created with regard to all or
any part of the Property, and to any and all advances to be made thereunder, and
to the interest thereon, and all modifications, consolidations, renewals,
replacements and extensions thereof. Tenant also agrees that any lessor,
mortgagee or trustee may elect (which election shall be revocable) to have this
Lease superior to any lease or lien of its mortgage or deed of trust, and in the
event of such election and upon notification by such lessor, mortgagee or
trustee to that effect, this Lease shall be deemed superior to the said lease,
mortgage or deed of trust, whether this Lease is dated prior to or subsequent to
the date of said lease, mortgage or deed of trust. Tenant shall, in the event of
the sale or assignment of Landlord's interest in the Premises (except in a
sale-leaseback financing transaction), or in the event of a termination of any
lease in a sale-leaseback financing transaction wherein Landlord is the lessee,
attorn to and recognize such purchaser, assignee or mortgagee as Landlord under
this Lease. Tenant shall, in the event of any proceedings brought for the
foreclosure of, or in the event of the exercise of the power of sale under, any
mortgage or deed of trust covering the Premises, attorn to and recognize
purchaser at such sale, assignee, or mortgagee, as the case may be, as Landlord
under this Lease. Tenant shall not seek to enforce any remedy it may have for
any default on the part of Landlord without giving written notice specifying the
default in reasonable detail to any lessor, mortgagee or trustee whose address
has been delivered to Tenant, and affording such lessor, mortgagee or trustee a
reasonable opportunity to perform and/or cure Landlord's default. Tenant further
agrees that any lessor, mortgagee, trustee or purchaser at foreclosure shall not
be liable for any acts of Landlord, shall not be liable for the Security Deposit
if not actually received by any such party, be bound by any amendment of this
Lease to which it did not consent in writing or be obligated to recognize
Tenant's payment of any Rent which is paid to Landlord more than thirty (30)
days in advance of its due date. The above subordination and attornment clauses
shall be self-operative and no further instruments of subordination or
attornment need be required by any mortgagee, trustee, lessor, purchaser or
assignee. In confirmation thereof, Tenant agrees that, upon the request of
Landlord, or any such lessor, mortgagee, trustee, purchaser or assignee, Tenant
shall execute and deliver whatever instruments may be required for such purposes
and to carry out the intent of this Section 13.2.

SECTION 13.3 TENANT'S ESTOPPEL CERTIFICATE: Tenant shall, within ten (10) days
of the receipt of a request of Landlord or any mortgagee of Landlord, without
additional consideration, deliver an estoppel certificate, consisting of
reasonable statements required by Landlord, any mortgagee or purchaser of any
interest in the Property, which statements may include but shall not be limited
to the following: the commencement date of this Lease; the amount of any
security deposit; that this Lease is in full force and effect, with rental paid
through the current date specified by Tenant and that Tenant is not in default;
that this Lease has not been modified or amended; that Landlord is not in
default and has fully performed all of its obligations hereunder. If Tenant is
unable to make any of the statements contained in the estoppel certificate
because the same is untrue, Tenant shall with specificity state the reason why
such statement is untrue. Tenant shall, if requested by


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<PAGE>   24

Landlord or any such mortgagee, deliver to Landlord a fully executed instrument
in form reasonably satisfactory to Landlord evidencing the agreement of Tenant
to the mortgage or other hypothecation by Landlord of the interest of Landlord
hereunder.

                                   ARTICLE 14
                                     DEFAULT

SECTION 14.1 DEFAULTS BY TENANT: The occurrence of any of the events described
in subsections 14.1.1 through 14.1.7 shall constitute a default and breach of
this Lease by Tenant.

     14.1.1 Failure to Pay Rent: The failure by Tenant to make any payment of
Rent or any other payment required to be made by Tenant hereunder, as and when
due, where such failure continues for a period of three (3) days after written
notice thereof from Landlord to Tenant; provided, however, that any such notice
will be in lieu of, and not in addition to, any notice required under applicable
law (including, without limitation, the provisions of California Code of Civil
Procedure Section 1161 regarding unlawful detainer actions or any successor
statute or law of a similar nature).

     14.1.2 Failure to Perform: Except for failure covered by subsection 14.1.1
or 14.1.3, any failure by Tenant to observe and perform any provision of this
Lease to be observed or performed by Tenant where such failure continues for
fifteen (15) (or such other shorter or longer period of time as may otherwise be
specified in this Lease as to any particular provision hereof) days after
written notice to Tenant, provided that if such failure cannot be cured within
said period, Tenant shall not be in default hereunder so long as Tenant
commences curative action within such period, diligently and continuously
pursues the curative action, and fully and completely cures the failure within
thirty (30) days after such written notice to Tenant. The provisions of any such
notice will be in lieu of, and not in addition to, any notice required under
applicable law (including, without limitation, California Code of Civil
Procedure Section 1161 regarding unlawful detainer actions and any successor
statute or similar law).

     14.1.3 [Intentionally omitted]

     14.1.4 Bankruptcy, Insolvency, Etc: Tenant or any Guarantor of Tenant's
obligations hereunder, cannot meet its obligations as they become due; or is
declared insolvent according to any law; or an assignment of Tenant's or
Guarantor's property is made for the benefit of creditors; or a receiver or
trustee is appointed for Tenant or Guarantor or their respective properties; or
the interest of Tenant or Guarantor under this Lease is levied on under
execution or under other legal process; or any petition is filed by or against
Tenant or Guarantor to declare Tenant or Guarantor bankrupt or to delay, reduce
or modify Tenant's or Guarantor's debts or obligations; or any petition is filed
or other action taken to reorganize or modify Tenant's or Guarantor's capital
structure if either Tenant or Guarantor be a corporation or other entity
(provided that no such levy, execution, legal process or petition filed against
Tenant or Guarantor shall constitute a breach of this Lease if Tenant or
Guarantor shall vigorously contest the same by appropriate proceedings and shall
remove or vacate the same within sixty (60) days from the date of its creation,
service or filing).

     14.1.5 Abandonment; Vacation: The abandonment of the Premises by Tenant, or
the vacating of the Premises by Tenant, which shall be conclusively presumed if
Tenant is absent from the Premises for ten (10) consecutive days or more or if
Tenant shall fail to move into or take possession of the Premises within ten
(10) days after the date on which Rent is to commence under the terms of this
Lease.

     14.1.6 Loss of Right to do Business: If Tenant fails to maintain its right
to do business in the state in which the Property is located or fails to pay any
applicable annual franchise or other applicable taxes or assessments as and when
the same become finally due and payable.

     14.1.7 Dissolution or Liquidation: Tenant dissolves or liquidates or
otherwise fails to maintain its corporate or partnership structure, as
applicable.


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<PAGE>   25

SECTION 14.2 REMEDIES OF LANDLORD: Upon the occurrence of any default by tenant
specified in Section 14.1, Landlord, at its option, may in addition to all other
rights and remedies provided herein or at law or in equity, exercise one or more
of the remedies set forth in subsections 14.2.1, 14.2.2 or 14.2.3.

     14.2.1 Termination of the Lease: Upon the occurrence of a default
hereunder, Landlord may terminate this Lease and Tenant's right of possession of
the Premises (whereupon all obligations and liabilities of Landlord hereunder
shall terminate) and, without further notice and without liability, repossess
the Premises. Upon any such termination, Landlord shall be entitled to recover:

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

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

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

Any other amount necessary to compensate Landlord for all the detriment
proximately caused by Tenant's failure to perform its obligations under this
Lease or which, in the ordinary course of things, results therefrom including,
but not limited to: attorneys' fees and costs; brokers' commissions; the costs
of refurbishment, alterations, renovation and repair of the Premises, and
removal (including the repair of any damage caused by such removal) and storage
(or disposal) of Tenant's personal property, equipment, fixtures, alterations
and any other items which Tenant is required under this Lease to remove but does
not remove, as well as the unamortized value of any free rent, reduced rent,
free parking, reduced rate parking and any tenant improvement allowance or other
costs or economic concessions provided, paid, granted or incurred by Landlord
pursuant to this Lease. The unamortized value of such concessions shall be
determined by taking the total value of such concessions and multiplying such
value by a fraction, the numerator of which is the number of months of the Lease
Term not yet elapsed as of the date on which this Lease is terminated, and the
denominator of which is the total number of months of the Lease Term.

As used in Subsections 14.2.1(a) and (b) above, the "worth at the time of award"
is computed by allowing interest at the rate prescribed in Section 16.9 hereof.
As used in Subsection 14.2.1(c) above, the "worth at the time of award" is
computed by discounting such amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of award plus one percent (1%).

     14.2.2 Collect Rent as it Becomes Due: Landlord also has the remedy
described in California Civil Code Section 1951.4, providing that Landlord may
continue this Lease in effect after Tenant's breach and abandonment and recover
Rent as it becomes due, if Tenant has the right to sublet or assign, subject
only to reasonable limitations.

     14.2.3 Cure of Default: Landlord may enter upon the Premises, without
having any liability therefor, and do whatever Tenant is obligated to do under
the terms of this Lease and Tenant agrees to reimburse Landlord on demand for
any expenses which Landlord may incur in effecting compliance with Tenant's
obligations under this Lease and Tenant further agrees that Landlord shall not
be liable for any damages resulting to Tenant from such action, WHETHER CAUSED
BY THE NEGLIGENCE OF LANDLORD OR OTHERWISE.


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<PAGE>   26

     14.2.4 Continuing Obligations: No re-entering upon the Premises or any part
thereof pursuant to subsection 14.2.3 of this Section or otherwise shall relieve
Tenant or any Guarantor of its liabilities and obligations hereunder, all of
which shall survive such or re-entering. In the event of any such re-entering
upon the Premises or any part thereof by reason of the occurrence of a default,
Tenant will continue to pay to Landlord Rent required to be paid by Tenant.

     14.2.4 Waiver of Right to Claim Forfeiture. Tenant hereby waives, so far as
permitted by law, any right it may have under California Code of Civil Procedure
Section 1179 to apply to the Court to relieve Tenant from forfeiture of this
Lease following a judgment for possession of the Premises.

     14.2.5 Cumulative Remedies: No right or remedy herein conferred upon or
reserved to Landlord is intended to be exclusive of any other right or remedy,
and each and every right and remedy shall be cumulative and in addition to any
other right or remedy given hereunder or now or hereafter existing at law or in
equity or by statute. In addition to the other remedies provided in this Lease,
Landlord shall be entitled, to the extent permitted by applicable law, to
injunctive relief in case of the violation, or attempted or threatened
violation, of any of the covenants, agreements conditions or provisions of this
Lease, or to a decree compelling performance of any of the covenants,
agreements, conditions or provisions of this Lease, or to any other remedy
allowed to Landlord at law or in equity.

SECTION 14.3 DEFAULTS BY LANDLORD: Landlord shall be in default under this Lease
if Landlord fails to perform any of its obligations hereunder and said failure
continues for a period of thirty (30) days after Tenant delivers written notice
thereof to Landlord (to each of the addresses required by this Section) and each
mortgagee who has a lien against any portion of the Property and whose name and
address has been provided to Tenant, provided that if such failure cannot
reasonably be cured within said thirty (30) day period, Landlord shall not be in
default hereunder if the curative action is commenced within said thirty (30)
day period and is thereafter diligently pursued until cured. In no event shall
(i) Tenant claim a constructive or actual eviction or that the Premises have
become unsuitable hereunder or (ii) a constructive or actual eviction or breach
of the implied warranty of suitability be deemed to have occurred under this
Lease, prior to the expiration of the notice and cure periods provided under
this Section 14.3. Any notice of a failure to perform by Landlord shall be sent
to Landlord at the addresses and to the attention of the parties set forth in
Item 14 of Article 1. Any notice of a failure to perform by Landlord not sent to
Landlord at all addresses and/or to the attention of all parties required under
this Section and to each mortgagee who is entitled to notice or not sent in
compliance with Article 15 shall be of no force or effect.

SECTION 14.4 LANDLORD'S LIABILITY:

     14.4.1 Limitations of Recourse: Tenant is granted no contractual right of
termination by this Lease, except to the extent and only to the extent set forth
in Sections 8.1 and 9.2, or in any Rider which may be attached hereto. If Tenant
shall recover a money judgment against Landlord, such judgment shall be
satisfied only out of the right, title and interest of Landlord in the Property
as the same may then be encumbered and Landlord, its trust managers, partners,
officers, employees and shareholders shall not be liable for any deficiency or
other property of Landlord be levied for execution. In no event shall Landlord
be liable to Tenant for consequential or special damages by reason of a failure
to perform (or a default) by Landlord hereunder or otherwise.

     14.4.2 Limitations on Landlord's Liability: Unless covered by Section
8.5.2, Landlord shall not be liable to Tenant for any claims, actions, demands,
costs, expenses or damage or liability of any kind arising from (i) the use,
occupancy or enjoyment of the Premises by Tenant or any person therein or
holding under Tenant or by or through the acts or omissions of any of their
respective employees, officers, agents, invitees, or contractors; (ii) fire,
explosion, falling sheetrock, gas, electricity, water, rain, or snow, or
dampness or leaks in any part of the Premises, (iii) the pipes, appliances or
plumbing works or from heating, ventilation or air conditioning equipment, the
roof, street, or subsurface, or (iv) tenants or any persons either in the
Premises or elsewhere in the Building (other than Common Areas), or by occupants
of Property adjacent to the Building or Common Areas, or by the public or by the


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<PAGE>   27

construction of any private, public, or quasi-public work. In no event shall
Landlord be liable to Tenant for any loss of or damage to property of Tenant or
of others located in the Premises or the Building by reason of theft or
burglary.

                                   ARTICLE 15
                                     NOTICES

Any notice required or permitted in this Lease shall be given in writing, sent
by (a) personal delivery, or (b) Federal Express or similar overnight carrier
with proof of delivery, or (c) United States mail, postage prepaid, addressed as
provided in Item 14 of Article 1 and Section 14.3 hereof, or to such other
address or to the attention of such other person as shall be designated from
time to time in writing by the applicable party and sent in accordance herewith.
Notice also may be given by telex or fax, provided each transmission is
confirmed (and such confirmation is supported by documented evidence) as
received and further provided a telex or fax number, as the case may be, is set
forth in Item 14 of Article 1. Any such notice or communication shall be deemed
to have been given either at the time of receipt of personal delivery or, in the
case of overnight courier service or mail, as of the date of first attempted
delivery at the address and in the manner provided herein, or in the case of
telegram or telex or fax, upon receipt.


                                   ARTICLE 16
                            MISCELLANEOUS PROVISIONS

SECTION 16.1 BUILDING NAME AND ADDRESS: Tenant shall not, without the prior
written consent of Landlord, use the name of the Building for any purpose other
than as the address of the business to be conducted by Tenant in the Premises,
and in no event shall Tenant acquire any rights in or to such names. Landlord
shall have the right at any time to change the name, number, address, or
designation by which the Building is known.

SECTION 16.2 SIGNAGE: Tenant shall not without the prior written consent of
Landlord erect, inscribe, paint, affix or display anything or other insignia
upon any part of the Property or any portion of the Premises. Without in any way
limiting the foregoing, any signs erected by Tenant shall conform to all laws,
ordinances, statutes, rules, regulations or other governmental or
quasi-governmental or restrictive covenant requirements and standard signage
criteria that Landlord has prescribed for the Property. Once approved by
Landlord and erected by Tenant, Tenant shall keep and maintain such signs in
good repair and remove the same and restore the Premises (and/or Property) prior
to the Expiration Date (as set forth in Item 5 of Article 1) to their original
condition.

SECTION 16.3 NO WAIVER: No waiver by Landlord or by Tenant of any provision of
this Lease shall be deemed to be a waiver by either party of any other provision
of this Lease. No waiver by Landlord or Tenant of any breach by the other shall
be deemed a waiver of any subsequent breach by such party of the same or any
other provision. The failure of Landlord or Tenant to insist at any time upon
the strict performance of any covenant or agreement or to exercise any option,
right, power or remedy contained in this Lease shall not be construed as a
waiver or a relinquishment thereof for the future. Landlord's or Tenant's
consent to or approval of any act by the other party requiring the other party's
consent or approval shall not be deemed to render unnecessary the obtaining
consent to or approval of any subsequent act of the other party. No act or thing
done by Landlord or Landlord's agents during the term of this Lease shall be
deemed an acceptance of a surrender of the Premises, unless done in writing
signed by Landlord. The delivery of the keys or access cards to any employee or
agent of Landlord shall not operate as a termination of this Lease or a
surrender of the Premises. The acceptance of any Rent by Landlord following a
breach of this Lease by Tenant shall not constitute a waiver by Landlord of such
breach or any other breach. No waiver by Landlord or Tenant of any provision of
this Lease shall be deemed to have been made unless such waiver is expressly
stated in writing signed by the waiving party. No payment by Tenant or receipt
by Landlord of a lesser amount than the monthly installment of Rent due under
this Lease shall be deemed to be other than on account of the earliest Rent due
hereunder, nor shall any endorsement or statement on any check or any letter
accompanying any check or payment as Rent be deemed an


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<PAGE>   28

accord and satisfaction and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance of such Rent or pursue any
other remedy which may be available to Landlord.

SECTION 16.4 APPLICABLE LAW: This Lease shall be governed by and construed in
accordance with the laws of the state where the Property is located.
Furthermore, this Lease shall not be construed against either party more or less
favorably by reason of authorship or origin of language.

SECTION 16.5 SUCCESSORS AND ASSIGNS: Subject to Article 12 hereof, all of the
covenants, conditions and provisions of this Lease shall be binding upon and
shall inure to the benefit of the parties hereto and their respective heirs,
personal representative, successors and assigns.

SECTION 16.6 BROKERS: Tenant warrants that it has had no dealings with any real
estate broker or agent in connection with the negotiation of this Lease,
excepting only the broker named in Item 11 of Article 1, and that it knows of no
other real estate brokers or agents who are or might be entitled to a commission
in connection with this Lease. TENANT AGREES TO INDEMNIFY AND HOLD HARMLESS
LANDLORD FROM AND AGAINST ANY LIABILITY OR CLAIM, WHETHER MERITORIOUS OR NOT,
ARISING IN RESPECT TO BROKERS AND/OR AGENTS NOT SO NAMED. Landlord has agreed to
pay the fees of the brokers (but only the brokers) named in Items 10 and 11 of
Article 1 to the extent that Landlord has agreed to do so pursuant to a written
agreement with such brokers.

SECTION 16.7 SEVERABILITY: If any provision of this Lease or the application
thereof to any person or circumstances shall be invalid or unenforceable to any
extent, the application of such provisions to other persons or circumstances and
the remainder of this Lease shall not be affected thereby and shall be enforced
to the greatest extent permitted by law.

SECTION 16.8 EXAMINATION OF LEASE: Submission by Landlord of this instrument to
Tenant for examination or signature does not constitute a reservation of or
option for lease. This Lease will be effective as a lease or otherwise only upon
execution by and delivery to both Landlord and Tenant.

SECTION 16.9 INTEREST ON TENANT'S OBLIGATIONS: In addition to the late charges
specified in Section 3.4, any amount due from Tenant to Landlord which is not
paid on or before the date due shall bear interest at the lower of (i) eighteen
percent (18%) per annum or (ii) the highest rate from time to time allowed by
applicable law, from the date such payment is due until paid, but the payment of
such interest shall not excuse or cure the default.

SECTION 16.10 TIME: Time is of the essence in this Lease and in each and all of
the provisions hereof. Whenever a period of days is specified in this Lease,
such period shall refer to calendar days unless otherwise expressly stated in
this Lease.

SECTION 16.11 DEFINED TERMS AND MARGINAL HEADINGS: The words Landlord and Tenant
as used herein shall include the plural as well as singular. If more than one
person is named as Tenant, the obligations of such persons are joint and
several. The headings and titles to the articles, sections and subsections of
this Lease are not a part of this Lease and shall have no effect upon the
construction or interpretation of any part of this Lease.

SECTION 16.12 AUTHORITY OF TENANT: Tenant and each person signing this Lease on
behalf of Tenant represents to Landlord as follows: Tenant and its general
partners and managing members, if applicable, are each duly organized and
legally existing under the laws of the state of its incorporation and is duly
qualified to do business in the state where the Property is located. Tenant and
its general partners and managing members, if applicable, each has all requisite
power and all governmental certificates of authority, licenses, permits,
qualifications and other documentation to lease the Premises and to carry on its
business as now conducted and as contemplated to be conducted. Each person
signing on behalf of Tenant is authorized to do so.


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<PAGE>   29

SECTION 16.13 FORCE MAJEURE: Whenever a period of time is hereby prescribed for
action to be taken by Landlord or Tenant, the party taking the action shall not
be liable or responsible for, and there shall be excluded from the computation
of any such period of time, any delays due to strikes, riots, acts of God,
shortages of labor or materials, war, governmental laws, regulations or
restrictions or any other causes of any kind whatsoever which are beyond the
reasonable control of such party; provided, however, in no event shall the
foregoing apply to the financial obligations of either Landlord or Tenant to the
other under this Lease, including Tenant's obligation to pay Base Monthly Rent,
Additional Rent or any other amount payable to Landlord hereunder.

SECTION 16.14 RECORDING: This Lease shall not be recorded. However, Landlord
shall have the right to record a short form or memorandum hereof, at Landlord's
expense, at any time during the terms hereof, and, if requested, Tenant agrees
(without charge of Landlord) to join in the execution thereof.

SECTION 16.15 NO REPRESENTATIONS: LANDLORD AND LANDLORD'S AGENTS HAVE MADE NO
WARRANTIES, REPRESENTATIONS OR PROMISES (EXCEPT OR IMPLIED) WITH RESPECT TO THE
PREMISES, THE BUILDING OR ANY OTHER PART OF THE PROPERTY (INCLUDING, WITHOUT
LIMITATION, THE CONDITION, USE OR SUITABILITY OF THE PREMISES, THE BUILDING OR
THE PROPERTY), EXCEPT AS HEREIN EXPRESSLY SET FORTH AND NO RIGHTS, EASEMENTS OR
LICENSES ARE ACQUIRED BY TENANT BY IMPLICATION OR OTHERWISE EXCEPT AS EXPRESSLY
SET FORTH IN THE PROVISIONS OF THIS LEASE.

SECTION 16.16 PARKING: The parking areas and any parking structures shall be
designated for automobile parking on a non-exclusive basis for all Property
tenants (including Tenant) and their respective employees, customers, invitees
and visitors. Parking and delivery areas for all vehicles shall be in accordance
with parking regulations established from time to time by Landlord with which
Tenant agrees to conform. Tenant shall only permit parking by its employees,
customers and agents of appropriate vehicles in appropriate designated parking
areas.

SECTION 16.17 ATTORNEYS' FEES: In the event of any legal action or proceeding
brought by either party against the other arising out of this Lease, the
prevailing party shall be entitled to recover reasonable attorneys' fees and
costs incurred in such action (including, without limitation, all costs of
appeal) and such amount shall be included in any judgment rendered in such
proceeding.

SECTION 16.18 NO LIGHT, AIR OR VIEW EASEMENT: Any diminution or shutting off of
light, air or view by any structure which may be erected on the Property or
lands adjacent to the Property shall in no way affect this Lease or impose any
liability on Landlord (even if Landlord is the adjacent land owner).

SECTION 16.19 SURVIVAL OF INDEMNITIES: Each indemnity agreement and hold
harmless agreement contained herein shall survive the expiration or termination
of the Lease.

SECTION 16.20 TENANT AND LANDLORD EACH: (1) AGREE NOT TO ELECT A TRIAL BY JURY
WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS AGREEMENT OR THE RELATIONSHIP
BETWEEN THE PARTIES AS TENANT AND LANDLORD THAT IS TRIABLE OF RIGHT BY A JURY;
AND (2) WAIVE ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE
EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF RIGHT TO
TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH
THE BENEFIT OF COMPETENT LEGAL COUNSEL.

SECTION 16.21 ENTIRE AGREEMENT: This Lease contains all of the agreements of the
parties hereto with respect to any matter covered or mentioned in this Lease,
and no prior agreement, understanding or representation pertaining to any such
matter shall be effective for any purpose. No provision of this Lease may be
amended or added to except by an agreement in writing signed by the parties
hereto or their respective successors in interest.


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<PAGE>   30

SECTION 16.22   [Intentionally omitted]

SECTION 16.23   [Intentionally omitted]

SECTION 16.24   [Intentionally omitted]

SECTION 16.25 LANDLORD'S LIEN: Tenant grants to Landlord an express contractual
lien on and security interest in and to all goods, equipment, furnishings,
fixtures, furniture, chattels and personal property of whatever nature owned by
Tenant attached or affixed to or used in and about the Premises on the date of
this Lease or at any time after the date of this Lease or otherwise located in
the Premises or relating to Tenant's use of the Premises and all renewals or
replacements or substitutions for any of the foregoing, all building materials
and equipment now or hereafter delivered to the Premises and intended to be
installed in the Premises and all security deposits and advance rentals under
lease agreements on the date of this Lease or at any time after the date of this
Lease covering or affecting the Premises and held by or for the benefit of
Tenant, and all proceeds of the foregoing (including by way of illustration, but
not limitation, proceeds of any insurance which may accrue to Tenant by reason
of damage or destruction of any such property). Upon Landlord's request, Tenant
shall execute and deliver to Landlord two (2) originals of a financing statement
in form sufficient to perfect the security interest granted hereunder. A carbon,
photographic or other reproduction of this Lease or this provision is sufficient
and may be filed as a financing statement. Landlord shall have all the rights
and remedies of a secured party under the Uniform Commerce Code as adopted in
the State where the Property is located and this lien and security interest may
be foreclosed by process of law. The requirement of reasonable notice prior to
any sale under Article 9 of the applicable Uniform Commerce Code shall be met if
such notice is given in the manner prescribed herein at least ten (10) days
before the day of sale. Any public sale made pursuant to the provisions of this
Section shall be deemed to have been conducted in a commercially reasonable
manner if held in the Premises after the time place and method of sale and a
general description of the types of property to be sold have been advertised for
ten (10) consecutive days prior to the date of sale in a daily newspaper
published in the county where the Building is located.

SECTION 16.26 LEASE CONTENTS: This lease consists of sixteen Articles and
Exhibits "A" through "D", Riders 1 through __, and Addenda 1 through __.

     IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Lease as of the date specified in the introductory paragraph of this Lease.

                                   LANDLORD:

                                   AMERICAN INDUSTRIAL PROPERTIES REIT


                                   By:   /s/ Joseph D. Akers
                                   ----------------------------
                                   Name: Joseph D. Akers
                                   Title: Vice President


                                   TENANT:

                                   MEDSTONE INTERNATIONAL, INC.


                                   By:   /s/ Mark Selawski
                                   ------------------------------
                                   Name: Mark Selawski
                                   Title: Chief Financial Officer


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                                      29