<PAGE>

                                                                  Exhibit 10(21)

                      STANDARD INDUSTRIAL/COMMERCIAL LEASE

                          [Multi-Tenant - Triple Net]



                                    BETWEEN



                            OTAY BUSINESS PARK, LLC,
                     a California limited liability company



                                    LANDORD



                                      AND



                            AXSYS TECHNOLOGIES, INC.
                             a Delaware corporation



                                     TENANT

<PAGE>

                      STANDARD INDUSTRIAL/COMMERCIAL LEASE
                      ------------------------------------

                          [MULTI-TENANT - TRIPLE NET]
                          ---------------------------

                               TABLE OF CONTENTS
                               -----------------

<TABLE>
<CAPTION>
                                                                                PAGE
<S>                                                                              <C>
1.   BASIC LEASE TERMS ........................................................   1
2.   PREMISES AND COMMON AREAS ................................................   2
3.   TERM .....................................................................   3
4.   POSSESSION ...............................................................   4
5.   RENT .....................................................................   5
6.   OPERATING EXPENSES .......................................................   5
7.   SECURITY .................................................................   6
8.   USE ......................................................................   7
9.   NOTICES ..................................................................   8
10.  BROKERS ..................................................................   8
11.  SURRENDER; HOLDING OVER ..................................................   8
12.  TAXES ....................................................................   9
13.  ALTERATIONS ..............................................................   9
14.  REPAIRS AND MAINTENANCE ..................................................  10
15.  LIENS ....................................................................  12
16.  ENTRY BY LANDLORD ........................................................  12
17.  UTILITIES AND SERVICES ...................................................  12
18.  ASSUMPTION OF RISK AND INDEMNIFICATION ...................................  14
19.  INSURANCE ................................................................  14
20.  DAMAGE OR DESTRUCTION ....................................................  16
21.  EMINENT DOMAIN ...........................................................  18
22.  DEFAULTS AND REMEDIES ....................................................  18
23.  LANDLORD'S DEFAULT .......................................................  20
24.  ASSIGNMENT AND SUBLETTING ................................................  20
25.  SUBORDINATION ............................................................  22
26.  ESTOPPEL CERTIFICATE .....................................................  23
27.  EASEMENTS ................................................................  23
28.  RULES AND REGULATIONS ....................................................  23
29.  MODIFICATION AND CURE RIGHTS OR LANDLORD'S MORTGAGEES AND LESSORS ........  24
30.  DEFINITION OF LANDLORD ...................................................  24
31.  WAIVER ...................................................................  24
32.  PARKING ..................................................................  24
33.  FORCE MAJEURE ............................................................  24
34.  SIGNS ....................................................................  25
35.  LIMITATIONS ON LIABILITY .................................................  25
36.  FINANCIAL STATEMENTS .....................................................  25
37.  QUIET ENJOYMENT ..........................................................  26
38.  AUCTIONS .................................................................  26
39.  MISCELLANEOUS ............................................................  26
40.  EXECUTION OF LEASE .......................................................  27
</TABLE>

EXHIBITS
--------

Exhibit A:    Site Plan
Exhibit B:    Notice of Lease Term Dates and Tenant's Percentage
Exhibit C:    Work Letter Agreement
Exhibit D:    Definition of Operating Expenses
Exhibit E:    Estoppel Certificate
Exhibit F:    Rules and Regulations






                                       i

<PAGE>



                      STANDARD INDUSTRIAL/COMMERCIAL LEASE
                           [MULTI-TENANT - TRIPLE NET]



         This STANDARD INDUSTRIAL/COMMERCIAL LEASE ("Lease") is entered into as
of the 5th day of August, 1999, by and between OTAY BUSINESS PARK, LLC, a
California limited liability company ("Landlord"), and AXSYS TECHNOLOGIES, INC.,
a Delaware corporation ("Tenant").

         1. BASIC LEASE TERMS. For purposes of this Lease, the following terms
have the following definitions and meanings:

                 (a)     LANDLORD'S ADDRESS (For Notices):

                         Otay Business Park, LLC
                         c/o The Koll Company
                         4275 Executive Square, Suite 240
                         La Jolla, CA 92037
                         Attention:  Anthony Badeaux

                         WITH A COPY TO:

                         Law Offices of William J. Harris
                         777 South Pacific Highway, Suite 101
                         Solana Beach, California 92075
                         Attention:  William J. Harris

                 or such other place as Landlord may from time to time designate
by notice to Tenant.

                 (b)     TENANT'S ADDRESS (FOR NOTICES):

                         PRIOR TO THE COMMENCEMENT DATE:

                         Axsys Technologies, Inc.
                         1601 Precision Park Lane
                         San Diego, CA  92173-1399
                         Attention:  President


                         AFTER THE COMMENCEMENT DATE:

                         The Premises

                         WITH A COPY TO:

                         Axsys Technologies, Inc.
                         910 Sylvan Avenue, Suite 180
                         Englewood Cliffs, NJ  07632
                         Attn:  General Counsel

                         WITH AN ADDITIONAL COPY TO:

                         The Irving Hughes Group
                         501 West Broadway. Suite 2020
                         San Diego, CA  92101
                         Attention:  David B. Marino

                 (c) PERMITTED USE: All legally permissible general office,
manufacturing, distribution and related uses; subject, however, to any
limitations set forth in the CC&Rs (as defined below) and no other use without
the express written consent of Landlord, which consent Landlord shall not
unreasonably withhold.

                 (d) PREMISES, BUILDING, DEVELOPMENT AND INDUSTRIAL CENTER: That
certain portion of the Building (as defined below), including all improvements
therein on the date hereof or to be provided by Landlord and Tenant under the
terms of the Lease, consisting of approximately 64,840 rentable square feet, as
outlined on EXHIBIT "A" attached hereto ("Premises"). The "Building" is that
certain approximately 195,000 rentable square foot building which, together with
related parking areas and other common area improvements, is currently known as
the San Diego Distribution Center


<PAGE>

("DEVELOPMENT"). The Development is a part of that certain business park known
as Brown Field Business Park ("INDUSTRIAL CENTER").

                 In addition to Tenant's rights to use and occupy the Premises
as hereinafter specified, Tenant shall have non-exclusive rights to the Common
Areas (as defined in Paragraph 2(c) below) as hereinafter specified, but shall
not have any rights to the roof, exterior walls or utility raceways of the
Building or to any other buildings in the Industrial Center, except as otherwise
expressly provided herein.

                 (e) TENANT'S PERCENTAGE: Approximately 33.25%, based upon the
rentable square footage of the Premises as compared to the total rentable square
footage of the Building.

                 (f) TERM: Ten (10) Lease Years, plus two (2) options to extend
the Term for five (5) additional years each.

                 (g) TENANT IMPROVEMENTS: All Tenant Improvements installed or
to be installed by Tenant within the Premises to prepare the Premises for
occupancy pursuant to the terms of the Work Letter Agreement attached hereto as
EXHIBIT "C".

                 (h) COMMENCEMENT DATE: The earlier of (i) Tenant's occupancy of
the Premises (except in connection with Tenant's permitted early occupancy of
the Premises pursuant to Section 6.1 of EXHIBIT "C") or (ii) February 1, 2000,
subject to Paragraph 3(a) below.

                 (i) EXPIRATION DATE: The date which is ten (10) years after the
Commencement Date plus any partial month in which the Commencement Date occurs.

                 (j) MONTHLY BASE RENT: Initially $46,360.60. Commencing on the
first anniversary of the Commencement Date and on every one (1) year anniversary
thereafter (including each year of each of the Option Periods described in
Paragraph 3(b) below following the initial year of each such Option Period), the
then applicable Monthly Base Rent shall be increased by an amount equal to $.02
per rentable square foot of the Premises in excess of the Monthly Base Rent
payable during the immediately preceding period.

         In the event the Commencement Date occurs on other than the first (1st)
day of a month, the amount of the first and last monthly payment of Monthly Base
Rent shall be apportioned to account for the fact that the last month of the
Initial Term shall be less than a full calendar month.

                 (k)  SECURITY DEPOSIT:  $46,360.60.

                 (l)  BROKERS:  Landlord Broker:   CB Richard Ellis, Inc.

                                Tenant Broker:     The Irving Hughes Group, Inc.

                 (m) INTEREST RATE: Shall mean the greater of ten percent (10%)
per annum or two percent (2%) in excess of the prime lending or reference rate
of Wells Fargo Bank N.A. or any successor bank in effect on the twenty-fifth
(25th) day of the calendar month immediately prior to the event giving rise to
the Interest Rate imposition; provided, however, the Interest Rate will in no
event exceed the maximum interest rate permitted to be charged by applicable
law.

                 (n) EXHIBITS: A through F, inclusive, which Exhibits are
attached to this Lease and incorporated herein by this reference.

                 This Paragraph 1 represents a summary of the basic terms and
definitions of this Lease. In the event of any inconsistency between the terms
contained in this Paragraph 1 and any specific provision of this Lease, the
terms of the more specific provision shall prevail.

         2.      PREMISES AND COMMON AREAS.

                 (a) PREMISES. Landlord hereby leases to Tenant and Tenant
hereby leases from Landlord the Premises as improved or to be improved with the
Tenant Improvements described in the Work Letter Agreement, a copy of which is
attached hereto as EXHIBIT "C".

                 (b) MUTUAL COVENANTS. Landlord and Tenant agree that the
letting and hiring of the Premises is upon and subject to the terms, covenants
and conditions contained in this Lease and each party covenants as a material
part of the consideration for this Lease to keep and perform their respective
obligations under this Lease.

                 (c) TENANT'S USE OF COMMON AREAS. During the Term of this
Lease, Tenant shall have the nonexclusive right to use in common with Landlord
and all persons, firms and corporations conducting business in the Development
and their respective customers, guests, licensees, invitees,



                                      -2-
<PAGE>

subtenants, employees and agents (collectively, "Development Occupants"),
subject to the terms of this Lease, the Rules and Regulations referenced in
Paragraph 28 below and all covenants, conditions and restrictions now or
hereafter affecting the Development, the following common areas of the
Development (collectively, the "Common Areas"): the parking facilities of the
Development which serve the Building, loading and unloading areas, trash areas,
roadways, sidewalks, walkways, parkways, driveways, landscaped areas, and
similar areas and facilities situated within the Development and appurtenant to
the Building which are not reserved for the exclusive use of any Development
Occupants.

                 (d) LANDLORD'S RESERVATION OF RIGHTS. Provided Tenant's use of
and access to the Premises is not interfered with in an unreasonable manner,
Landlord reserves for itself and for all other owner(s) and operator(s) of the
Common Areas and the balance of the Development, the right from time to time to:
(i) make reasonable changes to the design and layout of the Development,
including, without limitation, changes to buildings, driveways, entrances,
loading and unloading areas, direction of traffic, landscaped areas and
walkways, parking spaces and parking areas; and (ii) reasonably use or close
temporarily the Common Areas, and/or other portions of the Development while
engaged in making improvements, repairs or alterations to the Building, the
Development, or any portion thereof.

         3.      TERM.

                 (a) INITIAL TERM. The term of this Lease ("Term") will be for
the period designated in Subparagraph 1(f), commencing on the Commencement Date
set forth in Paragraph 1(h), and ending on the Expiration Date set forth in
Paragraph 1(i), subject to extension as provided in Paragraph 3(b) below.
Notwithstanding the foregoing, the Commencement Date shall not be deemed to have
occurred unless and until (i) a certificate of occupancy (permanent or
temporary) or other governmental approval permitting occupancy of the Premises
has been issued for the Premises (unless the failure to obtain such approval to
occupy the Premises is due to any action or inaction of Tenant) and (ii) all
Building systems are in good working order to support the operation of the
Premises. Further notwithstanding the foregoing, if the Commencement Date falls
on any day other than the first day of a calendar month then the Term of this
Lease will be measured from the first day of the month following the month in
which the Commencement Date occurs. Each consecutive twelve (12) month period of
the Term of this Lease, commencing on the Commencement Date, will be referred to
herein as a "Lease Year". Promptly after the Commencement Date, Landlord will
deliver to Tenant the Notice of Lease Term Dates in the form attached hereto as
EXHIBIT "B", which Notice will confirm, among other things, the Commencement
Date and the date upon which the Term of this Lease shall end. The Notice will
be binding upon Tenant unless Tenant objects to the Notice in writing within
fifteen (15) days of Tenant's receipt of the Notice.

                 (b) OPTIONS TO EXTEND. Tenant shall have two (2) successive
options (individually, the "Extension Option" and collectively, the "Extension
Options") to extend the Term, as to not less than the entire Premises, for a
period (the "Option Period") of five (5) years each, commencing upon the date
the Term would otherwise expire, upon the same terms and conditions previously
applicable, except that (i) the Monthly Base Rent as of the commencement of the
Option Period and thereafter during the Option Period will be adjusted as
provided below, and (ii) Tenant shall have no right to receive any Allowance (as
defined below). Each Extension Option may be validly exercised only by written
notice to Landlord from Tenant not earlier than twelve (12) months and not later
than eight (8) months prior to commencement of the Option Period. The Extension
Option may be validly exercised only if Tenant is not then or at any time
thereafter until the commencement of the Option Period in default under this
Lease (after expiration of any applicable notice and cure period). If Tenant
does not exercise either Extension Option in strict accordance with the
provisions hereof, the Extension Options shall forever terminate and be of no
further force and effect. The Extension Options are personal to Tenant, may not
be exercised by any person or entity other than the original Tenant hereunder
and shall become null and void if Tenant assigns or sublets its interest in the
entire Premises to any person or entity other than a Tenant Affiliate (as
defined in Paragraph 24(c)).

                 (c) MONTHLY BASE RENT DURING OPTION PERIOD. The Monthly Base
Rent beginning with the first day of the Option Period shall equal the "fair
market rate" ("Fair Market Rate") for comparable office/warehouse space in
comparable buildings in the South Bay area of San Diego County ("Comparison
Area"). For purposes hereof, "Fair Market Rate" shall mean the base rent payable
to a willing landlord by a willing tenant having a similar financial
responsibility, credit rating and capitalization as Tenant then has, for like
and comparable premises, improved with tenant improvements of like and
comparable quality to those then existing in the Premises, in like and
comparable buildings located in Comparison Area and (ii) in no event shall the
initial Fair Market Rent be less than the Monthly Base Rent payable during the
period immediately preceding such adjustment plus $.02 per rentable square foot
of the Premises. In calculating Fair Market Rate appropriate consideration shall
be given to all relevant factors, including, without limitation, (i) rental
concessions and tenant improvement allowances generally being offered by
landlords of comparable properties, (ii) the age of the Building and Tenant
Improvements, (iii) rental market conditions then in existence, (iv) whether
Landlord will or will not be required to pay a real estate brokerage commission
in connection with Tenant's exercise of the Extension Option, and (v) the fact
that the Tenant will be accepting the Premises in an "As-Is" condition.




                                      -3-
<PAGE>

Commencing on the first anniversary of each Option Period and on every one (1)
year anniversary thereafter during the balance of such Option Period, the Base
Rent then payable hereunder shall be increased by an amount equal to $.02 per
rentable square foot of the Premises in excess of the Base Rent payable during
the immediately preceding period. Following Tenant's valid exercise of the
Extension Option, Landlord and Tenant shall commence negotiations for a period
of forty-five (45) days to determine whether Landlord and Tenant can reach
mutual agreement as to the Fair Market Rate. If the parties are unable to reach
an agreement within such period of time as to the Fair Market Rate, then either
party (the "First Party") may at any time prior to reaching such agreement, give
notice to the other party (the "Second Party") that an appraisal of the Premises
is required for purposes of determining the Fair Market Rate. Such notice shall
designate an appraiser (the "First Appraiser"). In the event that such appraisal
is required, Landlord and Tenant shall each prepare a determination of such
party's estimate of the appropriate Fair Market Rent and each party's
determination shall be submitted to arbitration as provided below. Within ten
(10) business days after the service of the notice referred to above, the Second
Party shall give written notice to the First Party designating a second
appraiser (the "Second Appraiser"). If the Second Appraiser is not so designated
within the time above specified, then the First Appraiser shall select the
Second Appraiser within ten (10) business days after the Second Party's failure
to appoint. The First Appraiser and the Second Appraiser so designated or
appointed shall themselves appoint a third appraiser (the "Third Appraiser"). If
the First Appraiser and the Second Appraiser shall be unable to agree upon such
appointment within five (5) business days after the appointment of the Second
Appraiser, then the Third Appraiser shall be selected by Landlord and Tenant. If
Landlord and Tenant are unable to agree upon the Third Appraiser within ten (10)
business days thereafter, either the First Party or the Second Party may apply
to the Superior Court for the County in which the Building is located to appoint
the Third Appraiser. Landlord and Tenant shall each pay the cost of their own
appraiser and shall share equally the cost of the Third Appraiser (and, if
necessary, court costs to appoint such appraiser). Any appraiser designated to
serve in accordance with the provisions of this Lease shall be disinterested and
shall be an MAI appraiser and professionally qualified to appraise the Premises
with at least ten (10) years experience in appraising similar properties in the
Comparison Area. The three (3) appraisers shall within thirty (30) days of the
appointment of the Third Appraiser reach a decision as to whether the parties
shall use Landlord's or Tenant's submitted Fair Market Rate and shall notify
Landlord and Tenant thereof. The determination of such arbitrators shall be
limited solely to the issue of whether Landlord's or Tenant's submitted Fair
Market Rate for the Premises is closest to the actual Fair Market Rate for the
Premises as determined by the arbitrators, taking into account the requirements
above. The decision of the majority of the three arbitrators shall be binding
upon Landlord and Tenant. Any appraisals to be provided pursuant to this Lease
shall be submitted to Landlord and Tenant within ten (10) business days after
the last of the three appraisers has been selected. After reaching a decision,
the appraisers shall give written notice of such decision to the parties.

         4.      POSSESSION.

                 (a) DELIVERY OF POSSESSION. Landlord agrees to construct the
Landlord's Work and deliver possession of the Premises to Tenant in accordance
with the terms of this Lease and the Work Letter Agreement attached hereto as
EXHIBIT "C".

                 (b) CONDITION OF PREMISES. Prior to the Commencement Date and
in accordance with the Work Letter Agreement attached hereto as EXHIBIT "C",
Landlord and Tenant will jointly conduct a walk-through inspection of the
Premises and will jointly prepare a punch-list ("Punch-List") of items required
to be installed by Landlord under the Work Letter Agreement which require
finishing or correction. The Punch-List will not include any items of damage to
the Premises caused by Tenant's move-in or early entry, if permitted, which
damage will be corrected or repaired by Landlord, at Tenant's expense or, at
Landlord's election, by Tenant, at Tenant's expense. Other than the items
specified in the Punch-List, by taking possession of the Premises, Tenant will
be deemed to have accepted the Premises in its condition on the date of delivery
of possession, subject to all applicable zoning, municipal, county and state
laws, ordinances and regulations governing and regulating the use and occupancy
of the Premises and to have acknowledged that the Tenant Improvements have been
installed as required by the Work Letter Agreement and that there are no
additional items needing work or repair by Landlord. Landlord will cause all
items in the Punch-List to be repaired or corrected within thirty (30) days
following the preparation of the Punch-List or as soon as reasonably practicable
after the preparation of the Punch-List. Tenant acknowledges that neither
Landlord nor any agent of Landlord has made any representation or warranty with
respect to the Premises, the Development or any portions thereof or with respect
to the suitability of same for the conduct of Tenant's business. Notwithstanding
the foregoing, Landlord shall deliver the Premises to Tenant on the Commencement
Date clean and free of debris with all items of Landlord's Worksubstantially
completed in accordance with the terms of the Work Letter attached hereto as
EXHIBIT "C," subject to such Punch-List items. Landlord warrants to Tenant that
the roof, plumbing, fire sprinkler system, lighting, heating, ventilation and
air conditioning systems and electrical systems in the Premises (to the extent
installed by or on behalf of Landlord as part of the Landlord's Work), shall be
in good operating condition on the Commencement Date and during the initial
twelve (12) months of the Term. In the event of a noncompliance with such
warranty, Landlord shall promptly after receipt of written notice from Tenant
setting forth the nature and extent of such



                                      -4-
<PAGE>

noncompliance, rectify same at Landlord's cost and expense and not as an
Operating Expense. Further, in connection with the construction of the
Landlord's Work pursuant to the Work Letter, Landlord shall obtain customary
warranties and guaranties from the contractor(s) performing such work and/or the
manufacturers of equipment installed by Landlord therein, but shall be under no
obligation to incur additional expense in order to obtain or extend such
warranties. If Tenant is required to make repairs to any component of the
Premises or any of its systems not covered by the Landlord's warranty contained
in this Section 4(b) but for which Landlord has obtained a contractor's or
manufacturer's warranty, then Landlord shall, upon request by Tenant, use its
good faith efforts to pursue its rights under such warranties for the benefit of
Tenant.

         5.      RENT.

                 (a) MONTHLY BASE RENT. Tenant agrees to pay Landlord the
Monthly Base Rent for the Premises (subject to adjustment as hereinafter
provided) in advance on the first day of each calendar month during the Term
without prior notice or demand, except that Tenant agrees to pay the Monthly
Base Rent for the first full month of the Term directly to Landlord on or prior
to January 1, 2000. If the Term of this Lease commences or ends on a day other
than the first day of a calendar month, then the rent for such period will be
prorated in the proportion that the number of days this Lease is in effect
during such period bears to the number of days in such month. Except as
expressly provided herein, all rent must be paid to Landlord, without any
deduction or offset, in lawful money of the United States of America, at the
address designated by Landlord or to such other person or at such other place as
Landlord may from time to time designate in writing. Monthly Base Rent will be
adjusted during the Term of this Lease as provided in Paragraph 1(j). Landlord
and Tenant hereby stipulate that, notwithstanding anything to the contrary
contained in this Lease, the rentable square footage of the Premises and
Building are 64,840 and 195,000 rentable square feet, respectively, and shall
not be subject to recalculation or adjustment.

                 (b) ADDITIONAL RENT. All amounts and charges to be paid by
Tenant hereunder, including, without limitation, payments for Operating
Expenses, real property taxes, insurance and repairs, will be considered
additional rent for purposes of this Lease, and the word "rent" as used in this
Lease will include all such additional rent unless the context specifically or
clearly implies that only Monthly Base Rent is intended.

                 (c) LATE PAYMENTS. Late payments of Monthly Base Rent and/or
any item of additional rent will be subject to interest and a late charge as
provided in Subparagraph 22(f) below.

         6.      OPERATING EXPENSES.

                 (a) OPERATING EXPENSES. In addition to Monthly Base Rent,
throughout the Term of this Lease, Tenant agrees to pay Landlord as additional
rent in accordance with the terms of this Paragraph 6, Tenant's Percentage of
Operating Expenses for the Development as defined in EXHIBIT "D" attached
hereto.

                 (b) ESTIMATE STATEMENT. Prior to the Commencement Date and on
or about March 1st of each subsequent calendar year during the Term of this
Lease or as soon thereafter as reasonably practicable, Landlord shall prepare
and deliver to Tenant a statement ("Estimate Statement") wherein Landlord will
estimate both the Operating Expenses and Tenant's Percentage of Operating
Expenses for the then current calendar year. Tenant agrees to pay Landlord, as
additional rent, one-twelfth (1/12th) of the estimated Tenant's Percentage of
Operating Expenses each month thereafter, beginning with the next installment of
rent due, until such time as Landlord issues a revised Estimate Statement or the
Estimate Statement for the succeeding calendar year; except that, concurrently
with the regular monthly rent payment next due following the receipt of each
such Estimate Statement provided that such receipt is not less than five (5)
business days before such monthly rent payment is due, Tenant agrees to pay
Landlord an amount equal to one monthly installment of the estimated Tenant's
Percentage of Operating Expenses (less any applicable Operating Expenses already
paid) multiplied by the number of months from January, in the current calendar
year, to the month of such rent payment next due, all months inclusive. If at
any time during the Term of this Lease, but not more often than quarterly,
Landlord reasonably determines that Tenant's Percentage of Operating Expenses
for the current calendar year will be greater than the amount set forth in the
then current Estimate Statement, Landlord may issue a revised Estimate Statement
and Tenant agrees to pay Landlord, within ten (10) days of receipt of the
revised Estimate Statement, the difference between the amount owed by Tenant
under such revised Estimate Statement and the amount owed by Tenant under the
original Estimate Statement for the portion of the then current calendar year
which has expired. Thereafter Tenant agrees to pay Tenant's Percentage of
Operating Expenses based on such revised Estimate Statement until Tenant
receives the next calendar year's Estimate Statement or a new revised Estimate
Statement for the current calendar year.

                 (c) ACTUAL STATEMENT. By April 1st of each calendar year during
the Term of this Lease or as soon thereafter as reasonably practicable, Landlord
shall prepare and deliver to Tenant a



                                      -5-
<PAGE>

statement ("Actual Statement") which states the actual Operating Expenses for
the preceding calendar year. If the Actual Statement reveals that Tenant's
Percentage of the actual Operating Expenses is more than the total Additional
Rent paid by Tenant for Operating Expenses on account of the preceding calendar
year, Tenant agrees to pay Landlord the difference in a lump sum within thirty
(30) days of receipt of the Actual Statement. If the Actual Statement reveals
that Tenant's Percentage of the actual Operating Expenses is less than the
Additional Rent paid by Tenant for Operating Expenses on account of the
preceding calendar year, Landlord will credit any overpayment toward the next
monthly installment(s) of Tenant's Percentage of the Operating Expenses due
under this Lease.

                 (d) MISCELLANEOUS. Any delay or failure by Landlord in
delivering any Estimate Statement or Actual Statement pursuant to this Paragraph
6 will not constitute a waiver of its right to require an increase in rent nor
will it relieve Tenant of its obligations pursuant to this Paragraph 6, except
that Tenant will not be obligated to make any payments based on such Estimate
Statement or Actual Statement until ten (10) days or thirty (30) days,
respectively, after receipt of such Estimate Statement or Actual Statement. Even
though the Term has expired and Tenant has vacated the Premises, when the final
determination is made of Tenant's Percentage of the actual Operating Expenses
for the year in which this Lease terminates, Tenant agrees to promptly pay any
increase due over the estimated expenses paid and, conversely, any overpayment
made in the event said expenses decrease shall promptly be rebated by Landlord
to Tenant. Such obligations will be continuing ones which will survive the
expiration or termination of this Lease. Prior to the expiration or sooner
termination of the Lease Term and Landlord's acceptance of Tenant's surrender of
the Premises, Landlord will have the right to estimate the actual Operating
Expenses for the then current Lease Year and to collect from Tenant prior to
Tenant's surrender of the Premises, Tenant's Percentage of any excess of such
actual Operating Expenses over the estimated Operating Expenses paid by Tenant
in such Lease Year.

                 (e) TENANT'S AUDIT RIGHTS. Landlord agrees that it shall
maintain complete and accurate records of all costs, expenses and disbursements
paid or incurred by Landlord with respect to the Operating Expenses in
accordance with generally accepted accounting principles, consistently applied.
Such records shall be kept until two (2) years after the termination of this
Lease. At any time within twelve (12) months of Tenant's receipt of any
statement from Landlord relating to Operating Expenses, Landlord shall furnish
Tenant, following Tenant's written request therefor, invoices and other source
documents relating to Operating Expenses and Landlord shall provide in
reasonable detail the calculation of Tenant's Percentage of the Operating
Expenses. If it is determined from Tenant's audit of such Operating Expenses
that Tenant was overcharged by more than five percent (5%), such overcharge
shall entitle Tenant to credit against its next payment of Operating Expenses
the amount of the overcharge and the reasonable costs associated with the audit,
excluding travel and lodging costs (and, if such credit occurs following the
expiration of the Term, Landlord shall promptly pay the amount of such credit to
Tenant). If the audit determines that the Tenant was overcharged less than five
percent (5%), such overcharge shall entitle Tenant to credit against its next
payment of Operating Expenses the amount of the overcharge and Tenant shall pay
for all reasonable costs associated with the audit (excluding travel and lodging
costs). If the audit shall determine that Tenant was undercharged for the
Operating Expenses, Tenant shall promptly pay the amount of such undercharge to
Landlord and Tenant shall pay for all costs associated with the audit.
Notwithstanding anything to the contrary herein, any Operating Expenses
attributable to a period which falls only partially within the term of this
Lease shall be prorated between Landlord and Tenant so that Tenant shall pay
only that portion thereof which the part of such period within the Lease term
bears to the entire period.

                 (f) OPERATING EXPENSES CAPS. Notwithstanding anything to the
contrary contained herein, from and after the first full calendar year during
the initial Lease Term, in no event shall the Operating Expenses payable by
Tenant under this Lease increase by more than five percent (5%), excluding Real
Property Taxes and Assessments (as defined in EXHIBIT "D"), over the prior
calendar year calculated on a non-compounded basis.

         7.      SECURITY.

                 (a) SECURITY DEPOSIT. Concurrently with Tenant's execution of
this Lease, Tenant will deposit with Landlord the Security Deposit designated in
Subparagraph 1(k). The Security Deposit will be held by Landlord as security for
the full and faithful performance by Tenant of all of the terms, covenants, and
conditions of this Lease to be kept and performed by Tenant during the Term
hereof. If Tenant fully and faithfully performs its obligations under this
Lease, including, without limitation, surrendering the Premises upon the
expiration or sooner termination of this Lease in compliance with Subparagraph
11(a) below, the Security Deposit or any balance thereof will be returned to
Tenant (or, at Landlord's option, to the last assignee of Tenant's interest
hereunder) within thirty (30) days following the expiration of the Lease Term or
as required under applicable law, provided that Landlord may retain the Security
Deposit until such time as any outstanding rent or additional rent amount has
been determined and paid in full. The Security Deposit is not, and may not be
construed by Tenant to constitute, rent for the last month or any portion
thereof. If Tenant defaults with respect to any provisions of this Lease
including, but not limited to, the provisions relating to the payment of rent or
additional rent, Landlord



                                      -6-
<PAGE>

may (but will not be required to) 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 shall reasonably spend or become
obligated to spend by reason of Tenant's default). If any portion of the
Security Deposit is so used or applied, Tenant agrees, within ten (10) days
after Landlord's written demand therefor, to deposit cash with Landlord in an
amount sufficient to restore the Security Deposit to its original amount and
Tenant's failure to do so shall constitute a default under this Lease. Landlord
is not required to keep Tenant's Security Deposit separate from its general
funds, and Tenant is not entitled to interest on such Security Deposit.

         8.      USE.

                 (a) TENANT'S USE OF THE PREMISES. The Premises may be used for
the use or uses set forth in Subparagraph 1(c) only, and Tenant will not use or
permit the Premises to be used for any other purpose without the prior written
consent of Landlord, which consent Landlord shall not unreasonably withhold.

                 (b) COMPLIANCE. At Tenant's sole cost and expense, Tenant
agrees to procure, maintain and hold available for Landlord's inspection, all
governmental licenses and permits required for the proper and lawful conduct of
Tenant's business from the Premises, if any. Tenant agrees not to use, alter or
occupy the Premises or allow the Premises to be used, altered or occupied in
violation of, and Tenant, at its sole cost and expense, agrees to use and occupy
the Premises and cause the Premises to be used and occupied in compliance, in
all material respects, with: (i) any and all laws, statutes, zoning
restrictions, ordinances, rules, regulations, orders and rulings now or
hereafter in force and any requirements of any insurer, insurance authority or
duly constituted public authority having jurisdiction over the Premises now or
hereafter in force, (ii) the requirements of the Board of Fire Underwriters and
any other similar body, (iii) the Certificate of Occupancy issued for the
Building, and (iv) any recorded covenants, conditions and restrictions and
similar regulatory agreements, if any, which affect the use, occupation or
alteration of the Premises; provided, however, that Landlord provides Tenant
with a written copy of such covenants, conditions and restrictions and similar
regulatory agreements. Tenant agrees to comply with the Rules and Regulations
referenced in Paragraph 28 below. Tenant agrees not to do or permit anything to
be done in or about the Premises which will in any manner obstruct or interfere
with the rights of other tenants or occupants of the Development, or injure or
unreasonably annoy them, or use or allow the Premises to be used for any
unlawful purpose. Tenant agrees not to cause, maintain or permit any nuisance or
waste in, on, under or about the Premises. Notwithstanding anything contained in
this Lease to the contrary, all transferable development rights related in any
way to the Development are and will remain vested in Landlord, and Tenant hereby
waives any rights thereto.

                 (c) HAZARDOUS MATERIALS. Except as provided below, Tenant
agrees not to cause or permit any Hazardous Materials to be brought upon,
stored, used, handled, generated, released or disposed of on, in, under or about
the Premises, the Building, the Development, the Industrial Park or any portion
thereof by Tenant, its agents, employees, subtenants, assignees, licensees,
contractors or invitees (collectively, "Tenant's Parties"), without the prior
written consent of Landlord, which consent Landlord shall not unreasonably
withhold (subject to the terms and conditions of this Lease). Upon the
expiration or earlier termination of this Lease, Tenant agrees to promptly
remove from the Premises, at its sole cost and expense, any and all Hazardous
Materials, including any equipment or systems containing Hazardous Materials
which are installed, brought upon, stored, used, generated or released upon, in,
under or about the Premises, the Building, the Development, the Industrial Park
or any portion thereof by Tenant or any of Tenant's Parties. To the fullest
extent permitted by law, Tenant agrees to promptly indemnify, protect, defend
and hold harmless Landlord and Landlord's partners, officers, directors,
employees, agents, successors and assigns (collectively, "Landlord Indemnified
Parties") from and against any and all claims, damages, judgments, suits, causes
of action, losses, liabilities, penalties, fines, expenses and costs (including,
without limitation, clean-up, removal, remediation and restoration costs, sums
paid in settlement of claims, attorneys' fees, consultant fees and expert fees
and court costs) which arise or result from the presence of Hazardous Materials
on, in, under or about the Premises, the Building or the Development or any
other portion of the Industrial Park and which are caused or permitted by Tenant
or any of Tenant's Parties. Tenant agrees to promptly notify Landlord of any
release of Hazardous Materials at the Premises, which Tenant becomes aware of
during the Term of this Lease, whether caused by Tenant or any other persons or
entities. In the event of any release of Hazardous Materials caused or permitted
by Tenant or any of Tenant's Parties, Landlord shall have the right, but not the
obligation, to cause Tenant to immediately take all steps Landlord deems
reasonably necessary or appropriate to remediate such release and prevent any
similar future release to the reasonable satisfaction of Landlord and Landlord's
mortgagee(s). As used in this Lease, the term "Hazardous Materials" shall mean
and include any hazardous or toxic materials, substances or wastes as now or
hereafter designated under any law, statute, ordinance, rule, regulation, order
or ruling of any agency of the State, the United States Government or any local
governmental authority, including, without limitation, asbestos, petroleum,
petroleum hydrocarbons and petroleum based products, urea formaldehyde foam
insulation, polychlorinated biphenyls ("PCBs"), and Freon and other
chlorofluorocarbons. Notwithstanding the foregoing, Tenant may, without
Landlord's prior consent, but in compliance with all Applicable Laws,



                                      -7-
<PAGE>

use any ordinary and customary materials reasonably required to be used by
Tenant in the normal course of Tenant's use of the Premises as permitted
hereunder provided that Tenant's handling, storage, use and disposal procedures
are in compliance with all Applicable Laws and the CC&Rs and so long as each
such use does not expose the Premises or neighboring property to any meaningful
risk of contamination or damage or expose Landlord to any liability therefor.
Landlord shall have the right upon the expiration or earlier termination of the
Term of this Lease, to cause, at Landlord's cost (except as provided below), a
duly qualified and licensed environmental consultant to conduct an environmental
audit of the Premises. The identity of the consultant and the scope and detail
of the audit shall be subject to Landlord's reasonable discretion. Landlord
shall provide Tenant with a copy of such audit or report promptly after the same
becomes available. If the audit recommends additional testing, then Tenant shall
conduct such tests at its expense. If the audit and/or tests reveal the presence
of Hazardous Materials at, on or under the Premises attributable to Tenant's
activities at the Premises, then Tenant shall reimburse Landlord for the cost of
such audit and shall remediate and mitigate the same, at its expense, as
necessary to obtain a final "no further action" letter (or equivalent) from all
governmental agencies having jurisdiction. In addition, if at any time during
the Term Tenant is required to file reports or manifests concerning its use of
Hazardous Materials at the Premises or concerning Hazardous Materials
contamination or remediation, then Tenant shall concurrently provide Landlord
with a copy of the same. Landlord represents and warrants that, as of the Date
of this Lease, to Landlord's actual knowledge, except as disclosed in writing to
Tenant, there are no Hazardous Materials located on or under the Premises, the
Building or the Development. For purposes of this Lease, "Landlord's actual
knowledge" means the actual knowledge of Charles Abdi and/or Anthony C. Badeaux,
without duty of investigation. The provisions of this subparagraph 8(c) will
survive the expiration or earlier termination of this Lease.

         9. NOTICES. Any notice required or permitted to be given hereunder must
be in writing and may be given by personal delivery (including delivery by
overnight courier or an express mailing service) or by mail, if sent by
registered or certified mail. Notices to Tenant shall be sufficient if delivered
to Tenant after the Commencement Date at the Premises and notices to Landlord
shall be sufficient if delivered to Landlord at the address designated in
Subparagraph 1(a). Either party may specify a different address for notice
purposes by written notice to the other.

         10. BROKERS. The parties acknowledge that the brokers who negotiated
this Lease are stated in Subparagraph 1(l). Landlord shall pay commissions to
such brokers pursuant to Landlord's separate agreement with such brokers. Each
party represents and warrants to the other, that, to its knowledge, no other
broker, agent or finder (a) negotiated or was instrumental in negotiating or
consummating this Lease on its behalf, and (b) is or might be entitled to a
commission or compensation in connection with this Lease. Landlord and Tenant
each agree to promptly indemnify, protect, defend and hold harmless the other
from and against any and all claims, damages, judgments, suits, causes of
action, losses, liabilities, penalties, fines, expenses and costs (including
reasonable attorneys' fees and court costs) resulting from any breach by the
indemnifying party of the foregoing representation, including, without
limitation, any claims that may be asserted by any broker, agent or finder
undisclosed by the indemnifying party. The foregoing mutual indemnity shall
survive the expiration or earlier termination of this Lease.

         11.     SURRENDER; HOLDING OVER.

                 (a) SURRENDER. The voluntary or other surrender of this Lease
by Tenant, or a mutual cancellation thereof, shall not constitute a merger, and
shall, at the option of Landlord, operate as an assignment to Landlord of any or
all subleases or subtenancies. Upon the expiration or earlier termination of
this Lease, Tenant agrees to peaceably surrender the Premises to Landlord broom
clean and in a state of good order, repair and condition, ordinary wear and tear
and casualty damage (if this Lease is terminated as a result thereof pursuant to
Paragraph 20) excepted, together with all of Tenant's personal property and
Alterations (as defined in Paragraph 13) removed from the Premises to the extent
required under Paragraph 13 and all damage caused by such removal repaired as
required by Paragraph 13. At least ninety (90) days, prior to the date Tenant is
to actually surrender the Premises to Landlord, Tenant agrees to give Landlord
notice of the exact date Tenant will surrender the Premises so that Landlord and
Tenant can schedule a walk-through of the Premises to review the condition of
the Premises and identify the Alterations and personal property which are to
remain upon the Premises and which items Tenant is to remove as well as any
repairs Tenant is to make upon surrender of the Premises as required by this
Lease. During such ninety (90) day period, Landlord may, at its option, and at
Landlord's sole cost and expense, retain the services of one or more inspectors
or consultants to inspect the Premises and all equipment and fixtures located
therein to determine if they are in the condition required for proper surrender
by Tenant. If any such inspections disclose any deficiencies in the condition of
the Premises, Tenant will promptly cause the same to be corrected in a good and
workmanlike manner at Tenant's sole cost and expense prior to the surrender
date. The delivery of keys to any employee of Landlord or to Landlord's agent or
any employee thereof alone will not be sufficient to constitute a termination of
this Lease or a surrender of the Premises.



                                      -8-
<PAGE>

                 (b) HOLDING OVER. Tenant will not be permitted to hold over
possession of the Premises after the expiration or earlier termination of the
Term without the express written consent of Landlord, which consent Landlord may
withhold in its sole and absolute discretion. If Tenant holds over after the
expiration or earlier termination of the Term, Landlord may, at its option,
treat Tenant as a tenant at sufferance only, and such continued occupancy by
Tenant shall be subject to all of the terms, covenants and conditions of this
Lease, so far as applicable, except that the Monthly Base Rent for the first
three (3) months of any such holdover period shall be equal to one hundred
twenty-five percent (125%) of the Monthly Base Rent in effect under this Lease
immediately prior to such holdover and one hundred fifty percent (150%) of the
Monthly Base Rent in affect under this Lease from and after such three (3) month
period, prorated on a daily basis. Acceptance by Landlord of rent after such
expiration or earlier termination will not result in a renewal of this Lease.
The foregoing provisions of this Paragraph 11 are in addition to and do not
affect Landlord's right of re-entry or any rights of Landlord under this Lease
or as otherwise provided by law. If Tenant fails to surrender the Premises upon
the expiration of this Lease in accordance with the terms of this Paragraph 11
despite demand to do so by Landlord, Tenant agrees to promptly indemnify,
protect, defend and hold Landlord harmless from all claims, damages, judgments,
suits, causes of action, losses, liabilities, penalties, fines, expenses and
costs (including reasonable attorneys' fees and costs), including, without
limitation, reasonable costs and expenses incurred by Landlord in returning the
Premises to the condition in which Tenant was to surrender it and claims made by
any succeeding tenant founded on or resulting from Tenant's failure to surrender
the Premises. The provisions of this Subparagraph 11(b) will survive the
expiration or earlier termination of this Lease.

         12.     TAXES.

                 (a) PAYMENT OF TAXES. Tenant agrees to pay, as an Operating
Expense, Tenant's Percentage of all Real Property Taxes and Assessments, as
defined in EXHIBIT "D." If any such Real Property Taxes and Assessments paid by
Tenant shall cover any period of time prior to or after the expiration of the
Term thereof, Tenant's Percentage of such real property taxes is to be equitably
prorated to cover only the period of time within the tax fiscal year during
which this Lease shall be in effect, and Landlord will promptly reimburse Tenant
to the extent required.

                  (b) PERSONAL PROPERTY TAXES. Tenant agrees to pay prior to
delinquency all taxes assessed against and levied upon trade fixtures,
furnishings, equipment and all other personal property of Tenant contained in
the Premises or elsewhere. When possible, Tenant will cause said trade fixtures,
furnishings, equipment and all other personal property to be assessed and billed
separately from the real property of Landlord. If any of Tenant's personal
property is assessed with Landlord's real property, Tenant shall pay Landlord
the taxes attributable to Tenant within ten (10) days after receipt of a written
statement setting forth the taxes applicable to Tenant's property but in no
event more than ten (10) days prior to delinquency.

         13. ALTERATIONS. After installation of the initial Tenant Improvements
for the Premises pursuant to EXHIBIT "C", Tenant may, at its sole cost and
expense, make alterations, additions, improvements, "Utility Installations" and
decorations to the Premises (collectively, "Alterations") subject to and only
upon the following terms and conditions:

                 (a) PROHIBITED ALTERATIONS. Tenant may not, without Landlord's
prior written consent, which consent may be granted or denied in Landlord's sole
and absolute discretion, make any Alterations which: (i) affect any area outside
the Premises; (ii) affect the Building's structure, roof, equipment, services or
systems, or the proper functioning thereof, or Landlord's access thereto; (iii)
affect the outside appearance, character or use of the Building or the Common
Areas; (iv) in the reasonable opinion of Landlord, materially reduce the value
of the Building; or (v) will cause a material increase in density within the
Premises or violate or require a change in any occupancy certificate applicable
to the Premises. As used in this Paragraph 13, the term "Utility Installations"
means carpeting, window coverings, air lines, power panels, electrical
distribution systems, space heaters, heating, ventilation and air conditioning
systems, plumbing systems, fencing, landscaping, exterior signage, satellite or
other radio or television reception or transmitting devices, or gas lines.

                 (b) LANDLORD'S APPROVAL. Before proceeding with any Alterations
which are not prohibited in Subparagraph 13(a) above, Tenant must first obtain
Landlord's written approval of the plans, specifications and working drawings
for such Alterations, which approval Landlord will not unreasonably withhold or
delay; provided, however, Landlord's prior approval will not be required for any
such Alterations which are not prohibited by Subparagraph 13(a) above and which
cost less than Twenty Thousand Dollars ($20,000) as long as (i) Tenant delivers
to Landlord notice and a copy of any final plans, specifications and working
drawings for any such Alterations at least ten (10) days prior to commencement
of the work thereof, and (ii) the other conditions of this Paragraph 13 are
satisfied, including, without limitation, conforming to Landlord's reasonable
rules, regulations and insurance requirements which govern contractors.
Landlord's approval of plans, specifications and/or working drawings for
Alterations will not create any responsibility or liability on the part of
Landlord for their



                                      -9-
<PAGE>

completeness, design sufficiency, or compliance with applicable permits, laws,
rules and regulations of governmental agencies or authorities.

                 (c) CONTRACTORS. Alterations may be made or installed only by
contractors and subcontractors which have been approved by Landlord, which
approval Landlord will not unreasonably withhold, condition or delay; provided,
however, Landlord reserves the right to require that Landlord's contractor be
given the first opportunity to bid for any Alteration work. Before proceeding
with any Alterations, Tenant agrees to provide Landlord with ten (10) days'
prior written notice and Tenant's contractors must obtain and maintain, on
behalf of Tenant and at Tenant's sole cost and expense: all necessary
governmental permits and approvals for the commencement and completion of such
Alterations. Throughout the performance of any Alterations, Tenant agrees to
obtain, or cause its contractors to obtain, workers compensation insurance and
general liability insurance in compliance with the provisions of Paragraph 19 of
this Lease.

                 (d) MANNER OF PERFORMANCE. All Alterations must be performed:
(i) in accordance with the approved plans, specifications and working drawings;
(ii) in a lien-free and first-class and workmanlike manner; (iii) in compliance
with all applicable permits, laws, statutes, ordinances, rules, regulations,
orders and rulings now or hereafter in effect and imposed by any governmental
agencies and authorities which assert jurisdiction; (iv) in such a manner so as
not to interfere with the occupancy of any other tenant of the Development or
Industrial Park, nor impose any additional expense upon Landlord; and (v) at
such times, in such manner, and subject to such rules and regulations as
Landlord may from time to time reasonably designate.

                 (e) OWNERSHIP. The Tenant Improvements and all Alterations will
become the property of Landlord and will remain upon and be surrendered with the
Premises at the end of the Term of this Lease; provided, however, Landlord
shall, by written notice delivered to Tenant concurrently with Landlord's
approval of the final working drawings for any Alterations, identify those
Alterations which Landlord will require Tenant to remove at the expiration or
earlier termination of this Lease. Landlord may also require Tenant to remove
Alterations which Landlord did not have the opportunity to approve as provided
in this Paragraph 13. If Landlord provides timely notice that it requires Tenant
to remove any Alterations, Tenant, at its sole cost and expense, agrees to
remove the identified Alterations on or before the expiration or earlier
termination of this Lease and repair any damage to the Premises caused by such
removal (or, at Landlord's option, Tenant agrees to pay to Landlord all of
Landlord's reasonable costs of such removal and repair).

                 (f) PLAN REVIEW. With respect to any proposed Alterations
affecting the mechanical or structural portions of the Premises or costing in
excess of One Hundred Thousand Dollars ($100,000.00), Tenant agrees to pay
Landlord, as additional rent, the reasonable costs of professional services and
costs of Landlord's third party consultants if utilized by Landlord (but not
Landlord's "in-house" personnel) for review of all plans, specifications and
working drawings for any such Alterations, within twenty (20) days after
Tenant's receipt of invoices (accompanied by reasonable "back-up" documentation)
either from Landlord or such consultants.

                 (g) PERSONAL PROPERTY. All articles of personal property owned
by Tenant or installed by Tenant at its expense in the Premises (including
Tenant's business and trade fixtures, furniture, movable partitions and
equipment, such as telephones, copy machines, computer terminals, refrigerators
and facsimile machines) will be and remain the property of Tenant, and must be
removed by Tenant from the Premises, at Tenant's sole cost and expense, on or
before the expiration or earlier termination of this Lease. Tenant agrees to
repair any damage caused by such removal at its cost on or before the expiration
or earlier termination of this Lease.

                 (h) REMOVAL OF ALTERATIONS. If Tenant fails to remove by the
expiration or earlier termination of this Lease all of its personal property, or
any Alterations identified by Landlord for removal, Landlord may (without
liability to Tenant for loss thereof) treat such personal property and/or
Alterations as abandoned and, at Tenant's sole cost and expense, and in addition
to Landlord's other rights and remedies under this Lease, at law or in equity:
(a) remove and store such items; and/or (b) upon ten (10) days' prior written
notice to Tenant, sell, discard or otherwise dispose of all or any such items at
private or public sale for such price as Landlord may obtain or by other
commercially reasonable means. Tenant shall be liable for all reasonable costs
of disposition of Tenant's abandoned property and Landlord shall have no
liability to Tenant with respect to any such abandoned property. Landlord agrees
to apply the proceeds of any sale of any such property to any amounts due to
Landlord under this Lease from Tenant (including Landlord's reasonable
attorneys' fees and other reasonable costs incurred in the removal, storage
and/or sale of such items), with any remainder to be paid to Tenant.

         14.     REPAIRS AND MAINTENANCE.

                 (a) TENANT'S OBLIGATIONS. Except for Landlord's obligations
under Paragraph 14(c) below, Tenant agrees to keep in good order, condition and
repair the Premises and every part thereof,



                                      -10-
<PAGE>

(whether or not such portion of the Premises requiring repair, or the means of
repairing the same are reasonable or readily accessible to Tenant, and whether
or not the need for such repairs occurs as a result of Tenant's use, any prior
use, the elements, the age or the quality of construction of such portion of the
Premises except as set forth in Paragraph 4(b)) including, without limiting the
generality of the foregoing (but subject to Landlord's obligation to maintain
the "Structural Elements" described below), all heating, ventilation, air
conditioning, electrical and other systems exclusively serving the Premises,
electrical, lighting facilities, plumbing and equipment within the Premises,
fixtures, interior walls, ceilings, floors, doors and skylights located within
the Premises, and Tenant's signs located on the Premises. Tenant shall procure
and maintain, at Tenant's expense, maintenance contracts reasonably acceptable
to Landlord for any heating, ventilating and air conditioning systems
exclusively serving the Premises. Tenant agrees to cause any mechanics' liens or
other liens arising as a result of work performed by Tenant or at Tenant's
direction to be eliminated as provided in Paragraph 15 below. Tenant shall, at
Tenant's sole cost and expense, provide its own janitorial services to the
Premises which services shall be performed by reputable janitorial service
reasonably acceptable to Landlord.

                 (b) TENANT'S FAILURE TO REPAIR. If Tenant refuses or neglects
to repair and maintain the Premises properly as required hereunder to the
reasonable satisfaction of Landlord, Landlord, at any time following ten (10)
days from the date on which Landlord makes a written demand on Tenant to effect
such repair and maintenance, may enter upon the Premises and make such repairs
and/or maintenance, and upon completion thereof, Tenant agrees to pay to
Landlord as additional rent, Landlord's costs for making such repairs plus an
amount not to exceed five percent (5%) of such costs for overhead, within ten
(10) days of receipt from Landlord of a written itemized bill therefor. Any
amounts not reimbursed by Tenant within such ten (10) day period will bear
interest at the Interest Rate until paid by Tenant.

                 (c) LANDLORD'S OBLIGATIONS. During the entire Term (including
any Option Periods), Landlord shall, at, except as otherwise provided herein,
Landlord's sole cost and expense (and not as an Operating Expense), repair,
maintain and replace, as necessary, the following structural elements of the
Building and Premises: structural walls, foundations, concrete subflooring,
roof, underground utilities, windows and seals and all central mechanical (if
any) and electrical systems (if any) (collectively, "Structural Elements").
Except for the obligations of Landlord under this paragraph, Landlord's
obligation to maintain, as an Operating Expense, the Building and the Common
Areas of the Development, Landlord's obligations under Paragraph 20 relating to
damage or destruction of the Premises, or under Paragraph 21 relating to eminent
domain, it is intended by the parties that Landlord have no obligation of any
kind whatsoever, (i) to repair or maintain the Premises other than the
Structural Elements, all of which obligations are intended to be Tenant's
obligations, or (ii) to pay any other cost or expense whatsoever directly or
indirectly relating to the ownership, management, lease, operation or use of the
Premises. Notwithstanding the foregoing, to the extent such repairs, maintenance
or replacements are required as a result of any act, negligent, fault or
omission of Tenant or any of the Tenant Parties, Tenant shall pay to Landlord,
as Additional Rent, the actual and reasonable cost of any such maintenance,
repairs or replacements. Tenant waives the right to make repairs at Landlord's
expense under any law, statute, ordinance, rule, regulation, order or ruling
(including, without limitation, to the extent the Premises are located in
California, the provisions of California Civil Code Sections 1941 and 1942 and
any successor statutes or laws of a similar nature). Landlord shall also repair
any damage caused by the negligence or willful misconduct of Landlord or
Landlord's employees, agents or contractors.

                 (d) TENANT'S SELF-HELP. If Landlord fails to perform any of its
repair and maintenance obligations under Paragraph 14(c) or otherwise as
required in this Lease, and such failure materially affects Tenant's ability to
use and occupy the Premises for the purposes permitted herein, Tenant shall have
the right, but not the obligation, to perform such repairs and/or maintenance if
such failure continues for more than thirty (30) days after written notice from
Tenant to Landlord; provided, however, that if the nature of the repairs and/or
maintenance to be completed by Landlord is such that more than thirty (30) days
are required to complete such repairs and/or maintenance, Landlord shall have
such additional time as is reasonably necessary to complete such repairs and/or
maintenance so long as Landlord takes appropriate action to commence such
repairs and/or maintenance within such thirty (30) day period and thereafter
diligently pursues such repairs and/or maintenance to completion. In such event,
Landlord shall reimburse Tenant for the reasonable costs incurred by Tenant to
complete such repairs and/or maintenance within thirty (30) days after receipt
of Tenant's written demand therefor, together with copies of the paid invoices
evidencing the costs incurred by Tenant. Any repairs and/or maintenance
permitted herein shall be performed in a good workmanlike manner by licensed
contractors. If Landlord objects to the repairs and/or maintenance performed or
the expenses incurred by Tenant in performing such work, Landlord shall deliver
a written notice of Landlord's objection to Tenant within thirty (30) days after
Landlord's receipt of Tenant's invoice evidencing the expenses incurred by
Tenant. Landlord's notice shall set forth in reasonable detail Landlord's
reasons for its claim that such repairs and/or maintenance were not required or
were not Landlord's obligation in the terms of this Lease and/or the reasons for
Landlord's dispute of the expenses incurred by Tenant in performing such work.
Upon receipt of such notice, Tenant shall contact Landlord, and the parties
shall negotiate in good faith to resolve any conflicts related to work performed
and expenses incurred pursuant to this Paragraph 14(d).



                                      -11-
<PAGE>

In no event, however, shall Tenant have the right to set off such sums owing
from Landlord against rent payable hereunder.

         15. LIENS. Tenant agrees not to permit any mechanic's, materialmen's or
other liens to be filed against all or any part of the Premises or the
Development, nor against Tenant's leasehold interest in the Premises, by reason
of or in connection with any repairs, alterations, improvements or other work
contracted for or undertaken by Tenant or any other act or omission of Tenant or
Tenant's agents, employees, contractors, licensees or invitees. At Landlord's
request, Tenant agrees to provide Landlord with enforceable, conditional and
final lien releases (or other evidence reasonably requested by Landlord to
demonstrate protection from liens) from all persons furnishing labor and/or
materials at the Premises. Landlord will have the right at all reasonable times
to post on the Premises and record any notices of non-responsibility which it
deems necessary for protection from such liens. If any such liens are filed,
Tenant will, at its sole cost, promptly cause such liens to be released of
record or bonded so that it no longer affects title to the Premises, the
Development or Industrial Park. If Tenant fails to cause any such liens to be so
released or bonded within ten (10) days after notice of the filing thereof, such
failure will be deemed a material breach by Tenant under this Lease without the
benefit of any additional notice or cure period described in Paragraph 22 below,
and Landlord may, without waiving its rights and remedies based on such breach,
and without releasing Tenant from any of its obligations, cause such liens to be
released by any means it shall deem proper, including payment in satisfaction of
the claims giving rise to such liens. Tenant agrees to pay to Landlord within
ten (10) days after receipt of invoice from Landlord, any sum paid by Landlord
to remove such liens, together with interest at the Interest Rate from the date
of such payment by Landlord. Notwithstanding the foregoing, Tenant shall be
entitled to contest any such liens without penalty provided that Tenant's
contest of any such lien is brought in good faith and diligently prosecuted
until the same is resolved. Landlord acknowledges Tenant's right to finance and
to secure under the Uniform Commercial Code, inventory, furnishings, furniture,
equipment, machinery, and other personal property located in or at the Premises,
and Landlord agrees to execute commercially reasonable waiver forms releasing
liens in favor of any purchase money seller, landlord or lender who has financed
or may finance in the future such items. Without limiting the effectiveness of
the foregoing, provided that no default shall have occurred and be continuing,
Landlord shall, upon the request of Tenant, and at the Tenant's sole cost and
expense, execute and deliver any commercially reasonable instruments necessary
or appropriate to confirm any such grant, release, dedication, transfer,
annexation or amendment to any person or entity permitted under this paragraph
including landlord waivers with respect to any of the foregoing.

         16. ENTRY BY LANDLORD. Landlord and its employees and agents will at
all times have the right to enter the Premises to inspect the same, to show the
Premises to prospective purchasers or (for the final nine (9) months of the Term
only) tenants, to post notices of nonresponsibility, and/or to repair the
Premises as permitted or required by this Lease. In exercising such entry
rights, Landlord will endeavor to minimize, as reasonably practicable, the
interference with Tenant's business, and will provide Tenant with 24-hours'
advance notice of any such entry and during such entry shall, if Tenant so
requests, be accompanied by a representative of Tenant (except in emergency
situations). Landlord may, in order to carry out such purposes, erect
scaffolding and other necessary structures where reasonably required by the
character of the work to be performed. Landlord will at all times have and
retain a key with which to unlock all doors in the Premises, excluding Tenant's
vaults and safes. Landlord will have the right to use any and all means which
Landlord may reasonably deem proper to open said doors in an emergency in order
to obtain entry to the Premises. Any entry to the Premises obtained by Landlord
by any of said means, or otherwise, will not be construed or deemed to be a
forcible or unlawful entry into the Premises, or an eviction of Tenant from the
Premises. Landlord will not be liable to Tenant for any damages or losses for
any entry by Landlord unless caused by the gross negligence or willful
misconduct of Landlord or Landlord's employees, agents or contractors.

         17.     UTILITIES AND SERVICES.

                 (a)     PAYMENT OF UTILITIES.

                 Tenant agrees to contract directly for and to pay for all
water, gas, heat, light, power, telephone, waste removal, sewer and other
utilities and services supplied to the Premises, together with any taxes
thereon. All utilities furnished to the Premises shall be separately metered at
Tenant's sole cost and expense. Except as provided in Paragraph 17(c) below,
Landlord will not be liable to Tenant for any failure to furnish any of the
foregoing utilities and services if such failure is caused by all or any of the
following: (i) accident, breakage or repairs; (ii) strikes, lockouts or other
labor disturbance or labor dispute of any character; (iii) governmental
regulation, moratorium or other governmental action or inaction; (iv) inability
despite the exercise of reasonable diligence to obtain electricity, water or
fuel; or (v) any other cause beyond Landlord's reasonable control. In addition,
in the event of any stoppage or interruption of services or utilities, Tenant
shall not be entitled to any abatement or reduction of rent (except as expressly
provided in Subparagraph 17(c) below and Subparagraphs 20(f) or 21(b) if such




                                      -12-
<PAGE>

failure results from a damage or taking described therein), no eviction of
Tenant will result from such failure and Tenant will not be relieved from the
performance of any covenant or agreement in this Lease because of such failure.

                 (b)     UTILITY DEREGULATION.

                         (i) LANDLORD CONTROLS SELECTION. Landlord has advised
Tenant that presently San Diego Gas & Electric ("Electric Service Provider") is
the utility company selected by Landlord to provide electricity service for the
Project. Notwithstanding the foregoing, if permitted by applicable law, Landlord
shall have the right at any time and from time to time during the Lease Term to
either contract for service from a different company or companies providing
electricity service (each such company shall hereinafter be referred to as an
"Alternate Service Provider") or continue to contract for service from the
Electric Service Provider. In no event shall Landlord's selection of an
Alternate Service Provider result in Tenant paying a higher cost for such
electricity than if Landlord elected to continue to contract for such service
from the Electric Service Provider.

                         (ii) TENANT SHALL GIVE LANDLORD ACCESS. Tenant shall
cooperate with Landlord, the Electric Service Provider, and any Alternate
Service Provider during non-business hours (except in the event of an emergency)
and, as reasonably necessary, shall allow Landlord, Electric Service Provider,
and any Alternate Service Provider reasonable access to the Building's electric
lines, feeders, risers, wiring and any other machinery within the Premises,
provided, that Landlord shall use Landlord's commercially reasonable efforts to
ensure that there shall be no interference with Tenant's use and enjoyment of
the Premises.

                         (iii) LANDLORD NOT RESPONSIBLE FOR INTERRUPTION OF
SERVICE. Unless caused by the gross negligence or willful misconduct of Landlord
or Landlord's employees, agents or contractors, Landlord shall in no way be
liable or responsible for any loss, damage, or expense that Tenant may sustain
or incur by reason of any change, failure, interference, disruption, or defect
in the supply or character of the electric energy furnished to the Premises, or
if the quantity or character of the electric energy supplied by the Electric
Service Provider or any Alternate Service Provider is no longer available or
suitable for Tenant's requirements, and no such change, failure, defect,
unavailability, or unsuitability shall constitute an actual or constructive
eviction, in whole or in part, or entitle Tenant to any abatement or diminution
of Rent (except for abatement as specifically provided in Paragraph 17(c)
below), or relieve Tenant from any of its obligations under the Lease.

                 (c) ABATEMENT EVENT. An "Abatement Event" shall be defined as
an event that prevents Tenant from using the Premises or any portion thereof, as
a result of any failure by Landlord to provide essential services or access to
the Premises, where (i) Tenant does not actually use the Premises or such
portion thereof, and (ii) such event is not caused by the negligence or willful
misconduct of Tenant or any of the Tenant Parties. Tenant shall give Landlord
notice ("Abatement Notice") of any such Abatement Event, and if such Abatement
Event continues beyond the "Eligibility Period" (as that term is defined below),
then Base Rent, all Additional Rent (including Tenant's Percentage of Operating
Expenses) shall be abated entirely or reduced, as the case may be, after
expiration of the Eligibility Period for such time that Tenant continues to be
so prevented from using, and does not use the Premises or a portion thereof, in
the proportion that the rentable area of the portion of the Premises that Tenant
is prevented from using, and does not use, bears to the total rentable square
footage of the Premises leased by Tenant; provided, however, in the event that
Tenant is prevented from using, and does not use, a portion of such Premises for
a period of time in excess of the Eligibility Period, then for such time after
expiration of the Eligibility Period during which Tenant is so prevented from
effectively conducting its business therein, Base Rent, all Additional Rent
(including Tenant's Percentage of Operating Expenses) for the entire portion of
the Premises located within such Building shall be abated entirely for such time
as Tenant continues to be so prevented from using, and does not use, such
portion of the Premises located within such Building. If, however, Tenant
reoccupies any portion of the Premises located within such Building during such
period, the Base Rent, all Additional Rent (including Tenant's Percentage of
Operating Expenses) allocable to such reoccupied portion, based on the
proportion that the rentable area of such reoccupied portion of such portion of
the Premises located within such Building bears to the total rentable area of
such Building, shall be payable by Tenant from the date Tenant reoccupies such
portion of the Premises. The term "Eligibility Period" shall mean a period of
five (5) consecutive business days after Landlord's receipt of any Abatement
Notice(s). Except as provided in Articles 13 and 14, such right to abate Base
Rent, all Additional Rent (including Tenant's Percentage of Operating Expenses)
shall be Tenant's sole and exclusive remedy at law or in equity for an Abatement
Event.

                 (d) HVAC HOURS OF OPERATION. Tenant shall have the ability to
control, from the Premises, the hours of operation with respect to heating,
ventilation and air conditioning supplied to the Premises.

                 (e) TRASH ENCLOSURE. Tenant shall also have sole control of the
trash enclosure behind the Premises as shown in the attached EXHIBIT "A" and
shall have the right to convert such enclosure into a Hazardous Materials
enclosure, subject to the provisions of subparagraph 8(c) above.



                                      -13-
<PAGE>

         18.     ASSUMPTION OF RISK AND INDEMNIFICATION.

                 (a) ASSUMPTION OF RISK. Tenant, as a material part of the
consideration to Landlord, hereby agrees that neither Landlord nor any Landlord
Indemnified Parties (as defined in Subparagraph 8(c) above) will be liable to
Tenant for, and Tenant expressly assumes the risk of and waives any and all
claims it may have against Landlord or any Landlord Indemnified Parties (except
for claims resulting from the negligent or willful act or omission of Landlord)
with respect to, (i) any and all damage to property or injury to persons in,
upon or about the Premises or the Development, (ii) any such damage caused by
other tenants or persons in or about the Premises, or caused by quasi-public
work, (iii) any damage to property entrusted to employees of Tenant and its
assignees and subtenants, (iv) any loss of or damage to property by theft or
otherwise, or (v) any injury or damage to persons or property resulting from any
casualty, explosion, falling plaster or other masonry or glass, steam, gas,
electricity, water or rain which may leak from any part of the Building or from
the pipes, appliances or plumbing works therein or from the roof, street or
subsurface or from any other place, or resulting from dampness. Notwithstanding
anything to the contrary contained in this Lease, neither Landlord nor any
Landlord Indemnified Parties will be liable for consequential damages arising
out of any loss of the use of the Premises or any equipment or facilities
therein by Tenant or any Tenant Parties or for interference with light or other
incorporeal hereditaments. Tenant agrees to give prompt notice to Landlord in
case of fire or accidents in the Premises, or of defects therein or in the
fixtures or equipment.

                 (b)     INDEMNIFICATION.

                         (i) Tenant will be liable for, and agrees, to the
maximum extent permissible under applicable law, to promptly indemnify, protect,
defend and hold harmless Landlord and Landlord Indemnified Parties, from and
against, any and all claims, damages, judgments, suits, causes of action,
losses, liabilities, penalties, fines, expenses and costs, including reasonable
attorneys' fees and court costs (collectively, "Landlord Indemnified Claims"),
arising or resulting from (A) any act or omission of Tenant or any Tenant
Parties (as defined in Subparagraph 8(c) above); (B) the use of the Premises and
Common Areas and conduct of Tenant's business by Tenant or any Tenant Parties,
or any other activity, work or thing done, permitted or suffered by Tenant or
any Tenant Parties, in or about the Premises or elsewhere within the
Development; and/or (C) any default by Tenant of any obligations on Tenant's
part to be performed under the terms of this Lease. In case any action or
proceeding is brought against Landlord or any Landlord Indemnified Parties by
reason of any such Landlord Indemnified Claims, Tenant, upon notice from
Landlord, agrees to promptly defend the same at Tenant's sole cost and expense
by counsel approved in writing by Landlord, which approval Landlord will not
unreasonably withhold.

                         (ii) Landlord will be liable for, and agrees, to the
maximum extent permissible under applicable law, to promptly indemnify, protect,
defend and hold harmless Tenant and Tenant's officers, directors, employees,
agents, successors and assigns (collectively, "Tenant Indemnified Parties") from
and against any and all claims, damages, judgments, suits, causes of action,
losses, liabilities, penalties, fines, expenses and costs, including reasonable
attorneys' fees and court costs (collectively, the "Tenant Indemnified Claims")
arising or resulting from (A) any default by Landlord of any obligations on
Landlord's part to be performed under the terms of this Lease and/or (B) the
negligent acts or omissions or willful misconduct of any Landlord Indemnified
Parties. In case any action or proceeding is brought against Tenant or any
Tenant Indemnified Parties by reason of any such Tenant Indemnified Claims,
Landlord, upon notice from Tenant, agrees to promptly defend the same at
Landlord's sole cost and expense by counsel approved in writing by Tenant, which
approval Tenant will not unreasonably withhold.

                 (c) SURVIVAL; NO RELEASE OF INSURERS. The indemnification
obligations under Subparagraph 18(b) will survive the expiration or earlier
termination of this Lease. Landlord's and Tenant's covenants, agreements and
indemnification obligation in Subparagraphs 18(a) and 18(b) above, are not
intended to and will not relieve any insurance carrier of its obligations under
policies required to be carried by Landlord and Tenant pursuant to the
provisions of this Lease.

         19.     INSURANCE.

                 (a) TENANT'S INSURANCE. On or before the date Tenant first
commences any work of any type in the Premises pursuant to this Lease (which may
be prior to the Commencement Date), and continuing throughout the entire Term
hereof and any other period of occupancy, Tenant agrees to keep in full force
and effect, at its sole cost and expense, the following insurance:

                         (i) "All Risks" property insurance including at least
the following perils: fire and extended coverage, smoke damage, vandalism,
malicious mischief, and sprinkler leakage (including earthquake sprinkler
leakage) upon all property owned by Tenant, for which Tenant is legally liable,
or which is installed at Tenant's expense, and which is located in the Premises
including, without limitation, any Tenant Improvements which satisfy the
foregoing qualification and any Alterations, and all furniture, fittings,
installations, fixtures and any other personal property of Tenant, in an amount
not



                                      -14-
<PAGE>

less than the full replacement cost thereof. If there is a dispute as to full
replacement cost, the reasonable and good faith decision of Landlord or any
mortgagee of Landlord will be presumptive.

                         (ii) One (1) year insurance coverage for business
interruption and loss of income and extra expense insuring the same perils
described in Subparagraph 19(a)(i) above, in such amounts as will reimburse
Tenant for any direct or indirect loss of earnings attributable to any such
perils including prevention of access to the Premises, Tenant's parking areas or
the Building as a result of any such perils.

                         (iii) Commercial General Liability Insurance or
Comprehensive General Liability Insurance (on an occurrence form) insuring
bodily injury, and property damage including the following divisions and
extensions of coverage: Premises and Operations; Owners and Contractors
protective; blanket contractual liability (including coverage for Tenant's
indemnity obligations under this Lease); products and completed operations;
liquor liability (if Tenant serves alcohol on the Premises); and fire and water
damage legal liability in an amount sufficient to cover the replacement value of
the Premises, including Tenant Improvements, that are rented under the terms of
this Lease. Such insurance must have the following minimum limits of liability:
bodily injury and property damage - $1,000,000 each occurrence and $2,000,000 in
the aggregate, provided that if liability coverage is provided by a Commercial
General Liability policy the general aggregate limit shall apply separately and
in total to this location only (per location general aggregate), and provided
further, such minimum limits of liability may be adjusted at the end of the
third Lease Year to reflect increases in coverages as reasonably recommended by
Landlord's insurance carrier as being prudent and commercially reasonable for
tenants of first class office buildings comparable to the Building.

                         (iv) Comprehensive Automobile Liability insuring bodily
injury and property damage arising from all owned, non-owned and hired vehicles,
if any, with minimum limits of liability of $500,000 per accident.

                         (v) Worker's Compensation or similar insurance as
required by the laws of the state in which the Premises are located, with at
least the following minimum limits of liability: Coverage A - statutory
benefits; Coverage B - $1,000,000 per accident and disease.

                         (vi) Any other form or forms of commercially reasonable
insurance as Tenant or Landlord or any mortgagees of Landlord may reasonably
require from time to time in form, in amounts, and for insurance risks against
which, a prudent tenant would protect itself, but only to the extent coverage
for such risks and amounts are available in the insurance market at commercially
acceptable rates. Landlord makes no representation that the limits of liability
required to be carried by Tenant under the terms of this Lease are adequate to
protect Tenant's interests and Tenant should obtain such additional insurance or
increased liability limits as Tenant deems appropriate.

                 (b) SUPPLEMENTAL TENANT INSURANCE REQUIREMENTS. All policies
must be in a form reasonably satisfactory to Landlord and issued by an insurer
admitted to do business in the state in which the Premises are located. All
policies must be issued by insurers with a policyholder rating of "A-" and a
financial rating of "VIII" in the most recent version of Best's Key Rating
Guide. All policies must contain a requirement to notify Landlord (and
Landlord's property manager and any mortgagees or ground landlords of Landlord
who are named as additional insureds, if any) in writing not less than thirty
(30) days prior to any material change, reduction in coverage, cancellation or
other termination thereof. Tenant agrees to deliver to Landlord, as soon as
practicable after placing the required insurance, but in any event within the
time frame specified in Subparagraph 19(a) above, certificate(s) of insurance
evidencing the existence of such insurance and Tenant's compliance with the
provisions of this Paragraph 19. Tenant also agrees to cause replacement
certificate(s) to be delivered to Landlord not less than ten (10) days prior to
the expiration of any such policy or policies. Tenant's failure to carry the
insurance specified herein will be deemed to be in material default under this
Lease without the benefit of any additional notice or cure period provided in
Subparagraph 22(a)(iii) below, and Landlord will have the right, but not the
obligation, to procure such insurance as Landlord deems necessary to protect
Landlord's interests at Tenant's expense. If Landlord obtains any insurance that
is the responsibility of Tenant under this Paragraph 19, Landlord agrees to
deliver to Tenant a written statement setting forth the cost of any such
insurance and showing in reasonable detail the manner in which it has been
computed and Tenant agrees to promptly reimburse Landlord for such costs as
additional rent. General Liability and Automobile Liability policies under
Subparagraphs 19(a)(iii) and (iv) must name Landlord and Landlord's property
manager (and at Landlord's request, Landlord's mortgagees and ground landlords
of which Tenant has been informed in writing) as additional insureds and must
also contain a provision that the insurance afforded by such policy is primary
insurance and any insurance carried by Landlord and Landlord's property manager
or Landlord's mortgagees or ground landlords, if any, will be excess over and
non-contributing with Tenant's insurance.

                 (c) BUILDING INSURANCE. Landlord shall obtain, at Tenant's sole
cost and expense, a policy or policies of insurance covering loss or damage to
the Premises, in the amount of the full



                                      -15-
<PAGE>

replacement value thereof against all perils included within the classification
of fire, extended coverage, vandalism, malicious mischief, earthquake, and
special extended perils ("All Risk" as such term is used in the insurance
industry) and if required by Landlord's lender or Landlord, earthquake coverage.
This insurance shall cover the Building, including tenant improvements, heating
and cooling equipment or machinery and electrical equipment, as well as any
furniture, fixtures, equipment or other personal property owned by Landlord. A
Stipulated Value or Agreed Amount endorsement deleting the coinsurance provision
of the policy shall be procured with said insurance. Tenant will be liable for
Tenant's Share of such deductible and Tenant agrees to reimburse Landlord for
Tenant's Share of the entire cost of such premiums as an Operating Expense. The
deductible amounts for all insurance obtained by Landlord pursuant to this Lease
shall be commercially reasonable; provided, however, Tenant acknowledges that
the deductibles carried under Landlord's current insurance program (a copy of
which has been delivered to Tenant) are commercially reasonable.

                 (d) TENANT'S USE. Tenant will not keep, use, sell or offer for
sale in or upon the Premises any article which may be prohibited by any
insurance policy periodically in force covering the Premises. If Tenant's
occupancy or business in, or on, the Premises, whether or not Landlord has
consented to the same, results, in Landlord's good faith and reasonable
judgment, in any increase in premiums for the insurance periodically carried by
Landlord with respect to the Building or results in the need for Landlord to
maintain special or additional insurance, Tenant agrees to pay Landlord the
reasonable cost of any such increase in premiums or special or additional
coverage as additional rent within ten (10) days after being billed therefor by
Landlord, provided, however, Landlord shall give written notice to Tenant as
soon as reasonably possible after obtaining any such additional coverage. In
determining whether increased premiums are a result of Tenant's use of the
Premises, a schedule issued by the organization computing the insurance rate on
the Building showing the various components of such rate, will be conclusive
evidence of the several items and charges which make up such rate. Tenant agrees
to promptly comply with all reasonable requirements of the insurance authority
or any present or future insurer relating to the Premises.

                 (e) CANCELLATION OF LANDLORD'S POLICIES. If any of Landlord's
insurance policies are canceled or cancellation is threatened or the coverage
reduced or threatened to be reduced in any way because of the use of the
Premises or any part thereof by Tenant or any assignee or subtenant of Tenant or
by anyone Tenant permits on the Premises and, if Tenant fails to remedy the
condition giving rise to such cancellation, threatened cancellation, reduction
of coverage, threatened reduction of coverage, increase in premiums, or
threatened increase in premiums, within five (5) days after receipt of written
notice thereof, Tenant will be deemed to be in material default of this Lease
and Landlord may enter upon the Premises and attempt to remedy such condition,
and Tenant shall promptly pay Landlord the reasonable costs of such remedy as
additional rent. If Landlord is unable, or elects not to remedy such condition,
then Landlord will have all of the remedies provided for in this Lease in the
event of a default by Tenant which is not cured within the applicable cure
period.

                 (f) WAIVER OF SUBROGATION. Landlord and Tenant hereby mutually
waive any and all rights of recovery against one another for real or personal
property loss or damage occurring to the Premises, or any part thereof, or any
personal property therein from perils insured (or required to be insured)
against under the insurance maintained hereunder for the benefit of the
respective parties, and to the extent the proceeds of such insurance are
actually recovered, and each shall use commercially reasonable efforts to assure
that such insurance permits waiver of liability and contains a waiver of
subrogation.

         20.     DAMAGE OR DESTRUCTION.

                 (a) PARTIAL DESTRUCTION. If the Premises or Building are
damaged by fire or other casualty to an extent not exceeding twenty-five percent
(25%) of the full replacement cost thereof, and Landlord's contractor reasonably
estimates in a writing delivered to Landlord and Tenant that the damage thereto
may be repaired, reconstructed or restored to substantially its condition
immediately prior to such damage within, subject to Paragraph 33 below, one
hundred eighty (180) days from the date of such casualty, and Landlord will
receive insurance proceeds sufficient to cover the costs of such repairs,
reconstruction and restoration (including proceeds from Tenant and/or Tenant's
insurance which Tenant is required to deliver to Landlord pursuant to
Subparagraph 20(e) below to cover Tenant's obligation for the costs of repair,
reconstruction and restoration of any portion of the Tenant Improvements and any
Alterations for which Tenant is responsible under this Lease), then Landlord
agrees to commence and proceed diligently with the work of repair,
reconstruction and restoration and this Lease will continue in full force and
effect. Notwithstanding anything to the contrary contained in this Lease
(including, but not limited to, Paragraph 19 (c) above), Tenant shall only be
responsible for the first $50,000 of the deductible under any earthquake
coverage carried by Landlord with respect to the Building with Landlord
responsible for the next $50,000 of such deductible. In the event such
deductible exceeds $100,000, then, in the event of any earthquake triggering
coverage under such earthquake policy, either party may terminate this Lease by
written notice to the other effective as of the date of such earthquake unless
the other party, within ten (10) days of receipt of such notice of termination,
delivers written notice to the



                                      -16-
<PAGE>

terminating party of its agreement to pay for the cost of repairing such
earthquake damage to the Building in excess of $100,000.

                 (b) SUBSTANTIAL DESTRUCTION. Any damage or destruction to the
Premises or the Building which Landlord is not obligated to repair pursuant to
Subparagraph 20(a) above will be deemed a substantial destruction. In the event
of a substantial destruction, Landlord may elect to either: (i) repair,
reconstruct and restore the portion of the Premises damaged by such casualty, in
which case this Lease will continue in full force and effect, subject to
Tenant's termination right contained in Subparagraph 20(d) below; or (ii)
terminate this Lease effective as of the date of such destruction.

                 (c) NOTICE. Under any of the conditions of Subparagraph 20(a)
or (b) above, Landlord agrees to give written notice to Tenant of its intention
to repair or terminate, as permitted in such paragraphs, within the earlier of
sixty (60) days after the occurrence of such casualty, or fifteen (15) days
after Landlord's receipt of the estimate from Landlord's contractor (the
applicable time period to be referred to herein as the "Notice Period").

                 (d) TENANT'S TERMINATION RIGHTS. If Landlord elects to repair,
reconstruct and restore pursuant to Subparagraph 20(b)(i) hereinabove, and if
Landlord's contractor estimates that as a result of such damage, Tenant cannot
be given use of and access to the Premises sufficient to operate its business in
all material respects in the manner operated prior to such damage within,
subject to Paragraph 33 below, one hundred eighty (180) days after the date of
such damage, then Tenant may terminate this Lease effective upon delivery of
written notice to Landlord within ten (10) days after Landlord delivers notice
to Tenant of its election to so repair, reconstruct or restore.

                 (e) TENANT'S COSTS AND INSURANCE PROCEEDS. In the event of any
damage or destruction of all or any part of the Premises, Tenant agrees to
immediately (i) notify Landlord thereof, and (ii) deliver to Landlord all
property insurance proceeds received by Tenant with respect to any Tenant
Improvements and any Alterations, but excluding proceeds for Tenant's furniture,
fixtures, equipment and other personal property, whether or not this Lease is
terminated as permitted in this Paragraph 20, and Tenant hereby assigns to
Landlord all rights to receive such insurance proceeds. If, for any reason
(including Tenant's failure to obtain insurance for the full replacement cost of
any Tenant Improvements and any Alterations from any and all casualties), Tenant
fails to receive insurance proceeds covering the full replacement cost of any
Tenant Improvements and any Alterations which are damaged, Tenant will be deemed
(unless such failure to receive insurance is due to the acts or omissions of
Landlord and/or Landlord's agents, employees, or contractors) to have
self-insured the replacement cost of such items, and upon any damage or
destruction thereto, Tenant agrees to immediately pay to Landlord the full
replacement cost of such items, less any insurance proceeds actually received by
Landlord from Landlord's or Tenant's insurance with respect to such items.

                 (f) ABATEMENT OF RENT. In the event of any damage, repair,
reconstruction and/or restoration described in this Paragraph 20, rent will be
abated or reduced, as the case may be, in proportion to the degree to which
Tenant's use of the Premises is impaired during such period of repair until such
use is restored. Except for abatement of rent as provided hereinabove, Tenant
will not be entitled to any compensation or damages for loss of, or interference
with, Tenant's business or use or access of all or any part of the Premises or
for lost profits or any other consequential damages of any kind or nature, which
result from any such damage, repair, reconstruction or restoration.

                 (g) INABILITY TO COMPLETE. Notwithstanding anything to the
contrary contained in this Paragraph 20, if Landlord is obligated or elects to
repair, reconstruct and/or restore the damaged portion of the Building or the
Premises pursuant to Subparagraph 20(a) or 20(b)(i) above, but is delayed from
completing such repair, reconstruction and/or restoration beyond the date which
is one hundred eighty (180) days after the date estimated by Landlord's
contractor for completion thereof by reason of any causes (other than delays
caused by Tenant, its subtenants, employees, agents or contractors) which are
beyond the reasonable control of Landlord as described in Paragraph 33, then
either Landlord or Tenant may elect to terminate this Lease upon ten (10) days'
prior written notice given to the other after the expiration of such one hundred
eighty (180) day period.

                 (h) DAMAGE NEAR END OF TERM. Landlord and Tenant shall each
have the right to terminate this Lease if any damage to the Premises or the
Building occurs during the last twelve (12) months of the Term of this Lease
where Landlord's contractor estimates in a writing delivered to Landlord and
Tenant that the repair, reconstruction or restoration of such damage cannot be
completed within sixty (60) days after the date of such casualty. If either
party desires to terminate this Lease under this Subparagraph (h), it shall
provide written notice to the other party of such election within ten (10) days
after receipt of Landlord's contractor's repair estimates.

                 (i) WAIVER OF TERMINATION RIGHT. Landlord and Tenant agree that
the foregoing provisions of this Paragraph 20 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,



                                      -17-
<PAGE>

ordinance, rule, regulation, order or ruling now or hereafter in force which
provide remedies for damage or destruction of leased premises (including,
without limitation, to the extent the Premises are located in California, 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).

                 (j) TERMINATION. Upon any termination of this Lease under any
of the provisions of this Paragraph 20, the parties will be released without
further obligation to the other from the date possession of the Premises is
surrendered to Landlord except for items which have accrued and are unpaid as of
the date of termination and matters which are to survive any termination of this
Lease as provided in this Lease.

         21.     EMINENT DOMAIN.

                 (a) SUBSTANTIAL TAKING. If the whole of the Premises or more
than fifty percent (50%) of the floor area of the Building or fifty percent
(50%) of the land area of the Premises which is not occupied by the Building, is
taken for any public or quasi-public purpose by any lawful power or authority by
exercise of the right of appropriation, condemnation or eminent domain, or sold
to prevent such taking, either party will have the right to terminate this Lease
effective as of the date possession is required to be surrendered to such
authority.

                 (b) PARTIAL TAKING; ABATEMENT OF RENT. In the event of a taking
of a portion of the Premises which does not constitute a substantial taking
under Subparagraph 21(a) above, then, neither party will have the right to
terminate this Lease and Landlord will thereafter proceed to make a functional
unit of the remaining portion of the Premises (but only to the extent Landlord
receives proceeds therefor from the condemning authority), and rent will be
abated in proportion to the floor area of the Premises which Tenant is deprived
of on account of such taking; provided, however, there will be no abatement of
rent if the only area taken is that which does not have a building located
thereon.

                 (c) CONDEMNATION AWARD. In connection with any taking of all or
any portion of the Premises, Landlord will be entitled to receive the entire
amount of any award which may be made or given in such taking or condemnation,
without deduction or apportionment for any estate or interest of Tenant, it
being expressly understood and agreed by Tenant that no portion of any such
award will be allowed or paid to Tenant for any so-called bonus or excess value
of this Lease, and such bonus or excess value will be the sole property of
Landlord. Tenant agrees not to assert any claim against Landlord or the taking
authority for any compensation because of such taking (including any claim for
bonus or excess value of this Lease); provided, however, if any portion of the
Premises is taken, Tenant will have the right to recover from the condemning
authority (but not from Landlord) any compensation as may be separately awarded
or recoverable by Tenant for the taking of Tenant's furniture, fixtures,
equipment and other personal property within the Premises, for Tenant's
relocation expenses, and for any loss of goodwill or other damage to Tenant's
business by reason of such taking.

                 (d) TEMPORARY TAKING. In the event of taking of the Premises or
any part thereof for temporary use, (i) this Lease will remain unaffected
thereby and rent will not abate, and (ii) Tenant will be entitled to receive
such portion or portions of any award made for such use with respect to the
period of the taking which is within the Term, provided that if such taking
remains in force at the expiration or earlier termination of this Lease, Tenant
will then pay to Landlord a sum equal to the reasonable cost of performing
Tenant's obligations under Paragraph 11 with respect to surrender of the
Premises and upon such payment Tenant will be excused from such obligations. For
purpose of this Subparagraph 21(d), a temporary taking shall be defined as a
taking for a period of ninety (90) days or less.

         22.     DEFAULTS AND REMEDIES.

                 (a) DEFAULTS. The occurrence of any one or more of the
following events will be deemed a default by Tenant:

                         (i) The abandonment of the Premises by Tenant, which
for purposes of this Lease means any absence by Tenant from the Premises for
five (5) business days or longer while in default of any other provision of this
Lease.

                         (ii) The failure by Tenant to make any payment of rent
or additional rent or any other payment required to be made by Tenant hereunder,
as and when due, where such failure continues for a period of seven (7) 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, to the extent the Premises
are located in California, the provisions of California Code of Civil Procedure
Section 1161 regarding unlawful detainer actions or any successor statute or law
of a similar nature).



                                      -18-
<PAGE>

                         (iii) The failure by Tenant to observe or perform any
of the express or implied covenants or provisions of this Lease to be observed
or performed by Tenant, other than as specified in Subparagraph 22(a)(i) or (ii)
above, where such failure continues for a period of ten (10) business days after
written notice thereof from Landlord 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, to the extent the Premises are
located in California, California Code of Civil Procedure Section 1161 regarding
unlawful detainer actions and any successor statute or similar law). If the
nature of Tenant's default is such that more than ten (10) business days are
reasonably required for its cure, then Tenant will not be deemed to be in
default if Tenant, with Landlord's concurrence, commences such cure within such
five (5) business day period and thereafter diligently prosecutes such cure to
completion.

                         (iv) (A) The making by Tenant of any general assignment
for the benefit of creditors; (B) the filing by or against Tenant of a petition
to have Tenant adjudged a bankrupt or a petition for reorganization or
arrangement under any law relating to bankruptcy (unless, in the case of a
petition filed against Tenant, the same is dismissed within one hundred twenty
(120) days); (C) the appointment of a trustee or receiver to take possession of
substantially all of Tenant's assets located at the Premises or of Tenant's
interest in this Lease, where possession is not restored to Tenant within thirty
(30) days thereafter; or (D) the attachment, execution or other judicial seizure
of substantially all of Tenant's assets located at the Premises or of Tenant's
interest in this Lease where such seizure is not discharged within thirty (30)
days thereafter.

                 (b) LANDLORD'S REMEDIES; TERMINATION. In the event of any
default by Tenant, in addition to any other remedies available to Landlord at
law or in equity under applicable law (including, without limitation, to the
extent the Premises are located in California, the remedies of Civil Code
Section 1951.4 and any successor statute or similar law), Landlord will have the
immediate right and option to terminate this Lease and all rights of Tenant
hereunder. If Landlord elects to terminate this Lease then, to the extent
permitted under applicable law, Landlord may recover from Tenant: (i) the worth
at the time of award of any unpaid rent which had been earned at the time of
such termination; plus (ii) the worth at the time of award of the amount by
which the unpaid rent which would have been earned after termination until the
time of award exceeds the amount of such rent loss that Tenant proves could have
been reasonably avoided; plus (iii) the worth at the time of award of the amount
by which the unpaid rent for the balance of the Term after the time of award
exceeds the amount of such rent loss that Tenant proves could be reasonably
avoided; plus (iv) any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform its obligations
under this Lease or which, in the ordinary course of things, results therefrom
including, but not limited to: reasonable 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, the Tenant Improvements 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, and any Tenant Improvement
Allowance or other reasonable 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
the Lease is terminated, and the denominator of which is the total number of
months of the Lease Term; provided, however, that such amount is consistent with
Landlord's accounting methods in effect at the time of such default.

                 As used in Subparagraphs 22(b)(i) and (ii) above, the "worth at
the time of award" is computed by allowing interest at the Interest Rate. As
used in Subparagraph 22(b)(iii) 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%).

                 (c) LANDLORD'S REMEDIES; RE-ENTRY RIGHTS. In the event of any
default by Tenant, in addition to any other remedies available to Landlord under
this Lease, at law or in equity, Landlord will also have the right, with or
without terminating this Lease, to re-enter the Premises and remove all persons
and property from the Premises; such property may be removed and stored in a
public warehouse or elsewhere and/or disposed of at the sole cost and expense of
and for the account of Tenant in accordance with the provisions of Subparagraph
13(h) of this Lease or any other procedures permitted by applicable law. No
re-entry or taking possession of the Premises by Landlord pursuant to this
Subparagraph 22(c) will be construed as an election to terminate this Lease
unless a written notice of such intention is given to Tenant or unless the
termination thereof is decreed by a court of competent jurisdiction.

                 (d) LANDLORD'S REMEDIES; RE-LETTING. In the event of the
vacation or abandonment of the Premises by Tenant or in the event that Landlord
elects to re-enter the Premises or takes possession of the Premises pursuant to
legal proceeding or pursuant to any notice provided by law, then if Landlord
does not elect to terminate this Lease, Landlord may from time to time, without
terminating this Lease, either recover all rent as it becomes due or relet the
Premises or any part thereof



                                      -19-
<PAGE>

on terms and conditions as Landlord in its sole and absolute discretion may deem
advisable with the right to make alterations and repairs to the Premises in
connection with such reletting. If Landlord elects to relet the Premises, then
rents received by Landlord from such reletting will be applied: first, to the
payment of any indebtedness other than rent due hereunder from Tenant to
Landlord; second, to the payment of any cost of such reletting; third, to the
payment of the cost of any repairs to the Premises incurred in connection with
such reletting; fourth, to the payment of rent due and unpaid hereunder and the
residue, if any, will be held by Landlord and applied to payment of future rent
as the same may become due and payable hereunder. Should that portion of such
rents received from such reletting during any month, which is applied to the
payment of rent hereunder, be less than the rent payable during that month by
Tenant hereunder, then Tenant agrees to pay such deficiency to Landlord
immediately upon demand therefor by Landlord. Such deficiency will be calculated
and paid monthly.

                 (e) LANDLORD'S REMEDIES; PERFORMANCE FOR TENANT. All covenants
and agreements to be performed by Tenant under any of the terms of this Lease
are to be performed by Tenant at Tenant's sole cost and expense and without any
abatement of rent. If Tenant fails to pay any sum of money owed to any party
other than Landlord, for which it is liable under this Lease, or if Tenant fails
to perform any other act on its part to be performed hereunder, and such failure
continues for ten (10) days after written notice thereof by Landlord, Landlord
may, without waiving or releasing Tenant from its obligations, but shall not be
obligated to, make any such payment or perform any such other act to be made or
performed by Tenant. Tenant agrees to reimburse Landlord upon demand for all
reasonable sums so paid by Landlord and all reasonably necessary incidental
costs, together with interest thereon at the Interest Rate, from the date of
such payment by Landlord until reimbursed by Tenant. This remedy shall be in
addition to any other right or remedy of Landlord set forth in this Paragraph
22.

                 (f) LATE PAYMENT. If Tenant fails to pay any installment of
rent within seven (7) days of when due or if Tenant fails to make any other
payment for which Tenant is obligated under this Lease within seven (7) days of
when due, such late amount will accrue interest at the Interest Rate and Tenant
agrees to pay Landlord as additional rent such interest on such amount from the
date such amount becomes due until such amount is paid. In addition, Tenant
agrees to pay to Landlord concurrently with such late payment amount, as
additional rent, a late charge equal to five percent (5%) of the amount due to
compensate Landlord for the extra costs Landlord will incur as a result of such
late payment. The parties agree that (i) it would be impractical and extremely
difficult to fix the actual damage Landlord will suffer in the event of Tenant's
late payment, (ii) such interest and late charge represents a fair and
reasonable estimate of the detriment that Landlord will suffer by reason of late
payment by Tenant, and (iii) the payment of interest and late charges are
distinct and separate in that the 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 a result of Tenant's delinquent payments. Acceptance of
any such interest and late charge will not constitute a waiver of the Tenant's
default with respect to the overdue amount, or prevent Landlord from exercising
any of the other rights and remedies available to Landlord. If Tenant incurs a
late charge more than three (3) times in any period of twelve (12) months during
the Lease Term, then, notwithstanding that Tenant cures the late payments for
which such late charges are imposed, Landlord will have the right to require
Tenant thereafter to pay all installments of Monthly Base Rent quarterly in
advance throughout the remainder of the Lease Term.

                 (g) RIGHTS AND REMEDIES CUMULATIVE. All rights, options and
remedies of Landlord contained in this Lease will be construed and held to be
cumulative, and no one of them will be exclusive of the other, and Landlord
shall have the right to pursue any one or all of such remedies or any other
remedy or relief which may be provided by law or in equity, whether or not
stated in this Lease. Nothing in this Paragraph 22 will be deemed to limit or
otherwise affect Tenant's indemnification of Landlord pursuant to any provision
of this Lease.

         23. LANDLORD'S DEFAULT. Landlord will not be in default in the
performance of any obligation required to be performed by Landlord under this
Lease unless Landlord fails to perform such obligation within thirty (30) days
after the receipt of written notice from Tenant specifying in detail Landlord's
failure to perform; provided however, that if the nature of Landlord's
obligation is such that more than thirty (30) days are required for performance,
then Landlord will not be deemed in default if it commences such performance
within such thirty (30) day period and thereafter diligently pursues the same to
completion.

         24.     ASSIGNMENT AND SUBLETTING.

                 (a) RESTRICTION ON TRANSFER. Except as expressly provided in
this Paragraph 24, Tenant will not, either voluntarily or by operation of law,
assign or encumber this Lease or any interest herein or sublet the Premises or
any part thereof, or permit the use or occupancy of the Premises by any party
other than Tenant (any such assignment, encumbrance, sublease or the like, other
than a Permitted Transfer, will sometimes be referred to as a "Transfer"),
without the prior written consent of Landlord, which consent Landlord will not
unreasonably withhold, condition or delay.



                                      -20-
<PAGE>

                 (b) CORPORATE AND PARTNERSHIP TRANSFERS. For purposes of this
Paragraph 24, if Tenant is a corporation, partnership or other entity, any
transfer, assignment, encumbrance or hypothecation of fifty percent (50%) or
more (individually or in the aggregate) of any stock or other ownership interest
in such entity, and/or any transfer, assignment, hypothecation or encumbrance of
any controlling ownership or voting interest in such entity, will be deemed a
Transfer and will be subject to all of the restrictions and provisions contained
in this Paragraph 24. Notwithstanding the foregoing, the immediately preceding
sentence will not apply to any transfers of stock of Tenant if Tenant is a
publicly-held corporation and such stock is transferred publicly over a
recognized security exchange or over-the-counter market and will not apply to
any transfers resulting from a private placement(s) or an initial public
offering of stock if Tenant is not a publicly-held corporation.

                 (c) PERMITTED CONTROLLED TRANSFERS. Notwithstanding the
provisions of this Paragraph 24 to the contrary, Tenant may assign this Lease or
sublet the Premises or any portion thereof ("Permitted Transfer"), without
Landlord's consent and without extending any sublease termination option to
Landlord, to any parent, subsidiary or affiliate corporation which controls, is
controlled by or is under common control with Tenant, or to any corporation
resulting from a merger or consolidation with Tenant, whether or not Tenant is
the surviving entity, or to any person or entity which acquires all the assets
or stock of Tenant's business as a going concern (collectively, a "Tenant
Affiliate"), provided that: (i) at least thirty (30) days prior to such
assignment or sublease, Tenant delivers to Landlord the financial statements and
other financial and background information of the assignee or subtenant
described in Subparagraph 24(d) below; (ii) if an assignment, the assignee
assumes, in full, the obligations of Tenant under this Lease (or if a sublease,
the subtenant of a portion of the Premises or Term assumes, in full, the
obligations of Tenant with respect to such portion); (iii) the financial
condition of such successor or assignee is such that the substitution of such
successor or assignee for Tenant hereunder would not reasonably be expected to
materially adversely affect Landlord's ability to refinance any debt secured by
the Development or sell the Development without a material reduction in the
value attributed to the Development in connection with such refinancing or sale;
(iv) Tenant remains fully liable under this Lease; and (v) the use of the
Premises under Paragraph 8 is consistent with the Permitted Use described in
Paragraph 1(c) above. Without limiting the generality of the foregoing, for
purposes of clause (iii) above, the financial condition of a successor or
assignee shall not be deemed to reasonably be expected to materially adversely
affect Landlord's ability to refinance any debt secured by the Development or
sell the Development if: (A) such successor or assignee has a corporate credit
rating or indebtedness rated, in either case, by a "nationally recognized
statistical rating organization" (as defined under Rule 436(g)(2) under the
Securities Act of 1933) of BBB or better if rated by Standard and Poors, or an
equivalent rating if rated by any other nationally recognized statistical rating
organization or (B) the obligations of such successor or assignee under this
Lease are guaranteed by an entity meeting the qualifications of (A) above
pursuant to a form of lease guaranty reasonably acceptable to Landlord; (C) the
net worth of such successor following such proposed assignment or sublease is
not less than $40,000,000; or (D) the obligations of such successor or assignee
under this Lease are guaranteed by an entity having a net worth of not less than
$40,000,000 without a material reduction in the value attributed to the
Development in connection with such refinancing or sale.

                 In the event of a Transfer which would constitute a Permitted
Transfer but for a failure to comply with the provisions of Section 24(c)(iii)
above, if Landlord elects, in its sole discretion, to terminate this Lease as a
result of such unpermitted Transfer, Tenant shall be permitted to remain in the
Premises for no more than twelve (12) months from the date Landlord gives Tenant
notice of Landlord's election to terminate the Lease provided that (A) Tenant
provides Landlord with a letter of credit in form and substance reasonably
acceptable to Landlord in an amount not less than the equivalent of nine (9)
months of the then current Monthly Base Rent and (B) Tenant otherwise is not in
default under this Lease beyond any applicable cure period.

                 (d) TRANSFER NOTICE. If Tenant desires to effect a Transfer,
then at least thirty (30) days prior to the date when Tenant desires the
Transfer to be effective (the "Transfer Date"), Tenant agrees to give Landlord a
notice (the "Transfer Notice"), stating the name, address and business of the
proposed assignee, subtenant or other transferee (sometimes referred to
hereinafter as "Transferee"), reasonable information concerning the character,
ownership, and financial condition of the proposed Transferee, the Transfer
Date, any ownership or commercial relationship between Tenant and the proposed
Transferee, and the consideration and all other material terms and conditions of
the proposed Transfer, all in such detail as Landlord may reasonably require. If
Landlord reasonably requests additional detail, the Transfer Notice will not be
deemed to have been received until Landlord receives such additional detail, and
Landlord may withhold consent to any Transfer until such information is provided
to it.

                 (e) LANDLORD'S OPTIONS. Within fifteen (15) days of Landlord's
receipt of any Transfer Notice, and any additional information requested by
Landlord concerning the proposed Transferee's financial responsibility, Landlord
will elect to do one of the following: (i) consent to the proposed Transfer; or
(ii) refuse such consent, which refusal shall be on reasonable grounds
including, without limitation, those set forth in Subparagraph 24(f) below.



                                      -21-
<PAGE>

                 (f) REASONABLE DISAPPROVAL. Landlord and Tenant hereby
acknowledge that Landlord's disapproval of any proposed Transfer pursuant to
Subparagraph 24(e) will be deemed reasonably withheld if based upon any
reasonable factor, including, without limitation, any or all of the following
factors: (i) the proposed Transferee is a governmental entity; (ii) the portion
of the Premises to be sublet or assigned is irregular in shape with inadequate
means of ingress and egress; (iii) the use of the Premises by the Transferee (A)
is not permitted by the use provisions in Paragraph 8 hereof, (B) violates any
exclusive use granted by Landlord to another tenant in the project of which the
Premises is a part, or (C) is deemed by Landlord to present a risk of
incompatibility to the other tenants of the Development or otherwise poses an
unreasonable risk of increased liability to Landlord; (iv) the Transferee does
not have the financial capability to fulfill the obligations imposed by the
Transfer and this Lease, or (v) the Transferee poses a business or other
economic risk which Landlord reasonably deems unacceptable.

                 (g) ADDITIONAL CONDITIONS. A condition to Landlord's consent to
any Transfer of this Lease will be the delivery to Landlord of a true copy of
the fully executed instrument of assignment, sublease, transfer or
hypothecation, and, in the case of an assignment, the delivery to Landlord of an
agreement executed by the Transferee in form and substance reasonably
satisfactory to Landlord, whereby the Transferee assumes and agrees to be bound
by all of the terms and provisions of this Lease and to perform all of the
obligations of Tenant hereunder. As a condition to Landlord's consent to any
sublease, such sublease must provide that it is subject and subordinate to this
Lease and to all mortgages; that Landlord may enforce the provisions of the
sublease, including collection of rent; that in the event of termination of this
Lease for any reason, including without limitation a voluntary surrender by
Tenant, or in the event of any reentry or repossession of the Premises by
Landlord, Landlord may, at its option and after notifying Tenant in writing,
either (i) terminate the sublease, or (ii) take over all of the right, title and
interest of Tenant, as sublandlord, under such sublease, in which case such
subtenant will attorn to Landlord, but that nevertheless Landlord will not (1)
be liable for any previous act or omission of Tenant under such sublease, (2) be
subject to any defense or offset previously accrued in favor of the subtenant
against Tenant, or (3) be bound by any previous modification of any sublease
made without Landlord's written consent, or by any previous prepayment by
subtenant of more than one month's rent.

                 (h) EXCESS RENT. If for any Transfer, Tenant receives rent or
other consideration, either initially or over the term of the Transfer, in
excess of the rent fairly allocable to the portion of the Premises which is
assigned or subleased based on square footage, Tenant agrees to pay to Landlord
as additional rent fifty percent (50%) of the excess of each such payment of
rent or other consideration received by Tenant promptly after its receipt. In
calculating excess rent or other consideration which may be payable to Landlord
under this paragraph, Tenant will be entitled to deduct commercially reasonable
third party brokerage commissions, tenant improvement allowances, free rent,
attorneys' fees and other amounts reasonably and actually expended by Tenant in
connection with such assignment or subletting if acceptable written evidence of
such expenditures is provided to Landlord.

                 (i) NO RELEASE. No Transfer will release Tenant of Tenant's
obligations under this Lease or alter the primary liability of Tenant to pay the
rent and to perform all other obligations to be performed by Tenant hereunder.
Landlord may require that any Transferee remit directly to Landlord on a monthly
basis, all monies due Tenant by said Transferee. However, the acceptance of rent
by Landlord from any other person will not be deemed to be a waiver by Landlord
of any provision hereof. Consent by Landlord to one Transfer will not be deemed
consent to any subsequent Transfer. In the event of default by any Transferee of
Tenant or any successor of Tenant in the performance of any of the terms hereof,
Landlord may proceed directly against Tenant without the necessity of exhausting
remedies against such Transferee or successor. Landlord may consent to
subsequent assignments of this Lease or sublettings or amendments or
modifications to this Lease with assignees of Tenant, without notifying Tenant,
or any successor of Tenant, and without obtaining its or their consent thereto
and any such actions will not relieve Tenant of liability under this Lease.

                 (j) ADMINISTRATIVE AND ATTORNEYS' FEES. If Tenant effects a
Transfer or requests the consent of Landlord to any Transfer (whether or not
such Transfer is consummated), then, upon demand, Tenant agrees to pay Landlord
any reasonable attorneys' and paralegal fees actually incurred by Landlord in
connection with such Transfer or request for consent not to exceed One Thousand
Dollars ($1,000.00).

         25. SUBORDINATION. Without the necessity of any additional document
being executed by Tenant for the purpose of effecting a subordination, and at
the election of Landlord or any mortgagee or beneficiary with a deed of trust
encumbering the Premises, or any lessor of a ground or underlying lease with
respect to the Premises, this Lease will be subject and subordinate at all times
to: (i) all ground leases or underlying leases which may now exist or hereafter
be executed affecting the Premises; and (ii) the lien of any mortgage or deed of
trust which may now exist or hereafter be executed for which the Premises, or
Landlord's interest and estate in any of said items, is specified as security.
Notwithstanding the foregoing, Landlord reserves the right to subordinate any
such ground leases or underlying leases or any such liens to this Lease. If any
such ground lease or underlying lease terminates for any reason or any such
mortgage or deed of trust is foreclosed or a conveyance in lieu of foreclosure
is made for any



                                      -22-
<PAGE>

reason, at the election of Landlord's successor in interest, Tenant agrees to
attorn to and become the tenant of such successor in which event Tenant's right
to possession of the Premises will not be disturbed as long as Tenant is not in
default under this Lease beyond the applicable cure period. Tenant hereby waives
its rights under any law which gives or purports to give Tenant any right to
terminate or otherwise adversely affect this Lease and the obligations of Tenant
hereunder in the event of any such foreclosure proceeding or sale. Tenant
covenants and agrees to execute and deliver, upon demand by Landlord and in the
commercially reasonable form reasonably required by Landlord, any additional
documents evidencing the priority or subordination of this Lease and Tenant's
attornment agreement with respect to any such ground lease or underlying leases
or the lien of any such mortgage or deed of trust within twenty (20) days of
receipt of Landlord's written request therefor. If Tenant fails to sign and
return any such documents within twenty (20) days of receipt, Tenant will be in
default hereunder.

                 With respect to any existing or future first lien mortgages,
deeds of trust, or other liens entered into by and between Landlord and any such
mortgagee and/or a beneficiary of any deed of trust or other such lien granted
by Landlord, within thirty (30) days of Tenant's execution of this Lease, as a
condition precedent to Tenant's obligations under this Lease, Landlord shall
deliver to Tenant for immediate recording in the Official Records of San Diego
County notarized commercially reasonable nondisturbance agreements in writing
from all lessors under all ground leases or underlying leases from all
beneficiaries under all deeds of trust and all mortgagees under all mortgages
affecting the Building stating that so long as Tenant is not in default under
any of the terms, covenants, conditions or agreements of this Lease beyond any
applicable cure periods, this Lease and all of the terms, provisions and
conditions of this Lease, shall remain in full force and effect, and neither
this Lease, nor Tenant's rights nor Tenant's possession of the Premises will be
disturbed during the Term of this Lease or any extension thereof.

         26. ESTOPPEL CERTIFICATE. Within twenty (20) days following any written
request which Landlord may make from time to time, Tenant agrees to execute and
deliver to Landlord a fully completed, factually accurate statement, in a form
substantially similar to the form of EXHIBIT "E" attached hereto or as such
commercially reasonable form as may reasonably be required by Landlord's lender,
certifying: (i) the date of commencement of this Lease; (ii) the fact that this
Lease is unmodified and in full force and effect (or, if there have been
modifications, that this Lease is in full force and effect, and stating the date
and nature of such modifications); (iii) the date to which the rent and other
sums payable under this Lease have been paid; (iv) that there are no current
defaults under this Lease by either Landlord or Tenant except as specified in
Tenant's statement; and (v) such other matters reasonably requested by Landlord.
Landlord and Tenant intend that any statement delivered pursuant to this
Paragraph 26 may be relied upon by any mortgagee, beneficiary, purchaser or
prospective purchaser of the Premises or any interest therein. Tenant's failure
to deliver such statement within such time will be conclusive upon Tenant (i)
that this Lease is in full force and effect, without modification except as may
be represented by Landlord, (ii) that there are no uncured defaults in
Landlord's performance, and (iii) that not more than one (1) month's rent has
been paid in advance. Without limiting the foregoing, if Tenant fails to deliver
any such statement within such twenty (20) day period, Landlord may deliver to
Tenant an additional request for such statement and Tenant's failure to deliver
such statement to Landlord within ten (10) days after delivery of such
additional request will constitute a default under this Lease. Tenant agrees to
indemnify and protect Landlord from and against any and all claims, damages,
losses, liabilities and expenses (including attorneys' fees and costs)
attributable to any failure by Tenant to timely deliver any such estoppel
certificate to Landlord as required by this Paragraph 26.

         27. EASEMENTS. Landlord reserves to itself the right, from time to
time, to grant such easements, rights and dedications that Landlord deems
necessary or desirable, and to cause the recordation of parcel maps and
restrictions, so long as such easements, rights, dedications, maps and
restrictions do not unreasonably interfere with the use or occupancy of the
Premises by Tenant. Tenant shall sign any of the aforementioned documents upon
request of Landlord and failure to do so shall constitute a material breach of
this Lease.

         28. RULES AND REGULATIONS. Tenant agrees to faithfully observe and
comply with the "Rules and Regulations," a copy of which is attached hereto and
incorporated herein by this reference as EXHIBIT "F", and all reasonable and
nondiscriminatory modifications thereof and additions thereto from time to time
put into effect by Landlord.

         29. MODIFICATION AND CURE RIGHTS OF LANDLORD'S MORTGAGEES AND LESSORS.
If, in connection with Landlord's obtaining or entering into any financing or
ground lease affecting the Premises, the lender or ground lessor requests
modifications to this Lease, Tenant, within ten (10) days after request
therefor, agrees to execute an amendment to this Lease incorporating such
modifications, provided such modifications are reasonable and do not increase
the obligations of Tenant under this Lease or adversely affect the leasehold
estate created by this Lease. In the event of any default on the part of
Landlord, Tenant will give notice by registered or certified mail to any
beneficiary of a deed of trust or mortgage covering the Premises or ground
lessor of Landlord whose address has been furnished to Tenant, and Tenant agrees
to offer such beneficiary, mortgagee or ground lessor a reasonable



                                      -23-
<PAGE>

opportunity to cure the default (including with respect to any such beneficiary
or mortgagee, time to obtain possession of the Premises, subject to this Lease
and Tenant's rights hereunder, by power of sale or a judicial foreclosure, if
such should prove necessary to effect a cure).

         30. DEFINITION OF LANDLORD. The term "Landlord," as used in this Lease,
so far as covenants or obligations on the part of Landlord are concerned, means
and includes only the owner or owners, at the time in question, of the fee title
of the Premises or the lessees under any ground lease, if any. In the event of
any transfer, assignment or other conveyance or transfers of any such title
(other than a transfer for security purposes only), Landlord herein named (and
in case of any subsequent transfers or conveyances, the then grantor) will be
automatically relieved from and after the date of such transfer, assignment or
conveyance of all liability as respects the performance of any covenants or
obligations on the part of Landlord contained in this Lease thereafter to be
performed, so long as (a) the transferee assumes in writing all such covenants
and obligations of Landlord arising after the date of such transfer and (b) any
funds held by the transferor in which Tenant has an interest shall be turned
over to the transferee by credit to the purchase price or otherwise. Landlord
and Landlord's transferees and assignees have the absolute right to transfer all
or any portion of their respective title and interest in the Premises, the
Building, the Development and/or this Lease without the consent of Tenant, and
such transfer or subsequent transfer will not be deemed a violation on
Landlord's part of any of the terms and conditions of this Lease. Nothing in
this paragraph shall relieve Landlord from its obligations accruing prior to the
date of transfer.

         31. WAIVER. The waiver by either party of any breach of any term,
covenant or condition herein contained will not be deemed to be a waiver of any
subsequent breach of the same or any other term, covenant or condition herein
contained, nor will any custom or practice which may develop between the parties
in the administration of the terms hereof be deemed a waiver of or in any way
affect the right of either party to insist upon performance in strict accordance
with said terms. The subsequent acceptance of rent or any other payment
hereunder by Landlord will not be deemed to be a waiver of any preceding breach
by Tenant of any term, covenant or condition of this Lease, other than the
failure of Tenant to pay the particular rent so accepted, regardless of
Landlord's knowledge of such preceding breach at the time of acceptance of such
rent. No acceptance by Landlord of a lesser sum than the basic rent and
additional rent or other sum then due will be deemed to be other than on account
of the earliest installment of such rent or other amount due, nor will any
endorsement or statement on any check or any letter accompanying any check be
deemed an accord and satisfaction, and Landlord may accept such check or payment
without prejudice to Landlord's right to recover the balance of such installment
or other amount or pursue any other remedy provided in this Lease. The consent
or approval of Landlord to or of any act by Tenant requiring Landlord's consent
or approval will not be deemed to waive or render unnecessary Landlord's consent
or approval to or of any subsequent similar acts by Tenant.

         32. PARKING. Tenant and Tenant's customers, suppliers, employees and
invitees ("Tenant's Authorized Users") may use during the entire Term, at no
additional cost to Tenant, the parking areas in the Common Areas which parking
areas shall contain at least three (3) parking spaces per 1,000 rentable square
feet of the Building. Except as provided below, all visitor parking will be on a
non-exclusive, in common basis with all other visitors and guests of the
Development. Tenant will not use or allow any of Tenant's Authorized Users to
use any parking spaces which have been specifically assigned by Landlord to
other tenants or occupants or for other uses such as visitor parking or which
have been designated by any governmental entity as being restricted to certain
uses. As part of Tenant's parking privileges, Landlord and Tenant will mutually
and reasonably agree to the location of ten (10) parking spaces for Tenant's
exclusive use. Landlord shall have the right to reasonably relocate such
exclusive spaces to a location reasonably proximate to the Premises. Tenant and
Tenant's Authorized Users shall comply with all rules and regulations regarding
parking set forth in EXHIBIT "F" attached hereto and Tenant agrees to cause its
employees, subtenants, assignees, contractors, suppliers, customers and invitees
to comply with such rules and regulations. Landlord reserves the right from time
to time to modify and/or adopt such other reasonable and non-discriminatory
rules and regulations for the parking facilities as it deems reasonably
necessary for the operation of the parking facilities.

         33. FORCE MAJEURE. If either Landlord or Tenant is delayed, hindered in
or prevented from the performance of any act required under this Lease by reason
of strikes, lock-outs, labor troubles, inability to procure standard materials,
failure of power, restrictive governmental laws, regulations or orders or
governmental action or inaction (including failure, refusal or delay in issuing
permits, approvals and/or authorizations which is not the result of the action
or inaction of the party claiming such delay), riots, civil unrest or
insurrection, war, fire, earthquake, flood or other natural disaster, unusual
and unforeseeable delay not within Landlord's reasonable control which results
from an interruption of any public utilities (e.g., electricity, gas, water,
telephone) or other unusual and unforeseeable delay not within the reasonable
control of the party delayed in performing work or doing acts required under the
provisions of this Lease, then performance of such act will be excused for the
period of the delay and the period for the performance of any such act will be
extended for a period equivalent to the period of such delay. The provisions of
this Paragraph 33 will not operate to excuse Tenant from prompt payment of rent
or any other payments required under the provisions of this Lease.



                                      -24-
<PAGE>

         34. SIGNS. Subject to the requirements of this Paragraph 34, Tenant
shall be allowed, to the extent permitted under applicable laws and the CC&Rs,
to install, at Tenant's sole cost and expense, (i) Building-top signage in two
locations identifying Tenant's professional name on the exterior of the Building
and signage adjacent to Tenant's main suite entrance and (ii) signage
identifying Tenant's professional name on a monument sign for the Building,
provided Landlord elects, at Landlord's option, to construct a monument for the
Building and Tenant desires such signage. Tenant agrees to have Landlord install
and maintain Tenant's identification sign(s) in such designated location in
accordance with this Paragraph 34 at Tenant's sole cost and expense. Tenant has
no right to install Tenant identification signs in any other location in, on or
about the Premises or the Development in any interior or exterior Common Areas.
The size, design, color and other physical aspects of any and all permitted
sign(s) will be subject to (i) Landlord's written approval prior to
installation, which approval shall not be unreasonably withheld, conditioned or
delayed, (ii) the CC&Rs, and (iii) any applicable municipal or governmental
permits and approvals. Tenant will be solely responsible for all costs for
installation, maintenance, repair and removal of any Tenant identification
sign(s). If Tenant fails to remove Tenant's sign(s) upon termination of this
Lease and repair any damage caused by such removal, Landlord may do so at
Tenant's sole cost and expense. Tenant agrees to reimburse Landlord for all
reasonable costs incurred by Landlord to effect any installation, maintenance or
removal on Tenant's account, which amount will be deemed additional rent, and
may include, without limitation, all sums disbursed, incurred or deposited by
Landlord including Landlord's costs, expenses and actual attorneys' fees with
interest thereon at the Interest Rate from the date of Landlord's demand until
paid by Tenant. Any sign rights granted to Tenant under this Lease are personal
to Tenant and any Tenant Affiliate and may not be assigned, transferred or
otherwise conveyed to any assignee or subtenant of Tenant without Landlord's
prior written consent, which consent Landlord shall not unreasonably withhold.
Subject to Landlord obtaining any necessary governmental permits and approvals,
Landlord shall install, at Landlord's sole cost and expense, Building signage at
the main entry to the Development to direct trucks to the south entrance of the
Development and Tenant's visitors to the north entrance of the Development.
Further, all trucks shall be then directed to exit the Development through the
south entrance of the Development. In the event of any increase in Operating
Expenses solely related to the truck traffic of other tenants (and not normal
wear and tear) caused hereby, such costs shall be passed through to such tenants
and not to Tenant.

         35. LIMITATION ON LIABILITY. In consideration of the benefits accruing
hereunder, Tenant on behalf of itself and all successors and assigns of Tenant
covenants and agrees that, in the event of any actual or alleged failure, breach
or default hereunder by Landlord: (a) tenant's recourse against Landlord for
monetary damages will be limited to Landlord's interest in the Premises
including, subject to the prior rights of any Mortgagee, Landlord's interest in
the rents of the Premises and any insurance proceeds and any proceeds of any
sale or other conveyance, including, without limitation, any condemnation award
payable to Landlord; (b) except as may be necessary to secure jurisdiction of
the partnership, no partner of Landlord shall be sued or named as a party in any
suit or action and no service of process shall be made against any partner of
Landlord; (c) no partner of Landlord shall be required to answer or otherwise
plead to any service of process; (d) no judgment will be taken against any
partner of Landlord and any judgment taken against any partner of Landlord may
be vacated and set aside at any time after the fact; (e) no writ of execution
will be levied against the assets of any partner of Landlord; (f) the
obligations under this Lease do not constitute personal obligations of the
individual partners, directors, officers or shareholders of Landlord, and Tenant
shall not seek recourse against the individual partners, directors, officers or
shareholders of Landlord or any of their personal assets for satisfaction of any
liability in respect to this Lease; and (g) these covenants and agreements are
enforceable both by Landlord and also by any partner of Landlord.

         36. FINANCIAL STATEMENTS. Prior to the execution of this Lease by
Landlord and at any time during the Term of this Lease upon twenty (20) days
prior written notice from Landlord, Tenant agrees to provide Landlord with a
Tenant's most recent audited annual financial reports (dated no earlier than
twelve (12) months from the date of such request) together with, if required by
any prospective lender or purchaser of Landlord, a then current financial
statement for Tenant; provided, however, Landlord shall use Landlord's good
faith efforts to require that any such prospective lender or purchaser keep such
financial statements confidential (except that such prospective lenders and
purchasers may disclose such information to their consultants and as may be
required by law). Such annual statements are to be prepared in accordance with
generally accepted accounting principles, except as noted in the notes thereto,
and, if such is the normal practice of Tenant, audited by an independent
certified public accountant. Any interim financial statements provided by Tenant
as may be required above shall be prepared in accordance with generally accepted
accounting principles and certified by an officer of Tenant.

         37. QUIET ENJOYMENT. Landlord covenants and agrees with Tenant that
upon Tenant paying the rent required under this Lease and paying all other
charges and performing all of the covenants and provisions on Tenant's part to
be observed and performed under this Lease, Tenant may peaceably and quietly
have, hold and enjoy the Premises in accordance with this Lease.



                                      -25-
<PAGE>

         38. AUCTIONS. Tenant shall not conduct, nor permit to be conducted,
either voluntarily or involuntarily, any auction upon the Premises without first
having obtained Landlord's prior written consent. Notwithstanding anything to
the contrary in this Lease, Landlord shall not be bound by any standard of
reasonableness in determining whether to grant such consent.

         39.     MISCELLANEOUS.

                 (a) CONFLICT OF LAWS. This Lease shall be governed by and
construed solely pursuant to the laws of the State of California, without giving
effect to choice of law principles thereunder.

                 (b) SUCCESSORS AND ASSIGNS. Except as otherwise provided in
this Lease, 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 representatives, successors and assigns.

                 (c) PROFESSIONAL FEES AND COSTS. If either Landlord or Tenant
should bring suit against the other with respect to this Lease, then all
reasonable costs and expenses, including without limitation, actual professional
fees and costs such as appraisers', accountants' and attorneys' fees and costs,
incurred by the party which prevails in such action, whether by final judgment
or out of court settlement, shall be paid by the other party, which obligation
on the part of the other party shall be deemed to have accrued on the date of
the commencement of such action and shall be enforceable whether or not the
action is prosecuted to judgment. As used herein, attorneys' fees and costs
shall include, without limitation, reasonable attorneys' fees, costs and
expenses incurred in connection with any (i) post-judgment motions; (ii)
contempt proceedings; (iii) garnishment, levy, and debtor and third party
examination; (iv) discovery; and (v) bankruptcy litigation.

                 (d) TERMS AND HEADINGS. The words "Landlord" and "Tenant" as
used herein shall include the plural as well as the singular. Words used in any
gender include other genders. The paragraph headings of this Lease are not a
part of this Lease and shall have no effect upon the construction or
interpretation of any part hereof.

                 (e) TIME. Time is of the essence with respect to the
performance of every provision of this Lease in which time of performance is a
factor.

                 (f) PRIOR AGREEMENT; AMENDMENTS. This Lease and the exhibits
attached hereto constitute and are intended by the parties to be a final,
complete and exclusive statement of their entire agreement with respect to the
subject matter of this Lease. This Lease supersedes any and all prior and
contemporaneous agreements and understandings of any kind relating to the
subject matter of this Lease. There are no other agreements, understandings,
representations, warranties, or statements, either oral or in written form,
concerning the subject matter of this Lease. No alteration, modification,
amendment or interpretation of this Lease shall be binding on the parties unless
contained in a writing which is signed by both parties.

                 (g) SEPARABILITY. The provisions of this Lease shall be
considered separable such that if any provision or part of this Lease is ever
held to be invalid, void or illegal under any law or ruling, all remaining
provisions of this Lease shall remain in full force and effect to the maximum
extent permitted by law.

                 (h) RECORDING. Neither Landlord nor Tenant shall record this
Lease nor a short form memorandum thereof without the consent of the other.

                 (i) COUNTERPARTS. This Lease may be executed in one or more
counterparts, each of which shall constitute an original and all of which shall
be one and the same agreement.

                 (j) NONDISCLOSURE OF LEASE TERMS. Tenant acknowledges and
agrees that the terms of this Lease are confidential and constitute proprietary
information of Landlord. Disclosure of the terms could adversely affect the
ability of Landlord to negotiate other leases and impair Landlord's relationship
with other tenants. Accordingly, Tenant agrees that it, and its partners,
officers, directors, employees, agents and attorneys, shall not intentionally
and voluntarily disclose the terms and conditions of this Lease to any newspaper
or other publication or any other tenant or apparent prospective tenant of the
Building or other portion of the Development, or real estate agent, either
directly or indirectly, without the prior written consent of Landlord; provided,
however, that Tenant may disclose the terms to prospective subtenants or
assignees under this Lease, in its financial statements (to the extent required
by generally acceptable accounting principles) or as otherwise required by law
(including, without limitation, the Securities Act of 1933, as amended, and the
rules promulgated thereunder). Notwithstanding the foregoing, Tenant shall not
be deemed in breach of this rule if a term or condition of this Lease is made
public by any third party by reference to Tenant's financial statements or
governmental filings,



                                      -26-
<PAGE>

                 (k) NON-DISCRIMINATION. Tenant acknowledges and agrees that
there shall be no discrimination against, or segregation of, any person, group
of persons, or entity on the basis of race, color, creed, religion, age, sex,
marital status, national origin, or ancestry in the leasing, subleasing,
transferring, assignment, occupancy, tenure, use, or enjoyment of the Premises,
or any portion thereof.

         40.     EXECUTION OF LEASE.

                 (a) JOINT AND SEVERAL OBLIGATIONS. If more than one person
executes this Lease as Tenant, their execution of this Lease will constitute
their covenant and agreement that (i) each of them is jointly and severally
liable for the keeping, observing and performing of all of the terms, covenants,
conditions, provisions and agreements of this Lease to be kept, observed and
performed by Tenant, and (ii) the term "Tenant" as used in this Lease means and
includes each of them jointly and severally. The act of or notice from, or
notice or refund to, or the signature of any one or more of them, with respect
to the tenancy of this Lease, including, but not limited to, any renewal,
extension, expiration, termination or modification of this Lease, will be
binding upon each and all of the persons executing this Lease as Tenant with the
same force and effect as if each and all of them had so acted or so given or
received such notice or refund or so signed.

                 (b) TENANT AS CORPORATION OR PARTNERSHIP. If Tenant executes
this Lease as a corporation or partnership, then Tenant and the persons
executing this Lease on behalf of Tenant represent and warrant that such entity
is duly qualified and in good standing to do business in California and that the
individuals executing this Lease on Tenant's behalf are duly authorized to
execute and deliver this Lease on its behalf, and in the case of a corporation,
in accordance with a duly adopted resolution of the board of directors of
Tenant, a copy of which is to be delivered to Landlord on execution hereof, if
requested by Landlord, and in accordance with the by-laws of Tenant, and, in the
case of a partnership, in accordance with the partnership agreement and the most
current amendments thereto, if any, copies of which are to be delivered to
Landlord on execution hereof, if requested by Landlord, and that this Lease is
binding upon Tenant in accordance with its terms.

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

         IN WITNESS WHEREOF, the parties have caused this Lease to be duly
executed by their duly authorized representatives as of the date first above
written.


TENANT:                                  LANDLORD:

AXSYS TECHNOLOGIES, INC.,                OTAY BUSINESS PARK, LLC,
a Delaware corporation                   a California limited liability company

By: /s/ Raymond F. Kunzmann               By:    THE KOLL COMPANY,
   ------------------------------                a California corporation,
Name Printed: Raymond F. Kunzmann                its Managing Member
Title: Vice President
                                               By: /s/ James Watson
By: /s/ David L. Concannon
   ------------------------------              Its: Division President
Name Printed: David L. Concannon               Telephone:(949)833-3030
Title: Vice President                          Facsimile:(949)252-9116



*NOTE:
If Tenant is a California corporation, then one of the following alternative
requirements must be satisfied:

(A)      This Lease must be signed by two (2) officers of such corporation: one
         being the chairman of the board, the president or a vice president AND
         the other being the secretary, an assistant secretary, the chief
         financial officer or an assistant treasurer. If once (1) individual is
         signing in two (2) of the foregoing capacities, that individual must
         sign twice, once as one officer and again as the other officer.

(B)      If there is only one (1) individual signing in two (2) capacities, or
         if the two (2) signatories do not satisfy the requirements of (A)
         above, then Tenant shall deliver to Landlord a certified copy of a
         corporate resolution in a form reasonably acceptable to Landlord
         authorizing the signatory(ies) to execute this Lease.


                                      -27-
<PAGE>



If Tenant is a corporation incorporated in a state other than California, then
Tenant shall deliver to Landlord a certified copy of a corporate resolution in a
form reasonably acceptable to Landlord authorizing the signatory(ies) to execute
this Lease.




                                      -28-