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                                                                    Exhibit 10.5

                                INDUSTRIAL LEASE
                               (MULTI-TENANT; NET)

         THIS LEASE is made as of the 5th day of January, 2000, by and
between THE IRVINE COMPANY, hereafter called "Landlord," and OCULEX
PHARMACEUTICALS, INC., a California corporation, hereinafter called "Tenant."

                        ARTICLE I. BASIC LEASE PROVISIONS

         Each reference in this Lease to the "Basic Lease Provisions" shall mean
and refer to the following collective terms, the application of which shall be
governed by the provisions in the remaining Articles of this Lease.

1.       Premises: 601 California Avenue, Sunnyvale, CA (the Premises are more
         particularly described in Section 2.1).

         Address of Building: 601 California Avenue, Sunnyvale, CA 94086

2.       Project Description (if applicable): 601/605 California Avenue

3.       Use of Premises: General Office, R&D (including testing on animals)
         and Assembly.

4.       Estimated Commencement Date: February 1, 2000

5.       Lease Term: Sixty (60) months, plus such additional days as may be
         required to cause this Lease to terminate on the final day of the
         calendar month.

6.       Basic Rent: Forty Six Thousand Seventy-Eight Dollars ($46,078.00) per
         month, based on $1.65 per rentable square foot.

         Basic Rent is subject to adjustment as follows:

         Commencing twelve (12) months following the Commencement Date, the
         Basic Rent shall be Forty Seven Thousand Four Hundred Seventy-Four
         Dollars ($47,474.00) per month, based on $1.70 per rentable square
         foot.

         Commencing twenty-four (24) months following the Commencement Date,
         the Basic Rent shall be Forty Eight Thousand Eight Hundred
         Seventy-One Dollars ($48,871.00) per month, based on $1.75 per
         rentable square foot.

         Commencing thirty-six (36) months following the Commencement Date,
         the Basic Rent shall be Fifty Thousand Two Hundred Sixty-Seven Dollars
         ($50,267.00) per month, based on $1.80 per rentable square foot.

         Commencing forty-eight (48) months following the Commencement Date,
         the Basic Rent shall be Fifty One Thousand Six Hundred Sixty-Three
         Dollars ($51,663.00) per month, based on $1.85 per rentable square
         foot.

7.       Guarantor(s): None

8.       Floor Area of Premises: Approximately 27,926 rentable square feet

9.       Security Deposit: $56,829.41

10.      Broker(s): Colliers International

11.      Additional Insureds: Insignia/ESG of California, Inc.

12.      Address for Payments and Notices:

         LANDLORD                                            TENANT

         INSIGNIA/ESG OF CALIFORNIA, INC.         OCULEX PHARMACEUTICALS, INC.
         1 Ada, Suite 270                         601 California Avenue
         Irvine, CA 92618                         Sunnyvale, CA 94086


                                      1                               10/29/96


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         with a copy of notices to:

         IRVINE INDUSTRIAL COMPANY
         P.O. Box 6370
         Newport Beach, CA 92658-6370
         Attn: Vice President, Industrial Operations

13.      Tenant's Liability Insurance Requirement: $2,000,000.00

14.      Vehicle Parking Spaces: 95 unreserved parking spaces














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                             ARTICLE II. PREMISES


         SECTION 2.1. LEASED PREMISES. Landlord leases to Tenant and Tenant
leases from Landlord the premises shown in EXHIBIT A (the "Premises"),
containing approximately the floor area set forth in Item 8 of the Basic
Lease Provisions and known by the suite number identified in Item 1 of the
Basic Lease Provisions. The Premises are located in the building identified
in Item 1 of the Basic Lease Provisions (which together with the underlying
real property, is called the "Building"), and is a portion of the project
shown in EXHIBIT Y (the "Project").

         SECTION 2.2. ACCEPTANCE OF PREMISES. Tenant acknowledges that
neither landlord nor any representative of Landlord has made any
representation or warranty with respect to the Premises or the Building or
the suitability or fitness of either for any purpose, including without
limitation any representations or warranties regarding zoning or other land
use matters, and that neither Landlord nor any representative of Landlord has
made any representations or warranties regarding (i) what other tenants or
uses may be permitted or intended in the Building and the Project, or (ii)
any exclusivity of use by Tenant with respect to its permitted use of the
Premises as set forth in Item 3 of the Basic Lease Provisions. Tenant further
acknowledges that neither Landlord nor any representative of Landlord has
agreed to undertake any alterations or additions or construct any
improvements to the Premises except as expressly provided in this Lease. The
taking of possession or use of the Premises by Tenant for any purpose other
than construction shall conclusively establish that the Premises and the
Building were in satisfactory condition and in conformity with the provisions
of this Lease in all respects, except for those matters which Tenant shall
have brought to Landlord's attention on a written punch list. The list shall
be limited to any items required to be accomplished by Landlord under the
Work Letter attached as EXHIBIT X, and shall be delivered to Landlord within
thirty (30) days after the term ("Term") of this Lease commences as provided
in Article III below. If no items are required of Landlord under the Work
Letter, by taking possession of the Premises Tenant accepts the improvements
in their existing condition, and waives any right or claim against Landlord
arising out of the condition of the Premises. Nothing contained in this
Section shall affect the commencement of the Term or the obligation of Tenant
to pay rent. Landlord shall diligently complete all punch list items of which
it is notified as provided above.

         In addition to Landlord's obligations under the Work Letter attached
hereto as EXHIBIT X, Landlord warrants the good working order of the existing
HVAC, plumbing, lighting, electrical, sewer and life safety systems serving
the Premises for a period of thirty (30) days following the Commencement
Date. In the event Tenant provides Landlord with written notice of any
necessary repairs to such systems within such thirty (30) day period,
Landlord shall promptly make such repairs as may be necessary to place the
system in question in good working order.

         SECTION 2.3. BUILDING NAME AND ADDRESS. Tenant shall not utilize any
name selected by Landlord from time to time for the Building and/or the
Project as any part of Tenant's corporate or trade name. Landlord shall have
the right to change the name, address, number or designation of the Building
or Project without liability to Tenant.


                               ARTICLE III. TERM

         SECTION 3.1. GENERAL. The Term shall be for the period shown in Item
5 of the Basic Lease Provisions. Subject to the provisions of Section 3.2
below, the Term shall commence ("Commencement Date") on the earlier of (a)
the date upon which Landlord tenders possession of the Premises to Tenant
with the Tenant Improvements (as defined in the Work Letter attached hereto)
substantially completed (which date shall be no earlier then February 1,
2000), or (b) the date Tenant acquires possession or commences use of the
Premises for any purpose other than construction of Tenant Improvements by
Tenant under the Work Letter. Within ten (10) days after possession of the
Premises is tendered to Tenant, the parties shall memorialize on a form
provided by Landlord the actual Commencement Date and the expiration date
("Expiration Date") of this Lease. Tenant's failure to execute that form
shall not affect the validity of Landlord's determination of those dates.

         SECTION 3.2. DELAY IN POSSESSION. If Landlord, for any reason
whatsoever, cannot deliver possession of the Premises to Tenant on or before
the Estimated Commencement Date, this Lease shall not be void or voidable nor
shall Landlord be liable to Tenant for any resulting loss or damage. However,
Tenant shall not be liable for any rent and the Commencement Date shall not
occur until Landlord delivers possession of the Premises and the Premises are
in fact available for Tenant's occupancy with any Tenant Improvements that
have been approved as per Section 3.1(a) above, except that if Landlord's
failure to so deliver possession on the Estimated Commencement Date is
attributable to any action or inaction by Tenant (including without
limitation any Tenant Delay described in the Work Letter attached w this
Lease), then the Commencement Date shall not be advanced to the date on which
possession of the Premises is tendered to Tenant, and Landlord shall be
entitled to full performance by Tenant (including the payment of rent) from
the date Landlord would have been able to deliver the Premises to Tenant but
for Tenant's delay(s).

         SECTION 3.3. RIGHT TO EXTEND THIS LEASE. Provided that Tenant is not
in default under any provision of this Lease, either at the lime of exercise
of the extension right granted herein or at the time of


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the commencement of such extension, and provided further that Tenant is
occupying the entire Premises and has not assigned or sublet any of its
interest in this Lease, Tenant may extend the Term of this Lease for one (1)
period of sixty (60) months. Tenant shall exercise its right to extend the
Term by and only by delivering to Landlord, not less than six (6) months or
more than nine (9) months prior to the expiration date of the Term, Tenant's
irrevocable written notice of its commitment to extend (the "Commitment
Notice"). Thc Basic Rent payable under the Lease during any extension of the
Term shall be determined as provided in the following provisions.

         If Landlord and Tenant have not by then been able to agree upon the
Basic Rent for the extension of the Term, then within one hundred twenty
(120) and ninety (90) days prior to the expiration date of the Term, Landlord
shall notify Tenant in writing of the Basic Rent that would reflect the
prevailing market rental rate for a 60-month renewal of comparable space in
the Project (together with any increases thereof during the extension period)
as of the commencement of the extension period ("Landlord's Determination").
Should Tenant disagree with the Landlord's Determination, then Tenant shall,
not later than twenty (20) days thereafter, notify Landlord in writing of
Tenant's determination of those rental terms ("Tenant's Determination"). In
no event, however, shall Landlord's Determination or Tenant's Determination
be less than the Basic Rent payable by Tenant during the final month of the
initial Term. Within ten (10) days following delivery of the Tenant's
Determination, the parties shall attempt to agree on an appraiser to
determine the fair market rental. If the parties are unable to agree in that
time, then each party shall designate an appraiser within ten (10) days
thereafter. Should either party fail to so designate an appraiser within that
time, then the appraiser designated by the other party shall determine the
fair market rental. Should each of the parties timely designate an appraiser,
then the two appraisers so designated shall appoint a third appraiser who
shall, acting alone, determine the fair market rental for the Premises. Any
appraiser designated hereunder shall have an MAI certification with not less
than five (5) years experience in the valuation of commercial industrial
buildings in the vicinity of the Project.

         Within thirty (30) days following the selection of the appraiser and
such appraiser's receipt of the Landlord's Determination and the Tenant's
Determination, the appraiser shall determine whether the rental rate
determined by Landlord or by Tenant more accurately reflects the fair market
rental rate for the 60-month renewal of the Lease for the Premises, as
reasonably extrapolated to the commencement of the extension period.
Accordingly, either the Landlord's Determination or the Tenant's
Determination shall be selected by the appraiser as the fair market rental
rate for the extension period. In making such determination, the appraiser
shall consider rental comparables for the Project (provided that if there are
an insufficient number of comparables within the project, the appraiser shall
consider rental comparables for similarly improved space within the vicinity
of the Project with appropriate adjustment for location and quality of
project), but the appraiser shall not attribute any factor for market tenant
improvement allowances or brokerage commissions in making its determination
of the fair market rental rate. At any time before the decision of the
appraiser is rendered, either patty may, by written notice to the other
party, accept the rental terms submitted by the other party, in which event
such terms shall be deemed adopted as the agreed fair market rental. The fees
of the appraiser(s) shall be borne entirely by the party whose determination
of the fair market rental rate was not accepted by the appraiser.

         Within twenty (20) days after the determination of the fair market
rental, Landlord shall prepare an appropriate amendment to this Lease for the
extension period, and Tenant shall execute and return same to Landlord within
twenty (20) days. Should the fair market rental not be established by the
commencement of the extension period, then Tenant shall continue paying rent
at the rate in effect during the last month of the initial Term, and a lump
sum adjustment shall be made promptly upon the determination of such new
rental.

         If Tenant falls to timely comply with any of the provisions of this
paragraph, Tenant's right to extend the Term shall be extinguished and the
Lease shall automatically terminate as of the expiration dale of the Term,
without any extension and without any liability to Landlord. Any attempt to
assign or transfer any right or interest created by this paragraph shall be
void from its inception. Tenant shall have no other right to extend the Term
beyond the single sixty (60) month extension period created by this
paragraph. Unless agreed to in a writing signed by Landlord and Tenant, any
extension of the Term, whether created by an amendment to this Lease or by a
holdover of the Premises by Tenant, or otherwise, shall be deemed a part of,
and not in addition to, any duly exercised extension period permitted by this
paragraph.

                   ARTICLE IV. RENT AND OPERATING EXPENSES

         SECTION 4.1. BASIC RENT. From and after the Commencement Date,
Tenant shall pay to Landlord without deduction or offset, Basic Rent for the
Premises in the total amount shown (including subsequent adjustments, if any)
in Item 6 of the Basic Lease Provisions. Any rental adjustment shown in Item
6 shall be deemed to occur on the specified monthly anniversary of the
Commencement Date, whether or not that date occurs at the end of a calendar
month. The rent shall be due and payable in advance commencing on the
Commencement Date (as prorated for any partial month) and continuing
thereafter on the first day oaf each successive calendar month of the Term.
No demand, notice or invoice shall be required for the payment of Basic Rent.
An installment of rent in the amount of one (1) full month's Basic Rent at
the initial rate specified in Item 6 of the Basic Lease Provisions shall he
delivered to Landlord concurrently with Tenant's execution of this Lease and
shall be applied against the Basic Rent trust due hereunder.


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         SECTION 4.2. OPERATING EXPENSES.

                   (a) Tenant shall pay to Landlord, as additional tent,
Tenant's Share of "Operating Expenses", as defined below, incurred by
Landlord in the operation of the Building and Project. The term "Tenant's
Share" means that portion of an Operating Expense determined by multiplying
the cost of such item by a fraction, the numerator of which is the floor area
of the Premises and the denominator of which is the total square footage of
the floor area, as of the date on which the computation is made, to be
charged with such Operating Expense.

                   (b) Commencing prior to the start of the first full
"Expense Recovery Period" (as defined below) of the Lease, and prior to the
start of each full or partial Expense Recovery Period thereafter, Landlord
shall give Tenant a written estimate of the amount of Tenant's Share of
Operating Expenses for the Expense Recovery Period. Tenant shall pay the
estimated amounts to Landlord in equal monthly installments, in advance, with
Basic Rent. If Landlord has not furnished its written estimate for any
Expense Recovery Period by the time set forth above, Tenant shall continue to
pay cost reimbursements at the rates established for the prior Expense
Recovery Period, if any; provided that when the new estimate is delivered to
Tenant, Tenant shall, at the next monthly payment date, pay any accrued cost
reimbursements based upon the new estimate. For purposes hereof, "Expense
Recovery Period" shall mean every twelve month period during the Term (or
portion thereof for the first and last lease years) commencing July 1 and
ending June 30.

                   (c) Within one hundred twenty (120) days after the end of
each Expense Recovery Period, Landlord shall furnish to Tenant a statement
showing in reasonable detail the actual or prorated Operating Expenses
incurred by Landlord during the period, and the parties shall within thirty
(30) days thereafter make any payment or allowance necessary to adjust
Tenant's estimated payments, if any, to the actual Tenant's Share as shown by
the annual statement. Any delay or failure by Landlord in delivering any
statement hereunder shall not constitute a waiver of Landlord's right to
require Tenant to pay Tenant's Share of Operating Expenses pursuant hereto.
Any amount due Tenant shall be credited against installments next coming due
under this Section 4.2, and any deficiency shall be paid by Tenant together
with the next installment. If Tenant has not made estimated payments during
the Expense Recovery Period, any amount owing by Tenant pursuant to
subsection (a) above shall be paid to Landlord in accordance with Article
XVI. Should Tenant fail to object in writing to Landlord's determination of
actual Operating Expenses within sixty (60) days following delivery of
Landlord's expense statement, Landlord's determination of actual Operating
Expenses for the applicable Expense Recovery Period shall be conclusive and
binding on the parties and any future claims to the contrary shall be barred.

         Provided Tenant is not then in default under this Lease beyond any
applicable notice and cure periods, Tenant shall have the right to have an
independent certified public accountant audit Landlord's Operating Expenses,
subject to the terms and conditions hereof. Thc cost of the audit shall be
borne by Tenant; provided, however, in no even shall such auditor be
compensated by Tenant on a "contingency" basis, or on any other basis tied to
the results of said audit. Tenant shall give written notice to Landlord of
Tenant's intent to audit Operating Expenses, if at all, within sixty (60)
days following delivery of Landlord's expense statement for the Expense
Recovery Period in question. Following at least ten (10) business days notice
to Landlord, such audit shall be conducted at a mutually agreeable time
during normal business hours at the office of Landlord or its management
agent where records are maintained in Santa Clara County, California.
Landlord shall in good faith cooperate with Tenant during any such audit. All
information obtained by Tenant and/or its auditor in connection with any
audit, as well as any compromise, settlement or adjustment reached between
Landlord and Tenant as a result thereof, shall be held in strict confidence
by Tenant and its auditor and, except as may be required pursuant to any
litigation or as may otherwise be required by law, shall not be disclosed to
any third party, directly or indirectly, by Tenant or its auditor or any of
their respective officers, agents or employees. Landlord may require Tenant's
auditor to execute a separate confidentiality agreement affirming the
foregoing as a condition precedent to any audit. If, following Landlord's
review of Tenant's audit, Landlord disputes the same, Landlord shall have the
right, upon written notice to Tenant within a reasonable time following its
receipt of the audit, to contest such audit by demanding binding arbitration
with JAMS Endispute in Santa Clara County, California ("JAMS"). Tenant agrees
to submit to such arbitration upon such written notice from Landlord. Within
ten (10) business days following submission of the dispute by Landlord to
JAMS, JAMS shall designate three (3) arbitrators and each party may, within
five (5) business days thereafter, veto one (1) of the three (3) persons so
designated. If two (2) different designated arbitrators have been vetoed, the
third arbitrator shall hear and decide the matter. Any arbitration pursuant
to this paragraph shall be decided within thirty (30) days of submission to
JAMS. The decision of the arbitrator shall be final and binding on the
parties. The award rendered by the arbitrator shall be final, and judgment
may be entered upon it in accordance with applicable law in any court having
jurisdiction thereof. Except by written consent of the person or entity
sought to be joined, no arbitration under this paragraph shall include, by
consolidation, joinder or in any other manner, any person or entity not a
party to this Lease unless (i) such person or entity is substantially
involved in a common question of fact or law, (ii) the presence of such
person or entity is requited if complete relief is to be accorded in the
arbitration, or (iii) the interest or responsibility of such person or entity
in the matter in not insubstantial. All costs associated with the arbitration
(excluding the coat of the audit) shall be awarded to the prevailing party as
determined by the arbitrator. The foregoing agreement to arbitrate shall be
specifically enforceable under prevailing law. In the event that, based on
Tenant's audit (and, if the results thereof are contested by Landlord as
provided above, the award rendered by the arbitrator), it is determined that
actual Operating Expenses have been overstated by Landlord, then any
overpayment of actual Operating Expenses by Tenant revealed thereby (less any
prior credits or rebates given


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with respect thereto) shall be credited by Landlord against installments next
becoming due under this Section 4.2 (or, if the Lease has expired or
terminated at the time of such determination, such overpayment (less any
prior credits or rebates given with respect thereto) shall be rebated by
Landlord to Tenant within thirty (30) days following such determination).
Conversely, in the event that, based on Tenant's audit (and, if the results
thereof are contested by Landlord as provided above, the award rendered by
the arbitrator), it is determined that actual Operating Expenses have been
understated by Landlord, then any deficiencies in the payment of actual
Operating Expenses by Tenant revealed thereby (less any prior payments made
by Tenant with respect thereto) shall be paid by. Tenant together with the
next installment coming due under this Section 4.2 (or, if the Lease has
expired or terminated at the time of such determination, such deficiency
(less any prior payments made by Tenant with respect thereto) shall be paid
by Tenant upon notice from Landlord).

                   (d) Even though the Lease has terminated and the Tenant
has vacated the Premises, when the final determination is made of Tenant's
Share of Operating Expenses for file Expense Recovery Period in which the
Lease terminates, Tenant shall upon notice pay the entire increase due over
the estimated expenses paid. Conversely, any overpayment made in the event
expenses decrease shall be rebated by Landlord to Tenant.

                   (e) If, at any time during any Expense Recovery Period,
any one or more of the Operating Expenses arc increased to a rate(s) or
amount(s) in excess of the rate(s) or amount(s) used in calculating the
estimated expenses for the year, then the estimate of Tenant's Share of
Operating Expenses shall be increased for the month in which such rate(s) or
amount(s) becomes effective and for all succeeding months by an amount equal
to Tenant's Share of the increase. Landlord shall give Tenant written notice
of the amount or estimated amount of the increase, the month in which the
increase will become effective. Tenant's Share thereof and the month for
which the payments are due. Tenant shall pay the increase to Landlord as a
part of Tenant's monthly payments of estimated expenses as provided in
paragraph (b) above, commencing with the month in which effective.

                   (f) The term "Operating Expenses" shall mean and include
all "Project Costs" (as hereafter defined) and "Property Taxes" (as hereafter
defined).

                   (g) The term "Project Costs" shall include all expenses of
operation and maintenance of the Building and the Project, together with all
appurtenant Common Areas (as defined in Section 6.2), and shall include the
following charges by way of illustration but not limitation: water and sewer
charges; insurance premiums or reasonable premium equivalents should Landlord
elect to self-insure any risk that Landlord is authorized to insure
hereunder;, license, permit, and inspection fees; heat; light; power;
janitorial services to any interior Common Areas; air conditioning; supplies;
materials; equipment; tools; the reasonable cost of any environmental,
insurance, tax or other consultant utilized by Landlord in connection with
the Building and/or Project; establishment of reasonable reserves for
replacements and/or repair of the Building and/or Common Area improvements,
equipment and supplies; costs incurred in connection with compliance of any
laws or changes in laws applicable to the Building or the Project; the cost
of any capital investments (other than tenant improvements for specific
tenants) to the extent of the amortized amount thereof over the useful life
of such capital investments calculated at a market cost of funds, all as
determined by Landlord, for each such year of useful life during the Term;
costs associated with the procurement and maintenance of an air conditioning,
heating and ventilation service agreement, and procurement and maintenance of
an intrabuilding network cable service agreement for any intrabuilding
network cable telecommunications lines within the Project, and any other
installation, maintenance, repair and replacement costs associated with such
lines; labor; reasonably allocated wages and salaries, fringe benefits, and
payroll taxes for administrative and other personnel directly applicable to
the Building and/or Project, including both Landlord's personnel and outside
personnel; any expense incurred pursuant to Sections 6.1, 6.2, 6.4, 7.2, and
10.2; and a reasonable overhead/management fee for the professional operation
of the Project. Notwithstanding anything to the contrary herein, Tenant's
Share of any such property management fees shall be determined by multiplying
the actual property management fee charged (which from time to time may be
with respect to the Building only, a portion of the Project only, the entire
Project, or the Project together with other properties owned by Landlord
and/or its affiliates) by a fraction, the numerator of which is the floor
area of the Premises (as set forth in Item 8 of the Basic Lease Provisions
contained in the Lease), and the denominator of which is the total square
footage of space charged with such management fee actually leased to tenants
(including Tenant). It is understood that Project Costs shall include
competitive charges for direct services provided by any subsidiary or
division of Landlord.

                   (h) The term "Property Taxes" as used herein shall include
the following: (i) all real estate taxes or personal property taxes, as such
property taxes may be reassessed from time to time; and (ii) other taxes,
charges and assessments which are levied with respect to this Lease or to the
Building and/or the Project, and any improvements, fixtures and equipment and
other property of Landlord located in the Building and/or the Project, except
that general net income and franchise taxes imposed against Landlord shall be
excluded; and (iii) all assessments and fees for public improvements,
services, and facilities and impacts thereon, including without limitation
arising out of any Community Facilities Districts, "Mello Roos" districts,
similar assessment districts, and any traffic impact mitigation assessments
or fees; (iv) any tax, surcharge or assessment which shall be levied in
addition to or in lieu of real estate or personal property taxes, other than
taxes covered by Article VIII; and (v) costs and expenses incurred in
contesting the amount or validity of any Property Tax by appropriate
proceedings.


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         SECTION 4.3. SECURITY DEPOSIT. Concurrently with Tenant's delivery
of this Lease, Tenant shall deposit with Landlord the sum, if any, slated in
Item 9 of the Basic Lease Provisions, to be held by Landlord as security for
the full and faithful performance of Tenant's obligations under this Lease
(the "Security Deposit"). Subject to the last sentence of this Section, the
Security Deposit shall be understood and agreed to be the property of
Landlord upon Landlord's receipt thereof, and may be utilized by Landlord in
its discretion towards the payment of all prepaid expenses by Landlord for
which Tenant would be required to reimburse Landlord under this Lease,
including without limitation brokerage commissions and Tenant Improvement
costs. Upon any default by Tenant, including specifically Tenant's failure to
pay rent or to abide by its obligations under Sections 7.1 and 15.3 below,
whether or not Landlord is informed of or has knowledge of the default, the
Security Deposit shall be deemed to be automatically and immediately applied,
without waiver of any rights Landlord may have under this Lease or at law or
in equity as a result of the default, as a setoff for full or partial
compensation for that default. If any portion of the Security Deposit is
applied after a default by Tenant, Tenant shall within five (5) days after
written demand by Landlord deposit cash with Landlord in an amount sufficient
to restore the Security Deposit to its original amount. Landlord shall not be
required to keep this Security Deposit separate from its general funds, and
Tenant shall not be entitled to interest on the Security Deposit. If Tenant
fully performs its obligations under this Lease, the Security Deposit shall
be returned to Tenant (or, at Landlord's option, to the last assignee of
Tenant's interest in this Lease) after the expiration of the Term, provided
that Landlord may retain the Security Deposit to the extent and until such
time as all amounts due from Tenant in accordance with this Lease have been
determined and paid in full.

         SECTION 4.4. LETTER OF CREDIT. In addition to the Security Deposit
and as additional security hereunder, Tenant shall deliver to landlord
concurrently with Tenant's execution of this Lease, a letter of credit in the
amount of Two Hundred Thousand Dollars ($200,000.00), which letter of credit
shall be in form and with the content of EXHIBIT F attached hereto and issued
by a financial institution acceptable to Landlord. The letter of credit shall
provide for automatic yearly renewals throughout the Term of this Lease. Upon
any monetary default by Tenant or any failure by Tenant to abide by its
obligations under Sections 7.1 and 15.3 below, Landlord shall be entitled to
draw upon said letter of credit by the issuance of Landlord's sole written
demand to the issuing financial institution. Any such draw shall be without
waiver of any rights Landlord may have under this Lease or at law or in
equity as a result of the default. If any portion of the letter of credit is
drawn after a default by Tenant, Tenant shall within five (5) days after
written demand by Landlord restore the letter of credit. Provided that: (i)
Tenant is not in default under the Lease at any time during the Term hereof,
(ii) Tenant has not at any time been more than five (5) days late with
respect to any payments of rent due under the Lease more than twice during
the Term, and (iii) Tenant shall demonstrate by the delivery of its financial
statements that Tenant has a net worth of not less than Twenty Five Million
Dollars ($25,000,000.00) (as determined by generally accepted accounting
principles, consistently applied), then, upon written request of Tenant,
Landlord shall authorize a full exoneration and release of the letter of
credit.

                              ARTICLE V. USES

         SECTION 5.1. USE. Tenant shall use the Premises only for the
purposes stated in Item 3 of the Basic Lease Provisions, all in accordance
with applicable laws and restrictions and pursuant to approvals to be
obtained by Tenant from all relevant and required governmental agencies and
authorities. The parties agree that any contrary use shall be deemed to cause
material and irreparable harm to Landlord and shall entitle Landlord to
injunctive relief in addition to any other available remedy. Tenant, at its
expense, shall procure, maintain and make available for Landlord's inspection
throughout the Term, all governmental approvals, licenses and permits
required for the proper and lawful conduct of Tenant's permitted use of the
Premises. Tenant shall not do or permit anything to be done in or about the
Premises which will in any way interfere with the rights of other occupants
of the Building or the Project, or use or allow the Premises to be used for
any unlawful purpose, nor shall Tenant permit any nuisance or commit any
waste in the Premises or the Project. Tenant shall not perform any work or
conduct any business whatsoever in the Project other than inside the
Premises. Tenant shall not do or permit to be done anything which will
invalidate or increase the cost of any insurance policy(ies) covering the
Building, the Project and/or their contents, and shall comply with all
applicable insurance underwriters rules and the requirements of the Pacific
Fire Rating Bureau or any other organization performing a similar function.
Tenant shall comply at its expense with all present and future laws,
ordinances, restrictions, regulations, orders, rules and requirements of all
governmental authorities that pertain to Tenant or its use of the Premises,
including without limitation all federal and state occupational health and
safety requirements, whether or not Tenant's compliance will necessitate
expenditures or interfere with its use and enjoyment of the Premises. Tenant
shall comply at its expense with all present and future covenants,
conditions, easements or restrictions now or hereafter affecting or
encumbering the Building and/or Project, and any amendments or modifications
thereto, including without limitation the payment by Tenant of any periodic
or special dues or assessments charged against the Premises or Tenant which
may be allocated to the Premises or Tenant in accordance with the provisions
thereof. Tenant shall promptly upon demand reimburse Landlord for any
additional insurance premium charged by reason of Tenant's failure to comply
with the provisions of this Section, and shall indemnify Landlord from any
liability and/or expense resulting from Tenant's noncompliance.

         SECTION 5.2. SIGNS. Except as approved in writing by Landlord, in
its sole discretion, Tenant shall have no right to maintain identification
signs in any location in, on or about the Premises, the Building or the
Project and shall not place or erect any signs, displays or other advertising
materials that are visible from the


                                      7


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exterior of the Building. The size, design, graphics, material, style, color
and other physical aspects of any permitted sign shall be subject to
Landlord's written approval prior to installation (which approval may be
withheld in Landlord's discretion), any covenants, conditions cc restrictions
encumbering the Premises, Landlord's signage program for the Project, as in
effect from time to time and approved by the City in which the Premises are
located ("Signage Criteria"), and any applicable municipal or other
governmental permits and approvals. Tenant acknowledges having received and
reviewed a copy of the current Signage Criteria for the Project Tenant shall
be responsible for the cost of any permitted sign, including the fabrication,
installation, maintenance and removal thereof. If Tenant fails to maintain
its sign, or if Tenant fails to remove same upon termination of this Lease
and repair any damage caused by such removal, Landlord may do so at Tenant's
expense.

         SECTION 5.3. HAZARDOUS MATERIALS.

                   (a) For purposes of this Lease, the term "Hazardous
Materials" includes (i) any "hazardous materials" as defined in Section
25501(n) of the California Health and Safety Code, (ii) any other substance
or matter which results in liability to any person or entity from exposure to
such substance or matter under any statutory or common law theory, and (iii)
any substance or matter which is in excess of permitted levels set forth in
any federal, California or local law or regulation pertaining to any
hazardous or toxic substance, material or waste.

                   (b) Tenant shall not cause or permit any Hazardous
Materials to be brought upon, stored, used, generated, released or disposed
of on, under, from or about the Premises (including without limitation the
soil and groundwater thereunder) without the prior written consent of
Landlord. Notwithstanding the foregoing, Tenant shall have the right, without
obtaining prior written consent of Landlord, to utilize within the Premises
standard office products that may contain Hazardous Materials (such as
photocopy toner, "White Out", and the like), however, that (i) Tenant shall
maintain such products in their original retail packaging, shall follow all
instructions on such packaging with respect to the storage, use and disposal
of such products, and shall otherwise comply with all applicable laws with
respect to such products, and (ii) all of the other terms and provisions of
this Section 5.3 shall apply with respect to Tenant's storage, use and
disposal of all such products. Landlord may, in its sole discretion, place
such conditions as Landlord deems appropriate with respect to any such
Hazardous Materials, and may further require that Tenant demonstrate that any
such Hazardous Materials are necessary or useful to Tenant's business and
will be generated, stored, used and disposed of in a manner that complies
with all applicable laws and regulations pertaining thereto and with good
business practices. Tenant understands that Landlord may utilize an
environmental consultant to assist in determining conditions of approval in
connection with the storage, generation, release, disposal or use of
Hazardous Materials by Tenant on or about the Premises, and/or to conduct
periodic inspections of the storage, generation, use, release and/or disposal
of such Hazardous Materials by Tenant on and from the Premises, and Tenant
agrees that any costs incurred by Landlord in connection therewith shall be
reimbursed by Tenant to Landlord as additional rent hereunder upon demand.

                   (c) Prior to the execution of this Lease, Tenant shall
complete, execute and deliver to Landlord an Environmental Questionnaire and
Disclosure Statement (the "Environmental Questionnaire") in the form of
attached hereto. The completed Environmental Questionnaire shall be deemed
incorporated into this Lease for all purposes, and Landlord shall be entitled
to rely fully on the information contained therein. On each anniversary of
the Commencement Date until the expiration or sooner termination of this
Lease, Tenant shall disclose to Landlord in writing the names and amounts of
all Hazardous Materials which were stored, generated, used, released and/or
disposed of on, under or about the Premises for the twelve-month period prior
thereto, and which Tenant desires to store, generate, use, release and/or
dispose of on, under or about the Premises for the succeeding twelve-month
period. In addition, to the extent Tenant is permitted to utilize Hazardous
Materials upon the Premises, Tenant shall promptly provide Landlord with
complete and legible copies of all the following environmental documents
relating thereto: reports filed pursuant to any self-reporting requirements;
permit applications, permits, monitoring repots, workplace exposure and
community exposure warnings or notices and all other reports, disclosures,
plans or documents (even those which may be characterized as confidential)
relating to water discharges, air pollution, waste generation or disposal,
and underground storage tanks for Hazardous Materials; orders, reports,
notices, listings and correspondence (even those which may be considered
confidential) of or concerning the release, investigation of, compliance,
cleanup, remedial and corrective actions, and abatement of Hazardous
Materials; and all complaints, pleadings and other legal documents filed by
or against Tenant related to Tenant's use, handling, storage, release and/or
disposal of Hazardous Materials.

                   (d) Landlord and its agents shall have the right, but not
the obligation, to inspect, sample and/or monitor the Premises and/or the
soil or groundwater thereunder at any time to determine whether Tenant is
complying with the terms of this Section 5.3, and in connection therewith
Tenant shall provide Landlord with full access to all relevant facilities,
records and personnel. If Tenant is not in compliance with any of the
provisions of this Section 5.3, or in the event of a release of any Hazardous
Material on, under or about the Premises caused or permitted by Tenant, its
agents, employees, contractors, licensees or invitees, Landlord and its
agents shall have the right, but not the obligation, without limitation upon
any of Landlord's other rights and remedies under this Lease, to immediately
enter upon the Premises without notice and to discharge Tenant's obligations
under this Section 5.3 at Tenant's expense, including without limitation the
taking of emergency or long-term remedial action. Landlord and its agents
shall endeavor to minimize interference with Tenant's


                                      8


<PAGE>


business in connection therewith, but shall not be liable for any such
interference. In addition, Landlord, at Tenant's expense, shall have the
right, but not the obligation, to join and participate in any legal
proceedings or actions initiated in connection with any claims arising out of
the storage, generation, use, releases and/or disposal by Tenant or its
agents, employees, contractors, licensees or invitees of Hazardous Materials
on, under, from or about the Premises.

                   (e) If the presence of any Hazardous Materials on, under,
from or about the Premises or the Project caused or permitted by Tenant or
its agents, employees, contractors, licensees or invitees results in (i)
injury to any person, (ii) injury to or any contamination of the Premises or
the Project, or (iii) injury to or contamination of any real or personal
property wherever situated, Tenant, at its expense, shall promptly take all
actions necessary to return the Premises and the Project and any other
affected real or personal property owned by Landlord to the condition
existing prior to the introduction of such Hazardous Materials and to remedy
or repair any such injury or contamination, including without limitation, any
cleanup, remediation, removal, disposal, neutralization or other treatment of
any such Hazardous Materials. Notwithstanding the foregoing, Tenant shall
not, without Landlord's prior written consent, lake any remedial action in
response to the presence of any Hazardous Materials on, under or about the
Premises or the Project or any other affected real or personal property owned
by Landlord or enter into any similar agreement, consent, decree or other
compromise with any governmental agency with respect to any Hazardous
Materials claims; provided however, Landlord's prior written consent shall
not be necessary in the event that the presence of Hazardous Materials on,
under or about the Premises or the Project or any other affected real or
personal property owned by Landlord (i) imposes an immediate threat to the
health, safety or welfare of any individual or (ii) is of such a nature that
an immediate remedial response is necessary and it is not possible to obtain
Landlord's consent before taking such action. To the fullest extent permitted
by law, Tenant shall indemnify, hold harmless, protect and defend (with
attorneys acceptable to Landlord) Landlord and any successors to all or any
portion of Landlord's interest in the Premises and the Project and any other
real or personal property owned by Landlord from and against any and all
liabilities, losses, damages, diminution in value, judgments, fines, demands,
claims, recoveries, deficiencies, costs and expenses (including without
limitation attorneys' fees, court costs and other professional expenses),
whether foreseeable or unforeseeable, arising directly or indirectly out of
the use, generation, storage, treatment, release, on- or off-site disposal or
transportation of Hazardous Materials on, into, from, under or about the
Premises, the Building and the Project and any other real or personal
property owned by Landlord caused or permitted by Tenant, its agents,
employees, contractors, licensees or invitees, specifically including without
limitation the cost of any required or necessary repair, restoration, cleanup
or detoxification of the Premises, the Building and the Project and any other
real or personal property owned by Landlord, and the preparation of any
closure or other required plans, whether or not such action is required or
necessary during the Term or after the expiration of this Lease. If Landlord
at any time discovers that Tenant or its agents, employees, contractors,
licensees or invitees may have caused or permitted the release of a Hazardous
Material on, under, from or about the Premises or the Project or any other
real or personal property owned by Landlord, Tenant shall, at Landlord's
request, immediately prepare and submit to Landlord a comprehensive plan,
subject to Landlord's approval, specifying the actions to be taken by Tenant
to return the Premises or the Project or any other real or personal property
owned by Landlord to the condition existing prior to the introduction of such
Hazardous Materials. Upon Landlord's approval of such cleanup plan, Tenant
shall, at its expense, and without limitation of any rights and remedies of
Landlord under this Lease or at law or in equity, immediately implement such
plan and proceed to cleanup such Hazardous Materials in accordance with all
applicable laws and as required by such plan and this Lease. The provisions
of this subsection (e) shall expressly survive the expiration or sooner
termination of this Lease.

                   (f) Landlord hereby discloses to Tenant, and Tenant hereby
acknowledges, certain facts relating to Hazardous Materials at the Project
known by Landlord to exist as of the date of this Lease, as more particularly
described in EXHIBIT C attached hereto. Tenant shall have no liability or
responsibility with respect to the Hazardous Materials facts described in
EXHIBIT C, nor with respect to any Hazardous Materials which Tenant proves
were not caused or permitted by Tenant, its agents, employees, contractors,
licensees or invitees. Notwithstanding the preceding two sentences, Tenant
agrees to notify its agents, employees, contractors, licensees, and invitees
of any exposure or potential exposure to Hazardous Materials at the Premises
that Landlord brings to Tenant's attention.

                         ARTICLE VI. COMMON AREAS; SERVICES

         SECTION 6.1. UTILITIES AND SERVICES. Tenant shall be responsible for
and shall pay promptly, directly to the appropriate supplier, all charges for
water, gas, electricity, sewer, heat, light, power, telephone, refuse pickup,
janitorial service, interior landscape maintenance and all other utilities,
materials and services furnished directly to Tenant or the Premises or used
by Tenant in, on or about the Premises during the Term, together with any
taxes thereon. If any utilities or services are not separately metered or
assessed to Tenant, Landlord shall make a reasonable determination of
Tenant's proportionate share of the cost of such utilities and services and
Tenant shall pay such amount to Landlord, as an item of additional rent,
within ten (10) days after receipt of Landlord's statement or invoice
therefor. Alternatively, Landlord may elect to include such cost in the
definition of Building Costs in which event Tenant shall pay Tenant's
proportionate share of such costs in the manner set forth in Section 4.2.
Landlord shall not be liable for damages or otherwise for any failure or
interruption of any utility or other service furnished to the Premises, and
no such failure or interruption shall


                                      9


<PAGE>


be deemed an eviction or entitle Tenant to terminate this Lease or withhold
or abate any rent due hereunder. Landlord shall at all reasonable times have
flee access to all electrical and mechanical installations of Landlord.

         SECTION 6.2. OPERATION AND MAINTENANCE OF COMMON AREAS. During the
Term, Landlord shall operate all Common Areas within the Building and the
Project. The term "Common Areas" shall mean all areas within the exterior
boundaries of the Building and offer buildings in the Project which are not
held for exclusive use by persons entitled to occupy space, and all other
appurtenant areas and improvements provided by Landlord for the common use of
Landlord and tenants and their respective employees and invitees, including
without limitation parking areas and structures, driveways, sidewalks,
landscaped and planted areas, hallways and interior stairwells not located
within the premises of any tenant, common electrical rooms and roof access
entries, common entrances and lobbies, elevators, and restrooms not located
within the premises of any tenant

         SECTION 6.3. USE OF COMMON AREAS. The occupancy by Tenant of the
Premises shall include the use of the Common Areas in common with Landlord
and with all others for whose convenience and use the Common Areas may be
provided by Landlord, subject, however, to compliance with all rules and
regulations as are prescribed from time to time by Landlord. Landlord shall
operate and maintain the Common Areas in good operating condition and
otherwise in the manner Landlord may determine to be appropriate. All costs
incurred by Landlord for the maintenance and operation of the Common Areas
shall be included in Project Costs unless any particular cost incurred can be
charged to a specific tenant of the Project. Landlord shall at all rimes
during the Term have exclusive control of the Common Areas, and may restrain
any use or occupancy, except as authorized by Landlord's rules and
regulations. Tenant shall keep the Common Areas clear of any obstruction or
unauthorized use related to Tenant's operations. Nothing in this Lease shall
be deemed to impose liability upon Landlord for any damage to or loss of the
property of, or for any injury to, Tenant, its invitees or employees.
Landlord may temporarily close any portion of the Common Areas for repairs,
remodeling and/or alterations, to prevent a public dedication or the accrual
of prescriptive rights, or for any other reason deemed reasonably sufficient
by Landlord, without liability to Landlord.

         SECTION 6.4. PARKING. Tenant shall be entitled to the number of
vehicle parking spaces set forth in Item 14 of the Basic Lease Provisions, on
those portions of the Common Areas designated by Landlord for parking, on an
unreserved and unassigned basis. Tenant shall not use more parking spaces
than such number. All parking spaces shall be used only for parking by
vehicles no larger than full size passenger automobiles or pickup trucks.
Tenant shall not permit or allow any vehicles that belong to or are
controlled by Tenant or Tenant's employees, suppliers, shippers, customers or
invitees to be loaded, unloaded or parked in areas other than those
designated by Landlord for such activities. If Tenant permits or allows any
of the prohibited activities described above, then Landlord shall have the
right, without notice, in addition to such other rights and remedies that
Landlord may have, to remove or tow away the vehicle involved and charge the
costs to Tenant. Parking within the Common Areas shall be limited to striped
parking stalls, and no parking shall be permitted in any driveways, access
ways or in any area which would prohibit or impede the free flow of traffic
within the Common Areas. There shall be no overnight parking of any vehicles
of any kind unless otherwise authorized by Landlord, and vehicles which have
been abandoned or parked in violation of the terms hereof may be towed away
at the owner's expense. Nothing contained in this Lease shall be deemed to
create liability upon Landlord for any damage to motor vehicles of visitors
or employees, for any loss of property from within those motor vehicles, or
for any injury to Tenant, its visitors or employees, unless ultimately
determined to be caused by the sole active negligence or willful misconduct
of Landlord. Landlord shall have the right to establish, and from time to
time amend, and to enforce against all users all reasonable rules and
regulations (including the designation of areas for employee parking) that
Landlord may deem necessary and advisable for the proper and efficient
operation and maintenance of parking within the Common Areas. Landlord shall
have the right to construct, maintain and operate lighting facilities within
the parking areas; to change the area, level, location and arrangement of the
parking areas and improvements therein; to restrict parking by tenants, their
officers, agents and employees to employee parking areas; and to do and
perform such other acts in and to the parking areas and improvements therein
as, in the use of good business judgment, Landlord shall determine to he
advisable. Any person using the parking area shall observe all directional
signs and arrows and any posted speed limits. In no event shall Tenant
interfere with the use and enjoyment of the parking area by other tenants of
the Building or their employees or invitees. Parking areas shall be used only
for parking vehicles. Washing, waxing, cleaning or servicing of vehicles, or
the storage of vehicles for 24-hour periods, is prohibited unless otherwise
authorized by Landlord. Tenant shall be liable for any damage to the parking
areas caused by Tenant or Tenant's employees, suppliers, shippers, customers
or invitees, including without limitation damage from excess oil leakage.
Tenant shall have no right to install any fixtures, equipment or personal
property in the parking areas.

         SECTION 6.5. CHANGES AND ADDITIONS BY LANDLORD. Landlord reserves
the right to make alterations or additions to the Building or the Project, or
to the attendant fixtures, equipment and Common Areas. Landlord may at any
time relocate or remove any of the various buildings, parking areas, and
other Common Areas, and may add buildings and areas to the Project from time
to time. No change shall entitle Tenant to any abatement of rent or other
claim against Landlord, provided that the change does not deprive Tenant of
reasonable access to or use of the Premises. Landlord shall not make any
material changes to the parking areas unless such changes are otherwise
required by law or are necessitated by any taking by any lawful authority by
exercise of the right of eminent domain (or sold to prevent a taking)
(subject, however, to Tenant's rights under Section 12.3 below) or axe due to
any matters beyond the reasonable control of Landlord.


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<PAGE>


                     ARTICLE VII. MAINTAINING THE PREMISES

         SECTION 7.1. TENANT'S MAINTENANCE AND REPAIR. Tenant at its sole
expense shall comply with all applicable laws and governmental regulations
governing the Premises and make all repairs necessary to keep the Premises in
the condition as existed on the Commencement Date (or on any later date that
the improvements may have been installed), excepting ordinary wear and tear,
including without limitation the electrical and mechanical systems, all
glass, windows, doors, door closures, hardware, fixtures, electrical,
plumbing, fire extinguisher equipment and other equipment. Any damage or
deterioration of the Premises shall not be deemed ordinary wear and tear if
the same could have been prevented by good maintenance practices by Tenant.
As part of its maintenance obligations hereunder, Tenant shall, at Landlord's
request, provide Landlord with copies of all maintenance schedules, response
and notices prepared by, for or on behalf of Tenant. All repairs shall be at
least equal in quality to the original work, shall be made only by a licensed
contractor approved in writing in advance by Landlord (which approval shall
not be unreasonably withheld) and shall be made only at the time or times
approved by Landlord. Any contractor utilized by Tenant shall be subject to
Landlord's standard requirements for contractors, as modified from time to
time. Landlord may impose reasonable restrictions and requirements with
respect to repairs, as provided in Section 7.3, and the provisions of Section
7.4 shall apply to all repairs. Alternatively, Landlord may, upon no less
than seven (7) days written notice to Tenant, elect to make any such repair
on behalf of Tenant and at Tenant's expense, and Tenant shall promptly
reimburse landlord for all costs incurred upon submission of an invoice.

         SECTION 7.2. LANDLORD'S MAINTENANCE AND REPAIR. Subject to Section
7.1 and Article XI, Landlord shall provide service, maintenance and repair
with respect to the roof, foundations, and footings of the Building, all
landscaping, walkways, parking areas, Common Areas, exterior lighting, the
air conditioning, ventilating or heating equipment servicing the Premises,
and the exterior surfaces of the exterior walls of the Building, except that
Tenant at its expense shall make all repairs which Landlord deems reasonably
necessary as a result of the act or negligence of Tenant, its agents,
employees, invitees, subtenants or contractors. Landlord shall have the right
to employ or designate any reputable person or firm, including any employee
or agent of Landlord or any of Landlord's affiliates or divisions, to perform
any service, repair or maintenance function. Landlord need not make any other
improvements or repairs except as specifically required under this Lease, and
nothing contained in this Section shall limit Landlord's right to
reimbursement from Tenant for maintenance, repair costs and replacement costs
as provided elsewhere in this Lease. Tenant understands that it shall not
make repairs at Landlord's expense or by rental offset. Tenant further
understands that Landlord shall not be required to make any repairs to the
roof. foundations, footings, structural, electrical or mechanical systems
unless and until Tenant has notified Landlord in writing of the need for such
repair and Landlord shall have a reasonable period of time thereafter to
commence and complete said repair, if warranted. All costs of any maintenance
and repairs on the part of Landlord provided hereunder shall be considered
part of Project Costs.

         SECTION 7.3. ALTERATIONS. Tenant shall make no alterations,
additions or improvements to the Premises without the prior written consent
of Landlord, which consent may be given or withheld in Landlord's sole
discretion. Notwithstanding the foregoing, Landlord shall not unreasonably
withhold its consent to any alterations, additions or improvements to the
Premises which cost less than Two Dollars ($2.00) per square foot of the
improved portions of the Premises (excluding warehouse square footage) and do
not (i) affect the exterior of the Building or outside areas (or be visible
from adjoining sites), or (ii) affect or penetrate any of the structural
portions of the Building, including but not limited to the roof, or (iii)
require any change to the basic floor plan of the Premises, any change to any
structural or mechanical systems of the Premises, or any governmental permit
as a prerequisite to the construction thereof, or (iv) interfere in any
manner with the proper functioning of or Landlord's access to any mechanical,
electrical, plumbing or HVAC systems, facilities or equipment located in or
serving the Building, or (v) diminish the value of the Premises. Landlord may
impose, as a condition to its consent, any requirements that Landlord in its
discretion may deem reasonable or desirable, including but not limited to a
requirement that all work be covered by a lien and completion bond
satisfactory to Landlord and requirements as to the manner, time, and
contractor for performance of the work. Tenant shall obtain all required
permits for the work and shall perform the work in compliance with all
applicable laws, regulations and ordinances, all covenants, conditions and
restrictions affecting the Project, and the Rules and Regulations (hereafter
defined). If any governmental entity requires, as a condition to any proposed
alterations, additions or improvements to the Premises by Tenant, that
improvements be made to the Common Areas, and if Landlord consents to such
improvements to the Common Areas, then Tenant shall, at Tenant's sole
expense, make such required improvements to the Common Areas in such manner,
utilizing such materials, and with such contractors (including, if required
by Landlord, Landlord's contractors) as Landlord may require in its sole
discretion. Under no circumstances shall Tenant make any improvement which
incorporates any Hazardous Materials, including without limitation
asbestos-containing construction materials into the Premises. Any request for
Landlord's consent shall be made in writing and shall contain plans
describing the work in detail reasonably satisfactory to Landlord. Unless
Landlord otherwise agrees in writing, all alterations, additions or
improvements affixed to the Premises (excluding moveable trade fixtures and
furniture) shall become the property of Landlord and shall be surrendered
with the Premises at the end of the Term, except that Landlord may, by notice
to Tenant, require Tenant to remove by the Expiration Date, or sooner
termination date of this Lease, all or any alterations, decorations,
fixtures, additions, improvements and the like installed either by Tenant or
by Landlord at Tenant's request and to repair any damage to the Premises
arising from that removal. Except as otherwise provided in this Lease or in
any Exhibit to this Lease, should Landlord make any alteration or


                                      11

<PAGE>


improvement to the Premises for Tenant, Landlord shall be entitled to prompt
reimbursement from Tenant for all costs incurred.

         SECTION 7.4. MECHANIC'S LIENS. Tenant shall keep the Premises free
from any liens arising out of any work performed, materials furnished, or
obligations incurred by or for Tenant. Upon request by Landlord, Tenant shall
promptly cause any such lien to be released by posting a bond in accordance
with California Civil Code Section 3143 or any successor statute. In the
event that Tenant shall not, within thirty (30) days following the imposition
of any lien, cause the lien to be released of record by payment or posting of
a proper bond, Landlord shall have, in addition to all other available
remedies, the right to cause the lien to be released by any means it deems
proper, including payment of or defuse against the claim giving rise to the
lien. All expenses so incurred by Landlord, including Landlord's attorneys'
fees, and any consequential or offer damages incurred by Landlord arising out
of such lien, shall be reimbursed by Tenant promptly following Landlord's
demand, together with interest from the date of payment by Landlord at the
maximum rate permitted by law until paid. Tenant shall give Landlord no less
than twenty (20) days' prior notice in writing before commencing construction
of any kind on the Premises so that Landlord may post and maintain notices of
nonresponsibility on the Premises.

         SECTION 7.5. ENTRY AND INSPECTION. Landlord shall at all reasonable
times, upon written or oral notice (except in emergencies, when no notice
shall be required) have the right to enter the Premises to inspect them, to
supply services in accordance with this Lease, to protect the interests of
Landlord in the Premises, and to submit the Premises to prospective or actual
purchasers or encumbrance holders (or, during the last one hundred and eighty
(180) days of the Term or when an uncured Tenant default exists, to
prospective tenants), all without being deemed to have caused an eviction of
Tenant and without abatement of rent except as provided elsewhere in this
Lease. Landlord shall have the right, if desired, to retain a key which
unlocks all of the doors in the Premises, excluding Tenant's vaults and
safes, and Landlord shall have the right to use any and all means which
Landlord may deem proper to open the doors in an emergency in order to obtain
entry to the Premises, and any entry to the Premises obtained by Landlord
shall not under any circumstances be deemed to be a forcible or unlawful
entry into, or a detainer of, the Premises, or any eviction of Tenant from
the Premises.

         SECTION 7.6. [INTENTIONALLY DELETED].

            ARTICLE VIII. TAXES AND ASSESSMENTS ON TENANT'S PROPERTY

         Tenant shall be liable for and shall pay, at least ten (10) days
before delinquency, all taxes and assessments levied against all personal
property of Tenant located in the Premises, against all improvements to the
Premises made by Landlord or Tenant which are above Landlord's Project
standard in quality and/or quantity for comparable space within the Project
("Above Standard Improvements"), and against any alterations, additions or
like improvements made to the Premises by or on behalf of Tenant. When
possible Tenant shall cause its personal property, Above Standard
Improvements and alterations to be assessed and billed separately from the
real property of which the Premises form a part. If any taxes on Tenant's
personal property, Above Standard Improvements and/or alterations are levied
against Landlord or Landlord's property and if Landlord pays the same., or if
the assessed value of Landlord's property is increased by the inclusion of a
value placed upon the personal property, Above Standard Improvements and/or
alterations of Tenant and if Landlord pays the taxes based upon the increased
assessment, Tenant shall pay to Landlord the taxes so levied against Landlord
or the proportion of the taxes resulting from the increase in the assessment.
In calculating what portion of any tax bill which is assessed against
Landlord separately, or Landlord and Tenant jointly, is attributable to
Tenant's Above Standard Improvements, alterations and personal property,
Landlord's reasonable determination shall be conclusive.

                   ARTICLE IX. ASSIGNMENT AND SUBLETTING

         SECTION 9.1. RIGHTS OF PARTIES.

         (a) Notwithstanding any provision of this Lease to the contrary,
Tenant will not, either voluntarily or by operation of law, assign, sublet,
encumber, or otherwise transfer all or any part of Tenant's interest in this
lease, or permit the Premises to be occupied by anyone other than Tenant,
without Landlord's prior written consent, which consent shall not
unreasonably be withheld in accordance with the provisions of Section 9.1(b).
No assignment (whether voluntary, involuntary or by operation of law) and no
subletting shall be valid or effective without Landlord's prior written
consent and, at Landlord's election, any such assignment or subletting or
attempted assignment or subletting shall constitute a material default of
this Lease. Landlord shall not be deemed to have given its consent to any
assignment or subletting by any other course of action, including its
acceptance of any name for listing in the Building directory. To the extent
not prohibited by provisions of the Bankruptcy Code, 11 U.S.C, Section 101 et
seq. (the "Bankruptcy Code"), including Section 365(f)(1), Tenant on behalf
of itself and its creditors, administrators and assigns waives the
applicability of Section 365(e) of the Bankruptcy Code unless the proposed
assignee of the Trustee for the estate of the bankrupt meets Landlord's
standard for consent as set forth in Section 9.1(b) of this Lease. If this
Lease is assigned to any person or entity pursuant to the provisions of the
Bankruptcy Code, any and all monies or other considerations to be delivered
in


                                      12


<PAGE>


connection with the assignment shall be delivered to Landlord, shall be and
remain the exclusive property of Landlord and shall not constitute property
of Tenant or of the estate of Tenant within the meaning of the Bankruptcy
Code. Any person or entity to which this Lease is assigned pursuant to the
provisions of the Bankruptcy Code shall be deemed to have assumed all of the
obligations arising under this Lease on and after the date of the assignment,
and shall upon demand execute and deliver to Landlord an instrument
confirming that assumption.

         (b) If Tenant desires to transfer an interest in this Lease, it
shall first notify Landlord of its desire and shall submit in writing to
Landlord: (i) the name and address of the proposed transferee; (ii) the
nature of any proposed subtenant's or assignee's business to be carried on in
the Premises; (iii) the terms and provisions of any proposed sublease or
assignment, including a copy of the proposed assignment or sublease form;
(iv) evidence of insurance of the proposed assignee or subtenant complying
with the requirements of EXHIBIT D hereto; (v) a completed Environmental
Questionnaire from the proposed assignee or subtenant; and (vi) any other
information requested by Landlord and reasonably related to the transfer.
Except as provided in Subsection (c) of this Section, Landlord shall not
unreasonably withhold its consent, provided: (1) the use of the Premises will
be consistent with the provisions of this Lease and with Landlord's
commitment to other tenants of the Building and Project; (2) the proposed
assignee or subtenant has not been required by any prior landlord, lender or
governmental authority to take remedial action in connection with Hazardous
Materials contaminating a property arising out of the proposed aasignee's or
subtenant's actions or use of the property in question and is not subject to
any enforcement order issued by any governmental authority in connection with
the use, disposal or storage of a Hazardous Material; (3) at Landlord's
election, insurance requirements shall be brought into conformity with
Landlord's then current leasing practice; (4) any proposed subtenant or
assignee demonstrates that it is financially responsible by submission to
Landlord of all reasonable information as Landlord may request concerning the
proposed subtenant or assignee, including, but not limited to, a balance
sheet of the proposed subtenant or assignee as of a date within ninety (90)
days of the request for Landlord's consent, statements of income or profit
and loss of the proposed subtenant or assignee for the two-year period
preceding the request for Landlord's consent, and/or a certification signed
by the proposed subtenant or assignee that it has not been evicted or been in
arrears in rent at any other leased premises for the 3-year period preceding
the request for Landlord's consent; (5) any proposed subtenant or assignee
demonstrates to Landlord's reasonable satisfaction a record of successful
experience in business; (6) the proposed assignee or subtenant is not a
prospect with whom Landlord is negotiating to become a tenant at the Building
or Project; and (7) the proposed transfer will not impose additional burdens
or adverse tax effects on Landlord. If Tenant has any exterior sign rights
under this Lease, such rights are personal to Tenant and may not be assigned
or transferred to any assignee of this Lease or subtenant of the Premises
without Landlord's prior written consent, which may be withheld in Landlord's
sole and absolute discretion.

          If Landlord consents to the proposed transfer, Tenant may within
ninety (90) days after the date of the consent effect the transfer upon the
terms described in the information furnished to Landlord; provided that any
material change in the terms shall be subject to Landlord's consent as set
forth in this Section. Landlord shall approve or disapprove any requested
transfer within fifteen (15) days following receipt of Tenant's written
request, the information set forth above, and the fee set forth below.

         (c) Notwithstanding the provisions of Subsection (b) above, in lieu
of consenting to a proposed assignment or subletting, Landlord may elect to
(i) sublease the Premises (or the portion proposed to be subleased), or take
an assignment of Tenant's interest in this Lease, upon the same terms as
offered to the proposed subtenant or assignee (excluding terms relating to
the purchase of personal property, the use of Tenant's name or the
continuation of Tenant's business), or (ii) terminate this Lease as to the
portion of the Premises proposed to be subleased or assigned with a
proportionate abatement in the rent payable under this Lease, effective on
the date that the proposed sublease or assignment would have become
effective. Landlord may thereafter, at its option, assign or re-let any space
so recaptured to any third party, including without limitation the proposed
transferee of Tenant Landlord's rights under this Subsection (c) shall not
apply to any subletting for less than fifty percent (50%) of the Premises or
any subletting having a sublease term (including any extensions) that is less
than fifty percent (50%) of the then-remaining Term.

         (d) Tenant agrees that fifty percent (50%) of any amounts paid by
the assignee or subtenant, however described, in excess of (i) the Basic Rent
payable by Tenant hereunder, or in the case of a sublease of a portion of the
Premises, in excess of the Basic Rent reasonably allocable to such portion,
plus (ii) Tenant's direct out-of-pocket costs which Tenant certifies to
Landlord have been paid to provide occupancy related services to such
assignee or subtenant of a nature commonly provided by landlords of similar
space, shall be the property of Landlord and such amounts shall be payable
directly to Landlord by the assignee or subtenant or, at Landlord's option,
by Tenant. At Landlord's request, a written agreement shall be entered into
by and among Tenant, Landlord and the proposed assignee or subtenant
confirming the requirements of this subsection.

         (e) Tenant shall reimburse Landlord for all reasonable out-of-pocket
costs and expenses incurred by Landlord in connection with its review and
evaluation of any proposed assignment or subletting, which reimbursement
shall be made by Tenant to Landlord within fifteen (15) days following
Landlord's written demand therefor.


                                      13


<PAGE>


         SECTION 9.2. EFFECT OF TRANSFER. No subletting or assignment, even
with the consent of Landlord, shall relieve Tenant of its obligation to pay
rent and to perform all its other obligations under this Lease, Moreover,
Tenant shall indemnify and hold Landlord harmless, as provided in Section
10.3, for any act or omission by an assignee or subtenant. Each assignee,
other than Landlord, shall be deemed to assume all obligations of Tenant
under this Lease and shall be liable jointly and severally with Tenant for
the payment of all rent, and for the due performance of all of Tenant's
obligations, under this Lease. No transfer shall be binding on Landlord
unless any document memorializing the transfer is delivered to Landlord and
both the assignee/subtenant and Tenant deliver to Landlord an executed
consent to transfer instrument prepared by Landlord and consistent with the
requirements of this Article. The acceptance by Landlord of any payment due
under this Lease from any other person shall not be deemed to be a waiver by
Landlord of any provision of this Lease or to be a consent to any transfer.
Consent by Landlord to one or more transfers shall not operate as a waiver or
estoppel to the future enforcement by Landlord of its rights under this Lease.

         SECTION 9.3. SUBLEASE REQUIREMENTS. The following terms and
conditions shall apply to any subletting by Tenant of all or any part of the
Premises and shall be deemed included in each sublease:

         (a) Each and every provision contained in this Lease (other than
with respect to the payment of rent hereunder) is incorporated by reference
into and made a part of such sublease, with "Landlord" hereunder meaning the
sublandlord therein and "Tenant" hereunder meaning the subtenant therein.

         (b) Tenant hereby irrevocably assigns to Landlord all of Tenant's
interest in all rentals and income arising from any sublease of the Premises,
and Landlord may collect such rent and income and apply same toward Tenant's
obligations under this Lease; provided, however, that until a default occurs
in the performance of Tenant's obligations under this Lease, Tenant shall
have the right to receive and collect the sublease rentals. Landlord shall
not, by reason of this assignment or the collection of sublease rentals, be
deemed liable to the subtenant for the performance of any of Tenant's
obligations under the sublease. Tenant hereby irrevocably authorizes and
directs any subtenant, upon receipt of a written notice from Landlord stating
that an uncured default exists in the performance of Tenant's obligations
under this Lease, to pay to Landlord all sums then and thereafter due under
the sublease. Tenant agrees that the subtenant may rely on that notice
without any duty of further inquiry and notwithstanding any notice or claim
by Tenant to the contrary. Tenant shall have no right or claim against the
subtenant or Landlord for any rentals so paid to Landlord.

         (c) In the event of the termination of this Lease, Landlord may, at
its sole option, take over Tenant's entire interest in any sublease and, upon
notice from Landlord, the subtenant shall attorn to Landlord. In no event,
however, shall Landlord be liable for any previous act or omission by Tenant
under the sublease or for the return of any advance rental payments or
deposits under the sublease that have not been actually delivered to
Landlord, nor shall Landlord be bound by any sublease modification executed
without Landlord's consent or for any advance rental payment by the subtenant
in excess of one month's rent. The general provisions of this Lease,
including without limitation those pertaining to insurance and
indemnification, shall be deemed incorporated by reference into the sublease
despite the termination of this Lease.

         SECTION 9.4. CERTAIN TRANSFERS. The sale of all or substantially all
of Tenant's assets (other than bulk sales in the ordinary course of business)
or, if Tenant is a corporation, an unincorporated association, or a
partnership, the transfer, assignment or hypothecation of any stock or
interest in such corporation, association, or partnership in the aggregate of
fifty percent (50%) or more (except for publicly traded shares of stock
constituting a transfer of fifty percent (50%) or more in the aggregate)
shall be deemed an assignment within the meaning and provisions of this
Article. Notwithstanding the foregoing, Landlord's consent shall not be
required for the assignment of this Lease as a result of a merger by Tenant
with or into another entity, so long as (i) the net worth of the successor
entity after such merger is at least equal to the greater of the net worth of
Tenant as of the execution of this Lease by Landlord or the net worth of
Tenant immediately prior to the date of such merger, evidence of which,
satisfactory to Landlord, shall be presented to Landlord prior to such
merger, (ii) Tenant shall provide to Landlord, prior to such merger, written
notice of such merger and such assignment documentation and other information
as Landlord may request in connection therewith, and (iii) all of the other
terms and requirements of this Article shall apply with respect to such
assignment.

                       ARTICLE X. INSURANCE AND INDEMNITY

         SECTION 10.1. TENANT'S INSURANCE. Tenant, at its sole cost and
expense, shall provide and maintain in effect the insurance described in
EXHIBIT D. Evidence of that insurance must be delivered to Landlord prior to
the Commencement Date.

         SECTION 10.2. LANDLORD'S INSURANCE. Landlord may, at its election,
provide any or all of the following types of insurance, with or without
deductible and in amounts and coverages as may be determined by Landlord in
its discretion: "all risk" property insurance, subject to standard
exclusions, covering the Building or Project, and such other risks as
Landlord or its mortgagees may from time to time deem appropriate, including
leasehold improvements made by Landlord, and commercial general liability
coverage. Landlord shall not be required to carry insurance of any kind on
Tenant's property, including leasehold improvements, trade fixtures,
furnishings, equipment, plate glass, signs and all other items of personal
property, and shall not be obligated to


                                      14


<PAGE>


repair or replace that property should damage occur. All proceeds of
insurance maintained by Landlord upon the Building and Project shall be the
property of Landlord, whether or not Landlord is obligated to or elects to
make any repairs. At Landlord's option, Landlord may self-insure all or any
portion of the risks for which Landlord elects to provide insurance hereunder.

         SECTION 10.3. TENANT'S INDEMNITY. To the fullest extent permitted by
law, Tenant shall defend, indemnify, protect, save and hold harmless
Landlord, its agents, and any and all affiliates of Landlord, including,
without limitation, any corporations or other entities controlling,
controlled by or under common control with Landlord, from and against any and
all claims, liabilities, costs or expenses arising either before or after the
Commencement Date from Tenant's use or occupancy of the Premises, the
Building or the Common Areas, or from the conduct of its business, or from
any activity, work, or thing done, permitted or suffered by Tenant or its
agents, employees, invitees or licensees in or about the Premises, the
Building or the Common Areas, or from any default in the performance of any
obligation on Tenant's part to be performed under this Lease, or from any act
or negligence of Tenant or its agents, employees, visitors, patrons, guests,
invitees or licensees. Landlord may, at its option, require Tenant to assume
Landlord's defense in any action covered by this Section through counsel
satisfactory to Landlord. The provisions of this Section shall expressly
survive the expiration or sooner termination of this Lease.

         SECTION 10.4. LANDLORD'S NONLIABILITY. Landlord shall not be liable
to Tenant, its employees, agents and invitees, and Tenant hereby waives all
claims against Landlord for loss of or damage to any property, or loss or
interruption of business or income, or any other loss, cost, damage, injury
or liability whatsoever (including without limitation any consequential
damages and lost profit or opportunity costs) resulting from, but not limited
to, Acts of God, acts of civil disobedience or insurrection, acts or
omissions of other tenants within the Project or their agents, employees,
contractors, guests or invitees, fire, explosion, falling plaster, steam,
gas, electricity, water or rain which may leak or flow from or into any part
of the Premises or from the breakage, leakage, obstruction or other defects
of time pipes, sprinklers, wires, appliances, plumbing, air conditioning,
electrical works or other fixtures in the Building, whether the damage or
injury results from conditions arising in the Premises or in other portions
of the Building. It is understood that any such condition may require the
temporary evacuation or closure of all or a portion of the Building. Except
as provided in Sections 11.1 and 12.1 below, there shall be no abatement of
rent and no liability of Landlord by reason of any injury to or interference
with Tenant's business (including without limitation consequential damages
and lost profit or opportunity costs) arising from the making of any repairs,
alterations or improvements to any portion of the Building, including repairs
to the Premises, nor shall any related activity by Landlord constitute an
actual or constructive eviction; provided, however, that in making repairs,
alterations or improvements, Landlord shall interfere as little as reasonably
practicable with the conduct of Tenant's business in the Premises. Neither
Landlord nor its agents shall be liable for interference with light or other
similar intangible interests. Tenant shall immediately notify Landlord in
case of fire or accident in the Premises, the Building or the Project and of
defects in any improvements or equipment.

         SECTION 10.5. WAIVER OF SUBROGATION. Landlord and Tenant each hereby
waives all rights of recovery against the other and the other's agents on
account of loss and damage occasioned to the property of such waiving party
to the extent only that such loss or damage is required to be insured against
under any "all risk" property insurance policies required by this Article X;
provided however, that (i) the foregoing waiver shall not apply to the extent
of Tenant's obligations to pay deductibles under any such policies and this
Lease, and (ii) if any loss is due to the act, omission or negligence or
willful misconduct of Tenant or its agents, employees, contractors, guests or
invitees, Tenant's liability insurance shall be primary and shall cover all
losses and damages prior to any other insurance hereunder. By this waiver it
is the intent of the parties that neither Landlord nor Tenant shall be liable
to any insurance company (by way of subrogation or otherwise) insuring the
other party for any loss or damage insured against under any "all-risk"
property insurance policies required by this Article, even though such loss
or damage might be occasioned by the negligence of such party, its agents,
employees, contractors, guests or invitees. The provisions of this Section
shall not limit {he indemnification provisions elsewhere contained in this
Lease.

                        ARTICLE XI. DAMAGE OR DESTRUCTION

         SECTION 11.1. RESTORATION.

                   (a) If the Building of which the Premises are a part is
damaged, Landlord shall repair that damage as soon as reasonably possible, at
its expense, unless: (i) Landlord reasonably determines that the cost of
repair is not covered by Landlord's fire and extended coverage insurance plus
such additional amounts Tenant elects, at its option, to contribute,
excluding however the deductible (for which Tenant shall be responsible for
Tenant's Share); (ii) Landlord reasonably determines that the Premises
cannot, with reasonable diligence, be fully repaired by Landlord (or cannot
be safely repaired because of the presence of hazardous factors, including
without limitation Hazardous Materials, earthquake faults, and other similar
dangers) within two hundred seventy (270) days after the date of the damage;
(iii) an event of default by Tenant has occurred and is continuing at the
time of such damage; or (iv) the damage occurs during the final twelve (12)
months of the Term. Should Landlord elect not to repair the damage for one of
the preceding reasons, Landlord shall so notify Tenant in writing within
sixty (60) days after the damage occurs and this Lease shall terminate as of
the date of that notice.


                                      15


<PAGE>


                   (b) Unless Landlord elects to terminate this Lease in
accordance with subsection (a) above, this Lease shall continue in effect for
the remainder of the Term; provided that so long as Tenant is not in default
under this Lease, if the damage is so extensive that Landlord reasonably
determines that the Premises cannot, with reasonable diligence, be repaired
by Landlord (or cannot be safely repaired because of the presence of
hazardous factors, earthquake faults, and other similar dangers) so as to
allow Tenant's substantial use and enjoyment of the Premises within two
hundred seventy (270) days after the date of damage, then Tenant may elect to
terminate this Lease by written notice to Landlord within the sixty (60) day
period stated in subsection (a).

                   (c) Commencing on the date of any damage to the Building,
and ending on the sooner of the date the damage is repaired or the date this
Lease is terminated, the rental to be paid under this Lease shall be abated
in the same proportion that the floor area of the Premises that is rendered
unusable by the damage from time to time bears to the total floor area of the
Premises, but only to the extent that any business interruption insurance
proceeds are received by Landlord therefor from Tenant's insurance described
in EXHIBIT D.

                   (d) Notwithstanding the provisions of subsections (a), (b)
and (c) of this Section, and subject to the provisions of Section 10.5 above,
the cost of any repairs shall be borne by Tenant, and Tenant shall not be
entitled to rental abatement or termination rights, if the damage is due to
the fault or neglect of Tenant or its employees, subtenants, invitees or
representatives. In addition, the provisions of this Section shall not be
deemed to require Landlord to repair any improvements or fixtures that Tenant
is obligated to repair or insure pursuant to any other provision of this
Lease.

                   (e) Tenant shall fully cooperate with Landlord in removing
Tenant's personal property and any debris from the Premises to facilitate all
inspections of the Premises and the making of any repairs. Notwithstanding
anything to the contrary contained in this Lease, if Landlord in good faith
believes there is a risk of injury to persons or damage to property from
entry into the Building or Premises following any damage or destruction
thereto, Landlord may restrict entry into the Building or the Premises by
Tenant, its employees, agents and contractors in a non-discriminatory manner,
without being deemed to have violated Tenant's rights of quiet enjoyment to,
or made an unlawful detainer of, or evicted Tenant from, the Premises. Upon
request, Landlord shall consult with Tenant to determine if there are safe
methods of entry into the Building or the Premises solely in order to allow
Tenant to retrieve files, data in computers, and necessary inventory, subject
however to all indemnities and waivers of liability from Tenant to Landlord
contained in this Lease and any additional indemnifies and waivers of
liability which Landlord may require.

         SECTION 11.2. LEASE GOVERNS. Tenant agrees that the provisions of
this Lease, including without limitation Section 11.1, shall govern any
damage or destruction and shall accordingly supersede any contrary statute or
rule of law.

                          ARTICLE XII. EMINENT DOMAIN

         SECTION 12.1. TOTAL OR PARTIAL TAKING. If all or a material portion
of the Premises is taken by any lawful authority by exercise of the right of
eminent domain, or sold to prevent a taking, either Tenant or Landlord may
terminate this Lease effective as of the date possession is required to be
surrendered to the authority. In the event title to a portion of the Building
or Project, other than the Premises, is taken or sold in lieu of taking, and
if Landlord elects to restore the Building in such a way as to alter the
Premises materially, either party may terminate this Lease, by written notice
to the other party, effective on the date of vesting of title. In the event
neither party has elected to terminate this Lease as provided above, then
Landlord shall promptly, after receipt of a sufficient condemnation award,
proceed to restore the Premises to substantially their condition prior to the
taking, and a proportionate allowance shall be made to Tenant for the rent
corresponding to the time during which, and to the part of the Premises of
which, Tenant is deprived on account of the taking and restoration. In the
event of a taking, Landlord shall be entitled to the entire amount of the
condemnation award without deduction for any estate or interest of Tenant;
provided that nothing in this Section shall be deemed to give Landlord any
interest in, or prevent Tenant from seeking any award against the taking
authority for, the taking of personal property and fixtures belonging to
Tenant or for relocation or business interruption expenses recoverable from
the taking authority.

         SECTION 12.2. TEMPORARY TAKING. No temporary taking of the Premises
shall terminate this Lease or give Tenant any right to abatement of rent, and
any award specifically attributable to a temporary taking of the Premises
shall belong entirely to Tenant. A temporary taking shall be deemed to be a
taking of the use or occupancy of the Premises for a period of not to exceed
one hundred eighty (180) days.

         SECTION 12.3. TAKING OF PARKING AREA. In the event there shall be a
taking of the parking area such that Landlord can no longer provide
sufficient parking to comply with this Lease, Landlord may substitute
reasonably equivalent parking in a location reasonably close to the Building;
provided that if Landlord falls [to make that substitution within sixty (60)
days following the taking and if the taking materially impairs Tenant's use
and enjoyment of the Premises, Tenant may, at its option, terminate this Lease
by written notice to Landlord. If this Lease is not so terminated by Tenant,
there shall be no abatement of rent and this Lease shall continue in effect.


                                      16


<PAGE>


          ARTICLE XIII. SUBORDINATION; ESTOPPEL CERTIFICATE; FINANCIALS

         SECTION 13.1. SUBORDINATION. At the option of Landlord. this Lease
shall be either superior or subordinate to all ground or underlying leases,
mortgages and deeds of trust, if any, which may hereafter affect the
Building, and to all renewals, modifications, consolidations, repots and
extensions thereof; provided, that so long as Tenant is not in default under
this Lease, this Lease shall not be terminated or Tenant's quiet enjoyment of
the Premises disturbed in the event of termination of any such ground or
underlying lease, or the foreclosure of any such mortgage or deed of trust,
to which Tenant has subordinated this Lease pursuant to this Section. In the
event of a termination or foreclosure, Tenant shall become a tenant of and
attorn to the successor-in-interest to Landlord upon the same terms and
conditions as are contained in this Lease, and shall execute any instrument
reasonably required by Landlord's successor for that purpose. Tenant shall
also, upon written request of Landlord, execute and deliver all instruments
as may be required from time to time to subordinate the rights of Tenant
under this Lease to any ground or underlying lease or to the lien of any
mortgage or deed of trust (provided that such instruments include the
nondisturbance and attornment provisions set forth above), or, if requested
by Landlord, to subordinate, in whole or in part, any ground or underlying
lease or the lien of any mortgage or deed of trust to this Lease.

         SECTION 13.2. ESTOPPEL CERTIFICATE.

                   (a) Tenant shall, at any time upon not less than ten (10)
days prior written notice from Landlord, execute, acknowledge and deliver to
Landlord, in any form that Landlord may reasonably require, a statement in
writing (i) certifying that this Lease is unmodified and in full force and
effect (or, if modified, stating the nature of the modification and
certifying that this Lease, as modified, is in full force and effect) and the
dates to which the rental, additional rent and other charges have been paid
in advance, if any, and (ii) acknowledging that, to Tenant's knowledge, there
are no uncured defaults on the part of Landlord, or specifying each default
if any are claimed, and (iii) setting forth all further information that
Landlord may reasonably require. Tenant's statement may be relied upon by any
prospective purchaser or encumbrancer of all or any portion of the Building
or Project.

                   (b) Notwithstanding any other rights and remedies of
Landlord, Tenant's failure to deliver any estoppel statement within the
provided time shall be conclusive upon Tenant that (i) this Lease is in full
force and effect, without modification except as may be represented by
Landlord, (ii) there are no uncured defaults in Landlord's performance, and
(iii) not more than one month's rental has been paid in advance.

         SECTION 13.3. FINANCIALS.

                   (a) Tenant shall deliver to Landlord, prior to the
execution of this Lease and thereafter at any time ]upon Landlord's request,
Tenant's current tax returns and most recent annual financial statements,
certified true, accurate and complete by the chief financial officer of
Tenant, including a balance sheet and profit and loss statement for the most
recent prior year (collectively, the "Statements"), which Statements shall
accurately and completely reflect the financial condition of Tenant. Landlord
agrees that it will keep the Statements confidential, except that Landlord
shall have the right to deliver the same to any proposed purchaser of the
Building or Project, and to any encumbrancer of all or any portion of the
Building or Project.

                   (b) Tenant acknowledges that Landlord is relying on the
Statements in its determination to enter into this Lease, and Tenant
represents to Landlord, which representation shall be deemed made on the date
of this Lease and again on the Commencement Date, that no material change in
the financial condition of Tenant, as reflected in the Statements, has
occurred since the date Tenant delivered the Statements to Landlord. The
Statements are represented and warranted by Tenant to be correct and to
accurately and fully reflect Tenant's true financial condition as of the date
of submission by any Statements to Landlord.

                      ARTICLE XIV. DEFAULTS AND REMEDIES

         SECTION 14.1. TENANT'S DEFAULTS. In addition to any other event of
default set forth in this Lease, the occurrence of any one or more of the
following events shall constitute a default by Tenant:

                   (a) The failure by Tenant to make any payment of rent or
additional rent required to be made by Tenant, as and when due, where the
failure continues for a period of three (3) days after written notice from
Landlord to Tenant; provided, however, that any such notice shall he in lieu
of, and not in addition to, any notice required under California Code of
Civil Procedure Section 1161 and 1161(a) as amended. For purposes of these
default and remedies provisions, the term "additional rent" shall be deemed
to include all amounts of any type whatsoever other than Basic Rent to be
paid by Tenant pursuant to the terms of this Lease.

                   (b) Assignment, sublease, encumbrance or other transfer of
the Lease by Tenant, either voluntarily or by operation of law, whether by
judgment, execution, transfer by intestacy or testacy, or other means,
without the prior written consent of Landlord.


                                      17


<PAGE>


                   (c) The discovery by Landlord that any financial statement
provided by Tenant, or by any affiliate, successor or guarantor of Tenant,
was materially false.

                   (d) The failure of Tenant to timely and fully provide any
subordination agreement, estoppel certificate or financial statements in
accordance with the requirements of Article XIII.

                   (e) The failure or inability 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 any other
subsection of this Section, where the failure continues for a period of
thirty (30) days after written notice from Landlord to Tenant or such shorter
period as is specified in any other provision of this Lease; provided,
however, that any such notice shall be in lieu of, and not in addition to,
any notice required under California Code of Civil Procedure Section 1161 and
1161(a) as amended. However, if the nature of the failure is such that more
than thirty (30) days are reasonably required for its cure, then Tenant shall
not be deemed to be in default if Tenant commences the cure within thirty
(30) days, and thereafter diligently pursues the cure to completion.

                   (f) (i) The making by Tenant of any general assignment for
the benefit of creditors; (ii) the filing by or against Tenant of a petition
to have Tenant adjudged a Chapter 7 debtor unclear the Bankruptcy Code or to
have debts discharged 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 thirty (30) days); (iii) 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, if possession is not restored to Tenant within thirty (30) days; (iv)
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 the seizure is not discharged within thirty (30) days; or (v)
Tenant's convening of a meeting of its creditors for the purpose of effecting
a moratorium upon or composition of its debts. Landlord shall not be deemed
to have knowledge of any event described in this subsection unless
notification in writing is received by Landlord, nor shall there be any
presumption attributable to Landlord of Tenant's insolvency. In the event
that any provision of this subsection is contrary to applicable law, the
provision shall be of no force or effect.

         SECTION 14.2. LANDLORD'S REMEDIES.

                   (a) In the event of any default by Tenant, or in the event
of the abandonment of the Premises by Tenant, then in addition to any other
remedies available to Landlord, Landlord may exercise the following remedies:

                             (i) Landlord may terminate Tenant's right to
possession of the Premises by any lawful means, in which case this Lease
shall terminate and Tenant shall immediately surrender possession of the
Premises to landlord. Such termination shall not affect any accrued
obligations of Tenant under this Lease. Upon termination. Landlord shall have
the right to reenter the Premises and remove all persons and property.
Landlord shall also be entitled to recover from Tenant:

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

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

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

                                     (4) 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 would be likely to result from Tenant's default, including,
but not limited to, the cost of recovering possession of the Premises,
refurbishment of the Premises, marketing costs, commissions and other
expenses of reletting, including necessary repair, the unamortized portion of
any tenant improvements and brokerage commissions funded by Landlord in
connection with this Lease, reasonable attorneys' fees, and any other
reasonable costs; and

                                     (5) At Landlord's election, all other
amounts in addition to or in lieu of the foregoing as may be permitted by
law. The term "rent" as used in this Lease shall be deemed to mean the Basic
Rent and all other sums required to be paid by Tenant to Landlord pursuant to
the terms of this Lease. Any sum, other than Basic Rent. shall be computed on
the basis of the average monthly amount accruing during the twenty-four (24)
month period immediately prior to default, except that if it becomes
necessary to compute such rental before the twenty-four (24) month period has
occurred, then the computation shall be on the basis of the average monthly
amount during the shorter period. As used in subparagraphs (1) and (2) above,
the "worth at the time of award" shall be computed by allowing interest at
the rate of ten percent (10%) per annum.

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<PAGE>

As used in subparagraph (3) above, the "worth at the time of award" shall be
computed by discounting the amount at the discount rate of the Federal
Reserve Bank of San Francisco at the time of award plus one percent (1%).

                            (ii) Landlord may elect not to terminate Tenant's
right to possession of the Premises, in which event Landlord may continue to
enforce all of its rights and remedies under this Lease, including the right
to collect all rent as it becomes due. Efforts by the Landlord to maintain,
preserve or relet the Premises, or the appointment of a receiver to protect
the Landlord's interests under this Lease, shall not constitute a termination
of the Tenant's right to possession of the Premises. In the event that
Landlord elects to avail itself of the remedy provided by this subsection
(ii), Landlord shall not unreasonably withhold its consent to an assignment
or subletting of the Premises subject to the reasonable standards for
Landlord's consent as are contained in this Lease.

                   (b) Landlord shall be under no obligation to observe or
perform any covenant of this Lease on its part to be observed or performed
which accrues after the date of any default by Tenant unless and until the
default is cured by Tenant, it being understood and agreed that the
performance by Landlord of its obligations under this Lease are expressly
conditioned upon Tenant's full and timely performance of its obligations
under this Lease. The various rights and remedies reserved to Landlord in
this Lease or otherwise shall be cumulative and, except as otherwise provided
by California law, Landlord may pursue any or all of its rights and remedies
at the same time.

                   (c) No delay or omission of Landlord to exercise any right
or remedy shall be construed as a waiver of the right or remedy or of any
default by Tenant. The acceptance by Landlord of rent shall not be a (i)
waiver of any preceding breach or default by Tenant of any provision of this
Lease, other than the failure of Tenant to pay the particular rent accepted,
regardless of Landlord's knowledge of the preceding breach or default at the
time of acceptance of rent, or (ii) a waiver of Landlord's right to exercise
any remedy available to Landlord by virtue of the breach or default. The
acceptance of any payment from a debtor in possession, a trustee, a receiver
or any other person acting on behalf of Tenant or Tenant's estate shall not
waive or cure a default under Section 14.1. No payment by Tenant or receipt
by Landlord of a lesser amount than the rent required by this Lease shall be
deemed to be other than a partial payment on account of the earliest due
stipulated rent, nor shall any endorsement or statement on any check or
letter be deemed an accord and satisfaction and Landlord shall accept the
check or payment without prejudice to Landlord's right to recover the balance
of the rent or pursue any other remedy available to it. No act or thing done
by Landlord or Landlord's agents during the Term shall be deemed an
acceptance of a surrender of the Premises, and no agreement to accept a
surrender shall be valid unless in writing and signed by Landlord. No
employee of Landlord or of Landlord's agents shall have any power to accept
the keys to the Premises prior to the termination of this Lease, and the
delivery of the keys to any employee shall not operate as a termination of
the Lease or a surrender of the Premises.

         SECTION 14.3. LATE PAYMENTS.

                   (a) Any rent due under this Lease that is not received by
Landlord within five (5) days of the date when due shall bear interest at the
maximum rate permitted by law from the date due until fully paid. The payment
of interest shall not cure any default by Tenant under this Lease. In
addition, Tenant acknowledges that the late payment by Tenant to Landlord of
rent will cause Landlord to incur costs not contemplated by this Lease, the
exact amount of which will be extremely difficult and impracticable to
ascertain. Those costs may include, but are not limited to, administrative,
processing and accounting charges, and late charges which may be imposed on
Landlord by the terms of any ground lease, mortgage or mist deed covering the
Premises. Accordingly, if any rent due from Tenant shall not be received by
Landlord or Landlord's designee within five (5) days after the date due, then
Tenant shall pay to Landlord, in addition to the interest provided above, a
late charge in a sum equal to the greater of five percent (5%) of the amount
overdue or Two Hundred Fifty Dollars ($250.00) for each delinquent payment.
Acceptance of a late charge by Landlord shall not constitute a waiver of
Tenant's default with respect to the overdue amount, nor shall it prevent
Landlord from exercising any of its other rights and remedies.

                   (b) Following each second consecutive installment of rent
that is not paid within five (5) days following notice of nonpayment from
Landlord, Landlord shall have the option (i) to require that beginning with
the first payment of rent next due, rent shall no longer be paid in monthly
installments but shall be payable quarterly three (3) months in advance
and/or (ii) to require that Tenant increase the amount, if any, of the
Security Deposit by one hundred percent (100%). Should Tenant deliver to
Landlord, at any time during the Term, two (2) or more insufficient checks,
the Landlord may require that all monies then and thereafter due from Tenant
be paid to Landlord by cashier's check.

         SECTION 14.4. RIGHT OF LANDLORD TO PERFORM. All covenants and
agreements to be performed by Tenant under this Lease shall be performed at
Tenant's sole cost and expense and without any abatement of rent or right of
set-off. If Tenant fails to pay any sum of money, other than rent, or falls
to perform any other act on its part to be performed under this Lease, and
the failure continues beyond any applicable grace period set forth in Section
14.1, then in addition to any other available remedies, Landlord may, at its
election make the payment or perform the other act on Tenant's part.
Landlord's election to make the payment or perform the act on Tenant's part
shall not give rise to any responsibility of Landlord to continue making the
same or similar payments or performing the same or similar acts. Tenant
shall, promptly upon demand by Landlord,


                                      19


<PAGE>


reimburse Landlord for all sums paid by Landlord and all necessary incidental
costs, together with interest at the maximum rate permitted by law from the
date of the payment by Landlord. Landlord shall have the same rights and
remedies if Tenant fails to pay those amounts as Landlord would have in the
event of a default by Tenant in the payment of rent.

         SECTION 14.5. DEFAULT BY LANDLORD. Landlord shall not be deemed to
be in default in the performance of any obligation under this lease unless
and until it has failed to perform the obligation within thirty (30) days
after written notice by Tenant to Landlord specifying in reasonable detail
the nature and extent of the failure; provided, however, that if the nature
of Landlord's obligation is such that more than thirty (30) days are required
for its performance, then Landlord shall not be deemed to be in default if it
commences performance within the thirty (30) day period and thereafter
diligently pursues the cure to completion.

         SECTION 14.6. EXPENSES AND LEGAL FEES. All sums reasonably incurred
by Landlord in connection with any event of default by Tenant under this
Lease or holding over of possession by Tenant after the expiration or earlier
termination of this Lease, including without limitation all costs, expenses
and actual accountants, appraisers, attorneys and other professional fees,
and any collection agency or other collection charges, shall be due and
payable by Tenant to Landlord on demand, and shall bear interest al the rate
of ten percent (10%) per annum. Should either Landlord or Tenant bring any
action in connection with this Lease, the prevailing party shall be entitled
to recover as a part of the action its reasonable attorneys' fees, and all
other costs. The prevailing party for the purpose of this paragraph shall be
determined by the trier of the facts.

         SECTION 14.7. WAIVER OF JURY TRIAL. LANDLORD AND TENANT EACH
ACKNOWLEDGES THAT IT IS AWARE OF AND HAS HAD THE ADVICE OF COUNSEL OF ITS
CHOICE WITH RESPECT TO ITS RIGHTS TO TRIAL BY JURY, AND EACH PARTY DOES
HEREBY EXPRESSLY AND KNOWINGLY WAIVE AND RELEASE ALL SUCH RIGHTS TO TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER PARTY HERETO
AGAINST THE OTHER (AND/OR AGAINST ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
OR SUBSIDIARY OR AFFILIATED ENTITIES) ON ANY MATTERS WHATSOEVER ARISING OUT
OF OR IN ANY WAY CONNECTED WITH THIS LEASE, TENANT'S USE OR OCCUPANCY OF THE
PREMISES, AND/OR ANY CLAIM OF INJURY OR DAMAGE.

         SECTION 14.8. SATISFACTION OF JUDGMENT. The obligations of Landlord
do not constitute the personal obligations of the individual partners,
trustees, directors, officers or shareholders of Landlord or its constituent
partners. Should Tenant recover a money judgment against Landlord, such
judgment shall be satisfied only out of the proceeds of sale received upon
execution of such judgment and levied thereon against the right, title and
interest of Landlord in the Project and out of the rent or other income from
such property receivable by Landlord or out of consideration received by
Landlord from the sale or other disposition of all or any part of Landlord's
right, title or interest in the Project and no action for any deficiency may
be sought or obtained by Tenant.

         SECTION 14.9. LIMITATION OF ACTIONS AGAINST LANDLORD. Any claim,
demand or right of any kind by Tenant which is based upon or arises in
connection with this Lease shall be barred unless Tenant commences an action
thereon within six (6) months after the date that the act, omission, event or
default upon which the claim, demand or right arises, has occurred.

                          ARTICLE XV. END OF TERM

         SECTION 15.1. HOLDING OVER. This Lease shall terminate without
further notice upon the expiration of the Term, and any holding over by
Tenant after the expiration shall not constitute a renewal or extension of
this Lease, or give Tenant any rights under this Lease, except when in
writing signed by both parties. If Tenant holds over for any period after the
expiration (or earlier termination) of the Term without the prior written
consent of Landlord, such possession shall constitute a tenancy at sufferance
only; such holding over with the prior written consent of Landlord shall
constitute a month-to-month tenancy commencing on the first (1st) day
following the termination of this Lease. In either of such events, possession
shall be subject to all of the terms of this Lease, [except that the monthly
Basic Rent shall be the greater of (a) one hundred fifty percent (150%) of the
Basic Rent for the month immediately preceding the date of termination or (b)
the then currently scheduled Basic Rent for comparable space in the Building.
If Tenant fails to surrender the Premises upon the expiration of this Lease
despite demand to do so by Landlord, Tenant shall indemnify and hold Landlord
harmless from all loss or liability, including without limitation, any claims
made by any succeeding tenant relating to such failure to surrender.
Acceptance by Landlord of rent after the termination shall not constitute a
consent to a holdover or result in a renewal of this Lease. The foregoing
provisions of this Section are in addition to and do not affect Landlord's
right of re-entry or any other rights of Landlord under this or at law.

         SECTION 15.2. MERGER ON TERMINATION. The voluntary or other
surrender of this Lease by Tenant, or a mutual termination of this Lease,
shall terminate any or all existing subleases unless Landlord, at its option,
elects in writing to treat the surrender or termination as an assignment to
it of any or all subleases affecting the Premises.


                                      20


<PAGE>


         SECTION 15.3. SURRENDER OF PREMISES; REMOVAL OF PROPERTY. Upon the
Expiration Date or upon any earlier termination of this Lease, Tenant shall
quit and surrender possession of the Premises to Landlord in as good order,
condition and repair as when received or as hereafter may be improved by
Landlord or Tenant reasonable wear and tear and repairs which are Landlord's
obligation excepted, and shall, without expense to Landlord, remove or cause
to be removed from the Premises all personal property and debris, except for
any items that Landlord may by written authorization allow to remain. Tenant
shall repair all damage to the Premises resulting from the removal, which
repair shall include the patching and filling of holes and repair of
structural damage, provided that Landlord may instead elect to repair any
structural damage at Tenant's expense. If Tenant shall fail to comply with
the provisions of this Section, Landlord may effect the removal and/or make
any repairs, and the cost to Landlord shall be additional rent payable by
Tenant upon demand. If Tenant fails to remove Tenant's personal property from
the Premises upon the expiration of the Term, Landlord may remove, store,
dispose of and/or retain such personal property, al Landlord's option, in
accordance with then applicable laws, all at the expense of Tenant. If
requested by Landlord, Tenant shall execute, acknowledge and deliver to
Landlord an instrument in writing releasing and quitclaiming to Landlord all
right, title and interest of Tenant in the Premises.

                     ARTICLE XVI. PAYMENTS AND NOTICES

         All sums payable by Tenant to Landlord shall be paid, without
deduction or offset, in lawful money of the United States to Landlord at its
address set forth in Item 12 of the Basic Lease Provisions, or at any other
place as Landlord may designate in writing. Unless this Lease expressly
provides otherwise, as for example in the payment of rent pursuant to Section
4.1, all payments shall be due and payable within five (5) days after demand.
All payments requiring proration shall be prorated on the basis of a thirty
(30) day month and a three hundred sixty (360) day year. Any notice,
election, demand, consent, approval or other communication to be given or
other document to be delivered by either party to the other may be delivered
in person or by courier or overnight delivery service to the other party, or
may be deposited in the United States mail, duly registered or certified,
postage prepaid, return receipt requested, and addressed to the other party
at the address set forth in Item 12 of the Basic Lease Provisions, or if to
Tenant, at that address or, from and after the Commencement Date, at the
Premises (whether or not Tenant has departed from, abandoned or vacated the
Premises), or may be delivered by telegram, telex or telecopy, provided that
receipt thereof is telephonically confirmed. Either party may, by written
notice to the other, served in the manner provided in this Article, designate
a different address. If any notice or other document is sent by mail, it
shall be deemed served or delivered twenty-four (24) hours after mailing. If
more than one person or entity is named as Tenant under this Lease, service
of any notice upon any one of them shall be deemed as service upon all of
them.

                  ARTICLE XVII. RULES AND REGULATIONS

         Tenant agrees to observe faithfully and comply strictly with the
Rules and Regulations, attached as EXHIBIT E, and any reasonable and
nondiscriminatory amendments, modifications and/or additions as may be
adopted and published by written notice to tenants by Landlord for the
safety, care, security, good order, or cleanliness of the Premises, Building,
Project and Common Areas. Landlord shall not be liable to Tenant for any
violation of the Rules and Regulations or the breach of any covenant or
condition in any lease by any other tenant or such tenant's agents,
employees, contractors, guests or invitees. One or more waivers by Landlord
of any breach of the Rules and Regulations by Tenant or by any other
tenant(s) shall not be a waiver of any subsequent breach of that rule or any
other. Tenant's failure to keep and observe the Rules and Regulations shall
constitute a default under this Lease. In the case of any conflict between
the Rules and Regulations and this Lease, this Lease shall be controlling.

                ARTICLE XVIII. BROKER'S COMMISSION

         The parties recognize as the broker(s) who negotiated this Lease the
firm(s), if any, whose name(s) is (are) stated in Item 10 of the Basic Lease
Provisions, and agree that Landlord shall be responsible for the payment of
brokerage commissions to those broker(s) unless otherwise provided in this
Lease. Tenant warrants that it has had no dealings with any other real estate
broker or agent in connection with the negotiation of this Lease, and Tenant
agrees to indemnify and hold Landlord harmless from any cost, expense or
liability (including reasonable attorneys' fees) for any compensation,
commissions or charges claimed by any other real estate broker or agent
employed or claiming to represent or to have been employed by Tenant in
connection with the negotiation of this Lease. The foregoing agreement shall
survive the termination of this Lease. If Tenant fails to take possession of
the Premises or if this Lease otherwise terminates prior to the Expiration
Date as the result of failure of performance by Tenant, Landlord shall be
entitled to recover from Tenant the unamortized portion of any brokerage
commission funded by Landlord in addition to any other damages to which
Landlord may be entitled.


                                      21


<PAGE>


                 ARTICLE XIX. TRANSFER OF LANDLORD'S INTEREST

         In the event of any transfer of Landlord's interest in the Premises,
the transferor shall be automatically relieved of all obligations on the part
of Landlord accruing under this Lease from and after the date of the
transfer, provided that any funds held by the transferor in which Tenant has
an interest shall be turned over, subject to that interest, to the transferee
and Tenant is notified of the transfer as required by law. No holder of a
mortgage and/or deed of trust to which this Lease is or may be subordinate,
and no landlord under a so-called sale-leaseback, shall he responsible in
connection with the Security Deposit, unless the mortgagee or holder of the
deed of trust or the landlord actually receives the Security Deposit It is
intended that the covenants and obligations contained in this Lease on the
part of Landlord shall, subject to the foregoing, be binding on Landlord, its
successors and assigns, only during and in respect to their respective
successive periods of ownership.

                        ARTICLE XX. INTERPRETATION

         SECTION 20.1. GENDER AND NUMBER. Whenever the context of this Lease
requires, the words "Landlord" and "Tenant" shall include the plural as well
as the singular, and words used in neuter, masculine or feminine genders
shall include the others.

         SECTION 20.2. HEADINGS. The captions and headings of the articles
and sections of this Lease are for convenience only, are not a part of this
Lease and shall have no effect upon its construction or interpretation.

         SECTION 20.3. JOINT AND SEVERAL LIABILITY. If more than one person
or entity is named as Tenant, the obligations imposed upon each shall he
joint and several and the act of or notice from, or notice or refund to, or
the signature of, any one or more of them shall be binding on all of them
with respect to the tenancy of this Lease, including, but not limited to, any
renewal, extension, termination or modification of this Lease.

         SECTION 20.4. SUCCESSORS. Subject to Articles IX and XIX, all rights
and liabilities given to or imposed upon Landlord and Tenant shall extend to
and bind their respective heirs, executors, administrators, successors and
assigns. Nothing contained in this Section is intended, or shall be
construed, to grant to any person other than Landlord and Tenant and their
successors and assigns any rights or remedies under this Lease.

         SECTION 20.5. TIME OF ESSENCE.  Time is of the essence with  respect
to the  performance  of every  provision of this Lease.

         SECTION 20.6. CONTROLLING LAW. This Lease shall be governed by and
interpreted in accordance  with the laws of the State of California.

         SECTION 20.7. SEVERABILITY. If any term or provision of this Lease,
the deletion of which would not adversely affect the receipt of any material
benefit by either party or the deletion of which is consented to by the party
adversely affected, shall be held invalid or unenforceable to any extent, the
remainder of this Lease shall not be affected and each term and provision of
this Lease shall be valid and enforceable to the fullest extent permitted by
law.

         SECTION 20.8. WAIVER AND CUMULATIVE REMEDIES. One or more waivers by
Landlord or Tenant of any breach of any term, covenant or condition contained
in this Lease shall not be a waiver of any subsequent breach of the same or
any other term, covenant or condition. Consent to any act by one of the
parties shall not he deemed to render unnecessary the obtaining of that
party's consent to any subsequent act. No breach by Tenant of this Lease
shall be deemed to have been waived by Landlord unless the waiver is in a
writing signed by Landlord. The rights and remedies of Landlord under this
Lease shall be cumulative and in addition to any and all other rights and
remedies which Landlord may have.

         SECTION 20.9. INABILITY TO PERFORM. In the event that either party
shall be delayed or hindered in or prevented from the performance of any work
or in performing any act required under this Lease by reason of any cause
beyond the reasonable control of that party, then the performance of the work
or the doing of the act shall be excused for the period of the delay and the
time for performance shall be extended for a period equivalent to the period
of the delay. The provisions of this Section shall not operate to excuse
Tenant from the prompt payment of rent or from the timely Performance of any
other obligation under this Lease within Tenant's reasonable control.

         SECTION 20.10. ENTIRE AGREEMENT. This Lease and its exhibits and
other attachments cover in full each and every agreement of every kind
between the parties concerning the Premises, the Building. and the Project,
and all preliminary negotiations, oral agreements, understandings and/or
practices, except those contained in this Lease, are superseded and of no
further effect. Tenant waives its rights to rely on any representations or
promises made by Landlord or others which are not contained in this Lease. No
verbal agreement or implied covenant shall be held to modify the provisions
of this Lease, any statute, law, or custom to the contrary notwithstanding.


                                      22


<PAGE>


         SECTION 20.11. QUIET ENJOYMENT. Upon the observance and performance
of all the covenants, terms and conditions on Tenant's part to be observed
and performed and subject to the other provisions of this Lease, Tenant shall
peaceably and quietly hold and enjoy the Premises for the Term without
hindrance or interruption by Landlord or any other person claiming by or
through Landlord.

         SECTION 20.12. SURVIVAL. All covenants of Landlord or Tenant which
reasonably would be intended to survive the expiration or sooner termination
of this Lease. including without limitation any warranty or indemnity
hereunder, shall so survive and continue to be binding upon and inure to the
benefit of the respective parties and their successors and assigns.

                  ARTICLE XXI. EXECUTION AND RECORDING

         SECTION 21.1. 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.

         SECTION 21.2. CORPORATE AND PARTNERSHIP AUTHORITY. If Tenant is a
corporation or partnership, each individual executing this Lease on behalf of
the corporation or partnership represents and warrants that he is duly
authorized to execute and deliver this Lease on behalf of the corporation or
partnership, and that this Lease is binding upon the corporation or
partnership in accordance with its terms. Tenant shall, at Landlord's
request, deliver a certified copy of its board of directors' resolution or
partnership agreement or certificate authorizing or evidencing the execution
of this Lease.

         SECTION 21.3. EXECUTION OF LEASE; NO OPTION OR OFFER. The submission
of this Lease to Tenant shall be for examination purposes only, and shall not
constitute an offer to or option for Tenant to lease the Premises. Execution
of this Lease by Tenant and its return to Landlord shall not be binding upon
Landlord, notwithstanding any time interval, until Landlord has in fact
executed and delivered this Lease to Tenant, it being intended that this
Lease shall only become effective upon execution by Landlord and delivery of
a fully executed counterpart to Tenant.

         SECTION 21.4. RECORDING. Tenant shall not record this Lease without
the prior written consent of Landlord. Tenant, upon the request of Landlord,
shall execute and acknowledge a "short form" memorandum of this Lease for
recording purposes.

         SECTION 21.5. AMENDMENTS. No amendment or termination of this Lease
shall be effective unless in writing signed by authorized signatories of
Tenant and Landlord, or by their respective successors in interest. No
actions, policies, oral or informal arrangements, business dealings or other
course of conduct by or between the parties shall be deemed to modify this
Lease in any respect.

         SECTION 21.6. EXECUTED COPY. Any fully executed photocopy or
similar reproduction of this Lease shall be deemed an original for all
purposes.

         SECTION 21.7. ATTACHMENTS. All exhibits, amendments, riders and
addenda attached to this Lease are hereby incorporated into and made a part
of this Lease.

                       ARTICLE XXII. MISCELLANEOUS

         SECTION 22.1. 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 and attorneys, shall not
intentionally and voluntarily disclose the terms and conditions of this Lease
to any other tenant or apparent prospective tenant of the Building or
Project, 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.

         SECTION 22.2. GUARANTY. As a condition to the execution of this
Lease by Landlord, the obligations, covenants and performance of the Tenant
as herein provided shall be guaranteed in writing by the Guarantor(s) listed
in Item 7 of the Basic Lease Provisions, if any, on a form of guaranty
provided by Landlord.

         SECTION 22.3. CHANGES REQUESTED BY LENDER. If, in connection with
obtaining financing for the Project, the lender shall request reasonable
modifications in this Lease as a condition to the financing, Tenant will not
unreasonably withhold or delay its consent, provided that the modifications
do not materially increase the obligations of Tenant or materially and
adversely affect the leasehold interest created by this Lease.


                                      23


<PAGE>


         SECTION 22.4. MORTGAGEE PROTECTION. No act or failure to act on the
part of Landlord which would otherwise entitle Tenant to be relieved of its
obligations hereunder or to terminate this Lease shall result in such a
release or termination unless (a) Tenant has given notice by registered or
certified mail to any beneficiary of a deed of trust or mortgage coveting the
Building whose address has been furnished to Tenant and (b) such beneficiary
is afforded a reasonable opportunity to cure the default by Landlord (which
in no event shall be leas than sixty (60) days), including, if necessary to
effect the cure, time to obtain possession of the Building by power of sale
or judicial foreclosure provided that such foreclosure remedy is diligently
pursued. Tenant agrees that each beneficiary of a deed of trust or mortgage
covering the Building is an express third party beneficiary hereof, Tenant
shall have no right or claim for the collection of any deposit from such
beneficiary or from any purchaser at a foreclosure sale unless such
beneficiary or purchaser shall have actually received and not refunded the
deposit, and Tenant shall comply with any written directions by any
beneficiary to pay rent due hereunder directly to such beneficiary without
determining whether an event of default exists under such beneficiary's deed
of trust.

         SECTION 22.5. COVENANTS AND CONDITIONS. All of the provisions
of this Lease shall be construed to be conditions as well as covenants as
though the words specifically expressing or imparting covenants and
conditions were used in each separate provision.

         SECTION 22.6. SECURITY MEASURES. Tenant hereby acknowledges that
Landlord shall have no obligation whatsoever to provide guard service or
other security measures for the benefit of the Premises or the Project.
Tenant assumes all responsibility for the protection of Tenant, its agents,
invitees and property from acts of third parties. Nothing herein contained
shall prevent Landlord, at its sole option, from providing security
protection for the Project or any part thereof, in which event the cost
thereof shall be included within the definition of Project Costs.

LANDLORD:                               TENANT:

THE IRVINE COMPANY                      OCULEX PHARMACEUTICALS, INC.,
                                        a California corporation


By:   /s/ Richard G. Sim                By:     /s/ Jerry Gin
   -----------------------------------     -----------------------------------
    Richard G. Sim, Executive Vice      Name    Jerry Gin
    President of The Irvine Company          ---------------------------------
                                        Title   President
                                              --------------------------------


By:   /s/ Robert E. Williams, Jr.       By:     /s/ Vernon Wong
   -----------------------------------     -----------------------------------
    Robert E. Williams, Jr., President  Name    Vernon Wong
    Irvine Industrial Company,               ---------------------------------
    a division of The Irvine Company    Title   Corporate Secretary
                                              --------------------------------


                                      24


<PAGE>


                                  FLOOR PLAN



                                  [GRAPHIC]






                                  EXHIBIT A


<PAGE>


                                  EXHIBIT B

                THE IRVINE COMPANY - INVESTMENT PROPERTIES GROUP

                         HAZARDOUS MATERIAL SURVEY FORM

         The purpose of this form is to obtain information regarding the use
of hazardous substances on Investment Properties Group ("IPG") property.
Prospective tenants and contractors should answer the questions in light of
their proposed activities on the premises. Existing tenants and contractors
should answer the questions as they relate to ongoing activities on the
premises and should update any information previously submitted.

         If additional space is needed to answer the questions, you may
attach separate sheets of paper to this form. When completed, the form should
be sent to the following address:

                        INSIGNIA/ESG OF CALIFORNIA, INC.
                                1 Ada, Suite 270
                                Irvine, CA 92618

         Your cooperation in this matter is appreciated. If you have any
questions, please call your property manager at (714) 753-4744 for assistance.

1.       GENERAL INFORMATION

         Name of Responding Company:___________________________________________
         Check all that apply:      Tenant        (    )   Contractor    (    )
                                    Prospective   (    )   Existing      (    )

         Mailing Address:______________________________________________________

         Contact Person & Title:_______________________________________________

         Telephone Number: (   ) __________-__________


         CURRENT TIC TENANT(S):

         Address of Lease Premises:____________________________________________

         Length of Lease or Contract Term:_____________________________________

         PROSPECTIVE TIC TENANT(S):

         Address of Proposed Lease Premises:___________________________________

         Address of Current Operations:________________________________________

         Describe the proposed operations to take place on the property,
         including principal products manufactured or services to be conducted.
         Existing tenants and contractors should describe any proposed changes
         to ongoing operations. _______________________________________________
         ______________________________________________________________________
         ______________________________________________________________________

2.       HAZARDOUS MATERIALS. For the purposes of this Survey Form, the term
         "hazardous material" means any raw material, product or agent
         considered hazardous under any state or federal law. The term does not
         include wastes which are intended to be discarded.

         2.1      Will any hazardous materials be used or stored on site?

                  Chemical Products       Yes     (    )  No    (    )
                  Biological Hazards/
                  Infectious Wastes       Yes     (    )  No    (    )
                  Radioactive Materials   Yes     (    )  No    (    )
                  Petroleum Products      Yes     (    )  No    (    )


                                      1


<PAGE>



                  List any hazardous materials to be used or stored, the
                  quantities that will be on-site at any given time, and the
                  location and method of storage (e.g., bottles in storage
                  closet on the premises).

<TABLE>
<CAPTION>
                                            Location and Method
                  Hazardous Materials            of Storage              Quantity
                  -------------------            ----------              --------
                  <S>                       <C>                     <C>
                  -------------------       -------------------     -------------------
                  -------------------       -------------------     -------------------
                  -------------------       -------------------     -------------------
                  -------------------       -------------------     -------------------
</TABLE>

         2.3      Is any underground storage of hazardous materials proposed
                  or currently conducted on the premises?  Yes  (  )  No  (  )


                  If yes, describe the materials to be stored, and the size and
                  construction of the tank. Attach copies of any permits
                  obtained for the underground storage of such substances. ____
                  _____________________________________________________________
                  _____________________________________________________________

3.       HAZARDOUS WASTE. For the purposes of this Survey Form, the term
         "hazardous waste" means any waste (including biological, infectious or
         radioactive waste) considered hazardous under any state or federal law,
         and which is intended to be discarded.

         3.1      List any hazardous waste generated or to be generated on the
                  premises, and indicate the quantity generated on a monthly
                  basis.

<TABLE>
<CAPTION>

                                             Location and Method
                                             of Storage Prior to
                  Hazardous Materials              Disposal                  Quantity
                  -------------------              --------                  --------
                  <S>                        <C>                       <C>

                  -------------------        -------------------       -------------------
                  -------------------        -------------------       -------------------
                  -------------------        -------------------       -------------------
                  -------------------        -------------------       -------------------
</TABLE>

         3.2      Describe the method(s) of disposal (including recycling) for
                  each waste. Indicate where and how often disposal will take
                  place.

<TABLE>
<CAPTION>

                                             Location of Disposal
                  Hazardous Materials                Site                    Quantity
                  -------------------              --------                  --------
                  <S>                        <C>                       <C>

                  -------------------        -------------------       -------------------
                  -------------------        -------------------       -------------------
                  -------------------        -------------------       -------------------
                  -------------------        -------------------       -------------------
</TABLE>



         3.3      Is any treatment or processing of hazardous, infections or
                  radioactive wastes currently conducted or proposed to be
                  conducted on the premise?   Yes   (    )   No (    )

                  If yes, please describe any existing or proposed treatment
                  methods.____________________________________________________
                  ____________________________________________________________
                  ____________________________________________________________

         3.4      Attach copies of any hazardous waste permits or licenses
                  issued to your company with respect to its operations on the
                  premises.


                                      2


<PAGE>


4.       SPILLS

         4.1      During the past year, have any spills or releases of hazardous
                  materials occurred on the premises? Yes ( ) No ( )

                  If so, please describe the spill and attach the results of any
                  testing conducted to determine the extent of such spills. ____
                  ______________________________________________________________
                  ______________________________________________________________

         4.2      Were any agencies notified in connection with such spills?
                  Yes  (    )    No  (    )

                  If so, attach copies of any spill reports or other
                  correspondence with regulatory agencies.

         4.3      Were any clean-up actions undertaken in connection with the
                  spills?    Yes  (    )   No  (    )

                  If so, briefly describe the actions taken. Attach copies of
                  any clearance letters obtained from any regulatory agencies
                  involved and the results of any final soil or groundwater
                  sampling done upon completion of the clean-up work.__________
                  _____________________________________________________________
                  _____________________________________________________________

5.       WASTEWATER TREATMENT/DISCHARGE

         5.1 Do you discharge industrial wastewater to:

                  _______ storm drain?       _______ sewer?
                  _______ surface water?     _______ no industrial discharge

         5.2      Is your industrial wastewater treated before discharge?
                  Yes  (    )    No  (    )

                  If yes, describe the type of treatment conducted.____________
                  _____________________________________________________________

         5.3      Attach copies of any wastewater discharge permits issued to
                  your company with respect to its operations on the premises.

6.       AIR DISCHARGES

         6.1      Do you have any air filtration systems or stacks that
                  discharge into the air?
                  Yes  (    )   No  (    )

         6.2      Do you operate any equipment that require air emissions
                  permits?
                  Yes  (    )   No  (    )

         6.3      Attach copies of any air discharge permits pertaining to
                  these operations.

7.       HAZARDOUS MATERIALS DISCLOSURES

         7.1      Does your company handle an aggregate of at least 500 pounds,
                  55 gallons or 200 cubic feet of hazardous material at any
                  given time?    Yes  (    )   No  (    )

         7.2      Has your company prepared a Hazardous Materials Disclosure -
                  Chemical Inventory and Business Emergency Plan or similar
                  disclosure document pursuant to state or county requirements?
                  Yes  (    )    No  (    )

                  If so, attach a copy.


                                      3


<PAGE>


         7.3      Are any of the chemicals used in your operations regulated
                  under Proposition 65?

                  If so, describe the procedures followed to comply with these
                  requirements.________________________________________________
                  _____________________________________________________________
                  _____________________________________________________________

         7.4      Is your company subject to OSHA Hazard Communication Standard
                  Requirements?
                  Yes  (    )    No  (    )

                  If so, describe the procedures followed to comply with these
                  requirements.________________________________________________
                  _____________________________________________________________
                  _____________________________________________________________

8.       ANIMAL TESTING

         8.1      Does your company bring or intend to bring live animals onto
                  the premises for research or development purposes?
                  Yes  (    )    No  (    )

                  If so, describe the activity.________________________________
                  _____________________________________________________________
                  _____________________________________________________________

         8.2      Does your company bring or intend to bring animal body parts
                  or bodily fluids onto the premises for research or development
                  purposes? Yes  (    )   No  (    )

                  If so, describe the activity.________________________________
                  _____________________________________________________________
                  _____________________________________________________________

9.       ENFORCEMENT ACTIONS, COMPLAINTS

         9.1      Has your company ever been subject to any agency enforcement
                  actions, administrative orders, lawsuits, or consent
                  orders/decrees regarding environmental compliance or health
                  and safety?    Yes  (    )    No  (    )

                  If so, describe the actions and any continuing obligations
                  imposed as a result of these actions.
                  _____________________________________________________________
                  _____________________________________________________________
                  _____________________________________________________________

         9.2      Has your company ever received any request for information,
                  notice of violation or demand letter, complaint, or inquiry
                  regarding environmental compliance or health and safety?
                  Yes  (    )    No  (    )

         9.3      Has an environmental audit ever been conducted which
                  concerned operations or activities on premises occupied by
                  you?   Yes  (    )    No  (    )

         9.4      If you answered "yes" to any questions in this section,
                  describe the environmental action or complaint and any
                  continuing compliance obligation imposed as a result of the
                  same.
                  _____________________________________________________________
                  _____________________________________________________________
                  _____________________________________________________________



                                               ________________________________
                                               ________________________________


                                               By:_____________________________
                                                  Name:________________________
                                                  Title:_______________________
                                                  Date:________________________


                                      4


<PAGE>



                                    EXHIBIT C

                             LANDLORD'S DISCLOSURES






                           [INTENTIONALLY LEFT BLANK]












                                 Page 1 of 1


<PAGE>


                                  EXHIBIT D

                             TENANT'S INSURANCE

         The following standards for Tenant's insurance shall be in effect at
the Building. Landlord reserves the right to adopt reasonable
nondiscriminatory modifications and additions to those standards, Tenant
agrees to obtain and present evidence to Landlord that it has fully complied
with the insurance requirements.

         1.   Tenant shall, at its sole cost and expense, commencing on the
date Tenant is given access to the Premises for any purpose and during the
entire Term, procure, pay for and keep in full force and effect: (i)
commercial general liability insurance with respect to the Premises and the
operations of or on behalf of Tenant in, on or about the Premises, including
but not limited to personal injury, owned and nonowned automobile, blanket
contractual, independent contractors, broad form property damage (with an
exception to any pollution exclusion with respect to damage arising out of
heat, smoke or fumes from a hostile fire), fire and water legal liability,
products liability (if a product is sold from the Premises), liquor law
liability (if alcoholic beverages are sold, served or consumed within the
Premises), and severability of interest, which policy(ies) shall be written
on an "occurrence" basis and for not less than the amount set forth in Item
13 of the Basic Lease Provisions, with a combined single limit (with a
$50,000 minimum limit on fire legal liability) per occurrence for bodily
injury, death, and property damage liability, or the current limit of
liability carried by Tenant, whichever is greater, and subject to such
increases in amounts as Landlord may determine from time to time; (ii)
workers' compensation insurance coverage as required by law, together with
employers' liability insurance; (iii) with respect to improvements,
alterations, and the like required or permitted to be made by Tenant under
this Lease, builder's all-risk insurance, in an amount equal to the
replacement cost of the work; (iv) insurance against lure, vandalism,
malicious mischief and such other additional perils as may be included in a
standard "all risk" form in general use in the county in which the Premises
are situated, insuring Tenant's leasehold improvements, trade fixtures,
furnishings, equipment and items of personal property of Tenant located in
the Premises, in an amount equal to not less than ninety percent (90%) of
their actual replacement cost (with replacement cost endorsement); and (v)
business interruption insurance in amounts satisfactory to cover (1) year of
loss as reasonably determined by Tenant (but in no event less than one (1)
year's one Basic Rent and Tenant s Share of Operating Expenses). In no event
shall the limits of any policy be considered as limiting the liability of
Tenant under this Lease.

         2.   In the event Landlord consents to Tenant's use, generation or
storage of Hazardous Materials on, under or about the Premises pursuant to
Section 5.3 of this Lease, Landlord shall have the continuing right to
require Tenant, at Tenant's sole cost and expense (provided the same is
available for purchase upon commercially reasonable terms), to purchase
insurance specified and approved by Landlord, with coverage not less than
Five Million Dollars ($5,000,000.00), insuring (i) any Hazardous Materials
shall be removed from the Premises, (ii) the Premises shall be restored to a
clean, healthy, safe and sanitary condition, and (iii) any liability of
Tenant, Landlord and Landlord's officers, directors, shareholders, agents,
employees and representatives, arising from such Hazardous Materials.

         3.   All policies of insurance required to be carried by Tenant
pursuant to this EXHIBIT D containing a deductible exceeding Ten Thousand
Dollars ($10,000.00) per occurrence must be approved in writing by Landlord
prior to the issuance of such policy. Tenant shall be solely responsible for
the payment of all deductibles.

         4.   All policies of insurance required to be carried by Tenant
pursuant to this EXHIBIT D shall be written by responsible insurance
companies authorized to do business in the State of California and with a
Best's rating of not less than "A" subject to final acceptance and approval
by Landlord. Any insurance required of Tenant may be furnished by Tenant
under any blanket policy carried by it or under a separate policy, so long as
(i) the Premises are specifically covered (by rider, endorsement or
otherwise), (ii) the limits of the policy are applicable on a "per location"
basis to the Premises and provide for restoration of the aggregate limits,
and (iii) the policy otherwise complies with the provisions of this EXHIBIT
D. A true and exact copy of each paid up policy evidencing the insurance
(appropriately authenticated by the insurer) or a certificate of insurance,
certifying that the policy has been issued, provides the coverage required by
this EXHIBIT D and contains the required provisions, shall be delivered to
Landlord prior to the date Tenant is given the right of possession of the
Premises. Proper evidence of the renewal of any insurance coverage shall also
be delivered to Landlord not less than thirty (30) days prior to the
expiration of the coverage. Landlord may at any time, and from time to time,
inspect and/or copy any and all insurance policies required by this Lease.

         5.   Each policy evidencing insurance required to be carried by
Tenant pursuant to this Exhibit D shall contain the following provisions
and/or clauses satisfactory to Landlord: (i) a provision that the policy and
the coverage provided shall be primary and that any coverage carried by
Landlord shall be noncontributory with respect to any policies carried by
Tenant except as to workers' compensation insurance; (ii) a provision
including Landlord, the Additional Insureds identified in Item 11 of the
Basic Lease Provisions, and any other parties in interest designated by
Landlord as an additional insured, except as to workers' compensation
insurance; (iii) a waiver by the insurer of any right to subrogation against
Landlord, its agents, employees, contractors and representatives which arises
or might arise by reason of any payment under the policy or by reason of any
act or omission of Landlord, its agents, employees, contractors or
representatives; and (iv) a provision that the insurer will not cancel or
change the coverage provided by the policy without first giving Landlord
thirty (30) days prior written notice.

         6.   In the event that Tenant fails to procure, maintain and/or pay
for, at the times and for the durations specified in this EXHIBIT D, any
insurance required by this EXHIBIT D, or fails to carry insurance required by
any governmental authority, Landlord may at its election procure that
insurance and pay the


                                 Page 1 of 2                           12/28/99


<PAGE>


premiums, in which event Tenant shall repay Landlord all sums paid by
Landlord, together with interest at the maximum rate permitted by law and any
related costs or expenses incurred by Landlord, within ten (10) days
following Landlord's written demand to Tenant.




















                                  Page 2 of 2


<PAGE>


                                   EXHIBIT E

                            RULES AND REGULATIONS

         This Exhibit sets forth thc rules and regulations governing Tenant's
use of the Premises leased to Tenant pursuant to the terms, covenants and
conditions of the Lease to which this Exhibit is attached and therein made
part thereof. In the event of any conflict or inconsistency between this
Exhibit and the Lease, the Lease shall control.

         1.   Tenant shall not place anything or allow anything to be placed
near the glass of any window, door, partition or wall which may appear
unsightly from outside the Premises.

         2.   The walls, walkways, sidewalks, entrance passages, courts and
vestibules shall not be obstructed or used for any purpose other than ingress
and egress of pedestrian travel to and from the Premises, and shall not be
used for loitering or gathering, or to display, store or place any
merchandise, equipment or devices, or for any other purpose. The walkways,
entrance passageways, courts, vestibules and roof are not for the use of the
general public and Landlord shall in all cases retain the right to control
and prevent access thereto by all persons whose presence in the judgment of
the Landlord shall be prejudicial to the safety, character, reputation and
interests of the Building and its tenants, provided that nothing herein
contained shall be construed to prevent such access to persons with whom
Tenant normally deals in the ordinary course of Tenant's business unless such
persons are engaged in illegal activities. No tenant or employee or invitee
of any tenant shall be permitted upon the roof of the Building.

         3.   No awnings or other projection shall be attached to the outside
walls of the Building. No security bars or gates, curtains, blinds, shades or
screens shall be attached to or hung in, or used in connection with, any
window or door of the Premises without the prior written consent of Landlord.
Neither the interior nor exterior of any windows shall be coated or otherwise
sunscreened without the express written consent of Landlord.

         4.   Tenant shall not mark, nail, paint, drill into, or in any way
deface any part of the Premises or the Building. Tenant shall not lay
linoleum, tile, carpet or other similar floor covering so that the same shall
be affixed to the floor of the Premises in any manner except as approved by
Landlord in writing. The expense of repairing any damage resulting from a
violation of this rule or removal of any floor covering shall be borne by
Tenant.

         5.   The toilet rooms, urinals, wash bowls and other plumbing
apparatus shall not be used for any purpose other than that for which they
were constructed and no foreign substance of any kind whatsoever shall be
thrown therein. The expense of any breakage, stoppage or damage resulting
from the violation of this rule shall be borne by the tenant who, or whose
employees or invitees, caused it.

         6.   Landlord shall direct electricians as to the manner and
location of any future telephone wiring. No boring or cutting for wires will
be allowed without the prior consent of Landlord. The locations of the
telephones, call boxes and other office equipment affixed to the Premises
shall be subject to the prior written approval of Landlord.

         7.   The Premises shall not he used for manufacturing or for the
storage of merchandise except as such storage may be incidental to the
permitted use of the Premises. No exterior storage shall be allowed at any
time without the prior written approval of Landlord. The Premises shall not
be used for cooking or washing clothes without the prior written consent of
Landlord, or for lodging or sleeping or for any immoral or illegal purposes.

         8.   Tenant shall not make, or permit to be made, any unseemly or
disturbing noises or disturb or interfere with occupants of this or
neighboring buildings or premises or those having business with them, whether
by the use of any musical instrument, radio, phonograph, noise, or otherwise.
Tenant shall not use, keep or permit to be used, or kept, any foul or
obnoxious gas or substance in thc Premises or permit or suffer the Premises
to be used or occupied in any manner offensive or objectionable to Landlord
or other occupants of this or neighboring buildings or premises by reason of
any odors, fumes or gases.

         9.   No animals shall be permitted at any time within the Premises
except as may be necessary in connection with the permitted use of the
Premises.

         10.   Tenant shall not use the name of the Building or the Project
in connection with or in promoting or advertising the business of Tenant,
except as Tenant's address, without the written consent of Landlord. Landlord
shall have the right to prohibit any advertising by any Tenant which, in
Landlord's reasonable opinion, tends to impair the reputation of the Project
or its desirability for its intended uses, and upon written notice from
Landlord any Tenant shall refrain from or discontinue such advertising.

         11.   Canvassing, soliciting, peddling, parading, picketing,
demonstrating or otherwise engaging in any conduct that unreasonably impairs
the value or use of the Premises or the Project are prohibited and each
Tenant shall cooperate to prevent the same.


                                      1


<PAGE>


         12.   No equipment of any type shall be placed on thc Premises which
in Landlord's opinion exceeds the load limits of the floor or otherwise
threatens the soundness of the structure or improvements of the Building.

         13.   No air conditioning unit or other similar apparatus shall be
installed or used by any Tenant without the prior written consent of Landlord.

         14.   No aerial antenna shall be erected on the roof or exterior
walls of the Premises, or on the grounds, without in each instance, the prior
written consent of Landlord. Any aerial or antenna so installed without such
written consent shall be subject to removal by Landlord at any time without
prior notice at the expense of the Tenant, and Tenant shall upon Landlord's
demand pay a removal fee to Landlord of not less than $200.00.

         15.   The entire Premises, including vestibules, entrances, doors,
fixtures, windows and plate glass, shall at all times be maintained in a
safe, neat and clean condition by Tenant. All trash, refuse and waste
materials shall be regularly removed from the Premises by Tenant and placed
in the containers at the locations designated by Landlord for refuse
collection. All cardboard boxes must be "broken down" prior to being placed
in the trash container. All styrofoam chips must be bagged or otherwise
contained prior to placement in the trash container, so as not to constitute
a nuisance. Pallets may not be disposed of in the trash container or
enclosures. The burning of trash, refuse or waste materials is prohibited.

         16.   Tenant shall use at Tenant's cost such pest extermination
contractor as Landlord may direct and at such intervals as Landlord may
require.

         17.   All keys for the Premises shall be provided to Tenant by
Landlord and Tenant shall return to Landlord any of such keys so provided
upon the termination of the Lease. Tenant shall not change locks or install
other locks on doors of the Premises, without the prior written consent of
Landlord. In the event of loss of any keys furnished by Landlord for Tenant,
Tenant shall pay to Landlord the costs thereof.

         18.   No person shall enter or remain within the Project while
intoxicated or under the influence of liquor or drugs. Landlord shall have
the right to exclude or expel from the Project any person who, in the
absolute discretion of Landlord, is under the influence of liquor or drugs.

               Landlord reserves the right to amend or supplement the
foregoing Rules and Regulations and to adopt and promulgate additional rules
and regulations applicable to the Premises. Notice of such rules and
regulations and amendments and supplements thereto, if any, shall be given to
the Tenant.



                                      2


<PAGE>



                     IRREVOCABLE STANDBY LETTER OF CREDIT


                    Number:               ________________
                    Date:                 ________________
                    Amount:               ________________
                    Expiration:           ________________



         BENEFICIARY                                ACCOUNT PARTY

         The Irvine Company                         _____________
         550 Newport Center Drive                   _____________
         Newport Beach, CA 92660                    _____________

We hereby issue our Irrevocable Letter of Credit No.______ in favor of The
Irvine Company, its successors and assigns, for the account of _______________.
We undertake to honor your draft for any sum or sums not to exceed a total of
____________________ ($__________) in favor of said beneficiary when
accompanied by the following: a letter from an officer of The Irvine Company
that The Irvine Company is authorized to draw upon this Letter of Credit
according to the terms of its lease agreement with the Account Party as
"Tenant".

It is a condition of this letter of credit that it shall remain enforceable
against us for a period of _________ from this date and further, that it
shall be deemed automatically extended for successive one-year periods
without amendment thereafter unless thirty (30) clays prior to the expiration
date set forth above, or within thirty (30) days prior to the end of any
yearly Anniversary Date thereafter, you shall receive our notice in writing
by certified mail, return receipt requested, that we elect not to renew this
letter of credit for any subsequent year.

The draft must be marked "Drawn under _____________ Letter of Credit No._____
dated _________."

There are no other conditions of this letter of credit. Except so far as
otherwise stated, this credit is subject to the Uniform Customs and Practice
for Documentary Credits (1983 Revision, International Chamber of Commerce,
Publication No. 400).



______________________________
______________________________



By:___________________________

By:___________________________




                                    EXHIBIT F


<PAGE>


                                    EXHIBIT X

                                   WORK LETTER

              TENANT IMPROVEMENTS

              The tenant improvement work by Landlord shall consist of
repainting the Premises utilizing building standard paint, and installing new
building standard carpet in the Premises ("Tenant Improvements"). Landlord's
total contribution for the Tenant Improvements, inclusive of Landlord's
construction management fee, shall not exceed Eighty Three Thousand Seven
Hundred Seventy-Eight Dollars ($83,778.00) ("Landlord's Contribution"). Any
excess cost shall be borne solely by Tenant and shall be paid to Landlord
within ten (10) days following Landlord's billing for such excess cost.







                                    EXHIBIT X


<PAGE>


                                  [FLOOR PLAN]




















                                    EXHIBIT Y